Hanson Construction Materials Pty Ltd v Brolton Group Pty Ltd
[2019] NSWSC 1641
•26 November 2019
Supreme Court
New South Wales
Medium Neutral Citation: Hanson Construction Materials Pty Ltd v Brolton Group Pty Limited [2019] NSWSC 1641 Hearing dates: 19 November 2019 Decision date: 26 November 2019 Jurisdiction: Equity - Technology and Construction List Before: Ball J Decision: (1) Declare that the determination of the second defendant dated 31 October 2019 in respect of adjudication application no 2019-TASC-109 (the Determination) is void;
(2) Order that the first defendant be permanently restrained from requesting the provision of an adjudication certificate in relation to the Determination or filing an adjudication certificate in relation to the Determination as a judgment for a debt in any court;
(3) Order that the sum of $2,904,706.75 paid into court on 13 November 2019, and any interest thereon, be paid to the plaintiff;
(4) Order that the first defendant pay the plaintiff’s costs;
(5) Give leave to the parties to make an application to vary order (4) within 14 days’ of today’s date.Catchwords: BUILDING AND CONSTRUCTION – adjudication determination under Building and Construction Industry Security of Payment Act 1999 (NSW) – whether determination void – jurisdictional error – whether denial of natural justice – whether failure by adjudicator to provide parties with opportunity to make submissions with respect to choice of reference date relevant to payment claim – whether open to claimant to support determination with reference to different reference date than that relied on by adjudicator – whether open to adjudicator to justify determination on basis that it was a determination of a payment claim by reference to other reference date
BUILDING AND CONSTRUCTION – adjudication determination under Building and Construction Industry Security of Payment Act 1999 (NSW) –whether determination void – whether payment claim referrable to work completed after relevant reference date – construction of sections 8 and 13 of the legislation – Southern Han Breakfast Point Pty Ltd (In Liq) v Lewence Construction Pty Ltd and other authorities considered – whether payment claim may only relate to work done before reference date in respect of payment claim was served
BUILDING AND CONSTRUCTION – adjudication determination under Building and Construction Industry Security of Payment Act 1999 (NSW) – whether to grant conditional relief – power of court to sever part of determination which is within jurisdiction from that part which is not – recent authorityLegislation Cited: Building and Construction Industry Security of Payment Act 1999 (NSW) Cases Cited: Brodyn Pty Ltd v Davenport (2004) 61 NSWLR 421
CC Builders (Aust) Pty Ltd v Milestone Civil Pty Ltd [2019] NSWSC 1251
Cockram Construction Ltd v Fulton Hogan Construction Pty Ltd (2018) 97 NSWLR 773; [2018] NSWCA 107
Impero Pacific Group Pty Ltd v Bonheur Holdings Pty Ltd [2019] NSWSC 286
Musico v Davenport [2003] NSWSC 977
Patrick Stevedores Operations No 2 Pty Ltd v McConnell Dowell Constructors (Aust) Pty Ltd [2014] NSWSC 1413
Rhomberg Rail Australia Pty Ltd v Concrete Evidence Pty Ltd [2019] NSWSC 755
Southern Han Breakfast Point Pty Ltd (In Liq) v Lewence Construction Pty Ltd (2016) 260 CLR 340; [2016] HCA 52
The Trustee for Allway Unit Trust trading as Westside Mechanical Contracting Pty Ltd v R&D Airconditioning Pty Ltd [2018] SASC 46
Watpac Constructions v Austin Corp [2010] NSWSC 168
YTO Construction Pty Ltd v Innovative Civil Pty Ltd [2019] NSWCA 110Category: Principal judgment Parties: Hanson Construction Materials Pty Ltd ACN 009 679 734 (Plaintiff)
Brolton Group Pty Limited ACN 112 761 010 (First Defendant)
Edward Smithies (Second Defendant)Representation: Counsel:
Solicitors:
NJ Kidd SC with B Le Plastrier (Plaintiff)
G Sirtes SC with D Byrne (First Defendant)
Submitting Appearance (Second Defendant)
King Wood Mallesons (Plaintiff)
HBL Ebsworth (First Defendant)
File Number(s): 2019/347265
Judgment
Introduction
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By a summons filed on 5 November 2019, the plaintiff, Hanson Construction Materials Pty Ltd, seeks a declaration that an adjudication determination dated 29 October 2019 and amended on 31 October 2019 (the Determination) of the second defendant (the Adjudicator) made under the Building and Construction Industry Security of Payment Act 1999 (NSW) (the SOP Act) in favour of the first defendant, Brolton Group Pty Ltd, in the sum of $2,877,052.75 is void, together with ancillary relief.
Background
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The proceeding arises out of a contract dated 13 September 2017 by which Brolton agreed to construct for Hanson a quarry processing plant at Bass Point, New South Wales. It is common ground that the contract was terminated by Hanson on 3 October 2018.
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Clause 11 of the contract dealt with price and payment. Clause 11.1 set out the amount payable under the contract subject to the proviso that “the amount payable by the Principal [that is, Hanson] does not exceed the GMP [Guaranteed Maximum Price] as adjusted by any additions or deletions made pursuant to the Contract”. The GMP was stated to be $85,000,000 (excluding GST).
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Clause 11.4 dealt with interim payments. It relevantly provided:
The Contractor shall submit on the last Tuesday of each month, up to the date the Works reach Completion, a claim for payment showing the amounts which the Contractor contends it is entitled to be paid, based upon the Work under the Contract executed and incorporated into the Works including all agreed adjustments (“General Payment Claim”). The Contractor’s claim for payment is to be based on its entitlements to its Reimbursable Costs calculated in accordance with Appendix 12. The payment claim is to allow for deduction of amounts previously paid and adjustments under the terms of the Contract. The Contractor shall attach to each claim for payment all necessary supporting documentation.
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Clause 11.8 provided:
Delayed Payment
The Contractor shall be entitled to simple interest at a rate of 5% p.a. for any delayed payment.
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Clause 12 dealt with termination. It provided for termination for default by the Contractor (cl 12.1.1), default by the Principal (cl 12.1.2) and termination for insolvency (cl 12.1.3). Clause 12.2 also provided for termination for convenience by the Principal.
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Clause 12.3 was in the following terms:
Payment upon Termination
After termination, the Contractor shall be entitled to payment of the unpaid balance of the value of the Works executed and of the Materials and Plant reasonably delivered to the Site to be valued in accordance with Sub-Clause 11.3, but adjusted by the following:
(a) any sums to which the Contractor is entitled under Sub-Clause 10.4;
(b) any sums to which the Principal is entitled;
(c) if the Principal has terminated under Sub-Clause 12.1.1, 12.1.3 or 12.1.4, the Principal shall be entitled to a sum equivalent to its excess costs in completing or having completed the Works not executed at the date of the termination by another contractor and covering its other direct additional expenses and damages caused by such termination;
(d) if the Contractor has terminated under Sub-Clause 12.1.2 or 12.1.3, the Contractor shall be entitled to the cost of its suspension and proven early demobilisation and other early termination charges together with a reasonable margin of profit of the amount of Works not performed;
(e) if the Contract was terminated as per Sub-Clause 12.2 the Contractor shall be entitled to the proven cost of its early demobilisation and other early termination charges.
The net balance due shall be paid or repaid as soon as it can finally be determined.
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On 28 August 2019, Brolton served a payment claim in the amount of $6,300,962.64, which was described as “Progress Claim for September 2018”. The progress claim included a number of previous claims that had been made by Brolton. It also included a number of subcontractor invoices which covered work performed by the relevant subcontractors between the period from 25 September 2018 to 10 October 2018. Lastly, it included a claim for interest under cl 11.8 of the contract in the amount of $272,768.95.
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On 10 September 2019, Hanson served a payment schedule specifying the amount Hanson intended to pay as “Nil”. It gave two reasons. First, it said that the amount claimed exceeded the GMP. Second, it claimed that Hanson was entitled to liquidated damages for delay in the amount of $1,625,000.
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On 20 September 2019, Brolton lodged an adjudication application with Australian Solutions Centre Pty Ltd.
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In submissions made in support of the adjudication application, Brolton accepted that under s 8 of the SOP Act it was entitled to a progress payment on and from each reference date. On the question whether a valid reference date was available to support its payment claim, it said this:
48. In August 2018 and again in September 2018, Hanson [sic] submitted payment claims for Labour and General costs. Both claims were invalid because Brolton did not provide a supporting statement.
49. As Brolton served payment claims in August and September 2018 which were under the Contract only (and not under the Act), this leaves the reference dates available for Brolton to use.
50. Additionally the Payment Claim has a valid reference date given that the Payment Claim was served within 12 months of the works being carried out under the Contract.
51. The Payment Claim was submitted on 28 August 2019.
52. Accordingly, it is clear from the above that the Payment Claim is supported by a valid reference date.
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Hanson served its adjudication response on 30 September 2019. In that response, it accepted that 25 September 2018 was an available reference date for the payment claim. However, it made two points. First, consistently with the High Court’s decision in Southern Han Breakfast Point Pty Ltd (In Liq) v Lewence Construction Pty Ltd (2016) 260 CLR 340; [2016] HCA 52 it submitted that no further reference dates could arise under the contract following its termination on 3 October 2018. Second, it pointed out that the payment claim included 79 subcontractors and supplier invoices dated after 25 September 2018 and also included the claim for interest up until 28 August 2019. According to Hanson, it followed that the actual payment claim could not be supported by a reference date of 25 September 2018 because it claimed amounts for work done after that date. It could not be supported by a later reference date because no further reference dates arose under the contract. The result, according to Hanson, was that the Adjudicator did not have jurisdiction to adjudicate the claim.
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Hanson relevantly made two other points.
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First, Brolton had claimed in its adjudication application that Hanson had been responsible for delays in the supply and delivery of steel material and claimed an extension of time and delay costs resulting from that delay. In response, Hanson submitted that Brolton was not entitled under the contract to an extension of time or delay costs until it made a claim for them under cl 7.3 which relevantly provided:
Subject to Sub-Clauses 10.3 and 7.2 and notwithstanding the provisions in Clause 6, if the Contractor is or will be delayed in achieving Completion by the Time for Completion, then the Contractor shall submit to the Principal, in writing an application to extend the Time for Completion. An application for extension of time shall not give rise to any entitlement to additional remuneration to the Contractor unless the Variation is claimed and approved in accordance with Clause 10.
…
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Hanson pointed out that no written claim was received for an extension of time until 28 September 2018.
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Second, in its adjudication response, Hanson asserted that Brolton “has provided no evidence whatsoever of any connection between any delay and any of the costs supposedly incurred. The Claimant has not sought to demonstrate that the costs would not have been incurred otherwise, but for the supposed delay”.
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In his determination, the Adjudicator rejected Hanson’s submission that no further reference dates arose following termination of the contract on 3 October 2018. Relying on the decision in Impero Pacific Group Pty Ltd v Bonheur Holdings Pty Ltd [2019] NSWSC 286, the Adjudicator held that a further reference date arose on 23 October 2018. He gave the following reasons:
4.3.22 Read in its entirety, I consider that clause 12.3 of the contract contemplates that the Claimant is entitled to payment for any monies due after any form of termination of the contract. While the clause recognises that any entitlement that the Claimant may have under clause 12.3(a) may be offset by the Principal’s entitlement under clause 12.3(c), it nevertheless establishes a payment entitlement. I take this to mean that the contract has, in a manner similar to ‘Impero’, expressly provided that the Claimant is entitled to make a payment claim ‘after termination’. Accordingly, a reference date must exist for that purpose. It then follows, having regard for clause 11.4 of the contract, that the Claimant had available a Reference Date of the last Tuesday in October 2018, that being 23 October 2018.
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Having reached that conclusion, the Adjudicator rejected Hanson’s submission that the claim for an extension of time had only been made after the last reference date arising under the contract. He stated his conclusion in these terms:
5.2.7 In paragraphs 4.3.19 to 4.3.32 above I determined that the Reference Date available for the payment claim was 23 October 2018.
5.2.8 As the EOT claim was made prior to the Reference Date, I do not agree with the Respondent’s submission that I am unable to consider the EOT claim. Accordingly, I will now consider the EOT and Delay Costs submissions of the parties.
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As to the question of causation, the Adjudicator said this:
9.4.6 In light of the foregoing, I have reviewed the payment claim work elements to identify elements which I consider would have been impacted by the late delivery of the structural steel and the cost that would therefore be attributable to the Respondent and the ensuing costs that would result in an increase in the GMT in accordance with Schedule 3 (Appendix 12), Item 2(e).
9.4.7 In undertaking my review, I was cognisant of the site photos that were included in the Claimant’s monthly progress reports (Tab 2 of adjudication application), which I consider demonstrates that the Sinostruct Steel was an extensive and critical component of the project. The photos, while contemporaneous, show that the steel supply would impact on a wide range of elements of the work.
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The Adjudicator then summarised his conclusions in a table which grouped the various invoices in respect of which the payment claim was made into work types and summarised his decision on whether work of that type was a consequence of the delay. It is not necessary for present purposes to set out the whole table. The following is an example of what the Adjudicator did:
Description
Claimed Amount
Comment
Adjudicated Amount
Items – September Part 1
6861 Project Management
$112,459.81
I am not satisfied that this costs can be wholly attributed to the steel delay
$0.00
6862 Site Amenities & Equipment
$55,098.61
The amenities and equipment would be required for site wide activities, a number of which would not have related to the steel delay
$0.00
6863 Civil Concrete
$150,077.00
I do not consider that this item would have been delayed by the steel delay
$0.00
6864 Building Works
$82,117.13
The extent to which this item may have been impacted by the steel delay is unclear
$0.00
6865 Steel Fabrication
$62,507.02
The nature of the work item makes it more than likely that it would have been impacted by the late steel delivery
$62,507.02
6866 Mechanical Erection
$1,349,182.00
I consider that this item would have been directly impacted by the steel delay. In particular and noting the nature of the structure, mechanical erection was directly dependent on a structure being available
$1,349,182.00
The issues
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Originally, Brolton had sought to defend the Adjudicator’s determination on two bases. One was that the Adjudicator was entitled to select a reference date of 23 October 2018. The other was that, even if he was not, the determination could be supported by reference to a reference date of 25 September 2018. However, during the course of the hearing Mr Sirtes SC, who appeared for Brolton, properly conceded that no reference date arose on 23 October 2018. The difficulty with the Adjudicator’s conclusion that one did arise on that date is that it was common ground that the contract was terminated on 3 October 2018. It was plain that cl 11.4 of the contract did not survive termination. Consequently, no reference date could arise under it. It was doubtful that a reference date could arise under cl 12.3 because it did not provide for a progress payment. Rather, it provided for an adjustment to the rights and liabilities of the parties following termination which could have involved a payment by either party to the other. In any event, that adjustment could only be made once the cost of completing the project was known and the evidence is that the project has not yet been completed. Consequently, any reference date that might arise under cl 12.3 has not yet arisen.
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Despite that concession, Brolton resisted the orders sought by Hanson. Its case had the following steps:
The claim for a progress payment served on 29 August 2019 was a valid payment claim because it was supported by a reference date of 25 September 2018;
Consequently, the Adjudicator had jurisdiction under the SOP Act to determine that claim;
Any errors made by the Adjudicator in determining that claim were errors within jurisdiction and consequently not reviewable by the Court; and
In any event, to the extent that any errors were jurisdictional they did not affect the whole determination and the Court in its discretion should, as a condition of relief, impose a condition that Hanson pay that part of the determination unaffected by jurisdictional error.
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Hanson took issue with each of steps (1), (3) and (4).
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In addition Hanson advanced a further argument in support of the declaration it sought based on an alleged failure of the Adjudicator to carry out his statutory task under s 22 of the SOP Act, which required him to engage in “a process of evaluation, sufficient to warrant the description” in respect of the parties’ materials and submissions: see Cockram Construction Ltd v Fulton Hogan Construction Pty Ltd (2018) 97 NSWLR 773; [2018] NSWCA 107 at [41] per Meagher JA (with whom Basten JA and Barrett AJA agreed). That failure arose from the way in which the Adjudicator dealt with Hanson’s argument that none of the costs claimed by Brolton in its payment claim were caused by the delay in the supply of steel.
Was the payment claim supported by a reference date of 25 September 2018?
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The answer to this question turns on the correct construction of ss 8 and 13 of the SOP Act. Those sections have since been amended, but as applied to the contract in this case, they were in the following terms:
8 Rights to progress payments
(1) On and from each reference date under a construction contract, a person:
(a) who has undertaken to carry out construction work under the contract, or
(b) who has undertaken to supply related goods and services under the contract,
is entitled to a progress payment.
(2) In this section, reference date, in relation to a construction contract, means:
(a) a date determined by or in accordance with the terms of the contract as the date on which a claim for a progress payment may be made in relation to work carried out or undertaken to be carried out (or related goods and services supplied or undertaken to be supplied) under the contract, or
(b) if the contract makes no express provision with respect to the matter—the last day of the named month in which the construction work was first carried out (or the related goods and services were first supplied) under the contract and the last day of each subsequent named month.
13 Payment claims
(1) A person referred to in section 8(1) who is or who claims to be entitled to a progress payment (the claimant) may serve a payment claim on the person who, under the construction contract concerned, is or may be liable to make the payment.
(2) A payment claim:
(a) must identify the construction work (or related goods and services) to which the progress payment relates, and
(b) must indicate the amount of the progress payment that the claimant claims to be due (the claimed amount), and
(c) if the construction contract is connected with an exempt residential construction contract, must state that it is made under this Act.
(3) The claimed amount may include any amount:
(a) that the respondent is liable to pay the claimant under section 27 (2A), or
(b) that is held under the construction contract by the respondent and that the claimant claims is due for release.
(4) A payment claim may be served only within:
(a) the period determined by or in accordance with the terms of the construction contract, or
(b) the period of 12 months after the construction work to which the claim relates was last carried out (or the related goods and services to which the claim relates were last supplied),
whichever is the later.
(5) A claimant cannot serve more than one payment claim in respect of each reference date under the construction contract.
…
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Hanson submits that the claim for a progress payment that was submitted on 29 August 2019 was not a valid payment claim in respect of the 25 September 2018 reference date because it included invoices for work done after 25 September 2018. It contends that that submission is consistent with the High Court’s judgment in Southern Han. It also pointed to the following passage from the judgment of Parker J in Impero at [18]:
The reference date for progress claims under cl 37.1 of the Contract was the 25th day of the month. As at 25 October, the contract remained on foot. Accordingly, 25 October was an available reference date for making a progress claim under the Act for work done to that point. But a claim could not be made under that reference date for work done between 25 October and the date of termination (29 or 30 October). This follows from the fact that an entitlement to a progress payment only arises “on and from” each reference date.
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The express statement by Parker J is also said to be implicit in an earlier decision of mine in Patrick Stevedores Operations No 2 Pty Ltd v McConnell Dowell Constructors (Aust) Pty Ltd [2014] NSWSC 1413 at [36] and [39].
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For reasons which will become apparent, it is not necessary to decide this issue. However, had it been necessary, I would have concluded that the progress payment served on 29 August 2019 was capable of being supported by a reference date of 25 September 2018.
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In my opinion there is nothing in Southern Han which requires that, for a payment claim to be valid, it must only relate to work done before the reference date in respect of which the payment claim was served. Hanson relies on the following paragraphs of the judgment to suggest otherwise:
61 The construction of s 13(1) consonant with the structure of the Act is accordingly that advanced by Southern Han. The description in s 13(1) of a person referred to in s 8(1) is of a person whom s 8(1) makes entitled to a progress payment. Section 8(1) makes a person who has undertaken to carry out construction work or supply related goods and services under a construction contract entitled to a progress payment only on and from each reference date under the construction contract. In that way, the existence of a reference date under a construction contract within the meaning of s 8(1) is a precondition to the making of a valid payment claim under s 13(1).
62 That construction of s 13(1) affords to s 13(1) an operation that is harmonious with s 13(5). Section 13(1) operates to require that each payment claim be supported by a reference date and s 13(5) operates to require that each reference date support no more than one payment claim. …
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However, there is nothing in these passages that deal with work that may be made the subject of a payment claim. Rather, the point made by the High Court is that a payment claim can only be made on and from a reference date, and only one payment claim can be made in respect of each reference date.
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I accept that Hanson’s contention is supported by the passage quoted from the judgment of Parker J in Impero and is implicit in my judgment in Patrick Stevedores. However, Parker J’s statement was obiter, since his Honour found that the payment claim in question in that case was supported by a reference date. And to the extent that I suggested in Patrick Stevedores that the validity of a payment depended on when the work it covered was performed, on reflection, I do not think that can be right.
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There is no requirement in s 13 that the work in respect of which the payment claim is made must be performed before the claim is made. As the High Court held in Southern Han, there is a requirement that the date from which a progress claim may be made (the reference date) has occurred. Where the contract simply specifies that a claim for a progress payment may be made on a particular date each month, without tying that date to the performance of particular work, then, assuming the date has occurred, it is primarily a question for the Adjudicator what work may be made the subject of a progress claim in accordance with the contract by reference to that date. That conclusion is consistent with s 8(2)(a) which expressly contemplates the possibility that the contract might permit the contractor to make a claim not only for work that has been carried out by a date on which the progress claim may be made but also work “undertaken to be carried out (or related goods and services … undertaken to be supplied) under the contract” (emphasis added). None of that is to say that an Adjudicator is entitled to ignore the terms of the contract; and if he or she does so, that may be a ground for relief. Rather, it is simply a recognition that the contract may permit claims for periodic payments to be made in respect of work which has not been performed or completed; and if completion of the work is not itself expressed to be an event by reference to which the first reference date for that work is identified, then, subject to compliance with the requirements of the SOP Act, it is a question for the Adjudicator when the work is properly the subject of a payment claim.
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In the present case, cl 11.4 of the contract permitted Brolton to submit a claim for payment on the last Tuesday of each month. It was required to give various information in relation to the amount it claimed. In my view, it was a matter for the Adjudicator to determine whether Brolton had complied with that obligation under the contract and whether, in the light of that information, the amounts claimed were allowable in accordance with the contract at the time they were claimed. That was true of invoices dated after the date of the last reference date, which occurred on 25 September 2018.
Were the errors made by the Adjudicator reviewable?
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As I have said, it was accepted that the Adjudicator was in error when he determined that the payment claim made on 29 August 2019 was supported by a reference date of 23 October 2018. Brolton submits that that was not a reviewable error. If the payment claim was a valid payment claim because it was supported by a reference date, then an application of a different reference date by the Adjudicator was simply an error that was part of his adjudication process that was not reviewable.
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Hanson takes issue with that contention on two grounds.
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First, relying on the decision of Doyle J in The Trustee for Allway Unit Trust trading as Westside Mechanical Contracting Pty Ltd v R&D Airconditioning Pty Ltd [2018] SASC 46, it submits that it was not open to Brolton to support the determination by reference to a different reference date from the one relied on by the Adjudicator. Second, Hanson submits that the Adjudicator’s decision involved a denial of natural justice. I accept both those submissions.
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The facts of Allway were similar to the facts of the present case. The relevant construction contract provided for progress claims to be made on the “23rd day of the month for work done to and including the last day of the month”. The claimant made a payment claim by letter dated 8 December 2017, which included four invoices with dates from 24 September 2017 to 8 December 2017. The letter did not nominate a reference date for the claim. The respondent served a payment schedule dated 19 December 2017 asserting that the 8 December 2017 letter was not a valid payment claim because there was no valid reference date supporting the claim. If it was asserted that the reference date was 8 December 2017 (the date of the last invoice), that was not a valid reference date because the contract had terminated on 31 October 2017. If it was asserted to be 24 [sic] September 2017 or 23 October 2017, then the claim was invalid because it included a claim for work done after those dates.
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On 17 January 2018, the claimant made an adjudication application. In that application, it nominated a reference date of 23 December 2017. The Adjudicator accepted that as the relevant reference date (despite the fact that it occurred after service of the payment claim) and dealt with the claim on that basis. During the hearing, the claimant submitted that even if 23 December 2017 was not an available reference date, the payment claim could still be supported by the reference date that arose on 23 October 2017. Doyle J rejected that conclusion. He gave the following reasons for doing so (at [130]):
By way of explanation, I consider that not only must a payment claim under the SOP Act be supported by an available reference date, but also any adjudicator’s determination in respect of that payment claim must be in respect of the same reference date. In other words, while the existence of a payment claim in respect of an available reference date is sufficient to trigger the adjudicator’s statutory authority or jurisdiction to adjudicate and determine a payment claim under the SOP Act, it is not an authority or jurisdiction at large. It is confined to an authority or jurisdiction in respect of that reference date (and the right to make a progress claim that underpins it). A payment claim in respect of a particular reference date only provides authority or jurisdiction for an adjudicator’s determination in respect of a payment claim with that reference date. Conversely, and relevantly here, an adjudicator’s determination in respect of a payment claim with a particular reference date can only be sustained by a payment claim with that reference date; it cannot be sustained by reference to a payment claim with a different reference date.
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In my opinion, the conclusion of Doyle J was correct. As the High Court pointed out in Southern Han, a valid payment claim can only be made in respect of a reference date and only one payment claim can be made in respect of each reference date. Consequently, the reference date in respect of which a valid payment claim is made is an essential feature of the payment claim and is part of the characteristics of the payment claim that is subject to adjudication in accordance with the SOP Act. That is so whether the payment claim identifies the relevant reference date or not. If the payment claim does not itself identify the relevant reference date, it will be necessary for that to be determined objectively. That objective determination will depend on a number of factors, including when the reference dates arise under the contract, when the claim is made and the work included in the claim.
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In the present case, as the case was ultimately put, the parties agreed that the relevant reference date in the case of the payment claim in question was 25 September 2018. On that basis, what the Adjudicator was asked to adjudicate was a payment claim in respect of that reference date. It was not, therefore open to the Adjudicator to determine the claim as if it were a payment claim by reference to some other date. Conversely, if the parties had left it to the Adjudicator to determine the relevant reference date, it would not have been open to them to justify the determination on the basis that it was a determination of a payment claim by reference to some other reference date.
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As to Hanson’s second point, it is well accepted that a determination is void if “there is a substantial denial of the measure of natural justice that the Act requires to be given”: see Watpac Constructions v Austin Corp [2010] NSWSC 168 at [141] per McDougall J, quoting Brodyn Pty Ltd v Davenport (2004) 61 NSWLR 421 at [55] per Hodgson JA. There will be a denial of natural justice where the adjudicator determines a dispute on a basis for which neither party has contended without giving the parties an opportunity to make submissions on the matter: Watpac at [143] quoting Musico v Davenport [2003] NSWSC 977 at [107].
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In the present case, neither party contended for a reference date of 23 October 2018. It was Hanson’s submission that the reference date was 25 September 2018 and could not be later because the contract had been terminated. In para [49] of its submissions in support of its adjudication application, Brolton must be understood as submitting that reference dates were available in August and September 2018 because the previous payment claims served in respect of those reference dates were not valid. It was not open in those circumstances for the Adjudicator to choose a reference date of 23 October 2018 without giving the parties an opportunity to make submissions on that choice.
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The choice of reference dates had a substantial effect on the outcome of the determination. It provided an answer to Hanson’s submissions that Brolton had made progress claims for work done after 25 September 2018, which were not permitted by the contract. It also provided an answer to Hanson’s submission that any claim for extensions of time and delay costs were only submitted after the reference date (on 28 September 2018). It follows that there was a substantial denial of natural justice.
Should conditional relief be granted?
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The parties provided the Court with extensive submissions on whether it had power to grant conditional relief in this case. It is not necessary to review the relevant authorities in detail. I accept Brolton’s submission that the recent trend in the authorities in New South Wales is to the effect that the Court does have power in effect to sever that part of a determination that is within jurisdiction from that part which is not and to grant relief in relation to the latter on condition that the claimant pays the former: see YTO Construction Pty Ltd v Innovative Civil Pty Ltd [2019] NSWCA 110; Rhomberg Rail Australia Pty Ltd v Concrete Evidence Pty Ltd [2019] NSWSC 755; CC Builders (Aust) Pty Ltd v Milestone Civil Pty Ltd [2019] NSWSC 1251.
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However, even accepting that the Court has power to sever that part of the determination within jurisdiction from that part that is not, I would not exercise the discretion in this case. The error that the Adjudicator made went to the heart of the payment claim and altered the lens through which that payment claim was assessed. The issue that was before the Adjudicator was what amounts were properly claimable under the contract as at 23 September 2018. Instead, the Adjudicator addressed the question by reference to a reference date of 23 October 2018. As I have explained, that affected his assessment of what work could be claimed. It also affected his assessment of Brolton’s claim that it was entitled to an extension of time and delay costs. It is not readily apparent what effect those matters had on the Adjudicator’s decision. For example, it is not clear how the Adjudicator would have dealt with the fact that a number of invoices related to work done both before and after 23 September 2018. Similarly, it is not clear what effect it would have had on the determination if the claim had to be assessed as things stood before Brolton made a written request for an extension of time, although on the face of it, if Brolton was not entitled to an extension of time, that would have affected its whole claim. It is not for the Court to decide these matters on the merits. But that is what it would have to do in order to “sever” the determination in this case.
Failure to perform the statutory task
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Having regard to the conclusions I have reached, Hanson’s alternative ground for relief does not arise. However, if it had, I would have decided it against Hanson. The Adjudicator recognised that there was a causation issue. He was faced with a large number of invoices. Having regard to the time available, it was appropriate for him to seek to deal with those invoices in groups. In adopting that approach, he addressed the question whether the costs incurred were caused by Hanson’s delays. He gave brief reasons for his conclusions. In my opinion, those reasons were adequate. He therefore discharged his duties under s 22.
Orders
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The orders of the Court are:
Declare that the determination of the second defendant dated 31 October 2019 in respect of adjudication application no 2019-TASC-109 (the Determination) is void;
Order that the first defendant be permanently restrained from requesting the provision of an adjudication certificate in relation to the Determination or filing an adjudication certificate in relation to the Determination as a judgment for a debt in any court;
Order that the sum of $2,904,706.75 paid into court on 13 November 2019, and any interest thereon, be paid to the plaintiff;
Order that the first defendant pay the plaintiff’s costs;
Give leave to the parties to make an application to vary order (4) within 14 days’ of today’s date.
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Decision last updated: 26 November 2019
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