James Engineering Pty Limited v ABB Australia Pty Limited & Anor

[2020] HCATrans 13

[2020] HCATrans 013

IN THE HIGH COURT OF AUSTRALIA

Office of the Registry
  Darwin  No D18 of 2019

B e t w e e n -

JAMES ENGINEERING PTY LIMITED (ABN 63 101 887 950)

Applicant

and

ABB AUSTRALIA PTY LIMITED (ABN 68 003 337 611)

First Respondent

JOHN TUHTAN

Second Respondent

Application for special leave to appeal

KIEFEL CJ
EDELMAN J

TRANSCRIPT OF PROCEEDINGS

AT CANBERRA ON FRIDAY, 14 FEBRUARY 2020, AT 10.54 AM

Copyright in the High Court of Australia

MR D.A. SAVAGE, QC:   May it please, the Court, I appear with my learned friend, MR C.D. COULSEN, for the applicant.  (instructed by QBM Lawyers)

MR A. WYVILL, SC:   If it pleases the Court, I appear for the first respondent.  (instructed by McCullough Robertson Lawyers)

KIEFEL CJ:   Yes, Mr Savage.

MR SAVAGE:   Your Honour, the question here is whether in a building and construction payment adjudication in the Northern Territory, which our learned friends refer to as the “West Coast” model of that legislation, there is, as the court found below, a broader or a different scope for a view for jurisdictional error than there is in the corresponding “East Coast” model, that being the model that is legislated in New South Wales and Queensland and upon which the important cases on the scope of jurisdictional review in that model depend. 

The question raised invites a consideration of the different provisions between the Northern Territory legislation and, for example, the New South Wales legislation or any other legislation which one might call the “East Coast” model.

EDELMAN J:   Why does it invite a consideration of the different bits of legislation?  Why would it not just involve consideration of whether there was a jurisdictional error, as found below?

MR SAVAGE:   Only to this extent, that it was said that the decision rests on the basis that the Northern Territory legislation has different provisions than any of the “East Coast” model legislative provisions which authorise the review.  That is why the Court said it was unnecessary to look to decisions about jurisdictional review in the “East Coast” model because of the different provisions in the Northern Territory legislation.

KIEFEL CJ:   The Northern Territory legislation has been subject to amendment, has it not, last year?

MR SAVAGE:   Yes, yes.

KIEFEL CJ:   The effect of that provision is specific attention, now the matter has been clarified to an extent.

MR SAVAGE:   Not on our case.

KIEFEL CJ:   Expressly permits or requires adjudicators to assess liquidated damages.

MR SAVAGE:   It does – but only if there is a finding of liquidated damages in the adjudication.  So, prior, there was some doubt as to whether an adjudicator – if there was a claim for liquidated damages – could assess the liquidated damages and that – to the extent it was a controversy – has been clarified by that legislation.  But that has nothing to do with this case. 

This case depends upon the provisions which the Court of Appeal said were the essence of the distinction, as it were – being section 33(1)(b) of the Northern Territory legislation – the effect of which is said to be that an adjudicator, having performed the adjudication process, has an obligation to say who should pay whom what amount of money.

It is the same as any other provision in any other State legislation, save that in the Northern Territory as in Western Australia there is a provision that allows a response to a payment claim to include a claim which could overtop the payment claim.  So, in other legislation you can have a payment claim and you can put in a response which defends against that amount which you cannot yourself claim.  That is the only distinction which is, for our purposes, irrelevant.  The only other section was 34(1)(b).  Section 34(1)(b) requires the court to assess the submissions made by each party in the adjudication before exercising the function under 33(1)(b).  It is 33(1B) which is the amendment to which your Honour the Chief Justice referred. 

So here the facts, which are not in dispute and would be relevant to the appeal can really be briefly stated this way.  There was a construction contract.  There was a payment claim made under the construction contract, and there was a response to the payment claim.  After that, the applicant here elected to pursue an adjudication and so there was an application for an adjudication which contained some submissions, and a response to that which contained some submissions.

The adjudicator considered those and published reasons and an order, which was later found to be one vitiated by jurisdictional error.  The error of the adjudicator was this.  The adjudicator looked at the first set of submissions, that is, the ones that were responding to the payment claim and which defined the payment dispute that the adjudicator was empowered to resolve, and the adjudicator found that the respondent here had not elected to set off a claim to liquidated damages.  That was the adjudicator’s construction of the response.  So it did not, in the adjudicator’s view, allow for liquidated damages to be set off against the claim.

KIEFEL CJ:   Is that the adjudicator’s expression - how the adjudicator expressed the matter?

MR SAVAGE:   Yes, the adjudicator was very careful to distinguish between the issues that arose in the payment claim - in response to the payment claim as the issues upon which he was undertaking the adjudication.

KIEFEL CJ:   But that is not necessarily the correct characterisation of the error made by an adjudicator in a circumstance such as this, is it?  What the adjudicator really got wrong was that, there being a claim by ABB to liquidated damages, whether that fell within the payment dispute which he was required to deal with?  Is that not the error?  It is as simple as that.

MR SAVAGE:   That may be a characterisation of it, but he did that.

KIEFEL CJ:   Well, what is incorrect about it?  That is in fact how the respondent puts it at 22.3 of their ‑ ‑ ‑

EDELMAN J:   That is how the court put it as well, is it not?

MR SAVAGE:   Yes, but it is - the error in it is to misconstrue the response to give that result.

EDELMAN J:   That then really is a submission that the special leave should be given for an error by the Court of Appeal in its misconstruction of reasons of an adjudicator.  It is not really a special leave point.

MR SAVAGE:   No, no, the submission is that it is not that error - the error which is common ground, however one chooses to characterise it, the error in saying this response in the terms that you have sought to cast it means that you are not claiming and thus you are not entitled to claim liquidated damages as a set‑off is an error that would not attract, in our submission, judicial review, because it is not a jurisdictional error.

If one allows for that error as an error going to jurisdiction, because as the court said, it means that there is a failure to exercise the core function, that is the core function set out in 33(1B) to come to the correct result, or the core function at 34(1)(b), to consider the submissions in coming to that correct result, then that would mean it is not one of the five jurisdictional errors identified in Brodyn, it is simply saying ‑ ‑ ‑ 

EDELMAN J:   Why is it not a jurisdictional error when an adjudicator says, in effect, I cannot determine this aspect of the dispute because I do not have power under section 33(1)(b) over this aspect of the claim?

MR SAVAGE:   Because the power is just the necessary coincident of saying that you have not raised it in a way which takes up the sett‑off point.  They did not say you are not entitled to raise it because there is some inconsistency with the legislation.  It was the terms of the response did not express a desire to set it off.  So, if it had said anything else to a similar effect the result would be the same.  Under section 33(1)(b) as the court ‑ ‑ ‑ 

KIEFEL CJ:   Mr Savage, I take it that you do not dispute that under section 33(1)(b) the adjudicator had power to determine each of the claims for money, and to determine finally the amount to be paid, either one to the other?

MR SAVAGE:   No.  We accept that.

KIEFEL CJ:   Why does that not encompass, necessarily, the conclusion of the amount to be paid, encompass setting off one against the other to reach the final result?

MR SAVAGE:   It does, your Honour, but the question we would submit is not that.  The question is, if there is an error in that ‑ ‑ ‑ 

KIEFEL CJ:   No, it is a question of what the adjudicator understood or misunderstood.  In the Court of Appeal’s view he misunderstood that these were his powers and that was his task.  He took a rather technical approach to how one of the parties had framed it and whether it had left out what he considered to be some necessary words? 

MR SAVAGE:   Well, he did do that, but that is the same as any other error that an adjudicator might make in framing the issues ‑ ‑ ‑ 

EDELMAN J:  Not if it is a mandatory consideration that is required by the Act, in other words, if a mandatory, relevant consideration required by the Act is that the adjudicator take into account the set‑off defence that was raised in the response.

MR SAVAGE:   But he did take into account and he took into account in a way that was erroneous.  He did not take it into account ‑ ‑ ‑ 

EDELMAN J:  Well, that is not the finding that is made.  If you look at page 55, the quote from Justice Le Miere in the West Australian case that is being applied is talking about circumstances where an adjudicator failed to take into account a matter that the Act required to be taken into account.  That was the approach that was applied by the primary judge, was it not?

MR SAVAGE:   No.  Her Honour took the view that that case, although not on point, was sufficiently analogous to allow the result here.  It was not the same type of case because the reason that the adjudicator in Cooper & Oxley did not take into account was because the adjudicator did not consider there was a claim to it, not because the adjudicator took one view of the parties’ submissions about it.

That is, when one goes to the reasoning in respect of this case, which commences really at page 76 of the book and paragraph [55] of the reasons – after referring to decisions in the New South Wales court, over the page at 77, their Honours point to the differences in the legislation.  So, at about point 19, on page 77:

On the other hand, the NT Act does not refer to or require a “payment schedule” and expressly requires the adjudicator to take into account the adjudication response served under s 29 of the Act.  

Then at [58]:

In the present matter the Adjudicator failed to appreciate that the set‑off claim brought by ABB . . . could and did fall within the “payment dispute” –

Now, that is because of the construction that the adjudicator put on the issues that were in issue in the payment dispute.  So, any adjudicator – it is our case that we want to prosecute in the appeal, who makes an error in identifying the issues that arise in an adjudication and then goes on to make orders in accordance with 34(1)(b), having considered those submissions, albeit erroneously, and then published an order to that effect would commit an error – that error being analysed as being a lack of fulfilment of the core function, that is, the core function of deciding the dispute having account of the submissions.  Both of those require the correct understanding.

EDELMAN J:   Is the core of your disagreement with the reasons of the Court of Appeal a dispute about the first sentence of paragraph [59], that you dispute the conclusion that:

the Adjudicator failed to comply with an essential condition which was required of him in order for him to perform the decision‑making process required of him by the Act.

MR SAVAGE:   Yes, because, relevantly, he identified the dispute even though that was erroneous because he misconstrued one of the documents to it.  That is the only point that arises in the case we could say merits special leave.

EDELMAN J:   It is really the way that section 33(1)(b) is construed in terms of what 33(1)(b) requires as a mandatory relevant consideration.

MR SAVAGE:   Does it require – yes.  The answer to your Honour’s question is, yes.  Does it require consideration, or does it require the correct consideration?  If it requires the correct consideration and there was not correct consideration here, then we would lose.  If it requires merely the consideration, bona fide consideration, then that is what the adjudicator did, albeit erroneously. 

It allows, if one adopts the correct – there must be a correct understanding of it – one allows scope for any judicial review of any adjudication because in every adjudication, or in most adjudications at least one would expect the adjudicator would have regard to the submissions and would publish an order in accordance with those submissions.  That is what the adjudicator thought that he was doing in the instant case.

So, the benefit of the structure of the legislation to provide cash flow would be undercut to a very significant degree, in our submission, because one of the requirements is not just that the adjudicator is satisfied but that the court is ultimately satisfied that that is the correct result.  Your Honours, that is as far as we can take it.

KIEFEL CJ:   Thank you, Mr Savage.  We do not need to trouble you, Mr Wyvill.

In our view, there is no reason to doubt the correctness of the conclusion reached by the Court of Appeal.  Special leave is refused with costs.

AT 11.12 AM THE MATTER WAS CONCLUDED