Built Environs Pty Ltd v Tali Engineering Pty Ltd
[2013] SASC 84
•3 June 2013
SUPREME COURT OF SOUTH AUSTRALIA
(Civil: Application for Judicial Review)
BUILT ENVIRONS PTY LTD v TALI ENGINEERING PTY LTD & ORS
[2013] SASC 84
Judgment of The Honourable Justice Blue
3 June 2013
CONTRACTS - BUILDING, ENGINEERING AND RELATED CONTRACTS - REMUNERATION - STATUTORY REGULATION OF ENTITLEMENT TO AND RECOVERY OF PROGRESS PAYMENTS - ADJUDICATION OF PAYMENT CLAIMS
ADMINISTRATIVE LAW - JUDICIAL REVIEW - GROUNDS OF REVIEW - JURISDICTIONAL MATTERS
ADMINISTRATIVE LAW - JUDICIAL REVIEW - GROUNDS OF REVIEW - PROCEDURAL FAIRNESS - HEARING - NATURE OF HEARING - OPPORTUNITY TO PRESENT CASE
ADMINISTRATIVE LAW - JUDICIAL REVIEW - GROUNDS OF REVIEW - PROCEDURAL FAIRNESS - BIAS
Tali Engineering Pty Ltd lodged with Built Environs Pty Ltd a payment claim under the Building and Construction Industry Security of Payment Act 2009 (SA). Built Environs issued a responding payment schedule assessing the amount due at nil by setting off liquidated damages for delayed substantial completion.
Tali Engineering applied to an authorised nominating authority, Nominator Pty Ltd, to appoint an adjudicator to adjudicate the claim. Nominator appointed Mr Allan. Mr Allan determined that Tali Engineering was entitled to payment of $579,420.90 (plus GST).
Built Environs seeks an order setting aside Mr Allan’s determination as a nullity on six grounds:
1. Mr Allan had no jurisdiction because the payment contravened section 13(2);
2. Mr Allan entertained claims in respect of which he had no jurisdiction;
3. Mr Allan denied Built Environs natural justice;
4. there was a reasonable apprehension of bias of Nominator and Mr Allan;
5. Mr Allan made vitiating errors of law;
6. Mr Allan did not attempt in good faith to determine the issues.
Held:
1. (a) Mr Allan’s jurisdiction was dependent upon objective compliance of the payment claim with section 13(2) (at [64]-[79]).
(b) The payment claim was sufficiently comprehensible notwithstanding arithmetical errors and redundancies (at [81]-[83]).
(c) The Act does not require a payment claim to be calculated on an incremental, as opposed to a cumulative, basis (at [89]-[108]).
(d) The payment claim complied with section 13(2) (at [109]).
2. (a) Mr Allan did not grant to Tali Engineering unliquidated damages (at [114]).
(b) Mr Allan did not grant to Tali Engineering an extension of time (at [118]).
(c) Tali Engineering was entitled to rely on answers to Built Environs’ liquidated damages set-off notwithstanding the answers had not been identified or articulated in its payment claim (at [123]-[125]).
(d) Mr Allan did not entertain claims that Tali Engineering was not entitled to make (at [126]).
3. (a) Mr Allan denied natural justice to Built Environs by determining the claim by application of the prevention principle without Built Environs having had a proper opportunity to adduce evidence or make submissions on the issues (at [155]-[183]).
(b) This denial vitiated Mr Allan’s adjudication (at [184]).
4. (a) There was a reasonable apprehension of bias on the part of Nominator because its general manager, in his capacity as chief executive officer of another entity, had been advising Tali Engineering in connection with its dispute with Built Environs (at [192]-[203]).
(b) There was no reasonable apprehension of bias on the part of Mr Allan per se (at [205]-[207]).
(c) The reasonable apprehension of bias on the part of Nominator vitiated Mr Allan’s adjudication (at [203]).
5. Built Environs is entitled to a declaration that Mr Allan’s determination is a nullity and an order setting it aside (at [218]).
Building and Construction Industry Security of Payment Act 2009 (SA) ss 3, 4, 8, 9, 10, 11, 12, 13, 14, 15, 16, 17, 18, 19, 20, 21, 22, 23, 24, 25, 26, 27, 29, 32, 33; Building Work Contractors Act 1995 (SA) s 30; Building and Construction Industry Security of Payment Regulations 2011 (SA) r 6; Legal Practitioners Act 1981 (SA); Building and Construction Industry (Security of Payment) Act 2009 (ACT); Building and Construction Industry Payments Act 2004 (Qld); Building and Construction Industry Security of Payment Act 1999 (NSW); Building and Construction Industry Security of Payment Act 2002 (Vic); Building and Construction Industry Security of Payment Act 2009 (Tas); Construction Contracts (Security of Payments) Act 2004 (NT); Construction Contracts Act 2002 (NZ); Construction Contracts Act 2004 (WA), referred to.
Chase Oyster Bar Pty Ltd v Hamo Industries Pty Ltd [2010] NSWCA 190; (2010) 78 NSWLR 393; Clarence Street Pty Ltd v Isis Projects Pty Ltd [2005] NSWCA 391; (2005) 64 NSWLR 448; Isis Projects v Clarence Street [2004] NSWSC 714; Leighton Contractors Pty Ltd v Campbelltown Catholic Club Limited [2003] NSWSC 1103, applied.
Brodyn Pty Ltd v Davenport [2004] NSWCA 394; (2004) 61 NSWLR 421; Coordinated Construction Co Pty Ltd v Climatech (Canberra) Pty Ltd [2005] NSWCA 229; (2005) 21 BCL 364; Coordinated Construction Co Pty Ltd v JM Hargreaves (NSW) Pty Ltd [2005] NSWCA 228; (2005) 63 NSWLR 385; Gantley Pty Ltd v Phoenix International Group Pty Ltd [2010] VSC 106; Jemzone Pty Ltd v Trytan Pty Ltd [2002] NSWSC 395; (2002) 42 ACSR 42; Musico v Davenport [2003] NSWSC 977; Neumann Contractors Pty Ltd v Peet Beachton Syndicate Limited [2009] QSC 376; [2011] 1 Qd R 17; Protectavale Pty Ltd v K2K Pty Ltd [2008] FCA 1248, discussed.
Brodyn Pty Ltd v Davenport [2003] NSWSC 1019; Discain Project Services Limited v Opecprime Development Limited [2000] BLR 402; Ebner v Official Trustee in Bankruptcy [2000] HCA 63; (2000) 205 CLR 337; Grocon Constructors Pty Ltd v Planit Cocciardi Joint Venture (No 2) [2009] VSC 426; (2009) 26 VR 172; Hawkins Construction (Australia) Pty Ltd v Mac’s Industrial Pipework Pty Ltd [2002] NSWCA 136; Hervey Bay (JV) Pty Ltd v Civil Mining and Construction Pty Ltd [2008] QSC 58; (2010) 26 BCL 130; Holme v Guppy (1838) 150 ER 1195; 3 M&W 387; John Holland Pty Ltd v Cardno MBK (NSW) Pty Ltd [2004] NSWSC 258; Lamprell v Billericay Union (1849) 154 ER 850; 3 Exch 283; Multiplex Constructions Pty Ltd v Luikens [2003] NSWSC 1140; Parkview Constructions Pty Ltd v Sydney Civil Excavations Pty Ltd [2009] NSWSC 61; Peak Construction (Liverpool) Ltd v McKinney Foundation Ltd (1970) 1 BLR 114; Peninsula Balmain Pty Ltd v Abigroup Contractors Pty Ltd [2002] NSWCA 211; (2002) 18 BCL 322; Quasar Constructions v Demtech Pty Ltd [2004] NSWSC 116; (2004) 20 BCL 276; Re Sanders Constructions Pty Ltd v Eric Newham (Wallerawang) Pty Ltd [1969] Qd R 29; Reiby Street v Winterton [2005] NSWSC 545; (2006) 22 BCL 426; Roberts v The Bury Improvement Commissioners (1870) LR 5 CP 310; Russell v Da Bandeira 143 ER 59; (1862) 13 CB (NS) 149; SMK Cabinets v Hili Modern Electrics Pty Ltd Ltd [1984] VR 391; Turner Corporation (in provisional liquidation) v Co-ordinated Industries Pty Ltd (1997) 13 BCL 378; Turner Corporation Ltd (Receiver and Manager Appointed) v Austotel Pty Ltd (1997) 13 BCL 378; Westwood v Secretary of State for India (1863) 7 LT (NS) 736, considered.
BUILT ENVIRONS PTY LTD v TALI ENGINEERING PTY LTD & ORS
[2013] SASC 84Civil
BLUE J. The plaintiff, Built Environs Pty Ltd (“Built Environs”), entered into a subcontract with the first defendant, Tali Engineering Pty Ltd (“Tali”).
Tali applied to the second defendant, Nominator Pty Ltd (“Nominator”), to appoint an adjudicator to adjudicate a progress payment claim rejected by Built Environs. Nominator appointed the third defendant, Mr Allan, to adjudicate the claim under the Building and Construction Industry Security of Payment Act 2009 (SA) (“the Act”). Mr Allan determined that $579,420.90[1] was due by Built Environs to Tali by way of progress payment.[2]
[1] All dollar figures quoted herein are exclusive of GST (except where otherwise shown). All dollar figures are subject to GST of 10 per cent.
[2] He also determined that the nominating authority’s fee of $1,320 (including GST) and his adjudicator’s fee of $8,448 (including GST) was payable by Built Environs, together with interest at $130 per day since 6 March 2013.
Built Environs brings judicial review proceedings against Tali, Nominator and Mr Allan seeking a declaration that Mr Allan’s determination is a nullity and an order setting it aside.
Built Environs relies on six grounds for judicial review.
1.Tali’s payment claim did not comply with section 13(2) of the Act and this deprived Mr Allan of jurisdiction to undertake an adjudication.
2.Mr Allan exceeded his jurisdiction by:
(a) entertaining a claim for unliquidated damages;
(b) assuming the jurisdiction of the Subcontract Superintendent to grant an extension of time to Tali to achieve substantial completion;
(c) entertaining claims not made in Tali’s payment claim.
3.There was a denial of natural justice because Mr Allan did not invite further submissions or evidence from the parties.
4.There was a denial of natural justice due to a reasonable apprehension of bias of Nominator and/or Mr Allan.
5.Mr Allan made errors of law invalidating his determination.
6.Mr Allan did not act in good faith because he did not attempt in good faith to consider the submissions put by the parties or call for further submissions and identify, understand and determine the issues in accordance with the Act and the contract.
Background facts
The parties and personnel
Built Environs is a building contactor. It is the head contractor for the construction of the Woolworths Walkerville Shopping Centre.
Tali is a structural steel manufacturer and erector. It is the structural steel subcontractor for the Woolworths Walkerville Shopping Centre. In February 2013 it engaged Edward Sain & Associates (“ESA”) to advise and assist it concerning contractual issues with Built Environs on the Woolworths Walkerville project.
Nominator is an authorised nominating authority under section 29 of the Act. Its sole director and shareholder is Mr Busolin (a former project manager at Built Environs between 2002 and 2004). Nominator’s manager is Mr Sain. Its registered office is the address of accountants Rugari & Associates. Mr Rugari was Nominator’s acting manager for a specific purpose explained below.
Mr Sain is also the chief executive officer of ESA. ESA is a construction contract consultant, project manager and engineer. It undertakes, inter alia, consultancy, programming, estimation and cost reviews for contractors. It offers services in connection with payment claims under the Act, including preparation of payment claims, payment schedules, applications and submissions for adjudication and provision of support and assistance throughout the adjudication process. ESA’s website has a link to Nominator’s website. ESA conducts adjudication training courses on behalf of Nominator. ESA trained, on behalf of Nominator, both Mr Allan and Mr Rugari as adjudicators.
Mr Allan has the qualifications required under section 18 of the Act to act as an adjudicator. He was employed as project manager and engineering division manager by Built Environs between 1991 and 2005. Nominator and Mr Allan did not take an active role in the action, but rather agreed to abide the event.
The Woolworths Walkerville project
Built Environs entered into a contract with the owner or developer for the construction of a shopping centre on the corner of Walkerville Terrace and Victoria Terrace, Walkerville (“the Main Contract”). The shopping centre comprises a Woolworths Supermarket, a mall and specialty retail stores, and canopy roof.
In early June 2012, Tali tendered to Built Environs to supply and erect the structural steelwork for the shopping centre.
On 12 June 2012, Built Environs issued a construction program (“the Construction Program”). It provided for a construction start on 5 June 2012 and finish on 21 March 2013. It provided for the finish of Separable Portion 1 (supermarket shell, etc) by 25 January 2013, Separable Portion 2 (specialty retail shells, etc) by 7 February 2013, Woolworths fit out by 20 March 2013 and Separable Portion 3 by 21 March 2013.
On 12 June 2012, Built Environs sent by email to Tali the Construction Program together with a proposed subcontract. Tali confirmed that it could meet the program. In July 2012, Tali prepared shop drawings.
The Subcontract
On 14 September 2012, Built Environs and Tali executed a formal instrument of agreement for Tali to supply and erect the structural steelwork (“the Subcontract”). The Subcontract provided for a Subcontract Sum of $1,235,000. It appointed a Subcontract Superintendent, Mr Reinboth, and a Subcontract Superintendent’s Representative, Ms Dover, with delegated authority to undertake subcontract administration superintendent functions.
The Subcontract required substantial and practical completion for:
1.Separable Portion 1 by 13 October 2012 and 25 January 2013 respectively;
2.Separable Portion 2 by 29 November 2012 and 7 February 2013 respectively; and
3.Separable Portion 3 by 29 January 2013 and 21 March 2013 respectively.
The Subcontract defined the three Separable Portions as follows:
1.Separable Portion 1: structural steel erection complete to the Woolworths retail shell inclusive of all purlins, secondary steel, back of house mezzanine and plant platforms;
2.Separable Portion 2: structural steel erection complete to the mall and speciality retail stores, inclusive of all purlins, secondary steel and plant platforms;
3.Separable Portion 3: structural steel erection complete to Walkerville Terrace canopy structure.
Substantial completion was defined essentially to mean completion of the Subcontract works except for minor defects not preventing their being reasonably capable of use for their stated purpose which Tali had reasonable grounds for not promptly rectifying and the rectification of which would not prejudice their convenient use.[3] Tali was required to give to the Subcontract Superintendent written notice at least 14 days before anticipated substantial completion and of actual substantial completion. The Subcontract Superintendent was entitled to issue a certificate of substantial completion without a request being made or even though substantial completion had not been achieved.[4]
[3] Clause 1. The definition also required tests to be passed and documents or information to be supplied but it was not argued by either party that these were material to the achievement of substantial completion in the present case.
[4] Clause 34.6.
The Subcontract contained as an annexure the Construction Program. The Subcontract required compliance by Tali with the Construction Program and with any co‑ordination program issued by the Subcontract Superintendent.[5]
[5] Clause 32 and appendix 5.
The Subcontract provided for progress claims on a monthly basis for work done to the 25th day of each month except (relevantly) December which was 14 December.[6] Such claims were to be made progressively based on the ratio of value of completed work to the Subcontract Sum ($1,235,000). Amounts previously certified/paid were to be subtracted. Monies due by Tali to Built Environs (by way of set‑off or otherwise) were also to be deducted. Progress claims were to be submitted in the form of Appendix 7, which required work to be broken down into items, showing for each item the work completed to date (by value and percentage) and deduction of amounts previously paid. Variations were to be shown in a separate table with similar details.
[6] Clauses 37.1 and 37.2 and annexure item 31.
The Subcontract provided for liquidated damages of $10,000 for every day after the date for substantial completion for each Separable Portion.[7] The Subcontract Superintendent was to certify liquidated damages and they were recoverable as a debt. The Subcontract Superintendent was entitled to issue with a progress certificate a provisional assessment of the amount then provisionally due by way of liquidated damages. Built Environs was entitled to deduct that amount from the amount otherwise certified in the progress certificate as due to Tali.
[7] Clause 34.7 and annexure item 27(a).
The Subcontract also provided for liquidated damages of $10,000 for the first five days and $5,000 for each day thereafter by which substantial completion under the Main Contract was delayed for each of Separable Portions 1, 2 and 3 due to Tali not achieving substantial completion.[8] The Subcontract Superintendent was entitled to issue with a progress certificate a provisional assessment of the amount reasonably asserted to be Built Environs’ potential liquidated damages exposure under the Main Contract due to Tali not achieving substantial completion by the due date for each separable portion. Built Environs was entitled to deduct that amount from the amount otherwise certified in the progress certificate as due to Tali.
[8] Clauses 34.7A and annexure item 27(b).
The Subcontract provided for the grant of extensions of time by the Subcontract Superintendent.[9] Tali was entitled to an extension of time if:
1.Tali was delayed in reaching practical completion by a qualifying cause of delay;
2.Tali had given to the Subcontract Superintendent a written claim for an extension of time giving details of the facts within three days of when Tali should reasonably have become aware of that causation occurring; and
3.Tali satisfied the Subcontract Superintendent that the activities affected and critical to Tali’s activities on the Construction Program were apparent from an assessment of the critical path of the current revision of the Construction Program when the delay first arose and of certain other matters.
[9] Clauses 34.3 to 34.5A.
The Subcontract Superintendent was entitled to direct an extension of time although Tali had not claimed or was not entitled to an extension. The Subcontractor Superintendent had no obligation to grant, or consider whether to grant, an extension if Tali was not entitled to an extension.[10]
[10] Clauses 34.5 and 34.5A.
The Subcontract gave to the Subcontract Superintendent various powers and responsibilities. Clause 20 required Built Environs to ensure that the Subcontract Superintendent fulfilled all aspects of the role and functions reasonably and in good faith.
Clause 42 addressed dispute resolution. It provided mechanisms for notices of dispute, a conference between the parties and ultimately determination by arbitration.
Set out in the Appendix to these reasons are extracts from the Subcontract containing clauses 20, 34 and 37 addressing the Subcontract Superintendent’s role, substantial completion, extensions of time, liquidated damages and progress claims.
Progress of the works
On 24 July and 23 August 2012, Tali submitted to Built Environs Progress Claims 1 and 2 which cumulatively claimed $31,500, being 90% of drafting with a contract value of $35,000. The Subcontract Superintendent certified the value of $31,500. Built Environs paid Tali accordingly.
On 29 September 2012, Built Environs issued to Tali a Notice of Delay. The Notice asserted that Built Environs had not received an erection procedure requested since 11 September, that welding and setting out had commenced five days late and that delivery and erection of structural steel had been due to commence on 26 September but had not yet commenced.
Tali did not achieve substantial completion of Separable Portion 1 on 13 October 2012.
On 24 October 2012, Tali submitted to Built Environs Progress Claim 4 claiming value of works completed to date of $398,500. The Subcontract Superintendent certified the value of work completed to date at $396,500 (reducing the drafting component from $35,000 to $33,000), deducted the previous certification of $31,500 and certified a payment of $365,000 (less 10% retention). Built Environs paid Tali accordingly.
On 10 November 2012, Built Environs issued to Tali a further Notice of Delay. The Notice asserted that structural steel erection for Separable Portion 1 had been programmed to take 20 working days and had already taken 38 working days and was not complete. It asserted that the site had been ready for commencement of structural steel erection for Separable Portion 2 on dates ranging from 19 September to 2 November 2012, but erection was yet to commence.
Tali did not achieve substantial completion of Separable Portion 2 by 29 November 2012.
On 22 November 2012, Tali submitted to Built Environs Progress Claim 5, claiming value of works completed to date of $995,000. On 18 December 2012, the Subcontract Superintendent issued a payment schedule certifying the value of the works at $396,500 (being the same amount previously certified for Claim 4). The payment schedule showed a set-off of liquidated damages for delay in achieving substantial completion of $640,000 under the Subcontract and $190,000 under the Main Contract. These amounts set-off exceeded the amount of Progress Claim 5 less amounts previously certified. It is evident from the payment schedule and the dates for substantial completion shown in the Subcontract that Built Environs was accepting that substantial completion had been achieved for Separable Portion 1 on 24 November 2012, being 42 days after it was due on 13 October 2012. No evidence was adduced before the Adjudicator or in this Court of any dispute by Tali with the set off.
On 12 December 2012, Built Environs sent to Tali a further Notice of Delay. It asserted that structural steel for Separable Portion 1 had not been finished until 24 November 2012, with a number of miscellaneous items not yet completed. It asserted that various areas for the erection of structural steel in Separable Portion 2 had commenced a month after the site had been available for erection. It said that Built Environs did not believe that the erection would be complete until 21 December. No response by Tali to the three delay notices from Built Environs was provided to the Adjudicator although responses were tendered in evidence before me.
On 17 December 2012, Tali submitted to Built Environs Progress Claim 6. Tali claimed value of work completed to date of $1,111,500. It also claimed for Variation 2 ($2,373.75) and Variation 3 ($1,005.70). Tali claimed that it had completed 100% of drafting ($35,000), 90% of materials, fabrication, etc ($738,000), 90% of purlins/girts ($72,000) and 89% of transport and erection ($266,500).
On 16 January 2013, the Subcontract Superintendent issued a payment schedule in respect of Progress Claim 6. It certified the value of work completed to date at $396,500 (the same as for Claims 4 and 5 certifications). This was due to a set-off of liquidated damages under the Subcontract of $640,000 and under the Main Contract of $190,000. It also rejected the claims for the two variations because they were out of time and, in any event, were not variations.
Shortly before 25 January 2013, an agreement was reached that Built Environs would pay $300,000 to Tali. On 25 January 2013, Tali rendered to Built Environs Progress Claims 7 and 8 totalling $300,000. On 29 and 30 January 2013, Built Environs paid those amounts (less retentions). I infer that payment schedules were issued by the Subcontract Superintendent certifying total value of work completed to date at $696,500, being a $300,000 increase from the amount previously certified at $396,500.
Progress claim 9
On 25 January 2013, Tali submitted to Built Environs Progress Claim 9. It claimed that it had now completed work to the value of $1,201,500.[11] Tali claimed that it had completed 100 per cent of drafting ($35,000), 100 per cent of materials, fabrication, etc ($820,000), 100 per cent of purlins/girts ($80,000) and 90 per cent of transport and erection ($266,500 out of $300,000).[12]
[11] This was the total shown on the four component figures. However, when transposing $1,201,500 from the subsidiary schedule to the main page, Tali erroneously showed a total of $1,202,500.
[12] The figure of 90% was evidently rounded up from 88.83%.
Tali claimed that there had been 10 variations in respect of which it had partially or wholly completed the work. It claimed that the value of work undertaken to date in respect of those variations was $37,336.30 out of a total of $42,404.30.
Tali claimed the total value of work completed to date was $1,238,836.30.[13] Tali deducted amounts previously certified of $656,850.[14] Tali claimed a net amount of $581,986.30.[15]
[13] Due to the arithmetical error identified at Footnote 11, Tali erroneously showed this as $1,239,836.30.
[14] The amount previously certified was $696,500 but retentions had been deducted.
[15] Due to the arithmetical error identified at Footnote 11, Tali erroneously showed this as $582,986.30.
On 12 February 2013, Mr Sain sent an email to Mr Rugari. He said that he and Mr Rodella at ESA had been doing work for Tali, Tali may seek adjudication under the Act and he did not want an actual or perceived conflict of interest if Tali submitted an adjudication application to Nominator to appoint an adjudicator. Mr Sain asked Mr Rugari to deal with the matter on behalf of Nominator to the exclusion of Mr Rodella and himself to ensure no real or perceived conflict of interest. On 14 February 2013, Mr Rugari sent a reply email to Mr Sain agreeing.
On 15 February 2013, Mr Reinboth (the Subcontract Superintendent) sent by email to Tali a payment schedule in response to Progress Claim 9 (“the Payment Schedule”). The Payment Schedule rejected the claim for variation 2 ($2,260.94) and variation 3 ($958.10) because they were out of time and in any event were not variations. The Payment Schedule set-off liquidated damages of $420,000 for Separable Portion 1, $500,000 for Separable Portion 2 and head contract liquidated damages of $90,000 for Separable Portion 1.
It is evident from the Payment Schedule and the dates for substantial completion shown in the Subcontract that Built Environs was accepting that substantial completion had been achieved for Separable Portion 1 on 24 November 2012, being 42 days after it was due on 13 October 2012, and for Separable Portion 2 on 18 January 2013, being 50 days after it was due on 29 November 2012.
Adjudication application
On 22 February 2013, Tali served on Nominator and Built Environs an adjudication application in respect of Progress Claim 9 (“the Adjudication Application”). Tali thereby applied to Nominator to appoint an adjudicator under the Act. Tali attached a submission dated 21 February 2013 together with the Subcontract, the Construction Program, three co-ordination programs, three delay notices, two drawings marked up by Tali to show items of Subcontract work which it claimed were part of Separable Portions 1 and 2 and a bundle of photographs.
On 25 February 2013, Mr Rugari on behalf of Nominator nominated Mr Allan as the adjudicator. On 26 February 2013, Mr Allan served on Nominator, Tali and Built Environs notice of acceptance of appointment as adjudicator.
On 1 March 2013, Built Environs served on Mr Allan its adjudication response (“the Adjudication Response”).
On 15 March 2013, Mr Allan served on Tali and Built Environs his adjudication determination (“the Adjudication Determination” or “the Determination”). He determined that Built Environs was not entitled to liquidated damages and that Tali was not entitled to variation 2 ($2,260.94)[16] but was entitled to variation 3 ($958.10). He therefore determined that the value of the progress payment to which Tali was entitled was $579,420.90.
[16] He erroneously deducted $2,565.40 (variation 12) instead of $2,260.94 (variation 2) but neither party refers to or takes issue with that error in the proceedings.
The parties have now invoked the provisions of clause 42 of the Subcontract dealing with dispute resolution. It is likely that their ultimate rights and liabilities will be determined by arbitration.
The statutory regime
The Act came into force on 10 December 2011. The Act is in large part identical to the Building and Construction Industry Security of Payment Act 1999 (NSW) (“the NSW Act”). Victoria, Queensland, Tasmania and the Australian Capital Territory have also enacted legislation based on the NSW Act but with greater variations from the model.[17] New Zealand, Western Australia and the Northern Territory have also legislated for progress payments as part of legislation covering a broader field.[18]
[17] Building and Construction Industry Security of Payment Act 2002 (Vic); Building and Construction Industry Payments Act2004 (Qld); Building and Construction Industry Security of Payment Act2009 (Tas) and Building and Construction Industry (Security of Payment) Act 2009 (ACT).
[18] Construction Contracts Act 2002 (NZ); Construction Contracts Act 2004 (WA); Construction Contracts (Security of Payments) Act 2004 (NT).
Essentially, the Act:
1. gives to a construction contractor (including a subcontractor, sub‑subcontractor, etc) a statutory entitlement to progress payments where there is no contractual right;[19]
2.gives to a construction contractor a statutory entitlement to progress payments in essentially the same terms as and in parallel to a contractual right to a progress payment;[20]
3.creates a statutory procedure for payment claims and responsive payment schedules in respect of progress claims (whether purely statutory or statutory/contractual);[21]
4.provides for the adjudication of disputes in relation to payment claims by qualified adjudicators appointed by authorised nominating authorities;[22]
5.enables recovery in a court of competent jurisdiction by way of debt of the unpaid portion of a payment claim in response to which no payment schedule is served within time or which has been acknowledged by a payment schedule or pursuant to an adjudication;[23]
6.precludes parties contracting to modify rights and obligations created by the Act;[24]
7.does not otherwise take away or affect parties’ contractual rights under a construction contract.[25]
[19] Building and Construction Industry Security of Payment Act 2009 (SA) ss 8, 9(b), 10(1)(b) and (2)(b), 11(1)(b) and (2)(a).
[20] Building and Construction Industry Security of Payment Act 2009 (SA) ss 8, 9(a), 10(1)(a) and (2)(a), 11(1)(a) and (2) and 12.
[21] Building and Construction Industry Security of Payment Act 2009 (SA) ss 13 and 14.
[22] Building and Construction Industry Security of Payment Act 2009 (SA) ss 17-23, 26 and 27.
[23] Building and Construction Industry Security of Payment Act 2009 (SA) ss 15, 16, 24 and 25.
[24] Building and Construction Industry Security of Payment Act 2009 (SA) ss 12 and 33.
[25] Building and Construction Industry Security of Payment Act 2009 (SA) ss 3(4) and 32.
Rights to progress payments
Part 2 of the Act is entitled “Rights to progress payments”. The material provisions of Part 2 are as follows.
8—Rights to progress payments
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.
9—Amount of progress payment
The amount of a progress payment to which a person is entitled in respect of a construction contract is to be—
(a) the amount calculated in accordance with the terms of the contract; or
(b) if the contract makes no express provision with respect to the matter—the amount calculated on the basis of the value of construction work carried out or undertaken to be carried out by the person (or of related goods and services supplied or undertaken to be supplied by the person) under the contract.
10—Valuation of construction work and related goods and services
(1) Construction work carried out under a construction contract is to be valued—
(a) in accordance with the terms of the contract; or
(b)if the contract makes no express provision with respect to the matter, having regard to—
(i) the contract price for the work; and
(ii) any other rates or prices set out in the contract; and
(iii)any variation agreed to by the parties to the contract by which the contract price, or any other rate or price set out in the contract, is to be adjusted by a specific amount; and
(iv)if any of the work is defective, the estimated cost of rectifying the defect.
...
11—Due date for payment
(1) A progress payment under a construction contract becomes due and payable—
(a)on the date on which the payment becomes due and payable in accordance with the terms of the contract; or
(b)if the contract makes no express provision with respect to the matter—on the date occurring 15 business days after a payment claim is made under Part 3 in relation to the payment.
...
Payment claims and payment schedules
Part 3 of the Act is entitled “Procedure for recovering progress payments”. Division 1 is entitled “Payment claims and payment schedules”. The material provisions of Division 1 are as follows:
13—Payment claims
(1) A person referred to in section 8 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 contract concerned, is or may be liable to make the payment.
(2) A payment claim—
(a)must identify the construction work (or related goods and services) to which the progress payment relates; and
(b)must indicate the amount of the progress payment that the claimant claims to be due (the claimed amount); and
(c) must state that it is made under this Act.
...
14—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).
(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 15 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.
Adjudication of disputes
Division 2 of Part 3 of the Act is entitled “Adjudication of disputes”. The material provisions of Division 2 are as follows:
17—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 a 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 a 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 20 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 5 business days after receiving the claimant's notice.
(3) An adjudication application—
(a) must be in writing; and
(b)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 15 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 20 business days after the due date for payment; and
(e)in the case of an application under subsection (1)(b)—must be made within 15 business days after the end of the 5 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 such application fee (if any) as may be determined by the authorised nominating authority; and
(h)may contain such submissions relevant to the application that the claimant chooses to include.
...
(5) A copy of an adjudication application must be served on the respondent concerned.
(6) It is the duty of an authorised nominating authority to which an adjudication application is made to refer the application to an adjudicator (being a person who is eligible to be an adjudicator as referred to in section 18) as soon as practicable.
...
19—Appointment of adjudicator
(1) If an authorised nominating authority refers an adjudication application to an adjudicator, the adjudicator may accept the adjudication application by causing notice of acceptance to be served on the claimant and the respondent.
(2) On accepting an adjudication application, the adjudicator is taken to have been appointed to determine the application.
20—Adjudication responses
(1) Subject to subsection (3), 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)may contain any submissions relevant to the response that the respondent chooses to include.
(3) 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 14(4) or 17(2)(b).
(4) The respondent cannot include in the adjudication response reasons for withholding payment unless those reasons have already been included in the payment schedule provided to the claimant.
(5) A copy of the adjudication response must be served on the claimant.
21—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 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.
(3) Subject to subsections (1) and (2), an adjudicator is to determine an adjudication application as expeditiously as possible and, in any case—
(a) within 10 business days after—
(i)the date on which an adjudication response is lodged with the adjudicator; or
(ii)if an adjudication response is not lodged with the adjudicator on or before the last date on which the response may be lodged with the adjudicator under section 20(1)—that date; or
(iii)if the respondent is not entitled under section 20 to lodge an adjudication response—the date on which the respondent receives a copy of the adjudication application; or
(b)within any further time that the claimant and the respondent may agree.
(4) For the purposes of 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.
(5) If any such conference is called, it is to be conducted informally and the parties are not entitled to legal representation.
(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 time or to comply with the adjudicator's call for a conference of the parties.
22—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 any such amount became or becomes payable; and
(c) the rate of interest payable on any such amount.
(2) In determining an adjudication application, the adjudicator is to consider the following matters only:
(a) the provisions of this Act;
(b)the provisions of the construction contract from which the application arose;
(c)the payment claim to which the application relates, together with all submissions (including relevant documentation) that have been duly made by the claimant in support of the claim;
(d)the payment schedule (if any) to which the application relates, together with all submissions (including relevant documentation) that have been duly made by the respondent in support of the schedule;
(e)the results of any inspection carried out by the adjudicator of any matter to which the claim relates.
(3) The adjudicator's determination must—
(a) be in writing; and
(b)include the reasons for the determination (unless the claimant and respondent have both requested the adjudicator not to include those reasons in the determination).
...
The nature of progress payments
The object of the Act is to ensure that a contractor who undertakes to carry out construction work under a construction contract is entitled to receive and is able to recover progress payments.[26]
[26] Building and Construction Industry Security of Payment Act 2009 (SA) s 3(1).
It is common, but not universal, for construction contracts to provide for progress payments. It is common for such contracts to provide a mechanism for the contractor to lodge progress claims and for the principal or superintendent to certify the amount payable by way of progress payments. The Act proceeds on this assumption because it provides that the amount, valuation and due date for payment of a progress claim are to be governed by the contract where the contract addresses such matters.
At common law, a progress payment is regarded simply as a payment by the principal to the contractor on account of the final contract price.[27] A progress payment does not determine the ultimate rights of the parties, nor does it represent the final determination of the amount payable for work completed to date. The parties are at liberty to make contentions concerning the final contract price independently of progress claims and progress payments. The Act treats progress payments under the Act in the same way, ie they are merely payments on account of the final contract price.[28]
[27] Lamprell v the Guardians of the Poor of the Billericay Union (1849) 154 ER 850; 3 Exch 283 at 305 per Rolfe B; Re Sanders Constructions Pty Ltd v Eric Newham (Wallerawang) Pty Ltd [1969] Qd R 29 at 39 per Hoare J (Stable J agreeing).
[28] Building and Construction Industry Security of Payment Act 2009 (SA) ss 3 and 32 and definition of “progress payment” in s 4. See Brodyn Pty Ltd v Davenport [2003] NSWSC 1019 at [18] per Einstein J; Brodyn Pty Ltd v Davenport [2004] NSWCA 394; (2004) 61 NSWLR 421 at [51] per Hodgson JA (Mason P and Giles JA agreeing).
The paradigm type of dispute concerning progress claims is a dispute about the value of the work performed to date by the contractor out of the total work to be performed under the contract. This can involve a dispute about the quantum and/or value of goods and services acquired/supplied by the contractor. It can involve a dispute about the percentage completed to date in respect of defined components of the works. It can involve a dispute about a variation. These types of disputes are the province of quantity surveyors, architects, building surveyors, project managers, building supervisors and suchlike.
The value of building work completed to date may also be affected by defective work. The assessment whether work is defective in the sense that it affects the value of the work completed to date is the province of architects, engineers, building surveyors, project managers, building supervisors and suchlike.
The structure of the Act assumes that disputes concerning payment claims to be adjudicated under the Act will predominantly be of the above nature. This is reflected in the relatively short timing for payment schedules in response to payment claims under section 14, adjudication responses in response to adjudication applications under section 20 and adjudication determinations under section 21. It is reflected in the adjudicator being confined to having regard only to the contract, the payment claim and submissions in support of it, the payment schedule and submissions in support of it and the results of any inspection carried out by the adjudicator[29] under section 22(2). It is reflected in section 18(1)(b) requiring regulations to prescribe qualifications, expertise and experience for a person to be an adjudicator. The Building and Construction Industry Security of Payment Regulations 2011 (SA) (“the Regulations”) prescribe eligibility criteria encompassing architects, engineers, building surveyors, project managers, quantity surveyors and building supervisors.[30]
[29] Together with the provisions of the Act.
[30] Building and Construction Industry Security of Payment Regulations 2011 (SA) r 6. The Regulations also provide for qualifications in building, construction, law and arbitration, but legal qualifications are not required as eligibility criteria. While the Regulations cannot be used to construe the Act, the types of qualifications in fact prescribed by the Regulations are the type which the legislature can be expected to have anticipated in enacting section 18 of the Act.
The above is not to say that diverse other issues of law or fact might not be thrown up by a progress claim and its response and may not be determined by the adjudicator. However, the paradigm types of disputes over progress claims contemplated by the Act provide some guidance to construing the requirements of the Act.
Ground 1: Jurisdiction by reference to valid payment claim
Built Environs’ first ground for review is that an adjudicator’s jurisdiction under the Act is conditional upon the claimant having served a valid payment claim under section 13 of the Act and that Progress Claim 9 was not a valid payment claim under section 13 of the Act.
Condition of jurisdiction
Section 17(1)(a) of the Act provides:
(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 a part of the scheduled amount to the claimant by the due date for payment of the amount. …
Section 13(1) and (2) of the Act provides:
(1)A person referred to in section 8 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 contract concerned, is or may be liable to make the payment.
(2) A payment claim—
(a) must identify the construction work (or related goods and services) to which the progress payment relates; and
(b) must indicate the amount of the progress payment that the claimant claims to be due (the claimed amount); and
(c) must state that it is made under this Act.
It is common ground that it is a precondition to the jurisdiction of an adjudicator that a payment claim complying with section 13(2) has been served by the applicant upon the respondent. However, Tali claims, and Built Environs denies, that the adjudicator is given jurisdiction to determine that question and the adjudicator’s determination that a claim is a complying claim under section 13 of the Act is (absent the usual vitiating factors) final and conclusive.
I reject Tali’s contention. For the reasons set out below, the adjudicator only has jurisdiction if the payment claim objectively complies with section 13. It is not sufficient merely that the adjudicator forms an opinion that the payment claim complies with section 13.
Section 21 specifies adjudication procedures and section 22 specifies what the adjudicator is to determine and how the adjudicator is to make that determination. Section 22(1) is confined to empowering the adjudicator to determine the amount of the progress payment, the date on which it is payable and the rate of interest payable thereon. There is nothing in sections 21 or 22, or the Act more generally, which confers jurisdiction on the adjudicator to conclusively determine whether or not there has been a valid adjudication application under section 17 or a valid payment claim under section 13. Questions whether there has been a valid adjudication application or a valid payment claim are likely to give rise to legal issues involving the construction of those sections of the Act and/or the relevant construction contract. The adjudicator is not required to have any legal expertise and there is no reason to consider that the legislature intended to confer jurisdiction on the adjudicator to conclusively determine such issues.
Tali concedes that the adjudicator does not have jurisdiction to determine whether the requirements of section 17 have been met. Tali contends that the making of a valid adjudication application marks the beginning of the appointment process for the adjudicator, whereas section 13 predates and may not involve any such appointment and should be treated differently. However, section 17(1) itself makes it a precondition of an application for adjudication that there be a “payment claim” and that phrase refers back to section 13. In addition, there is no reason of principle or policy why the adjudicator should not have jurisdiction to determine whether the requirements of section 17 have been met but should have jurisdiction to determine whether the requirements of section 13 have been met. Compliance with each of sections 13 and 17 are essential preliminaries to the adjudicator’s decision‑making process and neither section 13 nor section 17 is addressed to the adjudicator.[31]
[31] Compare Chase Oyster Bar Pty Ltd v Hamo Industries Pty Ltd [2010] NSWCA 190; (2010) 78 NSWLR 393 at [36] and [43] per Spigelman CJ (Basten JA relevantly agreeing).
The approach of the New South Wales Court of Appeal to the availability of judicial review in relation to determinations under the NSW Act and to the question of what constitutes jurisdictional facts and who determines them has changed over time.
In 2003, in Musico v Davenport,[32] McDougall J at first instance held that judicial review was available in respect of adjudicators’ adjudications under the NSW Act. He held that judicial review was available in respect of jurisdictional error, which included consideration whether the adjudicator had power to make the determination.[33]
[32] [2003] NSWSC 977.
[33] Ibid at [42]-[54].
In 2004, in Brodyn Pty Ltd v Davenport,[34] the Court of Appeal took a more limited view. Hodgson JA (Mason P and Giles JA agreeing) said:
[34] (2004) 61 NSWLR 421.
However, it is plain in my opinion that for a document purporting to be an adjudicator's determination to have the strong legal effect provided by the Act, it must satisfy whatever are the conditions laid down by the Act as essential for there to be such a determination. If it does not, the purported determination will not in truth be an adjudicator's determination within the meaning of the Act: it will be void and not merely voidable. A court of competent jurisdiction could in those circumstances grant relief by way of declaration or injunction, without the need to quash the determination by means of an order the nature of certiorari.
What then are the conditions laid down for the existence of an adjudicator's determination? The basic and essential requirements appear to include the following:
1.The existence of a construction contract between the claimant and the respondent, to which the Act applies (s 7 and s 8).
2. The service by the claimant on the respondent of a payment claim (s 13).
3.The making of an adjudication application by the claimant to an authorised nominating authority (s 17).
4.The reference of the application to an eligible adjudicator, who accepts the application (s 18 and s 19).
5.The determination by the adjudicator of this application (s 19(2) and s 21(5)), by determining the amount of the progress payment, the date on which it becomes or became due and the rate of interest payable (s 22(1)) and the issue of a determination in writing (s 22(3)(a)).
The relevant sections contain more detailed requirements: for example, s 13(2) as to the content of payment claims; s 17 as to the time when an adjudication application can be made and as to its contents; s 21 as to the time when an adjudication application may be determined; and s 22 as to the matters to be considered by the adjudicator and the provision of reasons. A question arises whether any non-compliance with any of these requirements has the effect that a purported determination is void, that is, is not in truth an adjudicator's determination. ...
In my opinion, the reasons given above for excluding judicial review on the basis of non-jurisdictional error of law justify the conclusion that the legislature did not intend that exact compliance with all the more detailed requirements was essential to the existence of a determination. What was intended to be essential was compliance with the basic requirements (and those set out above may not be exhaustive), a bona fide attempt by the adjudicator to exercise the relevant power relating to the subject matter of the legislation and reasonably capable of reference to this power, and no substantial denial of the measure of natural justice that the Act requires to be given. If the basic requirements are not complied with, or if a purported determination is not such a bona fide attempt, or if there is a substantial denial of this measure of natural justice, then in my opinion a purported determination will be void and not merely voidable, because there will then not, in my opinion, be satisfaction of requirements that the legislature has indicated as essential to the existence of a determination. If a question is raised before an adjudicator as to whether more detailed requirements have been exactly complied with, a failure to address that question could indicate that there was not a bona fide attempt to exercise the power; but if the question is addressed, then the determination will not be made void simply because of an erroneous decision that they were complied with or as to the consequences of non-compliance.[35]
(emphasis added, citations omitted)
[35] Ibid at [52]-[55].
In 2005, in Coordinated Construction Co Pty Ltd v Climatech (Canberra) Pty Ltd,[36] the contractor argued that the subcontractor had included in its payment claim a claim for damages (delay costs) which were not for construction work within the meaning of section 13(2). The Court of Appeal unanimously rejected that contention because costs under the terms of the contract were not simple unliquidated damages and were payments “for construction work”.[37] The question whether an error by the adjudicator in this respect would have comprised jurisdictional error did not therefore arise. Basten JA alone addressed that question. He said:
The next question is whether the existence of a valid payment claim, which complies with s 13(2) is an essential precondition to a valid determination. A related question is whether, even if there is a valid claim, a determination which appears to go beyond the parameters of the claim is itself a valid determination: see [24] and [26] above.
For reasons explained in Hargreaves at [72]-[77], it is not possible to construe s.13(2) as doing otherwise than imposing mandatory requirements with respect to the making of payment claims. However, it does not follow that the Court should set aside a determination in circumstances where, in its view, the claim does not satisfy those requirements, or the determination goes beyond the parameters of the claim, properly understood. Intervention on that basis will only be justified if the legislature has imposed an objective requirement, rather than one which the adjudicator has power to determine. It is well established that the mere fact that a requirement is objectively expressed, rather than by reference to the satisfaction of the officer or tribunal concerned, is not decisive of the construction issue. Indeed, in relation to inferior courts, it has been said that there is a strong presumption against any jurisdictional qualification being interpreted as contingent upon the actual existence of a state of facts, as opposed to the decision-maker’s opinion in that regard. A factor favouring that approach is “the inconvenience that may arise from classifying a factual reference in a statutory formulation as a jurisdictional fact.
In the present case, three factors militate in favour of treating elements identified in s 13(2) as properly dependent upon the satisfaction or opinion of the adjudicator. First, what is or may be a sufficient identification of matters for the purposes of a claim falls within the special experience which a qualified adjudicator is intended to bring to the task and is one which may well require evaluative judgment. Secondly, the requirement relates to a procedural step in the claim process, rather than some external criterion. Thirdly, the overall purpose of the Act, as reflected in its objects and procedures, is to provide a speedy and effective means of ensuring that progress payments are made during the course of the administration of a construction contract, without undue formality or resort to the law.
In my view the omission of reference to s 13(2) in the list of mandatory requirements identified in Brodyn, should be understood as giving effect to these principles.[38]
(citations omitted)
[36] [2005] NSWCA 229; (2005) 21 BCL 364.
[37] [2005] NSWCA 229 at [22] per Hodgson JA, [34] per Ipp JA and [52] per Basten JA.
[38] Ibid at [43]-[46].
In 2005, in Coordinated Construction Co Pty Ltd v JM Hargreaves (NSW) Pty Ltd,[39] Basten JA said:
The next step in the reasoning in Brodyn Pty Ltd was to say, (at 441 [55]), that all that was intended by the legislature was compliance with certain identified “basic requirements”, which may not have been exhaustively stated in that case … Each of these three elements could require further consideration.
First, although the statement of “basic requirements” is said not necessarily to be exhaustive, one of the factors which appears to have been excluded is compliance by the claimant with s 13(2) of the Act. According to that provision, a payment claim “must” do certain things. The basis for reading “must” as “must but need not” is not explained. It does not appear to accord with the approach adopted, albeit in relation to very different legislation, in SAAP. On the other hand, Brodyn Pty Ltd may be read as saying that satisfaction of this condition depends on the opinion of the adjudicator.
...
These considerations suggest that there may be room for debate ... whether Brodyn Pty Ltd “set the requirements for validity too low, particularly in relation to the application of s 22 of the Act”.[40]
(citations omitted)
[39] [2005] NSWCA 228; (2005) 63 NSWLR 385.
[40] Ibid at [72], [73] and [77].
In 2010, in Chase Oyster Bar Pty Ltd v Hamo Industries Pty Ltd,[41] the Court of Appeal reconsidered Brodyn and decided that it should not be followed in certain respects. The immediate question in that case was whether compliance with section 17(2)(a) was an essential condition for the jurisdiction of an adjudicator and whether that question was to be determined objectively by the court or according to the opinion in good faith of the adjudicator. The Court of Appeal unanimously held that it was an essential condition and was to be determined objectively by the court. Spigelman CJ said:
The issue to be determined is whether the adjudicator had jurisdiction to determine an “application” which had been made without compliance with the mandatory (in a negative sense) terminology of s 17(2). The issue is not, contrary to some of the submissions made, whether the adjudicator had jurisdiction to determine that s 17(2)(a) had been complied with. That section is not addressed to the adjudicator and is not a matter which he is directed to “determine” within s 22(1) of the Security of Payment Act. It may be that it is a matter which he must “consider” as one of the “provisions of the Act” within s 22(2)(a). However, that section confers no power to determine the issue.
...
With respect to the first aspect, it is particularly relevant that the element occurs at the application stage of the decision-making process. It does not involve consideration of matters which can arise during the course of the decision-making process itself. A traditional formulation of the relevant distinction is whether the relevant element is “a fact to be adjudicated upon in the course of the inquiry” as distinct from an “essential preliminary” to the decision-making process.
...
There are a number of cases in which the absence of an element required to be present in the application which initiates a decision-making process has been held to be jurisdictional.[42]
(citations omitted)
[41] (2010) 78 NSWLR 393.
[42] Ibid at [36], [43] and [45].
Basten JA expressly agreed with paragraphs of the reasons for judgment of Spigelman CJ which include paragraphs [36], [43] and [45] quoted above.[43] He added:
The power to determine compliance with the essential requirements of an adjudication application could lie with the authorised nominating authority (to whom the application is made), the adjudicator (to whom the application is referred) or the Court exercising its supervisory jurisdiction.
...
The second possibility is that power to determine the validity of an adjudication application lies with the adjudicator. In a practical sense, there is much to recommend the view that the adjudicator is able to determine whether the application complies with provisions such as s 17(2)(a), as the adjudicator sought to do in the present case. However, there are factors which support a contrary view. First, s 22(1), identifying that which the adjudicator is to determine, makes no reference to the validity of the adjudication application. Secondly, s 22(2) limits the matters which the adjudicator is entitled to consider to the Act, the provisions of the construction contract, the payment claim, the payment schedule, submissions in support of either and the results of any inspection. In a provision which renders the consideration of any other material impermissible, the absence of any reference to the circumstances in which the adjudication application was made is highly significant.
Thirdly, the descriptions of the matters to which payment claims and payment schedules must relate and hence (at least implicitly) the matters to which the submissions in support can properly refer, do not expressly identify any aspect of the circumstances in which the adjudication application was made.
For these reasons, the proper construction of the Security of Payment Act is that it does not permit the adjudicator to determine the validity of the adjudication application. The challenge in the present case must therefore be determined on the basis of facts found by the Court.[44]
[43] Ibid at [96].
[44] Ibid at [97], [99]-[101].
McDougall J said:
... I conclude that, in circumstances to which s 17(1)(b) of the Security of Payment Act applies, the requirement set out in s 17(2)(a) is a condition of the right to make an adjudication application, and satisfaction of that condition is an element of the jurisdiction of the adjudicator — the power of the adjudicator to determine the application in accordance with s 22(1). Put shortly, the giving of notice in time is a jurisdictional fact.
This approach is supported by the reasoning of Basten JA in Coordinated Construction Co Pty Ltd v Climatech (Canberra) Pty Ltd, dealing with s 13(2) of the Security of Payment Act. His Honour pointed out (at [44]) that “it is not possible to construe s 13(2) as doing otherwise than imposing mandatory requirements with respect to the making of payment claims”. However, his Honour (at [45]) said there were three reasons for treating satisfaction of s 13(2) “as properly dependent upon the satisfaction or opinion of the adjudicator”. Those reasons were:
(1) Evaluation of the issues might require the special experience or qualifications of adjudicators, and might involve a process of evaluation;
(2) Section 13(2) set out a procedural step in the claim process, rather than an external criterion of validity; and
(3) The construction was consistent with the overall objects of the Security of Payment Act, in relation to the speedy and effective resolution of disputes in relation to payment claims.
The factors that suggested to Basten JA that satisfaction of s 13(2) should depend on the opinion of the adjudicator do not apply to s 17(2)(a), for the reasons that I have given (at [220] above).
...
It could be said, of the Security of Payment Act, that it is a legislative scheme for quick resolution of the question of entitlement to a progress payment and the determination, in the absence of agreement, as to what should be paid. It could also be said that it is “a condition of the gift” of the right to make an adjudication application pursuant to s 17(1)(b), that the right be exercised in the manner specified by s 17(2)(a).[45]
(citations omitted)
[45] Ibid at [222]-[224], [228].
The reasoning of Spigelman JA (with which Basten JA expressly agreed) and of Basten JA himself in relation to section 17(2)(a) applies equally to section 13(2) of the Act. Like section 17(2)(a), section 13(2) is expressed in mandatory terms. Moreover, section 17(1) itself permits a claimant to apply for adjudication only of a “payment claim”. This must mean a claim which complies with section 13(2). The term “payment claim” is defined by section 4 to mean “a claim referred to in section 13”.
Further, section 14(4) provides that, if a claimant serves a payment claim on a respondent but the respondent does not provide a payment schedule within the requisite time, the respondent becomes liable to pay the claimed amount to the claimant. Section 15(2)(a)(i) entitles the claimant to recover the claimed amount from the respondent as a debt due in a court of competent jurisdiction. In those circumstances, it is clear that there is only a valid and recoverable debt if the payment claim complies with section 13(2).[46]
[46] Protectavale Pty Ltd v K2K Pty Ltd [2008] FCA 1248; Neumann Contractors Pty Ltd v Peet Beachton Syndicate Limited [2009] QSC 376; [2011] 1 Qd R 17.
The dicta expressed by Basten JA in the two Coordinated Construction Co Pty Ltd cases referred to at [70]-[71] above were in the context of the fundamental approach to jurisdiction laid down in Brodyn. Indeed, Basten JA himself raised doubts in Coordinated Construction Co Pty Ltd v JM Hargreaves (NSW) Pty Ltd as to the decision in Brodyn and suggested that it may require further consideration.[47] Those dicta are superseded by the fundamental change in the approach adopted in Chase Oyster Bar. Although McDougall J in Chase Oyster Bar referred to those dicta, he did not express a view as to whether compliance with section 13(2), objectively assessed, should now be regarded as an essential condition of the adjudicator’s jurisdiction. In any case, the reasons for judgment of Spigelman CJ and Basten JA are inconsistent with the adjudicator’s jurisdiction turning on the adjudicator’s own opinion as to compliance with section 13.
[47] (2005) 63 NSWLR 385 at [69]-[79].
The three factors which had been identified by Basten JA in the two Coordinated Construction Co Pty Ltd cases as militating in favour of treating the elements of section 13(2) as being dependent on the opinion of the adjudicator were the subject of a quite different approach by the Court of Appeal in Chase Oyster Bar. As to the second factor, namely the requirement relates to a procedural step in the claim process, paragraphs [45]-[48] of the reasons for judgment of Spigelman CJ (with which Basten JA expressly agreed) demonstrate that the question of compliance with essential procedural requirements does involve an essential prerequisite, to be objectively assessed, for the jurisdiction of the adjudicator. As to the third factor, the reasons for judgment of both Spigelman CJ and Basten JA in Chase Oyster Bar demonstrate that the purpose of the Act in providing speedy and effective means of ensuring the making of progress payments is not impinged by a requirement that the Act’s own prerequisites for making an adjudication determination, objectively assessed, must be met. As to the first factor, the question whether a payment claim identifies the construction work to which it relates is apt to raise legal issues which an adjudicator with practical expertise and experience is not necessarily equipped to decide.
I conclude that it is a question for this Court to determine whether Progress Claim 9 identified the construction work to which it related and the opinion of Mr Allan on that question does not determine his jurisdiction to make a valid adjudication.
Identification of construction work
Built Environs contends that Progress Claim 9 did not identify the construction work to which the progress payment related for two discrete reasons.
1.It contained arithmetical errors, inconsistencies and confusion such that it did not enable a reasonable contractor in the position of Built Environs to ascertain with sufficient certainty the basis of the claim so as to be able to provide a meaningful payment schedule.
2.It did not identify the construction work performed since the previous progress claim (ie since 14 December 2012).
Errors and inconsistencies
It is common ground that, in order to comply with section 13(2)(a), a payment claim must allow a reasonable principal to ascertain with sufficient certainty the basis of the claim so as to be able to provide a meaningful payment schedule. Both parties accepted that the relevant test was identified in Protectavale Pty Ltd v K2K Pty Ltd[48] by Finkelstein J as follows:
It is necessary to decide whether the invoice meets the requirements of s 14. The test is an objective one; that is, it must be clear from the terms of the document that it contains the required information. But the terms must be read in context. Payment claims are usually given and received by parties experienced in the building industry who are familiar with the particular construction contract, the history of the project and any issues which may have arisen between them regarding payment. Those matters are part of the context.
The manner in which compliance with s 14 is tested is not overly demanding. …
Nonetheless a payment claim must be sufficiently detailed to enable the principal to understand the basis of the claim. If a reasonable principal is unable to ascertain with sufficient certainty the work to which the claim relates, he will not be able to provide a meaningful payment schedule. That is to say, a payment claim must put the principal in a position where he is able to decide whether to accept or reject the claim and, if the principal opts for the latter, to respond appropriately in a payment schedule.[49]
(citations omitted)
[48] [2008] FCA 1248.
[49] Ibid at [10]-[11], [12].
There are minor arithmetical errors in Progress Claim 9. Not only are they relatively small, but they are readily identifiable upon a cursory analysis of the progress claim read as a whole. It is also apparent that the figures contained in the supporting schedule under the heading “Amount Invoiced” are irrelevant to the amount claimed in the progress claim and should be disregarded.
It is apparent from Built Environs’ responsive Payment Schedule that Built Environs correctly identified each of the errors and irrelevancies in the progress claim and addressed it on the assumption that each error was corrected and the irrelevancies ignored. Moreover, its responses to Progress Claims 1, 2, 4, 5 and 6 demonstrate that it understood the methodology of Tali’s progress claims.
I reject Built Environs’ contention under this heading.
Identification of current construction work
Built Environs contends that section 13(2)(a) on its proper construction requires that the progress claim must relate exclusively to construction work undertaken since the previous progress claim and accordingly must identify that work. Because Progress Claim 9 does not attempt to identify what work was undertaken since 14 December 2012, Built Environs contends that it fails to identify “the construction work to which it relates” in compliance with section 13(2)(a).
The Subcontract requires progress claims to be calculated, not by reference to the value of the work undertaken since the previous progress claim, but rather by reference to the total value of completed work since commencement assessed against the total contract price. It requires there to be a deduction for amounts previously certified and paid.
Clause 37.1 of the Subcontract relevantly provides:
The Subcontractor shall claim payment progressively in accordance with Item 31.
…
Each progress claim shall be given in writing to the Subcontract Superintendent and shall include details of the value of WUS done and may include details of other moneys then due to the Subcontractor pursuant to provisions of the Subcontract.
…
All payment claims or progress claims delivered by the Subcontractor shall be typewritten and include:
(d)the Subcontractor’s valuation of work executed being a value based on work complete assessed against the subcontract sum;
(e)the amount and particulars of any adjustments to the subcontract sum in accordance with and subject to the terms of the Subcontract;
(f)any deduction by way of set‑off or otherwise having regard to the Subcontractor’s knowledge of any monies due or claimed to be due from the Subcontractor to the Main Contractor;
(g) the total amount previously certified pursuant to this clause;
(h)the total amount previously paid or in terms of the Subcontract deemed to have been paid to the Subcontractor;
(i)the amount then claimed by the Subcontractor ...
For the avoidance of doubt, no payment at all is due and payable unless the progress claim is submitted in the approved format, accompanied by the monthly documentation required under this Subcontract and submitted to the Subcontract Superintendent with copy to the Contracts Administrator.
Appendix 7 requires the claim to be in the following format:
SUMMARY ITEM
Description
Approved Contract Value %
Work Completed To Date Less Previous Paid Claim This Month 1 0% 2 0% 3 0% etc 0% Sub-Total 0% Less Retention Sub-Total 0% Plus GST 10% 0% Total This Claim Including GST 0%
The construction of section 13(2)(a) of the Act advanced by Built Environs is that, notwithstanding that a construction contract may require progress claims to be calculated on a cumulative basis, a payment claim under the Act must be calculated on an incremental basis of the value of work undertaken since the previous progress claim. I reject that contention.
Sections 9(a) and 10(a) of the Act expressly provide that the amount of a progress payment to which a person is entitled under the Act is the amount calculated in accordance with the terms of the contract and the construction work is to be valued in accordance with the terms of the contract.[50] Built Environs’ construction would require the amount to be calculated and the valuation to be undertaken contrary to the terms of the contract.
[50] See Jemzone Pty Ltd v Trytan Pty Ltd [2002] NSWSC 395; (2002) 42 ASCR 42 at [37] per Austin J; Quasar Constructions v Demtech Pty Ltd [2004] NSWSC 116; (2004) 20 BCL 276 at [21] per Barrett J.
Section 13(2)(a) does not identify the construction work to which the progress payment relates, and in particular does not say that it is to be the construction work undertaken since the previous progress claim. In those cases governed by sections 9(a) and 10(1)(a), it leaves the question of what work is to be the subject of the progress payment to the contract where the contract addresses those matters.[51]
[51] In Hawkins Construction (Australia) Pty Ltd v Mac’s Industrial Pipework Pty Ltd [2002] NSWCA 136 at [20] Davies AJA (Handley JA and Stein JA agreeing) said that as the terms used in s 13(2) ‘are used in relation to events occurring in the construction industry, they should be applied in a common sense practical manner’.
The Act proceeds on the assumption that the term “progress payment” has a pre‑existing understanding in the building industry.[52] This had already been reflected by section 30(1)(a) of the Building Work Contractors Act 1995 (SA) which referred (before enactment of the Act) to a “genuine progress payment in respect of work already performed”. Parliament can be expected to have known that it was common for progress payments to be calculated on a cumulative basis.
[52] Ibid.
Calculating the amount of a progress payment on a cumulative basis is inherently fair and reasonable in the interests of both parties. If a mistake has been made in favour of one party in the calculation of previous progress payments, there is no reason why that mistake should be perpetuated in future progress claims. This is especially so as progress payments are “on account” of the final contract price for the work.
By sections 3(4) and 32, the Act does not limit any other entitlement that a claimant may have under a construction contract. Great complexities might be introduced if a claimant had a contractual entitlement to one amount by way of a progress payment (calculated cumulatively) and a statutory entitlement to a quite different amount under the Act (calculated incrementally).
Built Environs contends that there are four decisions at first instance in other jurisdictions to the effect that a payment claim under the equivalent of section 13(2)(a) must identify construction work undertaken since the previous payment claim. Caution needs to be exercised in interpreting passages from reasons for judgment which may be affected by the terms of the contract in that case (which are not necessarily disclosed in the reasons), the manner in which that case was argued and the issues framed (not necessarily disclosed in the reasons) and other matters specific to that case.
In Jemzone Pty Ltd v Tritan Pty Ltd,[53] a statutory demand under s 459E of the Corporations Act 2001 (Cth) was served by a builder on a developer relying upon a debt the subject of a payment claim in respect of which a payment schedule had not been served. Austin J held that the claim was not a “progress claim” within the meaning of the NSW Act because it was a claim for final payment. Austin J therefore did not need to decide whether the claim otherwise complied with section 13. However, he made the following observation:
Section 13(2)(a) requires the payment claim to identify the construction work to which the progress payment relates. In my opinion, this requires the claimant to identify the particular work that is the subject of the progress payment, rather than simply to identify in general terms the work that is the subject of the construction contract as a whole. The document in question refers to "motel construction for Jemzone Pty Ltd". That falls well short of satisfying the requirement of s.13(2)(a). The letter sets out a table which calculates the amount due, but the table does not identify any particular construction work other than variations. It merely begins by specifying a balance owing as at 9 February 2001, and then makes adjustments for variations and payments and other matters. At no stage is there any statement purporting to identify the work carried out since the making of the last payment claim.[54]
[53] (2002) 42 ACSR 42.
[54] Ibid at [43].
It is not apparent from the reasons for judgment what were the precise contractual terms governing the calculation of progress payments. Earlier, Austin J had said:
... In my opinion the words "progress payment" when used in s 8 and other parts of the Act should therefore be given the meaning that they have under the construction contract. That accords with the structure of the Act itself, which generally leaves it to the construction contract to define the rights of the parties but makes "default provisions" to fill in the contractual gaps: see second reading speech, at p 1013).[55]
[55] Ibid at [37].
If Austin J had been construing section 13 as requiring calculation of a progress payment on an incremental basis when the contract provided for a cumulative basis, he can be expected to have explained why that was so and how it was consistent with the construction of the Act which he identified in the passage quoted at [97] above. In the circumstances, I do not interpret the last sentence quoted at [96] above as holding that section 13 requires the payment claim to relate exclusively to work undertaken since the previous payment claim notwithstanding that the contract provides otherwise.
Built Environs has not established that there was a reasonable apprehension of bias on the part of Mr Allan (divorced from the critical fact that he was selected by Nominator).
Ground 5: Errors of law
Built Environs’ fifth ground for review is that Mr Allan made several interrelated errors of law in his Adjudication Determination.
It is common ground that an adjudication determination under section 22 of the Act is amenable to judicial review by way of certiorari if the adjudicator makes an error of law[89] which is arbitrary, capricious or irrational.[90] While Built Environs does not concede that certiorari does not lie in the absence of the error being arbitrary, capricious or irrational, it does not put substantive submissions or cite any authorities supporting a lower threshold test.
[89] Assuming it is not an error concerning the existence of a jurisdictional fact.
[90] In accordance with the principle identified by Basten JA in Chase Oyster Bar Pty Ltd v Hamo Industries Pty Ltd (2010) 78 NSWLR 393 at [102].
Built Environs also contends that, on the assumption that Mr Allan applied the prevention principle, he made three errors of law in so doing, namely:
1.disregarding the contractual obligation of Tali to comply with the Construction Program because he characterised it as an absurdity due to its requiring steps to be taken by Tali before execution of the Subcontract on 14 September 2012;
2.erroneously having regard to the provisions of clause 34.5 as contained in AS4901 when they had been modified by clause 34.5A contained in Part B of the Subcontract;
3.ignoring the fact that the prevention principle is displaced, as a matter of law, by the existence of a contractual entitlement to an extension of time.
Built Environs contends that Mr Allan erred in failing to factor Built Environs’ entitlement to liquidated damages into his assessment, but this is a general complaint relying upon the three specific errors identified in the previous paragraph.[91]
[91] Built Environs also contends that Mr Allan made an error of law by assuming jurisdiction to grant extensions of time, but the question does not arise for the reasons set out at [118] above.
It is not necessary to decide whether Mr Allan made the three errors of law alleged by Built Environs or, if so, whether they were arbitrary, capricious or irrational or otherwise are amenable to judicial review by way of certiorari. These issues may arise in the determination by arbitration or litigation of the ultimate rights of the parties under clause 42 of the Subcontract. In those circumstances, it is undesirable that I express any view on the contentions of the parties before me on this issue.
Ground 6: Bona fide attempt to exercise power
Built Environs’ sixth ground for review is that Mr Allan’s adjudication did not represent a bona fide attempt to understand and deal with the issues in dispute and accordingly is void.
Built Environs relies upon this ground strictly as an alternative to the other grounds for review already addressed. It does not advance any contentions under this sixth ground which are independent of the contentions advanced in respect of other grounds.
In those circumstances, and given the conclusions I have reached on the third and fourth grounds, it is not necessary to further consider this sixth ground.
Discretion
Tali does not contend that, if Built Environs succeeds on one of its grounds for review, I should not exercise my discretion to grant declaratory and prerogative relief. In any event, I exercise my discretion to grant the relief sought by Built Environs.
Conclusion
Built Environs fails on its first and second grounds of review. It succeeds on its third and fourth grounds. It is unnecessary to decide its fifth and sixth grounds.
Mr Allan’s determination dated 14 February 2013 is void. Built Environs is entitled to a declaration to that effect. Built Environs is entitled to an order in the nature of certiorari setting aside the determination. I will hear the parties as to the terms of the orders to be made.
Built Environments
Annexure1. Interpretation and Construction of Subcontract
No Claim means no claim for any monies for or any adjustment to the subcontract sum or for any EOT for Practical Completion or for costs, expense, or loss or damage on any basis whatsoever including, no claim:
(a)pursuant to subcontract;
(b)in tort (including negligence);
(c)on a quantum meruit;
(d)pursuant to quasi contract;
(e)for unjust enrichment; or
(f)(without limitation) pursuant to any other principle of law or equity;
…
qualifying cause of delay
(a)any act, default or omission of the Subcontract Superintendent, the Main Contractor or its consultants, agents or other contractors (not being employed by the Subcontractor) not being an act or omission:
(i)expressly permitted or allowed by the Subcontract;
(ii)which is within a timeframe expressly permitted, or allowed by the Subcontractor; or
(iii)to the extent the act or omission is caused or contributed to by a breach of the Subcontract by the Subcontractor or any negligent, or [sic]
(iv)[sic] unlawful, act or omission of the Subcontract or;
(b)state-wide industrial dispute, being a dispute in the building industry which is not restricted to the site or the subcontract works and involved, as parties to the dispute, other subcontractors other than the Subcontractor or any of its secondary subcontractors;
(c)latent conditions;
(d)variations directed under clause 36;
(e)inclement weather; and
(f)changes to legislative requirements affecting the WUS.
…
substantial completion is that stage in the carrying out and completion of WUS when:
(a) the Subcontract Works are complete except for minor defects:
(i) which do not prevent the Subcontract Works from being reasonably capable of being used for their stated purpose;
(ii) which the Subcontract Superintendent determines the Subcontractor has reasonable grounds for not promptly rectifying; and
(iii) the rectification of which will not prejudice the convenient use of the Subcontract Works;
(b)those tests which are required by the Subcontractor to be carried out and passed before the Subcontract Works reach substantial completion have been carried out and passed; and
(c)documents and other information required under the Subcontract which, in the Subcontract Superintendent’s opinion, are essential for the use, operation and maintenance of the Subcontract Works have been supplied.
WUS means the work which the Subcontractor is or may be required to carry out and complete under the Subcontract and includes variations, remedial work, construction plant and temporary works,
20 Subcontract Superintendent
The Main Contractor shall ensure that at all times there is a Subcontract Superintendent, and that the Subcontract Superintendent fulfils all aspects of the role and functions reasonably and in good faith.
…
34Time and progress
34.1 Progress
The Subcontractor shall commence and execute the WUS in a manner and at a rate of progress satisfactory to the Main Contractor, and otherwise in accordance with the requirements of the latest version of the co-ordination program, so as to ensure that the WUS reaches substantial completion by the date for substantial completion, that any milestone dates shown in the construction program (as amended by the latest version of the co-ordination program) are met and that the Main Contractor is not hindered or prevented by any act or omission of the Subcontractor from achieving practical completion by the date for practical completion.
…
34.2 Notice of delay
A party becoming aware of anything which will probably cause delay to WUS shall promptly give the Subcontract Superintendent and the other party written notice of that cause and the estimated delay. For the purposes of this clause, the issuing of any co-ordination programs or revised construction programs by the Subcontract Superintendent that my [sic] cause delay to the WUS shall be a deemed notice.
34.3Claim
(a)Subject to clauses 34.3(d) and 36.1A(b), the Subcontractor shall only be entitled to such extension of time for carrying out WUS (including reaching substantial completion) as the Subcontract Superintendent assesses (“EOT”), if:
(i)the Subcontractor is or will be delayed in reaching substantial completion of Separable Portion 1 … by a qualifying cause of delay; or
(ii)for substantial completion of any Separable Portion other than Separable Portion 1 … if the Subcontractor is or will be delayed:
(A.)Subject to clause 34.3(d), by a cause described in paragraphs (b), (c), (d), (e) or (f) of the definition of qualifying cause of delay but only if such cause occurs before the date of substantial completion of Separable Portion 1;
(B.)by a cause described in paragraph (a) of the definition of qualifying cause of delay regardless of whether such cause occurs before or after the date of practical [sic]completion of Separable Portion 1;
(iii) the Subcontractor gives the Subcontract Superintendent, no later than 3 days after the Subcontractor first became aware or the Subcontractor should reasonably have become aware of that causation occurring, a written claim for an EOT for substantial completion, setting out:
(A.)a detailed statement of the facts on which the claim is based;
(B.)a precise identification of the activities affected and critical to the Subcontractor’s activities on the construction program; and
(C.)the date on which the cause of delay first arose;
(iv) the Subcontractor satisfies the Subcontract Superintendent that:
(A.)the matters referred to in clause 34.3(iii)(B) are apparent from an assessment of the critical path of the current revision of the construction program when the delay first arose;
(B.)[sic] has consistently taken all reasonable steps to minimise the delay and to reprogram and expedite the sequence of activities;
(C.)the Subcontractor has taken proper and reasonable steps both to preclude the occurrence of the cause of delay and/or to minimise the consequences of the cause of delay; and
(D.)the cause of the delay is not in anyway connected with an act or omission of the Subcontract [sic]; and
(b)If the Subcontractor fails to give a notice strictly in accordance with clause 34.3(a)(ii), then the Subcontractor shall have No Claim arising out of or connected with or in any way brought about by that delay.
(c)If further delay results from a qualifying cause of delay evidenced in a claim under clause 34.3(a)(ii), the Subcontractor shall claim an EOT for such delay by promptly giving the Subcontract Superintendent a written claim evidencing the facts of that delay.
34.4 Assessment
Where more than one event causes concurrent delays and the cause of at least one of those events, but not all of them, is not a qualifying cause of delay, then to the extent that the delays are concurrent, the Subcontractor shall not be entitled to an EOT for substantial completion.
34.5 Extension of time
Within 35 days after receiving the Subcontractor’s claim for an EOT, the Subcontract Superintendent shall give to the Subcontractor and the Main Contractor a written direction evidencing the EOT so assessed. A delay by the Main Contractor, or the failure of the Subcontract Superintendent to assess an EOT within 35 days, shall not extend the date for substantial completion or set time at large, but nothing in this paragraph will prejudice any right of the Subcontractor to damages.
Notwithstanding that the Subcontractor is not entitled to or has not claimed an EOT, the Subcontract Superintendent may at any time and from time to time before issuing the final certificate direct an EOT.
Notwithstanding any other provisions of this clause 34, the Subcontractor shall not be entitled to any EOT unless it shall have taken proper and reasonable steps to:
(a) Preclude the occurrence of any delay; and/or
(b) Avoid or minimize the consequences thereof.
Where an EOT claimed by the subcontractor is for the same delay that is the cause of an EOT claim that is made by the Main Contractor under the main contract, then the Subcontractor shall not be entitled to an EOT that exceeds the EOT that is determined by the Superintendent for the main contract delay.
34.5A Independent discretion to extend time
(a)If there is a delay to any WUS for which the Subcontractor is not entitled to an EOT, the Subcontract Superintendent may grant an EOT but has no obligation to grant, or to consider whether it should grant, an EOT.
(b)If the Subcontract Superintendent grants an EOT under clause 34.5A(a):
(i) it shall give the Subcontractor written notice, which expressly refers to clause 34.5(a); and
(ii) the Subcontractor is not entitled to any compensation for the delay.
34.6 Substantial completion
The Subcontractor shall give the Subcontract Superintendent at least 14 days written notice of the date upon which the Subcontractor anticipates that substantial completion will be reached.
When the Subcontractor is of the opinion that substantial completion has been reached the Subcontractor shall in writing request the Subcontract Superintendent to issue a certificate of substantial completion. Within 14 days after receiving the request, the Subcontract Superintendent shall give the Subcontractor and the Main Contractor either a certificate of substantial completion evidencing the date of substantial completion or written reasons for not doing so.
If the Subcontract Superintendent is of the opinion that substantial completion has been reached, the Subcontract Superintendent may issue a certificate of substantial completion even though no request has been made.
The Subcontract Superintendent may in its absolute sole discretion issue a certificate of substantial completion notwithstanding the failure by the Subcontractor to comply with all of the requirements for substantial completion. The issue by the Subcontract Superintendent of such a Certificate of Substantial Completion in such circumstances shall not release the Subcontractor from his obligations to comply with all of the requirements contained within the definition of Substantial Completion.
34.6A Practical Completion
Upon issue of the certificate of practical completion, by the Superintendent under the main contract, to the Main Contractor, the Main Contractor shall provide to the Subcontractor a copy of the certificate of practical completion.
34.7 Liquidated Damages
(a)If the Subcontractor fails to achieve substantial completion by the date for substantial completion, the Subcontract Superintendent shall certify, as due and payable to the Main Contractor, liquidated damages in Item 27 for every day after the date for substantial completion, or termination of the Subcontract or the Main Contractor taking WUS out of the hands of the Subcontractor, and the Main Contractor may recover all liquidated damages payable as a debt.
…
(c)If an EOT is directed after the Subcontractor has paid or the Main Contractor has set off liquidated damages, the Main Contractor shall repay to the Subcontractor such of those liquidated damages as represent the days the subject of the EOT.
(d)Should the date for substantial completion pass without the subcontract works achieving substantial completion, the Subcontract Superintendent when issuing any progress certificate may issue with it a provisional assessment in writing of the amount then provisionally due by way of liquidated damages and the Main Contractor may deduct such amount from the amount certified and the amount so deducted shall be taken in partial satisfaction of any indebtedness of the Subcontractor to the Main Contractor for the amount subsequently certified pursuant to this clause 34.7.
…
34.7A Indemnity
If the main contract works do not reach practical completion by their date for practical completion, for which the proximate cause is delay by the Subcontractor in completing WUS, the Subcontractor shall indemnify the Main Contractor against:
a)liquidated damages under the main contract stated in Item 27(b) certified by the Superintendent; and
b)damages, other than liquidated damages, which have become due and payable by the Main Contactor to the Principal.
If the Subcontractor’s delay is not the sole cause of the Main Contractor’s liability for damages, the Subcontractor shall indemnify the Main Contractor only in proportion to the Subcontractor’s delay, which shall be certified by the Subcontract Superintendent, as moneys due to the Main Contractor by the Subcontractor.
If an EOT is directed after the Subcontractor has paid or the Main Contractor has set off liquidated damages, the Main Contractor shall forthwith repay to the Subcontractor such of those liquidated damages as represent the days the subject of the EOT.
The Subcontractor’s indebtedness under this subclause is not included in the liquidated damages applicable to subclause 34.7.
Should the date for substantial completion pass without the subcontract works achieving substantial completion, the Subcontract Superintendent when issuing any progress certificate may issue with it a provisional assessment in writing of the amount the Subcontract Superintendent reasonably considers is equivalent to the Main Contractor’s potential liquidated damages exposure under the main contract due to the WUS not reaching substantial completion by the date for substantial completion (“Liquidated Damages Amount”). The Main Contractor may deduct such amount from the amount certified and the amount so deducted shall be taken in partial satisfaction of any indebtedness of the Subcontractor to the Main Contractor for the amount subsequently certified pursuant to this clause 34.7A.
If the Superintendent certifies liquidated damages as due and payable by the Main Contractor to the Principal under the main contract for which the proximate cause is failure by the Subcontractor to achieve substantial completion by the date for substantial completion the Liquidated Damages Amount may be applied by the Main Contractor against its indebtedness to the Principal. If the Superintendent does not so certify, the Liquidated Damages Amount will be released to the Subcontractor within 30 days of the issue of the certificate of practical completion.
…
34.11 No Entitlement
If there is a delay to the WUS for which the Subcontractor is not entitled to an EOT, the Subcontractor:
(a)shall achieve substantial completion by the date for substantial completion;
(b)does not have any remedy against the Main Contractor for the delay, including any entitlement to damage [sic] for breach of the Subcontract; and
(c)is not relieved of any liability to the Main Contractor for any failure to achieve substantial completion by the date for substantial completion by reason of the delay, including any liability to pay liquidated damages.
37 Payment
37.1 Progress claims
The Subcontractor shall claim payment progressively in accordance with Item 31.
An early progress claim shall be deemed to have been made on the date for making that claim.
Each progress claim shall be given in writing to the Subcontract Superintendent and shall include details of the value of WUS done and may include details of other moneys then due to the Subcontractor pursuant to provisions of the Subcontract.
The Subcontractor’s entitlement to a progress payment shall be calculated having regard to:
(a)the value of work executed being a value based on completed work assessed against the subcontract sum, including any adjustments made pursuant to the Subcontract;
(b)the amount of any adjustment to the subcontract sum (whether upwards or downwards) calculated strictly in accordance with and subject to the terms of the Subcontract;
(c)any deduction by way of set-off or otherwise having regard to any monies due or claimed to be due from the Subcontractor to the Main Contractor.
All payment claims or progress claims delivered by the Subcontractor shall be typewritten and include:
(d)the Subcontractor’s valuation of work executed being a value based on work complete assessed against the subcontract sum;
(e)the amount and particulars of any adjustments to the subcontract sum in accordance with and subject to the terms of the Subcontract;
(f)any deduction by way of set-off or otherwise having regard to the Subcontractor’s knowledge of any monies due or claimed to be due from the Subcontractor to the Main Contractor;
(g)the total amount previously certified pursuant to this clause;
(h)the total amount previously paid or in terms of the Subcontract deemed to have been paid to the Subcontractor;
(i)the amount then claimed by the Subcontractor;
(j)completed copies of the Progress Claim Criteria Checklist as set out in Appendix 8;
(k)a statutory declaration in the form set out in Appendix 10;
(l)any other statements required under applicable state or territory law as set out in Appendix 14 clause 2; and
(m)any other documentation required by the Subcontract or the Subcontract Superintendent.
For the avoidance of doubt the amount of any progress payment to which the Subcontractor is entitled shall not be calculated simply on the basis of the value of construction work carried out or undertaken to be carried out by the Subcontractor. The amount of the progress payment entitlement shall be calculated strictly in accordance with the Subcontract and shall include deductions for claims by the Main Contractor.
All progress claims shall be submitted to the Subcontract Superintendent in the format shown in Appendix 7 or any similar format approved by the Main Contractor. Any progress claim received that is not in the approved format or is not accompanied with the necessary forms shall not be considered for payment.
…
For the avoidance of doubt, no payment at all is due and payable unless the progress claim is submitted in the approved format, accompanied by the monthly documentation required under this Subcontract and submitted to the Subcontract Superintendent with copy to the Contracts Administrator.
37.2 Certificates
The Subcontract Superintendent shall, after receiving such a progress claim, issue to the Subcontractor by the 18th day of the month following the month to which the progress claim applies, a progress certificate in the form of a Recipient Created Tax Invoice (“RCTI”) covering the same month as the month to which the progress claim applies evidencing the approved payment. The RCTI shall identify the progress payment due and any retention monies or other monies withheld pursuant to the Subcontract. The Subcontractor must not issue Tax Invoices to the Main Contractor in respect of progress claims.
If the Subcontractor does not make a progress claim in accordance with Item 31, the Subcontract Superintendent may at its absolute sole discretion and without any obligation to do so, issue an RCTI for a progress payment, as calculated by the Subcontract Superintendent.
The Main Contractor shall pay the Subcontractor the progress payment amount identified in the RCTI by the 5th day of the month following the month in which the RCTI is issued by the Subcontract Superintendent. For clarity, an RCTI issued by 18th August, in respect of a progress claim made in July for work performed in July, is due to be paid by 5th September.
Neither a progress certificate nor a payment of moneys shall be evidence that the subject WUS has been carried out satisfactorily. Payment other than final payment shall be payment on account only.
13
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