Justar Property Group Pty Ltd v Chase Building Group (Canberra) Pty Ltd
[2020] ACTSC 231
•26 August 2020
SUPREME COURT OF THE AUSTRALIAN CAPITAL TERRITORY
Case Title: | Justar Property Group Pty Ltd v Chase Building Group (Canberra) Pty Ltd |
Citation: | [2020] ACTSC 231 |
Hearing Date: | 14 May 2020 |
DecisionDate: | 26 August 2020 |
Before: | Mossop J |
Decision: | See [80] |
Catchwords: | APPEAL – APPLICATION FOR LEAVE TO APPEAL – Appeal from adjudicator’s decision under the Building and Construction Industry (Security of Payment) Act 2009 (ACT) – no manifest error of law on the face of the decision – whether there was strong evidence of an error of law – jurisdictional error – whether there was strong evidence that the question of law could substantially add to the certainty of the law – there was not – application for leave to appeal dismissed ADMINISTRATIVE LAW – CLAIM FOR PREROGATIVE RELIEF – Relief in the nature of certiorari – claim first raised in closing submissions – application for extension of time to commence proceedings – no special circumstances – application for extension of time dismissed |
Legislation Cited: | Building and Construction Industry (Security of Payment) Act 2009 (ACT), ss 16, 19, 22, 24, 43, Dictionary Commercial Arbitration Act1986 (ACT), s 38 Supreme Court Act 1933 (ACT), ss 8, 20 |
Cases Cited: | Birdseye v Australian Securities and Investments Commission [2003] FCAFC 232; 76 ALD 321 Chase Oyster Bar Pty Ltd v Hamo Industries Pty Ltd [2010] NSWSC 1167 Wooding v Eastoe [2006] NSWSC 277 |
Texts Cited: | Marcus Jacobs, Security of Payment in the Australian Building and Construction Industry (Lawbook Co, 6th edition, 2017) |
Parties: | Justar Property Group Pty Ltd (Applicant) Chase Building Group (Canberra) Pty Ltd (Respondent) |
Representation: | Counsel M Sherman (Applicant) J Moffett (Respondent) |
| Solicitors McInnes Wilson Lawyers (Applicant) Bradley Allen Love Lawyers (Respondent) | |
File Number: | SCA 15 of 2020 |
MOSSOP J:
Introduction
On 4 February 2020 an adjudicator appointed under the Building and Construction Industry (Security of Payment) Act 2009 (ACT) (SOP Act) made a determination that a progress payment of $314,144.15 was payable by the applicant to the respondent. He also required that the applicant pay 100% of the adjudication fees.
The applicant (Justar) was the owner of land in Bruce upon which a development was intended to be carried out. The respondent (Chase) was a building company.
Justar has applied for leave to appeal under s 43(3)(b) of the SOP Act to appeal against an order of an adjudicator. Section 43 provides, relevantly:
43Judicial review of adjudication decision
(1)Except as provided for in this part, a court does not have jurisdiction to set aside or remit an adjudication decision on the ground of error of fact or law on the face of the decision.
(2)An appeal may be made to the Supreme Court on any question of law arising out of an adjudication decision.
(3)An appeal under subsection (2) may be brought by any of the parties to an adjudication decision—
(a)with the consent of the parties to the decision; or
(b)with the leave of the Supreme Court.
(4)The Supreme Court must not grant leave under subsection (3) (b) unless it considers that—
(a)having regard to all the circumstances, the determination of the question of law concerned could substantially affect the rights of 1 or more parties to the adjudication decision; and
(b)there is—
(i)a manifest error of law on the face of the adjudication decision; or
(ii) strong evidence that the adjudicator made an error of law and that the determination of the question may add, or may be likely to add, substantially to the certainty of the law.
(5)The Supreme Court may make any leave which it grants under subsection (3) (b) subject to the applicant complying with any conditions it considers appropriate.
….
In the event that leave to appeal is granted, the draft notice of appeal contains the following grounds:
1.The adjudicator lacked jurisdiction to adjudicate the respondent’s purported payment claim against the appellant.
Particulars
A.Section 19(1) of the SOPA relevantly provides that an application may be made “for adjudication of a payment claim”.
B.Section 15 of the SOPA relevantly provides that a payment claim may be given to the person who, under the construction contract, is or may be liable to make the relevant progress payment.
C.Section 10 of the SOPA relevantly provides that an entitlement to a progress payment arises on and from each reference date under a construction contract if the relevant person has undertaken, under the construction contract, to carry out construction work or supply related goods and services.
D.The dictionary defines “construction contract” to mean “a contract or other arrangement under which one party undertakes to carry out construction work, or to supply related goods and services, for another party”.
E.The construction contract pursuant to which the payment claim was made, was entered into between the respondent and Maxon Group Pty Ltd (Maxon).
F.On the evidence before the adjudicator there was no relevant construction contract within the meaning of the SOPA between the appellant and the respondent.
G.The respondent’s payment claim dated 8 December 2019 and the adjudicator’s adjudication were each addressed to the appellant rather than Maxon.
2.The adjudicator erred at [16]-[17] and [20] of his decision in having regard to the connection between persons and entities involved with both Maxon and the appellant in determining the adjudication application.
Particulars
The appellant refers to and repeats the particulars to ground 1 above.
3.The adjudicator erred at [21] of his decision in finding that the appellant was, on the respondent’s evidence, the entity with which the respondent entered into a contract.
Particulars
The appellant refers to and repeats the particulars to ground 1 above.
4.The adjudicator’s decision was legally unreasonable.
Particulars
The appellant refers to and repeats the particulars to ground 1 above.
Because it became a matter of some procedural significance, it must be noted that the relief sought in the draft notice of appeal was as follows:
6.The orders sought are:
1.The adjudication decision of Mr John O’Brien dated 5 February 2020 be set aside pursuant to s 43(6)(a) of the SOPA.
2.In the alternative, the decision of Mr John O’Brien dated 5 February 2020 be set aside in the exercise of the Court’s inherent jurisdiction arising under ss 8(2) and 20(1)(a) of the Supreme Court Act 1933 (ACT).
3.Such further or other orders that the Court considers appropriate.
4.The respondent pay the applicant’s costs of the proceeding as assessed or agreed.
Issues
Chase did not consent to Justar appealing from the adjudication decision and hence s 43(3)(a) did not apply. This meant that if any appeal was to proceed, the leave of the court was required under s 43(3)(b).
Chase accepted that the determination of the questions of law put forward by Justar could substantially affect the rights of one or more parties to the adjudication decision and hence the requirement in s 43(4)(a) was satisfied.
Chase also accepted that the concept of a “question of law” was to be interpreted consistently with the decision of the five member Federal Court in Haritos v Federal Commissioner of Taxation [2015] FCAFC 92; 233 FCR 315 (Haritos) and May v Military Rehabilitation and Compensation Commission [2015] FCAFC 93; 233 FCR 397 (May), and was not confined in the manner previously indicated in Birdseye v Australian Securities and Investments Commission [2003] FCAFC 232; 76 ALD 321 and Comcare v Etheridge [2006] FCAFC 27; 149 FCR 522.
The issue on the application for leave to appeal was whether the requirements of s 43(4)(b) were satisfied. That involved determining whether either of the two limbs of paragraph (b) were satisfied, namely, whether:
(i) there was a manifest error of law on the face of the adjudication decision; or
(ii) strong evidence that the adjudicator made an error of law and that the determination of the question may add, or may be likely to add, substantially to the certainty of the law.
The parties agreed that it was appropriate to hear the application for leave to appeal and any appeal at the same time.
Finally, in the course of closing submissions, an oral application was made for leave to file, out of time, an application for prerogative relief. That application was opposed.
Facts
The payment claim served by Chase upon Justar was dated 31 October 2019 but sent by email on 21 November 2019. The claim was for an amount of $314,144.15. No payment schedule was served by Justar in response.
Notice under s 19(2) of the SOP Act was given on 8 December 2019. No payment schedule was served by Justar in response to this notice.
The adjudication application was lodged on 6 January 2020 and served on Justar on 21 January 2020. It asserted a construction contract dated 13 October 2017. Because of the failure by Justar to serve a payment schedule it was not entitled to, and did not, file an adjudication response.
The adjudication decision was made on 4 February 2020 and given to the parties on 5 February 2020.
The position of Justar was that it never entered into a “construction contract” with Chase and that any construction contract was with a different company, Maxon Group Pty Ltd.
The factual issues agitated by the parties related to two separate areas. First, was the identity of the parties to the contract or arrangement entered into on 13 October 2017. These issues were principally agitated by Justar in order to establish the absence of a “construction contract” between it and Chase.
Second, there were issues agitated by Chase going to the failure by Justar to take any steps in relation to the payment claim or the adjudication process. This went to the discretion to grant leave to appeal.
Four witnesses gave evidence. Mr Xingshun Jiang is the sole director of Justar. Mr Samuel McDonald is employed as a project manager of Maxon Group Pty Ltd. Mr Thomas Simonds is the managing director of Chase. Each of these three witnesses was cross-examined. Mr Mark French is the chief financial officer of Chase. He was not cross-examined on his affidavit evidence.
Justar and Maxon Group Pty Ltd are part of a group of companies referred to in the evidence as “the Maxon Group”. Maxon Group Pty Ltd is a company controlled by Mr Songnan Huang which employs staff who are engaged on development projects. The relationship between the companies is shown in the ASIC records that were in evidence. The individuals who are behind the relevant companies are Mr Jiang and Mr Huang. Through separate companies both control shareholdings in Justar. Although Mr Huang owns the shares in Maxon Group Pty Ltd, which provides offices and staff to “the Maxon Group”, the basis on which it does so is not revealed by the evidence. The details of the relationship between Mr Jiang and Mr Huang, the other members of the Maxon Group and the scope of the activities of companies within the Maxon Group were not disclosed in any detail by the evidence.
In 2017 Chase was approached by Mr McDonald with the idea of becoming a builder for a project on land at Bruce. That land was owned by Justar but that was not made clear to Chase at the time. The proposal was to build a development known as “Malmo Hotel & Apartments”. On 5 October 2017 Mr Simonds, the managing director of Chase, wrote a letter to “Maxon Group”. The letter was a letter of offer proposing a three-stage process. Stage 1 involved Chase working with “Maxon Group and their nominated design team” to develop the design documents. Stage 2 was to issue all trade tender packages, to engage in “value engineering” and to deal with tenders and tender responses on an open book basis with Maxon Group. Stage 3 was to convert the open book trade cost plan into either a design and construct building contract or a construction management agreement with Chase. Under the heading “Commercial Offering” stages 1 and 2 attracted a fee of $20,000 and $30,000 plus GST respectively, in the event that there was no agreement reached as part of stage 3. It provided an estimate of the project costs as being between $21.25 and $22.5 million plus GST.
A slightly revised letter with the same structure was issued on 12 October 2017. Once again it was to “Maxon Group” and incorporated the same stages and costs for stages 1 and 2.
There was a telephone meeting on 13 October 2017 involving Mr Simonds on one end and Mr McDonald on the other. Mr Jiang was with Mr McDonald. Mr Simonds said that in that conversation Mr McDonald and Mr Jiang said “we are accepting the offer, please proceed”. In Mr Simonds’ oral evidence he said that he was talking to Mr McDonald and that Mr Jiang was in the background. Mr Jiang denied having accepted the offer contained in the 12 October 2017 letter. His evidence was that Justar had not entered into a contract with Chase. Mr McDonald gave evidence in relation to the meeting. He agreed in cross‑examination that Mr Jiang was present. Although Mr Jiang and Mr McDonald denied having accepted the offer contained in the letter, they kept no records relating to what transpired at the meeting.
I accept Mr Simonds’ evidence that on 13 October 2017 Mr McDonald, with Mr Jiang’s approval, said words to Mr Simonds to the effect that Chase should proceed with the development of the proposal in accordance with the stages outlined in his letter on 12 October 2017. Apart from the explicit acceptance of Chase’s offer, there is no other reasonable explanation for Chase having proceeded as it did following that meeting. It is undeniable that it devoted considerable time and incurred not insignificant outgoings in carrying out the activities described in stage 1 and stage 2 of the project. A prominent example of such outgoings is the incurring of liabilities of $28,132.50 up to March 2018 for external cost planning and quantity surveying services. That is unlikely to have occurred in the absence of a clear indication of acceptance of the proposal in the 12 October 2017 letter. That is for two reasons. First, it is clear from the terms of the letter of 12 October 2017 that Chase was not engaged in a speculative exercise, in that it required the payments identified for stage 1 and stage 2 in accordance with the terms of the letter if the development project did not mature into a contract with it, as contemplated in stage 3. Second, the evidence of Mr Jiang and Mr McDonald did not suggest that there was any discussion of some alternative arrangement whereby Chase may act on a wholly speculative basis.
It is also clear that there was no discussion at that stage of Justar in the context of the acceptance of the offer in the letter of 12 October 2017. Mr Simonds understood that Maxon was a group of companies. He did not know which companies were in that group. He did not know whether Justar was part of the Maxon Group. He thought that it was likely that Chase would be working with an entity within that group. He did not know at that stage which entity within the Maxon Group he would be contracting with. He was not aware of who Mr McDonald was employed by, but he knew that Mr McDonald had a Maxon Group email signature block. He understood Mr McDonald was employed by, or consulting to, one of the companies in the Maxon Group.
In April 2018, after having completed stage 1 and stage 2, Chase submitted an offer for the design and construct works contemplated in stage 3 of the 12 October 2017 letter. At that time Mr French, the chief financial officer of Chase, attempted to regularise the billing for work done on the project. As a result of a request from Mr French, Mr Simonds called Mr McDonald and enquired “Who is the correct entity for billing for Malmo?”. Mr McDonald told him that it was Justar. As a result, Justar was formally included as a debtor in the electronic billing system of Chase on 4 May 2018.
In relation to the conduct of Justar in response to the payment claim and the adjudication, the position was as follows. Mr Jiang read the payment claim when it was sent to him by email in November 2019. He made a decision at the time that he did not want to pay it. His evidence was that the payment claim had nothing to do with Justar and that he should not pay it. He also did not expect the items claimed to amount to more than $300,000. He did not communicate with Mr Simonds about it. He did not send any email in reply.
He also received an email sent on 8 December 2019 which contained a notice under s 19(2) of the SOP Act. That notice made clear the intention of Chase to apply for adjudication, gave a further opportunity to Justar to file a payment schedule and explained that the consequence of a failure to serve a payment schedule would be that, in accordance with s 22(3) of the Act, Justar would be prevented from lodging an adjudication response. When Mr Jiang received the document he knew that Chase was maintaining its claim against Justar for the approximately $314,000. He provided no response to Chase about what was claimed in that letter. He said that he was about to travel to China at the time. He said that builders sometimes just write invoices, some of which are correct, some of which are not. He said that because he was planning to go overseas he did not address the letter. The effect of his evidence appeared to be that he did not know much about the law and that this was his explanation as to why he did not address the correspondence.
He received a copy of the adjudication application on 21 January 2020. He knew that Chase was maintaining that Justar owed it $314,000. When the adjudication decision arrived, he read it very carefully and found a lawyer. He agreed with the proposition that the first time that he told Chase that Justar was not the contracting entity was when his solicitors wrote to Chase on 24 February 2020, well after the delivery of the adjudication decision.
Submissions
Justar’s submissions
In support of ground 1 of the proposed appeal, Justar contended that the existence of a construction contract is an essential precondition to the jurisdiction of an adjudicator. It submitted that the existence of such a contract is a jurisdictional fact and hence, is not a matter that is solely for the adjudicator to determine. It made two submissions in relation to the adjudicator’s lack of jurisdiction. The first submission was that there was no such contract. The reasoning contended for by Justar had four steps:
(a)Mr Jiang denied that Justar entered into a contract with Chase and the totality of the evidence indicated that it did not.
(b)The decision of the adjudicator depended upon Mr McDonald having accepted an offer orally on 13 October 2017, but Mr McDonald was an employee of Maxon Group Pty Ltd not Justar, and the court should not find that he had authority to contract on Justar’s behalf.
(c)The court would not conclude that Mr McDonald was held out as a representative or agent of Justar.
(d)Even if he was, then the scope of Mr McDonald’s authority did not extend to the oral execution of a $22 million contract on Justar’s behalf.
The second submission was that, on the material before him, the adjudicator committed a jurisdictional error in finding that there was a contract. The evidence disclosed that Mr Jiang was the sole director and company secretary of Justar. Any acceptance of an offer by a party other than to whom it was addressed amounted to a counter-offer. It was necessary to determine whether the offer was accepted by a person with apparent or ostensible authority. Chase’s evidence before the adjudicator was that Mr McDonald was the “Development Manager” for Justar but it provided no evidence as to his authority to accept an offer of the kind that was made. Rather, the evidence of communications from Mr McDonald was that he was associated with Maxon Group Pty Ltd. In the absence of evidence to establish his authority to enter a $22 million contract, it was not open to the adjudicator to conclude that Justar had entered into a contract with Chase based on Mr McDonald’s actions.
In relation grounds 2 and 3 of the proposed appeal, Justar contended that these were complimentary to ground 1. It pointed to the reference by the adjudicator to ASIC records which were before him and the statement that those “illustrate and expose the connection between persons and entities involved with both Maxon and [Justar]”. Justar submitted that this was extraneous to the statutory question which required the identification of the essential requirements for the formation of a contract between two corporations.
Ground 4 was an assertion of legal unreasonableness. In relation to this, Justar submitted that the exercise of statutory power must “be legal and regular, not arbitrary, vague and fanciful”: see Minister for Immigration and Citizenship v Li [2013] HCA 18; 249 CLR 332 at [65], referring with approval to Sharp v Wakefield [1891] AC 173 at 179. It was submitted that the finding of a construction contract between Justar and Chase “in the absence of evidence which was probative of that fact” was arbitrary in that sense.
Chase’s submissions
Chase made essentially two submissions. First, it pointed to the fact that the term “construction contract” is defined in the Dictionary to the SOP Act as “a contract or other arrangement under which one party undertakes to carry out construction work, or to supply related goods and services, for another party” (emphasis added). Chase placed emphasis on the words “or other arrangement” and the explanation of that concept by McDougall J in Machkevitch v Andrew Building Constructions [2012] NSWSC 546 at [17]‑[30] (Machkevitch).
Second, Chase made submissions directed to the factual circumstances surrounding what it says was the entry into the construction contract. That involved pointing to the fact that Justar is part of the “Maxon Group”, that Mr Jiang is not a director of Maxon Group Pty Ltd, that Justar is the owner of the land upon which the development was to proceed and there was no commercial reason why, if there was no agreement, Chase commenced work and incurred significant costs in relation to the proposed development.
So far as the application for leave was concerned, it submitted:
(a)there was no “manifest error of law on the face of the adjudication decision”; and
(b)there is no “strong evidence that the adjudicator made an error of law” but, if there was, the determination of the question would not “add, substantially to the certainty of the law”.
So far as the discretion to grant leave to appeal was concerned, Chase placed emphasis upon the opportunities that Justar had to address the issues it now raises as part of the payment claim and adjudication process. Chase submitted that the failure of Justar to take any steps to preserve or protect its own commercial interests should weigh heavily against a grant of leave to appeal.
Was there a manifest error of law on the face of the decision?
Test
In Westport Insurance Corporation v Gordian Runoff Ltd [2011] HCA 37; 244 CLR 239 at [42] the expression in s 38(5)(b)(i) of the Commercial Arbitration Act 1984 (NSW) “manifest error of law on the face of the award” was interpreted as expressing the one idea. This is the same expression found in s 43(4)(b)(i) the SOP Act, although the SOP Act refers to “adjudication decision” rather than “award”. A majority of the High Court found that what is required is “that the existence of error be manifest on the face of the award, including the reasons given by the arbitrator, in the sense of apparent to that understanding by the reader of the award”. The emphasis was upon it being apparent on the face of the award, rather than there being some additional requirement of “egregious error”: at [42], [45]. As Kiefel J explained it: “It does not require that the error be of a particular quality or that errors involving complex questions be disqualified”: at [163].
Decision
In assessing the reasons of the adjudicator it is important to bear in mind that, because of the failure by Justar to serve a payment schedule under s 16 of the SOP Act and hence the failure to provide an adjudication response under s 22, the only material that was before the adjudicator was the material provided by Chase.
That material included the following evidence from a statutory declaration of Mr Simonds:
Contract Formation
6.I was contacted by Maxon Group Pty Ltd [Maxon] on or about 29 September 2017. Maxon wanted to explore the development of some property in Bruce, ACT through its related entity Justar Property Group Pty Ltd … into an hotel and serviced apartments.
7.I developed an offer for a Design Development Agreement that was presented on the 5th October 217 [sic] and a revised offer was presented on the 12th of October 2017, which forecast a target construction budget of $21.25 - $22.5m for the construction of the project, given the information we had at that time. This was based on and in line with the build price for similar or equivalent projects that Chase has constructed.
8.The offer contemplated 3 stages of works, with the final stage involving reaching an agreement on a Design and Construct or Construction Management Contract. The first two stages were initial design and tendering works, with a break fee included in each stage if we didn’t get to Stage 3. If we did get to Stage 3, these costs would be absorbed in our Stage 3 contract price.
9.Sam McDonald, the Development Manager for [Justar], accepted the offer orally or [sic] about the 13th of October 2017.
The adjudicator was entitled to rely upon this evidence to find that the contracting party was Justar and that the contract was formed when the offer was accepted orally on 13 October 2017. On the evidence before the arbitrator there was no uncertainty arising about who the contracting party was because paragraph [6] of the statutory declaration set out above made it clear that Maxon Group Pty Ltd was acting on behalf of its related entity, Justar. Further, the evidence disclosed that Mr McDonald was the development manager for Justar.
A significant factual premise of Justar’s argument in this court was that the contract being entered into was a $22 million contract. That factual premise was false. Its falsity deprives of some of their force the submissions made on behalf of Justar in relation to the authority of Mr McDonald. The offer contained in the letter of 12 October 2017 was for a three-stage process. The first two stages involved $20,000 and $30,000 respectively, each exclusive of GST. Those amounts were only payable in the event that there was no agreement to move on to stage 3 of the project. Stage 3 contemplated the entry into a Design and Contract Agreement or Construction Management Agreement for the project, the value of which would be in the order of $22 million. Because the contemplated stage 3 was contingent upon the completion of stage 1 and stage 2 of the project and involved the negotiation and entry into a further contract, the acceptance of any offer on 13 October 2017 could not reasonably be characterised as the acceptance of an offer for a $22 million contract. If some summary of the expense to which it is alleged Justar was being committed is required, it would be more accurate to describe it as a $22,000 contract rather than a $22 million contract. It created a liability of between zero and $55,000. It would be zero if stage 3 proceeded and Chase was awarded a separate contract. It would be up to $55,000 ($20,000 plus $30,000, plus GST) if both stages 1 and 2 proceeded but no contract was entered into in stage 3. Because stage 1 and stage 2 involved amounts that were only payable if there was no agreement to proceed to stage 3, it is clear that the conduct of work on the part of Chase was not on a speculative basis. The amounts payable for stage 1 and stage 2 were clearly designed to protect Chase’s position in the event that the project did not proceed by one of the types of contract contemplated in the description of stage 3. Chase was prepared to do the preliminary work to develop the construction proposal, but only on the basis that it would be paid the identified fees in the event that there was no Design and Contract Agreement or Construction Management Agreement entered into as part of stage 3.
The adjudicator was, in my view, entitled to accept the uncontradicted evidence of Mr Simonds as indicating that an offer had been made to Justar and accepted by Mr McDonald. That the letter of 12 October 2017 referred to “Maxon Group” did not preclude the adjudicator from reaching the conclusion that he did. That is for the following reasons:
(a)The adjudication application itself explained that “the employees and directors of [Justar], although principally employed by an entity called Maxon Group (‘Maxon’), work through various property development entities for specific construction projects, as is commonplace in property development.”
(b)The summary of the ASIC records that were before the adjudicator was consistent with Justar being related to Maxon Group Pty Ltd by reason of the 50% shareholding of Justar ultimately controlled by Mr Huang.
(c)There was evidence of Mr Simonds as to the interaction between Maxon Group Pty Ltd and Justar in relation to the possible development of the property in Bruce.
(d)There was no submission by Justar that Maxon Group Pty Ltd did not have the relationship with it that was described by Mr Simonds.
Further, the requirement upon the adjudicator to give reasons under s 24(3)(b) did not extend to addressing the possibility that the person disclosed by the evidence as being Justar’s “Development Manager” did not have actual or ostensible authority to enter the contract with Chase. That is because:
(a)the description of the role of Mr McDonald given in Mr Simonds’ evidence was consistent with him having actual or apparent authority;
(b)the nature of the contract, which created an exposure of between zero and $55,000, was not such an exposure as would make it inherently unlikely that a person in a position of Mr McDonald would be entitled to enter the contract; and
(c)there was no submission by Justar to the adjudicator that there was an issue to be determined about Mr McDonald’s authority to enter the contract on behalf of Justar.
In my view, having regard to the material that was before the adjudicator and to which he was obliged to give consideration under s 24(2), there is no error of law which is manifest on the face of the adjudication decision.
Is there strong evidence that the adjudicator made an error of law and that the determination of the question may add, or may be likely to add, substantially to the certainty of the law?
Test
There are two elements required to satisfy s 43(4)(b)(ii), namely, that there is strong evidence that:
(a)the adjudicator made an error of law; and
(b)the determination of the question may add, or may be likely to add, substantially to the certainty of the law.
Although the framing of the test in s 43 of the SOP Act was modelled on s 38 of the Commercial Arbitration Act1986 (ACT) (CA Act): see Pines Living Pty Ltd v O’Brien [2013] ACTSC 156 at [19]; Steel Contracts Pty Ltd v Simons [2014] ACTSC 146 at [30] (Steel Contracts), there is one difference of relevance to the present issue. While s 38 of the CA Act referred to “the certainty of commercial law”, s 43 of the SOP Act refers to “the certainty of the law”. In the context of the CA Act, the reference to the certainty of commercial law reflected a desire to limit appeals to circumstances where the point to be raised upon the appeal was of broader significance than simply the particular arbitration in question. That recognised that while most questions of law that arise in relation to an arbitration decision should not provide a basis for a grant of leave to appeal, there was a more limited category of such questions which would be of significance to commercial transactions generally, and hence warrant a grant of leave to appeal, notwithstanding that the parties had agreed to settle their disputes by arbitration.
Section 43 of the SOP Act is untethered from any mooring to a purpose associated with any particular area of law. That deprives it of the policy coherence of the CA Act provision. Notwithstanding this untethering, the court is obliged to assume that the legislature had some coherent scheme in mind and attempt to work out what that scheme is from the words actually used, read in their total context. That context includes the historical antecedents of the provision in question. Engaging in that task, the following features of the provision can be identified:
(a)One only gets to s 43(4)(b)(ii) after having reached the conclusion that there is no manifest error of law on the face of the adjudication decision that would bring the case within s 43(4)(b)(i). The provision is therefore addressing circumstances where there is a strong potential for there to be an error of law, but there is also an additional factor relating to the significance of that error which means that it is appropriate that an appeal be available.
(b)While the reference to “strong evidence” in the context of an error of law is unusual, the intention appears to be that an applicant relying upon this paragraph is not restricted to only the face of the record, but instead may rely upon other evidentiary material to show error on the part of the adjudicator which is not apparent on the face of the adjudication itself: Commonwealth v Rian Financial Services and Developments Pty Ltd (1991) 105 FLR 239 at 244 (Rian).
(c)The fact that a decision on a question of law arising out of an adjudication decision is made by the Supreme Court is not sufficient, of itself, to “add, substantially to the certainty of the law”. If that was the case then the criterion would inevitably be satisfied and hence would be deprived of any content. Something more is necessary.
(d)What is necessary is that there must be a potential for a decision on the question to add to the certainty of the law and to do so in a way which is “substantial”. Certainty of the law is an important component of the rule of law, particularly in a commercial context. The potential for adding to that certainty is only one of many possible characteristics of a decision by the Supreme Court on a question of law. Most cases involving such questions will have few consequences going beyond the resolution of the dispute between the immediate parties. Some cases will have broader consequences going beyond the immediate parties. Only a subset of those cases with broader consequences will add to the certainty of the law. An even smaller subset will have the potential to do so “substantially”.
(e)As a matter of construction of the paragraph, the requirement for “strong evidence” also applies to the question whether the determination would add to the certainty of the law: Rian at 245. The question “is not a matter … for judicial guess-work”. When the provision related to certainty in “commercial law” Miles CJ in Rian held that it required “evidentiary material … that there is some uncertainty in the commercial community on the question or questions of law”: Rian at 245. The approach of Allsop P in Gordian Runoff Ltd v Westport Insurance Corporation [2010] NSWCA 57; 267 ALR 74 at [173] is not consistent with there being a strict requirement for such evidence, in that it allows for a judge to reach a conclusion about the significance of a decision on a particular point without evidence. Obviously, it is more difficult to make sense of the “strong evidence” requirement now that the provision is untethered from a defined area of law in relation to which evidence may be given.
Decision
There is strong evidence that there was an error of law by the adjudicator, namely a jurisdictional error. That error was in concluding that there was a “construction contract” between Justar and Chase, formed as a result of what occurred on 13 October 2017.
In Wooding v Eastoe [2006] NSWSC 277 at [16] Young CJ concluded that the bona fide attempt by an adjudicator to determine the parties to the contract was not capable of judicial review. In Marcus Jacobs, Security of Payment in the Australian Building and Construction Industry (Lawbook Co, 6th edition, 2017), Mr Jacobs submits that post Chase Oyster Bar Pty Ltd v Hamo Industries Pty Ltd [2010] NSWSC 1167, “it would probably still be a matter for the adjudicator to determine” having regard to the requirement to consider the terms of the contract which include who the parties are: at 492. On the other hand, Refshauge J treated the identity of the parties to the construction contract as being part of the jurisdictional requirement that there be a “construction contract”: Steel Contracts at [46], [48], [115], [121].
As the submissions of the parties did not specifically address this issue, I proceed on the basis most favourable to Justar, namely, that both the existence of a construction contract and the identity of the parties are matters that go to the jurisdiction of the adjudicator. As a consequence, even if the adjudicator correctly determines that a “construction contract” exists but incorrectly identifies the parties to that contract, the adjudicator will have fallen into jurisdictional error.
I accept, based on the decision in Machkevitch, that an arrangement under which “related goods and services” are provided which falls short of an enforceable contract may be a “construction contract” for the purposes of the SOP Act. Such an “‘arrangement’ encompasses transactions or relationships which are not legally enforceable”: Machkevitch at [24]. It is a requirement, however, that the “‘arrangement’ … must be one under which one party to it undertakes to carry out construction work for another party to it”: Machkevitch at [25]. I agree that “the court must look for a concluded state of affairs, which is bilateral at least, which can amount to an arrangement under which one party to it undertakes to perform construction work for another party to it”: Machkevitch at [28].
In my view, there is strong evidence that there was not a contract (in the general law sense) between Justar and Chase. That is because the communications were addressed to “Maxon Group”, Mr Jiang and Mr McDonald were both identified by reference to “Maxon Group” in their email addresses, and Justar was never expressly identified as the contracting party. That Justar was subsequently identified as the appropriate billing entity, was the owner of the land and was the only relevant entity of which Mr Jiang was a director is not, in my view, sufficient to establish that it entered a contract with Chase on 13 October 2017. That there commonly exist multiple entities used by developers for the purposes of different construction projects does not mean that the uncertainty at the time of the alleged contract can be disregarded.
The position is less clear in relation to an “arrangement” within the scope of the defined term “construction contract”. Within the concept of an “arrangement” there is more scope for a lack of precision in the identification of the parties to the arrangement. In this case, Justar was the owner of the land and the entity in relation to which Mr Jiang clearly had authority. Although the relevant entity was not known to Chase as at 13 October 2017, the unchallenged evidence was that in April 2018 when Mr Simonds asked Mr McDonald “who is the correct entity for billing for Malmo”, he was told “Justar Property Group Pty Ltd”. That was at about the same time as Justar submitted its offer for the design and construct component of the development. That appears to have been at the conclusion of stage 2 and where proceeding to stage 3 was being contemplated. I consider that, as at April 2018, Mr McDonald had at least ostensible authority to make it clear that the “arrangement” was with Justar, or at least not exclusively with another “Maxon Group” entity. From this point, it is likely that there was an arrangement that included Justar. A substantial portion of the payment claim involved claims for work done in the period from April 2018 until November 2018. Another substantial portion of the payment claim related to the engagement of consultants, some of which post-dated April 2018.
Therefore, in summary, the position is that:
(a)there is strong evidence that there was not a contract between Justar and Chase as a result of what occurred on 13 October 2017;
(b)for the same reasons, there is strong evidence that there was not an “arrangement” as referred to in the definition of “construction contract” between Justar and Chase as a result of what occurred on 13 October 2017 up until April 2018; and
(c)from April 2018 it cannot be said that there is strong evidence that there was no such “arrangement” between Justar and Chase because, from that point, it was made clear that Justar was the relevant billing entity.
There was therefore strong evidence of an error of law by the adjudicator, satisfying the first element of s 43(4)(b)(ii).
It is in that context that it is then necessary to turn to the question of whether there is “strong evidence … that the determination of the question may add, or may be likely to add, substantially to the certainty of the law”.
In my view, this requirement is plainly not satisfied. The final determination of the question of whether or not there was a jurisdictional error on the part of the adjudicator in the circumstances of this case does not have any prospect of adding substantially to the certainty of the law. It would do nothing that had any implications of significance beyond the factual circumstances of the present case. The case would be a highly specific one, dependent upon the subtleties of the factual circumstances of this case. It would not even rise to the level of “interesting but academic questions” referred to by Miles CJ in Rian: at 245.
The two propositions said by Justar to meet the statutory test were the absence of any binding authority “in the context of the ACT [SOP Act]” in relation to both:
(a)whether an adjudicator may find a construction contract to exist in the absence of evidence of any analysis of offer and acceptance by the party said to be bound; and
(b)whether or not the absence of a necessary jurisdictional fact which gives rise to a jurisdictional error is an error of law.
So far as the first of these propositions is concerned, I have rejected the challenge to the reasons given by the adjudicator. The proposition is therefore directed to an error of law of which there is not strong evidence and is thereby not relevant.
So far as the second proposition is concerned, the subtlety of Justar’s submission is that it says there is no binding authority “in the context of the ACT [SOP Act]”. On the other hand, Justar has pointed to clear statements that the absence of a jurisdictional fact gives rise to a jurisdictional error and is therefore an error of law: Minister for Immigration and Multicultural Affairs v Yusuf [2001] HCA 30; 206 CLR 323 at [82]; Haritos at [202]; May at [181]; Viscariello v Legal Practitioners Disciplinary Tribunal [2016] SASCFC 107 at [63]. It is a proposition which appears self‑evident and plainly just as applicable to the SOP Act as it is elsewhere. It therefore does not provide a basis upon which this limb of the test in s 43(4)(b)(ii) could be satisfied.
As a consequence, because neither of the limbs of s 43(4)(b) are satisfied, the court “must not grant leave”. Therefore, the application for leave to appeal must be dismissed.
Application to file application for prerogative relief out of time
During the course of closing submissions, counsel for Justar made submissions to the effect that even if leave to appeal was not granted under s 43, nevertheless, prerogative relief should be granted. In order to support the availability of this remedy he pointed to the relief sought in the draft notice of appeal. The relevant part of the notice of appeal is set out at [5] above. It makes reference, in general terms, to the decision of the adjudicator being “set aside in the exercise of the Court’s inherent jurisdiction arising under ss 8(2) and 20(1)(a) of the Supreme Court Act”.
There had been no mention of any claim for prerogative relief in the application for leave to appeal, in the written submissions ordered to be filed and served prior to the hearing of the application, or at any stage of the hearing prior to closing submissions. Rather, the matter had proceeded, up until closing submissions, on the basis that it was only an application for leave to appeal pursuant to s 43 of the SOP Act.
Unsurprisingly, in those circumstances, the position taken by Chase was that the jurisdiction of the court to grant prerogative relief was not enlivened.
Justar then applied orally for leave to file an application for prerogative relief outside the time specified in the Court Procedures Rules 2006 (ACT) (CPR). No evidence was led in support of this application. Ultimately, counsel for Justar said:
The application is made on the basis that it is in effect regularising what’s already in the notice of appeal and would not require any further evidence. To the extent that the court’s against me on that, I don’t press the application, but to the extent that the court accepts that it’s substantially regularising what’s already in the documents then I press it.
Rule 3557(2) of the CPR provides that the application for prerogative relief must be filed in the court not later than 60 days after the day when the grounds for the grant of the relief sought first arose. The court has power under r 3557(4) to extend that time “only in special circumstances”. The content of “special circumstances” was discussed by Refshauge J in Steel Contracts at [51]-[60]. A strong claim of error is not sufficient to establish “special circumstances” but may contribute to a finding of special circumstances: see the authorities referred to in Steel Contracts at [52]-[56].
In my view, the application should not be characterised as one involving merely the regularisation of a claim already made in the documents. The only application before the court is an application for leave to appeal made pursuant to s 43 of the SOP Act. It is only if that application is granted, then the jurisdiction to hear an appeal exists. If leave is granted, the appeal is a statutory appeal within the bounds of s 43. The scope of the powers on appeal are set out in s 43(6). They extend to confirming, amending or setting aside the adjudication decision or remitting it with the Supreme Court’s opinion on the question of law to the adjudicator. The granting of leave to appeal under s 43 does not in any way enliven the jurisdiction of the court to grant prerogative relief.
The rather obscure reference to the granting of relief “in the exercise of the court’s inherent jurisdiction arising under ss 8(2) and 20(1)(a) of the Supreme Court Act 1933 (ACT)” did not, in substance, put Chase on notice of any claim for prerogative relief.
First, there was no mention of prerogative relief or certiorari.
Second, the reference to s 8(2) is to a provision identifying that the rules may provide that the jurisdiction of the court that is otherwise exercisable by a single judge may be exercised by the Registrar. It makes no sense in the context of the present proceedings and does nothing to indicate that prerogative relief was being sought.
Third, the reference to s 20(1)(a) is to a provision which is in general terms and states that the court has “all original and appellate jurisdiction that is necessary to administer justice in the Territory”. Although this encompasses the powers of the court as a superior court of general jurisdiction to give prerogative relief, the bare reference to the section would not alert Chase to the fact that such a claim was being made.
Fourth, the nature of the relief sought was that the decision “be set aside”. That is not consistent with the relief that might have been sought in a claim for prerogative relief. The only relevant prerogative order would be an order in the nature of certiorari quashing the decision or, conceivably, a declaration under r 3558 of the CPR. Neither of those are consistent with the decision being “set aside”.
Fifth, including a claim for prerogative relief in a draft notice of appeal would have been legally incoherent having regard to the fact that the draft notice of appeal was for the purposes of an appeal under s 43 of the SOP Act. At least where both sides are legally represented, an opposing party is not required to search for the means by which a legally incoherent claim may be made against it and respond to the proceedings on that basis.
I conclude that the alternative prayer for relief buried in the terms of a draft notice of appeal, for which leave had not been granted, was insufficient to put Chase or the court on notice that what was being sought were prerogative orders. It is, therefore, not a case in which what is being sought is merely to regularise a matter of which the opposing party is or ought to have been on notice.
Further, it is not a case in which the absence of such notice could have made no difference to the approach taken by the opposing party to the evidence in the case. While Chase did lead evidence from Mr Simonds concerning the circumstances surrounding the entry into what Chase asserted to be the “construction contract”, I accept the submission made by counsel for Chase that it may have taken a different approach to the evidence if there was a properly constituted challenge to the decision of the adjudicator which sought prerogative relief. Although the changes in the evidence are unlikely to have been dramatic, I do not consider that this is a case in which the claim that a party would have taken a different approach to evidence is without substance. The approach to evidence taken by Chase is likely to have been significantly affected by the fact that it was facing an application for leave under s 43 and hence it could take some comfort from the very significant obstacles that were in Justar’s path as a result of the terms of s 43(4).
Given my conclusion that the claim for relief in the draft notice of appeal was not sufficient to put Chase on notice of a claim for prerogative relief, and my conclusion that the approach taken by Chase to the evidence is likely to have been different if it had been on notice of such a claim, I understood that counsel for Justar did not press the application. However, in case the application was pressed and in order to make the position clear, the matters that I consider to be of most relevance in considering the application for an extension of time are as follows:
(a)The adjudicator made his decision on 4 February 2020 and notified the parties on 5 February 2020. The 60 day period referred to in r 3557 ended on 4 or 5 April 2020. The extension of time sought was therefore from 4 or 5 April 2020 until 14 May 2020, just over five weeks.
(b)For the reasons given above, Chase was not on notice by reason of the terms of the draft notice of appeal of the claim that was to be made.
(c)There was no mention of any claim for such relief in Justar’s written submissions or at any time prior to closing submissions.
(d)There was no explanation for the failure to put on an application for prerogative relief that would explain whether it was a deliberate course of conduct or an oversight by solicitors or counsel and, if the latter, when that oversight was identified.
(e)The claim of jurisdictional error appears to be strong in relation to the period from October 2017 to April 2018. There appears to be a foundation for jurisdiction for the period from April 2018 (even though that was not relied upon before the adjudicator), which covers a majority of the amounts the subject of the adjudication decision. The existence of that alternative basis for jurisdiction of the adjudicator would not prevent the decision of the adjudicator being able to be quashed for jurisdictional error, but it is relevant to the exercise of discretion.
(f)The filing of proceedings seeking prerogative relief would involve an additional party (the adjudicator) and hence delay the finalisation of the proceedings, even though it is unlikely that the additional party would take any substantive role.
(g)Chase has asserted that if it was a defendant in proceedings seeking prerogative relief, it is likely to take a different approach to the evidence. The granting of an extension of time in which to commence proceedings would necessitate giving Chase an opportunity to consider its evidentiary position and the possibility of further interlocutory steps being taken, such as the issue of subpoenas or notices to produce. While it cannot be said with certainty how the evidentiary position would be altered, given a claim unconstrained by the limitations in s 43, it is likely that Chase would put significant effort into the factual issues surrounding 13 October 2017 and any available contention relating to an “arrangement” which might affect the exercise of discretion to grant prerogative relief.
In light of these matters, I am not satisfied that there are “special circumstances” that would enliven the power to extend time. Therefore, it is not open to grant an extension of time.
Further, even if, contrary to my opinion, those circumstances, taken collectively, do amount to “special circumstances”, having regard to:
(a)the absence of any evidence giving an explanation for the failure to file the proceedings within the required time;
(b)the consequences in terms of increased cost and delay in permitting the proceedings to be filed at this stage of the proceedings under s 43;
(c)the failure by Justar to raise the factual and legal contentions now sought to be raised when it was given the opportunity to contest the payment claim; and
(d)the fact that the refusal to grant leave will not preclude Justar from exercising any substantive rights that it has;
I would not exercise my discretion to grant an extension of time in which to commence proceedings seeking prerogative relief in relation to the adjudication decision.
Orders
The orders of the Court are:
1. The oral application for an extension of time in which to commence proceedings seeking prerogative relief to quash the decision of the adjudicator, Mr John O’Brien, dated 4 February 2020 is dismissed.
2. The application for leave to appeal is dismissed.
3. The applicant is to pay the respondent’s costs of the proceedings.
4. Order 3 does not take effect for a period of seven days after the date of these orders and if, within that period, either party notifies my associate by email that it wishes to be further heard in relation to costs, the order does not take effect until further order of the Court.
| I certify that the preceding eighty [80] numbered paragraphs are a true copy of the Reasons for Judgment of his Honour Justice Mossop. Associate: Date: 26 August 2020 |
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