Acciona Infrastructure Australia Pty Ltd v Chess Engineering Pty Ltd

[2020] NSWSC 1423

Supreme Court

New South Wales

Medium Neutral Citation:

Acciona Infrastructure Australia Pty Ltd v Chess Engineering Pty Ltd [2020] NSWSC 1423

Hearing dates:

27 July 2020

Decision date:

16 October 2020

Jurisdiction:

Equity - Technology and Construction List

Before:

Henry J

Decision:

Error established in respect of one variation. See also [222].

Catchwords:

BUILDING AND CONSTRUCTION – Building and Construction Industry Security of Payments Act 1999 (NSW) – adjudication – judicial review – whether adjudicator failed to perform statutory function and denied plaintiff procedural fairness by failing to consider payment schedule and adjudication response submissions – whether adjudicator failed to form a view as to what was properly payable on the merits of the defendant’s claim – whether adjudicator misconstrued s 20(2B) of the Act – error in failing to form a view as to what was properly payable found in respect of one variation

Legislation Cited:

Building and Construction Industry Security of Payment Act 1999 (NSW), ss 20(2B), 22(2)

Civil Procedure Act 2005 (NSW), ss 56, 58

Cases Cited:

Anderson Street Banksmeadow Pty Ltd v Helcon Contracting Australia Pty Ltd [2013] NSWSC 657

Azriel v NSW Land & Housing Corporation [2006] NSWCA 372

Brodyn Pty Ltd v Davenport (2004) 61 NSWLR 421; [2004] NSWCA 394

CC Builders (Aust) Pty Limited v Milestone Civil Pty Limited [2019] NSWSC 1251

Cockram Construction Ltd v Fulton Hogan Construction Pty Ltd (2018) 97 NSWLR 773; [2018] NSWCA 107

Diona Pty Ltd v Downer EDI Works Pty Ltd [2020] NSWSC 480

Downer Construction (Aust) Pty Ltd v Energy Australia (2007) 69 NSWLR 72; [2007] NSWCA 49

Goodwin Street Developments Pty Ltd v DSD Builders Pty Ltd (2018) 98 NSWLR 712; [2018] NSWCA 276

Hanson Construction Materials Pty Ltd v Brolton Group Pty Ltd [2019] NSWSC 1641

Hossain v Minister for Immigration and Border Protection (2018) 264 CLR 123; [2018] HCA 34

Icon Co (NSW) Pty Ltd v Australia Avenue Developments Pty Ltd [2018] NSWCA 339

Iskra v MMIR Pty Ltd [2019] NSWCA 126

JKC Australia LNG Pty Ltd v Inpex Operations Australia Pty Ltd (2018) 334 FLR 314; [2018] NTCA 6

John Holland Pty Ltd v Roads and Traffic Authority of New South Wales [2007] NSWCA 19

Laing O’Rourke Australia Construction Pty Ltd v Monford Group Pty Ltd [2018] NSWSC 491

Northbuild Construction Pty Ltd v Central Interior Linings Pty Ltd [2012] 1 Qd R 525; [2011] QCA 22

NSW Netball Association Limited v Probuild Construction (Aust) Pty Limited [2015] NSWSC 1339

Perform (NSW) Pty Ltd v Mev-Aust Pty Ltd [2009] NSWCA 157

Plaintiff S157/2002 v Commonwealth of Australia (2003) 211 CLR 476; [2003] HCA 2

Probuild Constructions (Aust) Pty Ltd v Shade Systems Pty Ltd (2018) 264 CLR 1; [2018] HCA 4

Rhomberg Rail Australia Pty Limited v Concrete Evidence Pty Limited [2019] NSWSC 755

Richard Crookes Construction Pty Ltd v CES Projects (Aust) Pty Ltd (No 2) [2016] NSWSC 1229

Trysams Pty Ltd v Club Constructions (NSW) Pty Ltd [2007] NSWSC 941

TWT Property Group Pty Ltd v Cenric Group Pty Ltd [2020] NSWSC 72

Weal v Bathurst City Council (2000) 11 LGERA 181; [2000] NSWCA 88

YTO Construction Pty Limited v Innovative Civil Pty Limited [2019] NSWCA 110

Texts Cited:

Nil

Category:

Principal judgment

Parties:

Acciona Infrastructure Australia Pty Ltd (Plaintiff)

Chess Engineering Pty Ltd (First Defendant)
John O’Brien (Second Defendant)

Representation:

Counsel:
F Hicks SC with D Hume (Plaintiff)
I Roberts SC with D Byrne (First Defendant)

Solicitors:
Vincent Young (Plaintiff)
Toomey Pegg Lawyers (First Defendant)
King Lawyers (Second Defendant)

File Number(s):

2020/163383

Publication restriction:

Nil

Judgment

1. In June 2019, the plaintiff (Acciona) and the first defendant (Chess Engineering) entered into a contract under which Chess Engineering agreed to supply and install anti-throw screens and related components for a pedestrian bridge on Anzac Parade as part of the Sydney Light Rail Project for a contract sum of $1,244,500.00 (sub-contract).

2. By summons filed on 1 June 2020, Acciona seeks to set aside an adjudication determination made on 18 May 2020 by the second defendant (Adjudicator) in favour of Chess Engineering under the Building and Construction Industry Security of Payment Act 1999 (NSW) (the SoPAct) (Determination). The Determination relates to a payment claim issued by Chess Engineering, on 15 January 2020 for $1,302,097.27 (excluding GST). The adjudicated amount determined by the Adjudicator was $640,593.69 (excluding GST).

3. Acciona contends that the Determination is liable to be set aside because the Adjudicator failed to fulfil his statutory function under the SoP Act and denied it procedural fairness by not considering aspects of its payment schedule and submissions or forming a view as to what was properly payable in respect of eight variation claims.

4. Chess Engineering contests this. It submits that the Adjudicator did not fail to consider or determine matters as required and that any errors he made were within jurisdiction and did not involve any denial of procedural fairness. In the alternative, Chess Engineering contends that, if any part of the Determination is found to be affected by jurisdictional error, the Court should impose as a condition of the relief that Acciona pay the unaffected component of the adjudicated amount.

5. Acciona has paid $736,747.09 into Court pending final determination of the proceedings, representing the adjudicated amount plus GST, interest and 75% of the Adjudication fees. As is usual with these cases, the Adjudicator has filed a submitting appearance.

Background

6. On 15 January 2020, Chess Engineering served payment claim No. 6 on Acciona for $1,032,097.27 (excluding GST) comprising $1,021,880.60 for variations and $10,216.67 for the balance of the sub-contract works (Payment Claim). The Payment Claim consisted of a three page schedule; page two lists nineteen variations, of which ten were the subject of the claim that month totalling $1,021,880.60.

7. On 30 March 2020, Acciona served its payment schedule in response to the Payment Claim certifying an amount payable of -$39,354.90 (excluding GST) (Payment Schedule). The scheduled amount was calculated as the claimed amount of $1,032,097.25 less “monies not due” of $921,692.59 and monies “set off” of $149,759.57.

8. The Payment Schedule consisted of a two page document and 34 pages of Annexures. The first page of the Payment Schedule notes that Acciona had undertaken a “cumulative assessment” of Chess Engineering’s claims to date and that previously scheduled amounts had been re-assessed.

9. Page two of the Payment Schedule is headed “Detailed Schedule”. It identifies that Acciona did not dispute the claim of $10,216.67 for the balance of the sub-contract works and describes the nature and amount of the four set-off claims totalling -$149,759.57. Page two also contains a table that lists the amounts scheduled (totalling $100,188.00) and withheld (totalling -$921,692.59) in relation to variations (cumulative and claimed in the Payment Claim) by reference to nine items which are described as: “Item 1, B-General Works”; “Item 2, C-Surveying Issues”; “Item 3, D-Possession”; “Item 4, E-Expansion Joint”; “Item 5, F-Powder Coating”; “Item 6, G-EWP Costs”; “Item 7, H-Cost Plus Works”; “Item 8, I-Management Cost”; and “Item 9, J-Broken Panel”. The table also specifies the general reasons for withholding the amounts and refers to the Annexures that are relevant to each of the nine items.

10. Annexure A of the Payment Schedule is headed “Summary of Variation Claims”. It lists 19 variations and states that Acciona had assessed each of Chess Engineering’s claims for “variations” in sections in accordance with the type of claims made by Chess Engineering for the relevant “variation”, which are summarised in a table that cross-references the 19 variations to the nine items referred to on page two. Annexure A also notes that amounts claimed by Chess Engineering for certain variations may be divided into parts and assessed separately in different Annexures of the Payment Schedule.

11. Annexures B to J to the Payment Schedule adopt the same descriptors as the nine items referred to on page two of the Payment Schedule and are described as: “Annexure B: General Works”; “Annexure C: Surveying Issues”; “Annexure D: Possession Works”; “Annexure E: Expansion Joint”; “Annexure F: Powder Coating”; “Annexure G: EWP Costs”; “Annexure H: Cost Plus Works”; “Annexure I: Management Cost”; and “Annexure J: Broken Panel”. There are two other Annexures to the Payment Schedule, referred to as “Annexure K – Labour Rates” and “Annexure L – Set Off 1 – D&C Contractor costs incurred to support Subcontractor’s lack of resources for Possession Works”.

12. On 15 April 2020, Chess Engineering made an adjudication application in relation to the Payment Claim (Adjudication Application). The Adjudication Application consisted of five folders of materials including submissions, a statutory declaration of Ms Elham Haddo dated 15 April 2020 and other supporting documents. The Adjudication Application noted that, after allowing for concessions, the proper amount due in respect of the Payment Claim was $993,812.61 (excluding GST).

13. On 24 April 2020, Acciona lodged its adjudication response (Adjudication Response), consisting of three folders of materials, including submissions, statements from Mr Francisco Romero Hernandez and Mr Syed Gilani and other supporting documents. The Adjudication Response submissions noted that Acciona decided to categorise Chess Engineering’s variation claims in the Payment Schedule in accordance with Acciona’s groupings of the relevant issues applicable to the claims (which Acciona defines as the “Issues”), instead of referring to Chess Engineering’s variation claims and that some of the Issues were relevant to more than one of variation claims. Submissions were made on Acciona’s Issues as well as in response to nine of the variation claims adopting the descriptors used by Chess Engineering. Acciona also confirmed that it did not dispute the balance of the contract works claim and made submissions in support of its set-off claims.

The Determination

14. On 18 May 2020, the Adjudicator determined that Chess Engineering was entitled to an interim payment of $640,593.69 (excluding GST), calculated as $10,216.67 for the balance of the sub-contract works and $693,161.02 for variations, less $16,920.00 for variation credits and $45,864.00 for set-off claims.

15. In the adjudication reasons, the Adjudicator sets out a summary of the facts and dispute: at [1] to [30]. He deals with the sub-contract, the reference date and Payment Claim: at [31] to [59].

16. At [64] to [78], the Adjudicator deals with the Payment Schedule. He states that he found the annexures to the Payment Schedule “time consuming to examine”, “complex” and “not at all accessible in terms of the methodology of assessment of the value of each of the Items of claim adopted by [Acciona]”: at [74]. He also states that to achieve an overall appreciation of the Payment Schedule, “one is obliged to refer to and cross reference various Annexure documents to ascertain the reasons for non-payment of each Variation claim” which was a task that “had to be undertaken… to appreciate in full the reasons for non-payment given in the Payment Schedule and to identify any reasons relied upon in the [Adjudication Response] that were not contained in the Payment Schedule”: at [77].

17. The Adjudicator deals with the Adjudication Application (at [79] to [88]) and the Adjudication Response (at [95] to [109]), noting particular issues raised by Acciona, including that Chess Engineering had failed to provide sufficient evidence to support its claim (at [101]), ignored mechanisms required under the sub-contract in making claims (at [102]) and seeks to rely on material outside the scope or ambit of the materials provided in the Payment Claim (at [103]). The Adjudicator sets out that Acciona is precluded by s 20(2B) of the SoP Act from including in its Adjudication Response any reasons for withholding payment not included in the Payment Schedule and states that he will not have regard to any submissions or supporting materials they raise or relate to reasons not included in the Payment Schedule, irrespective of their merits: at [105] and [108].

18. From [110] to [121] of the adjudication reasons, the Adjudicator sets out matters relevant to his decision and to which he had regard in making it, noting that:

1. it is a matter for Chess Engineering to establish an entitlement to be paid the amounts claimed and a matter for Acciona to establish a valid entitlement to set off any amount or amounts against Chess Engineering’s valid entitlements: at [118];

2. his determination does not limit either party’s rights under the sub-contract or at common law, consistent with the purpose of the SoP Act, being to allow for a prompt interim determination as to the merits of the Payment Claim: at [119]; and

3. he has, as required of him by s 22(2) of the SoP Act, taken into account the evidence to which he may have regard, namely the Payment Claim, the Adjudication Application by Chess Engineering including Ms Haddo’s declaration, the Payment Schedule and the Adjudication Response, including Mr Hernandez and Mr Gilani’s statements, in so far as the Adjudication Response deals with the reasons for non-payment contained in the Payment Schedule: at [120] and [121].

19. From [123] to [156], the Adjudicator deals with Acciona’s submission that the Adjudication Application was not validly served under s 17(5) of the SOP Act, and concluded that it had been.

20. From [157] to [278], the Adjudicator deals with Chess Engineering’s claims as contained in the Payment Claim.

21. The Adjudicator refers again to the format of the Payment Schedule, noting that Ms Haddo said that it was “unhelpful” and “difficult to understand”, and agreeing that it is a “particularly difficult and time-consuming document to comprehend and assess as a whole on account of the formatting approach adopted”: at [166] and [167]. He sets out that he is aware of his obligations under ss 9 and 10 of the SoP Act to value Chess Engineering’s entitlements, if any, based on the evidence provided, to payment for works claimed in the Payment Claim, that the onus is on Chess Engineering to establish its entitlements under the SoP Act and that, under the sub-contract, it is a matter for Acciona to make submissions in regard to those issues when responding to items claimed in the Payment Claim and, where made, he shall have regard to them and respond accordingly: at [172] and [175]. He refers to submissions made by Acciona to the effect that Chess Engineering’s claims fail because it has failed to comply with the terms of the sub-contract, failed to explain why certain services are additional and failed to prove the quantum of its claim is reasonable, and states that those submissions are relevant as and where they originate in the Payment Schedule: at [174]. He states that he is satisfied that Chess Engineering is entitled to payment of the amounts claimed for the balance of the sub-contract works (at [176] and [177]) and deals with Chess Engineering’s claims for payment in relation to nine variations and Acciona’s dispute in relation to one other variation: at [178] to [278].

22. From [279] to [287], the Adjudicator deals with Acciona’s claims of set offs.

Grounds of challenge

23. In its list statement and written submissions, Acciona raises five grounds of challenge to the Determination, as follows:

1. the Adjudicator failed in his statutory duty to consider the Payment Schedule as required by s 22(2)(d) in respect of two variations; V08 - Powdercoating and V17 - APPB Signage;

2. the Adjudicator failed to properly consider the Adjudication Response submissions that were duly made in support of the Payment Schedule in respect of four variations; V2 - Extra Billing due to Design Changes, V9 - Lift Shaft Progress Claim 1, V13 - Delay Costs and V16 - EWP Cost;

3. the Adjudicator failed to afford Acciona procedural fairness by failing to properly consider its Payment Schedule in relation to variations V08 - Powdercoating and V17 - APPB Signage, and failing to properly consider the Adjudication Response submissions in relation to variations V2 - Extra Billing due to Design Changes, V9 - Lift Shaft Progress Claim 1, V13 - Delay Costs and V16 - EWP Costs;

4. the Adjudicator failed to form a view as to what was properly payable to Chess Engineering as he did not undertake any reasonable assessment of its claims and simply rejected the scheduled amounts in relation to variations; V9 - Lift Shaft Progress Claim 1, V10 - Lift Shaft Progress Claim 2, V16 - EWP Cost, V17 - APPB Signage and V18 - BOCC Lift Entrance Cladding; and

5. the Adjudicator misconstrued the operation of s 20(2B) of the SoP Act in relation to variation V08 - Powdercoating.

24. In written submissions, Chess Engineering took issue with Acciona’s reliance on V9 - Lift Shaft Progress Claim 1, V17 - APPB Signage and V18 - BOCC Lift Entrance Cladding as part of ground (4). Chess Engineering submitted that those three variations went beyond Acciona’s pleaded case and that, as a result, the Court’s consideration of ground (4) should be limited to V10 - Lift Shaft Progress Claim 2 and V16 - EWP Cost. At the hearing, Chess Engineering did not press this submission and dealt with the arguments raised by ground (4) in relation to the five variations referred to, as I have in these reasons.

25. At the hearing, there was also a dispute about Acciona’s submission that the Adjudicator’s decision involved jurisdictional error as he had regard to matters extraneous to those set out in s 22(2) of the SoP Act. Chess Engineering objected to that submission on the basis that it was a new ground of challenge. I deal with that issue as part of my consideration of V9 - Lift Shaft Progress Claim 1, at [84] to [95] below.

26. Acciona’s list statement raised a further ground of challenge to the Determination that the Adjudication Application had not been served in accordance with s 17(5) of the SoP Act. That ground was not pressed at the hearing.

27. Acciona submits that each of the matters referred to in grounds (1), (2), (4) and (5) involve jurisdictional error on the part of the Adjudicator. It also contends that the jurisdictional errors referred to in grounds (1) and (2) involved the Adjudicator denying it procedural fairness.

28. While accepting that some of the complaints raised in respect of certain variations are not significant, Acciona submits that the errors evince a pattern of treatment by the Adjudicator that should lead the Court to conclude that he failed to discharge his obligations under the SoP Act in respect of the whole of the Determination, thereby rendering it void.

Legal principles

29. Judicial review of an adjudicator’s determination is available but only for jurisdictional error on the part of an adjudicator: Probuild Constructions (Aust) Pty Ltd v Shade Systems Pty Ltd (2018) 264 CLR 1; [2018] HCA 4 (Probuild Constructions) at [2], [29].

30. A jurisdictional error is an error in a statutory decision-making process, involving a failure by the decision maker to comply with one or more statutory pre-conditions to an extent which results in a decision which has been made in fact lacking the characteristics necessary for it to be given force and effect by the statute pursuant to which the decision-maker purported to make it. A decision involving jurisdictional error is that which has been made “outside jurisdiction” and is properly to be regarded for the purposes of the law pursuant to which it was purported to be made as “no decision at all” and therefore “invalid” or “void”. A decision made within jurisdiction is a decision which sufficiently complies with the statutory pre-conditions and conditions: Hossain v Minister for Immigration and Border Protection (2018) 264 CLR 123; [2018] HCA 34 at [23], [24].

29. An adjudicator’s ultimate function is to determine the amount and timing of a progress payment: SoP Act, s 22(1); Probuild Constructions at [80].

30. In performing that function, an adjudicator must have regard to the matters, and only the matters, set out in s 22(2) of the SoP Act. Relevantly, those matters are:

(a)the provisions of the SoP Act,

(b)   the provisions of the construction contract from which the application arose,

(c)   the payment claim to which the application relates, together with all submissions (including relevant documentation) that have been duly made by the claimant in support of the claim,

(d)   the payment schedule (if any) to which the application relates, together with all submissions (including relevant documentation) that have been duly made by the respondent in support of the schedule,

(e)   the results of any inspection carried out by the adjudicator of any matter to which the claim relates.

33. In this case, the issues are whether the Adjudicator exercised his function conferred under s 22(1) of the SoP Act to determine the “amount of the progress claim” and the requirements of s 22(2) of the SoP Act that he consider the “payment schedule…together with all submissions…duly made”.

34. The obligation in s 22(2) to consider the matters listed requires an adjudicator to undertake a process of evaluation sufficient to warrant the description that the matter has been considered in the particular context and not merely a formalistic reference to those matters: CockramConstruction Ltd v Fulton Hogan Construction Pty Ltd (2018) 97 NSWLR 773; [2018] NSWCA 107 (Cockram) at [41] citing Weal v Bathurst City Council (2000) 11 LGERA 181; [2000] NSWCA 88 at [80]; Azriel v NSW Land & Housing Corporation [2006] NSWCA 372 at [49].

35. If a question arises as to whether an adjudicator failed to consider or have regard to a matter expressly identified in s 22(2), that will be the ground of review. No question of good faith will normally arise in such a circumstance and care must be taken to avoid straying into impermissible merits review by looking to whether a decision maker has given proper, genuine and realistic consideration of the matters to which regard must be had: Goodwin Street Developments Pty Ltd v DSD Builders Pty Ltd (2018) 98 NSWLR 712; [2018] NSWCA 276 (Goodwin) at [23], [24], [29].

36. When looking at an adjudicator’s reasons to ascertain whether a matter has been considered, the scheme of the SoP Act is to be taken into account. The scheme provides what has been referred to as a “rough and ready procedure for the determination of interim rights”. Adjudicators are required to provide reasons for their determinations under s 22(3) of the SoP Act but they should not be viewed through the prism of legal concepts or with a “fine tooth comb”. There is no requirement in s 22(3) of the SoP Act for an adjudicator to use legally correct language and it is unrealistic to expect that their reasons will treat minutely and in detail each and every aspect of a parties submissions or the evidence. An adjudicator does not need to refer to all material before rejecting a claim and a refusal to give weight to particular material does not demonstrate that a decision maker failed to consider what was required: Iskra v MMIR Pty Ltd [2019] NSWCA 126 (Iskra) at [49]; Cockram at [17]; Goodwin at [23], [24]; JKC Australia LNG Pty Ltd v Inpex Operations Australia Pty Ltd (2018) 334 FLR 314; [2018] NTCA 6 at [38].

37. Given the function conferred by s 22(1) and the requirement of s 22(2) to “consider the following matters only”, an adjudicator is limited to acting on their own understanding of the matters referred to, such as the contractual obligations and the payment claim: Icon Co (NSW) Pty Ltd v Australia Avenue Developments Pty Ltd [2018] NSWCA 339 (Icon) at [16].

38. The determination of the content of a payment claim, the nature and scope of a payment schedule, what a payment schedule indicates are the reasons for the scheduled amount being less than the claimed amount and whether a submission was duly made are matters for an adjudicator to determine. A mistaken or erroneous decision by an adjudicator about those matters does not involve jurisdictional error and will not invalidate a determination. It is not for the Court to objectively determine those matters or whether an adjudicator was correct in forming their opinion on them if they were lawfully made: Icon at [13]-[16], [27]; Iskra at [50]-[52]; Perform (NSW) Pty Ltd v Mev-Aust Pty Ltd [2009] NSWCA 157 (Perform) at [67]; John Holland Pty Ltd v Roads and Traffic Authority of New South Wales [2007] NSWCA 19 (John Holland) at [57]; Downer Construction (Aust) Pty Ltd v Energy Australia (2007) 69 NSWLR 72; [2007] NSWCA 49 (Downer Construction) at [86].

39. An adjudicator’s finding with respect to matters of fact or errors of law are also within jurisdiction and will be unreviewable: Icon at [15].

40. An adjudicator is obliged to come to a view as to what is properly payable and cannot accede to a payment claim without considering the merits of the claim. The applicable principles were summarised by Stevenson J in Laing O’Rourke Australia Construction Pty Ltd v Monford Group Pty Ltd [2018] NSWSC 491 (Laing O’Rourke v Monford) at [1]-[5] as follows:

[1]An adjudicator making a determination under the Building and Construction Industry Security of Payment Act 1999 (NSW) (“the Act”) has a “duty…to come to a view as to what is properly payable” on, relevantly, the “true merits of the claim” (Coordinated Construction Co Pty Ltd v J.M. Hargreaves (NSW) Pty Ltd (2005) 63 NSWLR 385; [2005] NSWCA 228 at [52] (Hodgson JA) (Ipp and Basten JJA agreeing)).

[2]   The mere absence of material adduced on behalf of a respondent to an adjudication application does not, without more, mean that an adjudicator can simply award the amount of the claim without addressing its merits.

[3]   As Brereton J said in Pacific General Securities Ltd v Soliman & Sons (2006) 196 FLR 388; [2006] NSWSC 13 at [82]:

“…the absence of [material put forward by the respondent] does not entitle the adjudicator simply to award the amount of the claim without addressing its merits, which as a minimum will involve determining whether the construction work identified in the payment claim has been carried out, and what is its value.”

[4]   An adjudicator who acts otherwise, has not performed [their] statutory function and [their] determination must be set aside.

[5]   These principles have been applied on numerous occasions both in this state and elsewhere: see Asian Pacific Building Corp Pty Ltd v Aircon Duct Fabrication Pty Ltd [2010] VSC 300 at [12] (Vickery J), McNab Developments (Qld) Pty Ltd v MAK Construction Services Pty Ltd [2013] QSC 293 at [8] (Mullins J), and Richard Crookes Construction Pty Ltd v CES Projects (Aust) Pty Ltd (No 2) [2016] NSWSC 1229 at [19]-[20] (McDougall J).

41. A jurisdictional error may result in a failure by an adjudicator to provide procedural fairness or deny a party natural justice, although an adjudication determination will not be set aside for a denial of procedural fairness or natural justice unless the denial is material: Brodyn Pty Ltd v Davenport (2004) 61 NSWLR 421; [2004] NSWCA 394 (Brodyn) at [57]; TWT Property Group Pty Ltd v Cenric Group Pty Ltd [2020] NSWSC 72 (TWT v Cenric) at [111]. A denial of procedural fairness or natural justice will not be material if submissions which an adjudicator did not consider could not have induced an adjudicator to come to a different view: Laing O’Rourke v H&M at [26], [27].

42. The Court needs to consider the nature, gravity and effect of the errors, if any are made, to determine whether what occurred worked practical injustice sufficient to vitiate a determination: Trysams Pty Ltd v Club Constructions (NSW) Pty Ltd [2007] NSWSC 941 (Trysams) at [33], [34].

V2 – Extra Billing due to Design Changes (V2)

43. The issue before the Adjudicator related to Acciona’s claim for two credits in respect of V2.

44. In the Payment Claim, Chess Engineering claimed an amount of $115.00, having previously claimed and been paid an amount of $31,510.00 in relation to V2. In the Payment Schedule, Acciona reassessed the previous claim for V2 and sought to withhold payment of $31,718.20, made up of two credits of $14,798.20 and $16,920.00. In the Adjudication Application, Chess Engineering did not press its claim of $115.00 and accepted that Acciona was entitled to a credit of $16,920.00 for the “column design change”.

45. The Adjudicator dealt with V2 at [178] to [192] of the Determination. He concluded that Acciona was entitled to the credit of $16,920.00 but not to the other credit of $14,798.20: at [192].

Grounds (2) and (3) – Did the Adjudicator fail to consider Acciona’s submissions and deny it procedural fairness?

46. Acciona takes issue with the Adjudicator’s comments at [188] where he states:

In the [Adjudication Response], [Acciona] has provided extensive submissions in relation to this claim. [Acciona] agrees that the parties eventually agreed that the subject work was to be valued at costs plus 15% margin.

47. Acciona submits that the Adjudicator’s last statement is simply wrong and that the Adjudicator could not have made it if he had considered Acciona’s Adjudication Response submissions which, it contends, clearly asserted to the contrary, akin to the position in TWT v Cenric. It also submits that the Adjudicator’s reference to Acciona having provided “extensive submissions in relation to this claim” supports this view, in the context where its Adjudication Response submissions on V2 relevantly comprised only 13 paragraphs.

48. In TWT v Cenric, an adjudicator concluded that a payment claim was not valid because it appeared to be common ground that the only work undertaken during the 12 months preceding the claim was excavation of sandstone (which was correct) and also common ground that the payment claim did not include any amount for sandstone excavation. This last aspect was wrong; the adjudicator was incorrect to conclude that the payment claim did not include any amount for sandstone excavation or that it was common ground.

49. Stevenson J was of the view that the adjudicator’s conclusion that it was common ground that the payment claim did not include sandstone excavation must have been from a failure to consider the claimant’s submissions at all rather than a mere misunderstanding of them: at [86], [112]. This was because of clear statements to the contrary contained within the payment claim and the submissions, including in further submissions made in response to a request from the adjudicator: at [108], [109] and [112]. His Honour was also of the view that the adjudicator’s failure to consider the submissions amounted to a material breach of natural justice as, had the Adjudicator considered the submissions, he was bound to have come to a different view on whether, as a matter of fact, the excavation work had been carried out in the previous 12 months, and that it was procedurally unfair for the adjudicator to say that it was “common ground” that the payment claim did not include any amount for sandstone excavation, when it was plainly not: at [113], [114]. His Honour said that, had it been necessary to deal with the determination, he would have found it to be void for those reasons: at [115].

50. Chess Engineering submits that a fair reading of [188] in the context of the other paragraphs of the Determination does not establish error by failing to consider Acciona’s submissions but indicates that the Adjudicator, rightly or wrongly, accepted Ms Haddo’s evidence that Acciona had agreed to the works being valued at costs plus 15% over Acciona’s competing submissions. It submits that it was open to the Adjudicator to accept Ms Haddo’s evidence and, even if the Adjudicator was wrong in accepting her submission, that was an error within jurisdiction as it was a matter for the Adjudicator to decide which competing submission to accept.

51. I find it difficult to accept Chess Engineering’s contention that the Adjudicator’s statement in the second sentence of [188] indicates that the Adjudicator accepted Ms Haddo’s evidence that the method of valuation of the works was agreed rather than a statement of what was submitted to him by Acciona. The sentence sets out what Acciona “agrees” after a reference to Acciona’s submissions.

52. In its Adjudication Response, Acciona submitted that V2 related to items A and C of Variation Order 1 of the sub-contract and that Chess Engineering claimed it as a separate variation (at [6.2]). It also asserted that it was agreed that Chess Engineering would be entitled to a variation for Item A (Additional Drilling and Detailing Work) and Acciona would receive a credit for Item C (at [6.4]), and it had paid the amount of $31,510.00 for V2 by mistake and “not in accordance with the parties agreement in Variation No 1”: at [6.8]. It also submitted that Chess Engineering’s assertion that V2 comprised two elements, being an invoice totalling $27,400.00 and 15% margin, was incorrect because “Item A in Variation Order 1 is a lump sum item… not an item that was subject ot (sic) be paid on a cost plus basis… and [Chess Engineering] cannot charge a margin of 15% on a lump sum item”: at [6.11], [6.12].

53. Given their overall effect was to contend that V2 related to Item A of Variation Order No 1, which was not valued at costs plus 15%, the Adjudicator’s statement at [188] that “[Acciona] agrees that the parties eventually agreed that the subject work was to be valued at costs plus 15% margin” is at odds with Acciona’s Adjudication Response submissions at [6.11] and [6.12].

54. That said, I am not persuaded by Acciona’s submission that the statement at [188] demonstrates that the Adjudicator failed to comply with the requirement in s 22(2) to consider Acciona’s submissions. In my view, the Adjudicator’s reasons indicate that he rejected Acciona’s claim to a credit to the full amount sought and limited it to $16,920.00 having considered and weighed up the competing contentions of the parties and what he understood to be Acciona’s submissions on the issues.

55. At [183], the Adjudicator refers to Acciona’s claims to the two credits in the Payment Schedule against V2. He sets out, correctly, that the basis of the credit claimed of $14,796.20, [1] for “Drilling and Detailing Work”, was that Chess Engineering had “overclaimed the agreed valuation of this item of works. Refer to Item C of Variation Order 1”. He also notes that Acciona had not explained how it calculated the alleged overclaimed amount for that item.

    1. This appears to be a typographical error, as the Payment Schedule refers to a credit claimed in the amount of $14,978.20. The difference is not material to these reasons.

56. At [185] to [187], the Adjudicator refers to Ms Haddo’s statement about the claim and the documents that support it, including the invoices from [Tek]. He refers to Chess Engineering’s assertion that it claimed amounts on the basis of costs plus 15%, in the same way that the other variations had been priced and consistent with how Variation Order 1 required provisional sums to be valued, and noted that it maintained an entitlement to retain the amount claimed less the conceded credit. The Adjudicator also referred to Ms Haddo’s understanding, from reviewing the previous payment schedules, that Acciona had valued the works on the basis of a quote and invoices plus 15% and her evidence that Acciona’s attempt to re-assess the value was not accurate: at [180] and [181].

57. The Adjudicator refers to Acciona’s submissions at [188] and what he understood the agreed position to be as to how the works were to be valued. The paragraph that follows [188] indicates that the Adjudicator examined Variation Order 1 in relation to the asserted overclaim, considered both of Items A and C and concluded that “Drilling and Detailing work” appears to be covered by Item A allowing for a lump sum of $16,711.80: at [189]. Relevantly, Variation Order 1, Items A and C, and lump sum costing were matters raised in the Adjudication Response submissions (at pages 33 and 34) as relating to V2.

58. The Adjudicator then refers to and repeats arguments from Acciona’s “detailed submissions” at pages 27 to 34: at [190].

59. The Adjudicator’s reference to “Acciona’s detailed submissions” at pages 27 to 34 suggests he misunderstood the nature and scope of Acciona’s Adjudication Response submissions on V2. Pages 33 and 34 deal with V2, whereas pages 27 to 32 deal with “Annexure H – Costs Plus Works” and Variation Order 2 which were more relevant to other variations (V9 and V10). In my view, that misunderstanding might explain the Adjudicator’s reference to Acciona’s “extensive” submissions in [188]. It also might explain his statement that “Acciona agreed that the parties eventually agreed that the subject work was to be valued at cost plus 15% margin”, given the references to Acciona’s proposal and agreement to pay costs plus 15% for Variation Order 2 at [5.77.d.] and [5.79] on pages 27 and 28 of the Adjudication Response submissions.

60. The fact that Acciona had previously paid V2 on the costs plus 15% basis, the reference in the Payment Schedule to an overclaim in respect of the “agreed valuation of this item of works”, and the reference in Acciona’s Adjudication Response submissions (at pages 33 and 34) to “the parties agreement in Variation No. 1”, are also matters that provide some foundation for the Adjudicator’s view in [188] that Acciona agreed that the parties eventually agreed that the works were to be valued at cost plus 15%.

61. In light of those matters, unlike the position in TWT v Centric, I do not consider that the Adjudicator’s statement at [188] indicates that he must have failed to consider Acciona’s submissions at all. Even accepting it indicated an error on the part of the Adjudicator, to my mind, that error is more properly characterised as an incorrect view of Acciona’s submissions and arguably one that was open to him to make. A mistaken or erroneous view of a submission or accidental omission of a particular submission does not invalidate an adjudicator’s decision. The duty on the Adjudicator was to consider submissions and come to his own understanding of them, not to understand them correctly: Icon at [16]; Perform at [67]; John Holland at [55].

62. In my view, the Adjudicator’s reasons demonstrate that he had regard to the submissions of Chess Engineering and Acciona, formed a view about what they were arguing and knew what was in dispute, namely whether Acciona was entitled to a full refund for the V2 works. He concluded that Acciona was not entitled to the full credit because the work had been done, Acciona had previously been content to pay for the work and Acciona had contended there had been an overclaim but did not say what amount Chess Engineering was entitled to be paid: at [191]. Having done so, any misunderstanding as to Acciona’s submissions did not constitute a jurisdictional error. Nor, in my opinion, did it result in any lack of procedural fairness to Acciona upon which the Determination could now be squashed.

V08 – Powdercoating (V8)

63. V8 was not part of the Payment Claim. The dispute before the Adjudicator arose because Acciona had reassessed Chess Engineering’s prior claims for payment of V8, in respect of which an amount of $100,335.92 had previously been scheduled and paid. In the Payment Schedule, Acciona claimed a credit for $13,425.11 in relation to V8.

64. The Adjudicator determined that Acciona was not entitled to a credit or set off for the amount of $13,425.11. He dealt with the dispute as follows:

207.    No claim was made for this Variation in the Payment Claim. [Acciona] has previously scheduled an amount of $100,335.92 for this Variation, which was for the costs incurred, pursuant to invoices submitted by [Chess Engineering], at Tab 53 of the [Adjudication Application], plus 15% margin.

208.    I can find no reference to this purported set-off in either Annexure A or Annexure F of the payment schedule. No reason is given in support of the claim for set-off in the payment schedule that I can locate. I cannot see where it was in the payment schedule that [Chess Engineering] was able to identify the alleged set-off amount claimed. [Chess Engineering] says no reason was given in support of the claim.

209. [Acciona] is precluded by section 20(2B) of the [SoP] Act from pursuing this set-off in the [Adjudication Response] as no reasons were given in support of it in the payment schedule.

Grounds (1) and (3) – Did the Adjudicator fail to consider the Payment Schedule and deny Acciona procedural fairness?

65. Acciona submits that the Adjudicator’s statements that there was no reference in Annexures A and F to the claim or reasons for it at [208] betray a failure by him to consider the Payment Schedule at all as Annexure F of the Payment Schedule identified the “back charge” claim for $13,425.11 and the reasons as a re-assessment of Chess Engineering’s claim “as per below line items”.

66. Annexure A does not refer to the amount of -$13,425.11 or to any reasons for the claim, so the Adjudicator’s statement in [208] is not wrong to that extent.

67. Annexure F lists five invoices totalling $86,910.81 and identifies a subtotal for the “scheduled amount” and “difference” as -$13,425.11. It also lists the reasons as Acciona having undertaken a “reassessment” of the claim, that Chess Engineering’s invoices had been assessed on a cost plus 15% basis as per Variation Order 1, and refers to cl 33.8 of the sub-contract pursuant to which the issue of a payment certificate or making of a payment will not be evidence of the value of the work or admission of liability or evidence that work has been executed satisfactorily.

68. In light of Annexure F’s contents, it is hard to reconcile the Adjudicator’s conclusions in [208] that he could not find any reference to Acciona’s purported claim or the reasons for it in the Payment Schedule with Annexure F.

69. That said, I am not persuaded that the Adjudicator’s reasons, including his statements in [208], indicate that he erred in a jurisdictional sense by failing to consider the Payment Schedule. This is for the following reasons.

70. The starting position is that the express references to Annexures A and F in [208] indicate to me that the Adjudicator had regard to the Payment Schedule, rather than not considering it at all.

71. The Adjudicator’s conclusion that he could find no reference to the “purported set-off” or to the reasons for it in the Payment Schedule also makes more sense when regard is had to the reasons given for Acciona’s claim in the Adjudication Response submissions.

72. The Adjudication Response submissions do not refer to Annexure F. They identify the amount of $13,424.69 as the “difference” and submit that the Adjudicator should determine Acciona is entitled to an amount of $13,425.00. They identify that Acciona has reassessed V8 and dispute Chess Engineering’s entitlement to the claim because an invoice for $11,673.64 had never previously been provided to Acciona (Adjudication Response at [6.77] and [6.78]) and rely on an asserted right of set off under clause 33.9 of the sub-contract to recover the claimed amount (Adjudication Response [6.81]). As Annexure F does not refer to a right of set off pursuant to clause 33.9 of the sub-contract, to the amount of $11,673.00 or $13,424.69, or to a lack of an invoice being provided to substantiate the claim, the Adjudicator’s statements that he could not identify the alleged set-off or the reasons for it in Annexure F have some logic and could not, in my view, be characterised as only being open to him having failed to consider the Payment Schedule at all.

73. The discrepancies between the reasons in Annexure F and the Adjudication Response submissions also go some way to explain the Adjudicator’s view that Acciona was precluded by s 20(2B) of the SoP Act from pursuing the “set off” in the Adjudication Response as no reasons were given in the Payment Schedule.

74. While not determinative, as Chess Engineering submits, the Adjudicator’s conclusion that he could find no reference to the set off or reasons for it is also perhaps not surprising having regard to the issues relating to the format and presentation of the Payment Schedule identified by the Adjudicator, as referred to at [16] and [21] above.

75. All of the above matters lead me to conclude that the Adjudicator formed his own understanding about the Payment Schedule and that any error on his part in not being able to identify the “back charge” claim or the reasons for it should be characterised as a misunderstanding of the scope and nature of the Payment Schedule and the Adjudication Response submissions, rather than reflecting a failure by him to consider the Payment Schedule at all.

76. The Adjudicator may have been wrong to come to the view that he did on what the Payment Schedule indicated as Acciona’s claim for the back charge and the reasons for it, but any errors he made about those matters were within the exercise of his function. In my view, any erroneous decision about those matters did not involve jurisdictional error or constitute a denial of procedural fairness and will not invalidate the Determination: Perform at [67], Icon at [13]-[16].

Ground (5) – Did the Adjudicator misconstrue s 20(2B) of the SoP Act?

77. Section 20(2B) of the SoP Act provides:

The respondent cannot include in the adjudication response any reasons for withholding payment unless those reasons have already been included in the payment schedule provided to the claimant.

78. In written submissions, Acciona contended that the Adjudicator misconstrued s 20(2B) by declining to consider the credit claimed by Acciona for the reason that he could not see where it was in the Payment Schedule that Chess Engineering was able to identify “the alleged set off amount claimed”. It argued that the Adjudicator’s reference to “amount claimed” indicates that the Adjudicator was of the view that the claim could not be considered unless the Adjudication Response claimed a credit for the very same amount claimed in the Payment Schedule; in this case the amount of credit claimed for V8 in the Adjudication Response was 42c less than the amount referred to in the Payment Schedule. Acciona submitted that such an approach involved a serious misunderstanding of s 20(2B) as the section refers to the “reasons” for withholding payment and the Adjudication Response is constrained by those reasons, rather than by a difference in the amounts claimed.

79. As Acciona’s Senior Counsel did not address this ground during oral submissions, it is not clear whether it continues to be pressed. I have, however, considered its written submissions on the issue and do not accept them.

80. I do not agree that it is apparent that the Adjudicator declined to consider the claim because he formed the view that there was some discrepancy between the amounts claimed in the Payment Schedule and Adjudication Response submissions. In my view, the Adjudicator’s reference in [208] to “no reasons given” in support of the purported set off in the Payment Schedule indicates otherwise, as do his references to “reasons”, rather than an amount in [209].

81. The Adjudicator’s understanding that no reasons were given in the Payment Schedule may have been incorrect but it resulted in a decision that correctly applied s 20(2B), namely that Acciona could not pursue the claim for the reasons outlined in the Adjudication Response submissions, rather than misconstruing the section.

V9 – Lift Shaft Progress Claim 1 (V9)

82. V9 relates to the works to supply the lift shafts pursuant to Variation Order No 2.

83. Acciona scheduled $35,509.82 against Chess Engineering’s claim of $266,675.25. The Adjudicator found that Chess Engineering was entitled to $180,049.51 relating to a component described as “Cost Plus Works”, but not to two other components described as “Management Cost” (of $81,950.74) and “Broken Panel” (of $4,675.00): at [223].

Threshold issue – new ground of challenge

84. In its list statement and written submissions, Acciona raised two grounds of challenge in relation to V9. The first that the Adjudicator erred by failing to consider Acciona’s submissions. The second that the Adjudicator accepted Chess Engineering’s claim because he did not agree with Acciona’s scheduled amount, thereby failing to properly assess the merits of Acciona’s claim.

85. At the hearing, Acciona’s case changed. Acciona’s Senior Counsel accepted that the Adjudicator had considered Acciona’s submissions (T15:17-18 and T16:34-5). He maintained that the Adjudicator failed to assess Acciona’s claim (as per the second ground) and raised another contention, being that the Adjudicator introduced extraneous considerations of “reasonableness” and “the interim nature of the payment” into his decision making. Acciona submitted that those extraneous matters went beyond the matters in s 22(2) of the SoP Act to which he could have regard and that, by considering them, the Adjudicator erred in a jurisdictional sense.

86. In support of that submission, Acciona’s Senior Counsel relied on the observations of White JA in Northbuild Construction Pty Ltd v Central Interior Linings Pty Ltd [2012] 1 Qd R 525; [2011] QCA 22 at [79]:

The “only” matters which an adjudicator may consider in reaching a decision are the provisions of the Payments Act, the terms of the construction contract, the payment claim and response and all submissions properly made so that if the adjudicator departed from that list and considered, for example, what he regarded as a “fair thing” he would have made a decision without authority and, if he truly disregarded a claimant’s submissions, his decision would not be one envisaged by the Payments Act.

87. Senior Counsel for Chess Engineering objected to Acciona’s ‘third’ contention, arguing that no claim had been advanced in the list statement that the Determination was invalid because the Adjudicator had gone beyond what was required by s 22(2) of the SoP Act.

88. In reply, Acciona’s Senior Counsel submitted that the contention being advanced was within the scope of paragraphs 13, 14 and 15 of its list statement and that, in any event, Chess Engineering was able to deal with the submissions during the course of the hearing.

89. The Court must exercise its discretions consistent with what the dictates of justice require, the obligations imposed on the Court by ss 56 and 58 of the Civil Procedure Act 2005 (NSW) (CPA) and bearing in mind the overriding purpose specified in s 56, namely, to facilitate the just, quick and cheap resolution of the real issues in the proceedings.

90. In its list statement, Acciona asserts that the Adjudicator failed to consider the Adjudication Response in breach of s 22(2)(d) of the SoP Act (at [13]); failed to provide procedural fairness for that reason (at [14]); and erred by asking the wrong question and/or failing to form a view as to what was properly payable by deciding that amounts were payable to Chess, not because he accepted its claim, but because he rejected Acciona’s case (at [15]). Acciona’s written submissions in chief and in reply adopt these three grounds. Relevantly, the list statement and Acciona’s written submissions do not particularise or refer to matters extraneous to s 22(2) of the SoP Act as factors taken into account in error by the Adjudicator.

91. In this case, the new contention relates to V9, a variation identified by the list statement as the subject of dispute. The Adjudicator’s reasoning at [223], which refers to “the interim nature of the payment”, was a paragraph that had been identified as being in issue in the proceedings, having been referred to in the list statement (at [13] to [15]), in Acciona’s written submissions in chief (at [31] to [33] and [49] to [50]) and in submissions in reply (at [14] and [23]). I am also satisfied that Chess Engineering’s Senior Counsel was able to deal with Acciona’s submission about the impact of the Adjudicator’s reference to “the interim nature of the payment” during the course of the hearing: T40:11-21;T46:32-36.

92. The extraneous matter of “reasonableness” seems to me to raise different considerations. The paragraph of the Determination relied on by Acciona as introducing the notion of “reasonableness” (namely [219]) was not referred to in the list statement or in submissions in chief. It was referred to in Acciona’s submissions in reply but as part of a group of paragraphs in the Determination (at [218] to [220]) that were said not to disclose active intellectual engagement with Acciona’s submissions (Reply Submissions at [14]).

93. Chess Engineering’s Senior Counsel objected to the new contention (T30:21) and did not deal, in a substantive way, with Acciona’s submission that [219] indicated that the Adjudicator took into account the notion of “fairness” as an extraneous matter. Rather, he made oral submissions in relation to V9 in response to the grounds raised in the list statement and written submissions that the Adjudicator failed to consider material and form a view as to the value of the works, including by reference to [219]: T39:1-47; T40:1-9; T46:1– 23.

94. In light of the above, there is force to, and I accept, Chess Engineering’s submission that Acciona’s claim that the Adjudicator erred by introducing an extraneous consideration of “reasonableness” into his decision making is a new contention and should not be entertained by the Court.

95. It was incumbent on Acciona to identify the real issues in dispute and enable Chess Engineering to know the nature of the case that would be put against it prior to the hearing. As it did not do so, it would not, in my view, be consistent with the dictates of justice to allow Acciona to rely on a new and separate ground of challenge to V9 that the Adjudicator erred by introducing the extraneous consideration of “reasonableness” into his decision making. Accordingly, I uphold Chess Engineering’s objection to that ground and decline to consider it.

96. While coming to that view, I note that, for the reasons set out below, I have concluded that the Adjudicator did not fail to consider Acciona’s submissions in relation to V9 and that his reference to “reasonableness” in [223] had some foundation based on the materials before him.

Grounds (2), (3) and (4) – Did the Adjudicator fail to consider Acciona’s submissions, deny it procedural fairness or fail to form a view as to what was properly payable?

97. The dispute before the Adjudicator in relation to V9 concerned the Cost Plus Works component of the claim.

98. The Adjudicator deals with V9 at [210] to [223]. At [214] to [217], the Adjudicator refers to the reasons given in the Payment Schedule in relation to each of the components of the claim and notes that Acciona’s reasons in relation to “Costs Plus Work” refer to an assessment of labour rates, found at Annexure K, and reliance on clause 29.1(c) of the sub-contract.

99. At [219], the Adjudicator states:

Having regard to that material, I cannot see any justification for [Acciona’s] very low assessment of the value of these works. The costs claimed appear to me to be reasonable, having regard to the amount of work required to complete this Variation.

100. At [221] to [223], the Adjudicator states:

221.    In the [Adjudication Response] submissions from page 44 to page 52, [Acciona] deals with its three separate categorisations of this claim to argue that [Chess Engineering] has failed to substantiate its costs by failing to provide verification as required; failed to apply reasonable rates, in accordance with the provisions of the [sub-contract]; claimed categories of costs, such as management costs, to which it has no entitlement under the [sub-contract] and, finally, claimed for replacement of a broken panel that it or its sub-contractors damaged.

222.    I am not persuaded to accept [Acciona’s] submissions, submissions that I may take into account, in relation to the argument that the amount previously paid together with the scheduled amount is adequate remuneration for the work completed by [Chess Engineering]. I do not accept that, for the work performed, the amount scheduled is adequate recompense. I do however accept that [Chess Engineering] is not entitled to charge “Management Costs” separately. I accept that pursuant to Schedule 4, those costs are not payable under Variation Order No.2.

223.    In the absence of an assessment from [Acciona] which I regard as reasonable, for the purposes of an interim payment under the [SoP] Act, I am satisfied that [Chess Engineering] is entitled to the amount claimed for “Cost Plus Works” but not the amounts claimed for “Management Cost” and “Broken Panel”; an amount of $180,049.51.

101. The essence of Acciona’s submission is that the Adjudicator erred by accepting Chess Engineering’s claim for Costs Plus Works having formed a view that the amount Acciona scheduled for the works was not an adequate or reasonable amount which was sufficient for the purposes of an interim payment under the SoP Act.

102. Acciona contends that the Adjudicator’s approach led to him to fail in his statutory duty to consider the matters referred to in s 22(2) and come to a view on the claim having assessed the merits and its value. As indicators of the Adjudicator’s failures, Acciona points to the Adjudicator’s references to what was “reasonable” in [219]; the amount scheduled by Acciona as not being “adequate” remuneration in [222]; the lack of any cross-reference to contractual allowances in Ms Haddo’s statement compared to Acciona’s contention of a contractual rate; and the Adjudicator’s reference to an absence of any assessment that he regarded as “reasonable” in [223].

103. I do not accept Acciona’s submission on this variation. In my view, when read as a whole, the Adjudicator’s reasons indicate that he considered and assessed the competing submissions including Acciona’s, and accepted Chess Engineering’s claim for Cost Plus Works having determined that the work had been carried out and its value as he was required to do, and not simply because he rejected Acciona’s submissions.

104. The Adjudicator formed a view that the V9 works had been undertaken and the basis on which they were to be valued, namely an agreed basis of cost plus 15% margin: at [210]. He satisfied himself as to how the costs were calculated, by reviewing Ms Haddo’s account and the schedules of labour costs and breakdown: at [218]. He satisfied himself that the claim reflected the cost to Chess Engineering of the labour employed in performing the variation works and that Acciona’s costs calculation did not, by reference to Ms Haddo’s statement: at [218] and [220]. In addition to identifying the basis on which Chess Engineering calculated and valued the cost components and labour rates relied on, Ms Haddo’s statement refers to the contractual basis for the claimed rates, namely Variation Order No 2, schedule 4, which the Adjudicator also considered. The Adjudicator also had regard to and applied the claim in accordance with the sub-contract having determined that cl 29.1(c) had no application as the costs did not relate to a time related claim: at [220].

105. In addition to these matters, and as Acciona’s Senior Counsel accepted at the hearing, the Adjudicator considered and rejected Acciona’s materials and submissions, as he was entitled to do so. The Adjudicator’s rejection of Acciona’s submissions included its contentions that the labour rates claimed by Chess Engineering were “excessive” and “unreasonable” and not in accordance with Variation Order No 2. In that context, I do not consider that the Adjudicator’s references to the costs claimed as appearing to be “reasonable” having regard to the work done, to Acciona’s scheduled amount not being “adequate” or to the absence of an assessment that he regarded as “reasonable” are indicative of the Adjudicator being informed by some extraneous notion of fairness, as Acciona submits. While those words may not be legally apt, they should be read through the prism of language used by a lay decision maker dealing with and responding to Acciona’s submissions that Chess Engineering’s rates were “excessive” and “unreasonable”. Their use does not evince error of a jurisdictional nature on the part of the Adjudicator but reflects, in my view, his determination of which rates were, and were not, reasonable and properly payable having considered the competing submissions about their quantification by reference to Variation Order No 2 and other sub-contract terms.

101. As to the use by the Adjudicator in [223] of the words “for the purposes of an interim payment under the Act”, to my mind, that phrase is no more than a short-hand recognition by the Adjudicator of the statutory context of the claim, consistent with his acknowledgement at [119]. I do not consider his adoption of those words in relation to V9 or other of Chess Engineering’s variation claims (at [206], [238], [251], [264], [269], [274] and [278]) and Acciona’s set off claims (at [283] and [287]) to indicate that the Adjudicator introduced some extraneous matter to his decision making to which he was not entitled to have regard.

102. The Adjudicator was satisfied of Chess Engineering’s entitlement to the amount claimed for V9. That satisfaction was arrived at after expressly directing his attention to the matters required for consideration in accordance with s 22(2) of the SoP Act and having determined the value of the Costs Plus Works component of V9 in accordance with the agreement between the parties and the relevant materials that calculated the value of those works.

103. It follows that I do not consider that the Adjudicator made any jurisdictional error or denied Acciona procedural fairness in the way he dealt with V9.

V10 – Lift Shaft Progress Claim 2 (V10)

109. V10 is also a claim in relation to work on the lift towers; namely the installation of the lift shaft components pursuant to Variation Order No 2.

110. Acciona scheduled $122,657.65 against the claim of $278,886.40, leaving $156,228.75 in dispute. The Adjudicator found that Chess Engineering was entitled to payment of $268,577.13, which represented the claimed amount less $15,219.48 for “Surveying Issues” plus an amount of $4,910.10 for Elevated Work Platforms (EWP) costs: at [234] and [238].

111. The Adjudicator dealt with V10 at [224] to [238]. He referred to the difficulties in interpreting the Payment Schedule. As he was unable to satisfy himself of the amount scheduled, he accepted the parties submissions that Acciona had broken up the claim into components in Annexures C, G, H and J, the largest of which was under Annexure H, “Cost Plus Works”: [225] to [227].

112. The Adjudicator refers to the reasons for the scheduled amount, noting that the reasons in relation to “Costs Plus Work” refer to an assessment of labour rates found at Annexure K, a lack of substantiation verifying whether the costs were incurred and excessive labour calculations: [228] to [232].

113. The Adjudicator deals with the “Surveying Issues” at [234] and EWP costs at [235] and [236].

114. At [237]-[238], the Adjudicator said:

[237]   I have read [Acciona’s] submissions on the “Cost Plus” component of the claim at pages 56-59 of the [Adjudication Response] Submissions. Whatever the merits of these submissions, I am not satisfied that the amount scheduled by [Acciona] reflects [Chess Engineering’s] entitlement under the [sub-contract] or reasonable recompense for its work.

[238]   Accordingly, I am satisfied that, for the purposes of an interim payment under the [SoP] Act, [Chess Engineering] is entitled to be paid the amount claimed, including the scheduled amount, less the component for “Surveying Issues”, plus allowed “EWP Costs” of $4,910.10; a total of $268,577.13.

Ground (4): Did the Adjudicator fail to form a view as to what was properly payable?

115. Acciona contends that the Adjudicator erred because he failed to form a view as to what was properly payable to Chess Engineering. Acciona points to the words “whatever the merits of these submissions” in [237] as demonstrating that the Adjudicator adverted to and discarded Acciona’s submissions. It says that, together with [238], they indicate that the Adjudicator simply accepted Chess Engineering’s claim for Costs Plus Works after rejecting Acciona’s submissions absent any determination of the value of the works in accordance with the sub-contract.

116. Chess Engineering submits that the Adjudicator’s reasons make clear that he did not simply “rubber stamp” the claim, relying on the Adjudicator’s rejection of parts of the claim relating to the “Surveying Issues” and EWP costs based on Acciona’s submissions.

117. I accept that the Adjudicator did not rubber stamp the claim for V10 and that he considered and rejected parts of it. The question is whether he undertook what was required of him in relation to the Cost Plus Works component, namely to form a view as to what was properly payable having considered the submissions and the merits of the claim.

118. In relation to V10, there was no dispute that Chess Engineering was entitled to be paid for works carried out pursuant to Variation Order No 2. Acciona scheduled an amount representing just over 50% of the claim for additional costs due to the Cost Plus Works component. The dispute related to whether the remainder of the claim for labour and some materials costs was excessive, whether the costs were valued in accordance with Variation Order No 2 and whether they had been substantiated: Adjudication Response at [6.200] and [6.212].

119. The Adjudicator refers to the Payment Claim at [224] and to Chess Engineering’s understanding of the reasons for Acciona withholding amounts in relation to V10: at [232].

120. The Adjudicator expressly directs his attention to Ms Haddo’s submissions in relation to V10 and states that he has reviewed the documentation she provided in support, which included the schedules of labour costs incurred and a schedule of supplier invoices “in relation to materials used in the installation of the lift shaft components, together with the invoices referred to in the schedule”: at [233].

121. The Adjudicator also refers to having read Acciona’s submissions on the Cost Plus Works component: at [237].

122. Ms Haddo’s statement makes clear that the labour rates component of V10 were calculated in accordance with the same labour rates and on the same contractual basis as for V9, and reflect the actual cost of Chess Engineering doing the work. She identifies the contractual basis on which the claim is made, referring to schedule 4 of Variation Order No 2, and that the costs claimed are not excessive as they do not exceed the contractual limit provided for in item 1 of that schedule: Haddo Statement at [125] to [133].

123. Acciona’s Adjudication Response submissions also repeat and rely on their submissions in relation to V9 as to why it contended that Chess Engineering had failed to prove its entitlement to payment for V10’s labour and material costs, that the costs claimed were not in accordance with Variation Order No 2 and Chess Engineering had failed to prove quantum: Adjudication Response at [6.207], [6.214], [6.217] and [6.219].

124. In other words, it is apparent from the parties’ submissions that they both placed significant reliance on the V9 arguments and materials for the purposes of the Adjudicator’s decision in relation to the disputed Cost Plus Works Component of V10.

125. Unlike V9, the Adjudicator’s reasons in relation to V10 do not make any express statements as to the reasonableness or otherwise of the rates and other material costs claimed in relation to V10 based on Ms Haddo’s statement. Nor does the Adjudicator specifically say that the claim for V10 reflects the true cost of the labour and materials employed by Chess Engineering in undertaking the work the subject of the claim or refer to the application of the terms of the sub-contract in so far as they relate to V10.

126. His reasoning at [237] and [238] could also be read as suggesting that the Adjudicator did not consider Acciona’s submissions and that he allowed the Cost Plus Works component of V10 in full as a result of his rejection of Acciona’s submissions in response and his lack of satisfaction with the amount it scheduled. The reference to “whatever the merits of these submissions” and use of the word “accordingly” in [238] supports that view.

127. But I am not persuaded that the Adjudicator’s reasons should be read in that way.

128. While expressed in a summary form and use what might be described as non-legal and loose language, it seems to me that the reasons indicate that the Adjudicator had regard to Acciona’s submissions and rejected them, as he was entitled to do. His reasoning at [237] makes clear that he considered the contractual basis of Chess Engineering’s claim, which was referred to in its submissions and those of Acciona, and was not satisfied that Acciona’s scheduled amount reflected Chess Engineering’s entitlement under the sub-contract. The fact that he does not refer to the process by which he came to that view or the particular term of the sub-contract does not mean that he did not consider the submissions and form a view as to the contractual basis for the claim: Cockram [6]; Goodwin at [23].

129. In my view, the Adjudicator’s reasons also need to be read in the light of the overlap of the V9 issues and submissions with those of V10. The Adjudicator’s consideration and acceptance of Chess Engineering’s submissions and rejection of Acciona’s in respect of V9 supports the view that the Adjudicator weighed up the competing arguments and formed a view as to which submissions were to be preferred in determining the merits and value of the “Cost Plus Works” component of V10, given the same submissions, labour rates and contractual provisions were relied on by Chess Engineering in support of both variation claims and Acciona also relied on the same submissions in response to both claims. I accept that the Adjudicator does not say so expressly, but having regard to the time constraints and volume of issues that he had to deal with, it is perhaps not surprising that the Adjudicator did not repeat what he had earlier made clear about his reasons for accepting Chess Engineering’s submissions and the valuation of V9 and adopted a more shorthand approach in respect of what were, in effect, common issues raised in respect of V10.

130. In my view, the Adjudicator’s reasoning in relation to V10 is also to be contrasted with the position in Laing O’Rourke v Monford, a case in which the Court concluded that an adjudicator simply accepted a number of variation claims in the absence of any dispute that the work was performed or reasons given for rejecting a claim.

131. In this case, the Adjudicator’s reasons set out why he rejected Acciona’s submission that the amount claimed for V10 should be limited to the scheduled amount, namely he was not satisfied that the amount scheduled by Acciona reflected Chess Engineering’s contractual entitlement or was reasonable for the work. The Adjudicator’s acceptance of the disputed part of the Cost Plus Works claim was also expressed to be because the Adjudicator was “satisfied” that Chess Engineering is “entitled to be paid”, rather than a finding in favour “based on the above”: Laing O’Rourke v Monford at [33] and [34]. In this case, it is also apparent that the Adjudicator considered the materials on which the claim was based and valued.

132. The Determination also needs to be read as a whole. As noted above, the Adjudicator was aware of his obligation to value Chess Engineering’s entitlements to payment and that it had the onus to establish its entitlement to payment under the SoP Act and pursuant to the sub-contract: at [172] and [175].

133. The critical matter that the Adjudicator had to determine was what was properly payable for V10. That matter required the Adjudicator to assess the merits of Chess Engineering’s claim and the value of the works. In my view, when the matters referred to above are taken into account, the reasons indicate that he did so. His expressed satisfaction that Chess Engineering was entitled to be paid the amount claimed was based, not only on his consideration and rejection of Acciona’s submissions but on his satisfaction of Chess Engineering’s contractual entitlement to be paid for the works and the value of the labour and materials costs claimed having regard to the materials before him that calculated the value of those costs.

134. For these reasons, I do not accept Acciona’s submission that the Adjudicator erred in failing to form a view as to what was properly payable to Chess Engineering as he simply accepted it having rejected the scheduled amounts in relation to the Costs Plus Works component of V10.

V13 – Delay Costs (V13)

135. V13 relates to various asserted delay costs connected to what was described as “General Works”, “Surveying Issues” and “Expansion Joint Issues”. Acciona scheduled $nil against the $307,161.82 claimed by Chess Engineering for V13.

136. The Adjudicator determined that Chess Engineering was entitled to $82,854.67, comprising $8,001.09 for General Works, $74,853.58 for Expansion Joint Issues and $nil for Surveying Issues: [249] to [251].

Grounds (2) and (3) – Did the Adjudicator fail to consider Acciona’s submissions and deny it procedural fairness?

137. At [6.230] of the Adjudication Response, Acciona said, in respect of the General Works component:

Acciona did not instruct [Chess Engineering] to modify the coping panels, and [Chess Engineering] has failed to provide any substantiation in the Adjudication Application that it received such instructions.

138. Acciona contends that the Adjudicator erred in failing to consider its submission in relation to the General Works aspect of V13, which also amounts to a denial of procedural fairness because, despite Acciona having submitted otherwise in its Adjudication Response, the Adjudicator said at [250]:

I am satisfied that [Chess Engineering] has completed the “General Works” component as required by [Acciona]. I am satisfied that [Chess Engineering] is entitled to the amounts claimed for cost arising as a result of these works and that the amounts claimed are reasonable.

139. Acciona contends that the Adjudicator could not have made his finding at [250] if he had considered its submission at [6.230]. In support of its contention that the Adjudicator did not consider its submission, Acciona points to the absence of any reference to it in the Determination and to Ms Haddo’s material, which it says, does not refer to any instruction given by Acciona to Chess Engineering to undertake the work.

140. Chess Engineering contends that the Adjudicator did not err because there was material in Ms Haddo’s statement on which he could have come to the view he did.

141. In my view, Chess Engineering’s submission should be accepted. It seems to me that, when read in context, the Adjudicator’s conclusion that the works were required by Acciona was reasonably open having regard to Ms Haddo’s statement that Chess Engineering raised the issue of the constructed levels of the Bridge deck (which led to the need to modify the coping panels) in its request for instructions dated 21 August 2019 (at [171]) and the fact that the work was subsequently undertaken.

142. The Adjudicator’s reasons refer to him having read the relevant parts of the Adjudication Response submissions but notes there is “no utility, bearing in mind time constraints, in reproducing them”: at [249]. In my view, this statement, when considered together with the material in Ms Haddo’s statement and the Adjudicator’s conclusion at [250], supports the view that the Adjudicator engaged in a process of evaluation sufficient to warrant the description that he considered Acciona’s submissions and whether the instruction had been given, rather than negating it: Cockram: at [41]. A decision-maker is not required to refer to all of the materials supplied by one party before rejecting a party’s claim, nor does a failure to advert to material mean that it was not considered: Goodwin at [23].

143. In any event, the Adjudicator’s finding on whether an instruction had been given or not was with respect to a matter of fact. Such a finding is not reviewable even if it was factually wrong: Icon at [15].

144. There is also some force to Chess Engineering’s submission that there could be no jurisdictional error or failure to provide procedural fairness having regard to the reasons given in the Payment Schedule. A lack of instruction by Acciona was not mentioned in the Payment Schedule in respect of the General Works component of V13. The reason given was a failure to provide substantiation of the claim. Both the lack of instruction and failure to substantiate were referred to in the Adjudication Response submissions at [6.230], indicating they were advanced by Acciona as distinct reasons for why the amount claimed should be withheld.

145. Having regard to the above, I am not satisfied that Acciona has demonstrated that the Adjudicator erred in a jurisdictional sense by failing to consider its submissions or that he denied Acciona procedural fairness in the way he dealt with V13.

V16 – EWP costs (V16)

146. To understand the issues relating to V16, it is necessary to set out the details relating to the claim.

147. V16 relates to the cost to Chess Engineering of hiring EWP. It is referred to in the Payment Claim as “EWP excluded (Refer to Annexure B Clause 2.6 (f) – (Coates Hire invoices + 15%)” for $84,872.88, and noted as such by the Adjudicator at [257].

148. The Payment Schedule includes item 6 “G - EWP Costs”. It schedules $nil and seeks to withhold an amount of $101,240.23, comprising the EWP costs claimed in V16 (of $84,872.88) and the EWP costs component of V10 (of $16,367.35). As noted at [110] above, the Adjudicator allowed an amount of $4,910.10 in relation to EWP costs for V10.

149. The “general reasons” for item 6, “G - EWP Costs” on page two of the Payment Schedule refer to Annexures A and G and state as follows:

[Chess Engineering] has claimed for plant and associated costs utilised in the installation of Contract Works for the Pedestrian Bridge until 15 November 2019.

Pursuant to Annexure B – item 2.2(h) “[Chess Engineering] shall supply appropriate plant (crane, EWP, scissor lift etc), materials, equipment and tools required to conduct all scope of work under this sub-contract.”

150. Annexure G repeats the general reasons and contains further reasons as follows:

As such, the supply of this piece of equipment is deemed to be included within the Lump Sum of the Contract Works and [Chess Engineering] is not entitled to separate compensation for a different Scope of Works.

As such, EWP costs are explicitly deemed to be necessary for the completion of the scope of works and is included in [Chess Engineering’s] Lump Sum Pricing

Additionally, [Chess Engineering’s] claim for EWP Costs pursuant to Annexure B - Item 2.6 (f) has been rejected as it has failed to ever notify [Acciona] of any specific additional EWP requirements.

151. Acciona deals with V16 at [6.260] – [6.298] of the Adjudication Response. It refers to the reasons given in the Payment Schedule, including the further reasons in Annexure G, and makes submissions under the headings “No Direction for a Variation”, “No Notice of a Variation”, “Claimant was advised by Acciona to allow for EWPs in its pricing”, “No Entitlement to a Variation – Works Required by the Subcontract”, “Discrepancy in the Subcontract Documents”, “The Haddo Declaration and Documentation in Support of the Claim” and “Adjudication Application Does not establish Entitlement to a Variation”.

152. The Adjudicator deals with V16 at [257] to [264].

153. The Adjudicator refers to the Payment Schedule and states that Acciona rejects the claim and deals with it in Annexures E and G: at [258]. He then proceeds to detail the reasons from Annexure E in [258] to [260].

154. The Adjudicator then states:

261   In the [Adjudication Application] Submissions, [Chess Engineering] submits it is entitled to these costs pursuant to clause 2.6(f). Ms. Haddo says: “If EWP costs are an excluded item, then [Chess Engineering] is entitled to claim those costs as a variation”.

262 The reasons given in the [Adjudication Response] submissions are pertinent, but not consistent with those given in the Payment Schedule, which appear to be irrelevant in the context of the claim. [Acciona] cannot include reasons in the [Adjudication Response] that were not provided in the Payment Schedule. If it does, I cannot have regard to them by operation of section 20(2B) of the [SoP] Act.

263   I accept therefore, in the absence of relevant submissions to the contrary to which I can have regard, that [Chess Engineering] is entitled to these costs on the basis submitted by [Chess Engineering] in the [Adjudication Response].

264. I am satisfied that, for the purposes of an interim payment under the Act, [Chess Engineering] is entitled to be paid the amount claimed: $84,872.88.

Grounds (2) and (3) – Did the Adjudicator fail to consider Acciona’s submissions and deny it procedural fairness?

155. Acciona contends that it is apparent from the reasons that the Adjudicator failed to consider its submissions in relation to V16 as required by s 22(2) of the SoP Act because he confined himself to dealing with material relating to Annexure E and did not refer to Annexure A at all or the reasons set out in Annexure G, both of which were referred to in the Payment Schedule as relating to V16. Acciona submits that this led the Adjudicator into significant error as he concluded that he could not consider Acciona’s Adjudication Response submissions as they were not provided for in the Payment Schedule.

156. I do not consider that the Adjudicator’s failure to refer to Annexure A is of significance in the way Acciona contends. Annexure A did not include any reasons for withholding payment for V16 but simply identified the breakdown of “G - EWP Costs” as $16,367.35 relating to V10 and $84,872.88 as relating to V16, which were also identified in Annexure G, to which the Adjudicator’s reasons refer. Accordingly, to the extent that the Adjudicator failed to consider Annexure A at all, that failure was not material in the sense that it could not affect the outcome or create any practical injustice to Acciona.

157. As to Annexure E, the Adjudicator’s reference to and consideration of that annexure as part of his determination of V16 was plainly a mistake. Annexure E concerned “Expansion Joints” (nothing to do with EWP costs) and had already been dealt with by the Adjudicator (correctly) as part of the claim for V13: at [245] to [247]. That mistake, of itself, does not speak to any jurisdictional error. Rather, it likely reflects the Adjudicator’s misunderstanding of the scope and nature of the Payment Schedule and its application to V16 or, perhaps, an error in the formatting of the Determination, given [258] to [260] are in almost precisely the same terms as [245] to [247].

158. Chess Engineering argues that there was no error as the Adjudicator concluded, correctly, that the reasons referred to in the Adjudication Response submissions went beyond those referred to in the Payment Schedule, submitting that the reasons given in Annexure G were limited to the works being within scope. It also argues that any error by the Adjudicator in concluding that the submissions were not duly made, whether based on his consideration of Annexure E or G, was an error within jurisdiction and did not lead to any denial of procedural fairness.

159. As to the first point, I do not accept that the reasons given in Annexure G were as limited as Chess Engineering asserts. Annexure G to the Payment Schedule (as outlined at [150] above) refers to Item 2.6 (f) and Chess Engineering’s failure to notify Acciona of EWP requirements as well as the EWP costs being with the sub-contract scope. There were submissions made in the Adjudication Response that were “pertinent” to those reasons, such as the submission that there was no notice for a variation and no entitlement as the works were required by the sub-contract: Adjudication Response at [6.266] to [6.274] and [6.277] to [6.290]. But some do not appear to be clearly relevant, such as the matters referred to under the headings “Discrepancy in the Subcontract Documents” and “The Haddo Declaration and Documentation in Support of the Claim”.

160. To the extent that some of the Adjudication Response submissions raised matters that went beyond the reasons provided for in Annexure G, the Adjudicator was correct to exclude them. But based on my reading of Annexure G and the Adjudication Response submissions, it appears that the Adjudicator may have erred by concluding that all of the reasons given in the Adjudication Response submissions were not consistent with those given in the Payment Schedule, which then led to him to decide that the submissions were not duly made and could not be considered.

161. The difficulty I have with Acciona’s argument is that, in my view, the Adjudicator’s reasons demonstrate he considered its submissions by concluding that they were not duly made because, on his understanding, Acciona’s submissions raised reasons that were not relevant to the Payment Schedule. Even if I were to accept that he erred in doing so, it seems to me that any error was made in the course of the Adjudicator making a decision within his authority, namely what was the scope and nature of the Payment Schedule and whether Acciona’s submissions were duly made, which does not amount to jurisdictional error or a denial of procedural fairness: Perform at [67]; Icon at [16]-[19], [27]; John Holland at [63] (Hodgson JA, Beazley JA (as Her Excellency then was) agreeing); [71] (Basten JA); Trysams at [61]. While a decision made by the Adjudicator as a result of not performing the function required by s 22(2) of the SoP Act may amount to jurisdictional error, such as failing to consider a submission that he found was duly made, I am not persuaded that that was the nature of the error he made in this case. In my view, any error was in his decision that Acciona’s submissions referred to reasons that were not consistent with those given in the Payment Schedule, and his decision that, as a consequence, the submissions could not be considered as they were not duly made.

162. Acciona referred me to the decision of CC Builders (Aust) Pty Limited v Milestone Civil Pty Limited [2019] NSWSC 1251 (CC Builders), a case in which Rein J found that an adjudicator had denied a party procedural fairness establishing jurisdictional error by failing to consider submissions on the basis that the decision to reject the submissions had no rational or reasonable basis. In CC Builders, the adjudicator was aware that a party had raised a claim in its payment schedule, having referred to the claim in his reasons, but concluded that the party was prevented from including it in its adjudication response based on the view that it was not so advanced.

163. At [33], His Honour stated:

If the adjudicator has found that a submission was not duly made for reasons that are reasonable (albeit erroneous) it is not for the Court to determine whether or not the adjudicator was correct to so conclude and the adjudicator’s decision would not constitute a denial of procedural fairness. However, if the adjudicator does not explain how [they have] concluded that the adjudication response or submissions relate to a claim that has not been advanced in the payment schedule, but there is clear evidence that they do (and the adjudicator’s own reasons confirm that they do), then there is a lack of reasonableness and rationality as to the determination that the submissions were not duly made because they were not contained in the payment schedule. The decision to exclude the submission amounts to a denial of procedural fairness establishing jurisdictional error (see Shade Systems Pty Ltd v Probuild Constructions (Aust) Pty Ltd (No 2) [2016] NSWCA 379 at [3])… and the failure to consider the submissions, duly made, constitutes jurisdictional error...

164. There are similarities between the position in CC Builders and this case. Annexure G was correctly identified by the Adjudicator as a relevant part of the Payment Schedule: at [258]. The Annexure G reasons and the Adjudication Response submissions relating to those reasons were not referred to by the Adjudicator in the part of the Determination that deals with V16. He does not explain how he concluded that the Adjudication Response submissions did not relate to the reasons advanced in response to the V16 claim as outlined in Annexure G.

165. That said, it is not as clear as it was in CC Builders that all of the Adjudication Response submissions were relevant to the reasons advanced in Annexure G relating to the EWP claim in respect of V16. As noted at [159], while there appears to have been some overlap, not all of the reasons advanced were clearly relevant to the Payment Schedule. It seems to me that reasonable minds may differ as to whether the Adjudicator could have formed the view that he did. Further, and unlike in CC Builders, the Adjudicator’s own reasons relating to V16 do not confirm that the Adjudication Response submissions related to reasons that had been advanced in the Payment Schedule.

166. There are two other factors in this case that, in my view, militate against a finding that the Adjudicator’s decision was wholly irrational and reflective of a failure to consider matters that he was required to consider at all.

167. The first is that it is evident from the Determination that the Adjudicator did, in fact, consider Annexure G and the Adjudication Response submissions in the section of the Determination that deals with the EWP costs component of V10: at [231], [235] and [236].

168. At [231], he refers to the Annexure G reasons. At [235] and [236], he deals with Acciona’s submissions that Chess Engineering has no entitlement to EWP costs referring to Acciona’s submissions that the costs were covered by the sub-contract as provision of equipment under clause 2.2(h) of the Scope of Works (SoW); that even if Acciona was required to supply EWP Chess Engineering was obliged to notify Acciona 14 days prior to starting works pursuant to paragraph 2.6(f) of the SoW and did not do so; and that Chess Engineering did not notify Acciona of any discrepancy relating to the issue between clauses 2.2(h) and 2.2(f). Relevantly, those submissions were made in the part of Acciona’s Adjudication Response responding to the V16 claim for EWP costs (at [6.277] to [6.290]), not in the part that responded to the V10 claim for EWP costs.

169. To my mind, the references in the V10 section of the Determination makes clear that the Adjudicator considered Acciona’s submissions, as he was required to do, albeit perhaps mistakenly, as part of V10. No submission was advanced about this at the hearing, but it seems to me that this mistake also falls into the category of one that was made in the course of the Adjudicator making a decision within his authority, namely what was the scope and nature of the Payment Schedule and the nature of Acciona’s submissions, and his mistaken or erroneous approach to them does not render his decision void.

170. That mistake also needs to be considered in the context of the other relevant factor, namely the format of the Payment Schedule itself. It is apparent from his reasons that the Adjudicator had difficulties in understanding the Payment Schedule. From my own review at the hearing, Annexure G was particularly difficult to discern due to the very small print. More relevantly, the Payment Schedule grouped V10 and V16 together under the one banner of “G - EWP Costs”.

171. Thus, while acknowledging the force in Rein J’s reasoning in CC Builders, I am not persuaded that I should adopt the same approach in this case and conclude that there was such a lack of reasonableness and rationality to the Adjudicator’s decision that the Adjudication Response submissions were not duly made in relation to V16 that the Adjudicator made a jurisdictional error establishing a denial of procedural fairness.

172. If I am wrong to come to that view and the Adjudicator’s failure to consider Acciona’s submissions as part of V16 involved jurisdictional error, I would have concluded that it amounted to a denial of procedural fairness in a material way.

173. In his reasons relating to V10, the Adjudicator accepted aspects of Acciona’s contentions as to why EWP costs were not payable, concluding that Chess Engineering was not entitled to the entirety of the V10 EWP costs because of an absence of any evidence that it gave the required notice under the sub-contract: at [236]. That reasoning indicates that the Adjudicator may have come to a different conclusion on V16 if he had considered Acciona’s submissions relating to the proper construction of the sub-contract, whether notice was required and, if so, whether it had been given. In other words, the Adjudicator’s failure to consider Acciona’s submissions at [6.277] to [6.290] of the Adjudication Response was of significance to his decision on V16 as it was material that could have induced him to come to a different view: Brodyn at [57]; TWT v Cenric at [111].

Ground (4) – Did the Adjudicator fail to come to a view on what was properly payable?

174. Acciona submits that the Adjudicator’s reasoning reduces to the proposition that, because there were no submissions to the contrary, the claim for V16 was accepted.

175. Chess Engineering submits that there was no jurisdictional error as it was evident it had established an entitlement to payment for V16, given its claim was substantiated with invoices and Acciona did not complain about quantum but raised issues relating to an entitlement based on an interpretation of the sub-contract. It also submits that Acciona’s own Adjudication Response submissions, at [6.279], supported the Adjudicator’s acceptance of the value of the claim.

176. At [6.279] of its Adjudication Response, Acciona lists the items and costs claimed by Chess Engineering under V16 by reference to the supplier invoices. In my view, Acciona’s submissions make clear that it does not adopt, nor accept, that Chess Engineering was entitled to payment for those invoices.

177. I am, however, not persuaded by Acciona’s submissions that the Adjudicator’s reasons indicate that he did not come to a view as to what was properly payable in relation to V16 as he was required to do.

178. The Adjudicator’s reasons identify, in my view, that he reviewed Ms Haddo’s statement in relation to V16. That statement identified the contractual basis on which Chess Engineering claimed the costs as a variation, the invoices relied on, and the calculation of the claim on the basis of cost plus 15%: at [175] to [177].

179. Although the Adjudicator expressly refers to the “absence of relevant submissions to the contrary” leading to the entitlement of Chess Engineering to V16, he does so noting that he was satisfied of Chess Engineering’s entitlement to be paid based on its submissions in the Adjudication Application: at [263]. In my view, when read as a whole, it is implicit that the Adjudicator’s expressed satisfaction of Chess Engineering’s entitlement to be paid $84,872.88 for V16 was based on the submissions made and other materials before him, that he had come to a view that Chess Engineering was entitled to be paid in accordance with clause 2.6(f) of the sub-contract and had determined the value of the claim based on the calculations referred to by Ms Haddo in her statement at [177].

180. In those circumstances, I do not consider that the Adjudicator erred by failing to come to a view that the claim for V16 was properly payable on its merits.

V17 – APPB Signage (V17)

181. In relation to V17, Acciona contends that the Adjudicator failed to consider the Payment Schedule, which was also a denial of procedural fairness, and failed to form a view as to what was properly payable by considering the merits of Chess Engineering’s claim.

182. In the Payment Claim, Chess Engineering claimed payment of $22,586 for V17 against which Acciona scheduled $19,826, leaving $2,760 in dispute in the Adjudication. The dispute related to the labour cost of project managing the works. The Adjudicator determined that Chess Engineering was entitled to the entirety of the amount claimed.

183. The Adjudicator deals with V17 at [265] to [269] of the Determination. He refers to the Payment Claim (at [265]) and the Payment Schedule, in which Acciona characterises the works as Annexure B “General Works” and schedules an amount of $19,826, leaving a disputed amount of $2,760 at [266]. He refers to the reasons given in the Payment Schedule for the non-payment of the Project Management component (of $2,760) as “Singleton Moore’s works are inclusive of supply and installation and should be regarded as the total cost of works for the APPB Signage Works”, the “project management costs, overheads and profits are deemed to be included in the 15% loading already applied”, and that Chess Engineering “has failed to provide any substantiation of its project management costs for this item of works”: at [266] and [267].

184. The Adjudicator then states:

268.    In neither the Payment Schedule nor the [Adjudication Response], [Acciona] does not direct me to any provision in the [statement of works] or elsewhere in the [sub-contract] which says that project management costs, overheads and profits are deemed to be included in the 15% loading already applied. In the [Adjudication Response] submissions, [Acciona] says it has received no verification of the hours involved. That reason was not proffered in the Payment Schedule.

269.    I am satisfied that, for the purposes of an interim payment under the [SoP] Act, [Chess Engineering] is entitled to be paid the full amount claimed: $22,586.00.

Grounds (1) and (3) – Did the Adjudicator fail to consider the Payment Schedule and deny Acciona procedural fairness?

185. Acciona submits that the Adjudicator’s statement in the second and third sentence of [268] is explicable only by the Adjudicator having failed to properly consider and actively engage in the matters raised by the Payment Schedule. This is because, Acciona submits, the Payment Schedule clearly and expressly asserted that Chess Engineering failed to provide substantiation for its project management costs. Acciona submits that the Adjudicator’s failure to consider that reason was a jurisdictional error and procedurally unfair.

186. I am not persuaded by Acciona’s submission.

187. Acciona’s reasons for withholding payment in relation to V17, as referred to in Annexure B of the Payment Schedule, are correctly recorded by the Adjudicator: at [266] and [267]. In the Adjudication Response, Acciona accepted that Chess Engineering was entitled to V17 but submitted that Chess Engineering had failed to provide any timesheets or other means of substantiation to verify the hours worked by the relevant employees in support of the labour cost: at [6.303].

188. As Chess Engineering submits, the reasons in the Payment Schedule do not specifically refer to a lack of verification of hours but refer in general terms to a failure to substantiate the project management cost. In that context, it seems to me that it was reasonably open for the Adjudicator to come to the conclusion that the lack of verification of hours was not included as a reason in the Payment Schedule, as he did at [268].

189. In any event, the Adjudicator’s view as to whether Acciona raised the lack of verification of hours as a reason in the Payment Schedule was a matter in respect of which the Adjudicator was empowered to form an opinion. To the extent the Adjudicator came to an incorrect view, that error does not invalidate the Determination: Icon at [16]; Perform at [67].

190. Having come to the view he did, it can be inferred that the Adjudicator was also of the view that Acciona was precluded by s 20(2B) of the SoP Act from relying on the lack of verification of hours reason in the Adjudication. In my view, it follows that the Adjudicator did not err in failing to actively engage in the “reasons” in the way Acciona asserts or that the Adjudicator denied Acciona any procedural fairness.

Ground (4) – Did the Adjudicator fail to fail to form a view as to what was properly payable?

191. Acciona submits that the Adjudicator erred because he gave no reason for allowing the claim for V17, other than that he did not consider that Acciona had advanced any duly made reasons for rejecting it, relying on what the Adjudicator said at [268] to [269].

191. Chess Engineering submits that it is evident from the Determination that the Adjudicator was satisfied that Chess Engineering was entitled to the full amount claimed informed by his understanding of the sub-contract and his review of the submissions and evidence served by Chess Engineering. It submits that the Adjudicator did not ask himself the wrong question but simply dismissed an argument put forward by Acciona at [268].

192. Chess Engineering also argues that the Adjudicator’s reasons make clear that he weighed up the competing arguments and formed a view as to which one was to be preferred, unlike the position in Laing O’Rourke v Monford.

193. I accept Chess Engineering’s submission that the way in which the Adjudicator dealt with V17 is different to the approach adopted by the adjudicator in Laing O’Rourke v Monford. In this case, the Adjudicator’s reasons set out why he rejected Acciona’s argument that the amount claimed for V17 should be reduced by $2,760.00. The Adjudicator’s acceptance of the claim was also expressed to be because the Adjudicator was “satisfied” that Chess Engineering is “entitled to be paid”, rather than a finding in favour “based on the above”: Laing O’Rourke v Monford, at [33] and [34].

194. The difficulty I have with Chess Engineering’s submission is that the Adjudicator’s reasons do not state how he came to be satisfied that Chess Engineering was entitled to be paid the full value of the claim, including the disputed amount. He does not draw attention to any material relied on by Chess Engineering, such as the calculations set out in the Adjudication Application submissions or in Ms Haddo’s statement. Nor does he state that he had been provided with information as to how Chess Engineering arrived at the amount for the claim.

195. The Determination refers to the Payment Claim (at [265]), considers and rejects Acciona’s reasons as to why the disputed amount should not be paid (at [266]-[268]) and then states that the Adjudicator is satisfied of an entitlement to the full amount claimed. In doing so, the reasons reveal no examination of the merits of Chess Engineering’s claim or determination of the value of the work identified in the Payment Claim based on the submissions and other materials before him. There is simply a general statement that the Adjudicator was satisfied of such an entitlement.

196. The reference in [268] to the Adjudicator not being directed to any provisions of the statement of works or sub-contract which says that the project management costs, overheads and profits were deemed to be included in the 15% margin might suggest that the Adjudicator may have been cognisant of the contract, to the extent relevant. I also accept that the Determination needs to be read as a whole and there is no requirement for legal language: Cockram at [17]; Iskra at [51].

197. That said, the Adjudicator’s awareness of the terms of the sub-contract and general statements made in other parts of the Determination do not deal with the critical matter that the Adjudicator had to determine, namely the amount of the progress claim for V17. That matter required the Adjudicator to assess the merits of Chess Engineering’s claim and the value of the works having regard to the materials before him, rather than accepting the claim based on a rejection of Acciona’s submissions: Richard Crookes Construction Pty Ltd v CES Projects (Aust) Pty Ltd(No 2) [2016] NSWSC 1229 at [56].

198. In my view, the Adjudicator’s reasons do not indicate that he undertook those tasks in relation to V17 as required by the SoP Act.

V18 – BOCC Lift Entrance Cladding (V18)

200. Acciona scheduled $1,985.78 against the $2,343.70 claimed by Chess Engineering, leaving an amount of $357.92 in dispute in the adjudication. The Adjudicator allowed the claim in full.

201. The Adjudicator dealt with V18 at [270] to [274] and stated:

273.   I have read the submissions in the [Adjudication Application] and in the [Adjudication Response] on this issue. I have referred again to the documents at Tabs 16 and 18 of the [Adjudication Application]. I accept the submissions of [Chess Engineering].

274.   I am satisfied that, for the purposes of an interim payment under the [SoP] Act, [Chess Engineering] is entitled to be paid the amount claimed: $2,343.70.

Ground (4) – Did the Adjudicator fail to fail to form a view as to what was properly payable?

202. Acciona submits that the Adjudicator erred by accepting Chess Engineering’s submissions without any active engagement on the issue in dispute or forming a view of the amount of the progress payment and value of the claim.

203. Chess Engineering submits that, given the insignificant amount in dispute, of $357.92, the five paragraphs devoted to V18 in the Determination was more than sufficient for the Adjudicator to deal with the issue and that his reasons, in that context, do not demonstrate any jurisdictional error or lack of procedural fairness on his part. It also submits that V18 was supported by submissions and evidence served by Chess Engineering which was a sufficient basis on which the Adjudicator could come to his view.

204. In my view, Chess Engineering’s submissions should be accepted. In this case, the Adjudicator did what he was required to do. He determined the amount of the progress payment to be paid having considered the matters required of him under s 22(2) of the SoP Act, relevantly, the Payment Claim, the Payment Schedule and the submissions of the parties, all of which are referred to in his reasons.

205. Chess Engineering’s submissions identify the basis for the variation claim and its value; being that Acciona instructed Chess Engineering to undertake the works, the works were calculated on a cost plus 15% basis, and what the labour costs of $262.50 were based on. The Adjudication Response submissions identify the dispute as relating to the labour component of $357.92 and the only reason for non-payment as being an overlap in the labour costs claimed for V18 and V19.

206. Given the speed with which the Determination was to be provided, the quantum and nature of the dispute, and the content of the Adjudicator’s reasons, I am satisfied that his reasons demonstrate that he came to a view on the critical question as to whether Chess Engineering was entitled to payment of the labour component related to the cladding works and the value of that claim based on the materials before him, sufficient for the purposes of the SoP Act.

Consequential orders

207. As I have found that the Adjudicator went beyond jurisdiction only in respect of V17, the next issue that arises is what relief, if any, should be granted. The debate around this issue arises because the sub-contract was entered into some months prior to the introduction of s 32A of the SoP Act which provides the Court with the express power to set aside part only of a determination affected by jurisdictional error.

208. Chess Engineering submitted that, if the Court concludes that only part but not all of the Determination is affected by jurisdictional error, the Court has the power to set aside the relevant parts only, relying on the Court of Appeal’s decision in YTO Construction Pty Limited v Innovative Civil Pty Limited [2019] NSWCA 110 (YTO), which it says was applied in Rhomberg Rail Australia Pty Limited v Concrete Evidence Pty Limited [2019] NSWSC 755 (Rhomberg) at [25] and CC Builders at [43]. It also submitted that, rather than making a severance order, the appropriate course would be for the Court to exercise its discretion and require Acciona to pay to Chess Engineering the unaffected components of the adjudicated amount as a condition of granting the discretionary relief setting aside the Determination.

209. At the hearing, Chess Engineering also reserved the right to submit that the Court should not declare the Determination void at all if, for example, V18 was the only part of the decision identified as subject to jurisdictional error. I take from that submission that Chess Engineering might also make it in respect of my finding about V17.

210. Acciona submitted that the Determination could not be severed in the way Chess Engineering contends as there is only one determination which, if affected by any jurisdictional error, is no decision at all and void ab initio: Plaintiff S157/2002 v Commonwealth of Australia (2003) 211 CLR 476; [2003] HCA 2 at [76]; NSW Netball Association Limited v Probuild Construction (Aust) Pty Limited [2015] NSWSC 1339 at [49].

211. Acciona also submitted that relief should not be conditioned on the payment of the unaffected amount contending that the prevailing view is that expressed by Stevenson J in Anderson Street Banksmeadow Pty Ltd v Helcon ContractingAustralia Pty Ltd [2013] NSWSC 657 (Anderson Street), a decision in which His Honour declined to require the principal to pay the unaffected part of a determination affected by jurisdictional error as a condition of relief. Stevenson J considered that it was not open to do so as the determination was made in breach of natural justice rendering it void and not merely voidable: Brodyn. His Honour also said he would have declined to make such an order on discretionary grounds given just under half of the value of the determination was affected by jurisdictional error, the possibility of a challenge to the payment and the prospect of deterioration in the builder’s financial position.

212. Pausing here, and with due respect to Stevenson J, I am not persuaded by Acciona’s submission that His Honour’s decision in Anderson Street to the effect that neither severance or conditioning relief is available is the prevailing view, having regard to the decision in YTO, the obiter observations of Ball J in Rhomberg and Hanson Construction Materials Pty Ltd v Brolton Group Pty Ltd [2019] NSWSC 1641 (Hanson Construction) at [44] and the approach of Rein J in CC Builder. As Stevenson J acknowledged in Diona Pty Ltd v Downer EDI Works Pty Ltd [2020] NSWSC 480 at [46], some uncertainty appears to have arisen by reason of YTO.

213. When asked what Acciona’s position would be if the Court concluded that V17 or V18 were the only parts of the Determination subject to jurisdictional error, its counsel submitted that if there is any jurisdictional error the Determination was void and there was no discretion on the part of the Court in that regard. He acknowledged that an error in respect of a minor part of the claim might be something that impacts whether or not it is properly characterised as jurisdictional error, but that it would be a matter for Chess Engineering to establish that the error was not so bad to infect the whole of the Determination and not for the Court to make that assessment.

214. In YTO, a developer unsuccessfully sought to set aside an adjudication award in the amount of approximately $1.6 million on the grounds that a sum of approximately $462,000 plus GST had been obtained by fraud. It succeeded on appeal. White JA (with whom Macfarlan and Emmett JJA agreed) accepted that an adjudication determination procured by fraud would be liable to be quashed for jurisdictional error (at [46]). His Honour also stated that, if YTO established that the determination in respect of the claim for Variation 5 was procured fraudulently, that would only effect that part of the determination that was fraudulently procured: at [82]. His Honour ordered the matter to be remitted for a further hearing and for the respondent to pay into Court an amount representing that part of the award in respect of which it was alleged that the claim was procured fraudulently.

215. In Rhomberg and Hanson, Ball J indicated that, had he found denial of natural justice, he would have been willing to set aside the adjudication determination only to the extent of those parts of the determination affected by the errors and enable the claimant to be paid in respect of the unaffected parts. His Honour came to that view based on YTO and also noted that any relief given by the Court in respect of jurisdictional error is discretionary.

216. In CC Builders, Rein J was prepared to set aside the adjudicator’s determination on condition that the plaintiff would not seek to re-agitate the carry over claim at any further adjudication or to seek to recover that amount from the other party other than at a final hearing. His Honour considered that approach to be consistent with YTO and the balance of the authorities to which he had been referred without deciding whether YTO was distinguishable or to be followed as binding precedent or authoritative pronouncement.

217. Having considered the authorities and the submissions made at the hearing, I have deferred making any final orders and will allow the parties to make further submissions on the form of the final relief and precise orders to be made in the light of my findings, assuming orders cannot be agreed. In doing so, I note my views on this aspect of the case as follows.

218. While accepting the force in Acciona’s submission that any jurisdictional error renders a Determination void not voidable and that there are sound arguments as to why the approach in YTO may not be strictly binding on me, I would condition the grant of any declaratory relief, if it were pressed by Acciona and made, on the release of the monies paid into Court to Chess Engineering to the extent of the unaffected parts of the Determination, similar to the approach referred to by Ball J in Rhomberg and Hanson Construction.

219. In my view, that approach is consistent with the underlying reasoning in YTO which is persuasive and has been considered authoritative by other Judges of this Court. It also recognises that the grant of relief is discretionary and gives weight to my findings in the context of the Determination as a whole.

220. Acciona raised 18 individual challenges in respect of eight variations. Some of those challenges were to an aspect of a variation only, rather to the whole of the variation claim. I have upheld only one of the challenges in respect of a variation claim valued at $19,826, of which only $2,760 was in dispute, out of a total Determination of $640,593.69. Relevantly, my finding was that the Adjudicator erred in failing to form a view as to what was properly payable, not that there was no material before him on which he could have formed such a view. My conclusion in this case also makes it apparent that I have not accepted Acciona’s submission that there had been a pattern of dealing with the disputes by the Adjudicator that reflected an overall failure by him to discharge his obligations under the SoP Act.

221. As to costs, both parties had some success. However, it seems to me that any cost order should reflect that the weight of my findings are in favour of Chess Engineering.

222. I invite the parties to send through to my Associate short written submissions on relief and draft final orders, including on the issue of costs, within seven days. The parties should also indicate whether they are content for the issues to be dealt with on the papers or would prefer a short oral hearing. If the parties are able to reach agreement on final orders, they are to notify my Associate so that the orders can be made in chambers.

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Endnote

Decision last updated: 16 October 2020