AM Darlinghurst Investment Pty Ltd as trustee for AM Darlinghurst Investment Trust v Growthbuilt Pty Limited

[2024] NSWSC 825

Supreme Court

New South Wales

Medium Neutral Citation:

AM Darlinghurst Investment Pty Ltd as trustee for AM Darlinghurst Investment Trust v Growthbuilt Pty Limited [2024] NSWSC 825

Hearing dates:

25 June 2024

Decision date:

05 July 2024

Jurisdiction:

Equity - Technology and Construction List

Before:

Ball J

Decision:

(1)   The summons be dismissed with costs;

(2)   The amount paid into Court by the plaintiff on 22 May 2024 and 21 June 2024 together with any interest thereon be paid to the first defendant.

Catchwords:

BUILDING AND CONSTRUCTION — Adjudication — Judicial review — Building and Construction Industry Security of Payment Act 1999 (NSW), s 19, s 21, s 22

BUILDING AND CONSTRUCTION — Adjudication — Judicial review — Whether jurisdictional error to fail to consider documents provided to the Adjudicator — Where those documents include report produced relying on material subject to ‘without prejudice’ communications

BUILDING AND CONSTRUCTION — Adjudication — Judicial review — Whether jurisdictional error for Adjudicator to rely on grounds allegedly not advanced by either party

Legislation Cited:

Building and Construction Industry Security of Payment Act 1999 (NSW)

Cases Cited:

Ausenco Operations Pty Ltd & Anor v Ferretti International Ottoway Pty Ltd & Anor [2020] SASC 46

Brolton Group Pty Ltd v Hanson Construction Materials Pty Ltd [2020] NSWCA 63

Ceerose v A-Civil Aust Pty Ltd (2023) 112 NSWLR 225; [2023] NSWCA 215

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

Demex Pty Ltd v McNab Building Services Pty Ltd [2023] NSWCA 261

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

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

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

Southern Cross Electrical Engineering Ltd v Steve Magill Earthmoving Pty Ltd [2018] NSWSC 1027

Category:

Principal judgment

Parties:

AM Darlinghurst Investment Pty Ltd as trustee for AM Darlinghurst Investment Trust (Plaintiff)
Growthbuilt Pty Limited (First Defendant)
Resolution Institute (Second Defendant)
Jane Elizabeth Button (Third Defendant)

Representation:

Counsel:
FP Hicks SC with L Martin (Plaintiff)
S Robertson SC with D Hume (First Defendant)
Piper Alderman (Submitting Appearance | Second Defendant)

Solicitors:
Addisons (Plaintiff)
Gilbert + Tobin (First Defendant)

File Number(s):

2024/188535

Publication restriction:

None

JUDGMENT

Introduction

1. By a summons filed on 21 May 2024, the plaintiff, AM Darlinghurst Investment Pty Ltd, seeks orders quashing an adjudication determination issued on 13 May 2024 by the third defendant (the Adjudicator) under the Building and Construction Industry Security of Payment Act 1999 (NSW) (the Act) for the sum of $5,823,764.10 plus GST. The determination was made in respect of a payment claim made by the first defendant, Growthbuilt Pty Ltd, under a contract entered into on or about 10 February 2022 and varied on or about 23 December 2022 (the Construction Contract) by which Growthbuilt agreed to design and construct the redevelopment of three adjacent buildings in Oxford Street, Darlinghurst for a lump sum of $73.6 million.

Background

2. The payment claim, which was for an amount of $18,418,735.34, was served on AM Darlinghurst on 7 March 2024. Relevantly, it claimed the following amounts in respect of variation works:

1. A net additional amount of $693,660 relating to variation V20034, which related to a tenant request to increase the load capacity within Building 1;

2. An amount of $2,969,859.41 in respect of variation V20052, which arose from AM Darlinghurst’s request to relocate structural steel columns outside of the Big Poppas tenancy in Building 2;

3. An amount of $4,521,456.16 in respect of variation V20061, which arose out of a direction by AM Darlinghurst to change the roofing for the three buildings;

4. An amount of $5,125,799.29 in respect of variation V20071 arising out of the need to obtain approval to prune trees on Oxford Street to create work zones for the three buildings.

3. On 21 March 2024, AM Darlinghurst served a payment schedule scheduling a negative amount of $6,397,489.32. The negative amount arose from claims made by AM Darlinghurst for liquidated damages arising from delays in completing the work under the Construction Contract.

4. Clause 37.7 of the Construction Contract permitted AM Darlinghurst to deduct from moneys due to Growthbuilt any moneys which “the Principal [that is AM Darlinghurst] bona fide claims is or may become payable by the Contractor [that is Growthbuilt] to the Principal under or in connection with the Contract or otherwise …”.

5. The Construction Contract divided the work into three separable portions referred to as SP1A, SP1B and SP2, which corresponded to redevelopment of each of the three buildings. The contract provided different dates for completion of each separable portion and contained an elaborate regime for the payment of liquidated damages if there was a delay in what was described in the contract as “handover completion” for various components of each separable portion.

6. Annexed as Schedule 8 to the Construction Contract was a program for the works as at the Execution Date (defined as the date on which the contract was executed by the last party to do so). Under cl 32.2(g), Growthbuilt was required to “maintain the program up to date during the duration of the Contract and shall review and revise the program (as necessary) at least once every 14 days.” Clause 32.2 set out the information to be included in the program.

7. Under cl 34.3 of the Construction Contract, Growthbuilt was entitled to seek an extension of time if relevantly it was or would be delayed prior to the date for handover completion by a “qualifying cause of delay” (an expression which was defined in the contract) and the cause of delay impacted on an activity “on the critical path of WUC [work under contract]”.

8. Clause 34.5 of the Construction Contract relevantly provides:

Notwithstanding that the Contractor is not entitled to or has not claimed an EOT, the Principal’s Representative may in its sole discretion at any time and from time to time before issuing the final certificate direct an EOT. The Principal’s Representative is not required to exercise this discretion reasonably or for the benefit of the Contractor.

9. Clause 34.7 provides that if WUC does not reach handover completion by the date for handover completion “the Principal’s Representative shall certify, as due and payable to the Principal, liquidated damages [as calculated in accordance with the contract] for every day after … the date for handover completion to and including the earliest of the date of handover completion or termination of the Contract …”.

10. At the time AM Darlinghurst served its payment schedule, the Principal’s Representative also served a certificate of liquidated damages under cl 34.7 stating that the liquidated damages were $7,360,000 (applying a cap in the Construction Contract of 10 percent of the value of the works) and providing a breakdown of the amount of liquidated damages to which AM Darlinghurst claimed to be entitled.

11. Growthbuilt lodged its adjudication application with the second defendant, Resolution Institute, on 8 April 2024. In that application, Growthbuilt sought determinations of claims for extensions of time. On that issue, it said:

54    Further to the Pressed Variations, Growthbuilt seeks the determination and award of extensions of time. The Principal has levied liquidated damages for delay against Growthbuilt, so as to reduce the total amount payable by the Principal to Growthbuilt for the Works performed. The Principal has done so in circumstances where Growthbuilt has submitted claims for, and is entitled to, extensions of time.

55    The Adjudicator’s assessment and award of extensions of time will negate the Principal’s attempts to withhold sums otherwise due to Growthbuilt on account of incorrectly alleged delay in the performance of the Works. It is therefore an intrinsically necessary assessment to ensure that Growthbuilt is paid the amount to which it is entitled for the work it has in fact performed.

12. In support of its application, Growthbuilt provided a statutory declaration from Mr Daniel Litchfield, the senior project manager with Growthbuilt, and expert reports from Mr Daniel Such and Mr Nick White.

13. In his statutory declaration, Mr Litchfield sets out the history of the project including the history of disputes that had arisen between AM Darlinghurst and Growthbuilt concerning the project. Relevantly, he says that at a joint site inspection on 19 May 2023 an employee of the plaintiff stated that AM Darlinghurst was not able to resolve claims for variations without understanding the likely completion date. Mr Litchfield says that in response he agreed to put together a program on a without prejudice basis and explained that he “was not able to issue the forecasted dates on an open basis until [Growthbuilt’s] claims had been submitted and assessed by the Principal”. As a result, he says that on 31 May 2023 he issued a document to AM Darlinghurst titled ‘Oxford and Foley Programme Analysis’ which was said to be issued on a ’without prejudice’ basis. Mr Litchfield explains that between May and August 2023 he issued a number of construction programs to AM Darlinghurst on a “without prejudice” basis which he says were “to assist the commercial discussions we were having about the Project”. Growthbuilt did not issue any other programs during that time. Mr Litchfield also gives evidence of discussions he had with representatives of AM Darlinghurst concerning those without prejudice programs – particularly one dated 15 August 2023.

14. Mr Such gives programming evidence. He expresses the opinion that Growthbuilt was entitled to an extension of time of 215 working days in respect of SP1A, 261 working days in respect of SP1B and 14 working days in respect of SP2.

15. Mr White is a quantity surveyor who provided an expert report on the costs of various disputed items included in the variation claims.

16. AM Darlinghurst served its adjudication response on 16 April 2024. The adjudication response included a number of appendices which dealt separately with the variation claims by Growthbuilt including the four variation claims in issue in this proceeding. The adjudication response also included statutory declarations from Mr Vincent Santos and Mr John Lyle. Mr Santos is the senior development manager employed by AMP Darlinghurst. He responds to the evidence given by Mr Litchfield. In response to the evidence given by Mr Litchfield in relation to the without prejudice programs, Mr Santos said (at para 114):

(a)   Despite the Respondent continually requesting updated contract programs from the Claimant pursuant to clause 32.2(g), the Claimant continued to issue milestone programs on a ‘without prejudice’ basis.

(b)   For example, in the Notice to Accelerate, the Principal’s Representative formally directed that an updated program be provided pursuant to clause 32.3(g) of the Amended D&C Deed.

(c)   Then, with complete disregard to this direction and the acceleration direction, Mr Litchfield sent a without prejudice spreadsheet with later dates for practical completion of April 2024 and May 2024 …

17. Mr Lyle was the principal’s representative under the Construction Contract in or about October 2023. He gives evidence in relation to the causes of delay.

18. The adjudication response also included an expert report from Mr Jonathan Shahady of TBH Consultancy, which responded to the report prepared by Mr Such.

19. The Adjudicator handed down her determination on 13 May 2024. Relevantly, she concluded that:

1. Growthbuilt was entitled to $693,660 in respect of variation V20034;

2. Growthbuilt was entitled to $1,437,800.31 in respect of variation V20052;

3. Growthbuilt was entitled to $114,657.62 in respect of variation V20061;

4. Growthbuilt was entitled to $1,719,026.06 in respect of variation V20071;

5. Growthbuilt was entitled to the extensions of time it claimed.

She therefore assessed AM Darlinghurst’s claim for liquidated damages as $nil.

20. AM Darlinghurst takes issue with each of these conclusions.

Relevant legal principles

21. The task of an adjudicator appointed under s 19 of the Act is to determine an adjudication application in accordance with the Act. In making his or her determination, the adjudicator must comply with the timetable set out in s 21 and “is to consider … only” the matters set out in s 22(2). It is well established that in undertaking that task, the adjudicator is required to observe the rules of natural justice: see Brolton Group Pty Ltd v Hanson Construction Materials Pty Ltd [2020] NSWCA 63 at [66-67] per Gleeson JA (with whom Meagher and Payne JJA agreed).

22. Relevantly to the present case, a number of matters follow from this statement of the adjudicator’s task.

23. First, it is accepted that the task of the adjudicator is to resolve the dispute between the parties as identified by the adjudication application and the response and in doing so is to determine the matters set out in s 22(1) of the Act – most relevantly, the amount of the progress payment (if any) to be paid by the respondent to the claimant. It would be a jurisdictional error for the adjudicator to determine an issue not raised by the parties — for example, to determine that the respondent owed an amount not claimed by the claimant. Conversely, it is not a jurisdictional error for an adjudicator “to fail to consider a matter outside the scope of the dispute presented by the parties as required by the statute” see Ceerose Pty Ltd v A-Civil Aust Pty Ltd [2023] NSWCA 215 (Ceerose) at [84] per Payne JA (with whom Ward ACJ and Basten AJA agreed). Consequently, “the absence of material including a reason put forward by the respondent for not paying the payment claim, entitles an adjudicator to award the amount of the claim without “addressing its merits””: ibid.

24. Second, in resolving the dispute, the adjudicator must generally only consider the matters set out in s 22(2) of the Act. However, that does not mean that the adjudicator must give any particular weight to the matters the adjudicator is required to consider. It is open to the adjudicator, for example, to reject material as being irrelevant or as carrying no weight or as being outweighed by other material; and in reaching conclusions on those matters it is irrelevant that the adjudicator has misunderstood the material or misinterpreted the construction contract or chosen to give some material weight that it does not bear: see Ceerose at [52]; Ausenco Operations Pty Ltd & Anor v Ferretti International Ottoway Pty Ltd & Anor [2020] SASC 46 (Ausenco) at [50] per Doyle J.

25. Third, as I have said, an adjudicator is bound by the rules of natural justice. One aspect of those rules is that the adjudicator must give reasons for his or her decision: s 22(3)(b) of the Act. Another is that the adjudicator must afford parties procedural fairness and in doing so must not decide an application on a basis not raised by the parties, and which could not reasonably have been anticipated by the parties, without first inviting submissions on that basis: JKC Australia LNG Pty Ltd v Inpex Operations Australia Pty Ltd [2018] 334 FLR 314; [2018] NTCA 6 at [38]; Rhomberg Rail Australia Pty Ltd v Concrete Evidence Pty Limited [2019] NSWSC 755 at [17] and the cases cited there; Ausenco at [50], [64].

26. However, it is necessary to bear in mind that the content of these principles is affected by the context in which they are to be applied. An adjudication determination does not finally determine the rights and obligations of the parties. Normally, an adjudicator is not legally trained and is expected to bring his or her specialised knowledge to the task. The timetable placed on the adjudicator has been described as “brutally fast”: Probuild Constructions (Aust) Pty Ltd v Shade Systems Pty Ltd (2018) 264 CLR 1; [2018] HCA 4 at [40]. The adjudicator (as here) is often served with a vast amount of material running into hundreds if not thousands of pages which raise a broad range of issues that may not be clearly identified. Consequently, it is to be expected that an adjudicator’s reasons will be attenuated and will not necessarily be expressed with the degree of rigour that might be expected of a court: Cockram Construction Ltd v Fulton Hogan Construction Pty Ltd (2018) 97 NSWLR 773; [2018] NSWCA 107 at [17]; Southern Cross Electrical Engineering Ltd v Steve Magill Earthmoving Pty Ltd [2018] NSWSC 1027 at [33-34]. Accordingly, only in rare cases will be it possible, for example, to infer from the absence of reasons that an adjudicator failed to consider a matter that he or she was required to consider. The absence of reasons may simply reflect a conclusion by the adjudicator that the matter was not important or a misunderstanding on the part of the adjudicator of the facts or the legal principles to be applied: see Ceerose at [62]ff per Payne JA (with whom Ward CJ and Basten AJA agreed). Similarly, only if there has been a substantial denial of procedural fairness which leads to a substantial practical injustice will the court find that there has been jurisdictional error under the Act: see Demex Pty Ltd v McNab Building Services Pty Ltd [2023] NSWCA 261 at [14]ff, particularly at [32] per Kirk JA (with whom Mitchelmore and Adamson JJA agreed).

Errors relied on by AM Darlinghurst

27. AM Darlinghurst identifies what are said to be four errors with the Adjudicator’s determination which affect its validity. First, it submits that the Adjudicator committed a jurisdictional error by concluding that she should not consider the expert report of Mr Shahady. Second, it submits in relation to variations V20034, V20061 and V20071 that the Adjudicator failed to consider material provided by it. Third, it submits in relation to variation V20052 that the Adjudicator relied on a ground for agreeing to the extension that was not advanced by Growthbuilt. It makes a similar claim in relation to variation V20071, although the complaint in that case is that the Adjudicator does not explain the basis on which she thought Growthbuilt was entitled to an extension. Lastly, AM Darlinghurst submits that the Adjudicator wrongly treated Growthbuilt’s claims for an extension of time as a complete defence to AM Darlinghurst’s claim for liquidated damages, whereas the issue between the parties was what amount should be deducted for liquidated damages (if any) given the extensions of time that were allowed.

The report of Mr Shahady

28. AM Darlinghurst submits that the Adjudicator refused to consider Mr Shahady’s report because it was based on without prejudice communications and the Adjudicator did not have sufficient time to identify what parts of the report depended on the without prejudice communications. That is said to involve two errors. The first is that AM Darlinghurst was denied procedural fairness because it was not an issue between the parties, and it was not raised with AM Darlinghurst, that the Adjudicator should or might reject the report because it referred to without prejudice material. The only issue raised by Growthbuilt in relation to admissibility concerned a without prejudice program issued by it on 12 March 2024 for the purpose of settlement discussions. However, Mr Shahady did not rely on that document. The second is that the Adjudicator committed a jurisdictional error by failing to consider Mr Shahady’s report, which was one of the matters that the Adjudicator was required to consider by s 22(2) of the Act.

29. In my opinion, both those submissions must be rejected.

30. In its payment schedule, AM Darlinghurst had referred to the program dated 12 March 2024. In its adjudication application, Growthbuilt objected to those references. It said this:

209   All the references above are references to dates set out in the programme Growthbuilt issued to the Principal on 12 March 2024 on a without prejudice basis, for a settlement discussion. …

210   The Principal’s conduct of making references to a without prejudice programme and relying on it as the basis of its assessment of payment claim is improper and amounts to a breach of the without prejudice privilege.

31. In its adjudication response, AM Darlinghurst did not specifically refer to this submission. It did refer to the evidence concerning the earlier claims in relation to without prejudice privilege. In relation to those, it simply commented (at para 164(b)):

The parties had raised further concerns as to the progress of the project by March 2023 and the Claimant had (in an apparent attempt to limit their exposure) started to provide their construction program ‘on a without prejudice basis’ to the Respondent …

32. In my opinion, AM Darlinghurst was fairly on notice that Growthbuilt claimed that the programs prepared between May and August 2023 were the subject of a claim for without prejudice privilege. That is what Mr Litchfield asserts in his statutory declaration, and the passage quoted above from the adjudication response appears to acknowledge as much. Moreover, it appeared to be common ground between the parties that without prejudice material could not be relied on by either party in the material they submitted in relation to the adjudication determination. That is certainly what was asserted by Growthbuilt in its adjudication application on the basis of a number of authorities which it referred to and which AM Darlinghurst did not take issue with. It is true that in its adjudication application Growthbuilt only referred to the document dated 12 March 2024. But that was because the adjudication application was dealing with a specific reference to that document in the payment schedule. It did not become apparent until AM Darlinghurst served its adjudication response and Mr Shahady’s report that it intended to rely on other communications that were also marked “without prejudice”. But that does not alter the fact that it was apparent that Growthbuilt asserted that those other documents were protected by without prejudice privilege and that it appeared to be common ground that a party was not entitled to rely on material of that type. It was open to the Adjudicator in those circumstances to conclude that Mr Shahady could not rely on that material when preparing his report.

33. AM Darlinghurst’s real complaint appears to be that the relevant material was not properly the subject of a claim for without prejudice privilege or, if it was, the privilege had been waived by service of Mr Litchfield’s statutory declaration which refers to the material. But if that was AM Darlinghurst’s position, it was a position that needed to be put to the Adjudicator. On the material before the Adjudicator, AM Darlinghurst ought reasonably to have anticipated that the Adjudicator might conclude the relevant programs were the subject of without prejudice privilege and could not be relied on.

34. As to AM Darlinghurst’s second ground, the Adjudicator, after concluding that Mr Shahady had relied on the without prejudice programs in preparing his report said:

244.   It is almost impossible in the limited time for this adjudication for me to distill information from this report that is not tainted by the “without prejudice” nature of the original documents provided by the Claimant to the Respondent on a “without prejudice” basis, in particular where it appears the expert has reconstructed the “without prejudice” programmes on which his report is based.

245.   Having regard to the caselaw provided for my deliberation to the effect that taking into consideration documents that are clearly marked without prejudice and in light of the Claimant’s submissions, I am concerned that to have regard to this report or to select parts of the report that I consider are not so affected would affect the validity of this determination. I have limited time in this adjudication to work out what parts of the Report are not so affected and decline to do so.

The Adjudicator reaches conclusions to similar effect in other parts of her determination.

35. AM Darlinghurst submits that these paragraphs must be understood as a refusal by the Adjudicator to consider material she was required to consider under s 22(2) of the Act, which relevantly required the Adjudicator (in para (d)) to consider “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”.

36. I do not accept that submission. The Adjudicator plainly considered Mr Shahady’s report. However, she concluded that it was not practical in the time available to separate those parts of the report that depended on without prejudice communications from those that did not. Consequently, she decided to give the report no weight. Her decision to do so was within jurisdiction.

The alleged failure to consider material

37. AM Darlinghurst submits that the Adjudicator failed to consider submissions and evidence given by it in relation to the reasons for the delay and, in particular, failed to consider evidence given by Mr Lyle in relation to concurrent causes of delay.

38. It is convenient to take variation V20034 as an example. As I have explained, AM Darlinghurst in its adjudication response provided general submissions and then attached a number of schedules which make specific submissions in relation to each variation claim. Paragraph 29(e) of the specific submissions in relation to variation V20034 said:

Even if the Adjudicator accepts that the Claimant should not be time barred to claim an EOT, there a [sic] number of hurdles in clause 34.3(a)-(g) of the Contract which the Claimant must satisfy:

(i)   The Respondent refers to and relies on the findings of its program expert, TBH, at section 9.1 of its report dated 16 April 2024;

(ii)   As noted in the Respondent’s Payment Schedule, there were significant delays associated with other activities that themselves fell on the critical path. The TBH report found that “the start of level 3 structural steel was controlled by the completion of the concrete core walls up to level 3.

(iii)   The TBH Report also noted that “TBH observe that the slippage to structural steel has not critically delayed Building 1 Completion.”

(iv)   In conclusion the TBH Report observed that there was NIL critical delay associated with the Claimant’s V20034 claim [citations omitted].

39. In his statutory declaration, Mr Lyle describes the history of the project and expresses the view that the critical works took much longer than they should have and involved a sequencing that was not reflected in any program provided by Growthbuilt. Specifically, he says that Growthbuilt failed to procure structural steel and scaffolding in a timely manner, and he gives details of those assertions. Mr Lyle also gives evidence (at para 41) that following visits to three of Growthbuilt’s subcontractors, it was “plainly obvious to me that at that time the base building and subcontract design was not complete, and Growthbuilt did not have an approved construction methodology on roof/façade construction”. He concludes (at para 43):

… the above information demonstrates to me that the current delays that the Project suffers is due to Growthbuilt’s failure to:

(a)   sequence, resource and carry out the critical structural cores;

(b)   manage and complete their design obligations in a timely manner;

(c)   procure required materials required to erect and waterproof the buildings including (but not limited to):

(i)   Structural Steel;

(ii)   façade/glazing materials; and

(iii)   zinc roofing; or

(d)   obtain necessary authority approvals in a timely manner to facilitate the WUC (construction Certificates and scaffolding permits).

therefore Growthbuilt is not diligently proceeding with carrying out of the Works (as defined in the Contract) and is otherwise not diligently complying with all of its obligations under the Contract. Accordingly in my opinion they would be barred from making such claims by subclause 34.3(g) of the Contract.

40. In relation to variation V20034, Mr Lyle refers to the relevant paragraphs of Mr Such’s report and says:

49.   I disagree with Mr Such where he, in paragraph 110, states that the structural steel delivery was in some way effected [sic] by tree pruning or lack of Oxford St loading bays. I say this because:

(a)   I observed steel being delivered and lifted from Foley Street;

(b)   The majority of steel to Building 1 was lifted from Foley Street after the tree pruning was completed and loading zones reinstated.

(c)   I repeat and refer to paragraph 51 below [which gives further evidence about steel delivery].

50.   I do not agree with Mr Such’s conclusion in paragraph 114 of the Such Report and do not consider that it demonstrates an understanding of the current site progress. The photos in paragraph 28 above shows that L3 steel has been on hold for 5 months since mid-November 2023 until now which demonstrates to me that this delay was not critical.

41. The Adjudicator does not refer to Mr Lyle’s evidence when considering variation V20034. AM Darlinghurst submits that the evidence was important and that the only inference that can be drawn from the Adjudicator’s failure to refer to the evidence is that she did not consider it.

42. I do not accept that submission. As Payne JA pointed out in Ceerose at [62]ff there may be a number of reasons why an Adjudicator does not refer to particular material. In the present case, AM Darlinghurst itself does not refer to Mr Lyle’s evidence in that part of its Adjudication Response dealing with variation V20034. There was clearly competing evidence from Mr Such on the causes of delay. Moreover, the Adjudicator did discuss Mr Lyle’s evidence in relation to V20052. In that context, she said:

457.    The Respondent relies on the Statutory Declaration of the Principal’s Representative John Lyle and the TBH Report on Delays.

458.    Mr Lyle states (paragraph 14) that from the outset (October 2023) he was not authorised to deviate from the Contract terms. This statement is in conflict with the Contract, which provides the Principal’s Representative with discretion in issuing directions including extensions of time and dealing with claims. Nevertheless Mr Lyle says that he has not had any reason to deviate from its terms.

459.   Mr Lyle is critical of the Claimant and says that it had seriously miscalculated their programme and the required resourcing. He details the structural works forming the critical path. He notes the status of the works in all three buildings as at 27 March 2024.

460.    He is also critical that the Claimant had failed to procure scaffolding in a timely manner. He is unaware of the dates on which the Council provided a permit for the scaffolding for Building 1, but notes scaffolding commenced about 24 January 2024, that scaffolding for Building 2 commenced on 24 March 2024. He does not have information for Building 3.

461.    He states in summary (paragraphs 40-43) that the Claimant has failed to manage the design of the project and that the delays cannot be claimed by the [sic] Growthbuilt including but not limited to Growthbuilt’s failure to meet the requirements of the Contract in clause 34.3(c) to (g) (inclusive).

462.    In response to the Claimant’s expert (Such) report, Mr Lyle notes that at paragraph 100 Mr Such confirms that “the programming provided by the Claimant is inadequate” and there are numerous programmes being used, which do not reflect the true sequencing of the Project.

463.    I have read this paragraph of Mr Such’s report and I do not agree with this. Mr Such in fact says that “the 7 February 2023 Program required some modifications prior to being suitable for use in my delay analysis…”

464.    In relation to V20052, Mr Lyle says that the truss for Big Poppas was “finally approved on the day of my visit, being 19 March 2024”. Accordingly, he says, any delay that may have happened in Q2 or Q3 of 2023 for this item would not have been critical delays to the date of practical completion due to the overriding delays (6-10 months) caused by Growthbuilt.

465.    Having regard to the Claimant’s detailed chronology attached to its document dated 9 August 2023 and updated on 14 and 28 August 2023, and difficult working conditions, including the need to work around an operating tenant, the need to obtain additional architectural and structural design and have those approved before purchasing the materials, I do not agree with this view. The reason for the Variation is the direction by the Respondent on 29 April 2022 to accommodate the operational requirements of a tenancy as clearly set out in the Claimants [sic] documents.

43. The only conclusion that can be reached from these paragraphs is that the Adjudicator did consider Mr Lyle’s statutory declaration but for whatever reason chose not to deal with it specifically in relation to each variation claim. That is perhaps understandable when AM Darlinghurst does not specifically refer to it in its adjudication response submissions in relation to variations V0034, V0061 and V00071. Even assuming that the Adjudicator’s failure to refer to Mr Lyle’s evidence in relation to each variation was an oversight in drafting her report, that is not a jurisdictional error. The most that could be said is that the Adjudicator did not specifically refer to evidence that she had largely rejected in a related context.

Alleged reliance on grounds not advanced by Growthbuilt

44. Growthbuilt claimed that it was entitled to an extension of time (EOT) in relation to variation V20052. In relation to that claim, the Adjudicator said:

439.    The Respondent submits in its payment schedule (paragraph 56-61[)] (pages 37- 38) that where no EOT has been granted to the Contractor pursuant to clause 34.3, there can be no entitlement to delay damages pursuant to clause 34.9, and that the delay damages must be connected with a “compensable cause” (as set out by the Respondent).

440.    The Claimant submits (paragraph 765) it is

entitled to an EOT caused by a qualifying cause of delay regardless of whether an EOT has been granted. The correct interpretation of clause 34.9 should be that, if the Contractor is entitled to an extension of time pursuant to clause 34.3 for a Compensable Cause (other than variation as the time-related costs for variation shall be valued under clause 36.4):

(a)    if the Principal’s Representative has granted an extension of time, the Contractor is obliged to submit a claim under clause 34.9 and its entitlement to delay damages shall be governed and calculated in accordance with clause 34.9; and

(b)    if the Principal’s Representative failed to grant an extension of time while it should have, the Contractor is still entitled to damages associated with the Compensable Cause but its entitlement is not limited to the methodology in clause 34.9.

441.    I have read this clause and I do not make a finding regarding the Claimant’s proposed interpretation of this clause.

442.    However I consider that this Variation V20052 has arisen under a qualifying cause of delay. The Contract also provides a discretion for the Principal’s Representative to assess an EOT, notwithstanding that the Contractor is not entitled to or has not claimed it.

443.    I disagree with the Respondent’s submissions that the Claimant has provided insufficient information in order for the Respondent assess [sic] the EOT claim. Although the value may not have been known, the chronology and documents provided behind TABs 52.01-52.40 provide sufficient information from which the Respondent could address the Claimant’s EOT claim.

444.    I consider the Claimant is entitled to an extension of time.

45. AM Darlinghurst submits that the Adjudicator must be understood as saying in these paragraphs that an EOT could be granted under cl 34.5 by the principal’s representative as a matter of discretion and that therefore Growthbuilt was entitled to an extension of time. According to AM Darlinghurst, in reaching that conclusion, the Adjudicator relied on a ground not advanced by Growthbuilt without giving AM Darlinghurst an opportunity to address that ground, with the result that it was denied procedural fairness.

46. I do not accept that submission. Growthbuilt claimed to be entitled to an EOT under cl 34.3 of the Construction Contract, and that is the basis on which the Adjudicator concluded that it was entitled to an EOT. That is apparent from the fact that the Adjudicator says (in para 442 of her Determination) that she considers that “this Variation V20052 has arisen under a qualifying cause of delay”. Whether there had been a “qualifying cause of delay” is only relevant to an extension under cl 34.3. It is irrelevant to an extension under cl 34.5.

47. The reference in para 441 to “this clause” is a reference to cl 34.9, which deals with Growthbuilt’s right to claim delay damages. The Adjudicator rightly says that she did not need to make a finding regarding the interpretation of that clause to determine whether Growthbuilt was entitled to an extension of time. The Adjudicator also refers to a right to seek an extension under cl 34.5 (although she does not identify the clause specifically). But the fact that she refers to the clause does not mean she relied on it.

48. The Adjudicator does not identify in the paragraphs quoted the qualifying event. However, it is reasonable to conclude that she accepted Growthbuilt’s submissions in that regard. That does not involve any error, let alone a jurisdictional one.

49. The same point applies to variation V20071. In concluding that Growthbuilt was entitled to the extension of time, the Adjudicator must be taken to have accepted Growthbuilt’s submissions in that regard.

The issue of whether the EOTs were a complete defence to the claim for liquidated damages

50. The Adjudicator said this in relation to liquidated damages:

889.   As I have made a decision mainly in favour of the Claimant which includes extensions of time. [sic] Accordingly, I do not consider that the Respondent has a set off claim for liquidated damages.

890.   I have taken into consideration the submissions of the Claimant in respect of this claim who has urged on me that I should assess liquidated damages at $nil.

891.   As a result of my decision, above, I determine liquidated damages at $nil.

51. AM Darlinghurst submits that in reaching this conclusion, the Adjudicator decided the claim on a basis not in issue between the parties. It submits that it was common ground that liquidated damages could be set off against the amount claimed by Growthbuilt. It was therefore necessary to calculate the amount of liquidated damages to which AM Darlinghurst was entitled. That depended on the number of days delay that had occurred in achieving handover completion for various components of each separable portion, which in turn depended on the EOTs to which Growthbuilt was entitled in respect of each separable portion. Consequently, the issues between the parties were the number of days extension (if any) to which Growthbuilt was entitled in respect of each separable portion, the number of delays (if any) for which Growthbuilt was liable after taking account of those extensions and the amount of liquidated damages (if any) that was payable in respect of those days of delay, which was then to be deducted from the amount to which Growthbuilt was found to be entitled. Instead, the Adjudicator determined that because Growthbuilt was entitled to the EOTs it claimed, it was not liable to pay any liquidated damages. According to AM Darlinghurst, that was not a case advanced by Growthbuilt.

52. Growthbuilt, on the other hand, submits that it did advance that case. It says that the argument advanced by AM Darlinghurst was not put to the Adjudicator. Consequently, the Adjudicator could not have committed a jurisdictional error in failing to consider that argument.

51. AM Darlinghurst’s payment schedule stated that against the scheduled amount to which it accepted Growthbuilt was entitled ($1,058,761.75) should be set off liquidated damages “assessed to date per CL 37.7” of $7,360,000.00. As I have explained, that figure was broken down in a certificate of liquidated damages from the Principal’s Representative served on the same day.

52. In its adjudication application, Growthbuilt relevantly said this in relation to liquidated damages:

247    On 21 March 2024, the Principal’s Representative issued a letter to Growthbuilt (TAB 01.18) purporting to certify and levy liquidated damages in accordance with clause 34.7, in the sum of $7,360,000.00. It is evident from the appendix to this letter that the Principal’s Representative purportedly assessed the liquidated damages as to 20 March 2024 in the sum of $7,470,620 and certified a reduced amount of $7,360,000 as, pursuant to clause 34.7(f), the liquidated damages are capped to 10% of the Contract Sum.

248    In the Payment Schedule, the Principal’s Representative certified $1,058,761.75 for the works claimed in Payment Claim (despite its rejection of all the variation claims). The Principal’s Representative then sets off the certified liquidated damages in accordance with clause 37.7, in the sum of $7,360,000.00, resulting a negative balance of $6,397,489.32.

249    Firstly, Growthbuilt submits that the Principal’s Representative has erred in setting off liquidated damages up to 20 March 2024 against the certified amount, as such date is after the date of the Payment Claim.

250    Further, Growthbuilt respectfully requests that the Adjudicator, in making his or her determination, assess these costs as Nil; particularly where the Adjudicator finds that Growthbuilt is entitled to extensions of time claimed for V20034, V20052, V20061 and V20071 or any of those claims, as it will logically mean the Principal’s entitlement to certify and set off the liquidated damages is unfounded.

251    Growthbuilt notes that it is trite law that it is within the adjudicator’s jurisdiction to do so. It was established in J Hutchinson Pty Ltd v Glavcom Pty Ltd [2016] NSWSC that liquidated damages can be accounted for within a payment schedule, and therefore become subject to an adjudication, where the contract allows the Principal to set off amounts within the payment schedule. Under clause 34.7(c) of the Contract, the Principal is entitled to do so.

…

258    Accordingly, Growthbuilt submits that it is open to the Adjudicator to assess the liquidated damages under the payment schedule and, in the event the Adjudicator finds that the claimed liquidated damages have not been (fully) made out or are ineffective due to the delays claimed by Growthbuilt, make a determination that the Liquidated Damages amount as at 29 February 2024 was $Nil (or any such amount depending on the adjudicator findings on Growthbuilt’ s entitlement to EOT).

55. In response, AM Darlinghurst said this in its adjudication response:

155.    The Claimant seeks to include the determination of Liquidated Damages within the Adjudication Application as it purports to be entitled to set off any Liquidated Damages claimed by the Respondent against any delay damages or time-related costs, or asserts that any EOTs granted would reduce the Liquidated Damages payable to the Respondent accordingly.

156.    In circumstances where the Respondent submits that no EOTs, delay damages, or time-related costs are accruing to the Claimant, it is unnecessary for the Adjudicator to seek to determine the amount of Liquidated Damages owing to the Respondent.

157.    However, to the extent that the Adjudicator otherwise determines that she ought to consider the amount of Liquidated Damages payable to the Respondent, the Respondent has included in its Payment Schedule the quantification of Liquidated Damages owing by reference to the certificate of Liquidated Damages issued pursuant to clause 34.7 of the Contract on 21 March 2024 and as contained at AA-Tab 1.18 of the Claimant’s Adjudication Application.

56. It is apparent from the passages quoted above that Growthbuilt did advance a case that AM Darlinghurst was not entitled to any liquidated damages at least where she accepted all of Growthbuilt’s claims for EOTs. That was said to be so because “it will logically mean the Principal’s entitlement to certify and set off the liquidated damages is unfounded”. It may be that that submission had no merit. But that is beside the point. It was a submission made by Growthbuilt, which was not directly addressed by AM Darlinghurst. It was open to the Adjudicator in those circumstances to accept Growthbuilt’s submission, which is what she did.

Orders

57. It follows that AM Darlinghurst’s summons filed on 21 May 2024 must be dismissed with costs.

58. Accordingly, the orders of the Court are:

1. The summons be dismissed with costs;

2. The amount paid into Court by the plaintiff on 22 May 2024 and 21 June 2024 together with any interest thereon be paid to the first defendant.

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Decision last updated: 05 July 2024