Icon Co (NSW) Pty Ltd v Australia Avenue Developments Pty Ltd

[2018] NSWCA 339

Court of Appeal

Supreme Court

New South Wales

Medium Neutral Citation:

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

Hearing dates:

7 December 2018

Decision date:

21 December 2018

Before:

Basten JA at [1];
Meagher JA at [35];
Leeming JA at [36]

Decision:

(1)   Allow the appeal and set aside order (1) made on 19 October 2018 (quashing the determination of the adjudicator) and order (1) made on 24 October 2018 (as to costs).

 

(2)   In place of those orders, order that:

 

(a)   the proceedings brought in the Equity Division by Australia Avenue Developments Pty Ltd be dismissed;
(b)   Australia Avenue Developments Pty Ltd pay the costs of Icon Co (NSW) Pty Ltd in the Division.

 

(3)   Set aside order (2) made on 24 October 2018 and the subject of a stay (ordering that the moneys in court be paid out to Australia Avenue).

 

(4)   Order that the moneys held in court be paid out to the appellant.

 (5)   Order that the first respondent (Australia Avenue Developments Pty Ltd) pay the appellant’s costs of the appeal.

Catchwords:

ADMINISTRATIVE LAW – judicial review – adjudicator’s determination – jurisdictional error – scope of payment claim – duty to consider payment claim – scope of claim to be determined by adjudicator

BUILDING AND CONSTRUCTION – adjudication of payment claim – review of adjudicator’s determination – whether error in construction of payment claim – respondent alleged adjudicator made allowances in award for amounts not contained in payment claim – whether adjudicator exceeded jurisdiction by determining claim other than that made by claimant – Building and Construction Industry Security of Payment Act 1999 (NSW), ss 20, 22(2)

Legislation Cited:

Building and Construction Industry Security of Payment Act 1999 (NSW), ss 13, 14, 17, 20, 21, 22, Pt 3

Cases Cited:

Brodyn Pty Ltd t/as Time Cost and Quality v Davenport (2004) 61 NSWLR 421; [2004] NSWCA 394
Chase Oyster Bar Pty Ltd v Hamo Industries Pty Ltd (2010) 78 NSWLR 393; [2010] NSWCA 190
Coordinated Construction Co Pty Ltd v Climatech (Canberra) Pty Ltd [2005] NSWCA 229; 21 BCL 364
Downer Construction (Australia) Pty Ltd v Energy Australia (2007) 69 NSWLR 72; [2007] NSWCA 49
Gedeon v Commissioner, NSW Crime Commission (2008) 236 CLR 120; [2008] HCA 43
Hossain v Minister for Immigration and Border Protection (2018) 92 ALJR 780; [2018] HCA 34
Minister for Immigration and Multicultural Affairs v Eshetu (1999) 197 CLR 611; [1999] HCA 21
Probuild Constructions (Aust) Pty Ltd v Shade Systems Pty Ltd (2018) 92 ALJR 248; [2018] HCA 4.

Category:

Principal judgment

Parties:

Icon Co (NSW) Pty Ltd (Appellant)
Australia Avenue Developments Pty Ltd (First Respondent)
Rosemarie Risgalla (Second Respondent)

Representation:

Counsel:
Mr M Christie SC / Mr D Hume (Appellant)
Mr I Roberts SC / Mr D Byrne (First Respondent)

  Solicitors:
Vincent Young (Appellant)
HWL Ebsworth Lawyers (First Respondent)
Not represented (Second Respondent)

File Number(s):

2018/328636

 Decision under appeal 

Court or tribunal:

Supreme Court

Jurisdiction:

Equity – Commercial List

Citation:

[2018] NSWSC 1578

Date of Decision:

19 October 2018

Before:

Parker J

File Number(s):

2018/287463

Judgment

1. BASTEN JA: The appellant, Icon Co (NSW) Pty Ltd (“Icon”), is the head contractor under a construction contract entered into with the respondent, Australia Avenue Developments Pty Ltd (“Australia Avenue”). The contract related to the construction of the Opal Tower at Sydney Olympic Park. The contract provided for monthly progress payments, with a reference date of the 25th day of each month.

2. On 30 July 2018 Icon served a payment claim on the respondent under the Building and Construction Industry Security of Payment Act 1999 (NSW) (“Security of Payment Act”) in an amount of $3,331,744 (without GST). The reference date for the claim was 25 July 2018.

3. On 13 August 2018 Australia Avenue served a payment schedule, which identified the total amount of the claim as $3,664,918.40 (with GST) and the scheduled amount, being the amount that Australia Avenue proposed to pay (and has in fact paid) as $1,161,143.50. It followed that the amount in dispute was a little over $2.5 million.

4. On 27 August 2018 Icon lodged an adjudication application, to which Australia Avenue lodged an adjudication response. The matter was referred for adjudication and a determination, made on 14 September 2018, awarded an amount of $2,638,287.58 in favour of Icon. The unpaid balance was a little over $1.477 million.

5. On 19 September 2018 Australia Avenue commenced proceedings in the Equity Division seeking an order quashing the adjudication determination. Pursuant to a judgment delivered on 19 October 2018 Parker J granted the relief sought by Australia Avenue. [1] On 26 October 2018 Icon lodged an appeal in this Court.

   1. Australia Avenue Developments Pty Ltd v Icon Co (NSW) Pty Ltd [2018] NSWSC 1578.

6. For the reasons which follow, the appeal should be upheld, the judgment below set aside and Australia Avenue’s summons dismissed with costs.

Statutory scheme

7. Part 3 of the Security of Payment Act provides for the making of a payment claim and a response by way of a payment schedule. Sections 13 and 14, so far as presently relevant provide:

“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.

…

(5)   A claimant cannot serve more than one payment claim in respect of each reference date under the construction contract.

(6)   However, subsection (5) does not prevent the claimant from including in a payment claim an amount that has been the subject of a previous claim.

…

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.

…

8. Where a payment schedule has been served accepting an amount less than that claimed there is provision for an adjudication of the amount of the progress payment by s 17, which relevantly provides:

17   Adjudication applications

(1)   A claimant may apply for adjudication of a payment claim (an adjudication application) if:

(a)   the respondent provides a payment schedule under Division 1 but:

(i)   the scheduled amount indicated in the payment schedule is less than the claimed amount indicated in the payment claim,

…

…

(3)   An adjudication application:

(a)   must be in writing, and

(b)   must be made to an authorised nominating authority chosen by the claimant, and

(c)   in the case of an application under subsection (1)(a)(i)—must be made within 10 business days after the claimant receives the payment schedule, and

…

(f)   must identify the payment claim and the payment schedule (if any) to which it relates, and

…

(h)   may contain such submissions relevant to the application as the claimant chooses to include.

…

(5)   A copy of an adjudication application must be served on the respondent concerned.

(6)   It is the duty of the authorised nominating authority to which an adjudication application is made to refer the application to an adjudicator (being a person who is eligible to be an adjudicator as referred to in section 18) as soon as practicable.

9. Upon receipt of a claimant’s adjudication application, the respondent may lodge an “adjudication response”: s 20(1). An adjudication response is permitted only where a payment schedule has been provided: s 20(2A). The adjudication response cannot include reasons for withholding payment unless those reasons were included in the payment schedule: s 20(2B). Further procedural steps are set out in s 21. Importantly for the present matter, s 22 then provides:

22   Adjudicator’s determination

(1)   An adjudicator is to determine:

(a)   the amount of the progress payment (if any) to be paid by the respondent to the claimant (the adjudicated amount), and

(b)   the date on which any such amount became or becomes payable, and

(c)   the rate of interest payable on any such amount.

(2)   In determining an adjudication application, the adjudicator is to consider the following matters only:

(a)   the provisions of this Act,

(b)   the provisions of the construction contract from which the application arose,

(c)   the payment claim to which the application relates, together with all submissions (including relevant documentation) that have been duly made by the claimant in support of the claim,

(d)   the payment schedule (if any) to which the application relates, together with all submissions (including relevant documentation) that have been duly made by the respondent in support of the schedule,

(e)   the results of any inspection carried out by the adjudicator of any matter to which the claim relates.

10. In Brodyn Pty Ltd t/as Time Cost and Quality v Davenport [2] Hodgson JA (with the agreement of Mason P and Giles JA) identified a number of basic and essential requirements of the Act, which included the following:

“1.   The existence of a construction contract between the claimant and the respondent, to which the Act applies (s 7 and s 8).

2.   The service by the claimant on the respondent of a payment claim (s 13).

3.   The making of an adjudication application by the claimant to an authorised nominating authority (s 17).

4.   The reference of the application to an eligible adjudicator, who accepts the application (s 18 and s 19).

5. The determination by the adjudicator of this application (s 19(2) and s 21(5)), by determining the amount of the progress payment, the date on which it becomes or became due and the rate of interest payable (s 22(1)) and the issue of a determination in writing (s 22(3)(a)).”

2. (2004) 61 NSWLR 421; [2004] NSWCA 394.

11. Hodgson JA then identified certain “more detailed requirements: for example, s 13(2) as to the content of payment claims”, [3] as to which he said that “the reasons given above for excluding judicial review on the basis of non-jurisdictional error of law justify the conclusion that the legislature did not intend that exact compliance with all the more detailed requirements was essential to the existence of a determination”. [4]

    3. Brodyn at [54].

    4. Brodyn at [55].

12. It has been understood since Brodyn, and was affirmed by the High Court in Probuild Constructions (Aust) Pty Ltd v Shade Systems Pty Ltd,[5] that judicial review of an adjudicator’s determination is available, but only for jurisdictional error on the part of the adjudicator.

    5. (2018) 92 ALJR 248; [2018] HCA 4.

13. It is a fundamental principle that the engagement of a statutory power may depend either upon the existence of an identified state of affairs, or a state of satisfaction of the decision-maker as to an identified state of affairs. In the first category, the actual state of affairs, being the criterion of engagement of the power, is described as a “jurisdictional fact”,[6] meaning that the lawful exercise of the power may ultimately depend upon a finding of a court exercising judicial review as to whether or not the required state of affairs existed. The second category is sometimes also said to involve a jurisdictional fact, but only in the sense that the relevant fact is an opinion formed by the decision-maker; [7] in that case a reviewing court can only be concerned with the existence and lawful formation of the opinion.

    6. Gedeon v Commissioner, NSW Crime Commission (2008) 236 CLR 120; [2008] HCA 43 at [43].

    7. Minister for Immigration and Multicultural Affairs v Eshetu (1999) 197 CLR 611; [1999] HCA 21 at [130] (Gummow J).

14. There are aspects of the Security of Payment Act which fall into each category. The first category includes the service of a payment claim within the period specified by s 17(2)(a) of the Act. [8] In most cases that matter is readily determined and little inconvenience is generally caused by identifying it as an essential precondition to the exercise of the relevant powers.

    8. Chase Oyster Bar Pty Ltd v Hamo Industries Pty Ltd (2010) 78 NSWLR 393; [2010] NSWCA 190 at [53], [96], [285].

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

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

17. The primary judge referred, correctly, to the reasoning of this Court in Downer Construction (Australia) Pty Ltd v Energy Australia. [9] In particular, the judge set out two paragraphs from the reasoning of Giles JA which were entirely pertinent to the exercise before him:[10]

“[87]   In my opinion, determination of the parameters of the payment claim is a matter for the adjudicator, and a reasonable but erroneous decision by the adjudicator does not invalidate the determination. In the present case, in determining the amount of the progress payment (if any) to be made it was for the adjudicator to decide whether the water ingress fell within latent conditions for the purpose of the contract, and the parameters of the payment claim in that respect. He did so. As to both, it could not be said that the adjudicator’s decision was without foundation, and if the adjudicator addressed the matters and came to his decisions, even if other decisions could have been come to, he did what the Act required – he determined the adjudicated amount. As was stated in Minister for Commerce v Contrax Plumbing (NSW) Pty Ltd [11] at [49] –

‘… an error of fact or law, including an error in interpretation of the Act or of the contract, or as to what are the valid and operative terms of the contract, does not prevent a determination from being an adjudicator’s determination within the meaning of the Act.’

[88]   There is good reason for leaving determination of the scope and nature of the payment claim to the adjudicator, apart from the purpose of the Act earlier mentioned. The scope and nature of the payment claim will often be, and in the present case was, open to be elucidated and evaluated with the benefit of the adjudicator’s specialised knowledge.”

9. (2007) 69 NSWLR 72; [2007] NSWCA 49.

10. See also Coordinated Construction Co Pty Ltd v Climatech (Canberra) Pty Ltd [2005] NSWCA 229; 21 BCL 364 at [51].

11. [2005] NSWCA 142.

18. The correct approach was there identified in terms which have direct application to the present case. The primary judge in that case, having undertaken an exercise not dissimilar to that undertaken in this case, was found to have erred. Giles JA continued:

“[89]   Accordingly, I am unable to agree with the trial judge’s conclusion that the adjudicator failed to determine Downer’s payment claim, but instead determined a different claim. The adjudicator determined the payment claim, and the court should not by judicial review engage with the questions decided by him in doing so.

[90] Nor do I consider that the determination was void because the adjudicator failed to attempt to understand the basis of the claim or failed bona fide to exercise his power. With respect to the trial judge, to say that ‘the outcome of [the adjudicator’s] determination’ indicates failure to consider the matters to which s 22(2) refers does not pay heed to the exposure of the adjudicator’s reasons, and incorrectly imposes the Court’s opinion of the correct outcome as the determinant of bona fides.”

19. It follows that it was no part of the primary judge’s function to examine the payment claim to determine whether he considered that the approach adopted by the adjudicator was erroneous. Even if it were erroneous, it would not constitute jurisdictional error to act upon such an erroneous view. The concept of “jurisdictional error” was recently explained in the joint reasons of three members of the High Court (Kiefel CJ, Gageler and Keane JJ) in Hossain v Minister for Immigration and Border Protection:[12]

“[23]   Jurisdiction, in the most generic sense in which it has come to be used in this field of discourse, refers to the scope of the authority that is conferred on a repository. In its application to judicial review of administrative action the taking of which is authorised by statute, it refers to the scope of the authority which a statute confers on a decision-maker to make a decision of a kind to which the statute then attaches legal consequences. It encompasses in that application all of the preconditions which the statute requires to exist in order for the decision-maker to embark on the decision-making process. It also encompasses all of the conditions which the statute expressly or impliedly requires to be observed in or in relation to the decision-making process in order for the decision-maker to make a decision of that kind. A decision made within jurisdiction is a decision which sufficiently complies with those statutory preconditions and conditions to have ‘such force and effect as is given to it by the law pursuant to which it was made’. [13]

[24]   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. [14] 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. [15] 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’. [16] To that extent, in traditional parlance, the decision is ‘invalid’ or ‘void’. [17] ”

12. (2018) 92 ALJR 780; [2018] HCA 34.

13. Minister for Immigration and Multicultural Affairs v Bhardwaj (2002) 209 CLR 597 at [46].

14. eg, Minister for Immigration and Multicultural Affairs v Bhardwaj (2002) 209 CLR 597 at [17].

15. Minister for Immigration and Multicultural Affairs v Bhardwaj (2002) 209 CLR 597 at [46]; Jadwan Pty Ltd v Department of Health and Aged Care (2003) 145 FCR 1 at [42].

16. Minister for Immigration and Multicultural Affairs v Bhardwaj (2002) 209 CLR 597 at [51].

17. Baxter v NSW Clickers' Association (1909) 10 CLR 114 at 157; Probuild Constructions (Aust) Pty Ltd v Shade Systems Pty Ltd (2018) 92 ALJR 248 at [63].

Application of principles

20. The primary judge noted that there were two bases of challenge to the adjudicator’s determination, each of which was said to involve jurisdictional error. The first was dismissed and is not the subject of these proceedings. The second ground, which was upheld, was identified in Australia Avenue’s pleading below in the following terms: [18]

“The purported determination did not adjudicate or purport to adjudicate the payment claim. Rather, the purported determination expressed a view as to the amount by which the adjudicator thought the plaintiff [Australia Avenue] was liable to the first defendant [Icon] on any account whatsoever, whether or not the constituent parts of that liability formed part of the amount claimed in the payment claim.”

What the pleader meant was that the adjudicator had awarded amounts which were not the subject of the payment claim. The primary judge identified the ground in the following terms, referring to Australia Avenue as the Principal:

“[5]   … The Principal’s second contention concerns certain previous deductions made by the Superintendent from the contract works price (‘backcharges’). The Adjudicator made allowances in favour of the Contractor on these items. The Principal’s argument is that the allowances fell outside the scope of the payment claim and that the Adjudicator thereby exceeded her jurisdiction.”

The trial judge upheld this ground. He held, further, that the error so identified constituted a jurisdictional error.

18.    Amended Technology & Construction List Statement, filed 26 September 2018, par C10(b).

21. The argument put on behalf of the respondent, and ultimately accepted by the primary judge, was expressed in the following terms:

“[56]   Counsel for the Principal argued that: (1) the Adjudicator made an error in entertaining a challenge to the five backcharge items, in that those items had not been part of the payment claim and were not properly part of the adjudication process; and (2) that this error was a jurisdictional one which invalidated the determination. Initially it was contended on behalf of the Principal that the Court could, and should, remit the application for re-determination by the Adjudicator but this contention was abandoned on the second day of argument.”

22. Having identified the issue referred to above and having set out relevant provisions from the Security of Payment Act, the primary judge then noted that there were “five disputed backcharge items”, only one of which appeared in the “variation schedule in support of the payment claim.”[19] The judge concluded, consistently with Australia Avenue’s adjudication response, that “[t]he payment claim thus did not include any claim for the reversal of the backcharge items in question.”[20] The judge accepted that the adjudication application “was incorrect in asserting that the five backcharge items had been raised in the payment schedule as a credit against progress claim 33.” The judge said that “[t]he items did appear in the breakdown document for the contractual variations, but this was only a reconciliation of the figures in the project progress certificate which showed the breakdown of prior contractual claims and payments. It had nothing to do with the calculation of the scheduled amount.”[21] The judge held that the adjudicator “was wrong to say that the five backcharge items were referred to in the payment schedule. They were … referred to in the progress certificate, but not in the payment schedule.”[22]

    19. Judgment at [61].

    20. Judgment at [61].

    21. Judgment at [62].

    22. Judgment at [63].

23. The references to “backcharge items” requires some explanation: the term is obscure. Indeed, it is not entirely clear that it is used consistently by the parties. Thus, in its written submissions in this Court, the appellant stated: [23]

“The ‘backcharges’ were introduced into the dispute by Australia Avenue in its payment schedule…. The ‘backcharges’ reflected amounts which Australia Avenue asserted should be taken off the contract sum for various items of work because there had been variations reducing the scope (or price) of the relevant works. Variations of that kind can properly be described as ‘negative variations’. In the documents before the adjudicator, the parties called those items ‘backcharges’ because they reflected amounts which Australia Avenue had already paid to Icon, but which Australia Avenue was asserting should not have been paid by reason of the negative variations.”

23.    Appellant’s outline of annotated submissions, par 2.

24. The submissions further stated: [24]

“In its adjudication application, Icon contended that there should be no deduction for the ‘backcharge’ amounts …. The Adjudicator agreed with Icon's contentions and did not allow the deductions referred to by Australia Avenue …. His Honour held that the Adjudicator erred in doing so.”

24.    Ibid, par 4.

25. It was part of the respondent’s case that the adjudicator allowed an amount on account of “backcharges” which was not to be found in the payment claim. If a backcharge were an amount which reduced the claim, it would not properly be described as an amount for which a claim was made. It would only be part of a payment claim if the claim included amounts which had previously been made and allowed, or perhaps disallowed and were now sought to be reinstated. It is not clear that either party used the language in that sense.

26. In substance this case involved a dispute as to how the payment claim and the payment schedule should be understood.

27. It was not, and is not, appropriate for the Court to engage in an analysis of the manner in which the adjudicator dealt with the payment claim in her determination. However, the respondent’s submissions require reference to submissions put in the course of the adjudication, which can best be identified by the passage in the adjudicator’s reasons in which she identified and addressed them:

“5.   RECONCILIATION OF CLAIMED AND SCHEDULED AMOUNTS

5.1   Claimant Submission

In Folder A Tab 6 of the adjudication application, the Claimant provided a reconciliation of the disputed items which included the amounts previously determined in Adjudication Determination 2018-TASC040. In providing the reconciliation, the Claimant submitted:

‘… the Respondent does not appear to take the point (the parties have both preserved their contractual positions cognisant of Determination 2018-TASC-040) the table below sets out the new items to be determined in this Adjudication Application absent those items that have previously been agitated’

5.2   Respondent Submission

I have summarised my understanding of the key points of the Respondent’s submission as follows:

a.   The Claimant has ‘confused the ambit of its Adjudication Application by concerning itself with the previous Adjudication Determination 2018-TASC-040 and unhelpfully provides a "reconciliation table" at AA Folder A, Tab 6. This reconciliation table is of no utility as the items pressed by Icon are not subject to Adjudication Determination 2018-TASC-040. Icon has irrelevantly set out to identify that it has not re-agitated claims already determined’

b.   The backcharges referred to by the Claimant ‘were not the subject of the Payment Claim nor the Payment Schedule and cannot be subject of the Adjudication Application. It is outside the jurisdiction of the adjudicator to consider the backcharges.’

c.   Accordingly, Icon's purported claim for backcharges in the Adjudication Application must fail as it:

(a)   claimed amounts not included in its Payment Claim, and

(b)   raises new issues in its Adjudication Application which is contrary to the Act and in respect of which AAD is precluded from responding.

d.   In respect of backcharges included in the Claimant’s reconciliation, the Respondent submits that ‘there were no backcharges scheduled by AAD and Icon has no entitlement in respect of same as these were neither the subject of the Payment Claim or the Payment Schedule’. Further, the Respondent submits that a ‘reconciliation of the Payment Clam and the Payment Schedule identifies that the Superintendent has made an assessment of each claim made by Icon and that Icon have not disputed or claimed in its Payment Claim the backcharges previously set-off by the Superintendent’ in Progress Schedule No. 32 dated 13 July 2018:

Variation 14	Deletion of Plenum Walls	($306,863)
Variation 66	Deletion of pain to fire stairs	($93,938)
Variation 72	Lift Speeds	($661,763)
Variation 73	Ground Floor Glass	($142,441)
Variation 76	Green Tinge Glass	($236,309)

e.   The Respondent then submits that:

i.   I have no jurisdiction to consider and determine the backcharges in this Adjudication Application

ii.   The Respondent is precluded from including matter not the subject of its Payment Schedule as they were not part of the Payment Claim, no submissions in respect of the backcharges are made in the Adjudication Response.

f.   In excluding the abovementioned variations, the Respondent submits that the total contested amount is $282,203.15.

5.3   Adjudication Conclusion

I reviewed the reconciliation and note the following:

1.   A number of items in the payment claim included claimed amounts that were in excess of amount that I had previously determined

2.   The payment schedule included amounts for a number of items that were in excess of amount that I had previously determined

3.   In providing the reconciliation, the Claimant has adopted the previously determined amounts and this has resulted in the Claimant now pressing the lesser amount of $2,779,237.59 (including GST), compared to the claimed amount of $3,664,918.40 (including GST)

4.   I am not convinced that the Respondent has understood the Claimant’s reconciliation as illustrated by their notation concerning the ‘Deletion of [Plenum] Walls’ in their reconciliation at Paragraph 33 of the adjudication response. The notation states that ‘no amount claimed but pressed in adjudication application’ whereas, the amount pressed is a previously determined deduction of -$257,000.00

5.   In respect of the Respondent’s submission that backcharges were not included in the payment schedule, I note the following:

a.   Progress Payment Certificate 33 dated 30 July 2018, which is included as an attachment to the payment schedule, includes a variation amount to the contract of $13,934,843.87. The variation amount was used in the calculation of the schedule amount on page 15 of the payment schedule. In calculating he variation amount, the Respondent both itemised and included deductions for:

Variation 14 Identified as Variation 30	Deletion of Plenum Walls	($306,863)
Variation 66	Deletion of paint to fire stairs	($93,938)
Variation 72	Lift Speeds	($661,763)
Variation 73	Ground Floor Glass	($142,441)
Variation 76	Green Tinge Glass	($236,309)

b.   While the payment schedule (pages 3 to 14) includes a table of assessed items together with reasons and which exclude the foregoing variations, it is clear that the deductions associated with the above variations form part of the payment schedule and have accordingly been scheduled by the Respondent, albeit with no specific reason provided

6.   I do not agree with the Respondent’s submission that as the Claimant had not ‘disputed or claimed in its Payment Claim the backcharges previously set-off by the Superintendent’, these being Variations 14, 66, 72, 73 and 76, I do not have jurisdiction to consider these items. My reasons are:

a.   As referenced in Point 5 above, the variation amounts were included in the payment schedule and are part of the difference between the claimed amount and the scheduled amount, this being $2,281,159.00 (excluding GST), as opposed to the $282,203.15 (excluding GST) which the Respondent submits should be the scope of my determination considerations. The significant difference of itself tests the credibility of the Respondent’s submission

b.   It is my understanding that in Denham Constructions Pty Ltd v Islamic Republic of Pakistan (No 2) [2016] ACTSC 215, the court rejected the argument that because a valuation was not previously contested, it was now subsequently excluded from challenge in an adjudication application. …

7.   Having regard to the foregoing, I have used the Claimant’s reconciliation in identifying the contested or disputed amounts that I must consider in this determination

8. I note that the Claimant has included previously determined amounts that were not addressed in either the payment claim or the payment schedule. Consistent with my conclusion in Section 4.7 above and Section 22(4) of the Act, I have adopted the previously determined amounts in my reconciliation summary

9.   My understanding of the Claimant’s reconciliation and the amounts now disputed, is summarised in Table 2 below.”

28. In short, to the extent that there was an issue as to whether or not there was a claim for backcharges, the issue was expressly addressed by the adjudicator and was resolved. The respondent did not identify error in how the adjudicator addressed the issues; rather it submitted that she should not have addressed the issues otherwise than by accepting the respondent’s position. Alternatively, the jurisdictional issue identified at 5.2.e could only be finally resolved by the Court on judicial review.

29. This proposition gave rise to a debate as to whether the “progress certificate” was part of the payment schedule. The document identified as the respondent’s payment schedule in Icon’s tender bundle at trial commenced with the heading “Progress certificate/payment schedule”. In the course of submissions senior counsel for the respondent said that the certificate, although served with the schedule was “not the schedule”, but was “part of the schedule as an attachment.” [25] The reason for this coyness was that the certificate referred expressly to the backcharges; on any view they were before the adjudicator for consideration.

    25.    Tcpt, 7/12/18, p 17(30)-(40).

30. The point of substance was identified by the respondent’s counsel on the appeal as follows: [26]

“If a claimant were entitled to recast their claim as a reconciliation claim rather than a claim for identified discrete items of work, then the respondent, having responded to those discrete items, would be at risk of being denied the opportunity because of [s 20(2B)] of making submissions about earlier claims if they were brought into account in the application for adjudication as a claim revived.”

26.    Tcpt, p 18(5).

31. Although this complaint had an implicit air of procedural unfairness, it was not articulated in those terms. That was understandable because the issue had been squarely raised by the respondent’s own document and the very same complaint had been raised in the respondent’s submissions to the adjudicator. It had to be addressed by her, pursuant to s 22(2), and was addressed.

32. This was not a case in which it could be said that the adjudicator awarded more than the amount claimed; she self-evidently did not. Rather, it was a dispute as to the proper construction of the payment claim having regard to the contractual provisions. The statute requires that the adjudicator “is to consider” the provisions of the construction contract and the payment claim. [27] However, an error in construing the contract or in understanding the payment claim does not constitute jurisdictional error and therefore cannot form a basis upon which the adjudication can be quashed.

    27. Security of Payment Act, s 22(2)(b) and (c).

33. In any event, it is tolerably clear that there was no error. There was a dispute between the parties in relation to what were described as “backcharges”. Once it was accepted that there was a dispute to be resolved, the respondent identified no error in the reasoning of the adjudicator, except to say that the backcharges were not part of the payment claim as served. The respondent accepted that the payment claim as served and adjudicated upon identified the construction work, as required by s 13(2)(a). It was not deficient in that respect. The dispute was as to the calculation of the value of that work, which was the very task vested in the adjudicator.

Orders

34. There being no reviewable error on the part of the adjudicator, the Court makes the following orders:

1. Allow the appeal and set aside order (1) made on 19 October 2018 (quashing the determination of the adjudicator) and order (1) made on 24 October 2018 (as to costs).

2. In place of those orders, order that:

1. the proceedings brought in the Equity Division by Australia Avenue Developments Pty Ltd be dismissed;

2. Australia Avenue Developments Pty Ltd pay the costs of Icon Co (NSW) Pty Ltd in the Division.

3. Set aside order (2) made on 24 October 2018 and the subject of a stay (ordering that the moneys in court be paid out to Australia Avenue).

4. Order that the moneys held in court be paid out to the appellant.

5. Order that the first respondent (Australia Avenue Developments Pty Ltd) pay the appellant’s costs of the appeal.

35. MEAGHER JA: I agree with Basten JA.

36. LEEMING JA: I agree with Basten JA.

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Endnotes

Decision last updated: 21 December 2018