Argyle Building Services Pty Ltd v Dalanex Pty Ltd (No 2)

IN THE SUPREME COURT OF VICTORIA

Not Restricted

AT MELBOURNE

COMMERCIAL DIVISION

TECHNOLOGY, ENGINEERING & CONSTRUCTION LIST

S ECI 2021 04907

ARGYLE BUILDING SERVICES PTY LTD (ACN 151 322 520)	Plaintiff
v
DALANEX PTY LTD trading as RK BASEMENT & STRUCTURE SOLUTIONS (ABN 98 372 123 062)	First Defendant
JOHN McMULLAN	Second Defendant

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JUDGE:	DELANY J
WHERE HELD:	Melbourne
DATE OF HEARING:	14 April 2022; further written submissions 19 April 2022 and 3 May 2022
DATE OF JUDGMENT:	10 August 2022
CASE MAY BE CITED AS:	Argyle Building Services Pty Ltd v Dalanex Pty Ltd (No 2)
MEDIUM NEUTRAL CITATION:	[2022] VSC 452

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ADMINISTRATIVE LAW – Building and construction – Judicial review – Adjudication under Part 3 Division 2 of the Building Industry Security of Payment Act 2002 (Vic) – Application for certiorari and declarations – Whether subcontract specified reference date – Inconsistency between contractual provisions – Reference date unable to be determined by reference to contract – Adjudicator correctly applied s 9(2)(b) of Act – Purported unilateral withdrawal of payment claim – Second payment claim purportedly served in respect of single payment claim a nullity – No jurisdictional error established – Notice issued pursuant to s 21(2B) – Whether submissions to adjudicator ‘duly made’ – Whether adjudication determination contravened s 23(2B) – Contravention of s 23(2B) not proved – Building Industry Security of Payment Act 2002 (Vic) ss 9(2), 15(2)-(3), 19, 21(2B), 22(5), 23(2), 23(2A), 23(2B) – Southern Han Breakfast Point Pty Ltd (in liq) v Lewence Construction Pty Ltd (2016) 260 CLR 340, MAAG Developments Pty Ltd v Oxanda Childcare Pty Ltd [2018] VSCA 289, Cool Logic Pty Ltd v Citi-Con (Vic) Pty Ltd [2020] VCC 1261, Fitzgerald v Masters (1956) 95 CLR 420, Valeo Construction Pty Ltd v Pentas Property Investments Pty Ltd [2018] VSC 243, Dualcorp Pty Ltd v Remo Constructions Pty Ltd (2009) 74 NSWLR 190, Trustees of the Roman Catholic Church for the Diocese of Lismore v TF Woollam and Son Pty Ltd [2012] NSWSC 1559, Protectavale Pty Ltd v K2K Pty Ltd [2008] FCA 1248, Acciona Infrastructure Australia Pty Ltd v Chess Engineering Pty Ltd [2020] NSWSC 1423, Hickory Developments Pty Ltd v Schiavello (Vic) Pty Ltd (2009) 26 VR 112, Multiplex Constructions Pty Ltd v Luikens [2003] NSWSC 1140, Project Blue Sky Inc v Australian Broadcasting Authority (1998) 194 CLR 355 referred to – Citi-Con (Vic) Pty Ltd v Punton’s Shoes Pty Ltd [2020] VCC 804, Perform (NSW) Pty Ltd v Mev-Aus Pty Ltd [2009] NSWCA 157, John Holland Pty Ltd v Roads and Traffic Authority of NSW [2007] NSWCA 19, Australian Education Union v Department of Education and Children’s Services (2012) 248 CLR 1 applied.

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APPEARANCES:	Counsel	Solicitors
For the Plaintiff	Mr R Craig QC with Mr A Blunt	Thomson Geer
For the Defendants	Mr M Robins QC with Mr D Dudderidge	Ward & Co

TABLE OF CONTENTS

Introduction and Overview.............................................................................................................. 1

The Legislation................................................................................................................................... 4

The Subcontract................................................................................................................................ 14

The Payment Claims and the Adjudication Determination Process..................................... 16

Progress Payment Claims.......................................................................................................... 16
First Adjudication Application................................................................................................. 18
Second Adjudication Application and Adjudication Determination.................................. 19

Ground 1(a): Calculation of the Reference Date........................................................................ 21

The Submissions on Behalf of the Parties................................................................................ 22
Consideration.............................................................................................................................. 25

Ground 1(b): the Entitlement to Serve One Payment Claim Only......................................... 31

The Submissions on Behalf of the Parties................................................................................ 31
Consideration.............................................................................................................................. 34

Ground 2: Taking into Account Submissions Not ‘Duly Made’ for the Purposes of s 23(2)(c) of the SOP Act........................................................................................................................................ 35

Background & the Parties’ Submissions.................................................................................. 35
Did the 21(2B) Notice Comply With s 21(2B)?........................................................................ 46
Were RK’s 28 October 2021 Submissions ‘Duly Made’?....................................................... 55
Section 23(2B)............................................................................................................................... 58

Disposition........................................................................................................................................ 63

HIS HONOUR:

Introduction and Overview

The plaintiff, Argyle Building Services Pty Ltd (‘Argyle’), is the head contractor on a building project located at 68-74 Chapman Street, North Melbourne. The first defendant, Dalanex Pty Ltd, trading as RK Basement and Structure Solutions (‘RK’), is a subcontractor to Argyle on the project.

In this proceeding Argyle applies for an order that the adjudication determination of the second defendant, John McMullan, dated 9 November 2021 (‘Adjudication Determination’) in favour of RK in the sum of $431,266.80, made pursuant to the Building and Construction Industry Security of Payment Act 2002 (Vic) (‘SOP Act’), be quashed.[1] Alternatively, Argyle seeks a declaration that the Adjudication Determination is void.
[1]In these reasons, unless stated otherwise, all amounts are expressed as inclusive of GST.

The grounds relied upon by Argyle in its amended originating motion dated 23 February 2022 are as follows:

1.Mr McMullan committed a jurisdictional error, by determining that the 12 July 2021 payment claim, being the payment claim relevant to the Adjudication Determination, was made on and from a ‘reference date’ for the purposes of section 9(1) of the SOP Act, in circumstances where RK had served multiple payment claims on and from the reference date …
2.The Adjudication Determination is void by reason of section 23(2B)(b) of the SOP Act because Mr McMullan took into account RK’s further submissions dated 28 October 2021 and its supporting further documentation, in circumstances where those submissions and that further documentation had not been duly made for the purposes of section 23(2)(c) of the SOP Act …[2]

[2]Plaintiff, Amended Originating Motion dated 23 February 2022, [1]-[2].

The relief sought by Argyle is opposed by RK. Mr McMullan played no active role in the proceeding.

In support of their respective positions, Argyle and RK relied on written submissions filed both before and after the hearing:

(a)Argyle’s submissions are dated 11 March 2022, 28 March 2022 and 19 April 2022; and
(b)RK’s submissions are dated 11 March 2022, 25 March 2022 and 3 May 2022.

Three issues fell for determination in the proceeding.

(a) The first: whether Mr McMullan committed a jurisdictional error by determining that 12 July 2021 was a ‘reference date’ under the subcontract because s 9(2)(b) of the SOP Act, rather than s 9(2)(a) of the Act, was the subsection required to be applied (‘Ground 1(a)’).

(b) The second, related to the first: whether RK served multiple progress payment claims in respect of the same ‘reference date’ under the subcontract (‘Ground 1(b)’). The relevant claims were submitted:

(i) on 21 June 2021, in the amount of $379,723.15 (‘Claim 8’), later purportedly unilaterally withdrawn by RK and replaced by a claim made on 2 July 2021 (‘Claim 8.1’); and

(ii) on 12 July 2021, in the amount of $465,586.68 (‘Claim 9’).

(c) The third: whether the Adjudication Determination is void by reason of s 23(2B)(b) of the SOP Act because Mr McMullan took into account RK’s further submissions dated 28 October 2021 which had not been ‘duly made’ for the purposes of s 23(2)(c) of the SOP Act (‘Ground 2’).

For the reasons that follow, I have determined those issues as follows:

(a)There was no jurisdictional error as alleged in Ground 1(a). Mr McMullan was correct to find that s 9(2)(b) of the SOP Act applied to determine the ‘reference date’ under the subcontract. As found by Mr McMullan, 12 July 2021 was the ‘reference date’ under the subcontract.
(b)Having regard to the finding concerning Ground 1(a), the issue raised by Ground 1(b) does not arise on the facts. Claim 9, made on 12 July 2021, was a claim for work performed in the month of July. Claim 8 was originally made on 21 June 2021. It was a claim for work performed for the month of June. The original Claim 8 was unilaterally withdrawn by RK and replaced by Claim 8.1 on 2 July 2021. The Act does not contemplate the unilateral withdrawal and resubmission of a payment claim. Claim 8.1, when purportedly re-submitted on 2 July 2021, was a nullity. Claim 8 remained the only payment claim submitted for the month of June. Claim 9 was a payment claim for the month of July. This was not a case of the service of multiple payment claims on and from the same reference date. Ground 1(b) fails.
(c)Ground 2 also fails. Ground 2 depended upon a finding that the s 21(2B) notice issued by Mr McMullan on 26 October 2021 (the ‘21(2B) Notice’) was a notice issued in contravention of s 21(2B) of the SOP Act. Argyle submitted that because the 28 October 2021 submissions by RK were made in response to that notice, the submissions were not ‘duly made’ as required by s 23(2)(c). Ground 2 fails because the 21(2B) Notice was not issued in contravention of s 21(2B). It is a matter for the adjudicator to determine whether submissions were ‘duly made’. If that is not correct and the issue is one for the Court to determine, in my opinion the 28 October 2021 submissions were ‘duly made’ in response to the 21(2B) Notice. Even if the notice did not comply with s 21(2B) (a proposition I reject) Mr McMullan had the power to request written submissions pursuant to s 22(5) of the SOP Act. Even if he purported to act under a head of power that was not available to him, the decision to invite submissions was a valid decision. Further, s 23(2B) imposes an obligation upon the moving party to show the extent to which the adjudication determination is void. Argyle failed to discharge that onus. In circumstances where Argyle sought and was given an opportunity to make submissions in response to the 28 October 2021 submissions, and where it made such submissions and provided additional materials in support, there was no denial of procedural fairness. For those reasons, the relief sought must be refused.

The Legislation

A large number of the provisions of the SOP Act are relevant to the grounds upon which Argyle relies. Although reference is made later in these reasons to specific provisions, it is convenient to reproduce all of the relevant provisions:

1. Purpose
The main purpose of this Act is to provide for entitlements to progress payments for persons who carry out construction work or who supply related goods and services under construction contracts.
…
3. Object of Act
(1)The object of this Act is to ensure that any person who undertakes to carry out construction work or who undertakes to supply related goods and services under a construction contract is entitled to receive, and is able to recover, progress payments in relation to the carrying out of that work and the supplying of those goods and services.
(2)The means by which this Act ensures that a person is entitled to receive a progress payment is by granting a statutory entitlement to that payment in accordance with this Act.
(3)The means by which this Act ensures that a person is able to recover a progress payment is by establishing a procedure that involves—
(a)the making of a payment claim by the person claiming payment; and
(b)the provision of a payment schedule by the person by whom the payment is payable; and
(c)the referral of any disputed claim to an adjudicator for determination; and
(d)the payment of the amount of the progress payment determined by the adjudicator; and
(e)the recovery of the progress payment in the event of a failure to pay.

(4) It is intended that this Act does not limit—
(a)any other entitlement that a claimant may have under a construction contract; or
(b)any other remedy that a claimant may have for recovering that other entitlement.

…
9. Rights to progress payments
(1)On and from each reference date under a construction contract, a person—
(a)who has undertaken to carry out construction work under the contract; or
(b)who has undertaken to supply related goods and services under the contract—

is entitled to a progress payment under this Act, calculated by reference to that date.
(2)In this section, “reference date”, in relation to a construction contract, means—
(a)a date determined by or in accordance with the terms of the contract as—
(i)a date on which a claim for a progress payment may be made; or
(ii)a date by reference to which the amount of a progress payment is to be calculated—

in relation to a specific item of construction work carried out or to be carried out or a specific item of related goods and services supplied or to be supplied under the contract; or
(b)subject to paragraphs (c) and (d),[3] if the contract makes no express provision with respect to the matter, the date occurring 20 business days after the previous reference date or (in the case of the first reference date) the date occurring 20 business days after—
[3]Those provisions are not relevant on the facts of this case, which does not concern either a single one-off payment or a final payment.
(i)construction work was first carried out under the contract; or
(ii)related goods and services were first supplied under the contract; or

…
14. Payment claims
(1)A person referred to in section 9(1) who is or who claims to be entitled to a progress payment (the claimant) may serve a payment claim on the person who, under the construction contract concerned, is or may be liable to make the payment.
(2)A payment claim—
(a)must be in the relevant prescribed form (if any); and
(b)must contain the prescribed information (if any); and
(c)must identify the construction work or related goods and services to which the progress payment relates; and
(d)must indicate the amount of the progress payment that the claimant claims to be due (the claimed amount); and
(e)must state that it is made under this Act.

(3) The claimed amount—
(a)may include any amount that the respondent is liable to pay the claimant under section 29(4);
(b)must not include any excluded amount.

NoteSection 10(3) provides that a progress payment must not include an excluded amount.
(4)A payment claim in respect of a progress payment (other than a payment claim in respect of a progress payment that is a final, single or one-off payment) may be served only within—
(a)the period determined by or in accordance with the terms of the construction contract in respect of the carrying out of the item of construction work or the supply of the item of related goods and services to which the claim relates; or
(b)the period of 3 months after the reference date referred to in section 9(2) that relates to that progress payment—

whichever is the later.
(5)A payment claim in respect of a progress payment that is a final, single or one-off payment may be served only within—
(a)the period determined by or in accordance with the terms of the construction contract; or
(b)if no such period applies, within 3 months after the reference date referred to in section 9(2) that relates to that progress payment.

(6)Subject to subsection (7), once a payment claim for a claimed amount in respect of a final, single or one-off payment has been served under this Act, no further payment claim can be served under this Act in respect of the construction contract to which the payment claim relates.
(7)Nothing in subsection (6) prevents a payment claim for a claimed amount in respect of a final, single or one-off payment being served under this Act in respect of a construction contract if—
(a)a claim for the payment of that amount has been made in respect of that payment under the contract; and
(b)that amount was not paid by the due date under the contract for the payment to which the claim relates.

(8)A claimant cannot serve more than one payment claim in respect of each reference date under the construction contract.
(9)However, subsection (8) does not prevent the claimant from including in a payment claim an amount that has been the subject of a previous claim if the amount has not been paid.

…
15. Payment schedules
(1) A person on whom a payment claim is served (the respondent) may reply to the claim by providing a payment schedule to the claimant.
(2) A payment schedule—
(a) must identify the payment claim to which it relates; and
(b) must indicate the amount of the payment (if any) that the respondent proposes to make (the scheduled amount); and
(c) must identify any amount of the claim that the respondent alleges is an excluded amount; and
(d) must be in the relevant prescribed form (if any); and (e) must contain the prescribed information (if any).

(3) If the scheduled amount is less than the claimed amount, the schedule must indicate why the scheduled amount is less and (if it is less because the respondent is withholding payment for any reason) the respondent's reasons for withholding payment.
(4) If—
(a) a claimant serves a payment claim on a respondent; and
(b) the respondent does not provide a payment schedule to the claimant—
(i) within the time required by the relevant construction contract; or
(ii) within 10 business days after the payment claim is served; whichever time expires earlier—

the respondent becomes liable to pay the claimed amount to the claimant on the due date for the progress payment to which the payment claim relates.

…
18. Adjudication applications
(1) A claimant may apply for adjudication of a payment claim (an adjudication application) if—
(a) the respondent provides a payment schedule under Division 1 but—
(i) the scheduled amount indicated in the payment schedule is less than the claimed amount indicated in the payment claim; or
(ii) the respondent fails to pay the whole or any part of the scheduled amount to the claimant by the due date for payment of the amount; or

(b) the respondent fails to provide a payment schedule to the claimant under Division 1 and fails to pay the whole or any part of the claimed amount by the due date for payment of the amount.

(2) An adjudication application to which subsection (1)(b) applies cannot be made unless—
(a) the claimant has notified the respondent, within the period of 10 business days immediately following the due date for payment, of the claimant's intention to apply for adjudication of the payment claim; and
(b) the respondent has been given an opportunity to provide a payment schedule to the claimant within 2 business days after receiving the claimant's notice.

(3) An adjudication application—
(a) must be in writing; and
(b) subject to subsection (4), must be made to an authorised nominating authority chosen by the claimant; and
(c) in the case of an application under subsection (1)(a)(i), must be made within 10 business days after the claimant receives the payment schedule; and
(d) in the case of an application under subsection (1)(a)(ii), must be made within 10 business days after the due date for payment; and
(e) in the case of an application under subsection (1)(b), must be made within 5 business days after the end of the 2 day period referred to in subsection (2)(b); and
(f) must identify the payment claim and the payment schedule (if any) to which it relates; and
(g) must be accompanied by the application fee (if any) determined by the authorised nominating authority; and
(h) may contain any submissions relevant to the application that the claimant chooses to include.

(4) If the construction contract to which the payment claim relates lists 3 or more authorised nominating authorities, the application must be made to one of those authorities chosen by the claimant.
(5) A copy of the adjudication application must be served on the respondent.
* * * * *
(7) It is the duty of an authorised nominating authority to which an adjudication application is made to refer the application to an adjudicator as soon as practicable.
(8) An adjudicator to whom an application is referred under subsection (7) must be a person who is eligible to be an adjudicator as referred to in section 19.
…

21. Adjudication responses
(1)Subject to subsection (2A), the respondent may lodge with the adjudicator a response to the claimant’s adjudication application (the “adjudication response”) at any time within—
(a)5 business days after receiving a copy of the application; or
(b)2 business days after receiving notice of an adjudicator’s acceptance of the application—

whichever time expires later.
(2)The adjudication response—
(a)must be in writing; and
(b)must identify the adjudication application to which it relates; and
(c)must include the name and address of any relevant principal of the respondent and any other person who the respondent knows has a financial or contractual interest in the matters that are the subject of the adjudication application; and
(ca)must identify any amount of the payment claim that the respondent alleges is an excluded amount; and
(d)may contain any submissions relevant to the response that the respondent chooses to include.

(2A)The respondent may lodge an adjudication response only if the respondent has provided a payment schedule to the claimant within the time specified in section 15(4) or 18(2)(b).
(2B)If the adjudication response includes any reasons for withholding payment that were not included in the payment schedule, the adjudicator must serve a notice on the claimant—
(a)setting out those reasons; and
(b)stating that the claimant has 2 business days after being served with the notice to lodge a response to those reasons with the adjudicator.

(3)A copy of the adjudication response must be served on the claimant.
(4)In this section “relevant principal” in relation to the respondent, means any person with whom the respondent has entered into a contract (that is not a construction contract exempted from this Act under section 7(2)(b) or 7(2)(ba)) for the provision by the respondent of construction work or goods and services if the construction work carried out or the goods and services supplied by the claimant to or for the respondent under the construction contract are, or are part of or incidental to, the construction work or goods and services that the first-mentioned person engaged the respondent to carry out or supply.
22.Adjudication procedures
(1)An adjudicator is not to determine an adjudication application until after the end of the period within which the respondent may lodge an adjudication response.
(2)An adjudicator must serve a written notice—
(a)on any relevant principal and any other person who is included in the adjudication response under section 21(2)(c); and
(b)on any other person who the adjudicator reasonably believes, on the basis of any submission received from the claimant or the respondent, is a person who has a financial or contractual interest in the matters that are the subject of the adjudication application.

(3)An adjudicator is not to consider an adjudication response unless it was made before the end of the period within which the respondent may lodge the response.
(4)Subject to subsections (1) and (3), an adjudicator is to determine an adjudication application as expeditiously as possible and, in any case—
(a)within 10 business days after the date on which the acceptance by the adjudicator of the application takes effect in accordance with section 20(2); or
(b)within any further time, not exceeding 15 business days after that date, to which the claimant agrees.

(4A)A claimant must not unreasonably withhold their agreement under subsection (4)(b).
(5)For the purposes of any proceedings conducted to determine an adjudication application, an adjudicator—
(a)may request further written submissions from either party and must give the other party an opportunity to comment on those submissions; and
(b)may set deadlines for further submissions and comments by the parties; and
(c)may call a conference of the parties; and
(d)may carry out an inspection of any matter to which the claim relates.

(5A)Any conference called under subsection (5)(c) is to be conducted informally and the parties are not entitled to legal representation unless this is permitted by the adjudicator.
(6)The adjudicator’s power to determine an application is not affected by the failure of either or both of the parties to make a submission or comment within the time or to comply with the adjudicator’s call for a conference of the parties.

23. Adjudicator’s determination
(1)An adjudicator is to determine—
(a)the amount of the progress payment (if any) to be paid by the respondent to the claimant (the adjudicated amount); and
(b)the date on which that amount became or becomes payable; and
(c)the rate of interest payable on that amount in accordance with section 12(2).

Note The adjudicated amount may be added to under section 45(8).
(2)In determining an adjudication application, the adjudicator must consider the following matters and those matters only—
(a)the provisions of this Act and any regulations made under this Act;
(b)subject to this Act, 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.

(2A)In determining an adjudication application, the adjudicator must not take into account—
(a)any part of the claimed amount that is an excluded amount; or
(b)any other matter that is prohibited by this Act from being taken into account.

(2B)An adjudicator’s determination is void—
(a)to the extent that it has been made in contravention of subsection (2);
(b)if it takes into account any amount or matter referred to in subsection (2A), to the extent that the determination is based on that amount or matter.

(3)The adjudicator’s determination must be in writing and must include—
(a)the reasons for the determination; and
(b)the basis on which any amount or date has been decided.

(4)If, in determining an adjudication application, an adjudicator has, in accordance with section 11, determined—
(a)the value of any construction work carried out under a construction contract; or
(b)the value of any related goods and services supplied under a construction contract—

the adjudicator (or any other adjudicator) is, in any subsequent adjudication application that involves the determination of the value of that work or of those goods and services, to give the work or the goods and services the same value as that previously determined unless the claimant or respondent satisfies the adjudicator concerned that the value of the work or the goods and services has changed since the previous determination.

…
28.Claimant may make new application if previous application refused or not determined
(1)This section applies if—
(a)a claimant fails to receive an adjudicator's notice of acceptance of an adjudication application within 4 business days after the application is made; or
(b)an adjudicator who accepts an adjudication application fails to determine the application within the time allowed by section 22(4).

(2)In either of those circumstances, the claimant—
(a)may withdraw the application, by notice in writing served on the adjudicator or the authorised nominating authority to whom the application was made; and
(b)may make a new adjudication application under section 18.

(3)Despite sections 18(3)(c), 18(3)(d) and 18(3)(e), a new adjudication application may be made at any time within 5 business days after the claimant becomes entitled to withdraw the previous adjudication application under subsection (2).
(4)This Division applies to a new application referred to in this section in the same way as it applies to an application under section 18.

There are some definitional and other features of and related to the SOP Act that should be noted, particularly in relation to Ground 1(a). They concern the qualifications held by adjudicators and the process and criteria for their appointment.

An ‘adjudicator’ is defined in s 4 of the SOP Act to mean the person appointed in accordance with the Act to determine the application.

Section 19(1)(b) of the SOP Act provides that the qualifications, expertise and experience of a natural person in order for that person to be eligible to be an adjudicator under the Act may be prescribed. No criteria have been prescribed.

Section 42(1) of the SOP Act provides that the Victorian Building Authority (the ‘VBA’) may authorise persons to nominate adjudicators for the purposes of the Act. Section 41(2) provides that before giving an authorisation, the VBA must have regard to any guidelines issued by the Minister and published in the Government Gazette as provided for in s 44 of the SOP Act. Section 44(2)(c) of the SOP Act provides that the guidelines may provide for the qualifications and experience that are relevant to the carrying out of an authorised nominating authority as adjudicators. Ministerial Guidelines pursuant to s 44 of the SOP Act have been gazetted.[4]
[4]Victoria, Victoria Government Gazette, No 69, 30 March 2007.

Nothing in the SOP Act or those guidelines refers to or imposes an obligation upon authorised nominating authorities to appoint persons as adjudicators who are legally qualified.

The Subcontract

The subcontract between Argyle and RK is dated 14 December 2020. It is for the carrying out of concreting and basement works on the project for the sum of $2.1 million.

Before Mr McMullan, there was a dispute between the parties as to the relevant documents which comprise the subcontract. Argyle identified the following documents which it submitted relevantly comprise the subcontract:

(a)a formal instrument of agreement dated 14 December 2020 (‘FIA’);
(b)an amended standard form of subcontract conditions AS 4901-1998 (‘GCs’); and
(c)a scope of works (‘Scope of Works’).

Before Mr McMullan, RK submitted that the contractual documents did not include the GCs.[5] However, opposition to the proposition that the subcontract includes the GCs was not maintained by RK in the proceeding.[6]
[5]Court Book (‘CB’), 813.
[6]See, for example, RK’s submissions dated 11 March 2022, [14].

The relevant subcontract documents include three separate provisions which concern the making of progress claims/payment claims. Contractual provisions concerning the making of payment claims are relevant to determining the ‘reference date’ pursuant to s 9(2) of the SOP Act.

Part A of Annexure A to the FIA states, against the heading ‘Time for payment claims (Clause 37.1)’:

Claims submitted by the 20^th day of the month with payment no later than 30 days after the end of the month in which the claim is made.[7]

[7]CB, 108 (emphasis added).

Item 18 in Annexure B to the FIA deletes clause 37.2 of the GCs, replacing that clause with the following:

The Subcontractor is required to submit claims no later than the 21^st of each month with a full break up of items of work and percentage (%) complete for each item of work. Claims received after this date will be included in the claim for the following month…[8]

[8]CB, 115 (emphasis added).

Item 4.4 of the Scope of Works states:

Progress claims to be submitted on the 20^th day of each month for works up to the 25^th day of the month claimed…[9]

[9]CB, 123 (emphasis added).

No provision of the subcontract documents provides a hierarchy to be applied in the case of inconsistency or conflict in subcontract documents. There is, similarly, no clause contained in the subcontract documents that determines how any inconsistency between contractual terms is to be resolved. The closest to a clause addressing inconsistencies or conflicts is Item 4 of Annexure B of the FIA, which replaces clause 8.1 of the GCs:

Clause 8.1 is deleted and replaced by:
The Contract supersedes all previous offers and negotiations.
The several documents or evidence, which constitute the Contract, shall be taken as mutually explanatory and anything contained in one but not in another, shall be equally binding as if contained in all.
If either party discovers any ambiguity or discrepancy or inconsistency in any document prepared for the purpose of performing the Works, that party shall notify the Main Contractor’s Representative in writing of the ambiguity, discrepancy or inconsistency. The Main Contractor’s Representative shall direct the Subcontractor as to the interpretation to be followed by the Subcontractor in carrying out those parts of the Works to which the ambiguity, discrepancy or inconsistency relates. Any such ambiguity, discrepancy or inconsistency shall be at the Subcontractor’s risk and any direction given under this clause shall not entitle the Subcontractor to any compensation, whether by way of an addition to the Subcontract Sum or otherwise, or extension to the Date for Substantial completion.[10]

[10]CB, 111.

It is common ground that RK did not seek clarification from Argyle of the date by or on which payment/progress claims must be submitted, as might perhaps have been sought pursuant to clause 8.1 (as deleted and restated by Item 4 of Annexure B). I say ‘perhaps’ because the ability of a party to successfully invoke replacement clause 8.1 depends upon the ambiguity or inconsistency in clauses 37.1 and 37.2 (as amended by item 18 of FIA) of the GCs and clause 4.4 of the Scope of Works being properly categorised as an ‘ambiguity or discrepancy or inconsistency in any document prepared for the purpose of performing the works’. As no party sought to rely on clause 8.1, it is unnecessary to resolve the question of its application in this case.

The lack of reliance on clause 8.1 notwithstanding, the substituted clause 8.1 still has work to do when the Court is called upon to construe ambiguous or inconsistent documents. That is because the clause provides, in part:

the several documents … which constitute the Contract shall be taken as mutually explanatory and anything contained in one but not in another shall be equally binding as if contained in all.[11]
[11]Ibid.

The Payment Claims and the Adjudication Determination Process

On 9 November 2021 Mr McMullan made the Adjudication Determination, determining Claim 9 in favour of RK in the sum of $431,266.80. The various progress payment claims, submissions, applications and responses which culminated in the Adjudication Determination are quite complex.

Progress Payment Claims

On 21 June 2021, RK issued Claim 8 in the sum of $379,723.15. In the email which attached the claim, Grant Harris, the Financial Controller of RK, described the claim as the ‘June Progress Claim’. On 2 July 2021, Argyle provided its payment schedule in response. It rejected the claim in full. The payment schedule referred to there being no itemised claim breakdown.[12] In response to the payment schedule, on 2 July 2021, in an email from Mr Harris, RK informed Argyle as follows:

We take on board the comments made by Argyle within the payment schedule dated 2 July 2022.
Accordingly, we formally withdraw claim 8.
We will shortly issue a new claim 8 addressing the comments raised by Argyle in the payment schedule responding to the now withdrawn claim 8.[13]

[12]CB, 249.

[13]CB, 244.

On 2 July 2021, RK issued Claim 8.1. The replacement claim also sought payment of $379,723.15.[14]
[14]CB, 355.

On 12 July 2021, RK issued Claim 9 in the amount of $465,586.68. The claim comprised $258,985.03 outstanding under Claim 8, together with fresh claims totalling $85,734.48.[15]
[15]CB, 252.

On 9 September 2021, Argyle provided its payment schedule in response to Claim 9.[16] The schedule lists the ‘Claim Period’ for the claim as June 2021.[17] The ‘Scheduled Amount’ in the schedule is $355,159.65 – that is, Argyle asserted that it was owed $355,159.65 by Argyle. Under the heading ‘Reason for Nonpayment of Claim’, Argyle stated:
[16]In the Adjudication Determination, Mr McMullan noted that no payment schedule was provided in response to Claim 9; the payment schedule provided by Argyle in response to Claim 9 was provided on 9 September 2021, past the deadline for payment required by s 15(4)(b) of the SOP Act. However, it appears that no party took that point in the adjudication: CB, 2253.
[17]RK submitted that the claim period was incorrectly stated in the payment schedule and should have instead referred to July 2021: Transcript of Proceedings, Argyle Building Services Pty Ltd v Dalanex Pty Ltd trading as RK Basement & Structure Solutions & Anor (Supreme Court of Victoria, Delany J, 12 April 2022) (‘Transcript’), 34.

Under the BUILDING AND CONSTRUCTION INDUSTRY SECURITY OF PAYMENT ACT 2002 (Vic) – SECT 14(8) “A claimant cannot serve more than one payment claim in respect of each reference date under the construction contract.”
Claim 8 was submitted by RK for the June period on 21^st of June 2021.
The claim was responded to via payment schedule on 2^nd July 2021 and rejected in full – see attached.

RK then formally withdrew payment claim 8 via email also on 2^nd July 2021 and submitted a new claim 8.1 on the same day – see attached.
In accordance with the Act the second claim is deemed to be invalid, and the first claim was responded to.
Then RK submitted yet another Payment Claim (PC 09) on 12 July (again same claim period), which once again invalidates the claim.
*****NOTE***** Multiple reasons exists in which Adjudication under SOPA may be deemed as jurisdictional error and should the matter be heard under the Act Argyle will contest any adverse decision on such a basis.[18]

The response attached a quantity surveyor’s cost report dated 30 August 2021 prepared by AJL Consulting (Aust) Pty Ltd (‘AJL Cost Report’).[19]

[18]CB, 374 (emphasis original).

[19]CB, 375, 279-345.

First Adjudication Application

On 16 September 2021, RK applied under s 18(1) of the SOP Act for adjudication of Claim 9 (‘First Adjudication Application’). RK relied on written submissions and a statutory declaration of Ronen Kavallero also dated 16 September 2021.

Argyle provided its adjudication response, pursuant to s 21 of the SOP Act, on 23 September 2021 (‘First Adjudication Response’). The First Adjudication Response was supported by the AJL Cost Report and a statutory declaration by Sam Salloum.

On 28 September 2021, RK by its solicitor wrote to Mr McMullan submitting that in its First Adjudication Response, Argyle had raised new reasons for withholding payment which were not included in Argyle’s payment schedule issued in respect of Claim 9.

RK asserted that, pursuant to the rules of natural justice and s 21(2B) of the SOP Act, it ought be provided with a fair and reasonable opportunity to respond to the matters raised. Mr McMullan was asked by RK to issue a notice pursuant to s 21(2B) of the SOP Act so as to provide RK with the opportunity to address the new issues.

On 28 September 2021, Mr McMullan issued a notice citing s 21(2B) of the SOP Act identifying a number of matters which, in his opinion, were included in the reasons for withholding payment in the First Adjudication Response that had not been included in the payment schedule.

On 30 September 2021, RK provided submissions expressed to be made under s 21(2B) of the SOP Act. Those submissions were accompanied by a second statutory declaration from Mr Kavallero dated 30 September 2021 and reports from John Tamaressis, a consulting engineer, and Nathan Grimes, a quantity surveyor; in each case reports in response to the AJL Cost Report (albeit that report was by a quantity surveyor and was not supported by an engineer’s report).

On 1 October 2021, Argyle made a request to Mr McMullan to respond to those submissions. Mr McMullan gave leave to Argyle to deliver further submissions pursuant to s 22(5) of the SOP Act.

On 4 October 2021, Mr McMullan emailed the parties and enquired of Argyle whether it would consent to extend the time for Mr McMullan to make his determination by five business days, pursuant to s 22(4)(b) of the SOP Act. In doing so Mr McMullan made note of s 22(4A) of the Act, which states that a claimant must not unreasonably withhold their agreement to such a request.

On 5 October 2022, Argyle provided Mr McMullan its further submissions.

On 9 October 2021, Mr McMullan informed the parties that he intended to allow the application for determination to ‘time out’ without making a determination within the time allowed by s 22(4) of the SOP Act, as extended. He advised the parties that, for the purpose of s 28(3) of the SOP Act, the date upon which the claimant, RK, would become entitled to withdraw the application for adjudication would be 11 October 2021. RK subsequently withdrew its First Adjudication Application in accordance with s 28(2)(a) of the SOP Act.

Second Adjudication Application and Adjudication Determination

On 15 October 2021, RK applied once again for the adjudication of Claim 9, pursuant to s 28(3) of the SOP Act (‘Second Adjudication Application’). The application was supported by submissions dated 15 October 2021 and statutory declarations made by Mr Kavallero, Mr Grimes and Mr Tamaressis.

Argyle provided an adjudication response on 22 October 2021 (‘Second Adjudication Response’). Again, the response was supported by submissions, as well as a statutory declaration by Shiu (Louis) Ng, author of the AJL Cost Report, and an engineering report by Robert Talevski, both dated 22 October 2021.

On 26 October 2021, RK submitted to Mr McMullan that Argyle had again raised new reasons for withholding payment in its Second Adjudication Response.

On 26 October 2021, Mr McMullan responded to RK’s correspondence by issuing the 21(2B) Notice in the form of a letter. It is this notice that forms the basis of Ground 2. The 21(2B) Notice included the following:

1.In my opinion, the Adjudication Response dated 23 September 2021 included the following reasons for withholding payment that were not included in the Payment Schedule dated 9 September 2021:
1.new matters raised within the statutory declaration of Shiu (Louis) Ng, including:
a.replies to the Reports of Nathan Grimes and John Tamaressis dated 30 September 2021; and
b.opinions as to alleged defects not previously raised including references to plans and cross sections;

2.new matters raised within the Report of Robert Talevski dated 22 October 2021, including replies to the Reports of Louis Ng and John Tamaressis dated 30 August 2021 and 30 September 2021, respectively;
3.new jurisdictional arguments, including those arguments set out in part 6B of the Adjudication Response;
4.a valuation of the original contracted works including the percentage of works completed as set out in part 8A of the Adjudication Response;
5.an assessment of defects, back charges and variations as set out in parts 9, 10 and 11 of the Adjudication Response;
plus related attachments.[20]

[20]CB, 2197-2198.

On 28 October 2021, RK responded to the 21(2B) Notice by providing Mr McMullan with submissions, a further expert report prepared by Mr Grimes (in response to Mr Ng’s statutory declaration), a report from Mr Tamaressis (responding to the report of Mr Talevski) and a report from Trevor Jeffrey, a quantity surveyor.

On 29 October 2021, Argyle requested leave to respond to the further submissions and materials provided by RK under s 22(5) of the SOP Act, and invited Mr McMullan to conduct a site inspection of the property.

On 1 November 2021, Mr McMullan granted leave for Argyle to provide further submissions. On 4 November 2021, Argyle provided its further submissions. The further submissions were accompanied by quotations for allegedly defective works and copies of various drawings and plans relating to the works.

On 9 November 2021, Mr McMullan inspected the property.

On 9 November 2021, Mr McMullan made the Adjudication Determination. The adjudicated amount was $431,266.80, found to be due for payment by Argyle to RK as at 30 August 2021.

Ground 1(a): Calculation of the Reference Date

In Southern Han Breakfast Point Pty Ltd (in Liq) v Lewence Construction Pty Ltd,[21] the High Court determined the existence of a ‘reference date’ is a precondition to making a valid claim under the Building and Construction Industry Security of Payment Act 1999 (NSW) (the ‘NSW Act’), New South Wales’ equivalent to the SOP Act,[22] and is therefore a precondition to jurisdiction. A document purporting to be a payment claim that was not in respect of a ‘reference date’ was found in Southern Han not to be a payment claim under the Act.[23]
[21][2016] HCA 52; (2016) 260 CLR 340 (Kiefel, Bell, Gageler, Keane and Gordon JJ) (‘Southern Han’).
[22]Building and Construction Industry Security of Payment Act 1999 (NSW).
[23]Southern Han Breakfast Point Pty Ltd (in Liq) v Lewence Construction Pty Ltd [2016] HCA 52; (2016) 260 CLR 340, [62] (Kiefel, Bell, Gageler, Keane and Gordon JJ).

The existence of a reference date is a ‘jurisdictional fact’, that is, a ‘criterion, satisfaction of which enlivens the power of [a] decision-maker’.[24] Where the existence of such a jurisdictional fact is disputed on an application for judicial review, the Court must determine for itself whether a reference date exists.[25]
[24]Ibid, [47], [62]; Shape Australia Pty Ltd v The Nuance Group (Australia) Pty Ltd [2018] VSC 808, [40] (Digby J).
[25]Ibid.

There are two provisions in the SOP Act by which a reference date may be determined. The first, s 9(2)(a), states that where the contract itself specifies a reference date (or manner of determining such a date), then that date shall be the reference date for the purposes of the SOP Act. The second, s 9(2)(b), provides a mechanism that sets a reference date (linked to the date on which work is first carried out) which applies where a reference date (or means of determining such a date) is not specified in the contract.

At [96] of the Adjudication Determination, Mr McMullan concluded, ‘[o]n the material before me, there was no clearly identified reference date under the Subcontract’.[26] He gave reasons in support of that finding including:

[97]Firstly there are conflicting reference dates specified in the Subcontract: …
…
[100]Fourthly, in my view, the legal authorities are to the effect that the courts should not take an overly technical view of the Act ...
[101]In my view, on this reasoning, to be consistent with the intent of the Act, I should prefer an interpretation of the subcontract that does not result in the Payment claim being claim [sic] should be invalid because the particular construction contract was unclear as to the time for making payment claims.[27]

[26]CB, 2271. See also [102], [106], [107] and [116] of the Adjudication Determination, at CB2272-2273, 2276 respectively.

[27]CB, 2271-2272.

Having determined that s 9(2)(b) had application to the subcontract, Mr McMullan went on to find that, because the works commenced on 15 December 2020, the reference dates under the subcontract were 15 January 2021, 15 February 2021, 16 March 2021, 15 April 2021, 13 May 2021, 10 June 2021 and 9 July 2021. He determined the reference date in relation to Claim 9 was 9 July 2021.

The Submissions on Behalf of the Parties

Argyle submitted that there was a jurisdictional error by Mr McMullan:

(a)finding that reference dates were to be calculated by reference to s 9(2)(b) of the SOP Act, instead of s 9(2)(a); and
(b)failing to find that reference dates arose on a day to be selected by RK between the 21^st day of the month before, to the 20^th day of each month.[28]

[28]Plaintiff, outline of submissions dated 11 March 2022, [22].

In written submissions in the proceeding, Argyle submitted:

30.The subcontract makes express provision for the determination of reference dates under the Act even though the terms of the subcontract are inconsistent, in part: see Part A of the FIA and clause 37.1 of the GCs, which are identical in language and effect, compared with item 4.4 of the Scope of Works and then clause 37.2 of the GCs, which are not, at least in part.
31.But the existence of inconsistent terms does not displace the operation of section 9(2)(a) of the Act if, by adopting orthodox principles, the inconsistency can be fixed.
…
35.In MAAG Developments Pty Ltd v Oxanda Childcare Pty Ltd [2018] VSCA 298. There, McLeish, Hargrave JJA and Almond AJA said at [55]:
‘Where it is clear on a proper interpretation of a contract as a whole that ‘something has gone wrong with the language’ so as to indicate a mistake has been made, whether because the words do not make sense in context or because it is necessary to alter them to avoid absurdity or inconsistency, the Court may substitute words, insert words, delete words or rearrange words as necessary.’

36.Applying the[se] principles … a reasonable businessperson in the position of the parties at the time they entered into the subcontract would have understood that:
(a)reference dates arose, monthly, on a date to be selected by RK between the 21st day of the month before to the 20th day of each month. In other words, one payment claim could be made by RK on any date between, relevantly, 21 June 2021 and 20 July 2020;
(b)RK could claim, each month, for works carried out or to be carried out up to the 25th of the month. Thus, RK could claim for works carried out or to be carried out up to 25 July 2021; and
(c)payment of a scheduled amount was to be made by Argyle to RK by the date that is 30 days after the end of the month in which the claim is made. In other words, payment of the scheduled amount for June and July 2021 was to be made by Argyle by 30 August 2021, being the date that is 30 days after 31 July 2021.[29]

[29]Ibid, [30]-[31], [35]-[36].

Argyle concluded:

42.… It follows that the subcontract makes express provision for the determination of reference dates under the Act, and that each reference date arose on a date to be selected by the first defendant between the 21^st day of the month before and the 20^th day of the month.
43.While the construction of contracts in other cases is not always determinative, it is often illustrative. In Cool Logic Pty Ltd v Citi-Con (Vic) Pty Ltd [2020] VCC 1261, Woodward J held at [34] that clauses under two contracts that required payment claims to be made ‘by the 25^th day of the month with payment no later than 45 days after the end of the month in which the claim is made’ and ‘no later than the 25 [sic] day of the month’ determined the ‘reference date’ for the purposes of section 9(2)(a) of the Act because:
‘In my view, on their proper construction, those agreements allow for a payment claim to be issued from the 26^th day of the month before, up to the 25^th of the relevant month, and that both INV-0489 and IV-0503 were so issued’.

…

45. The same analysis should be applied in this case, too.[30]

[30]Plaintiff, outline of submissions dated 11 March 2022, [42]-[43], [45] (emphasis original).

Before Mr McMullan, RK submitted that the subcontract did not give rise to a specific date upon which RK is entitled to issue a payment claim; further, that the terms of the subcontract dealing with payment were conflicting and ambiguous. As a result, s 9(2)(b) had application.

In its written submissions in this proceeding, RK submitted that, as a matter of the proper construction of the SOP Act, a single reference date (for each progress payment) must be provided for or be capable of being determined in accordance with the terms of the contract in order for s 9(2)(a) to have application:

The Contract provisions in respect to the possible reference date are ambiguous, or at the very least they conflict with each other in whole or in part. As a result, there is no single express provision of a single reference date as required by s 9(2)(a) of the SOP Act, so that the dates provided under s 9(2)(b) apply.[31]

[31]First Defendant, outline of submissions dated 11 March 2022, [17] (emphasis original).

During the hearing, RK accepted that, provided the contract specifies a reference date, or the period of time within which a claim must be made, s 9(2)(a) is satisfied. The approach adopted by Woodward J in Cool Logic Pty Ltd v Citi-Con (Vic) Pty Ltd,[32] where the claimant had the discretion to choose the day upon which to make a progress claim, as extracted at paragraph 55 above, was accepted by RK as correct.[33]
[32][2020] VCC 1261 (‘Cool Logic’).
[33]Transcript, 30. The ‘single reference date’ argument set out in RK’s written submissions was not pressed by RK during the hearing.

However, RK submitted that application of the Cool Logic approach in this case was impossible, as the inconsistency of the subcontract documents required the rewriting of express terms in order to identify a reference date (or time-frame for such a date). RK submitted that the clauses in the subcontract which required progress payment claims to be made ‘by the 20^th day of each month’ and ‘no later than the 21^st day of each month’ demonstrated that the subcontract did not provide ‘with certainty or clarity’ the date on which a progress payment claim is to be made. In RK’s submission, the result is that the subcontract failed to specify a reference date as contemplated by s 9(2)(a) of the SOP Act.

During the hearing Argyle repeated its contention that a reference date is capable of being identified from the apparently conflicting or inconsistent contractual provisions:

HIS HONOUR: … So just looking at the formal instrument of agreement and the [clause which states that a] claim [is to be] submitted by the 20th day of the month. Do you say that remains as it is?
MR CRAIG: That remains as it is. That’s the provision, Your Honour, which directly engages with - look at the heading or on the side, time for payment claim. So Your Honour has a clear statement of a contractual intent documented there. You’ve got the initials of the first defendant next to it. If you then go to 37.2 as amended ...
The words, no later than, would be replaced with before. And then item 4.4 … the word, on, would be replaced with by.
HIS HONOUR: That’s a reasonable amount of surgery though, isn’t it?
MR CRAIG: Well, Your Honour, it’s the surgery necessary to resolve the inconsistency and that’s, with respect, Your Honour’s task.[34]
[34]Transcript, 18-19.

Consideration

There are a number of reasons why, in my opinion, Ground 1(a) fails. In short:

(a)Only express terms of a construction contract that either specify or provide for the identification of a reference date (or range of dates) satisfy s 9(2)(a) of the SOP Act.
(b)If it is necessary in order to identify the reference date to imply terms into the construction contract, that is beyond the scope of s 9(2)(a) and beyond the task required of the adjudicator.
(c)The subcontract between Argyle and RK does not contain an express term or terms that satisfy s 9(2)(a).
(d)MAAG Developments Pty Ltd v Oxanda Childcare Pty Ltd,[35] and the cases cited by the Court of Appeal in MAAG, are concerned with courts supplying words in a contract. That is not a task that the SOP Act requires be undertaken by an adjudicator who may or may not be legally qualified.
(e)Consistent with statements by the High Court in Fitzgerald v Masters,[36] the presence of s 9(2)(b) of the SOP Act means there is no necessity for the supply or correction of words in the construction contract so as to avoid absurdity or inconsistency.

[35][2018] VSCA 289 (McLeish, Hargrave JJA and Almond AJA) (‘MAAG’).

[36](1956) 95 CLR 420 (Dixon CJ, McTiernan, Webb, Fullagar and Taylor JJ).

When construing a section such as s 9(2) of the SOP Act, it is generally necessary to begin with the language of the section itself.[37]
[37]Perry Herzfeld and Thomas Prince, Interpretation (Thomson Reuters, 2^nd Ed, 2020) [1.140], [1.150]; see also Federal Commissioner of Taxation v Consolidated Media Holdings Ltd [2012] HCA 55; (2012) 250 CLR 503 (‘Consolidated Media Holdings’), [39] (French CJ, Hayne, Crennan, Bell and Gageler JJ); Momcilovic v The Queen [2011] HCA 34; (2011) 245 CLR 1, [39] (French CJ).

The chapeau of s 9(2), particularly the word ‘means’, makes it clear that the definition of ‘reference date’ that follows in sub-ss (a) and (b) is exhaustive.

Section 9(2)(a) provides that a reference date may be specified in a construction contract in one of two ways. The first, a reference date ‘determined by’ the contract. The second, a date determined ‘in accordance with’ the terms of the contract.

Section 9(2)(a) does not say whether a determination ‘in accordance with the terms of the contract’ is intended to refer to a determination in accordance with contractual terms that are express or to be implied, or a combination of the two. However, the prospect of an adjudicator determining a reference date in accordance with s 9(2)(a) ‘in accordance with’ implied terms is removed when s 9(2)(a) is read in context.

Section 9(2)(b) begins substantively with the words ‘if the contract makes no express provision with respect to the matter’. The reference to ‘the matter’ is a reference to the subject matter of s 9(2), being a ‘reference date’. Where there is no express term in the construction contract that identifies how a reference date (or range of dates) is to be determined, either ‘by’ or ‘in accordance with the terms of the contract’, then s 9(2)(b) applies. In such a case, the ‘reference date’ for the making of a progress payment claim pursuant to s 9(2)(b) is 20 business days after the first date on which construction work was first carried out or materials were first supplied under the contract.

Section 9(2) of the SOP Act must be read and construed as a whole. The reference in s 9(2)(b) to contracts where there is no ‘express provision’ dealing with either of the two alternatives for the identification of a reference date in s 9(2)(a), dictates that the scope of s 9(2)(a) is confined to contracts where there is express provision. Where a need arises to imply a term, s 9(2)(a) has no application and s 9(2)(b) is to be applied. Section 9(2)(b) ensures that the purpose and object of the SOP Act, as stated in ss 1 and 3, are not thwarted in cases where the contract makes no express provision for a reference date.

By confining the operation of s 9(2)(a) to cases where the contract makes ‘express provision’, the legislature has recognised the nature of the adjudication provisions; it has recognised the need for prompt determination and certainty – objectives not always likely to be readily achieved if the adjudicator is called upon to both find and to construe implied terms. That is particularly the case where, as earlier noted, there is no requirement that the adjudicator appointed to determine the dispute is legally qualified. Section 9(2)(b) removes the prospect of the requirement that an adjudicator is to imply terms into a construction contract which falls within the ambit of the SOP Act.

Construing s 9(2) in this way is consistent with the purpose of the SOP Act more broadly, as summarised by Vickery J in Hickory Developments Pty Ltd v Schiavello (Vic) Pty Ltd:[38]

The Act also manifests another central aspiration, that of freedom from excessive legal formality. The provisions demonstrate a pragmatic concern to provide a dispute resolution process which is not bedevilled with unnecessary technicality. The Building and Construction Industry Security of Payment Act 1999 (NSW) has led to a spate of litigation in its relatively short life. If the Victorian Act became prone to challenges founded on fine legal points, an important object of the Act would be defeated by the twin adversaries of cost and time.[39]

[38][2009] VSC 156; (2009) 26 VR 112.

[39]Ibid, [46]; see also Façade Designs International Pty Ltd v Yuanda Vic Pty Ltd [2020] VSC 570, [36] (Riordan J).

In this case, Argyle did not contend for a construction of the subcontract falling within s 9(2)(a) based on the implication of terms. Argyle did not submit that express terms of the subcontract, without more, meant that s 9(2)(a) was satisfied. Rather, it submitted that s 9(2)(a) was satisfied as the inconsistencies in the express terms were capable of being reconciled as a matter of construction. Going further, Argyle submitted that, consistent with the approach of the Court of Appeal in MAAG and the authorities there cited, the adjudicator (and the Court upon review) must undertake that task.

In MAAG, the Court of Appeal referred to earlier High Court and House of Lords authority:

53.As noted in Update Constructions, the governing authority in Australia is the decision of the High Court in Fitzgerald v Masters.[40] In that case, Dixon CJ and Fullagar J stated as a general principle that:
Words may generally be supplied, omitted or corrected, in an instrument, where it is clearly necessary in order to avoid absurdity or inconsistency.[41]

54.In England, the principle has been expressed in terms that clear mistakes may be corrected by this process. For example, in Chartbrook Ltd v Persimmon Homes Ltd,[42] Lord Hoffmann said that:
there is not, so to speak, a limit to the amount of red ink or verbal rearrangement or correction which the court is allowed. All that is required is that it should be clear that something has gone wrong with the language and that it should be clear what a reasonable person would have understood the parties to have meant.[43]^,[44]

[40](1956) 95 CLR 420.

[41]Ibid 426–7 (emphasis added).

[42][2009] 1 AC 1101 (‘Chartbrook’).

[43]Ibid 1114 [25] (emphasis added).

[44]MAAG Developments Pty Ltd v Oxanda Childcare Pty Ltd [2018] VSCA 289, [53]-[54] (McLeish, Hargrave JJA and Almond AJA).

Argyle submitted that the task of the adjudicator under s 9 of the SOP Act is to apply those principles. In this case, applying the approach to which the Court of Appeal referred in MAAG, as urged by Argyle, requires what, in argument, was described as ‘surgery’ to both the substituted clause 37.2 and to clause 4.4 of the Scope of Works. In the case of the substituted clause 37.2, this ‘surgery’ is required to remove the words ‘no later than’ and replace them with the word ‘before’, and in the case of the Scope of Works, the ‘surgery’ must remove the word ‘on’ and to substitute the word ‘by’.

Nothing in the SOP Act, or in subordinate legislation made thereunder, requires an adjudicator to undertake the rewriting of a contract by supplying, omitting or correcting words expressly adopted by the parties. In that context it is important to bear in mind that the decision of an adjudicator, or indeed that of a court on review of such a decision, is not determinative of the rights of the parties to the contract. In Protectavale Pty Ltd v K2K Pty Ltd,[45] Finkelstein J described the relationship between rights conferred under the legislation and rights of the parties in contract:

7.The Payment Act places the claimant in a privileged position in the sense that he acquires rights that go beyond his contractual rights: Jemzone Pty Ltd v Trytan Pty Ltd (2002) 42 ACSR 42, 50. The premise that underlies the legislation is that cash flow is the lifeblood of the construction industry (Amflo Constructions Pty Ltd v Jefferies [2003] NSWSC 856 at [27]) and that the principal under a construction contract should pay now and argue later (Multiplex Constructions [2003] NSWSC 1140 at [96]).[46]

[45][2008] FCA 1248.

[46]Ibid, [7].

A court called upon to determine the contractual right of a party to make a progress claim under a construction contract will, in appropriate cases, apply MAAG and the authorities relied upon by the Court of Appeal in that case. In that circumstance, the ‘reference date’ catch-all provided by s 9(2)(b) of the SOP Act will be irrelevant. The position is entirely different where an adjudication determination is concerned. The role of the adjudicator is to perform the function and to exercise the powers conferred by the statute, and no more. To require an adjudicator to proceed as contemplated by MAAG is to require them to act outside the role conferred by the SOP Act.

As implicitly recognised in the Argyle submissions, in this case the subcontract did not expressly provide for a reference date. Nor do the express contractual terms specify how the reference date is to be determined. The express terms are inconsistent.

If it is necessary in order to construe a contract to delete words, not from a standard form contract, but words that have been deliberately inserted by the parties in two separate parts in the contract documentation (first, in the substituted clause 37.2 and second in the Scope of Works) in order to arrive at a reference date, it is clear that the contract itself does not make ‘express provision’ for a reference date. If it made express provision there would be no need for surgical intervention.

I do not consider that, when s 9(2) is read as a whole, it is intended that a contract that requires such significant surgery to its language (that the parties themselves chose to adopt) in order to arrive at a consistent and identifiable reference date is a contract that makes ‘express provision’ for a reference date.

This subcontract does not include a term that establishes a hierarchy to be applied to the construction of its constituent documents. It does not contain a contractual mechanism for the resolution of inconsistencies between contractual provisions other than substituted clause 8.1. The mechanism for which that clause provides was not invoked. The operative part of clause 8.1 requires that the several documents constituting the contract shall be taken as ‘mutually explanatory’ of one another. The inconsistencies in the language in the three documents make that an impossible task. As a matter of construction, clause 8.1 of the subcontract stands in the path of Argyle’s approach.

As the subcontract makes no express provision with respect to a reference date, the reference date is taken to be the date occurring 20 business days after the previous reference date, with the first reference date being the date which was 20 business days after construction work was first carried out under the contract or materials were first supplied. This was the conclusion of Mr McMullan in the Adjudication Determination.

Even if it were otherwise appropriate for an adjudicator to embark on the correction of ‘clear mistakes’[47], and it is not, I do not consider that in light of s 9(2)(b) of the SOP Act the ‘construction’ for which Argyle contends is ‘clearly necessary in order to avoid absurdity or inconsistency’.[48] Applying the language of the High Court in Fitzgerald v Masters, for the purposes of the statutory scheme it is clearly unnecessary to alter the language of the subcontract in order to find a reference date. That is so because s 9(2)(b) fills the void that exists in such cases.
[47]Chartbrook Ltd v Persimmon Homes Ltd [2009] 1 AC 1101, [25] (Lord Hoffman).
[48]Fitzgerald v Masters (1956) 95 CLR 420, 426-427 (Dixon CJ and Fullagar J).

Mr McMullan was correct to find that there was no single reference date under the subcontract. There was no jurisdictional error.

There was no disagreement between the parties that, if there was no reference date under the subcontract, then Mr McMullan correctly applied s 9(2)(b) of the Act to identify the 20 business day intervals at which reference dates arise under contract.

Ground 1(b): the Entitlement to Serve One Payment Claim Only

Separately, Argyle submitted that Mr McMullan committed a jurisdictional error by determining the 12 July 2021 progress payment claim was valid because RK had served multiple progress payment claims with respect to a single reference date.

The Submissions on Behalf of the Parties

In support of Ground 1(b), in its written submissions Argyle submitted that the 12 July 2021 payment claim was not a valid payment claim because:

(a)the 2 July Payment Claim was issued ‘on and from’ the reference date between 21 June 2021 and 20 July 2021. A claimant cannot serve more than one payment claim in respect of each reference date and thus, RK had exhausted its statutory rights with respect to the 21 June 2021 to 20 July 2021 reference date before it issued the 12 July Payment Claim: see section 14(8) of the Act as construed by Digby J in Valeo Construction v Pentas [2018] VSC 243 at [30]; and
(b)it was made before the next available reference date, being the reference date between 21 July 2021 and 20 August 2021. A payment claim issued prior to a reference date is invalid for the purposes of the Act: MKA Bowen v Carelli Constructions [2019] VSC 436 at [42] per Digby J.[49]

[49]Plaintiff, outline of submissions dated 11 March 2022, [46].

Argyle’s submission depends on the correctness of its submission in Ground 1(a) that the subcontract specifies that each reference date was to be whichever date RK submitted a payment claim between the 21^st day of a preceding month and the 20^th day of the month following. Thus, in submitting a progress payment claim dated 2 July 2021 (Claim 8.1), RK had made its ‘selection’ of the reference date for the period 21 June 2021 to 20 July 2021. Because s 14(8) of the SOP Act prevents a claimant from serving more than one payment claim per reference date, RK did not have an entitlement to submit Claim 9 on 12 July 2021.

As Ground 1(a) is not made out, the premise upon which the submissions in support of Ground 1(b) are founded is not available.

Notwithstanding that the written submissions assumed success by Argyle on Ground 1(a), Argyle’s Amended Originating Motion filed 23 February 2022 is more widely framed. As a result, Ground 1(b) must also be considered against the history of progress payment claims by RK and the reference date finding made in the Adjudication Determination.[50]
[50]Mr McMullan determined reference dates under the subcontract to include 13 May 2021, 10 June 2021 and 9 July 2021.

Key to Argyle’s submissions is the contention that RK was not entitled to unilaterally withdraw Claim 8 and resubmit the claim as Claim 8.1. Argyle submitted that, as s 14(8) bars a claimant from serving more than one payment claim per reference date, the submission of Claim 9 was of no effect (and therefore, in adjudicating Claim 9, Mr McMullan made a jurisdictional error).

RK submitted that under s 14(4)(b), RK was entitled to serve Claim 8 or, if permitted, to withdraw and resubmit any replacement claim up until 21 September 2021.[51] Further, RK submitted that there was no basis on which Claim 8.1 (submitted 2 July 2022) could be construed as a duplicate claim for the period to which Claim 9 was referrable.[52]
[51]Transcript, 31.
[52]Ibid, 32.

In support of the submission that a party has no entitlement or ability to unilaterally withdraw the service of a payment claim, Argyle relied upon the decision of Marks J in Citi-Con (Vic) Pty Ltd v Punton’s Shoes Pty Ltd,[53] where her Honour held:

57.The section does not say a claimant ‘cannot rely’ on more than one payment claim in respect of each reference date under the construction contract at a time. The prohibition is on service of more than one payment claim. I do not consider this section allows for unilateral purported withdrawal of a payment claim which has been served, and service of another payment claim using the same reference date.
58.As occurred in the cases mentioned above, parties may choose not to take this point, and may agree to a substitution of a payment claim in particular circumstances. This will often be a cost effective, and expeditious way in itself of dealing with the disputes between them.
59.However, in this case there was no such agreement, the point is taken, and in my view, the October claim is invalid.[54]

[53][2020] VCC 804 (‘Citi-Con’).

[54]Ibid, [57]-[59].

RK submitted that in Valeo Construction Pty Ltd v Pentas Property Investments Pty Ltd,[55] Digby J accepted it was possible to withdraw a payment claim and to serve a replacement claim provided the withdrawal was done in clear terms.[56] In reply, Argyle disputed that Valeo stood for that proposition.
[55][2018] VSC 243 (‘Valeo’).
[56]Ibid, [61]-[66].

Argyle also relied on two New South Wales decisions: Dualcorp Pty Ltd v Remo Constructions Pty Ltd[57] and Trustees of the Roman Catholic Church for the Diocese of Lismore v TF Woollam and Son[58] in support of its submission that a claimant has a unilateral right to withdraw a payment claim. RK submitted that neither case addressed the question of the withdrawal and replacement of a payment claim.
[57][2009] NSWCA 69; (2009) 74 NSWLR 190 (Allsop P, Macfarlan JA and Handley AJA) (‘Dualcorp’).
[58][2012] NSWSC 1559 (McDougall J) (‘TF Woollam’).

Finally, RK submitted that Argyle clearly recognised that Claim 9 was served by RK with reference to the month of July.[59]
[59]First defendant, outline of submissions dated 11 March 2022, [31]; Transcript, 34.

Consideration

I agree with RK that the New South Wales cases referred to, Dualcorp and TF Woollam, do not address the question of the withdrawal of a payment claim.

In Valeo, the parties accepted that withdrawal and resubmission was permissible.[60] It was not necessary for Digby J to determine whether the statute permits unilateral withdrawal of a claim.[61]
[60]Valeo Construction Pty Ltd v Pentas Property Investments Pty Ltd [2018] VSC 243, [51].
[61]Ibid, [63].

In Citi-Con there was no acceptance or agreement between the parties about the right to withdraw and to resubmit a claim.[62] Marks J determined there was no such right.[63]
[62]Citi-Con (Vic) Pty Ltd v Punton’s Shoes Pty Ltd [2020] VCC 804, [59].
[63]Ibid, [57]-[59].

I agree with Marks J that, leaving agreement between the parties to one side, the statutory scheme does not contemplate the unilateral withdrawal or abandonment of a payment claim and the resubmission of a fresh claim in respect of the same reference date. I consider that is the result that flows from the text of s 14 of SOP Act.

Section 14(4) provides that ‘a payment claim’ may be served only within the period determined in accordance with the contract or within three months after the reference date referred to in s 9(2), whichever is the later. Section 14(8) provides that a claimant cannot serve more than one payment claim in respect of each reference date. Section 14(6) contains an express prohibition on the service of a further claim once a final, single or one off payment has been served, subject only to s 14(7). Section 14(8) does not use the same language as s 14(6) (which states that ‘no further payment claim can be served’ once a final, single or one-off payment claim has been served), but the clear meaning and intent of the text of s 14(8) is the same.

In the present case, the construction of s 14 that I prefer (the same construction adopted by Marks J in Citi-Con), means that Claim 8.1 is a nullity.

I agree with RK that if, contrary to its primary submission, there was no power to serve a replacement payment claim, and there was no power to do so because there was no power to unilaterally withdraw Claim 8, then Claim 8 would stand as RK’s claim for the month of June. Claim 9 was made on 12 July 2021 for the month of July.

In accordance with MKA Bowen Investments Pty Ltd v Carelli Constructions Pty Ltd,[64] there was no submission of the June payment claim prior to the 10 June 2021 reference date. There was no contravention of s 14(8) when, on 12 July 2021, RK served Claim 9 in respect of the month of July, a claim which was clearly intended to apply to work for the month of July.
[64][2019] VSC 436 (Digby J).

Ground 1(b) fails.

Ground 2: Taking into Account Submissions Not ‘Duly Made’ for the Purposes of s 23(2)(c) of the SOP Act
Background & the Parties’ Submissions

Ground 2, as developed by Argyle in written and oral submissions, is founded upon Argyle establishing the following propositions:

(1)RK did not have a ‘formal right’ to make the submissions dated 29 October 2022 to Mr McMullan.[65]
[65]Plaintiff, outline of submissions dated 11 March 2022, [55].
(2)It did not have a right to do so because:
(a)the 28 October 2021 submissions were made in response to the 21(2B) Notice given by Mr McMullan;[66] and
(b)the 21(2B) Notice was issued in contravention of s 21(2B).[67]

(3)The 28 October 2021 submissions were not ‘duly made’ as required by s 23(2)(c) because they were made in response to a notice issued in contravention of s 21(2B). RK had no right to make submissions in those circumstances.[68]
(4)Mr McMullan considered those submissions in the Adjudication Determination.

I consider that the words ‘setting out’ in s 21(2B)(a) must be interpreted in a practical and common sense manner. The requirement for the adjudicator to ‘[set] out’ certain reasons given by s 21(2B), might be satisfied in a number of different ways. It might be satisfied by the provision of a detailed explanation in the notice itself, it might also be satisfied by the notice setting out by description. It might also be satisfied by ‘setting out’ information contained in documents incorporated into the notice by reference. Approaching s 21(2B) in this way is consistent with the language and purpose of the SOP Act as a whole.[115]
[115]Project Blue Sky Inc v Australian Broadcasting Authority [1998] HCA 28; (1998) 194 CLR 355, [69] (McHugh, Gummow, Kirby and Hayne JJ); see paragraph 69 above.

I do not agree with Argyle that the s 21(2B) process miscarried because Mr McMullan failed to identify with proper specificity the reasons for withholding payment which were new to the Second Adjudication Response and not in the payment schedule. The submission on behalf of Argyle takes too narrow a view of what constitutes ‘new reasons’. It also seeks to impose too great a burden upon the adjudicator when ‘setting out’ those new reasons.

Concerning items 1 and 2 of the 21(2B) Notice, Mr McMullan identified the new materials. He included an express limitation upon the right to respond to both by restricting any response to ‘new matters raised within’ those documents. I reject the submission by Argyle that Mr McMullan gave a right to RK to respond that was ‘almost at large’.[116] I consider Mr McMullan’s approach and the wording of the 21(2B) Notice was effective to comply with s 21(2B).
[116]Transcript, 45.

For the reasons previously stated, I do not agree with the submission that the 21(2B) Notice included reasons that were not new, that it failed to identify the reasons that were not included in the Payment Schedule with sufficient specificity or that it otherwise failed in some way to comply with s 21(2B) of the SOP Act. The foundation for Ground 2, the attack on the validity of the 21(2B) Notice, is not made out.

Were RK’s 28 October 2021 Submissions ‘Duly Made’?

Because I have found the 22(2B) Notice issued by Mr McMullan to have been validly issued, and because the 28 October 2021 submissions on behalf of RK were in response to that Notice, it follows that those submissions were ‘duly made’.

In any case, the complaint which Argyle seeks to press that submissions were not ‘duly made’ is not a matter for the Court.

Whether a submission was ‘duly made’ is a matter for an adjudicator to determine. A mistaken or erroneous decision by an adjudicator in relation to that question does not involve jurisdictional error and will not invalidate a determination.[117]
[117]Acciona Infrastructure Australia Pty Ltd v Chess Engineering Pty Ltd [2020] NSWSC 1423, [38] (Henry J).

In John Holland Pty Ltd v Roads and Traffic Authority of NSW,[118] Basten J (with whom Beazley JA agreed) stated:
[118][2007] NSWCA 19 (Beazley, Hodgson & Basten JJA) (‘John Holland’).

71This argument is based on a false premise, and has given rise to this Court being invited to consider a number of false issues. The false premise is that the scope of the payment schedule and the identification of submissions “duly made” by the Respondent in support of the schedule are matters to be objectively determined by this Court. In my view they are not: they are matters to be determined by the adjudicator. If, as appears to be accepted by both parties, the adjudicator did not address the second response, it may have been for one of a number of reasons, namely:
(a)he did not think it fell within the scope of the payment schedule and that to be taken into account it should have done;
(b)it did not need to fall within the scope of the payment schedule, but for some other reason it was not “duly made”;
(c)The submission was inconsistent with the scheme of the Building Payment Act, which required the adjudicator to determine what work had been undertaken under the contract and what was the value of the work.

So long as it is part of the function of the adjudicator to determine such matters and so long as it is within the power of the adjudicator to act in accordance with his own determination, even if a court might have reached a different conclusion, there is no basis for saying that the adjudication was invalid.
72As I sought to explain in Coordinated Construction Co Pty Ltd v Climatech (Canberra) Pty Ltd [2005] NSWCA 229 at [43]-[48], in my view the power to resolve these questions has been conferred on the adjudicator.[119]

[119]Ibid, [72]-[73].

If it were a matter for the Court to determine whether or not the responding submissions dated 28 October 2021 were ‘duly made’, I consider the submissions in this case were duly made. That is the case, even if s 21(2B) did not provide a proper foundation for the notice that Mr McMullan issued.

If s 21(2B) does not provide a proper foundation for the notice, it is necessary to consider s 22(5). Section 22(5)(a) entitles an adjudicator to request further written submissions from either party. If that occurs, the adjudicator is required to give the other party an opportunity to comment on those submissions. I do not agree with Argyle’s submission that the power in s 22(5)(a) is limited to seeking submissions to clarify.[120] The power to request ‘any submissions relevant’ is a very broad one. It is a power that the adjudicator may exercise in her or his discretion, subject only to the requirement that the request be in respect of the adjudication application under consideration.
[120]This is unlike in New South Wales, where the scope of the adjudication process is governed by reasons identified in the adjudication response, and submissions are similarly restricted to clarify those matters. The SOP Act has no such limiting framework. See John Holland Pty Ltd v Cardno MBK (NSW) Pty Ltd [2004] NSWSC 258, [24]-[26] (Einstein J).

While the 21(2B) Notice was expressly issued under s 21(2B), s 22(5) provided a separate head of power available to Mr McMullan to invite submissions from RK.

In Australian Education Union v Department of Education and Children’s Services,[121] French CJ, Hayne, Kiefel and Bell JJ stated:[122]

A mistake by an administrative decision-maker as to the source of his or her power to make a decision does not necessarily invalidate the decision if it is able to be supported by another source of power. Whether it can be supported by the other source of power will depend upon whether that power is subject to requirements which the decision-maker has failed to meet because of his or her belief as to the source of the power or for some other reason. As Heydon J said in Eastman v Director of Public Prosecutions (ACT):
“If the maker of an administrative decision purports to act under one head of power which does not exist, but there is another head of power available and all conditions antecedent to its valid exercise have been satisfied, the decision is valid despite purported reliance on the unavailable head of power.”

[121][2012] HCA 3; (2012) 248 CLR 1 (French CJ, Hayne, Heydon, Kiefel and Bell JJ).

[122]Ibid, [34] (citation omitted).

The availability of s 22(5)(a) of the SOP Act in this case means that Mr McMullan’s decision to issue the 21(2B) Notice and to rely on submissions made purportedly as a consequence of the notice was valid notwithstanding any non-compliance with s 21(2B).

After RK’s response was received to the 21(2B) Notice, Argyle relied on s 22(5) when seeking an opportunity to respond to RK’s submissions. Mr McMullan agreed to provide Argyle with that opportunity.

A submission may be ‘duly made’ if made pursuant to either of those sub-sections. A submission may be ‘duly made’ if it is made in response to a s 21(2B) notice. A submission may also be ‘duly made’ under the broad power in s 22(5).

Mr McMullan, having acceded to the request by Argyle to have leave to reply to the RK material pursuant to s 22(5) of the SOP Act and Argyle having filed submissions and additional supporting materials, Mr McMullan was obliged by s 23(2)(d) to consider those materials. Argyle’s 4 November 2021 submissions were in response to the RK submissions which Argyle contends were not ‘duly made’. Argyle cannot have it all ways. Having requested and been granted leave pursuant to s 22(5) to respond to those materials and the adjudicator being obliged by s 23(2)(d) to consider them, it makes no sense to treat the RK submissions as not ‘duly made’ without also treating the 4 November 2021 Argyle submissions and materials in the same way.

For the reasons set out above, I am not persuaded that the RK submissions dated 28 October 2021 were not ‘duly made’.

Section 23(2B)

There is a further reason why Ground 2 fails. I do not accept that Argyle has discharged the onus to identify, for the purposes of s 23(2B)(a), ‘the extent’ to which the Adjudication Determination is void.

As soon as it is acknowledged that items 3 and 4 in the 21(2B) Notice were not inappropriate for inclusion in the notice, as tacitly accepted by Argyle, it is difficult to find that the process miscarried and that the whole of the Adjudication Determination is void as a result.

Both in its written submissions filed prior to trial, and in its oral submissions at trial, Argyle did not seek to identify the ‘extent to which’ the Adjudication Determination was infected by error, assuming items 1, 2 and 5 in the 21(2B) Notice should not have been included.

To establish ‘the extent to which’ an adjudication is void requires an applicant for relief to:

(a)identify the reasons that are not new in the 21(2B) Notice;
(b)establish that materials provided in response are directed to such impermissible reasons and are not otherwise justified, for example as a response to a s 22(5) request; and
(c)identify those parts of the Adjudication Determination that adopt or rely upon such impermissible materials in order to make the determination or a specific finding in the determination.

During the hearing, senior counsel for Argyle submitted that on the face of the Adjudication Determination in this case it was not possible to determine the extent to which the impermissible materials affected the determination.[123] It was submitted that ‘to identify what parts of the reasons can be salvaged’ cannot be a proper manifestation of the section.[124]
[123]Transcript, 53-55.
[124]Transcript, 55.

I do not agree with Argyle. Even if it is difficult to identify the parts of the determination impacted by breach of s 23(2) or s 23(2B), the obligation to only consider submissions ‘duly made’, and not to take into account any matter that is prohibited, the onus remains upon the applicant for relief. It is for the applicant for relief to show the extent to which the contravening conduct renders the adjudication determination void. The statements by senior counsel for Argyle referred to above reflected an acceptance that at the time the hearing took place, Argyle had not discharged that burden.

During the hearing, the Court was not taken by Argyle to specific parts of the Adjudication Determination where it might be said Mr McMullan relied on the expert materials submitted by RK on 28 October 2021 to determine a specific sum, for example, the allowance in relation to the concrete slab for Units 1 to 5. RK submitted that Argyle had failed to identify where or how in the Adjudication Determination Mr McMullan had relied on the ‘impermissible’ materials.[125]
[125]Transcript, 58-59.

Upon the onus question being discussed, senior counsel for Argyle sought and leave to file further short submissions directed to that issue was granted. Leave was also granted for RK to file answering submissions.

The purpose of providing an opportunity for Argyle to file further short submissions was to afford Argyle a further opportunity to identify what part or parts of the Adjudication Determination were said to be infected by the process of which it complained.

The further submissions by Argyle sought to discharge the onus via two alternative paths. The first, a submission that the Adjudication Determination is void in full because Mr McMullan gave RK a ‘general right of reply’ to the payment schedule, and it was accordingly difficult to discern what determination Mr McMullan would have made had he not considered impermissible materials.[126] In the alternative, Argyle submitted that, with respect to both defects and back charges, the Court should declare various paragraphs of the Adjudication Determination void. Argyle submitted that the Court should accept the evidence on behalf of Argyle and determine the adjudicated amount to be $0.
[126]Plaintiff, further submissions dated 19 April 2022, [4].

As to the first submission, the 21(2B) Notice did not give a ‘general right of reply’. Otherwise the first matter is a repeat of the argument advanced during the hearing. It must be rejected for the reasons discussed above.[127]
[127]See at paragraphs 126-162 above.

The second submission, like the first, assumes that the 21(2B) Notice was invalid and that as a result the Adjudication Determination considered submissions and materials not ‘duly made’. Argyle submitted that because the adjudicator considered such impermissible materials, where such consideration is identified in the Adjudication Determination, the determination is void.

Argyle sought a declaration that a large number of specific paragraphs in the Adjudication Determination be declared void.[128] Annexed to the submissions was a detailed schedule, relied upon to demonstrate ‘the extent of all Mr McMullan’s contraventions and the extent of his process under s 21(2B) of the Act miscarried’.[129]
[128]Plaintiff, further submissions dated 19 April 2022, [5], Schedule A. Argyle submitted that the Court should declare the following parts of the Adjudication Determination as void: [27], [30] to [34], [36] to [50], [83(g)], [83 h)], [143], [144], [145] and [146]5, [147] and [148], [210], [218] to [221], the columns headed ‘RK’ and ‘Adjudicator’ in the table at [222], [223], [226] to [255], the columns headed ‘RK’ and ‘Adjudicator’ in the table at [257], [258], the relevant items in the column headed ‘Claimant’ in the table at [260], [261], [262] and the section titled ‘Summary of Determination’ on page 100.
[129]Ibid, [4(a)].

The Adjudication Determination is over 100 pages in length. It is divided into sections with headings. The first series of paragraphs that Argyle contends should be declared void, paragraphs 27, 28, 30-34 and 36-50, form part of the first section of the Adjudication Determination titled ‘General’.

Paragraphs 27, 28, and 30-34 are part of a chronology of communications relevant to the process of the Adjudication Determination. Assuming the validity of all arguments advanced by Argyle, it is difficult to see why any of those paragraphs should be declared void. Paragraphs 36-50 involved a consideration by Mr McMullan of what is required by s 21(2B) of the SOP Act, including by reference to authorities. No reason is articulated and it is not apparent why those paragraphs should be declared void.

Paragraphs 143-148 fall under the heading ‘Issue 4: the competing Expert Reports and site inspection’. In substance, the section of the Adjudication Determination that includes these paragraphs sets out the competing views of the experts in reports prepared by them, including reports that were provided on behalf of RK following the 21(2B) Notice. These are not sections of the Adjudication Determination where findings are made by Mr McMullan. As earlier noted, I do not accept the submission that the mere reference to documents in an adjudication determination, assuming them to not have been ‘duly made’, constitutes a contravention of s 23(2). To adopt such an approach would result in absurd situations where the adjudicator could not even refer to such documents in his or her adjudication determination. It will only be to the extent that an adjudicator relies on such documents that the question of whether, as a result, a specific part of the determination is void arises.

Paragraph 210 falls under the heading ‘Issue 8: the deduction (if any) to be made in respect of the claimed defective work’. Paragraph 210 is another paragraph that refers to and identifies materials relied on by the parties, including further reports filed after the 21(2B) Notice. For the same reasons as apply to paragraphs 143-148, no issue arises about whether that paragraph should be declared void.

Paragraphs 218-222 and 223 are in a different category. Those paragraphs involve the adjudicator expressing his view in relation to the amount to be deducted in respect of defective work rectification items, the result of which is set out in the table at paragraph 222. At paragraph 218, Mr McMullan stated:

In my view, on balance, weighing the respective expert assessments, and taking into account the factors raised in those competing ports, I should adopt on the more conservative expert assessments of the estimated cost to rectify defective work, contained in the MQS reports [of Mr Grimes] and supported by the CAMC report [of Mr Jeffries].[130]

[130]CB, 2343.

Mr Grimes authored two reports before Mr McMullan, the first dated 30 September 2021 and the second dated 28 October 2021. In the section of the Adjudication Determination describing the content of those reports, Mr McMullan dealt with both reports in a combined manner. In paragraph 222, which sets out Mr McMullan’s findings, he relied upon both of Mr Grimes’ reports, reports written and submitted both before and after the 21(2B) Notice. The approach adopted by Mr McMullan has the result that, in my opinion, it is impossible to identify ‘the extent’ to which the Adjudication Determination has been made in contravention of s 23(2) in relation to the issue of cost of rectification of defective work. Mr McMullan’s reference to the report of Mr Jeffries is such that it seems more likely than not that Mr McMullan would have reached the same result without reference to that report.

Paragraphs 226-255 fall under the heading ‘Issue 9: the deduction (if any) to be made in respect of the claimed back charges’. Argyle submitted that back charges of $101,020.99 should be allowed in its favour. The reasons given by Mr McMullan for the rejection of each of the items claimed to make up the back charges[131] in each case included that there is ‘insufficient material to support the entitlement to the back charge’.[132] That is, Argyle did not persuade Mr McMullan that the allowance for back charges for which it contended was appropriate because Argyle failed to prove that was the case.
[131]With the exception of one item, in respect of which there was no dispute between the parties.
[132]CB, 2345-2347.

In relation to the issue of back charges, there does not appear to have been any reliance by Mr McMullan in the Adjudication Determination upon any of the materials submitted by RK which for these purposes might be assumed to be impermissible materials.

Finally, it may be noted that the schedule to Argyle’s further submissions refers extensively to the report of Mr Talevski. Until Mr Talevski’s report was provided as part of Argyle’s Second Adjudication Response on 22 October 2021, there was no substantiation of the need or the requirement to carry out the work the subject matter of the AJL Cost Report. It would not have been reasonable for an adjudicator to have deducted allowances, as determined by the AJL Cost Report, without persuasive evidence both that the defects existed and that the work which Mr Ng had costed was reasonable or was required to remedy those defects.

In all the circumstances, the claim by Argyle that the cost of rectifying defects which Argyle contends should be allowed in its favour in accordance with its expert evidence at $367,710.20 must be rejected.

No matter whether the onus of proof issue is approached on the first or second basis put forward by Argyle, I am not satisfied the onus has been discharged. There is no proper basis to find the Adjudication Determination or selected paragraphs of it void pursuant to s 23(2B).

Disposition

I will order that Argyle’s application in the nature of certiorari to quash the Adjudication Determination, and for declaratory relief, is refused.

If the parties are unable to agree about orders as to costs within seven days, then within a further seven days the parties should file and serve submissions in relation to costs of no more than four pages.

I anticipate dealing with any questions of costs on the papers.

[2022] VSC 452

10 August 2022