Ceerose Pty Ltd v A-Civil Aust Pty Ltd

[2023] NSWSC 239

Supreme Court

New South Wales

Medium Neutral Citation:

Ceerose Pty Ltd v A-Civil Aust Pty Ltd [2023] NSWSC 239

Hearing dates:

7-8 March 2023

Date of orders:

20 March 2023

Decision date:

20 March 2023

Jurisdiction:

Equity - Technology and Construction List

Before:

Darke J

Decision:

Jurisdictional error found in relation to parts of adjudication determinations (see at [132] and [180]).

Catchwords:

BUILDING AND CONSTRUCTION – Building and Construction Industry Security of Payment Act 1999 (NSW) (“the Act”) – adjudication determinations – whether adjudication determinations are affected by jurisdictional error – whether the adjudicator failed to meet essential requirements for the existence of a valid adjudication determination under the Act – whether the adjudicator failed to consider all submissions duly made – whether the adjudicator failed to address the merits of claims made – whether the adjudicator failed to afford the parties procedural fairness – jurisdictional errors found in respect of parts of the adjudication determinations – appropriate relief to be given where the Court has the power to set aside the whole or any part of the adjudication determinations pursuant to s 32A of the Act

Legislation Cited:

Building and Construction Industry Security of Payment Act 1999 (NSW), ss 14, 20, 21, 22, 32A

Cases Cited:

Acciona Infrastructure Australia Pty Ltd v Chess Engineering Pty Ltd [2020] NSWSC 1423

Brodyn Pty Ltd v Davenport (2004) 61 NSWLR 421; [2004] NSWCA 394

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

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

Coordinated Construction Co Pty Ltd v JM Hargreaves (NSW) Pty Ltd (2005) 63 NSWLR 385; [2005] NSWCA 228

Dranichnikov v Minister for Immigration and Multicultural Affairs (2003) 77 ALJR 1088; [2003] HCA 26

Goodwin Street Developments Pty Ltd v DSD Builders Pty Ltd (2018) 98 NSWLR 712; [2018] NSWCA 276

Hossain v Minister for Immigration and Border Protection (2018) 264 CLR 123; [2018] HCA 34

Icon Co (NSW) Pty Ltd v Australia Avenue Developments Pty Ltd [2018] NSWCA 339

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

Laing O’Rourke Australia Construction Pty Ltd v Monford Group Pty Ltd [2018] NSWSC 491

Malek Fahd Islamic School Ltd v Minister for Education and Training (No 2) [2017] FCA 1377

Multiplex Constructions Pty Ltd v Luikens [2003] NSWSC 1140

Musico v Davenport [2003] NSWSC 977

MZAPC v Minister for Immigration and Border Protection (2021) 95 ALJR 441; [2021] HCA 17

Nathanson v Minister for Home Affairs (2022) 96 ALJR 737; [2022] HCA 26

Pacific General Securities Ltd v Soliman & Sons Pty Ltd [2006] NSWSC 13

Probuild Constructions (Aust) Pty Ltd v DDI Group Pty Ltd (2017) 95 NSWLR 82; [2017] NSWCA 151

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

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

YTO Construction Pty Ltd v Innovative Civil Pty Ltd [2019] NSWCA 110

Category:

Principal judgment

Parties:

Ceerose Pty Ltd (Plaintiff/First Cross-Defendant)
A-Civil Aust Pty Ltd (First Defendant/Cross-Claimant)
John Tuhtan (Second Defendant/Second Cross-Defendant)
ABC Dispute Resolution Service (Third Defendant)

Representation:

Counsel:
Mr S Robertson SC with Mr D Hume (Plaintiff/First Cross-Defendant)
Mr F Hicks SC with Mr L Gor (First Defendant/Cross-Claimant)

Solicitors:
Salim Rutherford Lawyers (Plaintiff/First Cross-Defendant)
M&A Lawyers (First Defendant/Cross-Claimant)

File Number(s):

2022/217806; 2022/236818

Publication restriction:

None

Judgment

Introduction

1. This judgment concerns two proceedings between the plaintiff, Ceerose Pty Ltd, and the defendant, A-Civil Aust Pty Ltd, that arise out of building contracts entered into between them. The two proceedings, which were heard together, raise issues as to the validity of adjudication determinations made under the Building and Construction Industry Security of Payment Act 1999 (NSW) (“the Act”).

2. One proceeding (2022/236818) concerns a building contract in respect of a site known as 32-36 York Street, Sydney. Under that contract, entered into on about 6 October 2021, the defendant as subcontractor agreed to carry out certain work for a subcontract sum of $2,900,000 plus GST. On 30 May 2022, the defendant served a payment claim under the Act seeking a payment of $3,556,466.80 excluding GST. On 14 June 2022, the plaintiff provided a payment schedule in response which rejected the claimed amount in its entirety and indeed asserted that an amount of $895,565.50 excluding GST should be paid by the defendant. The defendant made an adjudication application on about 28 June 2022. Mr John Tuhtan was appointed as the adjudicator. On 7 July 2022, the plaintiff lodged an adjudication response. On about 2 August 2022, Mr Tuhtan issued a Determination that the amount of the progress payment to be paid by the plaintiff to the defendant was $2,045,453.97 including GST.

3. The plaintiff challenges the validity of the Determination, contending that in numerous respects it is affected by jurisdictional error. Nine grounds are raised, eight of which concern a particular component or item within the Determination. For each of those grounds, several errors said to amount to jurisdictional errors are alleged. The remaining ground is a more general complaint that the adjudicator failed to consider (or as it was put, actively engage with) the plaintiff’s adjudication response. The plaintiff seeks to have the whole of the Determination quashed.

4. The defendant disputes the allegations of jurisdictional error and contends that the Determination should stand. The defendant contends that if, however, the Determination is affected by jurisdictional error, the Court should set aside only the part or parts so affected, and should confirm the part or parts not so affected, as now permitted by s 32A of the Act.

5. The other proceeding (2022/217806) concerns a building contract in respect of a site in Elizabeth Bay. Under that contract, entered into on about 2 December 2021, the defendant as subcontractor agreed to carry out certain work for a subcontract sum of $780,896 plus GST. On 25 May 2022, the defendant served a payment claim under the Act seeking a payment of $327,492.67 excluding GST. On 1 June 2022, the plaintiff provided a payment schedule in response which rejected the claimed amount in its entirety. The defendant made an adjudication application on about 21 June 2022. Mr Tuhtan was appointed as the adjudicator. On about 28 June 2022, the plaintiff lodged an adjudication response. On about 11 July 2022, Mr Tuhtan issued a Determination that the amount of the progress payment to be paid by the plaintiff to the defendant was $349,324.36 including GST.

6. Again, the plaintiff challenges the validity of the Determination on the basis that it is affected by jurisdictional error in numerous respects. Five grounds are raised, each of which concerns a particular component or item within the Determination and alleges the existence of one or more jurisdictional errors. The plaintiff seeks to have the whole of the Determination quashed.

7. The defendant contends that the Determination should stand in whole, or at least as to any part or parts not affected by jurisdictional error.

8. The plaintiff also raised a challenge to the validity of an adjudication certificate, and a judgment of the District Court, that have arisen from the Determination in respect of the Elizabeth Bay contract. This challenge rested upon an error that occurred in the name of the claimant. Both the adjudication certificate and the judgment failed to employ the defendant’s correct name. However, this issue fell away in circumstances where the defendant stated that even if the Determination “survives” in whole or in part, it would not take any steps to rely upon the adjudication certificate or the District Court judgment.

Summary of applicable principles

9. The validity of a determination of an adjudicator appointed pursuant to the Act cannot be challenged for error of law on the face of the record that is not a jurisdictional error (see Probuild Constructions (Aust) Pty Ltd v Shade Systems Pty Ltd (2018) 264 CLR 1; [2018] HCA 4 at [2], [35], [48], [82]-[83] and [90]). That decision of the High Court is consistent with the approach earlier taken by the Court of Appeal in Brodyn Pty Ltd v Davenport (2004) 61 NSWLR 421; [2004] NSWCA 394. In that case, Hodgson JA (with whom Mason P and Giles JA agreed) stated at [51]-[55]:

I agree with McDougall J that the scheme of the Act appears strongly against the availability of judicial review on the basis of non-jurisdictional error of law. The Act discloses a legislative intention to give an entitlement to progress payments, and to provide a mechanism to ensure that disputes concerning the amount of such payments are resolved with the minimum of delay. The payments themselves are only payments on account of a liability that will be finally determined otherwise: ss.3(4), 32. The procedure contemplates a minimum of opportunity for court involvement: ss.3(3), 25(4). The remedy provided by s.27 can only work if a claimant can be confident of the protection given by s.27(3): if the claimant faced the prospect that an adjudicator's determination could be set aside on any ground involving doubtful questions of law, as well as of fact, the risks involved in acting under s.27 would be prohibitive, and s.27 could operate as a trap.

However, it is plain in my opinion that for a document purporting to 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 (ss.7 and 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 (ss.18 and 19).

5.   The determination by the adjudicator of this application (ss.19(2) and 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 (ss.22(1)) and the issue of a determination in writing (ss.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. That question has been approached in the first instance decision by asking whether an error by the adjudicator in determining whether any of these requirements is satisfied is a jurisdictional or non-jurisdictional error. I think that approach has tended to cast the net too widely; and I think it is preferable to ask whether a requirement being considered was intended by the legislature to be an essential pre-condition for the existence of 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: cf. Project Blue Sky Inc. v. Australian Broadcasting Authority [1998] HCA 28; (1998) 194 CLR 355 at 390-91. 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 (cf. R v. Hickman; Ex Parte Fox and Clinton [1945] HCA 53; (1945) 70 CLR 598), 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.

10. Questions concerning the requirements for a valid determination by an adjudicator under the Act have been considered more recently in several decisions of the Court of Appeal.

11. In Cockram Construction Ltd v Fulton Hogan Construction Pty Ltd (2018) 97 NSWLR 773; [2018] NSWCA 107, Meagher JA (with whom Basten JA and Barrett AJA agreed) referred to s 22 of the Act and stated (at [40]-[41]):

The adjudicator’s ultimate function is thus “to determine the amount and timing of a progress payment”: Probuild Constructions (Aust) Pty Ltd v Shade Systems Pty Ltd [2018] HCA 4; (2018) 92 ALJR 248 at [80] (Gageler J). In performing that function, the adjudicator is bound “to consider” the matters in paras (a)–(e) of sub-s (2) and not “to consider” other matters: Hargreaves at [65] (Basten JA).

By its nature, the obligation in s 22(2) required “a process of evaluation, sufficient to warrant the description” as consideration in the particular context, and not mere “formalistic reference” to those matters: Weal v Bathurst City Council [2000] NSWCA 88; (2000) 11 LGERA 181 at [80] (Giles JA, Priestley JA agreeing); Azriel v NSW Land & Housing Corporation (2006) 67 NSWLR 256; [2006] NSWCA 372 at [49] (Basten JA, Santow and Ipp JJA agreeing). The process adopted by the adjudicator did not cease to warrant that description merely because it included a conclusion that one provision of the contract was not to be applied. That remained so whether or not that conclusion proceeded from an error in construction or wrong understanding of the applicable law.

12. In Goodwin Street Developments Pty Ltd v DSD Builders Pty Ltd (2018) 98 NSWLR 712; [2018] NSWCA 276, Basten JA (with whom Leeming and White JJA agreed), in the course of dealing with an argument that an adjudicator’s determination was affected by bad faith, observed at [29]:

…The function of an adjudicator is to have regard to the matters, and only the matters, set out in s 22(2). These include “the provisions of [the Security of Payment Act]”; they do not include judicial glosses on the statute. Nor are such glosses helpful to judges undertaking the function of judicial review. Finally, if the real question is whether the adjudicator failed to have regard to some matter expressly identified in s 22(2), that should be the ground of review. No question of good faith will normally arise in such circumstances.

13. Further, in Icon Co (NSW) Pty Ltd v Australia Avenue Developments Pty Ltd [2018] NSWCA 339, Basten JA (with whom Meagher and Leeming JJA agreed) said at [15]-[16]:

The Security of Payment Act does not refer to the opinion or satisfaction of the adjudicator. Nevertheless, there being no right of appeal, the adjudicator’s findings with respect to matters of fact, within jurisdiction, will be unreviewable. Further, there being no review for errors of law on the face of the record, the adjudicator’s determination of legal issues will also be unreviewable.

Relevantly for the present case, with respect to the function conferred on the adjudicator under s 22(1) of the Act (determining “the amount of the progress payment” which is to be paid), s 22(2) requires that the adjudicator “is to consider the following matters only”. Those matters include “the provisions of the construction contract” and “the payment claim”. The fact that the requirement is limited to considering the provisions of the construction contract and the payment claim leads to the inference that the adjudicator is to act upon his or her understanding of the contractual obligations and of the content of the payment claim. While the construction of a contract will usually involve questions of law, the Act implicitly confers on the adjudicator the power to form an opinion as to the meaning of the contract, for the purposes of the adjudication. The adjudication cannot be set aside because an error of law in construing the contract appears on the face of the record, including in the reasons of the adjudicator. The same is true with respect to the scope of the payment claim.

14. The statutory context in which an adjudication determination arises, and in particular ss 21 and 22 of the Act, plainly assumes central importance. Those sections provide:

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 such a 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) if the respondent is entitled to lodge an adjudication response under section 20—the date on which the respondent lodges the response or, if a response is not lodged, the end of the period within which the respondent was entitled to lodge a response, or

(ii)   in any other case—the date on which notice of the adjudicator’s acceptance of the application is served on the claimant and the respondent, or

(b)   within such further time as the claimant and the respondent may agree.

(4)   For the purposes of any proceedings conducted to determine an adjudication application, an adjudicator—

(a)   may request further written submissions from either party and must give the other party an opportunity to comment on those submissions, and

(b)   may set deadlines for further submissions and comments by the parties, and

(c)   may call a conference of the parties, and

(d)   may carry out an inspection of any matter to which the claim relates.

(4A)   If any such conference is called, it is to be conducted informally and the parties are not entitled to any legal representation.

(5)   The adjudicator’s power to determine an adjudication 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 the respondent have both requested the adjudicator not to include those reasons in the determination), and

(c)   be served by the adjudicator on the claimant and the respondent.

(4)   If, in determining an adjudication application, an adjudicator has, in accordance with section 10, determined—

(a)   the value of any construction work carried out under a construction contract, or

(b)   the value of any related goods and services supplied under a construction contract,

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

(5)   If the adjudicator’s determination contains—

(a)   a clerical mistake, or

(b)   an error arising from an accidental slip or omission, or

(c)   a material miscalculation of figures or a material mistake in the description of any person, thing or matter referred to in the determination, or

(d)   a defect of form,

the adjudicator may, on the adjudicator’s own initiative or on the application of the claimant or the respondent, correct the determination.

15. In Acciona Infrastructure Australia Pty Ltd v Chess Engineering Pty Ltd [2020] NSWSC 1423, Henry J helpfully summarised the applicable principles at [29]-[42]. Her Honour stated at [38]-[42]:

The determination of the content of a payment claim, the nature and scope of a payment schedule, what a payment schedule indicates are the reasons for the scheduled amount being less than the claimed amount and whether a submission was duly made are matters for an adjudicator to determine. A mistaken or erroneous decision by an adjudicator about those matters does not involve jurisdictional error and will not invalidate a determination. It is not for the Court to objectively determine those matters or whether an adjudicator was correct in forming their opinion on them if they were lawfully made: Icon at [13]-[16], [27]; Iskra at [50]-[52]; Perform (NSW) Pty Ltd v Mev-Aust Pty Ltd [2009] NSWCA 157 (Perform) at [67]; John Holland Pty Ltd v Roads and Traffic Authority of New South Wales [2007] NSWCA 19 (John Holland) at [57]; Downer Construction (Aust) Pty Ltd v Energy Australia (2007) 69 NSWLR 72; [2007] NSWCA 49 (Downer Construction) at [86].

An adjudicator’s finding with respect to matters of fact or errors of law are also within jurisdiction and will be unreviewable: Icon at [15].

An adjudicator is obliged to come to a view as to what is properly payable and cannot accede to a payment claim without considering the merits of the claim. The applicable principles were summarised by Stevenson J in Laing O’Rourke Australia Construction Pty Ltd v Monford Group Pty Ltd [2018] NSWSC 491 (Laing O’Rourke v Monford) at [1]-[5] as follows:

[1] An adjudicator making a determination under the Building and Construction Industry Security of Payment Act 1999 (NSW) (“the Act”) has a “duty...to come to a view as to what is properly payable” on, relevantly, the “true merits of the claim” (Coordinated Construction Co Pty Ltd v J.M. Hargreaves (NSW) Pty Ltd (2005) 63 NSWLR 385; [2005] NSWCA 228 at [52] (Hodgson JA) (Ipp and Basten JJA agreeing)).

[2] The mere absence of material adduced on behalf of a respondent to an adjudication application does not, without more, mean that an adjudicator can simply award the amount of the claim without addressing its merits.

[3] As Brereton J said in Pacific General Securities Ltd v Soliman & Sons (2006) 196 FLR 388; [2006] NSWSC 13 at [82]:

“...the absence of [material put forward by the respondent] does not entitle the adjudicator simply to award the amount of the claim without addressing its merits, which as a minimum will involve determining whether the construction work identified in the payment claim has been carried out, and what is its value.”

[4] An adjudicator who acts otherwise, has not performed [their] statutory function and [their] determination must be set aside.

[5] These principles have been applied on numerous occasions both in this state and elsewhere: see Asian Pacific Building Corp Pty Ltd v Aircon Duct Fabrication Pty Ltd [2010] VSC 300 at [12] (Vickery J), McNab Developments (Qld) Pty Ltd v MAK Construction Services Pty Ltd [2013] QSC 293 at [8] (Mullins J), and Richard Crookes Construction Pty Ltd v CES Projects (Aust) Pty Ltd (No 2) [2016] NSWSC 1229 at [19]- [20] (McDougall J).

A jurisdictional error may result in a failure by an adjudicator to provide procedural fairness or deny a party natural justice, although an adjudication determination will not be set aside for a denial of procedural fairness or natural justice unless the denial is material: Brodyn Pty Ltd v Davenport (2004) 61 NSWLR 421; [2004] NSWCA 394 (Brodyn) at [57]; TWT Property Group Pty Ltd v Cenric Group Pty Ltd [2020] NSWSC 72 (TWT v Cenric) at [111]. A denial of procedural fairness or natural justice will not be material if submissions which an adjudicator did not consider could not have induced an adjudicator to come to a different view: Laing O’Rourke v H&M at [26], [27].

The Court needs to consider the nature, gravity and effect of the errors, if any are made, to determine whether what occurred worked practical injustice sufficient to vitiate a determination: Trysams Pty Ltd v Club Constructions (NSW) Pty Ltd [2007] NSWSC 941 (Trysams) at [33], [34].

16. It is clear that an adjudication determination may be impugned where there has been a substantial denial of “the measure of natural justice that the Act requires to be given” (see Brodyn Pty Ltd v Davenport (supra) at [55] per Hodgson JA). It has been held that there may be a failure to afford natural justice where an adjudicator determines an application upon a basis that neither party has notified to the other or contended for, and which the adjudicator has failed to give notice to the parties (see Musico v Davenport [2003] NSWSC 977 at [108] per McDougall J).

17. However, the statutory context is important to the question of the content of the natural justice (or procedural fairness) requirement (see Probuild Constructions (Aust) Pty Ltd v DDI Group Pty Ltd (2017) 95 NSWLR 82; [2017] NSWCA 151 at [130]-[131] per McColl JA, with whom Beazley ACJ and Macfarlan JA agreed; see also JKC Australia LNG Pty Ltd v Inpex Operations Australia Pty Ltd (2018) 334 FLR 314; [2018] NTCA 6 at [38]-[41], cited by Ball J in Rhomberg Rail Australia Pty Ltd v Concrete Evidence Pty Ltd [2019] NSWSC 755 at [16]-[17]). It seems that the requirement of procedural fairness will not require an adjudicator to notify the parties of matters that should reasonably have been anticipated would be relied upon.

18. In order for a want of procedural fairness to amount to a jurisdictional error, the extent of non-compliance with the statutory requirement must be of such a magnitude that it is regarded as material (see Hossain v Minister for Immigration and Border Protection (2018) 264 CLR 123; [2018] HCA 34 at [24]-[31]; Brolton Group Pty Ltd v Hanson Construction Materials Pty Ltd [2020] NSWCA 63 at [66]-[67]; MZAPC v Minister for Immigration and Border Protection (2021) 95 ALJR 441; [2021] HCA 17 at [31]-[32]; Nathanson v Minister for Home Affairs (2022) 96 ALJR 737; [2022] HCA 26 at [30]-[33]). In this context, the principle of materiality is underpinned by a concern to avoid “practical injustice”.

32-36 York Street site

19. It is convenient to deal first with the validity of the adjudication determination (“the Determination”) in respect of the 32-36 York Street site. As already noted, nine grounds of challenge are made. Before dealing with each of those grounds in turn, some aspects of the Determination should be noted.

20. Paragraph 1 of the Determination is in the following terms:

I, John Tuhtan, the Adjudicator pursuant to the Building and Construction Industry Security of Payment Act 1999 (Act), for the reasons set out in this determination, determine that:

The amount of the progress payment to be paid by the Respondent to the Claimant (the adjudicated amount) is $2,045,453.97 including GST.

The date on which any amount became payable is 28 June 2022.

The rate of interest payable on any amount is the contract rate as prescribed under the Supreme Court Act 1970 (NSW), which at the due date for payment, is 6.85% p.a.

The Adjudicator’s fees and expenses are to be apportioned as follows:

Claimant          20%

Respondent      80%

In the event that the Claimant makes an application for an adjudication certificate, pursuant to section 24(1)(a) of the Act, the Respondent is liable for 100% of the cost for the adjudication certificate fee.

21. In paragraph 6, the adjudicator set out the details of the documents provided to him, including the adjudication application dated 28 June 2022 (which attached the payment claim and payment schedule), and an adjudication response. The adjudication response is said to have been sent by email on 28 June 2022 and to consist of 12 pages. That statement is incorrect, as the adjudication response is dated 7 July 2022 and consists of 117 pages.

22. The Determination goes on to deal with various “jurisdictional” matters. The adjudicator records that he is satisfied that:

1. the payment claim complies with the requirements of s 13 of the Act;

2. the payment schedule complies with the requirements of s 14 of the Act; and

3. the adjudication application complies with the requirements of s 17 of the Act.

23. The adjudicator further recorded that the adjudication response had been served by email on 7 July 2022, within the time allowed under the Act, and that “pursuant to s 20(2) of the Act” he had jurisdiction to consider the adjudication response. The reference to s 20(2) seems to be an error, but nothing turns on this.

24. After referring to the contractual documents, the adjudicator set out in a table the issues between the parties by reference to the payment claim and the payment schedule.

25. Paragraph 53 of the Determination is in the following terms:

In making this determination I have had regard to the following matters only, pursuant to section 22(2) of the Act:

the provisions of the Act;

the provisions of the construction contract from which the application arose;

the Payment Claim to which the application relates, together with all submissions, including relevant documentation, that have been properly made by the Claimant in support of the claim;

the Payment Schedule, if any, to which the application relates, together with all submissions, including relevant documentation, that have been properly made by the Respondent in support of the schedule;

the result of any inspection carried out by the adjudicator of any matter to which the claim relates.

26. In paragraphs 57 to 64, reference is made to further submissions requested by the adjudicator concerning certain handwritten annotations to the contract, and in paragraphs 65 to 74 the adjudicator dealt with and rejected an argument that the payment claim was invalid.

27. The various items in dispute between the parties are dealt with in paragraphs 75 to 362. There follows a summary of the valuation of the construction work ($2,045,453.97 including GST) and the adjudicator’s determinations as to time for payment, payment of interest, and liability for his fees and expenses.

Ground 1 (32-34 Hard Demolition)

28. This ground concerns item 4 in the payment claim. An amount of $145,790.50 was claimed by the defendant on the basis that the item was 85% complete. The item was specifically dealt with in paragraphs 30 to 33 of the payment schedule. The plaintiff assessed the item at $29,158.10 (see paragraph 33), so the amount in issue on this item was $116,632.40.

29. Paragraphs 31 and 32 of the payment schedule stated:

31.   The works the subject of this claim are only 65% complete (not 85% complete as alleged by A Civil).

32.   The brick work on the main core and windows on the western façade has not been removed. In that regard, please see the below photograph taken on 31 May 2022. As can be seen from the below photograph, progress on the lift core is only at the beginning of level 2.

30. The defendant, in paragraph 59 of its adjudication application, responded to paragraph 32 by stating, in effect, that the item encompassed various additional works, and “considering the entire scope in respect of the item” the claim of 85% completion “is actual and accurate”.

31. In its adjudication response, the plaintiff took issue with each of the elements of paragraph 59, including by way of photographic evidence, and maintained that the works were only 65% complete.

32. The item is dealt with in paragraphs 75 to 84 of the Determination. Paragraphs 75 to 80 provide:

75   The Claimant claimed $495,687.70 of $583,162.00 for “32-34 Hard Demolition”, representing 85% of this item of the Subcontract.

76   The Claimant asserts the value of the work claimed under the Contract for the relevant period in the Payment Claim was; $145,790.50 and was for the demolition of;

lift core walls (85%);

concrete stairs at front entrance (including railing) (100%);

the awning at the front entrance (100%);

toilet floor adjacent to the lift core and stairs (100%);

timber stairs and landings (100%);

floor slabs (100%); and

internal tile partition wall (100%);

77   The Respondent has assessed that claim as $379,055.10, representing 65% complete for this item of the Subcontract.

78   The Respondent asserts completion of this item was 65% instead of 85% that was claimed by the Claimant.

79   The Respondent’s reasons for withholding payment are that;

“Ceerose does not agree with A-Civils assessment of this item as $29,158.10”; and

“the brickwork on the main wall and windows on the western façade has not been removed”.

80   The Claimant asserts the Respondent has not considered the other parts of this claimed item that were complete and rejects the Respondent’s assessment.

33. After referring in paragraph 81 to the decision of Palmer J in Multiplex Constructions Pty Ltd v Luikens [2003] NSWSC 1140 (at [67]-[68] and [70]) (“Luikens”) the adjudicator stated at paragraphs 82 to 84:

82   The Respondent’s reason; “the brickwork on the main call [sic - core] and windows on the western façade has not been removed” does not explain the [sic] why the claimed value for the other above-mentioned part were excessive and, therefore, the Claimant is unable to provide any response to that reason.

83 Based on the above Palmer J definition of what is required as a minimum for a valid reason for withholding payment under the Act, the Respondent’s statement (about the status of the demolition of the western wall) cannot be construed to be a reason for withholding payment that satisfies section 14(3) of the Act.

84   Accordingly, I accept the Claimant’s claim of 85% complete for this item amounting to $495,687.70 and decide it is entitled to payment of the amount claimed.

34. The plaintiff contends that the adjudicator’s reasons involved a number of errors that were jurisdictional errors. The primary argument advanced at the hearing was that the adjudicator simply awarded the amount claimed without addressing the merits of the claim, thereby failing to meet one of the essential requirements for the existence of a valid determination under the Act (see Brodyn Pty Ltd v Davenport (supra) at [53]). Reference was made in this regard to authorities including the view expressed by Hodgson JA in Coordinated Construction Co Pty Ltd v JM Hargreaves (NSW) Pty Ltd (2005) 63 NSWLR 385; [2005] NSWCA 228 at [50]-[53]; Pacific General Securities Ltd v Soliman & Sons Pty Ltd [2006] NSWSC 13 at [82]-[86] per Brereton J (as his Honour then was); and, as an illustration of the application of the principles, Laing O’Rourke Australia Construction Pty Ltd v Monford Group Pty Ltd [2018] NSWSC 491 per Stevenson J.

35. The plaintiff submitted that the adjudicator, having determined that the plaintiff did not raise a valid reason for withholding payment, simply accepted the claim without coming to his own view as to the value of the work done and hence as to the amount payable.

36. The defendant submitted that the adjudicator did not accept the claim only because he rejected the plaintiff’s proffered reason for withholding payment. It was submitted that his acceptance of the claim must be read in the context of the entire Determination and the material he had before him, including the contract and all the material (including photographs) in the adjudication application. It was put that the reasons of the adjudicator should not be treated with a fine-tooth comb (see Cockram Construction Ltd v Fulton Hogan Construction Pty Ltd (supra) at [17]), and his conclusion in paragraph 84 should reasonably be read as based on the material before him, including that which is referred to in paragraphs 76 and 80 of the Determination.

37. I accept that a pedantic or overly technical approach should not be taken to the language of an adjudicator’s determination. I also accept that the language should be read in the context of the Determination as a whole, and bearing in mind the nature of the statutory task which involves the determination of a disputed claim within a short period of time. It is also relevant to note that the requirement under s 22(3)(b) of the Act is one to include reasons for the determination, not a requirement that the reasons be adequate according to any objective criterion (see Cockram Construction Ltd v Fulton Hogan Construction Pty Ltd (supra) at [34]).

38. However, it seems to me that the reasons given by the adjudicator for his determination in respect of item 4 should be read as stating that his acceptance of the defendant’s claim followed from his conclusion that the plaintiff had not raised in its payment schedule a valid reason to withhold payment. That is to say, I think that paragraph 84 of the Determination should be read as stating, in effect, that because there was no valid reason to withhold payment the claim was accepted.

39. Whilst the lack of a valid reason might mean that the adjudicator could readily find in favour of the claimant on the merits of the claim, he was required to address those merits. He could not simply award the amount of the claim (see Coordinated Construction Co Pty Ltd v JM Hargreaves (NSW) Pty Ltd (supra) at [52]).

40. Even though the adjudicator has referred to the nature of the dispute before him (namely, that the defendant claimed that the relevant work was 85% complete whereas the plaintiff claimed it was only 65% complete), he seems not to have determined the merits of the claim in order to reach a conclusion as to whether the claim should be accepted, or accepted to a certain extent. Rather, he seems to have accepted the claim merely because of the absence of a valid reason to withhold payment. In my opinion, the adjudicator thereby failed to meet an essential requirement for a valid determination under the Act. That failure amounted to a jurisdictional error.

34. This conclusion renders it unnecessary to consider various other attacks made by the plaintiff upon this part of the Determination, including the contention that by deciding the matter on the basis that there was no valid reason to withhold payment, the adjudicator decided the matter on a basis that was neither contended for, nor notified to the parties.

Ground 2 (32-34 Render removal to North, East and South)

42. This ground concerns item 6 in the payment claim. An amount of $11,700 was claimed by the defendant on the basis that the item was 100% complete. The item was specifically dealt with in the payment schedule at paragraphs 38 to 41. The plaintiff asserted that the works were only 70% complete and hence it had overpaid the defendant by $11,700. It followed that the amount in issue on this item was $23,400.

43. Paragraph 39 of the payment schedule stated:

The works the subject of this claim are only 70% complete (not 100% complete as alleged by A Civil). In that regard, please see the below photographs taken on 31 May 2022. As can be seen from the below photographs, the render has not been removed as can be seen in background and left side of core.

44. Paragraph 61 of the adjudication application stated:

(61)   In response to paragraph 39 of the PS, A-Civil submits as follows:

(a)   In accordance with the agreed Progress Claim 08 and Ceerose’s Payment Schedule 08, this work was certified by Ceerose as being 85% completed (Refer: TAB – 3Q & TAB – SC Payment Schedule PC08).

(b)   The photograph contained in this paragraph 39 of the PS does not actually show any indication of the actual Render Removal work.

(c)   The site picture (Refer: TAB – Render Removal) indicates the actual render removal progress and 100% of the work being completed.

45. The plaintiff took issue with the above in paragraph 21 of its adjudication response in the following terms:

In response to paragraph 61 of the Adjudication Application, the Respondent submits the following:

(a)   At TAB 3 of the Respondent’s Adjudication Response are photos taken on 30 June 2022 from each respective floors of render that have not been removed;

(b)   As seen in the photos as [sic] TAB 3 on each level, a large portion of render removal and preparation of substrate has not been completed. The Claimant has attempted to claim 100% the works completed, however, to-date, works are still left outstanding.

(c)   Works are less than 70% completed. The images mentioned in the Claimant’s site picture in ‘TAB – Render Removal’ is only on certain floors and not the entirety of the building.

(d)   Additionally, a lot of the rubble created from render removal remained on the floors and was not removed off site.

46. The item is dealt with in paragraphs 92 to 98 of the Determination. Paragraphs 92 to 96 are in the following terms:

92.   The Claimant claimed $78,000.00 of $78,000.00 for “32-34 Render removal to North, East & South”, representing 100% of this item of the Subcontract.

93.   The Claimant asserts the value of the work claimed under the Contract for the relevant period in the Payment Claim was; $11,700.00 and was for the removal of render to the North, East and South walls.

94.   The Respondent has reduced its previous assessment by $11,700, and now assesses the value of completed work as $54,600.00, representing 70% of this item of the Subcontract.

95.   The Respondent’s reasons for withholding payment are that;

a.   “Ceerose has overpaid A-Civil the sum of $11,700 for this item”; and

b.   “the render has not been removed…”

96.   The Claimant has provided photographs showing the render removed.

47. The adjudicator then referred to Multiplex Constructions Pty Ltd v Luikens (supra) and stated that the plaintiff’s statement about the status of the render was not a reason for withholding payment that satisfies s 14(3) of the Act. He continued, at paragraph 98:

98.   Accordingly, I accept the Claimant’s claim of 100% complete for this item and decide it is entitled to payment of the amount claimed.

48. The plaintiff’s primary argument on this ground was again that the adjudicator simply awarded the amount claimed without addressing the merits of the claim. The parties made submissions on the point that were substantially the same as those made in relation to Ground 1, although the content of paragraph 96 of the Determination was recognised as a possible distinguishing feature. In that regard, the plaintiff submitted that paragraph 96 could not be read as stating, in effect, that regardless of the Multiplex Constructions Pty Ltd v Luikens (supra) point, the adjudicator accepted the claim based on the photographs referred to in the paragraph. It was suggested that paragraph 96 did no more than note (as part of a summary in paragraphs 92-96) what was put forward by each party. For its part, the defendant submitted that the “accordingly” in paragraph 98 of the Determination should be read as a reference to all of paragraphs 92 to 97 (i.e. not merely to paragraph 97) and in the light of what appears earlier in the Determination, which shows that the adjudicator understood the requirements of the Act and the matter in dispute, and considered the material put forward by the parties.

49. Whilst paragraph 96 of the Determination perhaps makes this argument less clear than it is in relation to the previous item, I have reached the same conclusion. In my view, the reasons given by the adjudicator for his determination in respect of item 6 should also be read as stating that his acceptance of the defendant’s claim followed from his conclusion that the plaintiff had not raised in its payment schedule a valid reason to withhold payment. In other words, paragraph 98 should be read as stating, in effect, that the claim was accepted because there was no valid reason to withhold payment. Again, it seems to me that the adjudicator has failed to determine the merits of the claim in order to reach a conclusion as to whether the claim should be accepted, or accepted to a certain extent. I do not think that paragraph 96 should be read as anything more than a recording of the fact that the defendant had provided some photographs in support of its claim. (The reference must be to the photographs that formed part of the adjudication application). Paragraph 96 does not seem to me to record any acceptance of the defendant’s position. I note that in several other places, the adjudicator did record his acceptance of particular parts of the material placed before him.

50. In my opinion, the adjudicator’s failure to determine the merits of the claim was a failure to meet an essential requirement for a valid determination under the Act, and amounted to a jurisdictional error. It is again unnecessary to consider various other attacks made by the plaintiff upon this part of the Determination.

Ground 3 (32-34 Lead Paint Removal)

51. This ground concerns item 7 in the payment claim. An amount of $8,500 was claimed by the defendant on the basis that the item was 70% complete. The item was specifically dealt with in the payment schedule at paragraphs 42 to 46. The plaintiff asserted that the works the subject of the claim were “0% complete” and hence it had overpaid the defendant by $21,250. It followed that the amount in issue on this item was $29,750.

52. Paragraph 44 of the payment schedule stated:

44.   Most of the lead paint sits on the bounding wall of 32-34 and 36 York Street (southern wall). To date, none of the lead paint on this wall have been removed. In that regard, please see the below photograph:

53. The defendant responded in paragraphs 62 and 63 of the adjudication application, which included the following:

(62)   In response to paragraph 43 of the PS, A-Civil submits as follows:

(a)   In accordance with the scope of lead pint [sic] removal as per the contract scope “2.6.6” and “2.6.7”, A-Civil had completed 100% of the lead paint removal for contract scope 2.6.7 as below with render removal works, which is 70% of total lead paint removal;

(b)   In accordance with the agreed Progress Claim 08 and Ceerose’s Payment Schedule 08, this work was certified by Ceerose as being 50% completed (Refer: TAB – 3Q & TAB – SC Payment Schedule PC08).

(63)   In response to paragraph 44 of the PS, A-Civil submits as follows:

(a)   The lead paint removal on the external wall of the building at 32-34 York Street equates to 30% of the total lead paint removal work, which was not included in A-Civil’s Progress Claim 09. As per the contract scope “2.6.6”, this work formed part of lead paint removal work, however Ceerose has alleged that this part represents the whole scope of lead paint removal undertaken by A-Civil.

54. The plaintiff took issue with the above in paragraph 28 of the adjudication response which includes the following:

28.   In response to paragraph 62 of the Adjudication Application, the Respondent submits the following:

(a)   The lead paint removal, which the Claimant claim’s [sic] to have removed along with the render, is evidently still incomplete as noted in the Payment Schedule. Not only is the internal lead paint removal incomplete, but this also only covers the internal lead paint removal which forms a miniscule portion of the works. There is still the external lead paint to be removed which makes up approximately 95% of the works. See below extract from the scope of works of the executed contract item 2.6.6:

(b)   Further, see below photo dated 14 June 2022 of the southern wall with lead paint remaining to date:

…

As seen in the above photo, the lead paint (in white) has not been touched.

55. The item is dealt with in paragraphs 99 to 107 of the Determination. Paragraphs 102 to 107 are in the following terms:

102.   The Respondent’s reasons for withholding payment are that;

a.   “Ceerose has overpaid A-Civil the sum of $21,250 for this item”; and

b.   “most of the lead paint sits on the bounding wall of 32 to 34 and 36 York Street (southern wall). To date, none of the lead paint on this wall have been removed….”

103.   The Claimant asserts that it removed 100% of the lead paid [sic] referred to in item 2.6.7 at the time it removed the render, which is 70% of the total lead paint removal.

104.   Based on the Claimant’[s] explanation [sic] is clear that the Claimant has removed some of the lead paint and the Respondent has provided no explanations as to why it says that none of the lead paint has been removed.

105.   I, therefore, do not accept that [sic] the Respondent’s explanation.

106.   Furthermore, the Respondent previously certified some lead paint had been removed. Nowhere does the Respondent explain that it made a mistake in the previous payment schedule and that no lead paint was removed.

107.   Accordingly, I accept the Claimant’s claim of $29,750, which represents 70% complete for this item and decide it is entitled to payment of the amount claimed.

56. In respect of this item, the plaintiff again contended that the adjudicator failed to address the merits of the claim. It was recognised that, unlike the two items dealt with above, the adjudicator did not simply accept the claim because of the absence of a valid reason to withhold payment. However, it was submitted that there was an “absent step of logic” between paragraphs 106 and 107 of the Determination such that it could not be said that the adjudicator had determined the claim by addressing its merits. It was said that there is no finding or reasoning supporting the conclusion that 70% of the work (as opposed to some other percentage) had been performed, and that it did not necessarily follow from the adjudicator’s rejection of the plaintiff’s position that the claim should be accepted.

57. I do not agree that the adjudicator has failed to address the merits of this claim. I think that paragraph 104 of the Determination should be read as including an acceptance of the defendant’s assertion that is referred to in paragraph 103, which includes that 70% of the total lead paint has been removed. Having accepted that, the adjudicator said that he therefore did not accept the plaintiff’s explanation that none of the paint had been removed, and went on to note that the plaintiff had previously certified that some lead paint had been removed. That may be taken as a reference to the certification of 50% completion, which is noted in the adjudication application. In these circumstances, I would not read the acceptance of the claim that is recorded in paragraph 107 as resting solely upon what is contained in the immediately preceding paragraph. In my view, it should be read as resting upon the reasoning disclosed in all of the preceding paragraphs under the item, including the apparent acceptance of the assertion that 70% of the total lead paint had been removed.

58. The plaintiff further submitted that the adjudicator committed jurisdictional error by failing to consider the payment schedule and all submissions duly made in support of the schedule, as required by s 22(2)(d) of the Act.

59. The adjudicator did not refer specifically to either the payment schedule or the adjudication response in paragraphs 99 to 107 of the Determination. However, the text quoted in paragraph 102 is taken from the payment schedule, so the adjudicator must at least have given some consideration to the payment schedule. Despite the lack of a specific reference to the adjudication response (or any of its contents), I am not prepared to infer that the adjudicator failed to consider the adjudication response in this respect, and hence failed to consider submissions duly made by the plaintiff in respect of this item. The adjudicator’s reasons in relation to the items the subject of Grounds 1 and 2 reveal an understanding of the relationship between ss 14(3), 20(2B) and 22(2)(d), but for this item, he did not conclude that the plaintiff had failed to provide a valid reason to withhold payment such that submissions made by the plaintiff in the adjudication response were not “duly made”. This suggests that the adjudicator is likely to have considered those submissions, consistent with the statement contained in paragraph 53 of the Determination to that effect. Further, a consideration of those submissions may well have led the adjudicator to conclude (as he stated in paragraph 104 of the Determination), that the plaintiff had provided “no explanations” as to why it said that none of the lead paint had been removed.

60. For the above reasons, Ground 3 has not been made out.

Ground 4 (32-34 Cutouts to South brick wall)

61. This ground concerns item 8 in the payment claim. An amount of $6,750 was claimed by the defendant on the basis that the item was 20% complete. The item was specifically dealt with in the payment schedule at paragraphs 47 to 50. The plaintiff asserted that the works were only 5% complete and hence it had overpaid the defendant by $13,500. It followed that the amount in issue on this item was $20,250.

62. Paragraphs 47 and 48 of the payment schedule stated:

47.   Ceerose does not agree with A-Civil’s assessment of this item and assess this item as -$13,500.

48.   The works the subject of this claim are 5% complete (not 20% complete as alleged by A Civil). 50 of the cutouts are to be completed at 100% however only 1 floor has been completed.

63. The defendant responded by paragraph 64 of the adjudication application, which referred to the plaintiff previously certifying that 15% of the work had been completed.

64. The plaintiff responded to that paragraph in its adjudication response at paragraph 35 in the following terms:

In response to paragraph 64 of the Adjudication Application, the Respondent submits the following:

(a)   As set out in the Payment Schedule, the Respondent has overpaid the Claimant. The justification of this, is that there are 50 cut-outs to be completed however only one cut-out per floor has commenced. Each opening is roughly at 20% completion. Out of the 10 levels at 1 opening completed at 20%, realistically, only 4% of the works is completed as the cut-out which has been “completed” has not be [sic] completely cut-out and only “punched” through. See TAB 11 for photographs sowing [sic] the extent of cut outs.

65. The item is dealt with in the Determination at paragraphs 108 to 113 in the following terms:

108.   The Claimant claimed $27,000.00 of $135,000.00 for “32-34 Cutout to South brick wall”, representing 20% of this item of the Subcontract.

109.   The Respondent has reduced its previous assessment by $13,500.00 to $6,750.00, asserting only 5% of this item of the Subcontract has been completed.

110.   The Respondent’s reasons for withholding payment are that;

a.   “Ceerose has overpaid A-Civil the sum of $13,500 for this item” and

b.   “50 of the cutouts are to be completed at 100% however only 1 floor has been completed…”

111.   Based on HH Palmer J definition of what is required as a minimum for a valid reason for withholding payment, the Respondent’s statement does not satisfy the minimum standard because it is impossible to determine the number of cutouts the Respondent asserts were completed.

112.   I, therefore, do not accept that [sic] the Respondent’s explanation and prefer the Claimant’s explanation.

113.   Accordingly, I accept the Claimant’s claim of 20% complete for this item and decide it is entitled to payment of the amount claimed.

66. The plaintiff submitted that the adjudicator simply awarded the amount claimed without addressing the merits of the claim, just as he had done with item 4 the subject of Ground 1, and item 6 the subject of Ground 2.

67. For the following reasons, I think that the plaintiff’s submission should be accepted.

68. Paragraph 112 of the Determination includes a statement to the effect that the adjudicator preferred the defendant’s “explanation”. That must be a reference to the content of paragraph 64 of the adjudication application. However, it was merely noted in that paragraph that the plaintiff had previously certified that the work had been 15% completed. Insofar as paragraph 64 can be regarded as an explanation, it cannot explain an entitlement to a payment based on the work having been 20% completed. The adjudicator appears to have accepted the defendant’s claim “of 20% complete” based only upon his acceptance of the defendant’s “explanation”, and his non-acceptance of the plaintiff’s “explanation”. To my mind, the adjudicator has thereby accepted the claim without addressing the merits of the claim in order to reach a conclusion as to whether the claim should be accepted, or accepted to a certain extent. The position seems to me to differ from that with respect to item 7 (Ground 3), where there was an acceptance of the defendant’s assertion that it had removed 70% of the lead paint.

69. The adjudicator’s failure to address the merits of the claim was a failure to meet an essential requirement for a valid determination under the Act, and amounted to a jurisdictional error. It is again unnecessary to consider various other attacks made by the plaintiff upon this part of the Determination.

Ground 5 (36 Hard Demolition)

70. This ground concerns item 15 in the payment claim. An amount of $77,379 was claimed by the defendant on the basis that the item was 90% complete. The item was specifically dealt with in the payment schedule at paragraphs 51 to 53. The plaintiff asserted that the works were only 80% complete. The plaintiff assessed the item as $38,689.50 (see paragraphs 51 and 53), so the amount in issue on this item was $38,689.50.

71. Paragraph 52 of the payment schedule stated:

52.   The works the subject of this claim are only 80% complete (not 90% complete as alleged by A Civil). In that regard please see the below paragraphs taken on 30 May 2022.

As can be seen from the below paragraph, the demolition at 36 York Street is only at level 1 with stockpiles still remaining…

72. Paragraph 52 of the payment schedule was not responded to in the adjudication application. The adjudication application seems not to have contained any submission in relation to this item.

73. The item is referred to in the adjudication response at paragraphs 38 to 43, wherein the plaintiff repeated paragraphs 51 to 53 of its payment schedule, noted that the item was not addressed in the adjudication application, and maintained that the relevant works were only 80% complete.

72. The item is dealt with in the Determination at paragraphs 114 to 119 in the following terms:

114.   The Claimant claimed $348,205.50 of $386,895 for “36 Hard Demolition”, representing 90% of this item of the Subcontract.

115.   The Respondent has assessed this item as 80% completed in the amount $38,689.50.

116.   The Respondent’s reasons for withholding payment are that;

a.   “Ceerose does not agree with A-Civil’s assessment of this item…”

117. Based on HH Palmer J definition of what is required as a minimum for a valid reason for withholding payment, the Respondent’s statement (about not accepting the Claimant’s claim) does not satisfy the minimum standard because it is impossible to determine the disputed work and cannot be construed to be a reason for withholding payment that satisfies section 14(3) of the Act.

118.   I, therefore, do not accept that [sic] the Respondent’s explanation and prefer the Claimant’s explanation.

119.   Accordingly, I accept the Claimant’s claim of 90% complete for this item and decide it is entitled to payment of the amount claimed.

75. The plaintiff submitted that the adjudicator had again simply awarded the amount claimed without addressing the merits of the claim. The plaintiff’s submission should be accepted.

76. The defendant accepted that its adjudication application did not contain any submissions about this item. However, it pointed to some of the material that was annexed to the adjudication application, including an email dated 20 May 2022 from the defendant’s project manager stating that the works were then 80% complete, and certain inspection and test reports dated 7 June 2022, and submitted that it could be inferred that some further work had been performed after 20 May 2022. It was noted that neither the payment schedule nor the adjudication response suggested that no works had been done since 20 May 2022.

77. However, whilst it may be the case that there was material before the adjudicator which, if accepted by him, might have justified acceptance of the defendant’s claim, it appears, upon my reading of the Determination, that the adjudicator did not proceed in that fashion. Rather, he appears to have accepted the claim because he did not accept the plaintiff’s explanation and because he preferred the defendant’s explanation. As the defendant had not provided what might reasonably be described as any “explanation” in its adjudication application, I do not think it can be said that the adjudicator, in reaching his conclusion, addressed the merits of the claim. I do not think it can be inferred that the adjudicator addressed the merits of the claim in order to reach a conclusion as to whether the claim should be accepted, or accepted to a certain extent.

78. The adjudicator’s failure to address the merits of the claim was a failure to meet an essential requirement for a valid determination under the Act, and amounted to a jurisdictional error. It is again unnecessary to consider various other attacks made by the plaintiff upon this part of the Determination.

Ground 6 (Extra Cost for Demolition of 36 York Street Wall)

79. This ground concerns Variation 6 in the payment claim which is a claim for $687,214.19. A number of documents were attached to the payment claim in support of the variation, including Attachment A03 which contained a calculation of the total wall area involved (917.77m²) and a calculation of the total additional cost of demolition based on specified rates for hand demolition.

80. The variation was dealt with in the payment schedule at paragraphs 125 to 148. The plaintiff entirely rejected the variation. Three main grounds were raised, being:

1. that there was no entitlement to the claim under the contract because there was no written direction for the variation under cl 36.1, or because the claim was time barred pursuant to cl 36.6;

2. that the works were within the scope of the subcontract and thus not a variation; and

3. that the amount claimed was grossly excessive. In that regard it was stated that at most the claim was $11,900 plus GST, based on approximately 140m² of wall area on Level 4 at $85 per m².

81. The defendant responded to the above by paragraphs 80 to 82 of the adjudication application. In paragraph 80, the defendant referred to verbal and written notifications by it of the variation. In paragraph 81, the defendant stated that it had priced the wall demolition on the basis of demolition by small excavator, but after certain incidents in the course of the demolition, the methodology was changed to demolition by hand on instruction from the engineer. This is said to have occurred with the knowledge of the plaintiff. In paragraph 82, the defendant referred again to Attachment A03 as to the quantum and value of the additional work.

82. The variation is specifically dealt with in the adjudication response at paragraphs 113 to 132, although other parts of the adjudication response touch upon the claim, including paragraphs 11 to 13 (on page 17) and paragraphs 44 to 52 (on pages 45-6). The plaintiff essentially repeated the points that had earlier been made in the payment schedule. In addition, the plaintiff suggested that the value of the claim could be no more than $15,000 excluding GST, or alternatively $17,368.87 excluding GST. Those amounts were based on the work being confined to Level 4, and that the relevant wall area was 90m².

83. The variation is dealt with in the Determination at paragraphs 214 to 239. The reasons of the adjudicator concerning the variation must be read in their entirety, and in the context of the Determination as a whole. Nevertheless, the reasons may be broadly summarised as follows.

84. After describing the nature of the dispute in paragraphs 214-215, the adjudicator dealt with the circumstances in which the claim arose, and certain of the contentions raised by the plaintiff in that regard, in paragraphs 216 to 227, before stating at paragraphs 228-229:

228.   I am satisfied that the Respondent was notified both by its consulting engineer and by the Claimant on 10 February and 24 February 2022 that the conditions encountered were not those that the Respondent had declared existed by way of its drawings, with which the Claimant had to comply.

229.   I am further satisfied that the Claimant notified the Respondent that the revised construction methodology instructed by its consulting engineer on 10 February 2022 involved hand demolition rather than demolition using a 5 tonne excavator and was significantly more labour intensive and the Claimant confirmed it intended to claim payment for the additional work due to the Respondent’s consultant’s instruction to change the method of demolition.

85. At paragraphs 230 to 233, the adjudicator then dealt with an argument raised by the plaintiff that the defendant was in breach of cl 2.8.5 of the Scope of Works, and then at paragraphs 234 to 239 the adjudicator stated:

234.   The Claimant has calculated the area of the wall that had to be demolished by hand as 917.77m2. The Respondent does not dispute that quantity.

235.   The Claimant indicates the contract rate for demolition of a brick wall using a 5 tonne excavator was $150.00/m2. The Respondent has not objected to that rate.

236.   The Claimant indicates the contract rate for demolition of a brick wall/concreate [sic] reinforced edge beams, slabs and columns by hand was $897.76/m2. The Respondent has indicated it considers an appropriate rate to be $85.00/m2.

237.   Given the presence of reinforced concrete and demolition by hand the uncontested demolition rate for brick, I do not accept the Respondent’s assertion that the fair rate for demolishing actual site conditions was $85.00/m2.

238.   I have considered the Claimant’s rate for hand excavation of a wall including reinforced concrete elements that encroached into the neighbouring property and accept the Claimant’s rate as reasonable.

239.   Accordingly, I have decided that the Claimant is entitled to payment for the extra-over cost for the demolition of the 36 York Street wall in the amount of $687,214.19.

86. The plaintiff submitted that the adjudicator failed to perform his statutory function, primarily by failing to consider all submissions duly made by the plaintiff in support of the payment schedule (see s 22(2)(d) of the Act). In particular, the plaintiff submitted that the adjudicator failed to consider the submission that the variation was time-barred under cl 36.6 of the contract, and further failed to consider the plaintiff’s submissions concerning the value of the claimed variation.

87. The defendant submitted that it should be concluded that those matters were considered by the adjudicator, or at least it should not be inferred that he failed to do so.

88. In relation to the time bar argument based on cl 36.6 of the contract, the defendant submitted that the argument was disposed of by the reasoning in paragraphs 228 and 229 of the Determination, particularly when read with other parts of the Determination (including paragraphs 148-9, 179-80 and 210-11).

89. In relation to the value of the claimed variation, the defendant submitted that the adjudicator correctly stated in paragraph 234 that the plaintiff did not dispute the defendant’s calculation of the area of the wall to be demolished (917.77m²), the plaintiff rather taking issue with the extent to which demolition of the wall was within the scope of the contract. It was further submitted that the adjudicator, having apparently accepted that the defendant was entitled to a variation as claimed, did not need to deal with the plaintiff’s alternative calculations of value that were based on areas of only about 140m² or 90m².

90. The defendant’s submissions as to the value of the claimed variation may be accepted, but I am unable to conclude that the plaintiff’s time bar argument was disposed of by the reasoning contained in paragraphs 228 and 229 of the Determination. Those paragraphs (read with paragraph 218) can be seen to deal with the argument that there was no entitlement to the variation because there was no written direction for the variation under cl 36.1 of the contract. However, even when read with other parts of the Determination, they do not seem to touch upon the separate question of whether the defendant submitted its variation claim within the period allowed under cl 36.6 of the contract. Paragraphs 148-9, 179-80 and 210-11 do not assist the defendant’s argument because they concern a different argument in relation to the administration of the contract by the superintendent. Whilst statements are made to the effect that the plaintiff could not “in some cases” insist upon strict compliance with the terms of the contract in relation to notification and making of claims, the adjudicator does not state that this would prevent the plaintiff from relying upon cl 36.6 to defeat this variation claim.

91. Although the reasons for a determination under the Act do not necessarily have to refer to all of the submissions made in support of a payment claim or payment schedule, the absence of any reference to a submission may permit an inference to be drawn that the adjudicator did not give any consideration to it (see Goodwin Street Developments Pty Ltd v DSD Builders Pty Ltd (supra) at [23] per Basten JA; Malek Fahd Islamic School Ltd v Minister for Education and Training (No 2) [2017] FCA 1377 at [43] per Griffiths J). Whether such an inference can or should be drawn depends of course upon the particular circumstances of the case at hand. Here, the Determination contains a general statement in paragraph 53 to the effect that the adjudicator has only had regard to the matters set forth in s 22(2) of the Act, including submissions properly made in support of the payment schedule. However, I do not think that statement warrants a conclusion that, despite the lack of any reference to it, the adjudicator considered the plaintiff’s time bar argument in dealing with Variation 6 (see Malek Fahd Islamic School Ltd v Minister for Education and Training (No 2) (supra) at [48]). Rather, it seems to me that the inference should be drawn in the circumstances that the adjudicator failed to consider that argument. The argument was one of only a few arguments raised that challenged the defendant’s contractual entitlement to claim the variation. It can fairly be regarded as one of the main arguments raised. The other main arguments of that character (namely, the cl 36.1 argument and the scope of the contract argument) can be seen from the reasons to have been dealt with by the adjudicator. If the adjudicator had given any consideration to the time bar argument, it is likely that this would also have found expression in the reasons. I note that even the argument based on cl 2.8.5 of the Scope of Works (which seems to go only to quantum rather than entitlement to claim) was referred to in the reasons.

92. In addition, it is my view that had the time bar argument been considered by the adjudicator, there is a reasonable possibility that it could have led him to reach a different conclusion. Put another way, the failure to consider the argument cannot be dismissed as immaterial.

93. For the above reasons, I have come to the conclusion that, in relation to Variation 6, the adjudicator has failed to consider all submissions that were duly made by the plaintiff in support of its payment schedule. The adjudicator thereby failed to consider a matter required to be considered by s 22(2)(d) of the Act. That failure amounted to a jurisdictional error.

Ground 7 (Additional costs due to unavailability of crane)

94. This ground concerns Variation 10 in the payment claim which is a claim for $854,874.92. The claim was supported by a number of documents attached to the payment claim, including a detailed breakdown of costs claimed (see Attachment A02).

95. The variation was dealt with in the payment schedule at paragraphs 179 to 198. The plaintiff entirely rejected the variation. The grounds raised were summarised in paragraph 179 as follows:

179.   Ceerose rejects this purported variation claim by A Civil and assesses this item as $Nil for the following alternate reasons:

(a)   There is no contractual entitlement to claim for the purported variation as no variation was directed in writing by Ceerose.

(b)   Further and in the alternative, A Civil cannot discharge its own onus. A Civil has not at a basic level established that there is an actual change in the original scope of works and the actual costs of the alleged additional works which do not relate [to] the original scope of works.

(c)   Further and in the alternative, the purported variation claim appears to be a delay claim and A Civil is not entitled to any delay costs under the Subcontract.

(d)   Further and in the alternative, A Civil’s works were not dependent on the installation of the tower crane.

(e)   Further and in the alternative, the costs claimed with regard to such works is disproportionate to reality and grossly over exaggerated.

96. It was further stated in paragraph 182 that even if the variation had been directed by the plaintiff, the defendant’s claim was time barred by cl 36.6 of the contract.

97. It was stated in paragraph 197 of the payment schedule that the plaintiff considered that the reasonable value for the works could be no more than $7,070 excluding GST. That figure was evidently based on the cost of 14 bins at $505 each.

98. The defendant responded to the above by paragraphs 91 to 95 of the adjudication application. Reference should also be made to paragraphs 26 to 31 and 40 to 44 of the adjudication application, which contained submissions about the informal nature of the dealings between the parties under the contract. In particular, it was stated in paragraphs 41 to 43:

(41)   The nature of the working relationship between A-Civil and Ceerose was often times informal. Numerous conversations occurred between A-Civil and Ceerose which dispensed with the formal procedures prescribed in the Contract.

(42)   Where A-Civil proceeded with work directed, with the knowledge of Ceerose, who later disputed A-Civil’s entitlement to the variation, it may be able to be recovered by claiming in an arbitration that the work was a variation: State Rail Authority of NSW v Baulderstone Hornibrook Pty Ltd (1998) 5 BCL 117. This is analogous to the present circumstances.

(43)   In addition and on the basis that Ceerose acquiesces, even tacitly, in A-Civil performing the work, Ceerose ought be taken to have ratified the Variations and should be made to pay A-Civil a reasonable price for carrying out Variations: Wren v Emmett Contractors Pty Ltd (1969) 43 ALJR 213 at [216]; the same result may be achieved by the application of the doctrine of estoppel: Update Constructions Pty Ltd v Rozelle Child Care Centre Ltd (1990) 20 NSWLR 251 at [276-8].

99. The variation is specifically dealt with in the adjudication response at paragraphs 156 to 181. The plaintiff essentially repeated the points that had earlier been made in the payment schedule, although I note that “in order to support the position of a grossly excessive claim” the plaintiff included some additional assessments of value, none of which exceeded $39,545 excluding GST (see paragraphs 178 to 180). It should also be noted that paragraph 181 contains a detailed response to paragraphs 91 to 95 of the adjudication application. Reference should also be made to paragraphs 11 to 13 (on page 17) which concern the requirements of the contract and in particular cl 36 in relation to variations, and paragraphs 44 to 52 (on pages 45-6) which concern the variation claims generally.

100. The variation is dealt with in the Determination at paragraphs 294 to 315. The reasons may be broadly summarised as follows.

101. After describing the variation claim and the plaintiff’s response to it in paragraphs 294 to 297, the adjudicator referred to the contract and communications between the parties about cranage in paragraphs 298 to 301. The adjudicator stated in paragraph 301 that it was clear that the plaintiff failed to provide cranage as required under the contract. The adjudicator continued at paragraphs 302 to 307 in the following terms:

302.   It is also clear that in discussions with the Respondent about the Respondent’s failure to provide a crane in April 2022, the Respondent instructed the Claimant to adopt a different demolition methodology involving manual handling of demolished materials. That was an oral instruction given by the Respondent pursuant to cl. 20 of the contract to perform additional work, which the Respondent should have confirmed by way of written instruction “as soon as practical”.

303.   Accordingly, I do not accept the Respondent’s arguments that the Claimant had to be first given an instruction before it accrued any right to claim for the additional costs it incurred as a consequence of the Respondent’s failure to provide a crane (which was a breach of contract) because the Respondent gave an instruction to the Claimant to change its methodology and then failed to confirm that instruction in writing.

304.   Accordingly, the Respondent is estopped from insisting on strict compliance with the 36.1 of the contract and the Claimant’s right to claim a variation for carrying out work pursuant to an instruction given by the Respondent at the time it directed the change of methodology.

305.   Similarly, the Respondent is estopped on relying on any claim that depends on a timely submission from the time an instruction should have been issued by the Respondent.

306.   The Claimant was instructed to adopt manual handling of materials and incur significant additional costs whereas those demolished materials would have been handled with a crane but for the Respondent’s failure to provide the crane for a smaller cost.

307.   I do not accept that this is a claim for delay damages. This is a claim for the cost of additional labour and materials incurred due to a change of demolition methodology instructed by the Respondent necessitated by its failure to provide a crane to the Claimant as it was required to do under the contract.

137. After referring to the contractual documents, the adjudicator set out in a table the issues between the parties by reference to the payment claim and the payment schedule.

138. Paragraph 49 of the Determination is in the following terms:

49. In making this determination I have had regard to the following matters only, pursuant to section 22(2) of the Act:

a. the provisions of the 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 properly 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 properly made by the Respondent in support of the schedule;

e.   the result of any inspection carried out by the adjudicator of any matter to which the claim relates.

140. The various items in dispute between the parties are dealt with in paragraphs 53 to 147. Further, an argument that the payment claim did not comply with the requirements of cl 37.1(d) of the contract was dealt with, and rejected, at paragraphs 148 to 155. There follows a summary valuation of the construction work ($349,324.36 including GST) and the adjudicator’s determinations as to time for payment, payment of interest, and liability for his fees and expenses.

Ground 1 (Building A – Demolition)

141. This ground concerns item 10 in the payment claim. An amount of $241,096 was claimed by the defendant on the basis that the item was 100% complete. In the payment schedule, the plaintiff assessed the item at $192,876.80 on the basis that the works were only 80% complete. The amount in issue on this item was thus $48,219.20.

142. The defendant dealt with this item in paragraphs 39 to 44 of its adjudication application. It submitted that it had carried out 99.72% of the demolition (as it had been directed by the plaintiff to leave a portion of slab on the north-west corner of the site), and accordingly slightly adjusted its claim down to $240,420.93. Paragraph 42 of the adjudication application contains an explanation of the defendant’s calculation of 99.72% completion.

143. This item is dealt with in paragraphs 27 to 38 of the adjudication response. The plaintiff maintained that the percentage of work completed was only 80%. It was submitted that the defendant’s assessment was incorrect as it failed to consider “any concrete slab/hardstand and substructure demolition works below the surface”.

144. The item is dealt with in paragraphs 53 to 65 of the Determination. Paragraphs 58 to 60 are relevantly in the following terms:

58.   In the Payment Schedule, the Respondent asserts that the Claimant;

a.   did not complete the demolition structures, footings;

b.   did not remove demolition material; and

c.   is 80% complete.

59.   The Claimant disputes the Respondent’s assessment and claims the work carried out is 99.72% complete for the following reasons;

…

60.   I prefer the Claimant’s explanation and supporting evidence in the circumstances and decide that the total value of completed work in relation to Building A Demolition is; $240,420.93 excluding GST.

145. The plaintiff submitted that the adjudicator’s reasoning, as contained in paragraphs 58 to 60, involved jurisdictional error in that he failed to give any consideration to the adjudication response, and there was “a wholesale failure to consider the parties’ respective cases on the merits”. It was submitted that the adjudicator merely expressed a preference for the defendant’s position without providing any reasoning, and this did not amount to a determination of the matter as required by the Act. Put another way, it was submitted that there had been a constructive failure to exercise jurisdiction (see Dranichnikov v Minister for Immigration and Multicultural Affairs (2003) 77 ALJR 1088; [2003] HCA 26 at [25]-[27] and [87]).

146. The defendant submitted that the plaintiff’s complaint was one of form not substance. It was put that the adjudicator’s reasons, in particular paragraph 60, show that he made an assessment of the competing positions of the parties and concluded that the defendant’s position was to be preferred. It was put that the adjudicator further indicated that, based on that explanation, he was satisfied as to the value of the work. It was submitted that there was no basis to conclude that the adjudicator did not consider the adjudication response at all simply because it is not specifically referred to in the Determination.

147. I am not satisfied that the adjudicator fell into jurisdictional error in respect of this item. In particular, I am not satisfied that he failed to address the merits of the claim, and I am not satisfied that he failed to consider the adjudication response, whether generally or in respect of the submissions contained in it that relate to this item.

148. It is clear that the adjudicator at least considered the payment claim, the payment schedule and the adjudication application, and appreciated that the nature of the dispute was whether the demolition work had been completed as to 99.72% (as contended by the defendant) or only as to 80% (as contended by the plaintiff). Moreover, I think it is likely that the adjudicator also considered the adjudication response, even though no specific reference is made to the submissions in it that were directed to the extent of completed work. I note that in paragraph 63 of the Determination, reference is made to the response given by the plaintiff to the defendant’s submissions. Read in its context, this must, it seems to me, be a reference to part of the adjudication response, albeit not the part that contains the submissions specifically directed to this item. In these circumstances, and having regard to the statement made in paragraph 49 of the Determination, I would not infer that the adjudicator failed to consider those submissions.

149. The adjudicator evidently came to an understanding of the nature of the dispute based on his consideration of the material placed before him by the parties. He expressed a preference for the defendant’s “explanation and supporting evidence” and thus concluded that the value of the work was $240,420.93, as claimed by the defendant. To my mind, the adjudicator thereby addressed the merits of the claim. The adjudicator did not commit any jurisdictional error in that regard, and there was no constructive failure to exercise jurisdiction as alleged.

150. Ground 1 has not been made out.

Ground 2 (Building B – Demolition)

151. This ground concerns item 12 in the payment claim. An amount of $145,000 was claimed by the defendant on the basis that the item was 100% complete. In the payment schedule, the plaintiff assessed the item at $106,662.45 on the basis that the works were only 73.56% complete. The amount in issue on this item was thus $38,337.55.

152. The defendant dealt with this item in paragraphs 45 to 49 of its adjudication application. It maintained that the works were 100% complete.

153. This item is dealt with in paragraphs 66 to 78 of the Determination. Paragraphs 71 to 73 are relevantly in the following terms:

71.   In the Payment Schedule, the Respondent assets that the Claimant;

a.   did not complete the demolition structures, footings;

b.   did not remove demolition material; and

c.   is 73.56% complete.

72.   The Claimant disputes the Respondent’s assessment and claims the work carried out is 100.00% complete for the following reasons;

…

73.   I prefer the Claimant’s explanation and supporting evidence in the circumstances and decide that the total value of completed work in relation to Building B Demolition is; $145,000.00 excluding GST.

154. It is readily apparent that the structure of the adjudicator’s reasons in respect of this item is substantially the same as that in relation to the item the subject of Ground 1.

155. The plaintiff raised essentially the same complaints in relation to this ground as it did in relation to Ground 1. The defendant took the same approach.

156. Having considered the matter, I have come to the same conclusions in respect of Ground 2 as I came to in respect of Ground 1. Further, I have reached those conclusions for substantially the same reasons as those set out above at [147] to [149]. Again, I would not infer that the adjudicator failed to consider the submissions contained in the adjudication response that were specifically directed to this item even though no specific reference is made to the submissions in it that were directed to the extent of completed work. Further, I am again of the view that the adjudicator addressed the merits of the claim. The adjudicator did not commit any jurisdictional error in that regard, and there was no constructive failure to exercise jurisdiction as alleged.

157. Ground 2 has not been made out.

Ground 3 (Concrete saw cutting costs)

158. In its payment schedule, the plaintiff claimed an amount of $3,740 for concrete saw cutting costs said to have been incurred by it in order to complete the defendant’s demolition works. The defendant disputed the claim in its adjudication application (see at paragraphs 9, 40-42, 51-53 and 56-62) on the basis that it carried out the relevant demolition works to a point, and was then instructed to leave a portion in place. The amount in issue on this item was thus only $3,740.

159. The relevant items of work (items 10 and 13) were the subject of submissions made in the plaintiff’s adjudication response, including the submissions specifically directed to this item that appear on page 6 of the adjudication response.

160. The item is dealt with in paragraphs 92 to 98 of the Determination. In essence, the adjudicator rejected the claim on the basis that the plaintiff had not accrued any right of set-off under cl 52 of the contract because such a claim is required to be communicated to the defendant (see paragraphs 94 to 98 of the Determination).

161. The plaintiff submitted that a denial of procedural fairness was involved in deciding the matter in that way. This was because neither party submitted that cl 52 could only be relied upon by the plaintiff if a claim under the clause was communicated to the defendant, and because the adjudicator did not notify the parties of the point. The plaintiff further submitted that the adjudicator’s conclusion in respect of cl 52 was “legally unreasonable”.

162. In paragraph 56 of the adjudication application, the defendant submitted that the plaintiff was not entitled to a set-off against it pursuant to cl 52 of the contract. The reasons advanced as to why there was no such entitlement are not easy to discern from the submissions that followed. However, it may be that the reason advanced was that the claim was not made bona fide (see cl 52(b) of the contract). In any event, the plaintiff responded by submitting that there was no separate set-off in the payment schedule for the item. Clause 52 of the contract is not otherwise addressed by the plaintiff.

163. The adjudicator plainly appreciated that there was an issue as to whether the claim fell within cl 52 of the contract. In seeking to determine that issue, he evidently thought that there could be no claim (or no bona fide claim) for payment within cl 52(b) of the contract unless the claim is communicated to the defendant. The adjudicator’s conclusion that the claim had not been communicated to the defendant was thus sufficient to determine the issue adversely to the plaintiff.

164. Neither party had made a submission about whether communication of a claim was necessary in order for the claim to fall within cl 52 of the contract. If (as he did) the adjudicator proposed to determine the matter on that basis, he could have requested the parties to make further submissions on the point, as envisaged by s 21(4)(a) of the Act. Given the very small amount in issue, the adjudicator could have requested very brief submissions.

165. In my view, and notwithstanding the very small amount in issue, the failure of the adjudicator to allow the parties an opportunity to comment upon the point amounted to a denial of procedural fairness. The point was in reality an entirely new point, not taken by either party. Neither party would reasonably have expected the adjudicator to decide the issue on that basis. Moreover, it is reasonable to think that had the adjudicator received submissions on the point, his decision might have been different. The denial of procedural fairness was in my view material.

166. In my opinion, there was in the circumstances a substantial denial of the measure of natural justice that the Act requires to be given. The adjudicator thereby made a jurisdictional error. It is not necessary to consider whether the adjudicator’s conclusion was “legally unreasonable”, or whether that would amount to a jurisdictional error.

Ground 4 (Incomplete demolition works)

167. In its payment schedule, the plaintiff claimed an amount of $91,566.75 for certain costs said to have been incurred by it in order to complete the defendant’s demolition works. In its adjudication application, the defendant disputed the claim in its entirety. The amount in issue on this matter was thus $91,566.75.

168. The claim was dealt with in the Determination at paragraphs 99 to 103. The adjudicator rejected the claim. This rejection depended upon conclusions reached by the adjudicator that the defendant had completed all demolition works as required, including the works the subject of Grounds 1 and 2 above.

169. The plaintiff accepted that this ground was consequential upon Grounds 1 and 2. That is to say, it was accepted that if those grounds were not made out then Ground 4 would also fail. The plaintiff’s acceptance of this position seems to me to be appropriate.

170. Accordingly, in circumstances where I have not upheld Ground 1 or Ground 2, Ground 4 has also not been made out.

Ground 5 (Liquidated damages)

171. The plaintiff made a claim in its payment schedule for liquidated damages in the amount of $195,500. The amount was said to be calculated on the basis of 23 days of delay from the adjusted date for practical completion of 22 March 2022, at $8,500 per day.

172. In its adjudication application at paragraphs 74 to 138, the defendant took issue with the claim. Amongst other things, the defendant submitted that the date for practical completion was 25 May 2023, and practical completion had in fact been reached on 14 April 2022, so there could be no entitlement to liquidated damages.

173. In its adjudication response, the plaintiff submitted that although Item 11(a) of Part A to the contract specified 25 May 2023 as the date for practical completion, that date was changed, by Marking H to the contract, to 12 weeks from the date of site establishment.

174. The liquidated damages claim was dealt with in the Determination at paragraphs 110 to 122. After describing the nature of the dispute and noting certain provisions of the contract (at paragraphs 110 to 117) the Determination continued (at paragraphs 118-122) as follows:

118.   The Respondent did not provide any evidence that the date for practical completion had been changed from 25 May 2023 to 9 March 2022.

119.   Accordingly, I prefer the Claimant’s assertion that the date for practical completion was, as was set out in Item 11(a) of Part A of the Annexure, being 25 May 2023.

120.   Given that there is no dispute about whether the Claimant has achieved practical completion, I decide that the Claimant achieved practical completion on 14 April 2022. This based on the Respondent’s claimed adjusted date for practical completion of 22 March 2022 (per extension of time claim determination No.004 dated 12 April 2022) plus 23 calendar days, being the date of practical completion (per part 3b of the annexure to the payment schedule #06).

121.   As the Claimant achieved practical completion before the date for practical completion, the Respondent is not entitled to claim any liquidated damages pursuant to clause 34.7 of the Contract.

122.   Accordingly, I do not accept the Respondent’s set-off relating to liquidated damages.

175. The plaintiff submitted that the adjudicator completely failed to consider the dispute concerning the date for practical completion. It was submitted that the adjudicator failed to consider the contract and failed to consider submissions made by the plaintiff in its adjudication response. It was further submitted that the adjudicator was plainly incorrect to state in paragraph 118 that the plaintiff did not provide any evidence that the date for practical completion had changed from 25 May 2023. In that regard, the plaintiff pointed to Marking H to the contract, which was in the material before the adjudicator, and had been referred to in the adjudication response.

176. The defendant submitted that the adjudicator clearly considered the contract, and the submissions made in the adjudication response, including that the date for practical completion had been changed. It was put that the adjudicator was correct to say that there was no evidence that the date had been changed. This was because Marking H said nothing about the date for practical completion and provided no evidence that such date had been changed.

177. I am unable to accept the plaintiff’s submissions. It is clear from the adjudicator’s reasons that he appreciated the nature of the dispute, including the central argument concerning the date for practical completion. The reasons strongly suggest that the adjudicator considered the submissions that were contained in the adjudication response. It is also clear that the adjudicator considered the provisions of the contract in relation to that issue, although I acknowledge that the adjudicator makes no reference to Marking H. However, the text of Marking H (apart from the heading) is set out in the adjudication response at paragraph 61, and I think it is likely that the adjudicator read that as part of his consideration of the submissions. Moreover, I do not agree that the statement made in paragraph 118 of the Determination must be incorrect. When one has regard to the terms of Marking H, which are concerned with time for completion of demolition works, and say nothing about the date for practical completion, it would not be inaccurate to conclude that it provided no evidence of a change to that date. The adjudicator’s reasoning on this point might have been expressed better or more clearly, but any such deficiency does not amount to jurisdictional error.

178. In summary, I am not satisfied that the adjudicator failed to address the merits of the claim, failed to consider the contract (as required by s 22(2)(b) of the Act), or failed to consider any submissions duly made in support of the payment schedule (as required by s 22(2)(d) of the Act).

179. Ground 5 has not been made out.

Summary of conclusions concerning Elizabeth Bay site

180. I have concluded that the adjudicator fell into jurisdictional error in only one respect in relation to his Determination concerning the Elizabeth Bay site. That was the substantial denial of natural justice the subject of Ground 3. All of the other grounds were not made out.

181. As noted earlier, the additional arguments raised by the plaintiff concerning the validity of an adjudication certificate and a judgment of the District Court do not require determination.

Relief

182. When jurisdictional error is found in respect of an adjudicator’s determination under the Act, the Court commonly declares the determination to be invalid, or makes orders quashing the determination. In more recent times, however, at least since the decision of the Court of Appeal in YTO Construction Pty Ltd v Innovative Civil Pty Ltd [2019] NSWCA 110, in some cases where part or parts of a determination appear to be affected by jurisdictional error, questions have arisen as to whether it is open to the Court to effectively sever those parts and order the determination to be set aside only to that extent (see the discussion by Henry J in Acciona Infrastructure Australia Pty Ltd v Chess Engineering Pty Ltd (supra) at [207]-[216]).

182. The position is now affected by the introduction into the Act (with effect from 21 October 2019) of s 32A. Section 32A is in the following terms:

(1)   If, in any proceedings before the Supreme Court relating to any matter arising under a construction contract, the Court makes a finding that a jurisdictional error has occurred in relation to an adjudicator’s determination under this Part, the Court may make an order setting aside the whole or any part of the determination.

(2)   Without limiting subsection (1), the Supreme Court may identify the part of the adjudicator’s determination affected by jurisdictional error and set aside that part only, while confirming the part of the determination that is not affected by jurisdictional error.

184. The section confers a discretionary power upon the Court, where it finds that a jurisdictional error has occurred in relation to an adjudicator’s determination, to set aside the whole or any part of the determination. The section recognises that parts of an adjudicator’s determination may be affected by jurisdictional error whilst other parts are not.

185. As I have found jurisdictional error to have occurred in respect of both the York Street site Determination and the Elizabeth Bay site Determination, the power is available to be exercised if appropriate.

186. I am inclined to think that it would be appropriate in both cases to make orders under s 32A of the Act. In each case, the adjudicated amount is in reality the sum of a number of distinct parts only some of which are, according to my conclusions, affected by jurisdictional error. In each case (and especially in relation to the Elizabeth Bay site Determination) numerous parts of the Determination, that together reflect substantial sums of money and a significant portion of the adjudicated amount, are not so affected. It seems to me that it may be appropriate to not set aside those parts, and indeed confirm those parts, as envisaged by s 32A(2), whilst setting aside the balance of the Determinations.

187. However, given that the question of appropriate relief in the circumstances obviously depends to a degree upon the nature and extent of the findings I have made as to jurisdictional error, I will not proceed to make orders immediately. I would urge the parties to seek to reach an agreement as to the appropriate orders to be made (including as to costs), but if that cannot be readily achieved, I will give the parties an opportunity to make brief submissions.

188. The matter will be listed for mention on 23 March 2023.

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Decision last updated: 20 March 2023