Martinus Rail Pty Ltd v Qube RE Services (No.2) Pty Ltd

[2025] NSWCA 49

Court of Appeal

Supreme Court

New South Wales

Medium Neutral Citation:

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

Hearing dates:

4 and 5 December 2024

Date of orders:

2 April 2025

Decision date:

02 April 2025

Before:

Gleeson JA at [1];
Payne JA at [2];
Griffiths AJA at [306]

Decision:

(1)   Appeal allowed.

(2)   Cross-appeal dismissed.

(3)   Summons seeking leave to appeal dismissed.

(4)   Set aside:

(a)   orders 1, 2, and 3 of the orders made on 26 September 2024 and orders 1, 2, 3, 4 and 7 of the orders made on 15 November 2024 in proceedings 2024/286961; and

(b)   order 3 of the orders made on 26 September 2024 and order 2 of the orders made on 15 November 2024 in proceedings 2024/278963; and

(c)   order 2 of the orders made on 15 November 2024 in proceedings 2024/278984.

(5)   Vary order 6 of the orders made on 26 September 2024 (as varied by order 5 made on 15 November 2024) in proceedings 2024/286961 by deleting the words on and from the words “on terms” in that order.

(6)   Vacate order 7 of the orders made on 26 September 2024 (as varied by order 6 made on 15 November 2024) in proceedings 2024/286961 (interlocutory regime pending appeal).

(7)   Order that Qube’s summons filed 5 August 2024 in proceedings 2024/286961 is dismissed with costs.

(8)   Order Qube to pay Martinus’s costs of the appeal, the cross-appeal and the application for leave to appeal.

Catchwords:

BUILDING AND CONSTRUCTION – adjudication – judicial review – whether adjudication affected by jurisdictional error – principles of jurisdictional error under Building and Construction Industry Security of Payment Act 1999 (NSW)

ADMINISTRATIVE LAW – Judicial review – content of obligation “to consider” – whether failure specifically to refer to a matter reveals failure to consider that matter – scope of obligation to consider under Building and Construction Industry Security of Payment Act 1999 (NSW), s 22(2) – whether procedural unfairness established – whether decision legally unreasonable

Legislation Cited:

Building and Construction Industry Payments Act 2004 (Qld)

Building and Construction Industry Security of Payment Act 1999 (NSW) ss 3, 8, 13, 14, 15, 16, 17, 18, 19, 20, 21, 22, 25, 29, 32, 32A, 32B

Commercial Arbitration Act2010 (NSW)

Cases Cited:

Attorney-General for the States of New South Wales v Quin (1990) 170 CLR 1; [1990] HCA 21

Brodyn Pty Ltd t/as Time Cost and Quality v Davenport (2004) 61 NSWLR 42; [2004] NSWCA 394

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

Chase Oyster Bar Pty Ltd v Hamo Industries Pty Ltd (2010) 78 NSWLR 393; [2010] NSWCA 190

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

Downer Construction (Australia) Pty Ltd v Energy Australia (2007) 69 NSWLR 72; [2007] NSWCA 49

Dualcorp Pty Ltd v Remo Constructions Pty Ltd (2009) 74 NSWLR 190; [2009] NSWCA 69

Hossain v Minister for Immigration and Border Protection (2018) 264 CLR 123; [2018] HCA 34

House v the King (1936) 55 CLR 499

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

Iskra v MMIR Pty Ltd [2019] NSWCA 126

Ismail v Minister for Immigration, Citizenship and Multicultural Affairs (2024) 98 ALJR 196; [2024] HCA 2

John Holland Pty Ltd v Roads and Traffic Authority of New South Wales [2007] NSWCA 19

Joye Group Pty Ltd v Cemco Projects Pty Ltd [2021] NSWCA 211

Kennedy Civil Contracting Pty Ltd (Administrators Appointed) v Richard Crookes Construction Pty Ltd; In the matter of Kennedy Civil Contracting Pty Ltd [2023] NSWSC 99

Kruger v The Commonwealth (1997) 190 CLR 1; [1997] HCA 27

LPDT v Minister for Immigration, Citizenship, Migrant Services and Multicultural Affairs (2024) 98 ALJR 610; [2024] HCA 12

M1 v R1 [2024] NSWCA 256

Martinus Rail 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 (No 3) [2024] NSWSC 1483

Martinus Rail Pty Ltd v Qube RE Services (No 2) Pty Ltd [2023] NSWSC 1550

Minister for Home Affairs v DUA16 (2020) 271 CLR 550; [2020] HCA 46

Minister for Immigration and Border Protection v SZVFW (2018) 264 CLR 541; [2018] HCA 30

Minister for Immigration and Citizenship v Li (2013) 249 CLR 332; [2013] HCA 18

Minister for Immigration and Citizenship v SZIAI (2009) 83 ALJR 1123; [2009] HCA 39

Minister for Immigration and Multicultural Affairs v Eshetu (1999) 197 CLR 611; [1999] HCA 21

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

R J Neller Building Pty Ltd v Ainsworth [2009] 1 Qd R 390; [2008] QCA 397

Secretary, Department of Education v Dawking [2024] NSWCA 4

Seymour Whyte Constructions Pty Ltd v Ostwald Bros Pty Ltd (in liq) (2019) 99 NSWLR 317; [2019] NSWCA 11

TFM Epping Land Pty Ltd v Decon Australia Pty Ltd [2020] NSWCA 118

Transgrid v Siemens Ltd (2004) 61 NSWLR 521; [2004] NSWCA 395

Texts Cited:

M Aronson, M Groves and G Weeks, Judicial Review of Administrative Action and Government Liability (Thomson Reuters, 6th ed, 2017)

Category:

Principal judgment

Parties:

Martinus Rail Pty Ltd (appellant)
Qube RE Services (No.2) Pty Ltd (first respondent)
John Tuhtan (second respondent)

Representation:

Counsel:
S Robertson SC, D Hume and A R Langshaw (appellant)
J Giles SC, T Boyle, and J Bridgett (first respondent)

Solicitors:
Maddocks Lawyers (appellant)
King & Wood Mallesons (first respondent)

File Number(s):

2024/00386902
2024/00386888
2024/00362269

Publication restriction:

Nil

 Decision under appeal 

Court or tribunal:

Supreme Court of New South Wales

Jurisdiction:

Equity – Commercial List

Citation:

Martinus Rail 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 (No 3) [2024] NSWSC 1483

Date of Decision:

30 September 2024
20 November 2024

Before:

Parker J

File Number(s):

2024/278963; 2024/278984; 2024/286962
2024/286961

HEADNOTE

[This headnote is not to be read as part of the judgment]

These proceedings arose out of two adjudications under the Building and Construction Industry Security of Payment Act 1999 (NSW) (“SOP Act”) involving two separate contracts between Qube RE Services (No.2) Pty Ltd (“Qube”) and a sub-contractor Martinus Rail Pty Ltd (“Martinus”). The primary judge held that each of the adjudications was, in part, affected by jurisdictional error and set aside the affected parts of the adjudications.

Martinus appealed. Qube cross-appealed and filed a notice of contention. The essential issues raised by Matinus’s appeal and Qube’s notice of contention and cross-appeal were whether the adjudicator’s decisions with respect to a number of issues were affected by jurisdictional error either because of failure to consider submissions “duly made”, a breach of procedural fairness or legal unreasonableness.

In considering complaints of jurisdictional error, the Court first addressed the identification of jurisdictional error under the SOP Act.

The Court applied those principles to address the issues raised by the notice of appeal, the notice of contention and the notice of cross-appeal.

Finally, there was an issue about whether leave to appeal should be granted from the primary judge’s decision that Qube was not entitled to a stay of the adjudicator’s decision pending final determination of a commercial arbitration.

The Court (per Payne JA, Gleeson JA agreeing at [1] and Griffiths AJA agreeing at [306]), allowing the appeal and dismissing the cross-appeal, held:

On the identification of jurisdictional error under the SOP Act:

1. The policy of the SOP Act is to ensure that a contractor who carries out construction work for a principal receives progress payments for carrying out that work. The risk that the contractor might not be able to refund moneys ultimately found to be due to the principal after a successful determination of the merits of the claim under the contract is a risk which is assigned to the principal. The clear policy of the SOP Act is to “pay now, fight later” to ensure cashflow to contractors, even if the contract has been terminated: at [3], [8], [292]-[294], [299], [303]. The SOP Act creates an entitlement that is to be determined informally, summarily and quickly and so the Court will not readily find jurisdictional error: at [45], [57], [68], [117], [237], [292]-[293]. This is so, even where the quantum of the claim is large and even where the adjudicator obtains an extension of time: at [45], [68].

   Probuild Constructions (Aust) Pty Ltd v Shade Systems Pty Ltd (2018) 264 CLR 1; [2018] HCA 4; R J Neller Building Pty Ltd v Ainsworth [2009] 1 Qd R 390; [2008] QCA 397; Seymour Whyte Constructions Pty Ltd v Ostwald Bros Pty Ltd (in liq) (2019) 99 NSWLR 317; [2019] NSWCA 11 applied.

2. The failure to identify a particular claim or response in reasons will not of itself demonstrate that the adjudicator failed to consider it. Even assuming the submission had been misunderstood, the facts mistaken or the law wrongly identified, that would explain absence from the reasons of something expected to be addressed but not lack of consideration. The duty to consider a submission is different from a duty to deal with it correctly, whether in law or in fact: at [67], [69], [73], [101], [148], [202]-[203], [211]-[213], [237]. Similarly, only if there has been a substantial denial of procedural fairness by an adjudicator will there be jurisdictional error under the SOP Act: at [117]

   Probuild Constructions (Aust) Pty Ltd v Shade Systems Pty Ltd (2018) 264 CLR 1; [2018] HCA 4; Chase Oyster Bar Pty Ltd v Hamo Industries Pty Ltd (2010) 78 NSWLR 393; [2010] NSWCA 190; Ceerose Pty Ltd v A-Civil Aust Pty Ltd (2023) 112 NSWLR 225; [2023] NSWCA 215; Icon Co (NSW) Pty Ltd v Australia Avenue Developments Pty Ltd [2018] NSWCA 339; Brodyn Pty Ltd t/as Time Cost and Quality v Davenport (2004) 61 NSWLR 42; [2004] NSWCA 394; Downer Construction (Australia) Pty Ltd v Energy Australia (2007) 69 NSWLR 72; [2007] NSWCA 49; Demex Pty Ltd v McNab Building Services Pty Ltd (2023) 113 NSWLR 282; [2023] NSWCA 261 applied.

3. It is for the adjudicator to determine the content and scope of the Payment Claim and the Payment Schedule, including the scope and content of the dispute between the parties: at [60]-[64], [80], [174], [186]-[187], [219]-[220], [234], [274]. It is for the adjudicator to determine the relationship between the detail contained in the Adjudication Response and the reason for non-payment provided in the Payment Schedule: at [104]. The adjudicator’s decision is valid even if he misconstrued the contract: [99], [107], [111]-[112], [131], [144], [160]-[161]. Findings of fact are matters for the adjudicator: at [190]. It is for the adjudicator to determine whether a submission has been “duly made”: at [65], [228], [274]. The weight to be accorded to a submission is a matter for the adjudicator: at [93], [95]. Even assuming that there was no reference to the matters identified by Qube in the adjudicator’s decision, it was not established that the adjudicator failed to consider any submission he regarded as “duly made”: at [97], [109].

   John Holland Pty Ltd v Roads and Traffic Authority of New South Wales [2007] NSWCA 19; Downer Construction (Australia) Pty Ltd v Energy Australia (2007) 69 NSWLR 72; [2007] NSWCA 49; Joye Group Pty Ltd v Cemco Projects Pty Ltd [2021] NSWCA 211; Ceerose Pty Ltd v A-Civil Aust Pty Ltd (2023) 112 NSWLR 225; [2023] NSWCA 215; Icon Co (NSW) Pty Ltd v Australia Avenue Developments Pty Ltd [2018] NSWCA 339; Iskra v MMIR Pty Ltd [2019] NSWCA 126 applied.

4. Failure to comply with s 22(2) is not helpfully characterised as procedural unfairness, but rather as failure to comply with a mandatory statutory obligation, the scope of which will be identified on quite a different basis: at [72].

5. The principles of judicial restraint in finding jurisdictional error on the basis of legal unreasonableness apply even more stringently in addressing an adjudicator’s decision made under the SOP Act: at [75]-[80], [129]

   Minister for Immigration and Citizenship v Li (2013) 249 CLR 332; [2013] HCA 18; Attorney-General for the States of New South Wales v Quin (1990) 170 CLR 1; [1990] HCA 21; Kruger v The Commonwealth (1997) 190 CLR 1; [1997] HCA 27; Minister for Immigration and Multicultural Affairs v Eshetu (1999) 197 CLR 611; [1999] HCA 21; Minister for Immigration and Citizenship v SZIAI (2009) 83 ALJR 1123; [2009] HCA 39; Ismail v Minister for Immigration, Citizenship and Multicultural Affairs (2024) 98 ALJR 196; [2024] HCA 2; Minister for Home Affairs v DUA16 (2020) 271 CLR 550; [2020] HCA 46; Minister for Immigration and Border Protection v SZVFW (2018) 264 CLR 541; [2018] HCA 30 applied.

Whether the adjudicator failed to consider submissions made by Qube in the Adjudication Response in relation to claim CN-420:

1. The adjudicator dealt with all of the reasons advanced by Qube in its Payment Schedule for failing to pay Martinus’ claim and did not fall into jurisdictional error. Qube could not include in its Adjudication Response any reasons for withholding payment unless those reasons have already been included in its Payment Schedule. The adjudicator was under no obligation to explain why he did not expressly deal with every argument contained in the Adjudication Response: at [92]. [102]-[104], [108]-[110].

2. In any event, the adjudicator did consider the relevant submissions: at [97]-[114].

Whether the adjudicator failed to consider submissions made by Qube in relation to an extension of time claim:

1. No breach of the obligation to consider submissions “duly made” pursuant to s 22(2) of the SOP Act was established. The adjudicator dealt with Qube’s submissions to the extent necessary to determine the claim: at [120]-[128].

Whether the adjudicator had fallen into jurisdictional error by failing to consider Qube’s submissions in relation to the “Directions Show Cause Notice”:

1. As Qube conceded, the primary judge proceeded from the incorrect understanding about the Qube submissions allegedly not taken into account: at [134], [146].

Whether the adjudicator failed to consider Qube’s alleged entitlement to terminate the contract “for cause” at common law:

1. This point could not be agitated in absence of a notice of contention: at [151]-[153]. In any case, the submissions were considered by the adjudicator to the extent required: at [154].

Whether the adjudicator’s finding that the “Program Show Cause Notices” lacked sufficient detail was affected by procedural unfairness:

1. There was no jurisdictional error. It was obvious that if Qube wished to rely on the notices, it would need to adequately state the alleged breaches. This was the subject of complaint by Martinus. It was not procedurally unfair for the adjudicator to come to the conclusion that the notices lacked sufficient detail: at [156]-[157].

Whether the adjudicator, in construing the contract, interpreted the contract in a legally unreasonable way:

1. Even if the construction of the contract adopted by the adjudicator was incorrect, it was not legally unreasonable: at [158]

Whether the adjudicator’s conclusion that Martinus was entitled to apply a margin of 45.31% to works consequential on Qube’s termination was legally unreasonable:

1. The adjudicator was entitled to characterise the work as a variation to the initial scope caused by Qube’s conduct. There was no jurisdictional error: at [161].

Whether the adjudicator’s conclusion that the appellant was entitled to the costs of “unfixed materials” was legally unreasonable because it effectively allowed double payment when considered alongside amounts awarded premised on the supply and installation of unfixed materials:

1. The conclusion reached by the adjudicator was not legally unreasonable. The adjudicator gave reasons why Martinus was entitled to the cost of the supply of unfixed materials and, in any event, the adjudicator was entitled to conclude that it followed from Qube’s own assessment that there were materials which needed to be taken from the stockpile post-termination: at [162]-[163].

Whether the adjudicator’s decision with respect to the bank guarantees was affected by jurisdictional error:

1. There was no jurisdictional error. By adding the sum of the bank guarantee to the adjusted contract sum, Qube put in issue the value of the work. The “dispute propounded by the parties” which the adjudicator was empowered by the SOP Act to determine was that which arises after both the Payment Claim and the Payment Schedule have been considered. The meaning of the Payment Claim and the Payment Schedule were matters falling within the jurisdiction of the adjudicator: at [173]-[175]

Whether the adjudicator failed to consider submissions duly made by Qube with respect to the bank guarantees:

1. There was no jurisdictional error. It was an impermissible incursion into the role of the adjudicator for the primary judge to construe the Payment Schedule as having “only set off” $463,703.76: at [176]

Whether the adjudicator failed to address the dispute between the parties with respect to “preliminaries” or otherwise decided on a basis that was procedurally unfair or legally unreasonable:

1. There was no jurisdictional error. The primary judge erred in treating the scope of the “dispute” between the parties as if it was a matter for objective determination by the Court. The interpretation of the Payment Schedule was a matter for the adjudicator: at [186]-[188]

2. The adjudicator’s interpretation of the Payment Claim and Payment Schedule was clearly open to him. It was a decision far removed from one affected by jurisdictional error as being legally unreasonable: at [195]

3. It was not a denial of procedural fairness for the adjudicator to act upon his understanding of the law and rely on binding authority of the Court of Appeal: at [196]

Whether the adjudicator’s decision was legally unreasonable due to an arithmetical error:

1. There was no jurisdictional error. The mathematical error was incorrectly characterised as an absence of a “reason”, when, at most, it was an incorrect reason. A mathematical computation is a finding of fact: at [190]-[192].

Whether the adjudicator failed to consider submissions made by Qube with respect to claim CN-421:

1. It was permissible for the adjudicator to say that Qube had not provided an explanation. It was not a jurisdictional error to fail to refer to a document buried in Qube’s Payment Schedule, because it was within the adjudicator’s jurisdiction to determine that it was directed to a different issue. Even if the adjudicator misunderstood the submission, that does not mean that it was not considered: at [200]-[204].

Whether the adjudicator failed to consider submissions made by Qube in the Payment Schedule as to signal design management:

1. There was no failure to consider Qube’s submission. Even if the adjudicator did not appreciate a subtlety in the submissions, that is not a jurisdictional error: at [205]-[215].

Whether the adjudicator failed to consider submissions made by Qube in the Adjudication Response as to wet weather costs:

1. It was a matter for the adjudicator to construe Qube’s Payment Schedule and, having construed it, to form a view as to what (if any) valid reasons for withholding payment were given by Qube in that Payment Schedule. If the adjudicator was of the view that no valid reasons for withholding payment were given in the Payment Schedule, the adjudicator was obliged to decline to consider any further submissions on the issue contained in the Adjudication Response: at [216]-[221].

Whether the adjudicator was required to correct Qube’s Payment Schedule lest he be held to have acted in a legally unreasonable or procedurally unfair way:

1. The adjudicator’s decision was not legally unreasonable. The adjudicator was not required to fix mistakes made by Qube in its Payment Schedule. There is no procedural unfairness in reading Qube’s Payment Schedule in the terms in which it was expressed: at [222]-[225], [230].

Whether the adjudicator failed to consider submissions duly made by Qube in the Adjudication Response as to storm water pit design:

1. Having concluded that Qube’s Payment Schedule did not give valid reasons because it responded to the wrong claim, the adjudicator did not fall into jurisdictional error: at [226]-[229].

Whether the adjudicator fell into jurisdictional error because he found the Payment Schedule was “incomprehensible”:

1. Qube was free to adopt whatever methodology and format it wished to adopt in its Payment Schedule responding to Martinus’s Payment Claim. However, having chosen what was fairly described as a confusing method, it open to the adjudicator to find that it was not comprehensible. The adjudicator’s interpretation of the Payment Schedule and conclusion that it did not relevantly set out reasons on the relevant matters was open to him. There was no denial of procedural fairness, nor was it legally unreasonable. There is a risk with this type of argument that claims about failure to address matters can shade into claims about arguments being resolved incorrectly because misunderstood, or not really grappled with, which tends towards merits or appellate review: at [244]-[288].

   M1 v R1 [2024] NSWCA 256 applied.

Whether leave to appeal should be granted from the primary judge’s decision that Qube was not entitled to a stay of the adjudicator’s decision pending final determination of a commercial arbitration:

1. Leave to appeal was refused. The grant of a stay until the end of the arbitration would be contrary to the statutory purpose of the SOP Act. There is a heavy burden on a party who seeks injunctive relief or a stay pending the outcome of proceedings contemplated by s 32 of the SOP Act on the basis that a payment may become unrecoverable due to the possible or even likely insolvency of the payee at a later date: at [8], [290]-[304].

   Probuild Constructions (Aust) Pty Ltd v Shade Systems Pty Ltd (2018) 264 CLR 1; [2018] HCA 4; R J Neller Building Pty Ltd v Ainsworth [2009] 1 Qd R 390; [2008] QCA 397; Kennedy Civil Contracting Pty Ltd (Administrators Appointed) v Richard Crookes Construction Pty Ltd; In the matter of Kennedy Civil Contracting Pty Ltd [2023] NSWSC 99; Colbran, in the matter of PBS Building Pty Limited (Administrators Appointed) [2023] FCA 276 applied.

JUDGMENT

1. GLEESON JA: I agree with Payne JA.

2. PAYNE JA: These proceedings arose out of two adjudications under the Building and Construction Industry Security of Payment Act 1999 (NSW) (“SOP Act”) involving two separate contracts between the same parties. The adjudications obliged the head contractor (Qube RE Services (No.2) Pty Ltd (“Qube”)) to pay $71 million in total to the sub-contractor (Martinus Rail Pty Ltd (“Martinus”)). The proceedings before the primary judge, Parker J, involved a complaint by Qube that each of the adjudications was affected by jurisdictional errors. The primary judge upheld a number of complaints of jurisdictional error and set aside the affected parts of the adjudications, relying upon s 32A of the SOP Act. Martinus appealed against the findings of jurisdictional error. Qube cross-appealed against the findings of the primary judge where his Honour had not found jurisdictional error.

Overview

3. As I will explain in detail, the policy of the SOP Act is to ensure that a contractor who carries out construction work for a principal receives progress payments for carrying out that work. The risk that the contractor might not be able to refund moneys ultimately found to be due to the principal after a successful action under the contract is a risk which is assigned to the principal. The SOP Act creates an entitlement that is to be determined informally, summarily and quickly, and then summarily enforced without prejudice to the rights of both parties to the construction contract which can be determined in due course: Probuild Constructions (Aust) Pty Ltd v Shade Systems Pty Ltd (2018) 264 CLR 1; [2018] HCA 4 at [44] (Kiefel CJ, Bell Keane, Nettle and Gordon JJ); R J Neller Building Pty Ltd v Ainsworth [2009] 1 Qd R 390; [2008] QCA 397 at [39]-[40] per Keane JA (discussing the equivalent Queensland statute, the Building and Construction Industry Payments Act 2004 (Qld)). It was confirmed by the High Court in Shade Systems that judicial review of an adjudicator’s determination is available, but only for jurisdictional error on the part of the adjudicator.

4. There was no debate in the present case about the correct identification by the primary judge of the legal principles to be applied in finding an adjudication under the SOP Act to be affected by jurisdictional error. What was controversial was the application of those principles and, in particular, the inferences the primary judge drew about the internal reasoning processes of the adjudicator.

5. The adjudicator in the present case was faced in this case with over 15,700 pages of material. Over 5000 pages were contained in Qube’s Adjudication Response. The adjudicator expressly stated that he had considered Qube’s Payment Schedule together with all submissions, including relevant documentation, that had been properly made by Qube in support of the Payment Schedule: at [145]. The adjudicator returned to this issue, and repeated that in making his adjudication he had considered all submissions that, in his view, had been duly made by Qube:

[194]   I have then considered each amount claimed, the reasons for withholding payment, the calculation of quantum as proffered by the Claimant and the Respondent, the parties’ rights and obligations under the Contract, submissions properly made and determined each disputed claim separately.

6. Despite the adjudicator’s 550 pages of reasons explaining how the adjudicator had taken Qube’s submissions and relevant documentation into account, Qube advanced challenges to 37 separate components of the adjudications as comprising jurisdictional error, on the principal basis that the adjudicator had “failed to consider” some matter contained in Qube’s Adjudication Response.

7. The primary judge inferred that the adjudicator had failed to consider a number of matters contained in Qube’s Adjudication Response and thus had fallen into jurisdictional error for the purposes of s 22(2) of the SOP Act. As I will explain in detail, I have concluded that Qube failed to prove that the adjudicator failed to consider the matters complained about by Qube for the purposes of the SOP Act. Further, I am not satisfied that any of the grounds of Qube’s notice of contention are made out nor that Qube has established any of the grounds of its cross-appeal. It follows that the appeal should be allowed and the cross-appeal dismissed.

8. Finally, the primary judge refused to stay the orders that his Honour made until the determination of the underlying arbitration proceedings, which have now been commenced. His Honour was correct to do so. The clear policy of the SOP Act is to “pay now, fight later”. The grant of a stay until the end of the arbitration would be contrary to the statutory purpose of the SOP Act. The primary judge was correct to refuse to grant a stay until the determination of the underlying arbitration proceedings. Leave to appeal that order should be refused.

Summary of the dispute

9. The contracts in question related to an infrastructure development in Moorebank known as the Moorebank Intermodal Terminal Project which is being carried out by a Commonwealth government business enterprise named National Intermodal. The contract between National Intermodal and Qube is known as the “Development and Operation Deed”.

10. The two sub-contracts at the heart of this case between Qube and Martinus were both dated July 2022. They are styled “Interstate Terminal Works Contract” dated 8 July 2022 (“INTS Contract”) and “Interstate Rail Access Works Contract” of the same date (“ISRA Contract”).

11. At the heart of the dispute are delays which occurred on the project. Martinus claimed that it was not responsible for the delays and that Qube was liable for additional costs caused by those delays. Martinus claimed that necessary designs were delivered late or were otherwise inadequate and that Qube failed to give access to the site, in some cases by more than a hundred days after the originally scheduled date, causing Martinus to incur substantial additional costs.

12. The administration of the contracts took place under the direction of a superintendent appointed by Qube (the “Superintendent”), Mr Marshall of Rail Planning Services Pty Limited.

13. Martinus’s Payment Claims under the SOP Act for the period up to 31 May 2023 were determined in August 2023 by an adjudicator, Mr Stapleton. The adjudicated amount in favour of Martinus was $11.1 million. That amount was paid by Qube and is not the subject of dispute in these proceedings.

14. In August 2023, Qube issued formal notices invoking the show cause procedure required for termination of the contracts. On 25 September 2023, Qube issued formal notices of termination for cause. On the same date, Qube issued formal notices of termination for convenience to take effect if the terminations for cause proved to be invalid. It is common ground that the contracts were terminated on 25 September 2023.

15. Martinus’s Payment Claims under the contracts for the period up to 31 August 2023 were determined in November 2023 by Mr Stapleton. The adjudicated amount in favour of Martinus was $4.6 million. That amount was also paid by Qube and is not the subject of dispute in these proceedings.

16. In early December 2023, Qube issued formal notices of dispute under the dispute resolution clauses of the contracts. Qube alleged that it was entitled to substantial damages from Martinus for breach of contract, and to reimbursement of moneys which Qube said should not have been allowed in the adjudications before Mr Stapleton.

17. Following the issue of the notices of dispute, Martinus applied under the Commercial Arbitration Act2010 (NSW) for an injunction restraining Qube from calling on the bank guarantees provided as security for Martinus’s obligations under the contracts. Rees J dismissed the application: Martinus Rail Pty Ltd v Qube RE Services (No 2) Pty Ltd [2023] NSWSC 1550. Although the injunction was refused, Qube did not call on the bank guarantees until 8 February 2024.

18. The Payment Claims which resulted in the proceedings below were made on 8 February 2024, in ignorance of the call by Qube on the same day of the bank guarantees. On 22 February 2024, Qube lodged a Payment Schedule in relation to each Payment Claim. Qube alleged that under each contract it was owed money by Martinus. The scheduled amounts were credits in favour of Qube of $1.4 million for the INTS Contract and $1.4 million for the ISRA Contract.

19. Qube elected not to put its Payment Schedules in a format which corresponded with the items in Martinus’s Payment Claims. Instead, Qube adopted its own methodology and format. This made it difficult to understand Qube’s position on a number of issues.

20. On 7 March 2024, Martinus made Adjudication Applications seeking payment of $104.1 million under the INTS Contract and $33.3 million under the ISRA Contract. Martinus complained that the form of Qube’s Payment Schedules made it difficult to understand what Qube was saying. The Adjudication Applications were referred to another adjudicator, Mr Tuhtan. On 15 March 2024, Qube provided its Adjudication Response. Qube said then, and repeated in this Court, that the Payment Schedules were not difficult to understand.

21. The adjudicator ultimately concluded that the Payment Schedule was difficult to comprehend, and that Qube had not explained its reasons for rejecting each of Martinus’s claims. As I will explain, that conclusion was not only open to the adjudicator, but was clearly correct.

22. The adjudication proceedings before Mr Tuhtan were complex, protracted and costly. Mr Tuhtan delivered his Adjudication Determinations on 22 July 2024. He determined that payments should be made by Qube of $63.1 million under the INTS Contract and $7.1 million under the ISRA Contract. He also decided that Qube should pay the whole of the costs of the adjudications. The adjudicator’s fees totalled $543,000 which was split $209,000 for the ISRA adjudication and $334,000 for the INTS adjudication.

23. The dispute resolution clause in the contracts provided for an elaborate dispute resolution process. On 2 February 2024, Qube gave notices pursuant to the dispute resolution procedure under the contracts escalating the dispute to executive level. A mediation took place unsuccessfully and it seems there were no further attempts at resolution. On 27 March 2024, while the adjudication proceedings were pending, Qube issued formal notices of referral to arbitration under the contracts. On 26 July 2024, four days after delivery of the adjudicator’s determinations, Qube served notices of arbitration under the rules of the Resolution Institute, the body responsible for the arbitration under the contracts.

24. Under the SOP Act the time for payment of the adjudicated amounts was 29 July 2024. Qube did not pay the adjudicated amounts by the due date and the commencement of the proceedings below followed soon after.

Primary judgments

25. There were three proceedings before the primary judge. The first two proceedings (2024/278963 and 2024/278984) were commenced by Martinus to enforce payment of the adjudicated amounts under the SOP Act (which I will call “the first and second enforcement proceedings”).

26. Adjudication certificates were filed on 30 July commencing the enforcement proceedings. On 31 July 2024, judgments were entered, pursuant to s 25 of the SOP Act. For the INTS Contract the judgment amount was $66.087 million. For the ISRA Contract the judgment amount was $7.595 million.

27. On 5 August 2024, Qube filed its own proceedings (2024/286961) seeking to set aside the determinations on the grounds of alleged jurisdictional errors on the part of the adjudicator.

28. On 9 August 2024, the following orders of remaining relevance were made by Ball J:

Interlocutory regime

1. ORDER that execution of the judgments entered in these proceedings is stayed until further order provided that:

1. By 5.00pm Friday, 9 August 2024 Qube pays the sum of $4,010,108.43 in cleared funds to the Judgment creditor (“Martinus”).

2. By 5.00pm Tuesday, 13 August 2024 Qube provides to the Associate to Ball J:

1. an unconditional bank guarantee in favour of Martinus issued by Westpac Banking Corporation in the sum of $62,707,365.90; and

2. an unconditional bank guarantee in favour of Martinus issued by Westpac Banking Corporation in the sum of $7,671,781.73.

2. ORDER that immediately on Qube’s compliance with order 1b, the bank guarantees provided to the court on 7 August 2024 are to be released to Qube.

3. ORDER that the stay of execution contained in order 1 ceases upon the end of the Hearing referred to in order 4 below.

Evidence and Hearing

4. ORDER that:

1. proceedings 2024/286961 (“Judicial Review Proceedings”);

2. paragraph 1 of the amended notices of motion filed by Qube on 2 August 2024 in proceedings 2024/278963 and 2024/278984 (“Grosvenor Applications”); and

3. paragraph 1 of the notice of motion filed by Martinus on 31 July 2024 in proceedings 2024/278963 and 2024/278984 (“Garnishee Applications”),

are set down for hearing on 4 and 5 September 2024 (“Hearing”).

….

29. As envisaged by Ball J’s orders, the primary judge heard the proceedings together on 4, 5 and 6 September 2024 and promptly delivered reasons and made orders on 26 September 2024. The orders made in the judicial review proceedings were:

1. Order pursuant to s 32A of the Building and Construction Industry Security of Payment Act 1999 (NSW):

1. that the adjudication determination dated 22 July 2024 (ABCDRS NSW 586) (INTS Determination) is set aside in the amount over and above $22,703,118.54 including GST and interest;

2. that the said adjudication determination be confirmed as the Adjudicated Amount of $22,703,118.54 including GST and interest.

2. Order that determination of the Second Defendant (Adjudicator) made on 22 July 2024 to the effect that the Plaintiff is liable for the whole of the Adjudicator’s fees and expenses for adjudicating the INTS Determination is set aside.

3. Order that the judgment entered in proceedings 2024/278963 on 31 July 2024 is varied by changing the “Claim amount” to $22,925,489.49 and the “TOTAL” amount to $22,925,711.49.

4. Reserve the question of what further or other orders, if any, should be made in respect of the components of the claim not resolved by the Court’s principal reasons.

5. Direct the Plaintiff, by 8 October 2024, to serve on the Defendant and deliver to the Associate to Parker J a notice of all components of the claim, if any, which it does not consider to have been resolved by the Court’s principal reasons.

6. Order that the unconditional bank guarantees provided to the Court in compliance with order 1(b) of the orders made on 9 August 2024 be provided to the Plaintiff on terms that the First Defendant may not make a demand under the unconditional bank guarantee provided to the Court in compliance with order 1(b)(ii) of the orders made on 9 August 2024 in an amount exceeding the amount owing under the judgment referred to in order 3 of these orders as amended by that order.

7. Upon the Plaintiff:

1. giving the usual undertaking as to damages; and

2. Qube continuing to pay one month’s interest at a daily rate of $16,942.76 on the last day of each month thereafter until this stay is dissolved or any appeal is determined,

order that:

3. order 6 of these orders is stayed;

4. the First Defendant is restrained from taking any steps by way of enforcement of the judgment referred to in order 3 of these orders (being the varied judgment entered in proceedings 2024/278983) or the judgment entered in proceedings 2024/278984,

until further order of this Court in this Division or by the Court of Appeal.

8. Costs be reserved.

30. The orders made in the first enforcement proceedings were:

1. Order that the amended notice of motion filed 2 August 2024 is dismissed.

2. Costs be reserved.

3. Order that the judgment entered in these proceedings on 31 July 2024 is varied by changing the “Claim amount” to $22,925,489.49 and the “TOTAL” amount to $22,925,711.49.

31. The orders made in the second enforcement proceedings were:

1. Order that the amended notice of motion filed 2 August 2024 is dismissed.

2. Costs be reserved.

32. As I have said, the primary judge’s first judgment was delivered on 30 September 2024: Martinus Rail Pty Ltd v Qube RE Services (No 2) Pty Ltd (No 2) [2024] NSWSC 1223 (the “September judgment”). This decision did not, however, deal with all of the claims made in the proceedings. Following a further hearing on 18 and 21 October 2024, the remaining claims were determined on 15 November in Martinus Rail Pty Ltd v Qube RE Services (No 2) Pty Ltd (No 3) [2024] NSWSC 1483 (the “November judgment”).

33. The orders made in the November judgment in the judicial review proceedings were:

INTS Determination

1. Order pursuant to s 32A of the Building and Construction Industry Security of Payment Act 1999 (NSW):

1. that the adjudication determination dated 22 July 2024 (ABCDRS NSW 586) (INTS Determination) is set aside in the amount over and above $17,247,488.19 including GST;

2. that the said adjudication determination be confirmed as the Adjudicated Amount of $17,247,488.19 including GST.

2. Order that the judgment entered in proceedings 2024/278963 on 31 July 2024 is varied by changing the ”Claim amount” to $18,165,684.76 and the ”TOTAL” amount to $18,165,684.76.

ISRA Determination

3. Order pursuant to s 32A of the Building and Construction Industry Security of Payment Act 1999 (NSW):

1. that the adjudication determination dated 22 July 2024 (ABCDRS NSW 585) (ISRA Determination) is set aside in the amount over and above $6,936,389.69 including GST;

2. that the said adjudication determination be confirmed as the Adjudicated Amount of $6,936,389.69 including GST.

4. Order that the judgment entered in proceedings 2024/278984 on 31 July 2024 is varied by changing the ”Claim amount” to $7,447,619.38 and the ”TOTAL” amount to $7,447,619.38.

Bank Guarantees

5. Vary order 6 made on 26 September 2024 such that it reads:

Order that the unconditional bank guarantees provided to the Court in compliance with order 1(b) of the orders made on 9 August 2024 be provided to the First Defendant on terms that:

1. the First Defendant may not make a demand under the unconditional bank guarantee provided to the Court in compliance with order 1(b)(i) of the orders made on 9 August 2024 in an amount exceeding the amount owing under the judgment entered in proceedings 2024/278963 as varied; and

2. the First Defendant may not make a demand under the unconditional bank guarantee provided to the Court in compliance with order 1(b)(ii) of the orders made on 9 August 2024 in an amount exceeding the amount owing under the judgment entered in proceedings 2024/278984 as varied.

Stay

6. Vary order 7 made on 26 September 2024 such that it reads: Upon the Plaintiff:

1. giving the usual undertaking as to damages; and

2. Qube continuing to pay into court one month’s interest at a daily rate of $16,942.76 on the last day of each month thereafter until this stay is dissolved or any appeal is determined, order that:

3. order 6 of these orders is stayed;

4. the First Defendant is restrained from taking any steps by way of enforcement of the judgments entered in proceedings 2024/278963 and 2024/278984, until further order of this Court in this Division or by the Court of Appeal.

Costs

7. The Plaintiff is to pay the First Defendant’s costs of the challenges to the components of the INTS and ISRA Determinations on which it was unsuccessful and/or not pressed, insofar as those costs were additional and incurred solely in respect of those challenges, and otherwise the First Defendant is to pay the Plaintiff’s costs of the proceedings.

34. The orders made in the November judgment in the first enforcement proceedings were:

1. The judgment debtor is to pay the judgment creditor’s costs of the notice of motion filed 31 July 2024 (including as subsequently amended) insofar as those costs are solely referrable to the issues raised in this proceeding.

2. Order that the judgment entered in these proceedings on 31 July 2024 is varied by changing the ”Claim amount” to $18,165,684.76 and the ”TOTAL” amount to $18,165,684.76.

35. The orders made on in the November judgment in the second enforcement proceedings were:

1. The judgment debtor is to pay the judgment creditor’s costs of the notice of motion filed 31 July 2024 (including as subsequently amended) insofar as those costs are solely referable to the issues raised in this proceeding.

2. Order that the judgment entered in these proceedings on 31 July 2024 is varied by changing the ”Claim amount” to $7,447,619.38 and the ”TOTAL” amount to $7,447,619.38.

36. In the September judgment and the November judgment, the primary judge, having found jurisdictional error, also set aside the order requiring Qube to pay 100% of the adjudicator’s fees and expenses for that determination. The practical effect of that order was that each side was responsible for 50% of the adjudicator’s costs.

37. The notice of appeal attacks the primary judge’s findings of jurisdictional error. The notice of contention and notice of cross-appeal address virtually all of the remaining issues which were before the primary judge. Rather than summarising the contents of the September judgment and the November judgment at this stage, I will address the relevant findings in those judgments when dealing with the notice of appeal, notice of contention and notice of cross-appeal.

Grounds of appeal

38. On 22 November 2024, Martinus filed an amended notice of appeal which contained 11 grounds of appeal:

No jurisdictional error in relation to “CN-420- Vehicle Management Plan”

1 The primary judge erred in finding (at [157] of the reasons for judgment delivered on 30 September 2024 (J1)) that the determination made by the Second Respondent (Adjudicator) under the Building and Construction Industry Security of Payment Act 1999 (NSW) (Act) on 22 July 2024 (INTS Determination) was affected by jurisdictional error insofar as it dealt with “CN-420 - Vehicle Management Plan”.

No jurisdictional error in relation to “CN 277.5 - EOT 34 Update 2”

2   The primary judge erred in finding (at [197] of J1) that the INTS Determination was affected by jurisdictional error insofar as it dealt with “CN-420 - Vehicle Management Plan”.

No jurisdictional error in relation to “CN-522- Termination for Convenience”

3   The primary judge erred in finding (at [235] of J1) that the INTS Determination was affected by jurisdictional error insofar as it dealt with “CN-522 - Termination for Convenience”.

No jurisdictional error in relation to “Bank guarantees”

4   The primary judge erred in finding (at [290] and [303] of J1) that the INTS Determination was affected by jurisdictional error insofar as it dealt with “Bank guarantees”.

Adjudicator’s determination as to fees and expenses should not have been set aside

5 The primary judge erred in concluding (at [316] of J1) that the Adjudicator’s determination under s 29(3) of the Act as to the parties’ liability to contribute to the payment of his fees and expenses should be set aside. That conclusion was in error because it was based on the findings of jurisdictional error referred to in grounds 1 to 4 above.

No jurisdictional error in relation to “Preliminaries”

6   The primary erred in finding (at [39]-[45] and [46]-[53] of the reasons for judgment dated 15 November 2024 (J2)) that the INTS Determination was affected by jurisdictional error insofar as it dealt with “Preliminaries”.

No jurisdictional error in relation to “Design management resources CN 421 (INTS)”

7   The primary judge erred in finding (at [65] of J2) that the INTS Determination was affected by jurisdictional error insofar as it dealt with “Design management resources CN 421 (INTS)”.

No jurisdictional error in relation to “Signal design management CN 422 (INTS)”

8   The primary judge erred in finding (at [75] of J2) that the INTS Determination was affected by jurisdictional error insofar as it dealt with “Signal design management CN 422 (INTS)”.

No jurisdictional error in relation to “Wet weather recovery variation CN 451 (INTS)”

9   The primary judge erred in finding (at [100] of J2) that the INTS Determination was affected by jurisdictional error insofar as it dealt with “Wet weather recovery variation CN 451 (INTS)”.

No jurisdictional error in relation to “Storm pit design clashes CN 299 (ISRA)”

10   The primary judge erred in finding (at [131]-[132] of J2) that the determination made by the Adjudicator under the Act on 10 July 2024 (ISRA Determination) was affected by jurisdictional error insofar as it dealt with “Storm pit design clashes CN 299 (ISRA)”.

No jurisdictional error in relation to “Termination of intertrack drainage CN-353 (ISRA)”

11   The primary judge erred in finding (at [139] of J2) that the ISRA Determination was affected by jurisdictional error insofar as it dealt with “Termination of intertrack drainage CN-353 (ISRA)”.

Grounds of cross-appeal

39. On 25 November 2024, Qube filed an amended notice of cross appeal:

1   The primary judge erred in finding at PJ2 [177]-[ 178] that there was no jurisdictional error in the decision of the Second Cross Respondent (the adjudicator) in circumstances where the adjudicator’s apparent conclusion that the payment schedule could not be understood:

a.    involved a denial of procedural fairness, because the notion that the payment schedule could not be comprehended by the First Cross Respondent (Martinus) was never raised by Martinus or raised with the Cross Appellant and Martinus had in fact dealt with the substantive issue between the parties at length (see PJ2 [168]-[169]);

b. involved a constructive failure to exercise jurisdiction, because the concluded incomprehensibility or incoherence led the adjudicator into an error that meant he failed to apply himself to the real question to be decided (including by reference to the extensive submissions that were ‘duly made’ under s 22 of the Building and Construction Industry Security of Payment Act 1999 (NSW)) (see PJ2 [172]); and/or

c.    was so unreasonable and irrational as to be infected by jurisdictional error in circumstances where the adjudicator adopted a position on the payment schedule that was inconsistent with the position that had been adopted by Martinus, viz. to conclude the payment schedule gave no reasons for withholding payment because it was allegedly incoherent when Martinus had engaged with the substance of the Cross Appellant’s reasons for withholding payment in submissions and had sought to meet the Cross Appellant’s reasons with evidence.

2   The primary judge erred in finding at PJ2 [179]-[ 181 ] that there was no jurisdictional error in the decision of the adjudicator in circumstances where the adjudicator’s apparent conclusion that the payment schedule could not be understood and that no reasons had been given by the Cross Appellant in the payment schedule in respect of the Contract works variations 2.1-2.6, 2.8-2.9, 2.11, 2.14-2.15 and 2.17:

a.   relied on the same reasons as addressed in ground 1 above; and

b.   was infected by the same jurisdictional errors identified in ground 1 above.

3   If ground 1 or ground 2 above is successful then the primary judge would (and should) have determined that the First Cross Respondent ought to have been ordered to pay 50% of costs of the adjudication in respect of the ISRA Contract (see PJ2 [316]-[317] and PJ3 [141 ]-[153]).

Notice of contention

40. Qube also relied upon an amended notice of contention:

Jurisdictional error in relation to “CN-420 - Vehicle Management Plan”

1   The primary judge’s finding of jurisdictional error at [157] of the primary judgment (PJ2) was correct for the additional reason that the second respondent’s (the adjudicator) decision was made in circumstances where there was a denial of procedural fairness, in that no argument was ever put forward by the appellant that the relevant directions were “deemed to be variation orders” or were variation orders “for all intents and purposes”: see PJ2 [134] and [158]. This error was material in the requisite sense because treating the relevant directions as variation orders had the consequence that a markup of 45.31% was applicable to the works in question in light of a previous adjudicator’s decision.

Jurisdictional error in relation to “CN 277.5 - EOT 34 Update 2”

2   The primary judge’s finding of jurisdictional error at PJ2 [197] was correct for the additional reason that the adjudicator’s decision was made in circumstances where it was so unreasonable and irrational as to be infected by jurisdictional error (cf PJ2 [192]).

Jurisdictional error in relation to “CN-522 - Termination for Convenience”

3   The primary judge’s finding of jurisdictional error at PJ2 [290] and [303] was correct for the additional reasons that the adjudicator’s decision was made in circumstances where:

a.   the adjudicator failed to consider submissions ‘duly made’ in relation to substantial breaches relied upon by the first respondent as justification for the exercise of a contractual right to terminate the Contracts “for cause”, in answer to a claim by the appellant for amounts under clause 40A of the Contracts (PJ2 [206] - [212], [220]-[222]);

b.   the adjudicator’s apparent finding that the “Program Show Cause Notice” was not a valid notice (PJ2 [218]) was reached without affording procedural fairness to the first respondent, not having been an argument that was put forward by the appellant (PJ2 [221]) and never having been raised by the second respondent;

c.   the adjudicator failed to consider submissions duly made by the first respondent with respect the limits of recovery under clause 40A of the Contracts;

d.   it was so unreasonable and irrational as to be infected by jurisdictional error, in that the adjudicator determined to treat the claim as a “variation” and thus apply a 45.31% mark up to the claimed costs despite the lack of any textual basis or justification for this in clause 40A of the Contracts (and when the termination of the Contracts was never claimed to constitute or involve a “variation” within the meaning of clause 36); and

e.   it was, further, so unreasonable and irrational as to be infected by jurisdictional error when the adjudicator determined that the appellant was entitled to amounts under clause 40A in respect of the costs of “unfixed materials” where he did not thereafter reconcile those claims with other amounts claimed and awarded in respect of related contract works items (being items premised on the supply and installation of unfixed materials - and incorporation of those unfixed materials into the works), such that the appellant would practically be paid twice for the same materials.

Determination as to fees and expenses

4   The primary judge’s conclusion (PJ2 [316]) was correct because the findings of jurisdictional error were correct, including for the reasons set out in the above grounds of this notice.

Jurisdictional error in relation to “Preliminaries”

5   The primary judge’s finding of jurisdictional error at [39]-[45] and [51] of Martinus Rail Pty Ltd v Qube RE Services (No 2) Pty Ltd (No 3) [2024] NSWSC 1483 (PJ3) were correct for the additional reasons that the adjudicators decision was made in circumstances where:

a.   the adjudicator’s finding that there were “no reasons for withholding payment save for providing its method of calculating the value of the Preliminaries” (extracted at PJ3 [16]) was reached without affording procedural fairness to the first respondent, not having been an argument that was put forward (see PJ3 [18] and [37]-[38]);

b.   the adjudicator had awarded more than was sought by the appellant which involved a denial of procedural fairness; and

c.   it was so unreasonable as to be infected by jurisdictional error, in that the adjudicator:

i.   found there were “no reasons for withholding payment save for providing its method of calculating the value of the Preliminaries” (extracted at PJ3 [16]) when this was inconsistent with the first respondent’s payment schedule and adjudication response (see PJ3 [19]); and

ii.   had awarded more than the amount which the appellant had sought in its payment claim.

Jurisdictional error in relation to “Wet weather recovery variation CN451 (INTS)”

6   The primary judge’s finding of jurisdictional error at PJ3 [ 100] was correct for the additional reasons that the adjudicator’s decision was made in circumstances where:

a.   it was so unreasonable as to be infected by jurisdictional error, in that he effectively treated obvious typographical errors in the payment schedule as entitling him to disregard the first respondent’s adjudication response and ignore that the appellant had substantively responded to the first respondent’s contentions, the appellant having understood the issues despite the typographical errors; and

b.   there was a denial of procedural fairness because he proceeded on the basis that the typographical errors meant no reasons had been given (see PJ3 at [98]-[99]) and he could therefore simply adopt the appellant’s claimed value.

Jurisdictional error in relation to “Storm pit design clashes CN299 (ISRA)”

7   The primary judge’s finding of jurisdictional error at PJ3 [131]-[132] was correct for the additional reasons that the adjudicator’s decision was made in circumstances where:

a.   it was so unreasonable as to be infected by jurisdictional error, in that he effectively treated obvious typographical errors in the payment schedule as entitling him to disregard the first respondent’s adjudication response and ignore that the appellant had substantively responded to the first respondent’s contentions, having understood the issues despite the typographical errors; and

b.   there was a denial of procedural fairness because he proceeded on the basis that the typographical errors (see PJ3 [127]) meant no reasons had been given (PJ3 [128]) and he could therefore simply adopt the appellant’s claimed value (see PJ3 [131]).

Jurisdictional error in relation to “Termination of intertrack drainage CN353 (ISRA)”

8   The primary judge’s finding of jurisdictional error at PJ3 [140] was correct for the additional reasons that the adjudicators decision was made in circumstances where:

a.   the adjudicator had awarded more than was sought by the appellant which involved a denial of procedural fairness (see PJ3 [134]-[137]); and

b.   it was so unreasonable as to be infected by jurisdictional error, in that the adjudicator had awarded more than the amount which the appellant had sought by its adjudication application.

41. I will first address the issues raised by the notice of appeal and notice of contention before moving to the issues raised by the notice of cross-appeal.

42. Qube also moved upon an application for leave to appeal from the refusal of a stay pending the outcome of the arbitration referred to at [23] above. Rather than take up space in what is already a lengthy judgment, I will address the relevant principles and authorities when dealing with the application for leave to appeal.

Identifying jurisdictional error under the SOPAct

43. The concept of “jurisdictional error” was explained in the joint reasons of three members of the High Court in Hossain v Minister for Immigration and Border Protection (2018) 264 CLR 123; [2018] HCA 34 per Kiefel CJ, Gageler and Keane JJ (footnotes supplied):

[23]   Jurisdiction, in the most generic sense in which it has come to be used in this field of discourse, refers to the scope of the authority that is conferred on a repository. In its application to judicial review of administrative action the taking of which is authorised by statute, it refers to the scope of the authority which a statute confers on a decision-maker to make a decision of a kind to which the statute then attaches legal consequences. It encompasses in that application all of the preconditions which the statute requires to exist in order for the decision-maker to embark on the decision-making process. It also encompasses all of the conditions which the statute expressly or impliedly requires to be observed in or in relation to the decision-making process in order for the decision-maker to make a decision of that kind. A decision made within jurisdiction is a decision which sufficiently complies with those statutory preconditions and conditions to have “such force and effect as is given to it by the law pursuant to which it was made” [Minister for Immigration and Multicultural Affairs v Bhardwaj (2002) 209 CLR 597 at [46]].

[24]   Jurisdictional error, in the most generic sense in which it has come to be used to describe an error in a statutory decision-making process, correspondingly refers to a failure to comply with one or more statutory preconditions or conditions to an extent which results in a decision which has been made in fact lacking characteristics necessary for it to be given force and effect by the statute pursuant to which the decision-maker purported to make it. To describe a decision as “involving jurisdictional error” is to describe that decision as having been made outside jurisdiction [Bhardwaj at [17]]. A decision made outside jurisdiction is not necessarily to be regarded as a “nullity”, in that it remains a decision in fact which may yet have some status in law [Bhardwaj at [46]; Jadwan Pty Ltd v Department of Health and Aged Care (2003) 145 FCR 1 at [42]]. But a decision made outside jurisdiction is a decision in fact which is properly to be regarded for the purposes of the law pursuant to which it was purported to be made as “no decision at all” [Bhardwaj at [51]]. To that extent, in traditional parlance, the decision is “invalid” or “void” [Baxter v NSW Clickers’ Association (1909) 10 CLR 114 at 157; Probuild at [63]].

44. In LPDT v Minister for Immigration, Citizenship, Migrant Services and Multicultural Affairs (2024) 98 ALJR 610; [2024] HCA 12, six members of the High Court returned to the topic of jurisdictional error and explained (footnotes supplied):

[2]   Jurisdictional error can refer to breach of an express or implied condition of a statutory conferral of decision-making authority which results in a decision made in the purported exercise of that authority lacking the legal force attributed to exercise of that authority by statute. Though a decision affected by jurisdictional error is a decision in fact, [Oakey Coal Action Alliance Inc v New Acland Coal Pty Ltd (2021) 272 CLR 33 at [94]; Minister for Immigration, Citizenship, Migrant Services and Multicultural Affairs v Moorcroft (2021) 273 CLR 21 at [20]] it is “in law ... no decision at all” [Minister for Immigration and Multicultural Affairs v Bhardwaj (2002) 209 CLR 597 at [53]] and is in that sense “void”. [Hossain v Minister for Immigration and Border Protection (2018) 264 CLR 123 at 133 [24], 143 [62]]

[3]   Because an express or implied condition of a statutory conferral of decision‑making authority can take many different forms, and because breach can occur in many different circumstances, the categories of jurisdictional error are not closed [Kirk v Industrial Court (NSW) (2010) 239 CLR 531 at 573 [71], 574 [73]; Minister for Immigration and Border Protection v SZMTA (2019) 264 CLR 421 at 455 [81], citing Minister for Immigration and Multicultural Affairs v Yusuf (2001) 206 CLR 323 at 351 [82]]. Jurisdictional error can result from breach by a third party of a condition of a statutory process preceding a decision, [See, eg, Wei v Minister for Immigration and Border Protection (2015) 257 CLR 22 at 32-33 [23]-[24], 35 [32]-[33]; SZMTA (2019) 264 CLR 421 at 444 [44]] but more often results from breach by a statutory decision-maker of a condition of the making of a decision. Jurisdictional error on the part of a statutory decision-maker in making a decision can include: misunderstanding the applicable law; asking the wrong question; exceeding the bounds of reasonableness; identifying a wrong issue; ignoring relevant material; relying on irrelevant material; in some cases, making an erroneous finding or reaching a mistaken conclusion; or failing to observe some applicable requirement of procedural fairness [See, eg, Craig v South Australia (1995) 184 CLR 163 at 179; Kirk (2010) 239 CLR 531 at 572 [67]; Hossain (2018) 264 CLR 123 at 134‑135 [30], 147-148 [70]-[72]; SZMTA (2019) 264 CLR 421 at 455 [81]].

[4]   A statute which contains an express or implied condition of a conferral of decision-making authority is not always to be interpreted as denying legal force and effect to every decision that might be made in breach of that condition [Project Blue Sky Inc v Australian Broadcasting Authority (1998) 194 CLR 355 at 388-389 [91]]. Only by construing the statute so as to understand the limits of the statutory conferral of decision‑making authority is it possible to determine, first, whether an error has occurred (that is, whether there has been a breach of an express or implied condition of the statutory conferral of decision‑making authority) and, second, whether any such error is jurisdictional (that is, whether the error has resulted in the decision made lacking legal force) [Hossain (2018) 264 CLR 123 at 133 [24], 133‑134 [27], 147 [72]; SZMTA (2019) 264 CLR 421 at 456 [83]; Minister for Immigration, Citizenship, Migrant Services and Multicultural Affairs v Thornton (2023) 276 CLR 136 at 154-155 [53]].

[5]   Determining whether an error exists as well as whether it is jurisdictional starts with an analysis of the nature of the error alleged in the statutory context within which the decision has been made. Given the broad range of decisions in which errors might be made, the large variety of statutory schemes in which those decisions might be made, and the range of circumstances which may attend the making of any particular decision, it is impossible to divine a rigid classification of the errors that constitute jurisdictional errors [See Kirk (2010) 239 CLR 531 at 574 [73]; Hossain (2018) 264 CLR 123 at 137 [42]]. There are no bright lines to be drawn – “[t]he nature of the error has to be worked out in each case concerning a specific decision under a particular statute” [MZAPC v Minister for Immigration and Border Protection (2021) 273 CLR 506 at 543 [101]; Nathanson v Minister for Home Affairs (2022) 276 CLR 80 at 117-118 [78]; Thornton (2023) 276 CLR 136 at 162 [77]].

45. As I will explain, there is a long and consistent history identifying what is or is not jurisdictional error in the context of the SOP Act. There was no challenge, by either party, to these established principles. Rather, Qube sought to dilute the application of established principles by references to the relatively large quantum of the claim and the fact that the adjudicator in this case sought and obtained extensions of time from the parties. I do not accept Qube’s submission that the quantum of the claim or the fact that the adjudicator in this case sought and obtained extensions of time effectively undermines the operation of those established principles. The High Court has made clear that in cases under the SOP Act, the risk of non-jurisdictional errors of law, including errors with “serious consequences”, is a risk allocated to the principal, in this case Qube. In Shade Systems, Kiefel CJ, Bell, Keane, Nettle and Gordon JJ said (footnotes supplied):

[51] Finally, it takes the matter no further to say, as Probuild submitted, that it is “absurd” that a “manifestly” erroneous determination, in the sense that it is affected by non-jurisdictional error of law, may stand. A non‑jurisdictional error of law may have serious consequences. But those consequences are dealt with by s 32 of the Security of Payment Act. The limited exclusion of review does not irrevocably entrench the consequences of an erroneous determination. Where it is contended that an adjudicator has made an error of law within jurisdiction, resulting in a progress payment that is inadequate or excessive, the dispute may be resolved through civil proceedings under the construction contract. If necessary, a restitutionary order can be sought [s 32(3)(b) of the Security of Payment Act]. The risk that the party placed at an advantage by an underpayment or overpayment may later become incapable of meeting such an order is a risk that is assigned to the other party. [Neller [2009] 1 Qd R 390 at 401 [40]] What Probuild characterised as an “absurd” outcome is more aptly seen as the coherent application of a statutory choice of forum rule. And private law proceedings in relation to a progress payment under a construction contract can hardly be expected to be less convenient than judicial review proceedings.

46. Section 8 of the SOP Act provides a right to progress payments for construction work. Section 3 of the SOP Act provides:

3   Object of Act

(1)   The object of this Act is to ensure that any person who undertakes to carry out construction work (or who undertakes to supply related goods and services) under a construction contract is entitled to receive, and is able to recover, progress payments in relation to the carrying out of that work and the supplying of those goods and services.

(2)   The means by which this Act ensures that a person is entitled to receive a progress payment is by granting a statutory entitlement to such a payment regardless of whether the relevant construction contract makes provision for progress payments.

(3)   The means by which this Act ensures that a person is able to recover a progress payment is by establishing a procedure that involves—

(a)   the making of a payment claim by the person claiming payment, and

(b)   the provision of a payment schedule by the person by whom the payment is payable, and

(c)   the referral of any disputed claim to an adjudicator for determination, and

(d)   the payment of the progress payment so determined.

(4)   It is intended that this Act does not limit—

(a)   any other entitlement that a claimant may have under a construction contract, or

(b)   any other remedy that a claimant may have for recovering any such other entitlement.

47. The critical provisions for the purposes of this appeal are found in Part 3 of the SOP Act. As is well known, a claimant must first serve a Payment Claim detailing the claimed amounts. Section 13 provides:

13   Payment claims

(1) A person referred to in section 8 who is or who claims to be entitled to a progress payment (the claimant) may serve a payment claim on the person who, under the construction contract concerned, is or may be liable to make the payment.

(1A)   A payment claim may be served on and from the last day of the named month in which the construction work was first carried out (or the related goods and services were first supplied) under the contract and on and from the last day of each subsequent named month.

(1B)   However, if the construction contract concerned makes provision for an earlier date for the serving of a payment claim in any particular named month, the claim may be served on and from that date instead of on and from the last day of that month.

(1C)   In the case of a construction contract that has been terminated, a payment claim may be served on and from the date of termination.

(2)   A payment claim—

(a)   must identify the construction work (or related goods and services) to which the progress payment relates, and

(b)   must indicate the amount of the progress payment that the claimant claims to be due (the claimed amount), and

(c)   must state that it is made under this Act.

(3)   The claimed amount may include any amount—

(a)   that the respondent is liable to pay the claimant under section 27(2A), or

(b)   that is held under the construction contract by the respondent and that the claimant claims is due for release.

(4)   A payment claim may be served only within—

(a)   the period determined by or in accordance with the terms of the construction contract, or

(b)   the period of 12 months after the construction work to which the claim relates was last carried out (or the related goods and services to which the claim relates were last supplied),

whichever is the later.

(5)   Except as otherwise provided for in the construction contract, a claimant may only serve one payment claim in any particular named month for construction work carried out or undertaken to be carried out (or for related goods and services supplied or undertaken to be supplied) in that month.

(6)   Subsection (5) does not prevent the claimant from—

(a)   serving a single payment claim in respect of more than one progress payment, or

(b)   including in a payment claim an amount that has been the subject of a previous claim, or

(c)   serving a payment claim in a particular named month for construction work carried out or undertaken to be carried out (or for related goods and services supplied or undertaken to be supplied) in a previous named month.

(7)   A head contractor must not serve a payment claim on the principal unless the claim is accompanied by a supporting statement that indicates that it relates to that payment claim.

Maximum penalty—1,000 penalty units in the case of a corporation or 200 penalty units in the case of an individual.

(8)   A head contractor must not serve a payment claim on the principal accompanied by a supporting statement knowing that the statement is false or misleading in a material particular in the particular circumstances.

Maximum penalty—1,000 penalty units in the case of a corporation or 200 penalty units or 3 months imprisonment (or both) in the case of an individual.

(9)   In this section—

supporting statement means a statement that is in the form approved by the Secretary and (without limitation) that includes a declaration to the effect that all subcontractors, if any, have been paid all amounts that have become due and payable in relation to the construction work concerned.

Note—

An offence against subsection (7) or (8) committed by a corporation is an executive liability offence attracting executive liability for a director or other person involved in the management of the corporation—see section 34D.

48. The recipient of the Payment Claim must then file and serve a Payment Schedule, which identifies which amounts in the Payment Claim it accepts as payable, and if the scheduled amount is less than the claimed amount in the Payment Claim, explains why the recipient of the Payment Claim is withholding payment. Section 14 provides:

14   Payment schedules

(1)   A person on whom a payment claim is served (the respondent) may reply to the claim by providing a payment schedule to the claimant.

(2)   A payment schedule—

(a)   must identify the payment claim to which it relates, and

(b)   must indicate the amount of the payment (if any) that the respondent proposes to make (the scheduled amount).

(3)   If the scheduled amount is less than the claimed amount, the schedule must indicate why the scheduled amount is less and (if it is less because the respondent is withholding payment for any reason) the respondent’s reasons for withholding payment.

(4)   If—

(a)   a claimant serves a payment claim on a respondent, and

(b)   the respondent does not provide a payment schedule to the claimant—

(i)   within the time required by the relevant construction contract, or

(ii)   within 10 business days after the payment claim is served,

whichever time expires earlier,

the respondent becomes liable to pay the claimed amount to the claimant on the due date for the progress payment to which the payment claim relates.

49. Section 14(2)(b) makes clear that what a Payment Schedule must do is indicate the amount of the payment, if any, that the respondent proposes to make. It is open to a respondent to include in a Payment Schedule any amount it chooses. That amount becomes the “scheduled amount”. It is well settled that it is a matter for an adjudicator and not the Court on judicial review to construe the Payment Schedule.

50. If the recipient of the Payment Claim does not, relevantly, pay the scheduled amount, the consequences are provided for in ss 15 and 16 respectively which, in essence, provide remedies including that the maker of the Payment Claim may recover the scheduled amount as a debt due to the claimant, in any court of competent jurisdiction.

51. If the amount identified in a Payment Schedule is less than the claimed amount the maker of a Payment Claim may make an “Adjudication Application”: s 17(1)(a)(i). The Adjudication Application identifies the Payment Claim and the Payment Schedule and contains any relevant submissions that the maker of the Payment Claim would like to make. The eligibility and appointment of adjudicators are provided for in ss 18 and 19. The respondent to the Adjudication Application may then lodge an Adjudication Response containing their submissions. Section 20 of the SOP Act provides:

20   Adjudication responses

(1)   Subject to subsection (2A), the respondent may lodge with the adjudicator a response to the claimant’s adjudication application (the adjudication response) at any time within—

(a)   5 business days after receiving a copy of the application, or

(b)   2 business days after receiving notice of an adjudicator’s acceptance of the application,

whichever time expires later.

(2)   The adjudication response—

(a)   must be in writing, and

(b)   must identify the adjudication application to which it relates, and

(c)   may contain such submissions relevant to the response as the respondent chooses to include.

(2A) The respondent may lodge an adjudication response only if the respondent has provided a payment schedule to the claimant within the time specified in section 14(4) or 17(2)(b).

(2B)   The respondent cannot include in the adjudication response any reasons for withholding payment unless those reasons have already been included in the payment schedule provided to the claimant.

(3)   A copy of the adjudication response must be served on the claimant.

52. As I will explain in greater detail, s 20(2B) is an important provision for the determination of the present case.

53. Section 21(3) provides that an adjudicator is to determine an Adjudication Application “as expeditiously as possible”.

54. Section 22 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.

55. Section 32 of the SOP Act is, as explained by the High Court in the passage from Shade Systems quoted at [45], a critical provision when seeking to identify errors made by an adjudicator which are non-jurisdictional:

32   Effect of Part on civil proceedings

(1)   Subject to section 34, nothing in this Part affects any right that a party to a construction contract—

(a)   may have under the contract, or

(b)   may have under Part 2 in respect of the contract, or

(c)   may have apart from this Act in respect of anything done or omitted to be done under the contract.

(2)   Nothing done under or for the purposes of this Part affects any civil proceedings arising under a construction contract, whether under this Part or otherwise, except as provided by subsection (3).

(3)   In any proceedings before a court or tribunal in relation to any matter arising under a construction contract, the court or tribunal—

(a)   must allow for any amount paid to a party to the contract under or for the purposes of this Part in any order or award it makes in those proceedings, and

(b)   may make such orders as it considers appropriate for the restitution of any amount so paid, and such other orders as it considers appropriate, having regard to its decision in those proceedings.

56. Finally, s 32A is another provision to which I will return:

….

[1560] As the scheduled amounts are not referable to the amounts claim in CN – 521 of the Payment Claim, I am not persuaded that the Respondent has satisfied its obligations under section 14 of the Act and the Contract because it failed to provide reasons for withholding payment against each claimed item to which the Claimant could respond either accepting or disputing the amount scheduled.

…

[1564] The Respondent’s approach is uncertain as it cannot be compared to the claim. Further, the Respondent provides no explanation of each quantity or rate that it applied that was different to those claimed in the Payment Claim by the Claimant. That explanation, if it had been provided would have constituted a reason for withholding payment as required under clause 37.2 of the Contract and under section 14(3) of the Act.

266. The adjudicator concluded:

[1572] The Respondent has not, therefore, complied with s 14(3) of the Act because it failed to provide reasons for withholding payment that the Claimant could consider and to which it could respond if it chose to do so.

267. The essential parts of the adjudicator’s reasoning were:

1. The INTS Contract was not a remeasurable contract, and it was appropriate to separate contract works from variations, as Martinus had done: at [1552]-[1554].

2. Qube’s approach had led to uncertainty because the items in Qube’s INTS Payment Schedule could not be compared to, and were not directly referable to, Martinus’s Payment Claim: at [1560] and [1564].

3. Qube had not provided an explanation about how the quantities and rates applied to each separate component of the contract works against which CN-521 had been apportioned had been determined: at [1558], [1560] and [1564].

4. Properly understood, Qube’s the INTS Payment Schedule did not supply “reasons for withholding payment” in response to the claimed item within the meaning of s 14(3): at [1572].

The November judgment

268. The primary judge considered Qube’s complaints in respect of CN-521 in the November judgment at [159]-[178]. At that time, Qube’s sole complaint was that CN-521 was affected by legal unreasonableness. As the primary judge correctly found, the threshold for finding that a decision was legally unreasonable is high. I have earlier addressed legal unreasonableness at [75]-[80].

269. The primary judge concluded that the adjudicator’s interpretation of the Payment Schedule was a matter within the adjudicator’s jurisdiction and was not legally unreasonable:

[177]   It may be accepted that, like any other decision of the Adjudicator on the merits, there is a possibility that a decision by an adjudicator of this type could be subject to review on the grounds of “legal unreasonableness”. But I do not think that this has been demonstrated in the present case. Qube’s allegation is simply an allegation of an ordinary error in reasoning. It is not an allegation of decision-making alien to an adjudicator’s function under the Act.

[178]   It may be that the Adjudicator failed to address, or address fully, the grounds of rejection advanced in Qube’s payment schedule. But if so, that still gave him an unreviewable justification for not addressing consequential submissions by Qube and meant that there was no jurisdictional error in failing to address such submissions. This challenge fails.

Consideration of cross-appeal ground 1

270. Qube puts its case in cross-appeal ground 1 about jurisdictional error in three ways. Two are complaints about an alleged denial of procedural fairness and the third is legal unreasonableness. Each is, in substance, a different label for the same complaint, arising from Qube’s contention about the adjudicator’s interpretation of the INTS Payment Schedule and conclusion that it did not relevantly set out “reasons” within the meaning of s 14(3) of the SOP Act.

271. I reject Qube’s contention that the adjudicator reached a decision on a basis not put by the parties. What the adjudicator found was that Qube’s approach was “uncertain as it cannot be compared to the claim”: at [1564]. That was what Martinus had submitted in the INTS Adjudication Application at [568]-[569], [615]-[616], and [649]. Qube was not denied procedural fairness. The point Qube complains about was clearly taken by Martinus.

272. Qube adopted an approach in its Payment Schedule where it did not respond directly to the Payment Claim, but instead used its own format and methodology. The differences between the amount claimed and the amount that Qube proposed to be paid could not readily be understood. Qube ought reasonably to have been aware that that adjudicator might conclude that Qube’s Payment Schedule could not readily be comprehended. Qube both had, and availed itself of, an opportunity to deal with that point in its Adjudication Response. There was no denial of procedural fairness.

273. Qube also contends that the adjudicator constructively failed to exercise jurisdiction because the adjudicator failed to resolve the dispute raised by the parties’ submissions. The phrase “constructive failure to exercise jurisdiction” is, of course, a label which is merely descriptive of jurisdictional error: Ceerose at [46] and the cases there referred to. The substance of Qube’s complaint is that there was a denial of procedural fairness because of the failure to consider a substantial, clearly articulated argument. There is a risk with this type of argument that claims about failure to address matters can shade into claims about arguments being resolved incorrectly because misunderstood, or not really grappled with, which tends towards merits or appellate review: M1 v R1 [2024] NSWCA 256 at [65] (Mitchelmore JA, Leeming JA agreeing at [1], Price AJA agreeing at [122]); see also Secretary, Department of Education v Dawking [2024] NSWCA 4 at [90]-[97] (Gleeson JA, Mitchelmore JA agreeing at [100], Kirk JA agreeing at [101]).

274. Qube’s argument is simply another way of contending that the adjudicator’s construction of the Payment Schedule was erroneous. That argument fails. At the risk of repetition, it is for an adjudicator to decide the dispute which he or she understands has been propounded by the parties. An adjudicator’s decision is not affected by jurisdictional error because a Court, for itself, concludes that a different dispute had been propounded by the partes. If this were not so, it would subvert clear authority arising under the SOP Act that an adjudicator can decide whether submissions are “duly made”. Qube’s complaint is premised upon an assertion that certain submissions were “duly made”, in circumstances where the determination of which submissions were “duly made” was a matter for the adjudicator. I would reject this second aspect of Qube’s complaint.

275. Finally, Qube contended that the adjudicator’s conclusion was legally unreasonable. I reject Qube’s assertion that legal unreasonableness has been established. The adjudicator’s understanding of the dispute was open to him. The primary judge correctly rejected this complaint.

276. Cross-appeal ground 1 should be rejected.

Cross-appeal Ground 2

277. Cross-appeal ground 2 concerned contract works variations 2.1-2.6, 2.8-2.9, 2.11, 2.14-2.15 and 2.17. These components of the adjudication concerned twelve contract works items for which Martinus claimed to be entitled to variation payments. The adjudicator allowed the claim but applied some deductions. The primary judge explained that because the adjudicator adopted the same reasoning to deal with the claims as he adopted for CN-521 (cross- appeal ground 1), the complaint made by Qube could be rejected on the same basis. Qube accepts that ground 2 should fail if it fails on ground 1. Qube’s acceptance that this ground falls with ground 1 is sufficient to dispose of this ground.

278. The reasons why Qube’s case should be rejected can be exposed by taking item 2.1 as an example. The Payment Claim addressed item 2.1 under four line items, 2.1, 2.1.1, 2.1.2 and 2.1.3. In respect of item 2.1, Qube said in its Payment Schedule:

The Superintendent notes there has been minimal design change since the Quantity Surveyors determination within VO-054. All conduit configurations are unchanged and the only change to pits has been the relocation of S14A by approximately 1 metre. As such, this has been valued using rates set out by the Quantity Surveyor within VO-054.

279. Qube then addressed this claim by reference to 41 separate line items. Qube elected not to respond in any comprehensible way to the detail of Martinus’s Payment Claim. Qube’s decision to introduce a large number of new items into the Payment Schedule ultimately made it difficult, if not impossible, for the adjudicator properly to understand Qube’s position. The adjudicator had to seek to transfer amounts across and between claims. For example:

[226]   The Claimant indicates that it has claimed 99.07% of the adjustment for VO-054, 055 and 061 (changes in quantities and rates)”) and the “budget transfer” under its claim for CN - 521 “Claim for design change variation scope VO 054 and VO 061”. I have accepted the percentages claimed for the adjustment for VO- 054, 055 and 061 (changes in quantities and rates)”) and the “budget transfer” to determine that part of the scheduled amount to be transferred to the scheduled amount for CN - 521 “Claim for design change variation scope VO 054 and VO 061.”

[227]   In order to compare the scheduled amount to the claimed amount for Item 2.1 - Service Zones, I will transfer 99.07% of the scheduled amount relating to VO 054, VO 055 and VO 061 and “budget transfer” from Item 2.1 - Service Zones in the Payment Schedule to the Respondent’s scheduled amount relating to the claim relating to CN - 521 “Claim for design change variation scope VO 054 and VO061.”

280. Qube addressed this issue at [7.1]-[7.21] of the INTS Adjudication Response. It, in effect, responded by incorporating its case on CN-521:

[7.8]   The suggestion that Qube’s approach to valuation of the contract works ought to be rejected because it has not been undertaken in accordance with the Contracts, is rejected. The reference to a remeasurement in the context of clause 36 is explained in section 10 below.

281. The adjudicator addressed this claim at [214]-[236]. The adjudicator concluded that:

1. Qube’s Payment Schedule did not “respond” or “directly respond” to Martinus’s Payment Claim: at [217] and [225].

2. the INTS Payment Schedule did not “provid[e] sufficient explanation of each of the new items”: at [217].

3. Qube had not “provided sufficient explanation for [him] to understand how each of the … new entries relate to any claimed item in the [INTS] Payment Claim”: at [219].

4. Qube had not “explained why the scheduled amount is less than the claimed amount”: at [229].

282. These were each correct statements of fact. They do not disclose error, let alone jurisdictional error. The problems which Qube introduced into the INTS Payment Schedule in respect of CN-521 repeated themselves throughout. Qube did not clearly respond to the INTS Payment Claim. Qube introduced multiple new line items. Qube failed to give any intelligible explanation about those new line items. It was open for the adjudicator, within the proper exercise of his jurisdiction, to reach the conclusions he did.

283. His Honour addressed these claims as follows in the September judgment:

Contract works variations 2.1-2.6, 2.8-2.9, 2.11, 2.14-2.15 and 2.17

[179]   These components of the adjudication concerned twelve contract works items for which Martinus claimed to be entitled to variation payments. The Adjudicator allowed the full amounts claimed but again applied some deductions.

[180]   In each case, the Adjudicator adopted the same reasoning to deal with the claims as he adopted for CN-521. Indeed, the same paragraphs (including quotations from the case law) appear to have been copied and pasted into the relevant parts of the adjudication.

[181]   In oral submissions, counsel for Qube indicated that the determinations were challenged on the same grounds as the CN-521 determination and did not address the items individually. In these circumstances, I proceed on the basis that the reasons I have given for rejection of the challenge concerning CN-521 apply equally to these claims.

284. No error has been shown in the primary judge’s conclusions about this issue.

285. Qube determined to reply to Martinus’s Payment Claim in a non-responsive way. Respectfully, after a full hearing in the Court of Appeal with experienced Senior Counsel on both sides, I remain unsure of the points Qube was seeking to make. Much less am I critical of the adjudicator for allegedly misunderstanding Qube’s reasons for rejecting Martinus’s claim.

286. Qube was aware that Martinus was asserting that Qube’s Payment Schedule was difficult to understand. It was a matter for the adjudicator to accept or reject the parties’ contentions on that issue. The primary judge’s reasons for rejecting the substance of ground 1 apply equally to ground 2.

287. The outcome of the cross-appeal in respect of the INTS Determination should equally apply to the analogous claims that arose in respect of the ISRA Determination, being each of the claims entitled “Contract Works” and enumerated 1 to 9 (inclusive) in the Amended List Statement. These claims were variously dealt with by the adjudicator at [200]-[611] of the ISRA Determination by applying substantively the same reasoning as that applied to the analogous claims in the INTS Determination.

288. I would reject ground 2 of the cross-appeal.

Cross-appeal Ground 3

289. Cross-appeal ground 3 was contingent on the success of the first two grounds of cross-appeal. Given my findings on those issues, cross-appeal ground 3 must also fail.

Qube’s application for leave to appeal

290. Qube applied for a stay of the proceedings pending a final determination of the arbitration referred to at [23]. The primary judge refused to grant that stay. Qube seeks leave to appeal from the decision of the primary judge.

291. The essential debate between the parties was whether Qube was entitled to a stay given what it submitted were financial difficulties faced by Martinus, such that there was a risk that if Qube was successful in the final arbitration, Martinus could not repay the sum it obtained under the SOP Act. The primary judge said in the September judgment:

[354]   Indeed, up to a point, the more financial difficulty the contractor is in, the less reason there is for granting a stay, as the more likely it will be that the grant of such a stay will result in the contractor being deprived of the cashflow which is needed to sustain its operations. It is only when insolvency becomes inevitable, or at least highly probable, that the dynamics reverse because of the possibility that an interim payment will effectively become final. No doubt it was considerations such as this which caused Payne JA, in Shade Systems Pty Ltd v Probuild Constructions (Aust) Pty Ltd [2018] NSWCA 33, to refuse a stay in a case where the contractor’s financial position was “precarious”.

[355]   Nothing like that is present here. I have been troubled by the fact that Martinus has failed to produce any updated accounts, and it is unclear what effect the partial failure of its claims in the adjudication proceedings, coupled with a reversal of any judgment which is enforced, would have on Martinus’ balance sheet. But the arbitration proceedings have not even begun, and it is not suggested that they will fall to be determined this year, or perhaps even next year.

292. As the High Court explained in Shade Systems, the policy of SOP Act is to ensure that any person who undertakes to carry out construction work (or who undertakes to supply related goods and services) under a construction contract is entitled to receive, and is able to recover, progress payments for carrying out that work and supplying those goods and services. The SOP Act is intended to provide a speedy and effective means of ensuring cash flow to builders and trade subcontractors from the parties with whom they contract. The SOP Act creates an entitlement that is to be determined informally, summarily and quickly, and then summarily enforced without prejudice to the common law rights of both parties which can be determined in due course.

293. The risk that a contractor might not be able to refund moneys ultimately found to be due to a developer after a successful civil action by the developer under the contract is a risk which, as a matter of policy in the SOP Act’s commercial context, has, prima facie, been assigned to the developer: see R J Neller approved in Shade Systems and followed on numerous occasions in this Court.

294. As the High Court further explained in Shade Systems at [51] (per Kiefel CJ, Bell, Keane, Nettle and Gordon JJ) about circumstances where contractual proceedings contemplated by s 32 of the SOP Act conclude that a payment made pursuant to the SOP Act should, on the correct construction of the contract, not have been made if necessary, a restitutionary order can be sought. The risk that the party placed at an advantage by an underpayment or overpayment may later become incapable of meeting such an order is a risk that is assigned to the other party.

295. The conclusion that the policy of the Act is to place the risk of insolvency on the developer/principal contractor is further underlined by s 32B which was introduced in 2018:

32B Application of Part to a claimant in liquidation

(1)   A corporation in liquidation cannot serve a payment claim on a person under this Part or take action under this Part to enforce a payment claim (including by making an application for adjudication of the claim) or an adjudication determination.

(2)   If a corporation in liquidation has made an adjudication application that is not finally determined immediately before the day on which it commenced to be in liquidation, the application is taken to have been withdrawn on that day.

296. In Kennedy Civil Contracting Pty Ltd (Administrators Appointed) v Richard Crookes Construction Pty Ltd; In the matter of Kennedy Civil Contracting Pty Ltd [2023] NSWSC 99 at [34], Ball J, in a passage approved by this Court in Ceerose, said that the purpose of s 32B is to deny the benefits of the legislation to companies in liquidation and not otherwise. In Colbran, in the matter of PBS Building Pty Limited (Administrators Appointed) [2023] FCA 276, Halley J said, in a passage also approved by this Court in Ceerose, dealing with a claimant subject to a deed of company arrangement (DOCA):

[96] The stated prime objective of keeping cash flowing in the contracting chain by enforcing timely payments cannot be construed as supporting any construction of the SOP Act that limits or qualifies its operation more generally to companies under external administration or that are the subject of a DOCA. Further, any weight that might be given to that prime objective in exercising a discretion to extend convening periods for the second creditors’ meetings must necessarily have regard to the text and operation of the SOP Act. The text of s 32B makes clear that the legislature has chosen the liquidation of a corporation as the relevant event for excluding a person from taking any action under the SOP Act to enforce a payment claim, not the appointment of external administrators or entry into a DOCA.

297. 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.

298. In the present case, Qube sought closely to analyse financial statements and management accounts produced by Martinus. Qube complained that the primary judge had wrongly failed to draw inferences adverse to Martinus by reason of what was an asserted lack of explanation of how the amount claimed by Martinus “was recorded in the accounts”. Secondly, Qube complained that the primary judge “wrongly thought that Martinus was profitable. Thirdly, Qube complained that Martinus’s financial position meant that this “put Qube at considerable risk of non-recovery, so as to render any interim payment one which was, in practical terms, final”. Fourthly, Qube complained that the primary judge wrongly discounted the evidence of Qube’s expert, Mr Cairns, as addressed to the wrong question. Qube submitted that the primary judge should have considered what Mr Cairns “sought to extract from the underlying financial information”. Fifthly, Qube submitted that the sum of money it was required to pay, compared to other cases in which a stay had been refused, meant that “the quantum of the amount which is required to be paid if a stay is not granted is a material integer when the discretion of the Court falls to be exercised”. Finally, Qube submitted that the significance of the purposes of the SOP Act “do not loom large in the same way as in many of the cases”, because Qube had already terminated the Contracts.

297. I would refuse leave to appeal. My reasons for rejecting the detail of Qube’s submissions may be summarised as follows:

1. Qube contends that that “Martinus had already accounted for, at least, a significant part of the amounts the subject of the adjudication applications”. That proposition was not established by the evidence. Qube analysed the FY 23 audited accounts of Martinus and asserted they showed that “there were real doubts about Martinus’s profitability”. “Real doubts” about Martinus’s profitability do not establish a proper basis for the stay sought by Qube. The onus was on Qube to establish that a stay should be granted, and the onus was a heavy one. It was not for Martinus to establish that it was profitable. Thus, even if it were correct as Qube submits that it was “clear that the notion that Martinus was profitable is wrong, or at least not established”, it would not follow that the primary judge erred in refusing to grant a stay.

2. Qube’s second point largely overlaps with its first. The gist of the submission is that, although the primary judge concluded at [355] that Martinus was “trading profitably at present”, if one assumed that Qube did not owe any money at all to Martinus under the relevant contracts, then Martinus would not be profitable. The primary judge’s observation at [356] was a statement of fact. Martinus is trading profitably. Qube does not establish that a finding of fact is wrong by asserting that if the facts were different the finding of fact would have been different.

3. Qube’s third point was that Martinus’s evidence demonstrated that it “had experienced difficulty in making payments of less than $1 million”. That submission should be rejected. What the relevant witness for Martinus, Mr Brunsdon, said was that Martinus had elected to spread redundancies over a period as, if they were all paid at once, “that would have a significant detrimental effect on Martinus’s cashflow”. That is a statement of the obvious. Attempts to manage cash flow do not establish an inability at some point in the future to provide restitution, should restitution be ordered.

4. Qube’s fourth point was that their expert, Mr Cairns, had allegedly identified a “trend” whereby Martinus “increased its indebtedness over time and was borrowing in order to fund its operations”. There was no error in the primary judge assessing Qube’s expert evidence by reference to “the question which confronted the Court when considering whether to grant a stay”. His Honour correctly concluded that Mr Cairns’ evidence did not establish a sufficient risk of inability to provide restitution in the future. The height of Mr Cairns’ evidence was that he was unable to say whether Martinus was presently at “risk of insolvency”.

5. Qube’s fifth point was that the primary judge failed to take into account that, as a result of his Honour’s rulings, Martinus would be entitled to an interim payment of around $30 million. The risk of prejudice to Qube was said to be “affected by the quantum of money the subject of the adjudication determination”. That submission is without merit. The primary judge’s reasoning was expressly directed to whether payment by Qube to Martinus now would convert the interim payment to Martinus into a final one. Qube did not establish a sufficient risk that any payments it is required to make to Martinus under the SOP Act would be rendered final regardless of any future order for restitution in Qube’s favour.

6. Qube’s sixth point was that the fact that the contracts had been terminated prior to the Payment Claims meant that the statutory policy of the SOP Act was less important. I do not agree. The purpose of the SOP Act is to ensure cashflow to contractors, whether or not they remain parties to an existing construction contract. Seymour Whyte Constructions Pty Ltd v Ostwald Bros Pty Ltd (in liq) (2019) 99 NSWLR 317; [2019] NSWCA 11 stands for the proposition that there is an entitlement to a progress payment under the SOP Act even if there is no expectation of future performance under the relevant construction contract. If Qube’s position was correct, it would subvert the policy of the SOP Act. A company in Qube’s position could immunise itself from a Payment Claim by terminating the contract. The SOP Act gives an express right to serve a Payment Claim after termination: see s 13(1C). In this case, there is no less need for cashflow because time has passed since the work was done, and the SOP Act expressly permits claims to be served within 12 months of work being completed: s 13(4) of the SOP Act.

300. The primary judge did not ask the wrong question, nor did his Honour apply the wrong test. His Honour correctly identified the relevant legal principles and appreciated that a balancing exercise was called for. In that balancing exercise, it was permissible to consider whether final rights would be frustrated, as his Honour did. The primary judge did not find that a stay was available only when insolvency has been demonstrated. It is clear that a mere risk of insolvency is ordinarily insufficient to justify a stay. No House v The King error was shown.

301. Finally, even if House v the King error had been established, and I were called upon to re-exercise the discretion, I would refuse a stay.

302. The stay sought is contrary to the policy of the SOP Act. There is no basis for concluding that there is a sufficient risk that Qube will be unable to recover from Martinus any amounts ordered to be paid as restitution following a final award. The fact that the sums are relatively large does not change this conclusion. The highest Qube puts it is that there is “significant doubt” about Martinus’s ability to repay. “Significant doubt” does not justify a stay of the kind sought.

303. 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.

304. Leave to appeal should be refused.

Conclusion and proposed orders

305. For the foregoing reasons I propose the following orders:

1. Appeal allowed.

2. Cross-appeal dismissed.

3. Summons seeking leave to appeal dismissed.

4. Set aside:

1. orders 1, 2, and 3 of the orders made on 26 September 2024 and orders 1, 2, 3, 4 and 7 of the orders made on 15 November 2024 in proceedings 2024/286961; and

2. order 3 of the orders made on 26 September 2024 and order 2 of the orders made on 15 November 2024 in proceedings 2024/278963; and

3. order 2 of the orders made on 15 November 2024 in proceedings 2024/278984.

5. Vary order 6 of the orders made on 26 September 2024 (as varied by order 5 made on 15 November 2024) in proceedings 2024/286961 by deleting the words on and from the words “on terms” in that order.

6. Vacate order 7 of the orders made on 26 September 2024 (as varied by order 6 made on 15 November 2024) in proceedings 2024/286961 (interlocutory regime pending appeal).

7. Order that Qube’s summons filed 5 August 2024 in proceedings 2024/286961 is dismissed with costs.

8. Order Qube to pay Martinus’s costs of the appeal, the cross-appeal and the application for leave to appeal.

306. GRIFFITHS AJA: I agree with Payne JA.

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Decision last updated: 02 April 2025