Kuatro Build Pty Ltd v Elite Formwork Group Pty Ltd

[2025] NSWSC 372

Supreme Court

New South Wales

Medium Neutral Citation:

Kuatro Build Pty Ltd v Elite Formwork Group Pty Ltd [2025] NSWSC 372

Hearing dates:

10 April 2025

Date of orders:

17 April 2025

Decision date:

17 April 2025

Jurisdiction:

Equity

Before:

Hmelnitsky J

Decision:

(1) Summons dismissed with costs.

(2) The funds paid into court by the plaintiff be paid into the trust account of the first defendant’s solicitors.

Catchwords:

BUILDING AND CONSTRUCTION — Adjudication — Judicial review — Whether adjudication was affected by jurisdictional error — Whether enforcement of the determination should be stayed even if the determination was not affected by jurisdictional error

ADMINISTRATIVE LAW — Jurisdictional error — Whether adjudicator failed to duly ‘consider’ relevant considerations under s 22(2) of the Building and Construction Industry Security of Payment Act 1999 (NSW) — Whether procedural unfairness established

Legislation Cited:

Building and Construction Industry Security of Payment Act 1999 (NSW) ss 17, 20, 22, 24(1)(a),

25

Corporations Act 2001 (Cth), s 459C

Cases Cited:

Brodyn Pty Ltd t/as Time Cost and Quality v Davenport & Anor (2004) 61 NSWLR 421; [2004] NSWCA 394

Ceerose Pty Ltd v A-Civil Aust Pty Ltd (2023) 112 NSWLR 225; [2023] NSWCA 215

Demex Pty Ltd v McNab Building Services Pty Ltd (2023) 113 NSWLR 282; [2023] NSWCA 261

Grosvenor Constructions (NSW) Pty Limited (in administration) v Musico & Ors [2004] NSWSC 344

MartinusRail Pty Ltd v Qube RE Services (No 2) Pty Ltd (No 2) [2024] NSWSC 1223

Martinus Rail Pty Ltd v Qube RE Services (No.2) Pty Ltd [2025] NSWCA 49

Probuild Constructions (Aust) Pty Ltd v Shade Systems Pty Ltd (2018) 264 CLR 1; [2018] HCA 4

Texts Cited:

Nil

Category:

Principal judgment

Parties:

Kuatro Build Pty Ltd (Plaintiff)
Elite Formwork Group Pty Ltd (First Defendant)
Doron Rivlin (Second Defendant)

Representation:

Counsel:
E Ball (Plaintiff)
J Dooley (First Defendant)

Solicitors:
Vincent Young (Plaintiff)
Mangioni Biggs + Co (First Defendant)
Lauderdale Law (Second Defendant)

File Number(s):

2025/53574

Publication restriction:

Nil

JUDGMENT

1. The plaintiff, Kuatro Build Pty Ltd (Kuatro), and the first defendant, Elite Formwork Group Pty Ltd (Elite), are parties to a building subcontract under which Elite agreed to provide concrete supply services for a residential development in Warriewood (the Subcontract), for which Kuatro is the main contractor.

2. Kuatro and Elite are in dispute as to the amounts payable under the Subcontract.

3. On 28 November 2024, pursuant to the provisions of Part 3 of the Building and Construction Industry Security of Payment Act 1999 (NSW) (the SOP Act), Elite issued a payment claim for a progress payment of $1,649,252.99. On 12 December 2024, Kuatro responded with a payment schedule contending that it did not owe Elite the amount claimed, and that Elite in fact owed it $965,129.40.

4. On 3 January 2025, Elite lodged an adjudication application under the SOP Act, submitting the dispute to independent adjudication. The adjudicator was Mr Doron Rivlin, the second defendant. The adjudicator issued his initial determination on 28 January 2025. However, correcting an error identified by the parties, he issued an amended determination under the ‘slip rule’ in s 22(5) of the SOP Act on 4 February 2025. By this amended determination, he determined that Elite was entitled to a progress payment of $515,290.38 including GST and that the due date for payment was 12 December 2024.

5. On 7 February 2025, Kuatro commenced proceedings in this Court against Elite in which it seeks judgment against Elite in the sum of $1,256,763.31. Those main proceedings concern the parties’ substantive, final entitlements under the Subcontract and are yet to be determined.

6. On 10 February 2025, Kuatro filed the summons in these proceedings by which it seeks both interlocutory and final relief in respect of the adjudicator’s determination concerning the progress payment.

7. So far as interlocutory relief is concerned, Kuatro seeks orders to restrain the defendants from taking any steps to obtain an adjudication certificate within the meaning of s 24(1)(a) of the SOP Act or to file any such certificate as a judgment pursuant to s 25 of the SOP Act. On 10 February 2025, interlocutory orders to that effect were made on an ex parte basis upon Kuatro giving the usual undertaking as to damages and upon Kuatro undertaking to pay the whole of the adjudicated amount into Court, which has occurred. Those interlocutory orders were of the kind described by Einstein J in Grosvenor Constructions (NSW) Pty Limited (in administration) v Musico & Ors [2004] NSWSC 344. That is, they restrained the payment of a progress payment otherwise due to the subcontractor in circumstances where it appeared that the subcontractor was insolvent and that there was a substantial risk that the subcontractor would be unable to repay the amount if required following a determination of the parties’ substantive dispute. By agreement between the parties, the stay remains in place until further order.

8. So far as final relief is concerned, Kuatro seeks orders quashing the adjudicator’s determination or, alternatively, permanently restraining Elite from taking steps to enforce it. Kuatro’s Technology and Construction List Statement filed on 10 February 2025 in these proceedings identifies what it considers to be seven discrete jurisdictional errors in the determination, each of which is articulated as a separate ground.

9. Kuatro now only presses for final relief on the basis of two of those seven grounds. However, it submits that even if the determination is not set aside or is only set aside in part, the stay should continue until the substantive dispute between the parties has been determined in the main proceedings.

Background

10. The Subcontract to which Kuatro and Elite are parties was originally between Elite and another company, EQ Constructions Pty Ltd. However, that company went into administration and on 17 February 2023 the Subcontract (with some alterations) was novated to the present parties pursuant to a deed of novation.

11. In May 2024, the Deputy Commissioner of Taxation issued a creditor’s statutory demand to Elite for the payment of debt for the amount of $171,156.02 in respect of unpaid taxes and interest. The unpaid amounts of tax and interest appear to have become due and payable from as early as April 2021. Elite did not comply with the statutory demand, nor was it set aside.

12. In late 2024, the Deputy Commissioner of Taxation commenced winding up proceedings against Elite in the Federal Court of Australia in respect of, inter alia, the unsatisfied statutory demand. On 14 February 2025, the Deputy Commissioner of Taxation filed evidence to the effect that, as of that date, the total unsatisfied debt owed to him was $461,225.38. The winding up proceedings are presently listed for final hearing on 1 July 2025.

13. I have already referred to Elite’s payment claim and Kuatro’s payment schedule. It is relevant to note that the payment schedule prepared by Kuatro was accompanied by supporting documents including correspondence.

14. As mentioned above, Elite lodged an adjudication application under s 17 of the SOP Act on 3 January 2025. On 13 January 2025, Kuatro lodged its adjudication response under s 20. I will refer to some of the detail in these documents, and to documents attached to them, in due course.

15. The determination as originally issued by the adjudicator contained an error. However, the error was quickly noticed and a revised determination was issued a few days later. Nothing turns on the error or the manner by which it was corrected.

The nature of Kuatro’s challenge to the determination

16. Each of the two remaining grounds of challenge to the determination involves a contention that the adjudicator failed to consider matters he was required to take into account under s 22(2) and that the failure has the consequence that the determination is affected by jurisdictional error. In respect of one ground, Kuatro further contends that, having failed to consider a matter that he was required to take into account, the adjudicator determined the particular issue on a basis that neither party had advanced and to which Kuatro was not given an opportunity to respond. In this respect, Kuatro contends that there was a failure to provide procedural fairness amounting to jurisdictional error.

17. These issues must be approached with an appreciation of the overall legislative scheme contained in the SOP Act. In this respect, I particularly note paragraphs [8] to [30] of the reasons of Payne JA in Ceerose Pty Ltd v A-Civil Aust Pty Ltd (2023) 112 NSWLR 225; [2023] NSWCA 215 (‘Ceerose’) (Ward ACJ and Basten JA agreeing). As Payne JA said in Martinus Rail Pty Ltd v Qube RE Services (No.2) Pty Ltd [2025] NSWCA 49 (‘Martinus’) (Gleeson JA and Griffiths AJA agreeing) at [57]:

“It is well established that the purpose of the legislative scheme established by the SOP Act is best served by restricting the scope of intervention by the courts: Chase Oyster Bar Pty Ltd v Hamo Industries Pty Ltd (2010) 78 NSWLR 393; [2010] NSWCA 190 at [55] per Spigelman CJ. As this Court held in Ceerose Pty Ltd v A-Civil Aust Pty Ltd (2023) 112 NSWLR 225; [2023] NSWCA 215 at [179], it is quite unrealistic in the context of the time sensitive and document heavy adjudication process required under the SOP Act to require an adjudicator, lest he or she commit jurisdictional error, to treat minutely with repetitive arguments or repetitively reject what is essentially the same contention. The adjudicator’s findings with respect to matters of fact, within jurisdiction, are 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 unless jurisdictional error is established: Icon Co (NSW) Pty Ltd v Australia Avenue Developments Pty Ltd [2018] NSWCA 339 at [15].”

18. The particular challenges to the adjudicator’s determination involve a consideration of s 22 of the SOP Act. That section 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.

(3) The adjudicator’s determination must—

(a) be in writing, and

(b) include the reasons for the determination (unless the claimant and the respondent have both requested the adjudicator not to include those reasons in the determination), and

(c) be served by the adjudicator on the claimant and the respondent.

(4) If, in determining an adjudication application, an adjudicator has, in accordance with section 10, determined—

(a) the value of any construction work carried out under a construction contract, or

(b) the value of any related goods and services supplied under a construction contract,

the adjudicator (or any other adjudicator) is, in any subsequent adjudication application that involves the determination of the value of that work or of those goods and services, to give the work (or the goods and services) the same value as that previously determined unless the claimant or respondent satisfies the adjudicator concerned that the value of the work (or the goods and services) has changed since the previous determination.

(5) If the adjudicator’s determination contains—

(a) a clerical mistake, or

(b) an error arising from an accidental slip or omission, or

(c) a material miscalculation of figures or a material mistake in the description of any person, thing or matter referred to in the determination, or

(d) a defect of form,

the adjudicator may, on the adjudicator’s own initiative or on the application of the claimant or the respondent, correct the determination.

19. In Ceerose, Payne JA said of such challenges at [31]:

“It is now well settled that whether a submission referred to in s 22(2)(c) or (d) has been ‘duly made’ is a matter within the jurisdiction of an adjudicator and error in identifying a submission as having been ‘duly made’ is not jurisdictional: John Holland Pty Ltd v Roads & Traffic Authority of New South Wales [2007] NSWCA 19 at [57]; Perform (NSW) Pty Ltd v MEV-AUS Pty Ltd [2009] NSWCA 157 at [65]; Coordinated Construction Co Pty Ltd v Climatech (Canberra) Pty Ltd [2005] NSWCA 229 at [24]-[26]. It may be accepted that, despite the apparently emphatic language (‘consider the following matters only’) in s 22(2), an adjudicator may in some circumstances take into account other matters: The Minister for Commerce (formerly Public Works & Services) v Contrax Plumbing (NSW) Pty Ltd [2005] NSWCA 142 at [33]-[36] per Hodgson JA (Bryson JA and Brownie AJA agreeing). This does not mean, however, that a failure to do so will amount to jurisdictional error.”

20. At paragraphs [62] to [69], his Honour explained the scope of the adjudicator’s obligation to ‘consider’ in s 22(2). His Honour said at [69]:

“For all of these reasons, there are likely to be few cases in which an applicant for judicial review can establish a breach of the duty to consider the matters set out in s 22(2). That is not to say that there may not be circumstances in which the inference of omission to consider is demonstrated. Thus, failure to refer to a submission on a centrally important matter, clearly articulated and based on uncontested facts, may demonstrate a failure to consider at all. Such is likely to be a rare case.”

21. In argument before me, Kuatro particularly referred to what Payne JA said about this same issue at paragraphs [65] to [69] of Martinus. At paragraph [69], his Honour repeated what he had said at paragraph [69] of Ceerose.

22. Kuatro’s argument is that this is one of the ‘few’ and ‘rare’ examples contemplated by Payne JA at paragraph [69] of Ceerose. In relation to both remaining grounds of challenge, it says there is an inescapable inference that the adjudicator altogether failed to consider its submissions on their merits.

The liquidated damages ground

23. The first error for which Kuatro contends concerns its claim for a set off for liquidated damages of $602,800. This figure was included in its payment schedule. It represents liquidated damages of $4,000 per day for 137 days, plus GST.

24. The particular provisions of the Subcontract on which Kuatro relied to assert its claim for liquidated damages were clauses 34.7 and 39.2. Clause 39.2 provided that the main contractor could give the subcontractor written notice to remedy substantial breaches and outlined examples of such breaches. Kuatro relied particularly on two examples. These were contained in clauses 39.2(c): ‘any departure from a Subcontractor's Program without reasonable cause or the Subcontractor Superintendent's approval’ and 39.2(e): ‘failing to (in the opinion of the Subcontract Superintendent) employ sufficient resources (including but not limited to labour) to progress the [Works Under Subcontract] in a manner that will ensure that the works will reach Practical Completion by the Date of Practical Completion’.

25. Clause 34.7 was as follows:

“34.7 Liquidated damages

If [Works Under Subcontract] does not reach Practical Completion by the Date for Practical Completion, the Subcontractor shall immediately be liable to the Main Contractor for liquidated damages at the rate prescribed in Item 33(a) for every day after the Date for Practical Completion to and including the earliest of the date of Practical Completion or termination of the Subcontract.

If an [Extension of Time] is directed after the Subcontractor has paid or the Main Contractor has set off liquidated damages under the Subcontract, the Main Contractor shall forthwith repay to the Subcontractor such of those liquidated damages as represent the days the subject of the [Extension of Time].

The Subcontractor acknowledges and agrees that the failure to reach Practical Completion by the Date for Practical Completion is a substantial breach of the Subcontract under subclause 39.2.

The parties acknowledge and agree that the rate of liquidated damages set out in Item 33 is a genuine pre-estimate of the Main Contractor's loss arising out of the Subcontractor's failure to reach Practical Completion by the Date for Practical Completion.

The parties acknowledge and agree that liquidated damages are not the exhaustive remedy available to the Main Contractor in circumstances where the Subcontractor fails to reach Practical Completion by the Date for Practical Completion.” (errors in original)

26. It is also relevant to note clauses 37.7 and 55 of the Subcontract, being the clauses which relate to set offs more generally.

“37.7 Set off

The Subcontract Superintendent may set off or deduct against any progress claim (by way of a Progress Certificate) or the Main Contractor may deduct from money due to the Subcontractor:

(a) any debt or other moneys due from the Subcontractor to the Main Contractor; or

(b) any claim to money which the Main Contractor may have against the Subcontractor (whether under the Subcontract or otherwise), and if such a claim / has been proven by the Main Contractor and if the Main Contractor has incurred any loss at the time of the set off or deduction.

…

55 Setoff

Without prejudice to the Main Contractor's right of recourse to the Security provided under the Subcontract, the Main Contractor may set off or deduct at any time from any money payable to the Subcontractor under the Subcontract:

(a) any debt or other moneys due from the Subcontractor to the Main Contractor under the Subcontract; or

(b) any other money which the Main Contractor reasonably believes is payable from the Subcontractor to the Main Contractor under the Subcontract.”

27. In its payment schedule breakdown, Kuatro included a table under the heading ‘Variations – Formwork’ which referred to a number of variations and back charges, and described for each of them: the amount claimed by Kuatro (being the ‘Value Approved’); the amounts the subcontractor had claimed were owing (as applicable); and any reasons for the difference. One such entry was described as follows:

“SET OFF LIQUIDATED DAMAGES – 432 days x $4000 per calendar days”.

28. However, the ‘Value Approved’ for this item was ‘- $548,000’. The amount claimed by the subcontractor was noted to be nil. In the column entitled ‘Reasons for Difference’, the table included the following:

“Credit for liquidated damages due to Elite not rectifying defects and delays to completing works, under Claim #20 under MUS-9020

Pursuant to Clauses 34.7 and 39.2 of the Subcontract Agreement, the Subcontractor is liable for liquidated damages due to their failure to meet the Practical Completion date and rectify defects within the specified timeframe.

As outlined in Clause 34.7, the Subcontractor is liable for liquidated damages at a rate of $4,000 per calendar day for failure to achieve Practical Completion by the specified date of 01/08/2023.

The Subcontractor's failure to provide sufficient resources and adhere to the project program resulted in significant delays, as evidenced by the following:

13 Jan - 23 Feb: Delays and defective works

24 Feb - 23 Apr: Delays and defective works

24 Apr - 06 May: Delays and defective works

07 May - 28 May: Delays and defective works

These delays directly contributed to the project's overall delay of 137 calendar days.

Therefore, the Main Contractor is entitled to recover liquidated damages totalling $548,000 from the Subcontractor.”

29. Although not referred to in that table or anywhere else in the payment schedule breakdown, the almost 700 pages attached to the breakdown included a 55-page series of documents that, on close inspection, must have been intended by the person who collated them to be read as four bundles or sets of documents relating to each of the periods of delay referred to in the table (although the correlation is not precise). That is, for each of those periods, there were (a) emails from representatives of Kuatro to representatives of Elite in which there was complaint about the time taken to remedy defects as well as WhatsApp messages among representatives of Kuatro in which they commented on the number of Elite personnel on site at particular times together with (b) for each period of delay, a printout of a ‘calculate days’ calculator on the ATO website showing how many days elapsed during that period.

30. The almost 700 pages of attachments also included a schedule for ‘Claim #20’ which hyperlinked the aforementioned documents, though it is unclear in which order the ‘Claim #20’ schedule was produced or whether an electronic copy was provided to the adjudicator. The ‘Modification Reason’ set out in the ‘Claim #20’ schedule also differed slightly from the above ‘Reason for Difference’. The ‘Modification Reason’ was as follows:

“Pursuant to Clauses 34.7 & 39.2 of the Subcontract Agreement, this Liquidated Damages has been applied against this claim due to the following:

-CLAUSE 34.7 LIQUIDATED DAMAGES states: ‘If [Works Under Subcontract] does not reach Practical Completion by the Date of Practical Completion, the [Subcontractor] shall immediately be liable to the Main [Contractor] for liquidated damages at the rate prescribed in Item 33 (a)...The Subcontractor Acknowledges and agrees that the failure to reach Practical Completion by the Date for Practical Completion is a substantial breach of the Subcontract under subclause 39.2’.

- CLAUSE 39.2 SUBCONTRACTORS DEFAULT states: ‘Substantial breaches include but are not limited to: .... (c) any departure from a Subcontractor's Program without reasonable cause or the Subcontractor Superintendent's approval' ... (e) failing to (in the opinion of the Subcontract Superintendent) employ sufficient resources (including but not limited to labour) to progress the [Works Under Subcontract] in a manner that will ensure that the works will reach Practical Completion by the Date of Practical Completion.’

- Annexure PART A 11 (a) date for practical completion - 01/08/2023

- Annexure PART A 33 (a) Subcontract liquidated damages rate - $4,000 per calendar day

As per attached documents, the Subcontractor failed to provide the resources required to complete works within the periods detailed in attached documents, ultimately delaying the project by 137 calendar days.

- 13Jan-23Feb-Elite_BKH Works - Delays and Defective Works

- 24Feb-23Apr-Elite_BKH Works - Delays and Defective Works

- 24Apr-06May-Elite_BKH Works - Delays and Defective Works

- 07May-28May-Elite_BKH Works - Delays and Defective Works“.

31. The ‘Claim #20’ schedule also included an ‘Attachments’ table at the end which contained hyperlinks to the four bundles of documents to which I have already referred.

32. It appears that the ‘Claim #20’ schedule was included in the adjudication application. It was agreed between the parties that the four bundles of documents were also included in the adjudication application.

33. In its adjudication application, Elite addressed the claim for liquidated damages as follows:

“75. Liquidated Damages: The Respondent applies $4,000/day for ‘the projects overall delay of 137 days’ from 1/8/2023. That does not make sense. The period between 1/8/2023 and the time of the claim is far more than 137 days. The Respondent does not set out where the 137 days arises. The Respondent relies on Cl.34.7 which relevantly provides;

‘34.7 Liquidated damages

If [Works Under Subcontract] does not reach Practical Completion by the Date for Practical Completion, the Subcontractor shall immediately be liable to the Main Contractor for liquidated damages at the rate prescribed in Item 33(a) for every day after the Date for Practical Completion to and including the earliest of the date of Practical Completion or termination of the Subcontract.’

76. The contract defines the date of Practical Completion as;

‘Date of Practical Completion means:

The date evidenced in a Certificate of Practical Completion as the date upon which practical completion was reached;’

77. The Respondent has not issued a Certificate. Indeed the Claimant still has some staff onsite doing minor rectification.

78. Clause 34.7 requires that LDs be calculated with regard to both the date for Practical Completion and either the Date of Practical Completion or Termination. Neither of those two events have occurred and so LDs cannot be calculated or applied. However looking at the four documents in support of the LDs claim it has become apparent that the Respondent has misapplied the LD mechanism. It seeks to apply the deduction to 4 specific periods wherein it argues the Claimant caused delays by not rectifying defects fast enough. Whether that [is] true or not is not relevant. The LDs can only be strictly applied in the manner set out in the contract; from the date for completion to the date of completion.

79. Instead, the Respondent seeks to use them as a penalty by applying the daily rate damages as punishment for not rectifying works fast enough. This is not allowed under the contract and due to this misapplication the purported LD set-off must fail.

80. In the alternative, if the Respondent’s approach is accepted then the Claimant is entitled under the Novation Agreement to deduct all the days it had suspended work as provided in that agreement at Item 7:

‘7. The parties agree that Elite is entitled to an extension of time for any of the periods of suspension of works as referred to in C above.’

81. Part C is:

‘C. During the course of the contract referred to in A above there were numerous breaches of the subcontract relating to non-payment of progress claims by EQ and other matters which resulted in Elite suspending works pursuant to the contract and ceasing work on the project.’

82. The adjudicator is referred to Attachment G which provides a timeline of when each suspension notice was issued along with the payment record that then ended each suspension. The seven notices are also supplied. The Claimant suspended for the following periods based on the contract 6-day week and public holidays:

Notice No 1: Suspension Period 19/9/2022 to 21/9/2022   3 days

Notice No 2: Suspension Period 18/10/2022 to 6/3/2023   106 days

Notice No 3: Suspension Period 24/8/2023 to 4/9/2023   10 days

Notice No 4: Suspension Period 13/10/2023 to 6/11/2023   21 days

Notice No 5/6/7: Suspension Period 6/2/2024 to 27/3/2024   44 days

Total days suspended:             184 days

83. It is submitted that the suspended days far exceed the 137 days pressed by the Respondent and so no deductions apply.

84. However the Claimant submits the Respondent has misapplied the LD clauses and the mechanism does not apply for the time taken to complete rectification works. That is penal in nature. This concludes the assessment of the Formworks. The Concrete Assessment now follows.”

34. In its adjudication response to ‘Points 75-84 – Liquidated Damages’, Kuatro referred to ‘Attachment 4 BACK CHARGE – Formwork’ and wrote ‘As provided under the previously issued payment schedule’, before reproducing what was said at [30] above.

35. The plaintiff informed me that the relevant documents attached to the adjudication response were similar to but not quite the same as the four bundles attached to the payment schedule. Counsel for the plaintiff said that the documents included in ‘Attachment 4’ as at 13 January 2025 were those included in the exhibit to the 7 April 2025 affidavit of Joseph Zeitoun. Those documents consisted of emails but did not contain any WhatsApp messages or the ‘calculate days’ calculator pages. They also contained some additional correspondence. For example, in respect of at least one of the periods of alleged delay there was an email from Mr Turpeinen (the principal of Elite) in which he stated that the Subcontract was currently under suspension because of Kuatro’s non-payment.

The adjudicator’s determination in relation to liquidated damages

36. The adjudicator dealt with and rejected the liquidated damages claim at paragraph 38(g) of his determination. His reference to BC 8 is a reference to this claim. However, because of the way Kuatro puts its case, it is relevant to note the whole of paragraph 38:

“38. I determine that the following back charge claims BC1 to BC8 for the formwork, which I have included in the reconciliation in Appendix B under column G ‘Adjudicated Amount’:

(a) I allow $Nil against for BC1 and BC2 as those back charges had no values or scheduled amounts in the Payment Schedule.

(b) I allow $8,900.00 for BC3 as the email from the Respondent to the Claimant dated 3 July 2024 referenced by the Claimant expressly gave the Claimant the opportunity to perform the rectification work and advised that the Respondent would otherwise engage a specialist contractor to undertake the works at the above cost. I do not accept the Respondent has provided evidence to explain the higher claimed amount of -$54,432.99.

(c) I do not accept BC4 and value that claim at $Nil for the following reasons:

(i) this back charge claim is based on the Respondent’s entitlement to set off under clauses 37.7 and 55;

(ii) clause 37.7 permits the Respondent to set off or deduct from a progress claim under sub-section (a) ‘any debt or other money due’ from the Claimant to the Respondent or under sub-section (b) ‘any claim to money…..and if such claim is proven….if the [Respondent] has incurred any loss at the time of the set off or deduction’. In this case there is no evidence of a representative of the Respondent with knowledge of the back charges to support the underlying facts and matters relied upon to support the Respondent’s reliance on clause 37.7;

(iii) clause 55 provides an additional right of set off for the Respondent. Sub-section (a) provides that the Respondent can deduct at any time ‘any debt or other money due’ from the Claimant to the Respondent. Sub-section (b) provides for the deduction of ‘any other money which [the Respondent] reasonably believes is payable from the Claimant] under the Subcontract.’ Again, there is no evidence of a representative of the Respondent with knowledge of the back charges to support the underlying facts and belief relied upon to support the Respondent’s reliance on clause 55; and

(iv) the Respondent bears the onus to support its contractual entitlement to a set off and it has not met that burden here. Clearly, it is critical for the Respondent to provide sufficient evidence to explain the basis upon which another Subcontractor carried out incomplete works of the Claimant other than the mere assertion as stated in the Payment Schedule.

(d) I do not accept BC5 and value that claim at $Nil. On this occasion the Respondent has not identified in the Payment Schedule the set off provisions to support this claim. However, to the extent that the Respondent intended to rely on the set off provisions under clauses 37.7 and 55, I find that the Respondent has not satisfied sufficient evidence to support those back charges for the same reasons as explained above for BC4.

(e) I do not accept BC6 and value each of those claims at $Nil. There is no evidence from the representatives of the Respondent to properly support these credits or the factual matters stated in the Payment Schedule, including meetings between certain representatives.

(f) I do not accept BC7. The Claimant is correct that there were no notices under clause 29.3 nor evidence of the defects provided by the Respondent in this matter. The Respondent has relied upon later defect notifications which assert a failure by the Claimant to perform defect rectification but has not presented the underlying requests for defects or evidence of the defects.

(g) I do not accept BC 8 and value that claim at $Nil. There is no evidence of ‘Delays and defective works’ for certain periods as identified in the Payment Schedule. There is also no evidence of any alleged failure by the Claimant to provide sufficient resources to adhere to the project program. The Respondent contends that ‘Those delays directly contributed to the project’s overall delay of 137 calendar days. Therefore the Main Contractor is entitled to recover liquidated damages totalling $548,000.00 from the Subcontractor.’ The Respondent merely repeated that position in the Respondent’s Submissions. I do not accept that the Respondent has provided any evidence or submissions to support this claim in the Payment Schedule or the Adjudication Response, and its reasons for withholding payment for this back charge are so generalised as to the meaningless.” (footnotes omitted and errors in original)

Kuatro’s submissions in relation to the liquidated damages claim

37. Kuatro put its argument in four steps. First, it pointed out that the principal conclusion in paragraph 38 was that Kuatro had not discharged its onus of demonstrating that it was entitled to a set off for back charges. As the adjudicator put it, there was ‘no evidence of a representative of [Kuatro] with knowledge of the back charges to support the underlying facts and matters relied upon to support [Kuatro’s] reliance on clause 37.7’. Kuatro particularly relied on what the adjudicator said at paragraphs 38(c)(ii)-(iv) in this respect.

38. Secondly, Kuatro referred to the adjudicator’s overall conclusion in relation to the set off for liquidated damages in paragraph 38(g) of his determination, which I have already set out.

39. Next, Kuatro submitted that what the adjudicator said in these two respects was plainly incorrect. It pointed out that contrary to what the adjudicator said at paragraph 38(g), there was evidence of ‘failure by [Elite] to provide sufficient resources to adhere to the project program’. It referred me to the contemporaneous emails and texts from Kuatro representatives in relation to delays which were referred to in the adjudication response. It pointed out that both Kuatro and Elite had made submissions to the adjudicator about this evidence.

40. It also submitted that this documentary evidence was from ‘representative[s] of [Kuatro] with knowledge of the back charges’, despite what the adjudicator said at paragraph 38(c).

41. Fourthly and relatedly, Kuatro pointed out that all of this contemporaneous material was before the adjudicator.

42. Kuatro submitted that when all of these factors are taken together, the language of the determination leaves no room for doubt that the adjudicator did not have regard to the submissions and accompanying materials put to him by the parties in relation to the liquidated damages issue. In its submission, this is not a case in which the adjudicator merely failed to refer to documents in support of a claim; it is rather a case in which the adjudicator positively but wrongly stated that such documents did not exist.

Resolution of the liquidated damages issue

43. It is appropriate to note several things about the way in which the adjudicator dealt with the liquidated damages issue.

44. First, there is no doubt that he well and truly appreciated the nature of Kuatro’s claim for liquidated damages. Paragraph 38(g) shows that he understood Kuatro’s case to be that it was entitled to an offset for liquidated damages in an amount that reflected four periods of ‘delays and defective works’ totalling 137 days. Secondly, he understood that the claim was advanced not only in the payment schedule but was also addressed in the adjudication response. I note that he footnoted a reference to that part of the adjudication response that dealt with this issue and which expressly included references to attached documents which, in Kuatro’s submission, evidenced both the delays and the defective works on which they relied. Thirdly, he appreciated that, for the claim to succeed, he needed to be persuaded of the merit of it. That is, he needed to be persuaded that Elite had caused delays through defective works for those periods. So much is clear from paragraph 38(g) itself, but it is relevant here also to note what he had said about other back charges in paragraph 38(c). In other words, despite the way in which Elite put its case on this issue (namely that the Subcontract did not permit liquidated damages at all in these circumstances, as to which see [33] above), the adjudicator nevertheless appreciated that Kuatro’s claim for liquidated damages could only succeed on the strength of its evidence that Elite had actually caused the relevant delays and defective works.

45. These are all matters that make it very difficult to accept the submission that the adjudicator altogether failed in his obligation under s 22(2)(d) to consider Kuatro’s submissions on this issue and the documents on which it relied. Paragraph 38(g), although perfunctory, states the adjudicator’s reasons for rejecting the claim on its merits. In terms, he was not willing to ‘accept’ the case put forward by Kuatro.

46. Kuatro submitted that paragraph 38(g) shows the adjudicator to have believed mistakenly that the liquidated damages claim was not supported by any material beyond what was stated in the body of the payment schedule breakdown and in the body of the adjudication response. It submitted that the adjudicator must have mistakenly thought that the four bundles of documents did not exist. It said that the reference to a lack of evidence from persons with knowledge of the delays and defects must mean that the adjudicator failed to notice the correspondence and WhatsApp messages from such persons, including the foreman.

47. I accept that one possible explanation for the language of paragraph 38(g) is that the adjudicator failed to notice all of the evidence on which Kuatro relied. However, it is not the only explanation. The fact that the adjudicator did not explicitly refer to the documents attached to either the schedule or the adjudication response may equally reflect a conclusion the attached documents did not take matters any further than the bald assertions in the schedule and the adjudication response. As counsel for Elite submitted, the adjudicator may well have expected any ‘evidence or submissions’ on the question of ‘delays and defective works’ to be somewhat more persuasive than the emails and WhatsApp messages contained in the four bundles of documents. I note that this material did not contain pictures, inspection reports or other independent material concerning either the delays or the defects. The vast majority of the emails were one-sided, sent from Kuatro representatives to Elite representatives, and did not include Elite’s replies (if there were any).

48. As to the submission that there was evidence of ‘failure by [Elite] to provide sufficient resources to adhere to the project program’ (as to which, see paragraph [39] above), I note that the four bundles of documents said almost nothing of substance about this proposition. There was, so far as I can tell, only a single reference to resourcing issues, but this was in the context of a statement that Elite must ensure sufficient resources to complete work in the future. It was not a statement about how insufficient resourcing had led to delay. In any event, these are all factual matters about which the adjudicator was entitled to form his own view.

49. The WhatsApp messages did not go much further than to note the number of Elite personnel on site at particular times, which the adjudicator may have thought was very thin evidence. One rational explanation for the way in which the adjudicator expressed his conclusions in paragraph 38(g) is that he simply did not consider Kuatro’s material to be sufficiently persuasive. The final part of the paragraph commencing ‘and its reasons…’ could very well be a reference to these matters.

43. Kuatro submitted that the adjudicator’s reference to an absence of ‘evidence of a representative of the Respondent with knowledge of the back charges…’ is explicable only by his failure to notice the attached correspondence which, it argues, was sent by persons with that knowledge. This submission assumes that the adjudicator was bound to regard the four bundles of documents as containing ‘evidence of a representative of [Kuatro] with knowledge of the back charges’. To this end, Kuatro pointed out that much of the correspondence in the four bundles does appear to have been sent by ‘[representatives] of [Kuatro] with knowledge of the back charges’. I agree, but that reflects nothing more than my own inexpert conclusion on a question of fact. It is a conclusion that does not take matters anywhere because the adjudicator may have seen the evidence differently.

44. This submission also assumes that the adjudicator’s reference to a lack of ‘evidence of a representative of [Kuatro] with knowledge of the back charges’ should be understood as applying to the liquidated damages claim. In terms, however, it was an observation about back charge 4. His criticism of the evidence concerning the liquidated damages claim was more perfunctory.

45. It is also relevant to bear in mind that the factual basis for Kuatro’s claim was not agreed. Although it did not put its position with complete clarity, the adjudication application at least made clear that Elite disputed that it had been responsible for ‘delay and defective works’, for some or all of the periods claimed by Kuatro. It submitted that there had been significant periods in which its works had been suspended for non-payment. Thus, at least for some of these periods, the adjudicator may have taken the view, rightly or wrongly, that the liquidated damages were being sought in relation to delays caused by Kuatro’s non-payment. As noted above, one of the emails attached to the adjudication response included a reply from Mr Turpeinen in which he said that the works were suspended for non-payment. This email was sent during one of the very periods during which Kuatro alleges it was entitled to liquidated damages.

46. The rare case contemplated by Payne JA in Ceerose was one in which, among other things, the relevant claim was based on uncontested facts. As counsel for Kuatro submitted, his Honour was not thereby laying down a rule that jurisdictional error may only be inferred where the submission in question was based on uncontested facts. Nevertheless, his Honour’s reference to uncontested facts in that context was important. That is because when an adjudicator fails to refer to a submission based on contested facts, it will ordinarily be very difficult to dismiss the theory that the submission was rejected because of a conclusion which the adjudicator has reached about the facts.

47. Kuatro submitted that the facts here were not seriously in dispute, in that Elite’s case was not so much that there had been no delay but that the Subcontract did not allow Kuatro to claim liquidated damages prior to the date of completion. To the extent it did address factual matters in relation to this issue, it was to argue that there had also been long periods of suspension. It did not argue that Kuatro’s claims for ‘delays and defective works’ were unsupported by evidence, which is a stance it took in relation to some other of Kuatro’s claims.

48. However that may be, it does not follow that its claim was based on uncontested facts. As I have already noted, it is clear that the adjudicator approached Kuatro’s claim for liquidated damages on the footing that it involved a factual inquiry, which was appropriate. He did not have to accept the claims for ‘delay and defective works’ even if Elite said nothing about them at all.

49. In my view, the adjudicator’s decision on the liquidated damages issue is not affected by error of the kind for which Kuatro contends. To the contrary, I find that the adjudicator did make a ‘bona fide attempt’ to deal with the issue on its merits (on the requirement of a ‘bona fide attempt’, see [55] of Brodyn Pty Ltd t/as Time Cost and Quality v Davenport & Anor (2004) 61 NSWLR 421; [2004] NSWCA 394, which decision was affirmed at [52] in Probuild Constructions (Aust) Pty Ltd v Shade Systems Pty Ltd (2018) 264 CLR 1; [2018] HCA 4).

Procedural fairness

57. Kuatro also submitted that it had been denied procedural fairness in relation to its liquidated damages argument. It pointed out that Elite had not made a ‘no evidence’ submission in relation to its liquidated damages claim and that, had it known that the adjudicator was proposing to deal with the claim in that way, it would have taken the opportunity to refer him to the four bundles of material on which its liquidated damages claim was based.

58. In Ceerose at [51], Payne JA explained that because procedural fairness is concerned with the conduct of the adjudicator towards the parties, the question of whether he or she has complied with its requirements in a particular case will usually be determined by reference to the communications (or lack thereof) between the adjudicator and the parties: see also Martinus at [73]. At paragraph [74] of Martinus, Payne JA reproduced paragraph [32] of the Court of Appeal’s reasons in Demex Pty Ltd v McNab Building Services Pty Ltd (2023) 113 NSWLR 282; [2023] NSWCA 261 (‘Demex’), which was as follows:

“Consistently with the effect of what was said in Brodyn, and with the arguments put by the appellant in this case, it should be understood that only if there has been a substantial denial of procedural fairness by an adjudicator in determining an adjudication application will there be jurisdictional error under the Act. Put another way, the content of the requisite procedural fairness is reduced: note Cardinal at [60]. What this means in practice will turn on the particular circumstances of cases. But generally a conclusion of invalidity would only be reached if there was a significant departure from what would ordinarily be the requirements of procedural fairness for a person exercising a statutory power, and where that departure could be characterised as leading to substantial practical injustice in all the circumstances. This approach reflects the fact that the Act provides for a ‘rough and ready’ process (Chase Oyster Bar at [208]), not intended readily to be held invalid on judicial review.”

59. In this case, the material on which Kuatro relied – and which the adjudicator supposedly failed to consider – was unquestionably before the adjudicator. As I noted at paragraph [44] above, the adjudication determination specifically referred to those parts of the payment schedule and adjudication response which referred to that material. If, which I do not accept, the adjudicator did fail to appreciate the significance of some of the roughly 700 pages of material provided to him by the parties, it was not because of his failure to give the parties an opportunity to refer him to it.

60. Nor was he duty-bound to tell Kuatro that he was proposing to deal with its claim for liquidated damages on a ‘no evidence’ basis. As I pointed out at paragraph [44], the adjudicator correctly appreciated that he needed to be satisfied about the merit of Kuatro’s claim. Whether or not Elite was relying on a ‘no evidence’ ground is therefore not to the point. Even if Elite had specifically made that submission, it is hard to see what Kuatro would have done other than refer to the same material to which it had already referred, and which it again expressly referred to in the adjudication response.

61. In my view, the adjudicator was not required to telegraph his tentative conclusions about the merits of Kuatro’s liquidated damages claim in order to give Kuatro a further opportunity to refer him to the same material to which it had already referred him on that point.

62. The problem, if there was one, was not a lack of procedural fairness. Much less was there a ‘significant departure’ from the requirements of procedural fairness: cf Demex at [32].

Variation 17

63. The second alleged jurisdictional error concerns variation 17. In its payment claim, Elite claimed the amount of $109,831 ($99,846.36 plus a 10% administration fee) for ‘variation 17’ in respect of formwork for hobs and upstands. Kuatro’s payment schedule denied this variation for reasons that included the failure by Elite to comply with the provisions of clause 36 of the Subcontract. That clause is as follows:

“36 Variations

36.1 Directing Variations

The Subcontractor shall not vary [Works Under Subcontract] except as directed in writing by the Main Contractor and/or the Subcontract Superintendent in writing.

For clarity, any Site instructions issued by the Subcontract Superintendent or the Main Contractor does not constitute a Direction to undertake a Variation.

The Subcontract Superintendent may direct the Subcontractor to vary [Works Under Subcontract] by any one or more of the following:

(a) increase, decrease or omit any part;

(b) change the character or quality

(c) change the levels, lines, positions or dimensions

(d) carry out additional work; and

(e) demolish or remove material or work no longer required by the Main Contractor.

A Variation may involve the omission of any part or parts of the [Works Under Subcontract] and the Subcontractor acknowledges and agrees that the Main Contractor may engage others to carry out that part or parts of the [Works Under Subcontract] so omitted. The Subcontractor further acknowledges any one or more omission will not constitute a basis to allege that the Main Contractor has repudiated the Subcontract notwithstanding the timing thereof and the Subcontractor will have No Claim arising out of or in connection with such omission.

36.2 Proposed Variations

The Subcontract Superintendent may give the Subcontractor written notice of a proposed Variation.

The Subcontractor (at its own cost) shall within 3 Business Days after receiving such notice provide the Subcontract Superintendent with the Subcontractor's:

(a) estimate of the effect on the Subcontractor's Program (including the Date for Practical Completion); and

(b) a detailed quotation for the proposed Variation (including any proposed credits that will be applied to the Subcontract arising out of the proposed Variation) supported by measurements or other evidence of cost (including all warranties and time-related costs, if any) of the proposed Variation.

If the Subcontract Superintendent accepts the Subcontractor's quotation for a proposed Variation, the Subcontractor's quotation will become the agreed price of the Variation.

36.3 Variations for convenience of Subcontractor

If the Subcontractor requests the Subcontract Superintendent to direct a Variation for the convenience of the Subcontractor, the Subcontract Superintendent may do so. The Direction shall be written and may be conditional. Unless the Direction provides otherwise, the Subcontractor have [sic] No Claim for a Variation directed under subclause 36.3.

36.4 Pricing

The Subcontract Superintendent shall price each Variation using the following order of precedence:

(a) prior agreement;

(b) applicable rates or prices in the Subcontract;

(c) rates or prices in a priced Bill of Quantities, Schedule of Rates or schedule of prices, even though not Subcontract documents. to the extent that it is reasonable to use them; and

(d) reasonable rates or prices, which shall include a reasonable amount for profit and overheads,

and any deductions shall include a reasonable amount for profit and overheads. That price shall be added to or deducted from the Subcontract Sum.

The Subcontractor must proceed to carry out any variation without delay notwithstanding that the price of the variation has not been determined under this clause 36.4.

36.5 Main Contractor only liable in certain circumstances

The Main Contractor shall only be liable to make payment to the Subcontractor for a Variation or for an [Extension of Time] due to a Variation, where either:

(a) the Direction to perform the Variation given by the Main Contractor and/or the Subcontract Superintendent is in writing, expressly states that the Direction constitutes a Direction for a Variation and identifies the [Works Under Subcontract] the subject of the Direction; or

(b) before performing the Variation and in any event within 5 Business Days of receiving the Direction to perform the Variation, the Subcontractor has given the Subcontract Superintendent a notice in writing which identifies:

(i) the substance of the Direction {if it was in writing a copy should be attached);

(ii) the approximate cost of the Variation including a detailed breakdown calculated in accordance with subclause 36.4; and

(iii) whether a claim will be made for an [Extension of Time] as a consequence of the Variation and if so, an estimate of the period.

Except where the Subcontractor is entitled to make a claim under this clause, the Subcontractor acknowledges that it has No Claim as a consequence of complying with a Direction for a Variation.

The Subcontractor further acknowledges that payment or approval of a variation notwithstanding a failure to comply with this clause on one or more occasions does not operate as a waiver of that right if it arises again[.]

Where the Subcontractor wishes to make a claim for an [Extension of Time] as a consequence of a Variation, in addition to the notices it is required to give under this subclause, the Subcontractor must also give all notices required under clauses 34 and 41.”

64. The payment schedule said:

“Initially rejected under Claim #19 under MUS-9021

Pursuant to Clause 36 of the Subcontract agreement, this variation line item has been assessed and determined to be valued at $0.00 for the following reasons:

- The variation was not submitted in accordance with Clause 36.1 of the Subcontract Agreement which states ‘The Subcontractor shall not vary the [Works Under Subcontract] unless directed in writing by the Main Contractor and/or the Subcontractor [Superintendent] in writing… For Clarity any site instructions issued by the Subcontract [Superintendent] or the Main Contractor does not constitute a direction to undertake a variation’.

- The variation was not submitted in accordance with Clause 36.5 (b) of the Subcontract Agreement which states ‘before performing the variation and in any [event] within 5 business days of receiving the direction to perform the variation the Subcontractor has given the Subcontract [Superintendent] a notice in writing…’ The Main Contractor did not receive the variation cost within the stipulated time frame.

- The variation submitted partially includes works that are already [included] in the contract documents, listed in Park K of the subcontract agreement. The Variation also includes works that the Main Contractor completed due to the Subcontractor failing to perform the works, therefore as the works were not completed by the Subcontractor, they are not entitled to the claim. We must adhere to the [contractual] obligations agreed upon by both parties, failure to follow the prescribed variation submission process, as set out in the subcontract, precludes the Main Contractor from approving payment for the variation.” (emphasis added)

65. The adjudicator dealt with this issue as follows (at 48(f) of their determination):

“48. I determine that the following valuations for the formwork variation claims, which I have included in the reconciliation in Appendix C under column G ‘Adjudicated Amount’:

…

(f) V17 is a claim for the Upstand Walls and Hobs in the amount of $109,831.00 and arose from the same works the subject of Formwork Variations 15 and 27 within the payment claim Attachment B. The schedule spreadsheet shows this as claimed at $99,846.36 but it is claimed at $109,831.00 which is that amount plus 10% administration fee. The Claimant contends that:

(i) these works were not shown on the Tender drawing but required by the For Construction Drawings. At Attachment F the Claimant supplies detailed calculations showing where the walls and hobs are required and converting the lineal metres into m3 totals. To this it has applied a rate of $450/m3 for upstands and $1,700/m3 for hobs.

(ii) the Respondent does not deny that the works were not allowed for in the tender plans

(iii) the Respondent argues that some of the work is in scope because it is ‘..in the contract documents listed in Part K’, but does not say which document and what part of the work is in the document.

(iv) the Respondent says that ‘the variation includes works that the (Respondent) completed due to the subcontractor/claimant failing to perform the works…’. This would seem to confirm that the work is a variation and was required to be completed. The Claimant has claimed for what it has completed and does not know what work the Respondent says it has done for this Variation. There is no evidence that another contractor did this work at all. This is a new allegation. The quantum and calculations are not contested.

I am satisfied that the Claimant is entitled to the value of V17 in the claimed amount of $99,846.36 plus 10% margin. The claim was submitted on 4 September 2024 for ‘Hobs and Upstands not shown on the Tender’ together with supporting calculations. I concur with the Claimant’s submissions in support of this claim as summarised above, and in particular the fact that the Respondent has not disputed the main basis for the claim namely a change in scope from the tender to for construction drawings. I also find that the Respondent’s reasons that the variation includes works that the Respondent has completed is not clear but does support some understanding by the Respondent that a variation was required to some degree.” (errors in original)

Kuatro’s submissions in relation to variation 17

66. Kuatro’s submission in relation to this issue was straightforward. Whereas the adjudicator had clearly acknowledged Kuatro’s reliance on clause 36 in the context of other variation claims, he made no mention of this clause in dealing with variation 17. Kuatro submitted that the failure to refer to clause 36 was conspicuous and that there was a powerful inference that he overlooked it. It submitted that the absence of any reference to clause 36 in the context of variation 17 was not explicable on any basis other than a lack of consideration.

67. Kuatro had relied on Elite’s failure to comply with clause 36 in the context of a number of other variations. In dealing with these, the adjudicator said at paragraph 37(d) of the determination:

“I do not accept that the Claimant is entitled to variation claims V23, V24, V25, V26 and V27 and have valued those claims at $Nil accordingly for the following reasons:

(i) these variation claims comprise the extra over value of formwork required for certain parts of the works based on handwritten calculations comparing the ‘Tender/Contract Drawings’ with the ‘Current’ or ‘Constructed Drawings’; and applying the rates based on the ‘Schedule of Rates’ submitted by the Claimant under a Contract Variation Form;

(ii) the front cover of the Contract Variation Forms state that the claimed amount with the narrative ‘As attached Working Sheets and Mark ups’;

(iii) the claims were submitted in early September 2024;

(iv) the Respondent rejected these claims as they were submitted 18 months late, and the variation claims were non-compliant with clause 36;

(v) the Respondent accepts that on certain occasions it did approve variations not strictly in accordance with the contract terms but submitted that ‘However, at no point did Kuatro agree, either expressly or impliedly, that the contractual obligations stipulated in the subcontract would not be followed. The approval of such variations was made in good faith and in recognition of the urgency of the works required at the time.’;

(vi) The Claimant does not actually reference any clause of the Contract in support of these variation claims in any of the Contract Variation Forms or in the Payment Claim or the Claimant’s Submissions. In fact, the Claimant’s case is based on an assumption that it is entitled to claim a variation for any difference in the calculations between the Tender and For Construction (or ‘as built’) works;

(vii) The Claimant is critical of the Respondent’s reliance on clause 36. However, it was reasonable and not surprising that the Respondent would focus on clause 36 in considering a claim submitted as a Contract Variation Form;

(viii) ‘Variation’ is defined as having the meaning under clause 36;

(ix) Clause 36.1 entitles the Respondent, or the Superintendent might issue a Direction to vary the work. Clause 36.5 states that the Respondent is only liable for a Variation where either a Direction for a Variation has been issued as per subclause 36.5(a) or the Claimant has given notice of the approximate cost and time of performing a Direction within 5 Business Days of receipt;

(x) Clause 36.5 also provides that the Claimant has ‘No Claim as a consequence of complying with a Direction for a Variation’ and ‘…that payment or approval of a variation notwithstanding a failure to comply with this clause on one or more occasions does not operate as a waiver of that right if it arises again’;

(xi) If and to the extent that the Claimant wished to pursue these variation claims then it was faced with a number of scenarios to consider: firstly, it might have considered that it was entitled to a ‘Variation’ within the meaning of, and having complied with, clause 36; secondly it might have considered it was entitled to a ‘Variation’ on the basis that the Respondent had waived the requirements of clause 36; or thirdly, it might have considered that it has some other contractual basis to found an entitlement to a Variation and seek to by-pass clause 36 altogether;

(xii) In this case, the Claimant has not clearly established an entitlement under any of those scenarios in that it did not purport to comply with clause 36 in the first scenario, it has not provided any evidence to establish waiver nor provided any submissions to explain how it would overcome the no waiver provision in clause 36.5 in the second scenario; and it has not proffered any contractual pathway to claim a Variation under any other provision of the Contract; and

(xiii) Finally, even if the Claimant did somehow establish such contractual pathway, the Claimant has not provided any statement from the author of the handwritten calculations the subject of the variation claims or any other evidence to properly explain those calculations or why it was entitled to claim the difference between the tender and as built works in the first place. The Respondent maintained in the Payment Schedule that the works claimed were integral to the original scope. The Claimant bears the onus to support its contractual entitlement to a ‘Variation’ and it has not met that burden here.” (errors in original)

68. Kuatro submitted that these various references to its reliance on clause 36 only highlighted that the same submission must have been overlooked in dealing with variation 17. As to the suggestion that the adjudicator had implicitly rejected Kuatro’s reliance on clause 36 in dealing with variation 17, Kuatro submitted as follows:

“The suggestion that, when upholding Variation 17, the Adjudicator implicitly rejected that non-compliance with clause 36 could be relied upon as a basis for rejecting variations conflicts with the exact opposite and express findings he made when dealing with Variations 23, 24, 25, 26 and 27 that it could be so relied upon…” (emphasis in original)

Resolution of the variation 17 issue

69. In my view, there was no jurisdictional error in the way the adjudicator dealt with Kuatro’s argument that it could rely on Elite’s failure to comply with clause 36 to defeat its claim concerning variation 17.

70. At paragraph 37(d)(xi) the adjudicator explained that the question of whether Elite was entitled to payment for variations may be in any one of three ways: it may show that it has complied with clause 36; or it may show that Kuatro had waived compliance with clause 36; or it may show that it had ‘some other contractual basis to found an entitlement to a Variation and seek to by-pass clause 36 altogether’. This paragraph is important, because it shows that the adjudicator was not prepared to accept that the formal requirements of clause 36 necessarily applied to every variation claim.

71. It is clear from the way he dealt with variation 17 that the adjudicator took the view that the parties had indeed agreed a variation in relation to upstand walls and hobs. In other words, as foreshadowed in paragraph 37(d)(xi), he took the view that Elite had ‘some other contractual basis’ to found its claim quite apart from clause 36. This is especially clear from paragraph 48(f)(iv) where the adjudicator referred to a submission made by Kuatro which, in his view, ‘would seem to confirm that the work is a variation and was required to be completed’. It is also clear from the balance of the paragraph where he expressly found that Kuatro’s submissions ‘support some understanding by [Kuatro] that a variation was required to some degree’.

72. In my view, the fact that clause 36 is not mentioned in paragraph 48(f) of the determination does not demonstrate any jurisdictional error on the part of the adjudicator. On the view he took, he had no reason to mention it.

The stay application

73. Kuatro contended that even if the adjudication determination is not set aside, or is only set aside in part, the interlocutory orders made by Stevenson J on 10 February 2025 in respect of the stay (and extended by his Honour on several occasions afterward) should continue until resolution of the main proceedings. Although described as a ‘stay’ of the determination, the orders are in the nature of injunctive relief to prevent Elite from taking the steps laid down in ss 24(1)(a) and 25 of the SOP Act in relation to the enforcement of the determination.

74. The parties made submissions on this issue principally by reference to paragraphs [318] to [354] of Parker J’s judgment in MartinusRail Pty Ltd v Qube RE Services (No 2) Pty Ltd (No 2) [2024] NSWSC 1223 and paragraphs [290] to [304] of Payne JA’s reasons in Martinus. I have approached the issue in the particular light of what Payne JA said at [292] to [297]. What his Honour said at [297] bears repeating:

“These matters lend weight to the conclusion that there is a heavy burden on a party who seeks injunctive relief or a stay pending the outcome of proceedings contemplated by s 32 on the basis that a payment may become unrecoverable due to the possible or even likely insolvency of the payee at a later date. Considerable caution should attend the grant of such an injunction or a stay, as to do so may detract from the primary purpose of the SOP Act.”

75. In addition to the matters set out at paragraphs [11] to [12] above, there was also other evidence in relation to Elite’s financial position.

76. Mr Turpeinen is the sole director of Elite. He said that Elite has defended the winding up proceedings on the basis that it is solvent. In an affidavit sworn on 3 March 2025, he referred to 11 separate projects in respect of which Elite is entitled to receive, or at least anticipates receiving, gross payments totalling $2,390,978.19. One such project involves a company called Monarch Building Solutions (Aust) Pty Ltd (Monarch) and relates to a project at Cobargo. The contract sum is $707,857.70. Another involves a company called Calderwood SC Pty Ltd and relates to a project at Calderwood. A sum of $107,770.41 was paid to Elite in January 2025 and the remaining contract sum for the Calderwood project is $1,213,299.59.

77. As to liabilities, Elite’s lease obligations, utilities and other regular expenses and outgoings are up to date. Elite’s payment arrangements with staff, subcontractors and unsecured creditors are all in accordance with agreed or adjusted terms. Elite has no overdue state taxes. None of its suppliers have placed it on cash-on-delivery terms or any other special terms. Mr Turpeinen’s unchallenged evidence was that other than the Deputy Commissioner of Taxation, ‘all creditors are being paid within agreed terms.’ Apart from the claim by the Deputy Commissioner of Taxation in the winding up proceedings, there are no outstanding demands for payment of proceedings on foot in respect of any liabilities of the defendant.

78. Mr Turpeinen also said that if Elite is paid the money held in Court in these proceedings, it will be in a position to pay its tax debts and have the winding up proceedings dismissed. No other creditor has appeared or filed a notice of intention to appear as a supporting creditor in those proceedings.

79. Kuatro did not challenge any of Mr Turpeinen’s evidence as to Elite’s financial circumstances. It did however tender documents to show that Mr Turpeinen had caused another company, Elite Form Pty Ltd (Elite Form) to be incorporated in December 2024 and that Elite Form had replaced Elite in the contract with Monarch. This, it submitted, was an instance of a ‘phoenix’ scheme. It submitted, in effect, that the incorporation of Elite Form was a device to defeat creditors.

80. Mr Turpeinen was not cross examined about these propositions.

81. Kuatro also provided a schedule in which it sought to demonstrate that the total amount which Elite could expect to receive in relation to current projects was far less than stated by Mr Turpeinen. In Kuatro’s submission, the total amount ‘outstanding’ from all projects was $82,715.83. Mr Turpeinen was also not cross examined about these propositions.

Should the stay be continued?

82. Kuatro’s application for the continuation of the stay relied heavily, but not solely, on the fact of non-compliance with the statutory demand and the impending winding up application. It submitted that Elite is presumed to be insolvent under s 459C of the Corporations Act 2001 (Cth) by reason of its failure to comply with the statutory demand and that, as such, the situation is not one in which there is a mere risk of insolvency. It referred to the fact that the tax debts in relation to which the statutory demand was issued arose well prior to Elite’s entry into the Subcontract and that they could not be characterised as debts incurred in the ordinary course of its business.

83. Kuatro also submitted that if Elite uses the funds in Court to pay its tax debts, then Kuatro will find itself in exactly the position of the Deputy Commissioner of Taxation vis a vis Elite, namely it will be a creditor of an insolvent company. It likened these circumstances to a game of musical chairs, the idea being that the music has now stopped but it is being made to stand up to allow the Deputy Commissioner of Taxation to sit down.

84. I do not accept these submissions. The fact that the tax debts in question pre-date Elite’s entry into the Subcontract says nothing about the nature of those liabilities. They are all debts that were incurred in the ordinary course of trading and, in the ordinary course, would be discharged using cashflow from operations, namely progress payments from concreting work. They are precisely the kinds of expenses that a subcontractor would expect to be able to meet from cashflow.

85. The fact that Elite would use a progress payment to pay out a circling creditor is also not a matter to which I am prepared to attach any weight. The evidence shows that the only creditor pressing for payment is the Deputy Commissioner of Taxation and that the funds in Court, if paid to Elite, would be sufficient to discharge that liability. Elite appears otherwise to be solvent, even according to Kuatro’s schedule of its expected revenues.

86. I also do not accept that the effect of lifting the stay will be to put Kuatro in the very same position as the Deputy Commissioner of Taxation is now in. The Deputy Commissioner of Taxation has a debt that is currently due and payable by Elite. Kuatro has claims that have been rejected by the adjudicator and which will be the subject of dispute in the main proceedings. Elite may or may not be found to be liable to Kuatro. I accept that if Kuatro ultimately succeeds in its claim, there is a risk that Elite will be unable to meet it. But this is precisely the kind of risk that the SOP Act intends to place on a contractor in Kuatro’s position: see Martinus at [303], where Payne JA said the following:

“The relevant jurisdiction engaged is the interlocutory power of the Court to prevent frustration of a future award (or judgment). The statutory policy of the SOP Act is that a contractor has a right to immediate cash flow, to be used in the ordinary course of business, despite the risk that a future award (or judgment) may not be satisfied. In this respect, it is important to note, as this Court has said, that s 32 is concerned with the legal rights of the parties, and ‘does not speak to the practical effect upon them’: TFM Epping Land Pty Ltd v Decon Australia Pty Ltd [2020] NSWCA 118 at [84] (Bell P, Macfarlan and Leeming JJA). Section 32B now also makes it clear that, while a company in liquidation lacks rights under Pt 3 of SOP Act, there is no intention that companies otherwise proven to be in financial distress lack such rights. Once the nature of the jurisdiction invoked is properly identified, and the policy of the SOP Act clearly understood, it is clear that a ‘significant doubt’ about the ability to meet an award in the future is insufficient to award a stay.”

87. Lastly, I do not accept that there was necessarily anything deceptive about the incorporation of Elite Form or the fact that it has replaced Elite as the contractor in the arrangement with Monarch. Elite is presently subject to a winding up application but, according to Mr Turpeinen, has a strong case to demonstrate its solvency. One explanation as to why the contract was ‘moved’ to Elite Form may simply be that Monarch did not want to be a party to a contract with an entity that was subject to a winding up application. I note that the new contract with Elite Form seems to have been entered into prior to the commencement of any works in relation to the Cobargo project and, I infer, before the time for performance of either party’s substantive obligations. The documents tendered by Kuatro make it impossible to accept that Elite, as opposed to Elite Form, can expect to receive revenues from Monarch. In this respect, I am unable to accept that what Mr Turpeinen says about the Monarch contract is altogether reliable. But this does not affect the balance of Mr Turpeinen’s evidence in relation to Elite’s financial position generally, which was not the subject of any challenge save for the submission contained in Kuatro’s schedule.

88. Even if I were to reject Mr Turpeinen’s evidence and instead entirely accept Kuatro’s submissions as to Elite’s financial position as set out in its schedule, I would conclude that Elite is still in fundamentally the same position so far as concerns its ability to demonstrate solvency. That is, it would still be able to pay its outstanding tax debts and continue to trade if it were to receive the funds paid into Court.

89. I therefore refuse to continue the interlocutory orders.

Orders

1. Summons dismissed with costs.

2. The funds paid into court by the plaintiff be paid into the trust account of the first defendant’s solicitors.

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Decision last updated: 12 May 2025