Laing O'Rourke Australia Construction Pty Ltd v H&M Engineering & Construction Pty Ltd - [2010] NSWSC 818

No judgment structure available for this case.

CITATION: Laing O'Rourke Australia Construction v H&M Engineering & Construction [2010] NSWSC 818

HEARING DATE(S): 14/07/10 and 15/07/10

JUDGMENT DATE :
28 July 2010

JURISDICTION: Equity Division
Technology & Construction List

JUDGMENT OF: McDougall J at 1

DECISION: Declaration as sought in summons together with costs and ancillary orders.

CATCHWORDS: BUILDING AND ENGINEERING CONTRACTS – challenge to adjudication determination – where plaintiff contended that adjudicator did not consider its submissions and documentation in support of its payment schedule – whether adjudicator considered plaintiff’s submission that defendant’s claim was a global claim – whether adjudicator “considered” payment schedule, expert report and statutory declarations – where conclusions given without reasons – whether denial of natural justice – whether failure to exercise statutory functions in good faith – content of good faith requirement – content of obligation to consider – whether adjudication determination void – Building and Construction Industry Security of Payment Act 1999.

LEGISLATION CITED: Building and Construction Industry Security of Payment Act 1999 (NSW)
Civil Procedure Act 2005 (NSW)
Uniform Civil Procedure Rules

CATEGORY: Principal judgment

CASES CITED: Brodyn Pty Ltd v Davenport (2004) 61 NSWLR 421
Halkat Electrical Contractors Pty Ltd v Holwood Holdings Pty Ltd [2007] NSWCA 32
Holmwood Holdings Pty Ltd v Halkat Electrical Contractors Pty Ltd [2005] NSWSC 1129
John Holland Construction Engineering Pty Ltd v Kvaerner RJ Brown Pty Ltd (1996) 13 BCL 262
Perform (NSW) Pty Ltd v MEV-AUS Pty Ltd [2009] NSWCA 157
Roberts v Hopwood [1925] AC 578
Tickner v Chapman (1995) 57 FCR 451
Timwin Construction v Façade Innovations [2005] NSWSC 548
Trysams Pty Ltd v Club Constructions (NSW) Pty Ltd [2007] NSWSC 941
Trysams Pty Limited v Club Constructions (NSW) Pty Ltd [2008] NSWSC 399
Watpac Constructions v Austin Group [2010] NSWSC 347

TEXTS CITED: Australian Oxford Dictionary, Second Edition, 2004
International Construction Law Review

PARTIES: Laing O'Rourke Australia Construction Pty Ltd (Plaintiff)
H&M Engineering & Construction Pty Ltd (First Defendant)
Philip Davenport (Second Defendant)
Adjudicate Today Pty Ltd (Third Defendant)

FILE NUMBER(S): SC 2010/95225

COUNSEL: F C Corsaro SC (Plaintiff)
M G Rudge SC / F P Hicks (Defendants)

SOLICITORS: Colin Biggers & Paisley (Plaintiff)
Ziman & Ziman (First Defendant)
Adjudicate Today Pty Ltd (Second and Third Defendants)

IN THE SUPREME COURT
OF NEW SOUTH WALES
EQUITY DIVISION
TECHNOLOGY & CONSTRUCTION LIST

McDOUGALL J

28 July 2010

2010/95225 LAING O’ROURKE AUSTRALIA CONSTRUCTION PTY LTD v H&M ENGINEEERING & CONSTRUCTION PTY LTD

JUDGMENT

1 HIS HONOUR: The fundamental question in these proceedings is whether the determination of an adjudicator, made under the Building and Construction Industry Security of Payment Act 1999 (NSW) (the Act), is void. That question arises in the following circumstances.

The project, the claim and the determination

2 There is a coal loading terminal situated on Kooragang Island in Newcastle. That terminal is being expanded. The plaintiff (LORAC) has contracted to do works that are part of that expansion. It entered into a subcontract with the first defendant (H&M) for the supply and installation of structural and other fabricated steel work to be used in the project.

3 The subcontract is a written agreement dated 18 July 2008, but said to have had effect from some prior time. The subcontract sum exceeded $21.8 million. The subcontract is a construction contract for the purposes of the Act.

4 H&M made a number of claims for progress payments, which were also payment claims for the purposes of the Act. Of particular relevance to these proceedings is a payment claim (which I shall refer to simply as “the payment claim”) constituted by an invoice number 19710, dated 24 February 2010, together with supporting documents. The claimed amount was (exclusive of GST) $10,639,413.00.

5 On 9 March 2010, LORAC provided a payment schedule. The payment schedule stated that H&M owed LORAC an amount in excess of $1.2 million, and accordingly that LORAC did not propose to make any payment to H&M. The payment schedule contained detailed reasons in support of LORAC’s position, and was supported by a large quantity of documents.

6 In a “without prejudice letter” accompanying the payment schedule, LORAC stated that it proposed to make a payment “without prejudice” and “on account” in an amount (excluding GST) of $221,447.25.

7 On 23 March 2010, H&M applied for adjudication of the payment claim. The adjudication application was referred to the second defendant (the adjudicator). He accepted appointment as adjudicator. LORAC lodged an adjudication response.

8 The documents provided to the adjudicator were extremely voluminous. By his account, they included (from H&M) “three boxes of 13 large spring back folders “and (from LORAC) “two boxes of large spring back folders”. The “joint tender bundle” provided to the Court for the hearing of these proceedings comprised only two lever arch folders of document. It appears, however, that at one stage the parties had planned to provide to the Court the whole of the material given to the adjudicator, and that this might have extended to some 41 lever arch folders.

9 The adjudicator prepared a determination (the determination) dated 13 April 2010. It appears from the tax invoice for his fees that it took him 144 hours to do so. He found that H&M was entitled to be paid an adjudicated amount of $10,614,474.00 inclusive of GST.

Outline of the payment claim

10 The payment claim comprised a number of distinct claims. Three of them, known as claim 110, claim 115 and claim 122, sought payment for costs associated with alleged disruption and delay to H&M’s works, said to have been caused by LORAC. Claim 110 related to site costs. Claim 115 was in effect a separate claim for a subset of site costs, said to have been excluded from claim 110. Claim 122 was for overhead costs.

11 Another claim, known as claim 118, was referred as a “resubmission of schedule of rates claims”. In effect, H&M said that it was a recalculation of claims earlier made and paid, which were, or should be treated as having been, made and paid on account.

12 LORAC’s principal complaints relate to the way that the adjudicator dealt with the four claims that I have identified. However, it complained also about his treatment of other claims. It is not necessary to go into the detail of those other claims at this stage.

13 I should however note two things. The first is that the claims for disruption (claims 110, 115 and 122), were characterised by LORAC as “global claims” or “total cost claims”. Thus, LORAC said, it was necessary for H&M to show that:

(1) the hours of work originally planned for the activities in question were reasonable;

(2) the hours of work in fact taken were, having regard to the circumstances of delay and disruption, reasonable; and

14 The other point to note is that, in relation to claim 118, the adjudicator, having extracted (to be dealt with separately) one of the underlying claims, and rejected others, effectively dealt with the remaining 39 underlying claims not by valuing them individually, but by settling on a figure which purported to split the difference between the parties’ stated positions. The adjudicator’s express reason for doing this was that it would not be worthwhile, having regard to the total amount left in those claims (a little under $100,000.00), to value each of them individually, taking into account the amount involved in proportion to the total of the payment claim and the subcontract sum. LORAC said that, in so acting, the adjudicator effectively abdicated his function.

The issues

15 The parties did not prepare an agreed statement, or for that matter competing statements, of the real issues in dispute. However, from the way that the parties presented their competing positions in argument, it seems that the fundamental issues may be stated as follows:

(1) did the adjudicator deny natural justice to LORAC by failing to consider fundamental issues raised by it in relation to the claims that I have described?

(2) did the adjudicator fail to exercise his statutory functions in good faith, as that expression (more accurately, its Latin equivalent) was used in Brodyn Pty Ltd v Davenport (2004) 61 NSWLR 421 at 442 [55], in dealing with those claims in the way that he did?

(3) if the answer to question 1 or question 2 is “yes”, is the determination void?

16 In Watpac Constructions v Austin Group [2010] NSWSC 347, I concluded at [31], after a review of the authorities, that if, in the adjudication process, there is a substantial denial of the measure of natural justice required to be given, then the resultant determination is void: wholly void, not just void to the extent of the denial.

17 Mr M G Rudge of Senior Counsel, who appeared with Mr F P Hicks of counsel for H&M, submitted that my conclusion in Watpac was wrong, and that, insofar as I had followed Brodyn in coming to that conclusion, that aspect of Brodyn was also wrong. Mr Rudge accepted, particularly in light of the fact that my conclusion was based on the reasoning of the Court of Appeal in Brodyn (and in other cases to which I referred), that it was not necessary for me to deal with this submission.

The relevant principles

18 I do not think that it is necessary to set out in detail relevant provisions of the Act. I will refer to particular sections below, in dealing with the issues, to the extent that is needed.

The reasoning in Brodyn

19 In Brodyn, Hodgson JA (with whom Mason P and Giles JA agreed) identified at 441 [53] some five “basic and essential requirements” which must exist for there to be an adjudicator’s determination. Since it is not suggested that any of those requirements is lacking in this case, I do not need to set out what his Honour said.

20 At 441 – 442 [55], Hodgson JA said that what was essential to the existence of a determination was:

(1) compliance with the basic requirements that his Honour had identified (which list, his Honour noted, might not be exhaustive);

(2) good faith in the exercise, or attempted exercise, of the powers given to adjudicators by the Act; and

21 Hodgson JA said that if one or other of those essential features was lacking then “a purported determination would be void and not merely voidable”.

22 At 443 [60], Hodgson JA considered the impact of fraud. There is no suggestion of fraud (in either of the senses to which his Honour referred) in this case.

Natural justice

23 As Hodgson JA recognised, in the extract from Brodyn set out at [20(3)] above, any consideration of denial of natural justice must take into account the scheme of the Act. His Honour returned to this at 442 [57] and said, by reference to specified sections of the Act, that natural justice was to be afforded to the extent that those sections contemplated. Thus, his Honour said, “if there is a failure by the adjudicator to receive and consider submissions, occasioned by breach of these provisions, the determination will be a nullity”. The provisions to which his Honour referred included s 22(2)(d) of the Act, by which an adjudicator is required “to consider… the payment schedule (if any) to which the [adjudication] application relates, together with all submissions (including all relevant documentation) that have been duly made by the respondent in support of the schedule”.

24 That is of particular importance in this case. Mr F Corsaro of Senior Counsel, who appeared for LORAC, submitted that the adjudicator, in breach of s 22(2)(d), had failed, in certain fundamental respects, to consider his client’s submissions (including supporting documentation) duly made in support of its payment schedule.

25 The question of natural justice has arisen in circumstances where an adjudicator has decided an application on a basis for which neither party contended, without affording either party the opportunity to be heard. This is not such a case (except, perhaps, in relation to the way that the adjudicator dealt with claim 118). However, those cases show that the denial of natural justice, in that context, must be material. It is convenient to set out what I said in Trysams Pty Limited v Club Constructions (NSW) Pty Ltd [2008] NSWSC 399 at [42] to [45]:

(1) the requirement that a respondent state in its payment schedule its reasons why its scheduled amount is less than the claimed amount (s14(3));

(2) the limited time within which a respondent to an adjudication application may lodge an adjudication response (s20(1)); and

(3) the prohibition against a respondent’s including in its adjudication response any reason for withholding payment that has not been stated in its payment schedule (s20(2B)).

[43] Ms Culkoff submitted that the test for denial for natural justice was that described by me in John Goss Projects v Leighton Contractors (2006) 66 NSWLR 707 . Referring to what I had said earlier in Musico v Davenport [2003] NSWSC 977 at [107], I said (in John Goss at [31]) “that where an adjudicator was minded to decide a dispute on a basis for which neither party had contended, then natural justice required the adjudicator to notify the parties of that intention, so that they could put submissions on it.” I adhere to that view. However, as I pointed out in John Goss at [42], “the concept of materiality is inextricably linked to the measure of natural justice that the Act requires parties to be given in a particular case”. By that I meant, as I said, that the principles of natural justice could not… “require an adjudicator to give the parties an opportunity to put submissions on matter that were not germane to his or her decision”.

[44] John Goss was a case where it was easy to see that the particular point on which the adjudicator decided it was “germane”. Indeed, it was fundamental to the adjudicator’s decision. Had the adjudicator notified the parties of the way in which he was proposing to dispose of the case, there were substantial submissions that could have been put to dissuade him from doing so. Thus, it was easy to conclude that, by denying the plaintiff in that case any opportunity to put submissions, the adjudicator had denied the plaintiff natural justice.

John Goss

Musico

Brodyn

26 In relation to claims 110, 115 and 122, LORAC’s complaint is, as I have indicated, that the adjudicator did not consider its submissions and supporting documentation. In my view, the concept of materiality is just as important in this context as it was in Trysams and in the cases that I referred to (including John Goss). In other words, if the adjudicator did not consider LORAC’s submissions or supporting documentation in relation to those claims, the denial of natural justice would not be material if the submissions and documentation, properly considered, could not have induced him to come to a different view.

27 To the extent that the decided cases have looked at the question of materiality, they have done so in the way just described. Could the submissions that might have been put (or that were not considered), properly considered, have caused the adjudicator to take a different view? Mr Rudge submitted that materiality required also an analysis of the relationship between the amount affected by the denial of natural justice and the amount of the payment claim overall. So far as I know, there is no decision supporting, in terms, that approach. Nor is there anything in the scheme of the Act to suggest that natural justice should only be afforded (to the extent that the Act requires) in report of substantial or significant components of a claim.

28 Mr Corsaro submitted that materiality could not encompass the amount at stake (either in absolute terms or considered in reference to either the amount of the payment claim or the contract sum) because the result of a substantial denial of natural justice was that the determination would be void. That, if I may say so, seems to me to be circular, if the question of amount is thought to be relevant to the question of materiality (in other words, to whether there has been a substantial denial of natural justice).

29 Mr Rudge relied on what Hammerschlag J had said in Trysams Pty Ltd v Club Constructions (NSW) Pty Ltd [2007] NSWSC 941 at [34]. His Honour had said at [33] that, in considering whether there was a breach of an essential condition for validity of a determination, the Court should look at “the nature, gravity and effect of the errors, if any, made by the adjudicator”. Thus, his Honour said at [34], “[t]he required exercise is to determine whether what occurred worked “practical injustice” on the plaintiff sufficient to vitiate the adjudication”. His Honour referred to the decision of Gleeson CJ in Re Minister for Immigration and Multicultural Affairs, ex parte Lam (2003) 214 CLR 1 at 13 – 14 [37].

Want of good faith

30 I dealt with the obligation of good faith, in the context of an adjudicator’s statutory obligation to consider certain matters pursuant to s 22(2) of the Act, in Timwin Construction v Façade Innovations [2005] NSWSC 548. Having referred at [19] and [20] to what Hodgson JA had said in Brodyn at 441 – 442 [55], [56], I said at [38] to [40]:

Brodyn

Roberts v Hopwood

Zhang v Canterbury City Council

The Queen v Hunt; ex parte Sean Investments Proprietary Limited

Evans v Marmont

31 Shortly after I decided Timwin, Brereton J considered the obligation of good faith in Holmwood Holdings Pty Ltd v Halkat Electrical Contractors Pty Ltd [2005] NSWSC 1129. In a detailed review of the authorities from [66] to [109], his Honour identified what he described as a narrow view and a broader view of good faith. His Honour explained the narrow view at [80] as “focussing on whether objectively the exercise of power could be regarded as honestly referrable to the purpose for which the power was conferred, and excluding from its ambit the reasoning process leading to the decision”. His Honour identified the broader view, at [87] and other paragraphs, as including recklessness or caprice in the exercise of the power, although falling short of a wilful and deliberate failure to exercise, or to attempt to exercise, the power. For the reasons given at [111] to [116], his Honour concluded at [110] and [117], that the requirement of good faith required more than honesty. In particular, it required faithfulness to the obligation and a conscientious attempt to perform it (at [117]), and absence of recklessness or caprice [at 110], [117]).

32 The defendant appealed. The appeal was dismissed (Halkat Electrical Contractors Pty Ltd v Holwood Holdings Pty Ltd [2007] NSWCA 32). Nonetheless, Giles JA (with whom Santow and Tobias JJA agreed) referred at [26] to what Brereton J had said. His Honour did not think that it was necessary to embark on “an exegesis of the reference in Brodyn… to a bona fide attempt to exercise the statutory power”. That was because, as his Honour said at [27], “the adjudicator simply did not perform the task required by the Act”, and thus did not exercise his power in good faith.

33 The Court of Appeal returned to the topic of good faith in Perform (NSW) Pty Ltd v MEV-AUS Pty Ltd [2009] NSWCA 157. It appeared that the appellant in that case had submitted that the Court of Appeal did not “fully endorse” the broader approach to good faith that Brereton J had identified in Holmwood. At [114], Giles JA (with whom McColl and Young JJA agreed) said that the Court “did not endorse it at all”.

34 I do not think that it is necessary to say more than that, in the words of Lord Sumner in Roberts v Hopwood [1925] AC 578 at 604 (cited by me in Timwin at [38]), for administrative bodies to act in good faith, they must put “their minds to the comprehension and their wills to the discharge of their duty”. As I said at [39] and [40], that view of the content of the obligation of good faith was supported by the requirement to “consider” various matters set out in s 22(2) of the Act. It follows that the obligation of good faith requires at least that adjudicators should turn their minds to, grapple with and form a view on all matters that they are required to “consider”.

35 It may be easy to see why an exercise of power that could be characterised as reckless or capricious is not undertaken in good faith. But it does not follow that, for there to be absence of good faith, it must be possible to characterise what happened as having been done recklessly or capriciously.

The obligation to “consider”

36 Section 22(2) of the Act requires adjudicators to “consider” certain specified matters:

22 Adjudicator’s determination

…

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

37 I looked at the obligation to “consider” in Timwin, in the paragraphs quoted at [30] above. It is, however, necessary to say a little more about the content of that obligation in the context of the Act.

38 As a matter of plain English, the obligation to “consider” something requires that it be given attention, or looked at on its merits (see, for example, the Australian Oxford Dictionary, Second Edition, 2004). Thus, in Tickner v Chapman (1995) 57 FCR 451, Black CJ, speaking of a statutory obligation on a minister of the Crown to consider representations made to him, said at 464 that “the consideration of a representation involves an active intellectual process directed at that representation”. In the same case, Burchett J said at 476 that the obligation required “the Minister… to apply his own mind to the issues raised by [the representations]”, which involved obtaining “an understanding of the facts and circumstances set out in them, and of the contentions they urged based on those facts and circumstances”. Kiefel J said at 495 that the obligation “requires that the Minister have regard to what is said in the representations, to bring his mind to bear upon the facts stated in them and the arguments or opinions put forward and to appreciate who is making them”.

39 In my view, the obligation to consider various matters imposed by s 22(2) of the Act should be read in the same way: namely, as requiring an active process of intellectual engagement. It may be thought that this imposes a substantial burden on adjudicators. That may be so; but there are at least two reasons why, even if that is correct, it does not justify reading down the statutory obligation to “consider”. The first is that adjudicators are not forced to accept nomination. They may decline nomination; or they may accept only on condition that they are given some longer period of time than ten working days to produce their determination. The second reason is that the outcome of the adjudicator’s consideration may have very significant consequences. In this case, the three delay claims total, in round figures, $7.5 million – a little under 75% of the total of the payment claim. Having regard both to the limited ability for adjudicators’ determinations to be reviewed and to the nature of the estoppels that they create, the parties to an adjudication are entitled to have the adjudicator’s consideration, in the sense that I have explained, of the case that each of them brings.

The delay claims: 110, 115, 122

Claim 110

The payment claim and adjudication application

40 The claim was described as being one for the recovery of “Work Related Costs associated with the Interference and Disruption to H&M’s Site Installation Works”. The amount of the claim was derived by the following steps:

(1) H&M asserted that, to 31 December 2009, it had expended 103,547 man hours in work-related site activities;

(2) from this total 12,993.31 hours, which were said to have been the subject of other claims, were subtracted;

(3) an allowance was made for 39, 241 “Total Earned Hours”;

(4) H&M thereby derived 51, 312.69 “claimable hours”;

41 The “Total Earned Hours” were the hours that H&M claimed had been allowed, for the work that had been performed to 31 December 2009, in estimating the subcontract price. The “Gang Rate” is a blended hourly rate taking into account the different amounts claimable in respect of the various trades and other personnel on site.

42 Because allowance had been made, by way of subtraction, for hours that were the subject of other claims, H&M, in its adjudication application, characterised claim 110 as a “modified total cost claim”. Further, it appears from the adjudication application, H&M accepted that the claim was one where it had not sought to particularise the nexus between the individual alleged disruptive matters and the alleged consequences in terms of time and cost.

43 In the adjudication application, H&M referred to the decision of Byrne J in John Holland Construction Engineering Pty Ltd v Kvaerner RJ Brown Pty Ltd (1996) 13 BCL 262 (for convenience, I shall refer to this as “Kvaerner”) and to what his Honour, writing extra-curially, had said in “Total Costs and Global Claims” (1995) ICLR 531, and elsewhere; and to other decisions and writings dealing with global claims or total cost claims.

44 H&M denied, in its adjudication application, that claim 110 was a “global claim” (and, presumably, took the same position in relation to claims 115 and 122). It said that it had “provided more than sufficient evidence to demonstrate that as a result the [sic] vast number of breaches of the contract and acts of prevention caused solely by LORAC, H&M has incurred substantial additional work-related costs for which LORAC must reimburse H&M.”

45 However, although H&M identified many of what it said were acts of disruption, delay or prevention, it did not seek to describe a connection between any individual act (or related groups of acts) and any particular loss of time. H&M’s case was that, taken together, it was all those acts of LORAC that had caused H&M to incur the number of man hours of labour over and above those, in effect, budgeted. (Indeed, as I have noted, H&M appeared to recognise this in its adjudication application.) It is clear that H&M asserted, at least implicitly, that there were no other causes. That is because, as I have said, it claimed for each and every one of the hours in question.

The payment schedule and adjudication response

46 LORAC asserted that claim 110 “is a “global” claim for alleged disruption… there is no particularisation whatsoever by the Subcontractor of the “nexus” between the alleged disruptive matters and the alleged consequences thereof in terms of time and cost” (emphasis in the original). Accordingly, LORAC said, it was necessary for H&M to show that:

(1) its “Total Earned Hours“ were a reasonable allowance for the work in question which would have been incurred in any event; and

47 LORAC challenged each of these matters. In particular, as to the second, it said the following (at para 92 of the payment schedule):

[92] The Subcontractor caused itself delay and/or disruption due to problems of its own making. These problems include:

(a) Delays associated with Subcontractor’s own poor manufacturing performances;

(b) Delays in the manufacture of steel resulted in an initial and then continuing delay in the production of steel for the Project;

(c) Defective fabricated steel items produced by the Subcontractor and in some cases delivered to Site;

(d) Significant absenteeism amongst the Subcontractor’s workforce;

(e) Poor site coordination;

(f) Significant staff turnover (and particularly senior staff);

(g) Slow productivity of welding and painting of steelwork; and

(h) Poor or non-existent quality assurance documentation (including late submission of weld procedures).

48 LORAC returned to those themes in its adjudication response. It, too, referred to the decision of Byrne J in Kvaerner and to his Honour’s article in the International Construction Law Review. Since H&M had not given the adjudicator a copy of the article, LORAC did so.

49 Further, LORAC included with its adjudication response (presumably, by way of submission or “relevant documentation”) four statutory declarations. The declarants were:

(1) Mr Kevin Brady, who was an employee of LORAC and who acted as LORAC’s representative in relation to the subcontract;

(2) Mr James Kennedy, a construction manager employed by LORAC who had been substantially involved in the supervision or monitoring of H&M’s performance of its subcontract;

(3) Mr Ken Fazakerley, a consultant who was contracted to LORAC to assist it in managing, among other things, H&M’s performance of its obligations under the subcontract; and

50 In addition, H&M relied on a report prepared by Mr Stephen Abbott (in conjunction with colleagues) of SJA Construction Services (the SJA report). In that report, Mr Abbott reviewed claims 110, 115, 117, 118 and 122. The report was prepared on the instructions of LORAC’s then solicitors. Mr Abbott, among other things:

(1) identified documents that he had reviewed for the purpose of preparing his report;

(2) stated assumptions made in for the purpose of formulating his opinions; and

The adjudicator’s reasons

51 The adjudicator dealt with claim 110 at paras 104 to 137 of his determination. (He had dealt with various contractual defences relied by LORAC earlier in his determination. It is not necessary to go to what he there said.) It is also necessary to have regard to what the adjudicator said in relation to claim 122, at paras 189 to 200 of the determination, because that too was a claim for increased costs said to be referable to LORAC’s disruption and delay.

52 It is clear that the adjudicator did not find either the SJA report or the four statutory declarations at all persuasive. He said of them, at paras 106, 107 and 109:

[106] SJA is SJA Construction Services Pty Ltd, consultants engaged by the respondent’s lawyers Sparke Helmore to review certain claims by the claimant including this claim 110. The SJA report dated 30 March 2010 was prepared under the supervision of Mr. Stephen Abbott and opinions stated in the report are his. At p.71 of the adjudication response the respondent says that the statutory declarations provided by the respondent in the adjudication response and the SJA report provide irrefutable evidence that the alleged increase in planned resources was a result of the respondent’s own inefficiencies and time allocated to rectification of defective work. The claimant has had no opportunity to refute the declarations or report. The SJA Report and the statutory declarations do not demonstrate to my satisfaction that the alleged increase in planned resources was a result of the respondent’s own inefficiencies and time allocated to rectification of defective work.

[107] As well as the SJA report, the respondent has provided four statutory declarations by officers of the respondent. The statutory declarations comprise five large springback folders. Under s 22(2)(d) of the Act I can have regard to the payment schedule and only submissions (including relevant documentation) that have been duly made by the respondent in support of the payment schedule. The SJA report and the statutory declarations go far beyond merely supporting the payment schedule. While I have read them all and looked at all attachments, I have been mindful of the need to accord fairness to the claimant. The claimant has not seen them or had the opportunity to comment on them.

…

53 Nonetheless, having said that, the adjudicator did refer frequently to the SJA report. It is I think reasonably clear that he considered Mr Abbott’s views: in some cases accepting, but in others rejecting, them.

54 The adjudicator appears to have accepted that H&M did expend the total number of hours claimed, and to have accepted the allowance for hours claimed elsewhere (see para 104 of the determination). At para 121, the adjudicator appears to have concluded that H&M did not underestimate the number of hours that should have been required to perform the work actually done to 31 December 2009. Both before and after para 121, the adjudicator concluded that there were numerous events of disruption or delay caused by LORAC to H&M.

55 The adjudicator dealt with the “global claims” issue at paras 130 to 132. He said at para 132;

I don’t see any point in using the label “global claim” or “total cost claim”. I don’t find the authorities cited by the respondent of any assistance.”

56 The adjudicator then turned his attention to the gang rate, including to Mr Abbott’s view that a lower rate than the one claimed by H&M was appropriate. He accepted the rate advanced by H&M. Thus, he concluded at paras 135 to 137:

[135] I am satisfied that the respondent did delay and disrupt the claimant’s work and I am satisfied that the delay and disruption caused the claimant substantial additional expense. I am satisfied that that expense was the cost of additional hours of labour. I am satisfied that there were many instances of delay and disruption and it would not be possible to ascribe a particular number of hours to each delaying event. I can think of no better way of estimating the additional cost incurred by the claimant than the way the claimant has done so. Whether this would suffice to prove the entitlement in court is not relevant. It is sufficient for the purpose of a quantifying progress payment.

[136] It would have been open to the respondent to contend that the extent of the delay caused by the respondent was a different period to that claimed but I don’t accept that there was no delay or disruption and no additional costs incurred by the respondent as a consequence of the delay and disruption. The respondent has not provided a submission on the extent of the delay which I should find occurred if I find that the claimant was delayed by the respondent. The respondent has not provided a submission on the amount at which I should access the claimant’s costs if I accept that the claimant is entitled to the claimant’s extra costs, I am only left with the claimant’s assessment. It is the way the respondent has approached this matter that makes it so difficult for me to arrive at any amount to be included in the progress other than the amount claimed.

[137] I am satisfied that the respondent caused enormous delay and disruption to the claimant and that the claimant incurred very considerable extra labour costs and that in calculating the amount of the progress payment I should include an amount for those costs. The respondent has criticised the claimant’s assessment and said that no amount should be included. In the absence of an assessment by the respondent of what the respondent considers would be a reasonable amount, I am satisfied that for the purposes of a progress payment on account, the claimant’s assessment is reasonable.

Claim 115

57 This was a claim for a specific aspect of work-related site costs said to have been incurred as a result of disruption. Presumably, the hours of disruption claimed (7,776.54) were among the “Hours Claimed Elsewhere” taken into account in the calculation of claim 110.

58 The basis of claim 115 was that the works area set aside by LORAC for use by H&M was inadequate, and quite different to what had been represented on the drawings on the basis of which H&M tendered. H&M said that it had to establish a works area further away. As a result, it said, its men had to travel further to and from the actual work sites. The additional travel time was unproductive.

59 The adjudicator said, at para 155 of his determination, that claims 110 and 115 could not be treated in isolation. If less time were allowed for claim 115 then, on his findings as to claim 110, more should have been allowed for that claim. In principle, I think, this approach was accurate. For present purposes, it is sufficient to say that there is no distinguishing feature either of the adjudicator’s treatment of claim 115 or of the parties’ submissions in respect of it that requires particular note.

Claim 122

60 As I have noted, claim 122 was for the offsite, or overhead, costs said to have been incurred as a result of disruption and delay. If, as H&M claimed, it had been delayed in the performance of its works, then the cost of that delay would include not only the extended onsite hours required to complete its subcontract, but also an appropriate allowance for additional offsite overheads.

61 The adjudicator dealt with claim 122 at paras 189 to 200 of his determination. He noted at para 190 that LORAC relied on the SJA report. He did not rely upon that report “since the claimant has not seen these assessments” and accordingly “it would not be fair for me to rely upon them”. Further, he said, “[i]n any event, I am satisfied that the assessments in the SJA report are based upon unsustainable interpretations of the contract and the facts”.

62 At paras 195 and following, the adjudicator turned his attention to Mr Abbott’s contentions that H&M had been responsible for some of the delays. He rejected that contention, for reasons that he gave. At para 199, the adjudicator rejected the contention that in any event concurrent delays for which H&M might be responsible would disentitle it to any part of the claim. He did not deal with any of the statutory declarations.

The parties’ submissions

63 Mr Corsaro submitted that the adjudicator had simply overlooked, or ignored, LORAC’s case based on the proposition that H&M’s claims under discussion were global claims, or total cost claims. He submitted that it was incumbent on the adjudicator to consider and deal with the proposition advanced by LORAC: namely, that if there were shown to have been non-compensable causes of delay then, in the absence of a proven nexus between individual compensable events of delay and individual aspects of loss, the global claim could not succeed.

64 Mr Corsaro submitted, further, that the adjudicator had acted wrongly in (as Mr Corsaro put it) rejecting the SJA report and the four statutory declarations. He submitted that the adjudicator’s reasons for doing so were capricious.

65 As to the SJA report: Mr Corsaro noted that the adjudicator had rejected it as independent because Mr Abbott stated that he relied on various assumptions. So far from being a reason for rejecting an expert report, Mr Corsaro submitted, that was a factor in its favour. Of course, it was incumbent on LORAC to make the assumptions good; but this, Mr Corsaro submitted, had been achieved through the statutory declarations.

66 As to the statutory declarations: Mr Corsaro submitted that it was wrong for the adjudicator to “reject” them (as Mr Corsaro submitted he did) because they “go far beyond merely supporting the payment schedule” and “include countless matters that are not mentioned in the payment schedule” (a criticism made also of the SJA report). Mr Corsaro submitted that there were many aspects of the statutory declarations that went directly to, and supported or made good, factual issues raised in the payment schedule.

67 Mr Rudge submitted that the adjudicator had not “rejected” either the SJA report or the statutory declarations. On the contrary, Mr Rudge noted, the adjudicator had dealt with the SJA report in detail, in his analysis of claim 110, and had returned to it once more in relation to claim 122.

68 More fundamentally, Mr Rudge submitted, the adjudicator had dealt with the “global claims” submissions on their merits. In those circumstances, Mr Rudge submitted, there was no basis for the Court to intervene.

69 Mr Rudge noted that the adjudicator had referred to the statutory declarations on many occasions in the determination. Accordingly, he submitted, the adjudicator could not be said to have “rejected” them. On the contrary, Mr Rudge submitted, it was apparent that the adjudicator had taken the declarations into account, for the purposes of his determination, to the extent that he thought they were relevant.

70 The parties’ submissions were far more voluminous than the summary that I have given. I do not propose to encumber these reasons with the detail. What I have said is enough to outline the area of debate.

Decision

Some preliminary points

71 I start with the proposition that the Court is not hearing an appeal from the adjudicator. The question is whether, in a real and practical sense, he denied natural justice to LORAC because he did not deal with an important aspect of its case. (I put the matter that way because, it seems to me, that is the fundamental element that underpins both the complaint of denial of natural justice and the complaint of want of good faith.) In doing so, I take into account the scheme of the Act, including that, as has been said on many occasions, it provides a rough and ready procedure for the determination of interim rights. It does not in terms create or affect final rights. On the contrary, it leaves the parties free to agitate their claims in the appropriate forum.

72 Further, I take into account that adjudicators frequently work under extreme pressures of time. Undoubtedly, that was so in the present case. I have referred above to the volume of material with which the adjudicator was confronted, and to the time that it took him to deal with it. Even if one assumes that his ten working days spanned two weekends (and I have not checked), it is apparent that he would have worked over ten hours daily for each and every one of those available days.

73 Finally, I note that although adjudicators are required to produce reasons for their determinations unless excused by the parties (s 22(3)(b)), it is unrealistic to expect that those reasons will treat minutely and in detail with each and every aspect of the parties’ submissions and each and every aspect of the evidence. Having said that, adjudicators’ reasons should be sufficiently detailed to enable parties to understand that their contentions, as advanced in the payment claim and payment schedule, and relevant material in support, have been considered, and to understand the process of reasoning that led to the particular conclusion.

Global claims

74 This is not the place to attempt an exhaustive review of the cases that deal with global claims, or total cost claims (I shall use the terms interchangeably). It is however necessary to refer briefly to the decision of Byrne J in Kvaerner, and to his Honour’s writing on the topic in the International Construction Law Review. They were the materials on which both parties relied, in relation to this aspect of the debate.

75 The application with which Byrne J dealt in Kvaerner was one to strike out a number of paragraphs of a statement of claim. The plaintiff sought damages for breach of contract. There were many breaches of contract alleged, and many heads of loss. Byrne J said at 267 that the pleaded claim “is a global claim, that is, the plaintiff does not seek to attribute any specific loss to a specific breach of contract, but is content to allege a composite loss as a result of all the breaches… as are ultimately proved”. Such a claim was permissible, his Honour said, “where it is impractical to disentangle that part of the loss which is attributable to each head of claim, and this situation has not been brought about by delay or other conduct of the claimant”.

76 Further, Byrne J said, that global claim “is in fact a total cost claim”. His Honour so described the claim because the plaintiff sought, as the result of the various breaches of contract alleged, the total additional cost incurred by it. Such a claim, his Honour said, has three elements:

(1) the plaintiff could reasonably have performed the work for a particular price, usually that tendered;

(2) the other party to the contract committed breaches of contract; and

77 As Byrne J said:

[t]he logical consequence implicit in this is that the proprietor’s breaches caused that extra cost or cost overrun. This implication is valid only so long as, and to the extent that, the three propositions are proved and a further unstated one is accepted: the proprietor’s breaches represent the only causally significant factor responsible for the difference between the expected cost and the actual cost.

78 In those circumstances, Byrne J said, “the causal nexus is inferred rather than demonstrated.” As part of the process of inference, it is necessary to conclude “that, given that the breaches of contract caused some extra cost, they must have caused the whole of the extra cost because no other relevant cause was responsible for any part of it”. In that process of analysis, as his Honour said at 268, “any other cause of any inadequacy in the tender price or of any overrun in the construction cost” is “[a]ssumed to be eliminated”.

79 Byrne J cautioned at 270 that “the Court should approach a total cost claim with a great deal of caution, even distrust”, but that such claims should not be treated as prima facie bad.

80 Byrne J returned to the topic in his article, Total Costs and Global Claims.

81 At 543, Byrne J said that the total (or global) cost method of assessing claims for breach of contract was “a demonstration, in a particular situation, of the readiness of the court to draw a factual inference where direct evidence is lacking in circumstances where, otherwise, injustice will be visited upon a claimant”. That is to say, his Honour regarded the global claim method as providing a sufficient basis for an inference of causation (between the events complained of on one hand and the total extra cost incurred on the other) in circumstances where direct evidence of causation was unavailable.

82 Thus, his Honour said, three elements needed to be proved:

(1) that the contract price was a reasonable price for the performance of the contract work;

(2) that the cost actually incurred was a reasonable cost for performing the work that was done; and

83 His Honour analysed the third element in more detail from 547, pointing out that “[i]t will be the rare case indeed where no overrun cost beyond the contract price and no time overrun beyond the contract period is due to an act or omission for which the contractor is responsible”. In particular, his Honour said, a global claim must fail if any part of the extra cost or time is the responsibility of the contractor. Thus, “the claimant must show that the whole of the overrun is the consequence of the compensable events for which the proprietor is contractually responsible”.

84 As I have said, this is not the place to review all the authorities on the question of global claims. Nor is it necessary to review the other authorities which the parties cited to the adjudicator. It is sufficient to note that each party referred the adjudicator both to the decision of Byrne J in Kvaerner and to his Honour’s extra-curial analysis of the problem.

Analysis

85 The case put forward by H&M, in relation to claim 110, was that the whole of its additional hours, other than those specifically allocated to other claims, were compensable because, as a whole, they were the result of a number of specified acts of disruption, delay and prevention on the part of LORAC. H&M asserted that it bore no responsibility whatsoever for the overrun. H&M specifically disavowed any attempt to demonstrate a causal link between any particular act of disruption, delay or prevention on the one hand and any specific additional cost on the other.

86 As I have said, H&M submitted that its claim was a “modified total cost claim”. The claim was “modified” because some of the extra hours had been allocated to particular claims. In other words, where that happened, H&M did suggest a nexus between the particular event and the particular cost. What was left was a “total cost claim” precisely because H&M did not seek to demonstrate a causal nexus between particular breaches alleged and particular losses.

87 In those circumstances, it was incumbent on the adjudicator to deal with LORAC’s “defence”, as advanced in its payment schedule. That defence involved two elements:

(1) LORAC denied that it had any responsibility for the cost overrun; and

88 In circumstances where the claim was presented and treated as a form of global claim, it was not sufficient for the adjudicator to disregard the principles explained by Byrne J by saying, as he did at para 132, merely that:

I don’t see any point in using the label “global claim” or “total cost claim”. I don’t find the authorities cited by the respondent of any assistance.

89 The point of the labels was that they drew attention to the elements that needed to be proved, as Byrne J had summarised them in the manner already described. True it is that the analysis could be conducted without reference to the labels. But, under any name (or no name), it was one that the adjudicator was required to perform, in order to deal with the case that was presented to him. He did not do so.

90 In this case, the two sentences stating the adjudicator’s reasons for disregard LORAC’s submissions on “global claim” give no hint whatsoever that he considered them, in the sense that I have indicated at [38] and [39] above.

91 Had the adjudicator considered the principles, and dealt with them, he could have concluded (for example) that H&M’s claims were not global claims in the sense explained by Byrne J. Such a conclusion might have been incorrect. But if the adjudicator had undertaken that task, and had reached an incorrect conclusion, there would be no basis for LORAC to complain: at least, so long as the adjudicator indicated some reasoning process that led to the conclusion that I have postulated.

92 Equally, the adjudicator may have had reasons for saying that the authorities (which I note were cited not merely by LORAC, as he said, but also by H&M) were not relevant to the process. But simply stating the conclusion does not give the reason. In circumstances where both parties appeared to think that the authorities might be of some assistance (because each referred to them), the adjudicator was required at least to ask himself why this might be so, and to justify his view to the contrary.

93 The adjudicator did not, in his discussions of claims 110, 115 or 122, refer to any of the statutory declarations. To the extent that he referred to any of the material submitted by LORAC, it was to the SJA report. He appears to have treated that report as a statement of LORAC’s reasons for opposing the claim. He dealt with those reasons to the extent that he considered necessary. There is an inference available that the adjudicator did not refer to the substance of the statutory declarations (in so far as they were referrable to the payment schedule) because he had not come to grips with the legal issue to which they were relevant. Whatever the reason, the adjudicator simply did not consider, in connection with claims 110, 115 and 122, an important factual element of LORAC’s case.

94 The referee made only two references to the statutory declarations:

(1) in para 106, he said that they did not demonstrate to his satisfaction “that the alleged increase in planned resources was a result of the respondent’s [sic] own inefficiencies and time allocated to rectification of defective work”; and

95 It must be accepted that (as he said) the adjudicator did read the statutory declarations. He referred to them in numerous paragraphs of his determination. But he did not refer to them, or more accurately to their substance, in dealing with claims 110, 115 and 122, except in the dismissive and unreasoned way that I have noted. As I did in relation to global claims (see at [90] above), I conclude that the adjudicator’s brief and uninformative statement as to why he disregarded the relevant aspects of the statutory declarations does not show that he considered them, in the requisite sense. I shall indicate why, in my view, this is so.

96 I have set out at [47] above para 92 of the payment schedule. Subparagraphs (c), (d), (e), (f) and (h) were the subject of evidence in the statutory declarations.

97 As to (c): Mr Fazakerley gave evidence of structural steel defects in paras 98 to 105 of his statutory declaration, and Mr Cook gave evidence of the same matters in paras 73 to 89 of his.

98 As to (d): Mr Brady gave evidence of this in para 73 of his statutory declaration. It is difficult to understand how the adjudicator, had he considered that paragraph or the document referred to in it, could have come to the view that it was unpersuasive. That is because it referred to an email that Mr Brady had received from H&M’s project manager, Mr Lance Summergreene, on 7 August 2009, in which Mr Summergreene acknowledged “our lack of progress”, a “need to significantly increase productivity” and measures that needed to be taken “[i]n an effort to curb site absenteeism” so as to prevent impact on the project “by continual lost time”. The adjudicator’s failure even to refer to, let alone to deal with the implications of, what on its face was a clear admission supports the inference that he did not consider Mr Kennedy’s statutory declaration.

99 Further, as to (d): Mr Kennedy gave evidence of absenteeism on site, based both on his observations and on an analysis of H&M’s and other site records, in paras 71 to 83.

100 As to (f): Mr Brady gave evidence of this, although in an extremely conclusory way, in para 75(f). Mr Kennedy gave more detailed evidence, again based on analysis of H&M’s documents and other site records, in paras 57 to 62 of his declaration.

101 As to para (h): Mr Brady touched on this topic in para 61 of his declaration, and Mr Kennedy dealt with it in some detail, again based on an analysis of H&M’s documents, other site records and communications with H&M, in paras 26 to 53 of his declaration.

102 If the adjudicator had considered those paragraphs, by reference to the relevant aspects of the payments schedule (and I interpolate that Messrs Kennedy, Fazakerley and Cook made this task a little easier for him, because they provided subject headings that correlated to the relevant subparagraphs of para 92 of the payment schedule) he would have been required to consider whether he found them at all persuasive. I do not think that his generalised assertion of want of satisfaction, in para 106 of the determination, can be considered as a sufficient intellectual response to the issues of fact and, therefore, of causation that they raised.

103 Of course, the adjudicator could have considered the paragraphs in question (and, no doubt, others) and could have concluded, nonetheless, that he did not accept them. But he would have been obliged to give at least brief reasons for why this was so. To my mind, his failure to refer to the paragraphs in question (either on their own account or in conjunction with the payment schedule), coupled with the non-specific and conclusory nature of his statement of want of satisfaction, supports very strongly the inference that he did not consider the material, in the sense that he did not turn his mind to it and decide what (if anything) to make of it.

104 Equally, if the adjudicator had considered that factual material, he would have been required to consider (in the same sense) whether it engaged the principles summarised by Byrne J in his decision in Kvaerner and his article. Again, no doubt, it would have been open to the adjudicator to conclude, for some reason of fact or law or both, that the principles were not engaged, or were not relevant. But his dismissive rejection of the relevance of the principles, coupled with his lack of attention to the detail of the substantial material that LORAC provided, leads to the inference that he did not consider it in the relevant sense.

105 In this context, it is instructive to look at the reason that the adjudicator gave for not accepting the SJA report as an independent expert report (para 109 of the determination). That reason was that Mr Abbott stated on numerous occasions, in one or other form of words, “I am instructed that…” as to some particular factual proposition. The adjudicator drew from this that “SJA has not done an independent analysis of the project but essentially relied upon instructions”. It is however entirely appropriate for an expert to state the assumptions on which he or she relies in coming to the views that he or she expresses; indeed, an expert who does not do so is open to legitimate criticism.

106 Further, and more importantly, Mr Abbott stated what was the source of some at least (in reality, I think, the vast majority) of the assumptions that he made. He said in para 8(b) of his report, under the heading “Methodology”:

(b) I have also been provide the following Statutory Declarations dated 29 March 2010 which I have been instructed to assume as fact:

107 Even the most cursory reading of the SJA report should have revealed two things. The first is that, both as to the assumptions of fact that it stated and as to the conclusions that were drawn from those assumptions, it needed to be read in conjunction with the statutory declarations. The second is that those statutory declarations should be considered as part of the material on which LORAC replied.

108 The adjudicator could have disagreed with the opinions expressed by Mr Abbott, even if he had regarded Mr Abbott as an independent expert who had complied with his duty to state, among other things, assumptions of fact on which his opinion was based. But to take a dismissive view of the opinions, simply because they were based on assumptions of fact, indicates a lack of attention to the case that LORAC put.

109 In my view, the way in which the adjudicator dealt with the SJA report supports the drawing of the inference, as to want of proper consideration, that is available from the way that the adjudicator dealt with LORAC’s submissions in relation to global claims and the evidence contained in the statutory declarations on which it relied.

110 A further indication that the adjudicator misunderstood, or failed to deal with, the way the case was put can be found at para 136 of the determination. That paragraph reads as follows:

[136] It would have been open to the respondent to contend that the extent of the delay caused by the respondent was a different period to that claimed but I don’t accept that there was no delay or disruption and no additional costs incurred by the respondent as a consequence of the delay and disruption. The respondent has not provided a submission on the extent of the delay which I should find occurred if I find that the claimant was delayed by the respondent. The respondent has not provided a submission on the amount at which I should assess the claimant’s costs if I accept that the claimant is entitled to the claimant’s extra costs, I am only left with the claimant’s assessment. It is the way the respondent has approached this matter that makes it so difficult for me to arrive at any amount to be included in the progress other than the amount claimed.

111 If the adjudicator had read and understood the “authorities” cited by LORAC, he must have understood that the case that was put to him was that no causal nexus could be shown between any individual delaying or disrupting event and any individual loss of hours. Thus, on the common basis on which the claims in question were advanced and met, it was not open to either party to say that some lesser amount of delay should be assessed if some other view of causation were taken. Yet the adjudicator criticises LORAC for failing to undertake that which, both parties were telling him, could not be undertaken.

112 I accept, as I have said, that this is not an appeal from the adjudicator. I accept, too, that the adjudicator was required to assimilate a huge mass of material and to deal with it, to the extent of producing a reasoned conclusion, in a very short space of time. But even allowing for those matters, it is in my view clear, when this aspect of the determination is considered as a whole (and as I have said, I consider together all of the paragraphs dealing with each of the three global or total cost claims), that the adjudicator did not turn his mind to, and thus did not consider, those features of LORAC’s defence that I have mentioned.

113 It follows inevitably that the adjudicator denied natural justice to LORAC. It cannot be said that the denial was insignificant or immaterial. That is because, if the adjudicator had taken into consideration the nature of the defence LORAC was advancing and the material on which it relied in support of that defence (which, at least to the extent that I have summarised it, was properly to be regarded as submissions, including relevant documentation, in support of the payment claim), he may well have come to a different view. At the very least, he would have been required to explain either why the evidence on which LORAC relied did not persuade him that there were any non-compensable causes (or causes for which LORAC was not responsible) or why, if it did, that the principles as to global claims enunciated by Byrne J were, nonetheless, inapplicable.

114 Were it necessary to do so, I would conclude also that, for essentially the same reasons, the adjudicator failed to exercise his statutory powers in good faith. That is because he failed to consider - turn his mind to, and deal with on a reasoned basis - a significant element of LORAC’s defence to the payment claim.

Conclusion in relation to claims 110, 115 and 122

115 Those conclusions are sufficient to justify the grant of relief substantially to the effect sought by LORAC, and to order that the money that it paid into Court be refunded to it, together with interest. I do not propose to deal with the “bits and pieces” issues that it raised. I will however look briefly at the issues in relation to claim 118.

Claim 118

Introduction: the claim and the adjudicator’s reasoning

116 I have set out at [11] above the nature of the claim, and summarised the way the adjudicator dealt with it at [14] above. It is not necessary to give further details either of the claim or of the adjudicator’s reasoning.

The parties’ submissions

117 Mr Corsaro submitted, in essence, that the adjudicator had abdicated his statutory function, and had decided the amount payable on a wholly arbitrary basis. According to Mr Corsaro, this meant that the adjudicator did not consider the claim, or deal with it in good faith, in the sense that those requirements have been discussed above.

118 Further, Mr Corsaro submitted, the adjudicator did not tell the parties that he was going to proceed in the way that he did, and offer them an opportunity to be heard on it. That, according to Mr Corsaro, amounted to a denial of natural justice.

119 Finally, Mr Corsaro submitted, by dealing with the claim in the way that he did, the referee overlooked, and did not deal with, LORAC’s submissions on its individual constituents. That, he submitted, amounted to a further denial of natural justice.

120 In his submissions in reply, Mr Corsaro pointed out that, contrary to both the adjudicator’s approach and the submissions for H&M, there were more reasons for LORAC’s rejection of the claim (and the difference between the parties) other than that stated by the referee at para 213 (“Supervisor is included in mark up”). Mr Corsaro prepared a detailed analysis which showed that, of the 39 individual claims that were not treated as withdrawn or dealt with elsewhere by the adjudicator, eight had some other reason given for the difference between the parties. Mr Corsaro submitted that, in failing to deal with those individual grounds of dispute, the adjudicator had once again denied natural justice to LORAC, and failed to exercise his powers in good faith by giving appropriate consideration to the issues.

121 Mr Rudge submitted that the adjudicator had taken a common-sense approach to the problem, in circumstances where, as he had said, to deal with the disputes individually would have resulted in substantial cost to the parties (see para 225 of the determination). Mr Rudge submitted that this approach was justified, in particular, where there was a “common thread” between the individual claims.

122 In any event, Mr Rudge submitted, there was no material denial of natural justice. That was because, in the context of the subcontract amount and the value of payment claim 14, a difference of a little under $100,000.00, and the approach taken by the adjudicator, could not be regarded as material.

Analysis

123 I do not think that the adjudicator failed to consider the payment schedule, or that he dealt with it in an unreasoned way. He took a practical approach to what he saw as being a very small part of the overall dispute. He gave reasons for his decision. Those reasons may not have involved attention to the detail of the payment claim and payment schedule, but the adjudicator explained why this was so.

124 Further, in a practical sense, it cannot be said that the result obtained by the adjudicator is capricious. It involved taking a somewhat arbitrary approach of, as he saw it, splitting the difference between the parties.

125 I accept that there may have been some denial of procedural fairness, when the adjudicator dealt with the claim in the way that he did in a manner for which neither party had contended, without giving them notice of his intention to do so.

126 If that conclusion were to have any consequence, in terms of relief, it would require consideration of the concept of materiality. In circumstances where the point is moot, I do not think that any further examination of it is necessary; on the contrary, I think that to embark upon some extended consideration of the point, by way of obiter dictum, would not be consistent with s 56 of the Civil Procedure Act 2005 (NSW).

Discretion

127 There is no discretionary consideration relevant to the conclusion that I have reached in relation to claims 110, 115 and 122. Nor is there any point in considering, on a hypothetical basis, what might have been said in relation to the discretionary considerations relevant to claim 100, had I decided that there was a material denial of natural justice.

Conclusion and orders

128 For the reasons that I have given, I conclude that the adjudicator denied natural justice in a material way to LORAC, and failed to perform his statutory obligations in good faith in the requisite sense, in relation to claims 110, 115 and 122. As I have indicated at [115] above, it follows from those conclusions that LORAC is entitled to relief of the kind sought and the return of the money that it has paid into Court.

129 The parties did not address on costs. However, I see no reasons why costs should not follow the event in the circumstances of this case. I shall reserve liberty to apply in respect of costs, in case either active party has a different view.

130 I make the following declaration and orders:

(1) Declaration in terms of prayer 1 of the summons filed on 19 April 2010.

(2) Order the first defendant to pay the plaintiff’s costs of the proceedings.

(3) Otherwise, make no order as to costs.

(4) Order that the money paid into Court by the plaintiff, together with any interest thereon, be paid out to the plaintiff forthwith.

(5) Reserve liberty to apply on two days’ notice either in respect of costs or generally.

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Citations

Laing O'Rourke Australia Construction Pty Ltd v H&M Engineering & Construction Pty Ltd [2010] NSWSC 818

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CITATION:	Laing O'Rourke Australia Construction v H&M Engineering & Construction [2010] NSWSC 818
HEARING DATE(S):	14/07/10 and 15/07/10
JUDGMENT DATE :	28 July 2010
JURISDICTION:	Equity Division Technology & Construction List
JUDGMENT OF:	McDougall J at 1
DECISION:	Declaration as sought in summons together with costs and ancillary orders.
CATCHWORDS:	BUILDING AND ENGINEERING CONTRACTS – challenge to adjudication determination – where plaintiff contended that adjudicator did not consider its submissions and documentation in support of its payment schedule – whether adjudicator considered plaintiff’s submission that defendant’s claim was a global claim – whether adjudicator “considered” payment schedule, expert report and statutory declarations – where conclusions given without reasons – whether denial of natural justice – whether failure to exercise statutory functions in good faith – content of good faith requirement – content of obligation to consider – whether adjudication determination void – Building and Construction Industry Security of Payment Act 1999.
LEGISLATION CITED:	Building and Construction Industry Security of Payment Act 1999 (NSW) Civil Procedure Act 2005 (NSW) Uniform Civil Procedure Rules
CATEGORY:	Principal judgment
CASES CITED:	Brodyn Pty Ltd v Davenport (2004) 61 NSWLR 421 Halkat Electrical Contractors Pty Ltd v Holwood Holdings Pty Ltd [2007] NSWCA 32 Holmwood Holdings Pty Ltd v Halkat Electrical Contractors Pty Ltd [2005] NSWSC 1129 John Holland Construction Engineering Pty Ltd v Kvaerner RJ Brown Pty Ltd (1996) 13 BCL 262 Perform (NSW) Pty Ltd v MEV-AUS Pty Ltd [2009] NSWCA 157 Roberts v Hopwood [1925] AC 578 Tickner v Chapman (1995) 57 FCR 451 Timwin Construction v Façade Innovations [2005] NSWSC 548 Trysams Pty Ltd v Club Constructions (NSW) Pty Ltd [2007] NSWSC 941 Trysams Pty Limited v Club Constructions (NSW) Pty Ltd [2008] NSWSC 399 Watpac Constructions v Austin Group [2010] NSWSC 347
TEXTS CITED:	Australian Oxford Dictionary, Second Edition, 2004 International Construction Law Review
PARTIES:	Laing O'Rourke Australia Construction Pty Ltd (Plaintiff) H&M Engineering & Construction Pty Ltd (First Defendant) Philip Davenport (Second Defendant) Adjudicate Today Pty Ltd (Third Defendant)
FILE NUMBER(S):	SC 2010/95225
COUNSEL:	F C Corsaro SC (Plaintiff) M G Rudge SC / F P Hicks (Defendants)
SOLICITORS:	Colin Biggers & Paisley (Plaintiff) Ziman & Ziman (First Defendant) Adjudicate Today Pty Ltd (Second and Third Defendants)