Barkly Regional Council v Harvey Developments (NT) Pty Ltd - [2024] NTSC 100

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 DARWIN
Barkly 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…

Grounds of appeal

[14] The appellant contends that the primary judge erred in finding that the respondent had discharged the onus of establishing the matters required under the relevant provision.

[15] It was submitted that his Honour failed to give adequate weight to the evidence of the second witness, and that the findings of fact were not reasonably open on the material before the Court.

[16] The respondent, for its part, submits that no error is disclosed, and that the conclusions reached were well within the range of outcomes available to the primary judge.

Consideration

[17] It is convenient to deal first with the question of construction, as the resolution of that issue informs the remaining grounds advanced by the appellant.

[18] For the reasons that follow, we are of the view that the appeal should be allowed in part and the matter remitted for further determination.

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Details

Case: [2024] NTSC 100
Decision Date: 4 December 2024

CaseChat Overview and Summary

Barkly Regional Council has applied for judicial review of an adjudicator's determination under the Construction Contracts (Security of Payments) Act 2004 (NT). The applicant claims that the adjudicator failed to give proper consideration to evidence and submissions provided by it. Specifically, the Council asserts that the adjudicator did not adequately address its submission that it had already paid sufficient amounts for the construction work completed. Additionally, the Council contends that the adjudicator failed to consider specific evidence it had presented. The court was tasked with determining whether the adjudicator's handling of the case resulted in a denial of procedural fairness to the Council.

The primary legal issues before the court were whether the adjudicator committed a jurisdictional error by failing to properly consider the Council's submissions and evidence. The Council argued that the adjudicator's determination was flawed because it did not address the Council's submission that the already-paid amounts were adequate, which the Council considered an offsetting claim. The Council also contended that the adjudicator did not sufficiently consider the evidence it provided, which was necessary for a fair adjudication. The court needed to examine the adjudicator's reasons and decide if they demonstrated an adequate consideration of the Council's submissions and evidence.

In its reasoning, the court found that the Council's claim that the amounts already paid were sufficient did not constitute an offsetting claim with a legal basis that the adjudicator was required to address. The court noted that there was no identified legal basis for this claim and that it did not form part of the adjudication process as required by the Act. The court also concluded that the adjudicator's reasons demonstrated a consideration of the Council's concerns, even if they did not align with the Council's perspective. The court held that the adjudicator's determination did not evidence a failure to consider the Council's submissions or evidence to a degree that would constitute a jurisdictional error.

As a result, the court dismissed the application for judicial review. The adjudicator's determination was upheld, and no grounds for overturning the decision were found. The court found that the adjudicator had sufficiently engaged with the Council's submissions and evidence, and therefore, the Council's claims of procedural unfairness were unfounded.

Orders

Orders of the court

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Background

Background to the litigation

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.

Evidence

Evidence Before The Court

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.

Decision

Reasons for decision

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Ratio Decidendi

Legal Principle Established

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.