Hansen Yuncken Pty Ltd v Yuanda Australia Pty Ltd
[2018] SASC 158
•4 October 2018
SUPREME COURT OF SOUTH AUSTRALIA
(Civil: Application for Judicial Review)
HANSEN YUNCKEN PTY LTD & ANOR v YUANDA AUSTRALIA PTY LTD & ANOR
[2018] SASC 158
Judgment of The Honourable Justice Lovell
4 October 2018
ADMINISTRATIVE LAW - JUDICIAL REVIEW - GROUNDS OF REVIEW - JURISDICTIONAL MATTERS
CONTRACTS - BUILDING, ENGINEERING AND RELATED CONTRACTS - THE CONTRACT - GENERALLY
The Second Defendant (the Adjudicator) was appointed under the Building and Construction Industry Security of Payment Act 2009 (SA) (the Act) to adjudicate a payment claim made by the First Defendant against the Plaintiffs. The Adjudicator determined that the Plaintiffs pay the First Defendant $1,905,069.
An issue before the Adjudicator was the question of liquidated damages. The Plaintiffs alleged that they put in issue the sum of $6,483,947.25. The Adjudicator in his Determination found that only the sum of $4,420,873.13 had been put in issue. The Plaintiffs alleged that the Adjudicator was in error, and requested that the Adjudicator correct the error pursuant to s 22(5) of the Act. The Adjudicator declined to exercise discretion under that section.
The Plaintiffs seek judicial review of that decision on three grounds:
1. The criteria in s 22(5) are jurisdictional facts, and the Court could determine whether the jurisdiction under s 22(5) was enlivened;
2. The Adjudicator committed a jurisdictional error in declining to exercise the jurisdiction conferred by s 22(5) of the Act;
3. The Decision was so unreasonable that no reasonable decision-maker in the position of the Adjudicator could have made it.
Held, dismissing Grounds 1, 2 and 3 of the Grounds of Review:
1. The criteria set out in s 22(5) are not, when considered in the context of the Act, jurisdictional facts;
2. The Adjudicator was correct in determining that the Plaintiffs had put in issue only the sum of $4,420,873.13 for liquidated damages;
3. The Adjudicator did not act unreasonably.
Building and Construction Industry Security of Payment Act (2009) s 22(5), referred to.
Hossain v Minister for Immigration and Border Protection (2018) 92 ALJR 780; Trustee for the Allway Unit Trust (trading as Westside Mechanical Contracting Pty Ltd) v R&D Airconditioning Pty Ltd [2018] SASC 46; Probuild Constructions (Aust) Pty Ltd v Shade Systems Pty Ltd (2018) 92 ALJR 248; Plaintiff M70/2011 v Minister for Immigration and Citizenship (Malaysian Declaration Case) (2011) 244 CLR 144; Musico v Davenport [2003] NSWSC 977; Uniting Church in Australia Property Trust (Qld) v Davenport [2009] QSC 134, considered.
HANSEN YUNCKEN PTY LTD & ANOR v YUANDA AUSTRALIA PTY LTD & ANOR
[2018] SASC 158LOVELL J:
Overview
The Second Defendant Mr O’Sullivan (the Adjudicator) was appointed under the Building and Construction Industry Security of Payment Act 2009 (SA) (the Act) to adjudicate a payment claim made by the First Defendant (Yuanda) against the Plaintiffs (HYLC). The Adjudicator determined that HYLC pay Yuanda $1,905,069. Upon receipt of the Adjudicator’s determination, HYLC wrote to him alleging that he had made an error in his calculations. HYLC asserted the Adjudicator could correct the error using s 22(5) of the Act. The Adjudicator declined to exercise his discretion under that section. HYLC seeks judicial review of that decision.
Background
HYLC entered into a contract with the State Government to design and construct the new Royal Adelaide Hospital. In August 2012 HYLC and Yuanda entered into a contract whereby Yuanda agreed to undertake the façade works on the hospital project. The original contract price was $64,839,472.50 (including GST). There were delays in the project. Yuanda (allegedly) did not meet the Date for Substantial Completion, as extended by HYLC pursuant to the contract. On 12 September 2017 HYLC exercised its rights under the contract and imposed liquidated damages on Yuanda at the rate of $66,349.00 per day. Liquidated damages, under the contract, were capped at 10% of the contract price. HYLC imposed liquidated damages for the period from 24 March 2015 to 1 July 2015 in the sum of $6,483,947.25 being the amount up to the “cap”. On 1 December 2017 HYLC had recourse to two bank guarantees, provided by Yuanda under the contract, totalling $4,420,873.13, in partial payment of the assessed liquidated damages. At the time of the Adjudication, HYLC asserted that Yuanda still owed HYLC the sum of $2,063,074.12 for liquidated damages.
Yuanda disputes that HYLC is entitled to liquidated damages. I do not have to decide this issue but the matters recited are relevant to the Adjudicator’s determination.
On 18 April 2018 Yuanda served a payment claim on HYLC pursuant to s 13 of the Act. Yuanda sought payment of $7,763,159.39. On 2 May 2018 HYLC served a payment schedule on Yuanda pursuant to s 14 of the Act. It asserted in the schedule that the amount owing was a negative sum of $592,029.10 (-$592,029.10). Having received the payment schedule Yuanda, on 25 May 2018, applied for adjudication pursuant to s 17 of the Act. On 28 May 2018 Mr O’Sullivan was appointed as the Adjudicator pursuant to s 19 of the Act. On 27 July 2018, the Adjudicator determined that HYLC pay Yuanda $1,905,069.90 (inclusive of GST). O’Sullivan released the determination to HYLC and Yuanda on 31 July 2018.
An issue before the Adjudicator was the question of liquidated damages. Yuanda contended that HYLC had no right to liquidated damages under the contract and therefore it was not a matter the Adjudicator could have regard to in his Determination. HYLC referred to the question of liquidated damages in its submissions to the Adjudicator. The Adjudicator rejected Yuanda’s submission and had regard to liquidated damages. However, the Adjudicator only took into account the sum of $4,420,873.13 (the amount recovered under the bank guarantees) rather than the total liquidated damages claimed of $6,483,947.25 in his final figures. That is the adjudicated amount did not include the balance of the liquidated damages of $2,063,074.12 that remained unpaid.
HYLC wrote to the Adjudicator on 10 August 2018 suggesting that s 22(5) may apply to the table contained in paragraph [299] of his Determination.
Section 22(5) states:
(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 a 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.
HYLC suggested that, having agreed that there was no reason to interfere with the liquidated damages regime, the Adjudicator had mistakenly used the amount of $4,420,873.13 rather than the full entitlement of liquidated damages namely $6,483,947.25. HYLC then invited the Adjudicator to “consider his calculation and the appropriate deduction to be made for liquidated damages” and suggested the appropriate consequential amendments. No other detail was supplied to the Adjudicator. Yuanda opposed any amendment. The Adjudicator requested submissions from the parties.
Having considered the submissions, the Adjudicator responded to the parties by email dated 13 August 2018. On this point the Adjudicator stated:
As noted in my determination, the starting point for any determination is the payment claim and the payment schedule. These documents define the dispute between the parties. As noted in the determination (from paragraphs 9 to 16 inclusive), part of the difficulty in calculating the final adjudicated amount is the different manner in which the parties approached the assessment of the payment claim.
In the payment schedule, the Respondent’s assessment was expressly based upon a scheduled amount of $592,029.10 (excl GST) which assessment made no allowance at all for the deduction of liquidated damages. However in the payment schedule, the Respondent also included an RCTI dated 2 May 2018 which showed an amount owing by the Claimant to the Respondent of $1,349,741.65 (incl GST), which amount was calculated using a deduction of, $4,420,873.13 for liquidated damages. This calculation is shown in the table at paragraph 10 of the determination.
Given this is the deduction used by the Respondent in its payment schedule (when considering the Respondent’s calculation of the adjusted contract amount on a global basis), I agree with the Claimant’s submission that this is the only amount which I may take into account in the calculation of the adjudicated amount. Notwithstanding the submissions of the Respondent dated 13 August 2018, having reviewed the payment schedule overall when deciding this matter, I did not consider that the Respondent had put in issue the greater amount it now seeks to deduct. I was cognisant of the issue when I made my determination (as indicated in paragraph 16) and this is the approach I took. Irrespective of the correctness of this position, I agree with the submissions of the Claimant that given this is the approach that I adopted in the determination, I am unable to revisit this position now pursuant to section 22(5) of the Act.
Based upon my determination on the liquidated damages issue, if I had considered that the Respondent made a deduction of $6,483,947.25 in the payment schedule, I would have included this figure in the calculation of the adjudicated amount. However, in my view, the Respondent did not put this larger amount in issue and I consider that I am bound by the position the parties took in the payment claim and the payment schedule respectively.
The Adjudicator therefore determined that he had not made an error to which s 22(5) applied. The Adjudicator declined to exercise discretion under s 22(5) and did not amend his determination.
HYLC seek to review that decision on three grounds:
1. The Adjudicator made a jurisdictional error, and thereby failed to exercise his jurisdiction when he ought to have, by:
a.determining that HYLC had claimed the sum of $4,420,873.13 and not the sum of $6,483,947.25 for liquidated damages from Yuanda pursuant to the construction contract; and
b.determining that he could not exercise the powers conferred by ss 22(5)(a), (b) and/or (c) of the Act to correct the amount of the liquidated damages to which he found HYLC had claimed and was entitled to from Yuanda and consequently the adjudicated amount in the Determination.
2. The Adjudicator acted without jurisdiction, and thereby committed a jurisdictional error, in declining to exercise the jurisdiction conferred by s 22(5) of the Act to correct the amount of the liquidated damages to which he found HYLC had claimed and was entitled to from Yuanda and consequently the adjudicated amount in the Determination in that he found that the jurisdictional facts contained in ss 22(5)(a), (b) and (c) of the Act did not exist when they did in fact exist, and he therefore ought to have exercised the power conferred by s 22(5) of the Act, because:
a.HYLC had claimed the amount of $6,483,947.25 for liquidated damages in the payment schedule and/or in the submissions before the Adjudicator; and
b.Consequently the Adjudicator had committed a clerical mistake, an error arising from an accidental slip or omission or a material miscalculation of figures, in stating the adjudicated amount to be $1,905,069.90 (inclusive of GST) in the Adjudication Determination within the meaning of ss 22(5)(a), (b) and/or (c) of the Act.
3. The Decision was so unreasonable that no reasonable decision-maker in the position of the Adjudicator could have made it in that:
a.Contrary to the decision, HYLC had claimed the amount of $6,483,947.25 for liquidated damages in the payment schedule and/or in the submissions before the Adjudicator; and
b.Consequently, the Adjudicator had committed a clerical mistake, an error arising from an accidental slip or omission or a material miscalculation of figures, in stating the adjudicated amount to be $1,905,069.90 (inclusive of GST) in the Adjudication Determination within the meaning of ss 22(5)(a), (b) and/or (c) of the Act; and
c.In any event, it was:
i.Illogical and/or irrational, having regard to the evidence and submissions before the Adjudicator; and/or
ii.Made contrary to the evidence and/or the submissions before the Adjudicator.
HYLC submitted that, properly construed, s 22(5) of the Act makes the existence of “a clerical mistake”, “an error arising from an accidental slip or omission” or “a material miscalculation of figures” jurisdictional facts.
A “jurisdictional fact” is a “criterion the satisfaction of which enlivens the exercise of the statutory power or discretion in question”.[1] If the jurisdictional fact is not satisfied, the exercise of the power will have been made without the necessary statutory authority required of the decision maker. A jurisdictional fact must actually exist for the decision maker’s ultimate action to be valid. A jurisdictional fact is to be determined by the court which decides whether it considers that the fact existed at the relevant time.
[1] Gedeon v Commissioner of the New South Wales Crime Commission (2008) 236 CLR 120 at [43].
HYLC submitted that, objectively, there had been a “clerical error” or a “material miscalculation of figures”. The Adjudicator therefore had jurisdiction to exercise the discretion conferred by s 22(5) and committed a jurisdictional error in denying the existence of jurisdiction.
HYLC does not challenge the Determination itself. It challenges the Adjudicator’s refusal to correct the Adjudication pursuant to s 22(5) of the Act. HYLC does not suggest that the Adjudicator wilfully refused to consider s 22(5); objectively, it submitted, he had made an error and in not appreciating his error he denied himself the jurisdiction.
Yuanda submitted that the Adjudicator had not made an error. Alternatively, Yuanda submitted that s 22(5) does not contain “jurisdictional facts”. The Adjudicator had an obligation to consider the submissions of HYLC which he did. Yuanda submitted that even if he had erred, as s 22(5) did not contain jurisdictional facts, any error made was within jurisdiction and therefore not reviewable.
Whether the matters contained within s 22(5) can be characterised as “jurisdictional facts” is ultimately a matter of statutory construction. In Hossain v Minister for Immigration and Border Protection,[2] in relation to jurisdictional error Kiefel CJ, Gageler and Keane JJ observed:
Jurisdictional error, in the most generic sense in which it has come to be used to describe an error in a statutory decision-making process, correspondingly refers to a failure to comply with one or more statutory preconditions or conditions to an extent which results in a decision which has been made in fact lacking characteristics necessary for it to be given force and effect by the statute pursuant to which the decision-maker purported to make it. To describe a decision as "involving jurisdictional error" is to describe that decision as having been made outside jurisdiction. A decision made outside jurisdiction is not necessarily to be regarded as a "nullity", in that it remains a decision in fact which may yet have some status in law. But a decision made outside jurisdiction is a decision in fact which is properly to be regarded for the purposes of the law pursuant to which it was purported to be made as "no decision at all". To that extent, in traditional parlance, the decision is "invalid" or "void"
…
Just as identification of the preconditions to and conditions of an exercise of decision-making power conferred by statute turns on the construction of the statute, so too does discernment of the extent of non-compliance which will result in an otherwise compliant decision lacking the characteristics necessary to be given force and effect by the statute turn on the construction of the statute. The question of whether a particular failure to comply with an express or implied statutory condition in purporting to make a particular decision is of a magnitude which has resulted in taking the decision outside the jurisdiction conferred by the statute cannot be answered except by reference to the construction of the statute.[3]
(Citations omitted)
[2] Hossain v Minister for Immigration and Border Protection (2018) 92 ALJR 780.
[3] Hossain v Minister for Immigration and Border Protection (2018) 92 ALJR 780 at 787 [24]-[27] (per Kiefel CJ, Gageler and Keane JJ).
If the matters contained in s 22(5) are characterised as “jurisdictional facts”, the question arises whether the failure to comply with one or more statutory preconditions results in a decision which lacks the characteristics necessary for it to be given force and effect by the statute pursuant to which the decision-maker purported to make it.
Evidence
HYLC tendered an affidavit of Travis George Toemoe (TGT) to which a number of documents were attached. An affidavit of Rodney James Macey (RJM), with exhibits was also tendered. Neither witness was required for cross-examination. Yuanda did not call any evidence.
The Scheme of the Act
The Act establishes a scheme of rights and procedures relating to the receipt and recovery by contractors of progress payments for construction work. Under the scheme, disputed payment claims may be referred for determination by an adjudicator.[4] The purpose of the legislation is to provide a prompt route for payment for those who have provided goods or services under a construction contract. As Doyle J observed in Trustee for the Allway Unit Trust (trading as Westside Mechanical Contracting Pty Ltd) v R&D Airconditioning Pty Ltd it is a scheme to “provide a speedy and effective means of ensuring cash flow to builders from the parties with whom they contract”.[5] Those providing goods or services under a construction contract are entitled to progress payments, and to make payment claims (pursuant to s 13) in respect of those progress payments.
[4] Probuild Constructions (Aust) Pty Ltd v Shade Systems Pty Ltd (2018) 92 ALJR 248.
[5] Trustee for the Allway Unit Trust (trading as Westside Mechanical Contracting Pty Ltd) v R&D Airconditioning Pty Ltd [2018] SASC 46 at [36]; Southern Han Breakfast Point Pty Ltd (in liq) v Lewence Construction Pty Ltd (2016) 91 ALJR 233.
Section 14(1) of the Act permits a person on whom a payment claim is served pursuant to s 13, defined as the “respondent”, to reply to the payment claim by providing a “payment schedule” to the claimant. Section 14(2) sets out what a payment schedule must contain for it to be a valid payment schedule. The payment schedule must indicate the amount of the payment, if any, that the respondent proposes to make (the scheduled amount) and, if the scheduled amount is less than the claimed amount, to indicate the basis for the lesser amount (s 14(3)). Section 14(4) sets out the consequences of a failure by the respondent to provide a payment schedule.
If the scheduled amount is less than the amount claimed, the claimant is entitled to apply for adjudication (s 17). The respondent is entitled to put in a written response to the adjudication application, but may not include reasons for withholding payment unless those reasons had been included in the payment schedule (s 20 (4)).
Sections 18 to 21 govern the Adjudication process; the appointment of an Adjudicator, the lodging of an adjudication response and the procedures that an Adjudicator must or may adopt.
If the Adjudicator determines that the respondent is required to pay an adjudicated amount, then the respondent must pay (s 23(2)); s 24 deals with the consequences of non-payment.
Section 22 sets out the task of the Adjudicator. Section 22(5) enables the Adjudicator to correct his or her Determination in particular circumstances (commonly referred to as the slip rule). Section 25 also deals with the filing in court of an Adjudication Certificate.
Section 32 provides that (subject to a qualification in s 33) nothing in the Act affects any right that a party to a construction contract may have under that contract. Nor does anything in the Act have any effect on civil proceedings arising under a construction contract, save that a court or tribunal is required to allow for any amount paid to a party under or for the purposes of the Act in any order or award it makes, and may make an order for the restitution of any amount so paid having regard to its decision in those proceedings.
Are the criteria set out in s 22(5) jurisdictional facts?
The characterisation of facts as jurisdictional is ultimately an issue of construction. That inquiry involves the interpretation of the relevant statutory provision(s) in light of the statutory purpose so as to identify the relevant Parliamentary intent. Determination of the relevant Parliamentary intent is often difficult, particularly where the issue is left largely to inference.[6] Parliament is not limited in its capacity to identify what factual findings are preconditions to jurisdiction and what are not. Nor is it limited so that a particular factual finding must always be one or the other.[7]
[6] Australian Heritage Commission v Mount Isa Mines Ltd (1995) 60 FCR 456 at 465-466.
[7] O’Halloran v Wood [2004] FCA 544 at [23].
In my view, the criteria set out in s 22(5) are not, when considered in the context of the Act, jurisdictional facts. My reasons follow.
A factual reference is unlikely to be a jurisdictional fact where the relevant factual reference “occurs in the statutory formulation of a power to be exercised by the primary decision-maker or, in some other way, necessarily arises in the course of the consideration by that decision-maker of the exercise of such a power. The conclusion is likely to be different if the factual reference is preliminary or ancillary to the exercise of a statutory power.”[8] The relevant distinction is whether the fact referred to is a fact to be adjudicated upon in the course of the inquiry or whether it is an essential preliminary to the decision-making process. As French CJ observed in Plaintiff M70/2011 v Minister for Immigration and Citizenship (Malaysian Declaration Case):
The term “jurisdictional fact” applied to the exercise of a statutory power is often used to designate a factual criterion, satisfaction of which is necessary to enliven the power of a decision-maker to exercise a discretion. The criterion may be “a complex of elements”. When a criterion conditioning the exercise of statutory power involves assessment and value judgements on the part of the decision-maker, it is difficult to characterise the criterion as a jurisdictional fact, the existence or non-existence of which may be reviewed by a court. The decision-maker’s assessment or evaluation may be an element of the criterion or it may be the criterion itself.[9]
[8] Timbarra Protection Coalition Inc v Ross Mining NL (1999) 46 NSWLR 55 at 65 [44] per Spiegelman CJ.
[9] Plaintiff M70/2011 v Minister for Immigration and Citizenship (Malaysian Declaration Case) (2011) 244 CLR 144 at 179 [57].
Section 22(5) enables an Adjudicator to correct the determination of his own motion or on application of a party. HYLC submitted that the ability of the Adjudicator to correct the determination of his own motion pointed to the criteria as being jurisdictional facts. I consider it points the other way. It suggests an intention to provide a “speedy” remedy to a minor, although possibly expensive, error.
A relevant factor is the inconvenience that may arise from classifying a factual reference in a statutory formulation as a jurisdictional fact.[10] The scheme has been designed to be a “speedy and effective means of ensuring cash flow to builders from the parties with whom they contract”.[11] The Determination is final subject to the reservation of ultimate contractual rights under s 32. The speedy adjudication does not extinguish a party’s ordinary contractual right to obtain a final resolution of issues including a set off. It is an important factor that the purpose of the Act is a quick resolution of disputes; there should only be limited recourse to the courts in respect of an adjudication and/or its correction.
[10] Timbarra Protection Coalition Inc v Ross Mining NL (1999) 46 NSWLR 55 at 72 [91].
[11] Trustee for the Allway Unit Trust (trading as Westside Mechanical Contracting Pty Ltd) v R&D Airconditioning Pty Ltd [2018] SASC 46 at [36].
The only way a determination, once made, can be “corrected” is under s 22(5). Section 22(5) gives the discretionary power to correct, not amend; it is a very limited power. The Adjudicator is best placed, having considered the materials before him during the Determination, to determine whether there is an error. Given the power is limited to “corrections”, it would be consistent with the policy of the scheme that a “correction” also be done in a speedy and efficient manner.[12] If the Adjudicator makes a mistake about the “correction”, such a mistake is not a final decision on the point. Again, s 32 is relevant to that consideration. To enable a review of that decision and require a court to objectively determine whether the criteria of s 22(5) have been met would not be consistent with the overall purpose of the scheme. Further, the fact that the remedy is discretionary suggests the criteria are not jurisdictional facts.
[12] Probuild Constructions (Aust) Pty ltd v Shade Systems Pty Ltd (2018) 92 ALJR 248 at 260-1 [40], [44], [51].
HYLC submitted that it was significant that ss 22(1), (2) and (3) have been held to define or affect the jurisdiction of the Adjudicator. They contain jurisdictional facts.[13] It was submitted that this strengthened the argument that the criteria in s 22(5) were jurisdictional facts. While the question is one of statutory construction and therefore the other subsections are a relevant consideration, the wording of the subsections varies as do the conditions imposed. For example the requirements of s 22(3) are mandatory. It is appropriate to construe the terms of s 22(5) within the totality of the scheme.
[13] Maxcon Constructions Pty Ltd v Vadasz (No 2) (2017) 127 SASR 193 at 229 [119].
None of the factors referred to are, in isolation, dispositive of the issue. In my view, however, the proper construction of s 22(5) is that the discretion is enlivened either by the Adjudicator of his own motion correcting the determination or a party applying to the Adjudicator to correct the determination. Once such an application is made, the Adjudicator decides whether the issue raised falls within the criteria of s 22(5). The Adjudicator may, not must, correct the determination. If he is wrong in his assessment of whether the criteria are engaged, that is an error within jurisdiction.
In this matter the Adjudicator exercised the jurisdiction by deciding not to revisit his Determination. It was not suggested that he declined to consider the application of HYLC at all.
A court with a judicial review jurisdiction may inquire into the reasonableness of that decision but not itself determine the actual existence or non-existence of the relevant facts.
Finally, in Musico v Davenport[14] McDougall J considered the operation of s 22(5) of the NSW Act. He considered that the criteria in s 22(5) were not jurisdictional facts. McDougall J observed:
It might be thought that, in the ordinary case, a proper exercise of the discretion conferred by s 22(5) would favour the correction of mistakes of the kind referred to therein. However, it is a matter for the adjudicator whether or not any such correction is to be made. If an adjudicator declines to make any correction - for example, because he or she thinks there is no mistake - then the error (if any) will be an error within jurisdiction. This is really another way of saying that, under s 22(5) a party to an adjudication has the right to request the adjudicator to consider the exercise of power under s 22(5), not the right to have the power exercised in a particular way. As Griffith CJ said in R v Arndel, ex parte Freeman (1906) 3 CLR 557, 566-567, and repeated in Randall v Council of the Town of Northcote (1910) 11 CLR 100, 105:
“If the act sought to be compelled to be done is a discretionary act, mandamus does not go further than to command the exercise of the discretion, and can never go to command its exercise in a particular manner.”[15]
[14] Musico v Davenport [2003] NSWSC 977.
[15] Musico v Davenport [2003] NSWSC 977 at [122].
HYLC submitted that this decision was distinguishable. First, it was submitted that the argument that McDougall J was asked to address was whether the adjudicator committed jurisdictional error in failing to exercise the discretion contained in s 22(5). He was not there asked to address the argument HYLC advances, namely that s 22(5)(a)-(d) contain jurisdictional facts. While I agree that McDougall J does not use the expression “jurisdictional facts”, there can be little doubt that he did not consider the criteria to be so. He stated the decision is one for the adjudicator to make and if he or she is wrong it is an error within jurisdiction. He could not have made that finding if the criteria were jurisdictional facts. Secondly it was submitted that McDougall J was concerned with the question of whether the determination made by the Adjudicator was infected with jurisdictional error by reason of the adjudicator failing to exercise the discretion under s 22(5) to correct it. HYLC in this matter does not challenge the Adjudication Determination but rather the decision itself. In my view that is not a distinguishing feature unless the question of “jurisdictional facts” is assumed in favour of HYLC. In my view McDougall J was correct in his construction of s 22(5).
HYLC sought support for its argument from the decision of Daubney J in Uniting Church in Australia Property Trust (Qld) v Davenport.[16] Daubney J held that:
My conclusion that the course proposed to be adopted by the adjudicator does not fall within any of the discrete circumstances specified in s 28(1) means that any purported exercise by the adjudicator of the power to correct under s 28(2) would be an act in excess of the discretionary power conferred on him by that subsection, and thereby constitute an act of jurisdictional error on his part. Absent any statutory prohibition, it seems to me that in a case such as the present, in which the adjudicator has clearly articulated his intention to commit jurisdictional error by acting beyond power, it is clearly available to the Court to prevent the adjudicator from committing that error by granting appropriate relief, whether declaratory or, if necessary, injunctive. As McDougall J said in Musico, “relief will lie where jurisdictional error, including jurisdictional error of law on the face of the record, is shown”. Semble, in my view, where, as here, it is demonstrated that a jurisdictional error is about to be committed.[17]
[16] Uniting Church in Australia Property Trust (Qld) v Davenport [2009] QSC 134.
[17] Uniting Church in Australia Property Trust (Qld) v Davenport [2009] QSC 134 at [39].
HYLC submitted that Daubney J found that the criteria in s 28 of the Queensland Act (the equivalent of s 22(5)) were “jurisdictional facts” and the decision was in conflict with McDougall J’s decision in Musico.
In my view the decision in Uniting Church supports the position adopted in Musico. Daubney J found that the Adjudicator proposed to adopt “a completely different method of making the calculations”. Dabuney J observed:
My characterisation of what is proposed to be done by the adjudicator as a complete change of reasoning also points to a conclusion that there is no question of “miscalculation” here; rather, the adjudicator proposes to substitute new calculations for his original calculations.[18]
[18] Uniting Church in Australia Property Trust (Qld) v Davenport [2009] QSC 134 at [38].
Daubney J found that the Adjudicator would be acting in excess of the discretionary power conferred on him by the subsection and this would constitute the jurisdictional error. He did not consider the criteria were “jurisdictional facts”; rather he characterised the approach of the Adjudicator as one which would exceed jurisdiction. Daubney J did not determine whether the “jurisdictional facts” existed objectively as it was unnecessary to do so. If I am wrong in my interpretation of the decision in Uniting Church, I prefer the reasoning in Musico.
The application for judicial review fails on this ground subject to the question of Wednesbury unreasonableness. However, I will determine the other grounds on the assumption that the criteria in s 22(5) are jurisdictional facts.
Did the Adjudicator make a reviewable jurisdictional error?
Assuming the criteria set out in s 22(5) are “jurisdictional facts”, the task of a court is to consider the evidence and determine for itself whether, objectively, any one of the criteria has been established. In undertaking that task a court must disregard the Adjudicator’s reasons (if given) for refusing to correct his or her decision pursuant to s 22(5).
What was in issue before the Adjudicator during his Determination is critical to this application. As discussed earlier in these reasons, HYLC, having received the Determination, wrote to the Adjudicator and requested that he consider amending his Adjudication pursuant to s 22(5) of the Act. The Adjudicator determined that only the sum of $4,420,873.13 was put in issue on the question of liquidated damages; he decided that he had not made an error to which s 22(5) applied. The Adjudicator therefore declined to exercise his discretion under s 22(5) and did not amend his determination.
HYLC submitted that the Adjudicator had in fact made a specific finding that HYLC had put in dispute, in the Adjudication, the full amount of liquidated damages namely $6,483,947.25. It was submitted not only that he made that finding but also his calculations, contained within his Reasons, supported the finding. Having made that finding, by using the lesser sum of $4,420,873.13 in his calculations, the Adjudicator made the type of error that could be corrected under s 22(5) of the Act. Therefore, it was submitted, the Adjudicator, viewing the facts objectively, had jurisdiction to apply s 22(5) of the Act and his decision not to correct his “error” was one infected by jurisdictional error. Review was sought of his decision not to exercise the power under s 22(5).
I reject HYLC’s submissions. The evidence establishes that HYLC did not, in fact, put the full amount of the liquidated damages in issue. What was in issue in relation to the question of liquidated damages was the sum of $4,420,873.13. In my view the Adjudicator made no finding that the sum of $6,483,947.25 was in issue. He determined that only $4,420,873.13 was in issue. Having made that determination the figure is used consistently through his calculations. The evidence does not establish that his methodology or his calculations support the submission that the Adjudicator had made a finding that the sum of $6,483,947.25 was in issue. My reasons follow.
Did HYLC put the full amount of liquidated damages in issue?
HYLC relied on the Adjudicator’s findings where, in his reasons, he stated:
Liquidated Damages
274.This item relates to a deduction by the Respondent of liquidated damages from the monies otherwise payable to the Claimant under the Contract.
275.For the purposes of this adjudication determination, the amount in dispute is the difference between the “paid to date” amounts attributed by the parties in the payment claim and payment schedule. By my calculations, the amount in dispute is $4,420,817.13 although this is slightly different to the amount of $4,439.127.88 which is the difference between the figures of $6,502,202.00 and $2,063,074.12 shown below.
276.In the payment schedule, the Respondent has withheld payment on the basis that:
(a)the Claimant failed to complete the Subcontract works by the date for Substantial Completion as adjusted;
(b)the adjusted date for Substantial Completion as adjusted was 24 March 2015, which date was unilaterally extended by the Respondent from 27 October 2014;
(c)the Claimant was therefore indebted to the Respondent for the sum of $6,502,202.00 (being 10% of the contract sum) because of the late completion, of which $2,063,074.12 remains outstanding.
(Underlining added)
HYLC relied upon paragraph 276(c) as supporting its submission. However, paragraph 276(c) must be read in the context of the Adjudicator’s findings at paragraph 275. Clearly in paragraph 275 the Adjudicator considered that only the sum of $4,420,873.13 was in issue “in the adjudication determination”. His observation that $2,063,074.12 remained outstanding was simply a statement of fact. I reject the submission that he made a finding that $6,483,947.25 was in issue at the Adjudication.
HYLC submitted that, irrespective of his comments at paragraph 276(c), it was clear from the Adjudicator’s own calculations that he intended to use the figure of $6,483,947.25 and that his use of $4,420,873.13 was the type of error or mistake that could be corrected by using the power conferred by s 22(5). That is, it was submitted, when looked at objectively his final use of the lesser figure was inconsistent with his own calculations and that he had made an error to which s 22(5) could apply.
It is fundamental to HYLC’s argument to understand the basis of the “payment claim” made by the respondent. On 18 April 2018 the respondent issued Payment Claim No. 62 (under s 13 of the Act). It claimed the amount due was $7,763,159.39 and that figure was calculated as follows:
Subcontract Work
Additional Claim for damaged materials
Modifications
Other adjustments (back charges)
$58,944,875.38
$0.00
$5,278,239.53
$450,000
Amount Claimed (Ex GST)
GST added
Total
Less Payments
$63,773,214.91
$6,377,321.49
$70,150,536.40
$62,387,377.01
Total (inc GST) $7,763,159.39
A note to the “Less Payments” entry stated that “the amount shown as paid allows for recourse to the “Claimants” security” for -$4,420,873.13. The respondent therefore had reduced the “Payments figure” by $4,420,873.13. In the above table, it asserted “Payments” of $62,387,377.01 when in fact it had received payments from HYLC in the sum of $66,808,250.14.
Yuanda, by constructing the Payment Claim in this manner, asserted it was entitled to additional payments under Act, by deducting from the total paid to date the amount HYLC had received by recourse to the security of Yuanda for liquidated damages, namely $4,420,873.13.
HYLC responded to the Payment Claim in its Payment Schedule and Adjudication Response dated 2 May 2018 (s 14 of the Act). HYLC submitted to the Adjudicator that the “paid to date amount” was “artificially” lowered by the Respondent to reflect the call on the security. Thus, it submitted, the Payment Claim for approximately $3.5 million worth of “line items” became a claim for approximately $7.7 million.
Section 14 of the Act states relevantly:
14—Payment schedules
(1)A person on whom a payment claim is served (the respondent) may reply to the claim by providing a payment schedule to the claimant.
(2) A payment schedule—
(a) must identify the payment claim to which it relates; and
(b) must indicate the amount of the payment (if any) that the respondent proposes to make (the scheduled amount).
(3) If the scheduled amount is less than the claimed amount, the schedule must indicate why the scheduled amount is less and (if it is less because the respondent is withholding payment for any reason) the respondent's reasons for withholding payment.
The “scheduled amount” (s 14(2)(a)) stated by HYLC in its Payment Schedule was -($592,029.10), that is a negative figure. The “scheduled amount” of -($592,029.10) was calculated by disputing many of the items in the Payment Claim and also contesting the artificially lowered “paid to date” figure as discussed. In reaching the figure for the “scheduled amount” HYLC deducted $4,420,873.13 (amongst the other items) from the Payment Claim figure of $7,763,159.39. It is important to note that the Scheduled Amount did not include a further deduction of $2,063,074.12, being the balance of liquidated damages imposed by HYLC but not yet paid by the Respondent.
HYLC in its submissions before this Court conceded that the “scheduled amount” calculation did not include, specifically, the balance of unpaid liquidated damages. However, HYLC submitted that its written submissions included as part of the Payment Schedule, and its submissions in the Adjudication Response, made it clear that it had “put in issue” the balance of unpaid liquidated damages.
In the Payment Schedule, HYLC disputed Yuanda’s submissions as to how the liquidated damages should be (or not be) accounted for. HYLC noted the balance of liquidated damages still outstanding. It submitted that it was entitled to “call on the security”. Having disputed the calculations in the Payment Claim HYLC submitted:
Set-off of liquidated damages and amounts certified in August 2017 payment schedule still owing
6.20 As set out above, the Claimant currently owes the respondent $2,063,074.12[19] for liquidated damages and $634,884.01 in respect of the August 2017 Payment Schedule (HYLC-GCOR-312790).
6.21 Clause 39.16 of the Subcontract allows the Respondent to set-off from money payable by the Respondent to the Claimant under the Subcontract, any money due from the Claimant to the Respondent.
6.22 To the extent that any moneys are found to be payable by the Respondent to the Claimant in respect of the Payment Claim, the Respondent reserves its rights to set these amounts off as against the amounts owing by the Claimant.
[19] This figure was later amended to $1,905,069.90.
I note that in 6.22 there is no assertion of a right to set off for the purpose of calculating the Scheduled Amount. HYLC merely reserved its contractual right of set-off against the Adjudication Determination.
Consistent with the statutory framework, and in particular s 14(3), the Payment Schedule must indicate why the Scheduled Amount is less and the reason for withholding payment. That is, written submissions, either in the Payment Schedule or in the Adjudication Response, are directed towards the Scheduled Amount and how it is calculated. The submissions are not permitted to add a further reason for withholding payment that is not directed to confirming the Scheduled Amount.
HYLC also referred to its Adjudication Response document where it stated that:
7PART K – LIQUIDATED DAMAGES
7.1The Respondent’s position on the imposition of liquidated damages
(a) Again, as is the case with the Adjudication Application generally, in seeking to deny its clear liability to the Respondent for liquidated damages under the Subcontract, the Claimant has spent what can only be described as an inordinate amount of time in crafting, and attempting to advance legal arguments, as to why it should be relieved of its clear and express contractual liability for liquidated damages.
(b) This is evident by the sheer length of the submissions, together with the extensive case law referred to therein which is said to support the Claimant’s position.
(c) Given the Respondent has a period of five (5) business days in which to prepare its response, the Respondent has not traversed each and every submission by the Claimant, and has instead focused its submissions on key factors which should be considered by the Adjudicator in the exercise of their discretion.
(d) For the reasons which follow, the Claimant’s position should be rejected.
(e) It is the Respondent’s position, consistent with its Payment Schedule (see section 6), that the Claimant is liable for liquidated damages under clause 32.12 of the Subcontract. It is the Respondent’s submission that the Adjudicator ought to make such a finding.
(Underlining added)
I do not consider that the submissions contained in 7.1 above take the matter further. HYLC was responding to Yuanda’s claim that the Adjudicator should have no regard to the question of “liquidated damages” at all.
If a general contractual right of set-off was to be in issue during the course of the Determination the full amount of the set-offs had to be included in the Scheduled Amount. HYLC did not include the balance of unpaid liquidated damages in its calculation of the Scheduled Amount. The written submissions, either in the Payment Schedule or the Adjudication Response, had to be directed to the Scheduled Amount. The Scheduled Amount did not include the figure of $2,063,074.12 for unpaid liquidated damages.
The failure to include the amount of $2,063,074.12 in the Scheduled Amount meant that the Adjudicator was not required to consider it in his calculations. Viewed objectively the Adjudicator was correct in finding that the sum of $2,063,074.12 for unpaid liquidated damages was not in issue in the Determination.
In my view that is fatal to HYLC’s argument. Viewed objectively the Adjudicator did not make a slip, error or miscalculation to which s 22(5) applied.
Turning to the question of his own calculations, the Adjudicator in his reasons stated:
PART B: SUMMARY OF THE PAYMENT CLAIM AND AMOUNTS IN DISPUTE
9.Based upon the payment claim and payment schedule, the parties are in dispute in the amount of $7,649,446.73 (excl GST), however this is not a very useful figure as the parties have approached the calculation of the claimed and scheduled amounts quite differently.
10.The Claimant has calculated the claimed figure in the payment claim on a global basis calculated using the cumulative contract values as follows:
Description
Claimant
Respondent
Difference
Original Contract Works
$58,944,975.38
$58,850,051.78
$94,923.60
Backcharges 1
$0.00
($763,142.90)
$763,142.90
Backcharges 2
($450,000.00)
($450,000.00)
$0.00
Other Adjustments
$0.00
($16,445.86)
$16,744.86
Modification Claims
$5,278,239.84
$1,887,271.97
$3,390,967.87
error
($0.31)
$0.00
($0.31)
Subtotal (excl GST)
$63,773,214.91
$59,507,734.99
$4,265,479.92
Paid to date (excl GST)
($56,715,797.28)
($56,715,797.28)
$0.00
Subtotal (excl GST)
$7,057,417.63
$2,791,937.71
$4,265,479.92
Subtotal (incl GST)
$7,763,159.39
$3,071,131.48
$4,692,027.91
Liquidated Damages Deduction
$0.00
($4,420,873.13)
$4,420,873.13
Claimed / Scheduled (incl GST)
$7,763,159.39
($1,349,741.65)
$9,112,901.04
11.In the payment schedule, the Respondent has approached the calculation of the scheduled amount using the amounts shown by the Claimant as having been claimed in the last month:
Description
Claimant
Respondent
Difference
Original Contract Works
$129,396.00
$34,472.40
$94,923.60
Backcharges 1
$763,142.90
$0.00
$763,142.90
Backcharges 2
$0.00
$0.00
$0.00
Other Adjustments
$1,744.97
($14,700.89)
$16,445.86
Modification Claims
$2,779,167.41
($611,800.61)
$3,390,968.02
Claimed / Scheduled (excl GST)
$3,673,451.28
($592,029.10)
$4,265,480.38
12.Apart from some minor rounding errors, both approaches were able to be reconciled and I note that the figure shown in the first table above as the Respondent’s ‘global’ assessment of the Claimant’s payment claim shows a figure of $1,349,741.65 (incl GST), which is consistent with the RCTI dated 2 May 2018 issued by the Respondent with the payment schedule which shows an Invoice Amount of $1,349,742.15 (a difference of only $0.50).
13.That said, the Respondent has stated in several places throughout its payment schedule that the schedule amount was based upon a figure of $592,029.10 (excl GST) and this therefore would be the minimum starting point for a calculation of the adjudicated amount.
14.Reviewing both approaches, the global approach is the better way in which to calculate the adjudicated amount (if any) because:
(a) the calculation of the claimed amount includes consideration of the validity of the liquidated damages deduction, which can only be properly considered having regard to the overall adjusted contract sum and payments; and
(b) the Respondent, in the payment schedule, has effectively reversed its previous valuations of multiple Modification claims such that it is necessary to consider the overall valuation of many of these claims (rather than just the incremental amount claimed in the last progress claim).
15.A summary of the reconciled payment claim and payment schedule with all disputed issues is provided in a spreadsheet as Attachment A to this determination.
16.Therefore, having reviewed and reconciled the payment claim and the payment schedule, the following groups of issues are in dispute for the purposes of this adjudication (all figures excluding GST):
(a) Original Contract Works
$94,923.60
(b) Backcharges (as noted above)
$0.00
(c) Other Adjustments
$16,445.86
(d) Modifications
$3,390,967.87
(e) Liquidated Damages
$4,420,873.13
Total Disputed (excl GST)
$7,923,210.46
The Adjudicator recognised in paragraph 9 that HYLC and Yuanda had approached the Payment Claim on a different basis. Importantly, in paragraph 11 he sets out the approach of HYLC to the Payment Claim and how the Scheduled Amount is calculated. The Scheduled Amount simply makes no reference to any amount of liquidated damages. As seen in paragraph 16, the Adjudicator reconciles the two approaches. Again it can be seen that the lesser figure of $4,420,873.13 in the calculations contained in paragraph 16 is a deliberate choice by the Adjudicator. It cannot, viewed objectively, be an error that would invoke the jurisdiction of s 22(5).
Finally, I turn to the calculations referred to in paragraph 15 above and found in Attachment A. I set out the Adjudicator’s summary table found in paragraph 299 of his Reasons:
Description Claimant Respondent Determined Original Contract Works $58,944,975.38 $58,850,051.78 $58,944,975.38 Backcharges 1 $0.00 ($763,142.90) $0.00 Backcharges 2 ($450,000.00) ($450,000.00) ($450,000.00) Other Adjustments $0.00 ($16,445.86) $0.00 Modification Claims $5,278,239.84 $1,887,271.97 $3,971,679.51 Error ($0.31) $0.00 ($0.31) Subtotal (excl GST) $63,773,214.91 $59,507,734.99 $62,466,654.58 Paid to date (excl GST) ($56,715,797.28) ($56,715,797.28) ($56,715,797.28) Subtotal (excl GST) $7,057,417.63 $2,791,937.71 $5,750,857.30 Subtotal (incl GST) $7,763,159.39 $3,071,131.48 $6,325,943.03 Liquidated Damages Deduction $0.00 ($4,420,873.13) ($4,420,873.13) Claimed/Scheduled (incl GST) $7,763,159.39 ($1,349,741.65) $1,905,069.90
I have carefully gone through Attachment A, and in particular the figures set out on page 310 of the Affidavit of Mr Toemoe. HYLC submitted that the figures contained within Attachment A are “irreconcilably different” to the figures used by the Adjudicator in paragraph 299. It was submitted that I should find that looking at the figures objectively it was plain that there was a miscalculation such that the jurisdiction pursuant to s 22(5) was invoked.
I do not accept that submission. I do not intend to set out the figures contained in Attachment A. In my view, they are consistent in substance with the figures contained in the summary table set out in paragraph 299 of his Reasons. While I accept that the Adjudicator has used a different method in setting out his calculations between Attachment A and the Summary, the figures can be reconciled. The form is different but the substance is the same. Rather than supporting HYLC’s submission, comparison of the two matters supports the position that the Adjudicator has consistently considered that on the sum of $4,420,873.13 was in issue between the parties, and only that amount on the question of liquidated damages.
It is not necessary for me to analyse the authorities on what amounts to a “clerical error, material miscalculation or an error arising from an accidental slip”. The evidence establishes, clearly in my view, that the Adjudicator had, in fact, not made a clerical error, material miscalculation or an error arising from an accidental slip. To amend his Determination in those circumstances would have required the Adjudicator to change his reasoning process. In effect, he would have been substituting new calculations for his original calculations. The evidence establishes that HYLC had not, in fact, put the sum of $6,483,947.25 in issue at the Determination. I agree with the Adjudicator’s reasons on that aspect. His reasoning clearly discloses that he made that decision and his calculations are consistent with that position. I am not satisfied that HYLC has proved that viewed objectively, the criteria, or any one of them, contained in s 22(5) have been established.
The Adjudicator was correct in finding that the sum of $2,063,074.12 for unpaid liquidated damages was not in issue for him to determine.
It is also clear from his Reasons, when read as a whole, that he considered the only figure in dispute relating to liquidated damages was $4,420,873.13. The Adjudicator did not make a slip, error or miscalculation. If he was in error in not including the sum of $2,063,074.12 for unpaid liquidated damages that was an error within jurisdiction. It was not an error of the type that would invoke the discretion under s 22(5) of the Act.
It follows from these findings that the Adjudicator did not act unreasonably. I reject HYLC’s submission that the Decision was so unreasonable that no reasonable adjudicator would have made it.
Order
I dismiss Grounds 1, 2 and 3 of the Grounds of Review.
I will hear the parties on the question of costs and the application for a stay.
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