Barkly Regional Council v Harvey Developments (NT) Pty Ltd
[2024] NTSC 100
•4 December 2024
CITATION:Barkly Regional Council v Harvey Developments (NT) Pty Ltd & Anor [2024] NTSC 100
PARTIES:BARKLY REGIONAL COUNCIL
(ABN 32 171 281 456)
v
HARVEY DEVELOPMENTS (NT) PTY LTD (ABN 33 142 861 612)
and
BADDOCK, Deon
TITLE OF COURT: SUPREME COURT OF THE NORTHERN TERRITORY
JURISDICTION: SUPREME COURT exercising Territory jurisdiction
FILE NO:2024-02069-SC
DELIVERED: 4 December 2024
HEARING DATE: 10 October 2024
JUDGMENT OF: Brownhill J
CATCHWORDS:
BUILDING AND CONSTRUCTION – Adjudication – Judicial review – Procedural fairness – Asserted failure to consider submissions about an offsetting claim – Whether adjudicator failed to consider a central tenet of the matter – There was no offsetting claim founded upon any identified legal basis – Ground of review not made out.
BUILDING AND CONSTRUCTION – Adjudication – Judicial review – Payment claims – Procedural fairness – Asserted failure to consider evidence – No inference that the case was not considered – No jurisdictional error – Ground of review not made out.
Construction Contracts (Security of Payments) Regulations 2005 (NT) r 11.
Alliance Contracting Pty Ltd v James [2014] WASC 212, Brenner v First Artists’ Management Pty Ltd [1993] 2 VR 221, Cooper & Oxley Builders Pty Ltd v Steensma [2016] WASC 386, James Engineering Pty Ltd v ABB Australia Pty Ltd (2019) 42 NTLR 51, Laing O’Rourke Australia Construction Pty Ltd v H&M Engineering & Construction Pty Ltd [2010] NSWSC 818, referred to.
REPRESENTATION:
Counsel:
Plaintiff:S Heidenreich
First Defendant: JW Roper SC
Second Defendant: No appearance
Solicitors:
Plaintiff:Povey Stirk
First Defendant: Piper Alderman
Second Defendant: No appearance
Judgment category classification: B
Judgment ID Number: Bro2412
Number of pages: 30
IN THE SUPREME COURT
OF THE NORTHERN TERRITORY
OF AUSTRALIA
AT DARWINBarkly Regional Council v Harvey Developments (NT) Pty Ltd & Anor [2024] NTSC 100
No. 2024-02069-SC
BETWEEN:
BARKLY REGIONAL COUNCIL
(ABN 32 171 281 456)
Plaintiff
AND:
HARVEY DEVELOPMENTS (NT) PTY LTD (ABN 33 142 861 612)
First Defendant
AND:
DEON BADDOCK
Second Defendant
CORAM: BROWNHILL J
REASONS FOR JUDGMENT
(Delivered 4 December 2024)
This is an application for judicial review of a determination by an adjudicator under the Construction Contracts (Security of Payments) Act 2004 (NT) (‘the Act’). The issues are whether the adjudicator denied the plaintiff procedural fairness by failing to consider evidence it had provided to the adjudicator, and/or failing to consider its submission, characterised as ‘an offsetting claim’, that it had already paid enough for the construction work done on the site.
Background
The following facts are not in dispute.
The plaintiff (‘Council’) is a local government council constituted under s 14(b) of the Local Government Act 2019 (NT) for the Barkly region.
In late 2020, Council put out a Request for Tender for the design and construction of the Ali Curung Youth Centre (‘Project’).
On 22 February 2021, the tender for the Project was awarded to the defendant (‘HD’).
On that date, the parties executed a written contract relating to the Project (‘Contract’). The Contract provided that HD was to perform and complete the works described in the tender documents and Council was to pay HD the sum of $2,559,828.09 inclusive of GST. Council issued a purchase order for this sum on 22 February 2021.
The Contract included the Request for Tender with schedules completed by HD and a General Conditions of Contract AS 4300-1995 document with some clauses amended or added as set out in the document.
On 29 June 2023, Council executed and issued to HD a ‘Notice to Proceed’ which stated that, pursuant to the Contract, HD was notified to proceed with the construction work under the Contract, noting the commencement and practical completion dates as provided by the Contract. The Notice to Proceed then stated:
[Council] acknowledges your revised pricing for the Contract ... received via email on 08 June 2023 together with your revised costing substantiation.
The Notice to Proceed asked HD to acknowledge receipt and acceptance of the Notice to Proceed by signing and returning it to Council. HD did so on 30 June 2023.
By the email of 8 June 2023, HD provided to Council a revised total price for the Contract of $4,081,344.03.
Between then and September 2023, HD submitted and Council paid six payment claims totalling $644,391.18.
On 30 August 2023, HD served on Council payment claim no. 7, seeking payment under the Contract.
On 21 September 2023, payment claim no. 7 was rejected in its entirety by Council.
On 17 October 2023, Council wrote to HD notifying HD that it did not accept that the total price of the Contract had, by agreement between the parties, been increased from that set out in the Contract.
On 1 December 2023, HD served on Council a notice of suspension of the Contract.
On 31 January 2024, HD served on Council payment claim no. 8, seeking payment under the Contract, including payment of some amounts within payment claim no. 7. Payment claim no. 8 sought payment of a total of $434,850.49 (inc GST), comprised of seven items, being $236,599.34 for Preliminaries, $19,222.25 for Professional Fees (Consultants and Designers), $47,593 for Groundworks/Earthworks, $8,670.08 for Substructure (including piling, formwork, concrete slab), $52,178.43 for Extra Earthworks, $8,177.81 for Delay Costs 18 Oct to 30 Nov 2023 and $22,877.72 for Suspension Costs 1 Dec to 31 Dec 2023.
On 6 February 2024, HD terminated the Contract.
On 14 February 2024, Council provided a payment certificate of $0 in relation to payment claim no. 8, thereby disputing that it was required to pay any part of the amount claimed in payment claim no. 8.
On 19 April 2024, HD made an application for adjudication of its claim under the Act for payment of $434,850.49 plus interest calculated at 3% per annum, compounded at six monthly intervals, from the due date for payment. The application included various documents and two statutory declarations.
The second defendant was appointed as the adjudicator (‘adjudicator’).
On 16 May 2024, Council’s response to HD’s application for adjudication was provided to the adjudicator. The response included written submissions with attachments and six statements.
On 20 May 2024, HD sent further submissions to the adjudicator about the application and sought to be heard in relation to them.
On 26 May 2024, the adjudicator responded stating he would not consider HD’s further submissions and that he would only hear the parties further to the extent he needed sufficient information to make a determination and/or to ensure procedural fairness. The adjudicator requested further written submissions from both parties in relation to three particularised topics.
On 28 and 29 May 2024, HD and Council provided their respective further submissions on those topics.
The adjudicator’s determination was delivered on 30 May 2024 and certified by the Construction Contracts Registrar on 12 June 2024. The adjudicator assessed the amount payable by Council to HD at $425,854.90 (inc GST), with interest of $2,919.42 and each party to pay 50% of the costs of the adjudication.
Without prejudice to its arguments in the proceedings, Council has paid $433,013.54 into the Supreme Court’s Civil Litigant’s Fund, pending the outcome of these proceedings.
Relief sought
By its originating motion and summons on originating motion, Council seeks:
(a)an order in the nature of certiorari quashing the adjudication determination; and
(b)costs.
Initially, Council alleged five grounds of jurisdictional error, as follows:
(1)The adjudicator exceeded his jurisdiction or denied procedural fairness to Council by failing to dismiss the adjudication application pursuant to s 33(1)(a)(iv)(A) of the Act.
(2)Contrary to his statutory functions under ss 33(1)(b) and 34(1)(a) of the Act, the adjudicator denied procedural fairness to Council by failing to consider the statements of Russell Anderson, Peter Holt and two statements by Suryateja Godavarthi provided to the adjudicator as part of its response to the adjudication application, which evidence would, if properly considered, have materially altered the outcome of the adjudication.
(3)Contrary to his statutory functions under ss 33(1)(b) and 34(1)(a) of the Act, the adjudicator denied procedural fairness to Council by failing to consider the submissions made by Council as to its offsetting claim as to funds already paid by Council to HD, which submissions would, if properly considered, have materially altered the outcome of the adjudication.
(4)Contrary to his statutory functions under ss 33(1)(b) and 34(2)(c) of the Act, the adjudicator denied procedural fairness to Council by failing to make a bona fide attempt to determine the matter by refusing to undertake a site inspection and refusing to engage a technical expert to perform geotechnical testing of the site, either of which would, if undertaken, have materially altered the outcome of the adjudication.
(5)The adjudicator exceeded his jurisdiction by taking into account an irrelevant consideration, namely the minutes of the Local Authority meeting dated 8 May 2023 that were not pertinent to the matter and should not have influenced the decision making process.
At the commencement of the hearing, Council abandoned grounds (1) and (5). During the hearing, Council also abandoned ground (4).
That leaves for determination grounds (2) and (3). I will deal with these grounds in the order in which they were dealt with by Council.
Ground 3 – Failure to consider submissions about an offsetting claim
Council argued that the adjudicator did not consider its submissions regarding its ‘offsetting claim’. This was said to be a failure to consider a central tenet and substantive issue in the Council’s response to payment claim no. 8, which was the subject of the payment dispute to be adjudicated.
It was not disputed, and may readily be accepted, that ss 33(1)(b) and 34(1) of the Act require the adjudicator to, if possible (given, for example, the matters in s 33(1)(a)), determine on the balance of probabilities whether any party to the payment dispute is liable to make a payment or to return any security and, if so, the amount and time by which such payment should be made, and to make the determination on the basis of the application and its attachments and the response and its attachments, by addressing the merits of cases put by both parties in respect of the payment dispute, including the substantive issues put in the response in defence of the payment claim.
It was also not disputed, and may be readily accepted, that a failure to do so comprises both a failure to exercise the statutory power conferred on the adjudicator by the Act and a denial of procedural fairness and, consequently, jurisdictional error invalidating the adjudicator’s decision.
Council’s response to the adjudication application
Before the adjudicator, Council made the following submissions in its response to HD’s application for adjudication of its payment claim no. 8.
Under the heading ‘Executive Summary’:
(a)Council’s primary position is that the adjudication application ought be dismissed under s 33(1)(a) of the Act because it is not possible for the adjudicator to fairly make a determination on account of the complexity of the legal issues underlying the factual claim for payment (at [7]). This was addressed in Part A of the response.
(b)If the adjudication application was not dismissed, Council is entitled to put on all evidence relevant to the payment dispute (at [8]). This was addressed in Part B of the response.
(c)There was an issue as to whether the Notice to Proceed constituted an agreed variation of the Contract price and the adjudicator was asked to find that the price was not varied (at [9]). This was addressed in Part C of the response.
(d)The adjudicator was also asked to consider ‘this matter’ in light of one simple question: Does the work in fact undertaken by HD warrant payments totalling $1,057,499.15? (at [10]). A site visit or an independent assessment should occur as that would ‘directly inform the answer to that question’ (at [10]). This was addressed in Part C of the response.
(e)In relation to the discrete items claimed in payment claim no. 8, the adjudicator should: find that the Contract price had not been varied, ‘that the payments made to date are adequate and appropriate in light of the lack of progress’ on the Project; value each item at nil; and determine that Council is not liable to make any payment to HD (at [11]). This was addressed in Part D of the response.
Part A of the response put the submission that the adjudication application should be dismissed due to the legal complexity of the issue of whether or not the Contract price had been varied as evidenced by the Notice to Proceed. Reference was made to the submissions put on this issue in Part C of the response.
Part B of the response was directed to HD’s submission that, contrary to Council’s covering letter to the payment schedule rejecting payment claim no.8, Council had not issued a notice for liquidated damages or sought to deduct any liquidated damages from payment claim no. 8 in its payment schedule and was not entitled to make a claim for liquidated damages in the payment dispute. Part B of the response included the following paragraphs (at [38]-[39]):
Insisting, as it does by the making of this Application, that the work the subject of its Payment Claim has been performed, [HD] will naturally have no objection to the Adjudicator undertaking a visit to Ali Curung to personally inspect the site, or to the engagement of an independent expert to certify the extent of the work [HD] claims to have undertaken and its monetary worth.
The Council presses for an inspection of the site as part of this process and for the engagement of an independent expert to consider whether the works undertaken by [HD] at the site justify the claimed entitlement to payment (on top of the payments already made, which together come to over $1 million).
Part C of the response is headed ‘Preliminary issue: the Notice to Proceed / variation of the Contract Price’. Part C contained three sub-parts, being C.1, headed ‘Why is the Notice to Proceed an issue and to which items does it relate?; C.2, headed ‘The Notice to Proceed was not and could not have been a formal variation to the Contract Price’; and C.3, headed ‘The real question and the importance of a site visit/inspection by an independent expert’.
In Part C.3, Council submitted that, if the adjudicator disagreed with the primary submission as advanced in Part A, and determined there was a formal variation of the Contract price, ‘this matter’ can be distilled into a single question, namely: ‘Does the work in fact undertaken by [HD] warrant payments totalling $1,057,499.15?’ (at [79]). Council submitted that ‘the only way’ the adjudicator could fairly determine the application was to satisfy himself that the amounts claimed ‘are justified’ by reference to the works actually undertaken by HD at the site, which could occur either by the adjudicator carrying out a site inspection or engaging an independent expert to ‘carry out quality assurance of the work undertaken to date and provide an assessment of the value thereof’ (at [80]). Council submitted that, if neither of those processes was adopted, the application could not be fairly determined and would be liable to dismissal under s 33(1)(a)(iv) of the Act (at [81]). Council said that, if the adjudicator were to determine the application, but does not see fit to carry out a site inspection, it had provided ‘imagery’ (namely, photographs of the site and ‘3D mapping’ of the site compiled from drone footage), to facilitate the adjudicator’s assessment of ‘the true condition of the site’ (at [82]).
Part D of the response deals with the seven items the subject of payment claim no. 8. In relation to five of those seven items, Council submitted that the adjudicator should find that the payments already made by Council were ‘appropriate and sufficient’ or that the absence of payments already made ‘is appropriate’ and to value the item at $nil (at [92.2], [96.2], [100.2], [103.1], [106.1]). The other two items were delay costs and suspension costs respectively, which were resisted on the basis that Council had not caused the delay or the suspension (at [113], [115]). As I understood them, none of Council’s complaints relate to the adjudicator’s treatment of delay costs and suspension costs.
In Part D.1, dealing with Item C1 – Preliminaries, Council’s response listed nine ‘concerns’ said to be documented in Mr Holt’s statement, 14 ‘concerns’ said to be documented in Mr Godavarthi’s statement, and 12 ‘concerns’ said to be documented in Mr Francis’s statement. These ‘concerns’ were set out in those three statements by way of the relevant witness stating things like: ‘I formed, and maintain, considerable concerns about the Project’;[1] and ‘I remained concerned about the Project’.[2]
No submissions were made in Council’s response as to how any of them impacted upon the payment claim made for item C.1 or any of the other items. The ‘concerns’ were as to a diverse range of matters, such as the lack of progress on the site, the ‘inaccuracy’ of HD’s original tender and the approval of variations for works defined in the tender, the absence from the drawings of ‘key items’ such as external cladding, the absence of a development approval, a building permit, a geotechnical report, or a soil assessment and ‘excessive expenditure relative to the works completed’.
Adjudicator’s determination – Overview
By way of overview, the adjudicator’s determination rejected Council’s submissions that the determination could not fairly be made due to legal complexity (at [64]-[72]), found that the Contract price had been varied (at [79]-[101]), and dealt with the need for a site visit or independent expert (at [102]-[105]), concluding that the adjudicator did not consider that an inspection of the site nor the engagement of an independent expert was necessary for him to make a determination because the information and evidence provided by the parties was more than sufficient to make a determination. The adjudicator then went on to consider each of the items in the payment claim.
In addressing items C.5, C.6 and V1.3, the adjudicator expressly repeated Council’s submissions that the amounts already paid by Council were appropriate and/or sufficient (at [133], [148], [156]). He went on to reject them, addressing what he understood to be the bases on which Council put that submission (at [134]-[139], [149]-[150], [157]).
In addressing item C2, the adjudicator did not repeat Council’s submission that the amounts already paid by Council were appropriate and sufficient, but did address, and reject, the bases on which Council put that submission (at [122]-[123], [125]-[127]).
In addressing item C.1, the adjudicator did not repeat Council’s submission that the amounts already paid by Council were appropriate and sufficient, but made reference to the ‘concerns’ raised in the three statements referred to by Council in its response regarding item C.1, said he had considered the ‘concerns’ raised, said he did not see how they demonstrated the calculation of the value of the item under the Contract, and so gave them little weight (at [111]). He also said that Council had not provided any submissions in respect of the costs the subject of item C.1 (at [115]).
Consideration
In response to Council’s argument as set out in paragraph [31] above, HD argued that, in rejecting Council’s submission that the Contract price had not been varied and individually assessing each item of the payment claim, the adjudicator had adequately dealt with Council’s response, including the submission that the payments already made by Council for the work done were appropriate and sufficient.
There is some force in this argument, but there is a more compelling basis upon which to conclude that the adjudicator did not commit jurisdictional error in the way asserted by Council under this ground, namely that, for the reasons set out below, the submissions that the amounts already paid were ‘adequate and sufficient’ was not an offsetting claim founded upon any identified legal basis which the adjudicator was required to address.
Reliance was placed by Council on the decision in James Engineering Pty Ltd v ABB Australia Pty Ltd (2019) 42 NTLR 51 (‘James’), submitting that Council’s submissions in the response to the effect that Council had already paid money to HD which exceeded the value of any work undertaken prior to the payment claim was an ‘offsetting claim’ akin to that in James.
In James, the Court of Appeal dismissed an appeal against a decision of the Supreme Court granting an order in the nature of certiorari in respect of an adjudicator’s determination because the adjudicator had failed to deal with the merits of the principal’s defence to the contractor’s payment claim. The Court of Appeal confirmed that the principal’s claim to set off liquidated damages against the payment claim had not been considered on its merits because the adjudicator had erroneously determined that a claim to set off liquidated damages required a separate payment claim to be made by the principal. Contrary to that view, the Court of Appeal held (at [30]) that the claim to set off liquidated damages was ‘a live issue’ in the contractor’s adjudication application.[3] The Court of Appeal held (at [34]-[35]) that a respondent to an application may use its counterclaim or set-off as a defence to the payment claim made against it and the adjudicator is required to take into account the respondent’s response, including the merits of any counterclaim or set-off in reaching its determination.[4]
In James, the principal’s response to the payment claim had identified a contractual obligation on the contractor to pay liquidated damages of a specified amount to the principal, the adjudication application referred to the claim for liquidated damages as part of the payment dispute and made submissions as to the merits of the claim. The principal’s response to the adjudication application contained a seven page submission regarding the principal’s claim for liquidated damages which asked the adjudicator to reject the contractor’s contentions about the liquidated damages claim and allow the principal’s set-off of those damages. Because of his erroneous view that a claim for liquidated damages required a separate payment claim to be made by the principal, which had not been done, the adjudicator ignored that claim when determining the payment claim. The Court of Appeal upheld the trial Judge’s finding that the adjudicator had misconstrued the nature of his functions under the Act and failed to deal with the merits of the principal’s claimed set off, which had been raised as a defence to the payment claim, and thereby made a jurisdictional error.
I do not accept that the Council’s defence to HD’s payment claim was an ‘offsetting claim’, whether akin to that in James or otherwise, which the adjudicator was required to determine.
First, Council submitted to this Court that the submissions it made in the response were a claim of quantum meruit under the general law. The submission is misplaced because a claim of quantum meruit is a claim for payment made on one of two bases: (i) a claim to recover a debt arising under an enforceable contract where the contract fails to state a price for services rendered and the court implies a term requiring payment of a reasonable sum; or (ii) a claim for payment in restitution where there is no valid and enforceable contract and so the law imposes an obligation to make fair and just compensation for a benefit accepted.[5] In the present case, there is a valid and enforceable contract which states the price for the construction services rendered by HD, which price the adjudicator found was later varied by agreement. Neither of the bases upon which a quantum meruit claim might be made is present in this case.
Furthermore, a quantum meruit claim is a claim for payment for a benefit provided. No authority was cited by Council in which a quantum meruit claim was successfully raised ‘as a shield and not a sword’[6] (i.e., put as a defence or as a counter-claim) to a claim for payment of money under a valid and enforceable contract.
Secondly, Council submitted that, as held by the Court of Appeal in James (at [41]), the adjudicator’s duty is to determine not just the merits of the payment claim which gave rise to the payment dispute, but also any claim to a set-off by the responding party against its asserted liability under the payment claim, which determination must be made by reference to the terms of the construction contract and the general law (if applicable). Council submitted that a quantum meruit claim is a claim under the general law, so the adjudicator was obliged to determine it. However, Council’s response made no express reference to a claim of quantum meruit under the general law. In this respect, Council also relied on James, where the Court of Appeal held (at [23]) that the principal’s failure in the response to use the words ‘set-off’ did not deny that the principal’s claim to a set-off against the contractor was squarely before the adjudicator.
In the present case, not only were the words ‘quantum meruit’ not expressed anywhere in the response, the response did not identify for the adjudicator any applicable common law principles,[7] or how those principles should be applied to the payment claim. It was not even identified that the Council’s position was founded upon an entitlement under the general law. In the context where an adjudicator is not necessarily a lawyer,[8] (and, even if they were), it would be expected that any defence to a payment claim founded upon some entitlement under the general law would expressly state what the entitlement is and describe its legal foundation.
Thirdly, this aspect of Council’s response to HD’s payment claim is very different to the authorities relating to an offsetting claim. As set out above, in James, the principal’s payment schedule expressly stated that one of the reasons why the principal proposed to pay the contractor $0 against the payment claim was that the contractor had a contractual obligation to pay the principal an identified sum in liquidated damages, the adjudication application expressly referred to the principal’s position and made submissions detailing a response to the principal’s claim for liquidated damages, and the principal’s response to the adjudication application contained detailed submissions as to its claim for liquidated damages and asked that the adjudicator allow the principal’s set-off based on that claim. The adjudicator had refused to do so because he was erroneously of the view that a responsive claim based on liquidated damages required a payment claim to have been made by the principal, without which it was not properly before him for determination.
Similarly, Alliance Contracting Pty Ltd v James [2014] WASC 212 and Cooper & Oxley Builders Pty Ltd v Steensma [2016] WASC 386 (the authorities referred to by the Court of Appeal in James at [41]), related to an express claim, in an identified sum, said to be payable under the construction contract to the principal by the contractor who sought the adjudication, which was a well-known claim to a legal entitlement said to reduce or deny the amount claimed by the contractor.
In the present case, the submission made by Council was effectively that Council had already paid $644,391.18 for the construction work done by HD on the Project, and should not, in light of the work actually done, be required to pay any more (specifically the additional $413,107.97 claimed in HD’s payment claim). So expressed, that submission did not appear to invoke a claim to a legal entitlement said to reduce or deny the amount claimed by HD. Indeed, it invited the adjudicator to make an assessment of the value of the construction work Council had previously paid for without any dispute. Whether or not such a course is open under the terms of the Act is unclear, given the strict timeframes for bringing and determining applications for adjudication of payment disputes and that a ‘payment dispute’ arises if an amount claimed or retained under a contract has not been paid. This question was not the subject of full argument, and I am not to be taken to be expressing any determinative view about it. However, such a course is at the very least novel. No authority was cited in which this has been done or attempted.
Finally, Council’s submissions in this regard can be understood as an adjunct to, and as put in support of, its primary submissions that the Contract price was not varied by the parties, a matter too legally complex for the adjudicator to fairly determine. Unlike the circumstances in which a quantum meruit claim may be made, here there was a valid and enforceable contract with an agreed contract price. In those circumstances, a submission to the effect that the absence of agreement on an increased price for the construction work under the Contract was confirmed by the value of the actual construction work done by HD on the Project in comparison to the total amount HD claimed it was entitled to be paid for that work makes sense.
Such an understanding is supported by the structure of the response, which placed the substance of the submission in Part C, headed ‘Preliminary issues: the Notice to Proceed / variation of the Contract Price’, which issue was described as ‘fundamental to the determination’ of the application for adjudication (at [60]). It is further supported by the submissions about items C.1, C.2 and C.5, being the items in respect of which the payment claim exceeded the original price under the Contract (at [55]) and which submissions invited the adjudicator to find that the Contract price was not varied and that the payments already made by Council were ‘appropriate and sufficient’ (at [92], [96] and [100]).
Such an understanding is further supported by the failure of the Council to provide the adjudicator with any report obtained by it from an independent expert of an assessment of the value of the construction work undertaken. If Council had actually made a submission to the effect that, by virtue of some legal entitlement to do so, the amounts already paid by Council for the construction work should be set off against the payments claimed in payment claim no. 8 because they exceed the value of the construction work actually done, one might expect that it would substantiate that claim by the provision of an assessment of that value.
It is the case that such an understanding is somewhat inconsistent with the submission (at [79]) that if the adjudicator disagrees with the primary submission that legal complexity prevented a fair determination, and determines that there was a formal variation to the Contract price, ‘this matter’ can be distilled to the question whether the work actually undertaken by HD warrants payments totalling $1,057,499.15. However, as has been concluded above, in the context of a valid and enforceable contract with an agreed price, the question identified as a quantum meruit claim was without any legal foundation and, essentially, irrelevant to the adjudicator’s determination of the payment claim.
It is apparent from the determination that the adjudicator did not understand Council’s submissions about whether the work warranted the payment of the total amount claimed by HD as an ‘offsetting claim’ or as an issue separate from the issue of whether the Contract price had been varied. He identified the preliminary issues as the variation of the Contract price and the need for a site visit or independent expert assessment. He did not otherwise address the submissions. Given the way the response was put, this is not surprising and supports the finding that the understanding of Council’s submissions referred to above was not just open, but the natural and obvious one.
This is a further basis upon which to distinguish the case of James. In that case, there were clear submissions from both parties raising the issue of liquidated damages, and the adjudicator erroneously found that the issue could not be put before him. Here, I have found that Council did not raise any ‘offsetting claim’, in the sense of a legal entitlement to the payment of money which should be set-off against the amounts claimed in payment claim no. 8, other than its position that, for some of the items in the payment claim, the original (and unvaried) Contract price had been exceeded.
Even if the adjudicator failed to consider and determine all of Council’s submissions in this regard, I do not accept that there was a denial of procedural fairness and a failure to properly exercise the statutory function because I do not accept that Council’s submissions in this regard were material, in other words, I do not accept that, properly considered, they could have caused the adjudicator to take a different view.[9]
The reasons for that conclusion are essentially that, if the basis of Council’s submissions was a claim in quantum meruit, as explained above, such a claim could not properly arise in the circumstances where there was a valid and enforceable contract with an agreed price for the construction work. It was a claim wholly without merit which could not have made any difference to the outcome.
This ground is not made out.
Ground 2 – Failure to consider evidence
Council argued that the adjudicator failed to give consideration to four statements included in Council’s response, as identified in the originating motion. The specific content or effect of the evidence was not particularised until the hearing.
Reliance was placed on Laing O’Rourke Australia Construction Pty Ltd v H&M Engineering & Construction Pty Ltd.[10] That case involved an adjudication determination for payment in excess of $10.6 million and in which the adjudicator specifically dealt with four payment claims and effectively dealt with the remaining 39 underlying claims by not valuing them individually, but by settling on a figure which purported to split the difference between the parties’ stated positions, expressly for the reason that it would not be worthwhile, having regard to the total amount left in those claims (an amount just under $100,000) to value each of them individually. In that case, the plaintiff argued that the adjudicator had denied it procedural fairness by failing to consider fundamental issues raised by it in relation to those claims, and failed to exercise his statutory functions bona fides in dealing with the claims. McDougall J held (at [39]) that the statutory obligation to ‘consider’, essentially the construction contract, the payment claim and materials and supporting documentation put by the parties required ‘an active process of intellectual engagement’ with those things by the adjudicator. McDougall J held (at [73]) that although adjudicators are required to produce reasons for their determinations, it is unrealistic to expect that they will treat minutely and in detail each and every aspect of the parties’ submissions and the evidence, but the reasons should be ‘sufficiently detailed to enable parties to understand that their contentions have been considered, and to understand the process of reasoning that led to the particular conclusion’. McDougall J held (at [90]) that the adjudicator had given two sentences in his reasons for disregarding the plaintiff’s submissions on a particular payment claim and ‘gave no hint whatsoever that he considered them’, that (at [93]) the adjudicator did not refer to any of the statutory declarations relating to three of the claims he considered and did not consider ‘an important factual element of [the plaintiff’s] case’. McDougall J held (at [98]) that the fact that the adjudicator did not refer to a particular statutory declaration, let alone deal with the implications of what on its face was a clear admission about delay, supported the inference that the adjudicator did not consider the statutory declaration. McDougall J held (at [102]) that, in relation to other evidence, the adjudicator’s generalised assertion of his want of satisfaction about a matter could not be considered as a sufficient intellectual response to the issues of fact and causation they raised. After concluding that the adjudicator denied procedural fairness to the plaintiff, McDougall J held (at [113]) that, if the adjudicator had taken into consideration ‘the nature of the defence [the plaintiff] was advancing and the material on which it relied in support of that defence, ... he may well have come to a different view’ or at least be required to explain why the plaintiff’s evidence did not persuade him about a particular issue.
That case did not involve a mere failure to refer to or consider a particular piece of evidence or submission. Rather, by reason of a failure to refer to certain submissions and supporting documentation, which prima facie raised or addressed an important factual issue relevant to a particular payment claim and was relied upon as part of a party’s case in the adjudication application, it was inferred there was a failure to consider that case or the issue at all.
Consideration
Russell Anderson’s statement said that, when he signed the Notice to Proceed on behalf of Council, he did not intend to agree to HD’s proposed variation to the Contract price on behalf of Council, and he had no authority to do so.
In the determination, the adjudicator gave detailed consideration to the issue about whether the Contract price had been varied as evidenced by the Notice to Proceed. In that consideration, the adjudicator quoted from Mr Anderson’s statement directly (at [89]). The adjudicator then concluded that the Contract price had been varied, by reference to evidence of the interactions between Council and HD prior to the Notice to Proceed, the wording of the Notice to Proceed, the attachments to the Notice to Proceed and a statement of the employee of Council who sent the Notice to Proceed to HD, which stated that it was his understanding that the Notice to Proceed would approve a variation to the Contract price in line with the revised costs proposed by HD (at [97]-[100]).
It cannot be accepted that the adjudicator’s failure to refer again to the Russell Statement permits the inference that he did not consider it or the issue between the parties to which it was directed.
Peter Holt’s statement said he was the official manager of Council appointed after Council members were suspended. He explained how the Project was funded from Commonwealth funding, that there were funding deadlines, and the process Council should have followed in approving payments made to HD in relation to it. He said he visited the site and saw a vacant lot with ‘wooden stakes’ and a pile of metal framing, Council had already paid around $600,000 and he formed the view that there was insufficient evidence of progress to justify an additional payment to HD. He explained that he received a report that the Project would not be finished on time or within budget and had various concerns regarding the design, that the original tender was inadequately costed, that there had been two requests to re-price the Project, there should have been greater rigour around ensuring milestones were met before making payments and that HD would not complete the Project within the time limit. He got legal advice and ultimately terminated the Contract.
In the determination, the adjudicator referred to these ‘concerns’ (at [111]) and said he gave them little weight as he did not see how they demonstrated the calculation of the value of items in the payment claim under the Contract.
Again, given the issues with the so-called ‘offsetting claim’ identified above, it cannot be accepted that the adjudicator’s failure to address the Holt Statement in more detail permits the inference he did not consider it or the issue between the parties to which it was directed.
In his first statement, Suryateja Godavarthi said he is a project manager employed by Council and a civil engineer. He identified seven ‘problems’ with the Project drawings prepared by HD, set out his observations of the Project site at two site inspections he made, various correspondence between himself and HD regarding Council’s approval of variations to the Contract price, and ‘concerns’ he had with the Project. He also attached drone footage of the site from which he had produced ‘a 3D map of the site’.
This ‘3D map’, along with the photographs of the site which the adjudicator had, was the material provided by Council in the alternative to undertaking a site inspection.
In the determination, the adjudicator dealt with these ‘concerns’ along with the ‘concerns’ raised in the Holt Statement and the Francis Statement (at [111]). Again, given the issues with the so-called ‘offsetting claim’ identified above, it cannot be accepted that the adjudicator’s failure to address the first Godavarthi Statement in more detail permits the inference he did not consider it or the issue between the parties to which it was directed.
In his second statement, Mr Godavarthi said that a geotechnical report is a critical document in construction and engineering projects and conducting a geotechnical assessment before starting earthwork is essential for planning, designing and executing a construction project successfully.
In the determination, the adjudicator quoted Council’s submission that there had been no geotechnical report or soil assessment to assist with assessing the groundworks/earthworks (item C5) (at [134]), but accepted HD’s submissions that the omission should not disentitle HD to payment for groundworks / earthworks completed (at [137]).
Given this treatment, it cannot be accepted that the adjudicator’s failure to refer expressly to the second Godavarthi Statement permits the inference he did not consider it or the issue between the parties to which it was directed.
By contrast with the decision in Laing, to the extent that these four statements were directed to what Council sought to characterise in this Court as a quantum meruit claim, for the reasons set out in relation to Ground 3, they did not prima facie raise or address any valid factual or legal issue relevant to payment claim no. 8 relied upon as part of Council’s case in the adjudication application. It cannot and should not be inferred that there was a failure to consider Council’s case or the issue at all such that the adjudicator committed jurisdictional error.
In addition, as held in relation to Ground 3 (see paragraphs [66] and [67] above), even if the adjudicator failed to consider these statements, I do not accept that there was a denial of procedural fairness and a failure to properly exercise the statutory function because I do not accept that the statements were material, in other words, I do not accept that, properly considered, they could have caused the adjudicator to take a different view.
This ground is not made out.
Disposition
Neither of the two grounds of judicial review ultimately pressed by Council are made out.
Council’s originating motion and summons on originating motion are dismissed.
I will hear the parties as to costs.
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[1]Statement of Peter Holt, Official Manager of Barkly Regional Council, 14 May 2024, [9].
[2]Statement of Suryateja Godavarthi, Project Manager, Infrastructure, 15 May 2024, [17].
[3]James Engineering Pty Ltd v ABB Australia Pty Ltd (2019) 42 NTLR 51 per Blokland and Hiley JJ and Graham AJ.
[4]Ibid quoting Cooper & Oxley Builders Pty Ltd v Steensma [2016] WASC 386 at [23], [33]-[34] per Le Miere J.
[5]Pavey & Matthews Pty Ltd v Paul (1987) 162 CLR 221 at 255-256 per Deane J (Mason and Wilson JJ agreeing at 227).
[6]Picking up the language referred to by the Court of Appeal in the decision appealed from in James referred to at [14].
[7]See, for example, the oft-cited decision of Brenner v First Artists’ Management Pty Ltd [1993] 2 VR 221 at 262-264 per Byrne J.
[8]See r 11 of the Construction Contracts (Security of Payments) Regulations 2005 (NT).
[9]See James at [59]-[60]; Laing O’Rourke Australia Construction Pty Ltd v H&M Engineering & Construction Pty Ltd [2010] NSWSC 818 (‘Laing’), at [27] per McDougall J.
[10]Laing, particularly at [39], [73], [85], [93], [102] and [113] per McDougall J.
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