Maxcon Constructions Pty Ltd v Vadasz (No 2)

[2016] SASC 156

SUPREME COURT OF SOUTH AUSTRALIA

(Civil: Application)

MAXCON CONSTRUCTIONS P/L v VADASZ & ORS (NO. 2)

[2016] SASC 156

Judgment of The Honourable Justice Stanley

29 September 2016

CONTRACTS - BUILDING, ENGINEERING AND RELATED CONTRACTS - REMUNERATION - STATUTORY REGULATION OF ENTITLEMENT TO AND RECOVERY OF PROGRESS PAYMENTS - ADJUDICATION OF PAYMENT CLAIMS

ADMINISTRATIVE LAW - JUDICIAL REVIEW - GROUNDS OF REVIEW - JURISDICTIONAL MATTERS

ADMINISTRATIVE LAW - JUDICIAL REVIEW - GROUNDS OF REVIEW - ERROR OF LAW

CONTRACTS - BUILDING, ENGINEERING AND RELATED CONTRACTS - THE CONTRACT - CONSTRUCTION OF PARTICULAR CONTRACTS AND IMPLIED CONDITIONS

Application for judicial review of an adjudication determination made by the third defendant under the Building and Construction Industry Security of Payment Act 2009 (SA) (the Act).

The plaintiff is a builder and was at all relevant times undertaking the construction of an apartment development in Wright Street, Adelaide known as the Bohem Apartments. 

At all relevant times the first defendant was an undischarged bankrupt trading as a construction contractor under the registered business name of Australasian Piling Company.  On or about 15 December 2015 the plaintiff and the first defendant entered into a written contract for the first defendant to supply and install piling at the Bohem Apartments development. 

The plaintiff alleges that prior to entry into the contract the first defendant did not disclose to it that he was an undischarged bankrupt in contravention of s 269(1)(b) of the Bankruptcy Act 1966 (Cth).

The first defendant undertook the piling works which were completed in about February 2016. On 25 February 2016 the first defendant served a payment claim seeking payment of $204,864.55 (including GST) pursuant to s 13 of the Act (the payment claim).  On 8 March 2016 the plaintiff issued a payment schedule for the amount of $141,163.55 (including GST) pursuant to s 14 of the Act.  On 18 March 2016 the first defendant applied to the second defendant for an adjudication of the payment claim pursuant to s 17 of the Act.  On 23 March 2016 the third defendant was appointed as adjudicator.  On 6 April 2016 the third defendant made the adjudication determination the subject of the application for judicial review.  

The third defendant found the first defendant is entitled pursuant to the payment claim to the sum of $204,864.55 (including GST) which was to be paid by 31 March 2016.  He further determined that the first defendant is entitled to interest on the unpaid payment claim and the plaintiff is liable for the second and third defendant’s fees in respect of the adjudication. 

On the application there is a fundamental challenge to the adjudicator’s jurisdiction and allegations of two discrete errors made by the adjudicator in his determination. 

The plaintiff alleges that the third defendant lacked jurisdiction because the exercise of the adjudicator’s jurisdiction pursuant to the Act depends upon the existence of a construction contract between the first defendant and the plaintiff. The plaintiff alleges the contract was void for illegality by reason of the non-disclosure of the fact of the first defendant’s bankruptcy.

The plaintiff submits that the third defendant erred in determining that the retention amount was void and unenforceable pursuant to s33 of the Act on the basis that the provisions in the contract entitling the plaintiff to retain amounts owing under the contract until the grant of a CFO certificate of occupancy were rendered ineffective by s12 of the Act.

The plaintiff submits that the third defendant misconstrued the subcontract in finding that it did not permit the plaintiff to charge for administrative services provided to the first defendant.    

Held, per Stanley J:

1.  The third defendant did not lack jurisdiction as the subcontract is not void for illegality (at [52]).

2.  The third defendant did not fall into error in determining that there was a provision in the construction contract which fell within the definition of “pay when paid” provision in s12 of the Act (at [78]).

3.  The third defendant did not fall into error in misconstruing clauses 7.5(d), 10(l) and schedule B clauses B27, B28, B29 and B30 of the subcontract in finding that they did not permit the plaintiff to charge for administrative services provided to the first defendant (at [98]).

4.  Dismiss the appeal (at [99]).

Building and Construction Industry Security of Payment Act 2009 (SA) s 4, s, 12, s 13, s 14, s 17, s 18(1)(b), s 22, s 33; Bankruptcy Act 1966 (Cth) s 269(1)(b); Supreme Court Civil Rules 2006 (SA) r 199(2)(b); Supreme Court Act 1970 (NSW) s 69(4), referred to.
Whiteford v Bailey [1994] QCA 426; Probuild Constructions (Aust) Pty Ltd v Shade Systems Pty Ltd [2016] NSWSC 770, discussed.
Maxcon Constructions Pty Ltd v Vadasz [2016] SASC 148; Romaldi Constructions Pty Ltd v Adelaide Interior Linings Pty Ltd (No. 2) [2013] SASCFC 124; Kirk & Anor v Industrial Court of NSW & Anor (2010) 239 CLR 531; Musico v Davenport [2003] NSWSC 977; Brodyn Pty Ltd v Davenport & Anor (2004) 61 NSWLR 421; Chase Oyster Bar v Hamo Industries (2010) 78 NSWLR 393; Okaroo Pty Ltd v Vos Construction & Joinery Pty Ltd & Anor [2005] NSWSC 45; Craig v South Australia (1995) 184 CLR 163; Anisminic Ltd v Foreign Compensation Commission [1969] 2 AC 147; Kostas v HIA Insurance Services Pty Ltd (2010) 241 CLR 390; Australian Broadcasting Tribunal v Bond (1990) 170 CLR 321; R v Australian Stevedore Industry Board; Ex parte Melbourne Stevedoring Company Pty Ltd (1953) 88 CLR 100; Corporation of the City of Enfield v Development Assessment Commission (2000) 199 CLR 135; Minister for Immigration and Multicultural and Indigenous Affairs v S G L V (2004) 78 CLR 992; Gedeon v Commissioner of the NSW Crime Commission (2008) 236 CLR 120, considered.

MAXCON CONSTRUCTIONS P/L v VADASZ & ORS (NO. 2)
[2016] SASC 156

Application for judicial review

STANLEY J:

Introduction

1. This is an application for judicial review of an adjudication determination made by the third defendant under the Building and Construction Industry Security of Payment Act 2009 (SA) (the Act).

2. The plaintiff is a builder and was at all relevant times undertaking the construction of an apartment development in Wright Street, Adelaide known as the Bohem Apartments. 

3. At all relevant times the first defendant was an undischarged bankrupt trading as a construction contractor under the registered business name of Australasian Piling Company.  On or about 15 December 2015 the plaintiff and the first defendant entered into a written contract for the first defendant to supply and install piling at the Bohem Apartments development. 

4. The plaintiff alleges that prior to entry into the contract the first defendant did not disclose to it that he was an undischarged bankrupt in contravention of s 269(1)(b) of the Bankruptcy Act 1966 (Cth) (Bankruptcy Act). That is a factual issue in dispute.

5. The first defendant undertook the piling works which were completed in about February 2016. 

6. On 25 February 2016 the first defendant served a payment claim seeking payment of $204,864.55 (including GST) pursuant to s 13 of the Act (the payment claim).  On 8 March 2016 the plaintiff issued a payment schedule for the amount of $141,163.55 (including GST) pursuant to s 14 of the Act.  On 18 March 2016 the first defendant applied to the second defendant for an adjudication of the payment claim pursuant to s 17 of the Act.  On 23 March 2016 the third defendant was appointed as adjudicator.  On 6 April 2016 the third defendant made the adjudication determination the subject of the application for judicial review.  

7. In the adjudication determination the third defendant found the first defendant entitled pursuant to the payment claim to the sum of $204,864.55 (including GST) which was to be paid by 31 March 2016.  He further determined that the first defendant is entitled to interest on the unpaid payment claim and the plaintiff is liable for the second and third defendant’s fees in respect of the adjudication. 

8. On the application there is a fundamental challenge to the adjudicator’s jurisdiction and allegations of two discrete errors made by the adjudicator in his determination.  Before turning to consider those arguments it is convenient to consider the scheme of the Act.  

   The scheme of the Act

9. In Maxcon Constructions Pty Ltd v Vadasz[1] I summarised the provisions of the Act in the following terms:

   [1] [2016] SASC 148.

   The scheme of the Act was considered by the Full Court in Romaldi Constructions Pty Ltd v Adelaide Interior Linings Pty Ltd (No. 2).[2]The operation of the Act is summarised in s 3.  It provides:

   [2] [2013] SASCFC 124 at [31] – [39].

   (1) The object of this Act is to ensure that a 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.

   The Act defines a construction contract to mean a contract or other arrangement under which a party undertakes to carry out construction work or to supply related goods and services for another party. Construction work is defined in s 5 of the Act.

   The Act creates a statutory right to progress payments and defines the value of construction work carried out and the amount and date for payment of the progress payment due.[3] The Act renders ineffective so called “pay when paid” provisions in construction contracts.[4]  The frequency, method of calculation and other terms relevant to an entitlement to progress claims are left to the provisions of the contract unless the contract is silent, in which case the Act creates the entitlement and makes default provision for those matters.  A claimant contractor can make a payment claim against a respondent that may be liable to make the payment.[5]  The respondent may reply to the claim by providing a payment schedule indicating the amount (if any) of any claim the respondent proposes to make.[6]  If the scheduled amount is less than claimed, or a payment schedule is not provided, or the respondent fails to pay the whole or part of the scheduled amount by the due date prescribed pursuant to s 16, the claimant can apply for an adjudication.[7] The Act provides for the appointment of an adjudicator and a determination of the amount of the progress payment (if any) to be paid by the respondent to the claimant (the adjudicated amount).[8] The Act imposes a statutory obligation upon the respondent to pay to the claimant the adjudicated amount.[9]  If the respondent fails to pay, the claimant is entitled to request an adjudication certificate from the authorised nominating authority[10] and file the adjudication certificate as a judgment for debt in a court of competent jurisdiction.[11]  The judgment is enforceable accordingly.[12]  Once judgment has been entered, it may be subject to a stay of execution in accordance with the ordinary principles relevant to the grant of such a stay.[13] The Act prohibits the parties from contracting out of its provisions and renders void any provision which purports to do so.[14] 

   The Act treats progress payments in the same way as the common law. A progress payment is a payment by the principal to the contractor (or contractor to subcontractor) on account of the final contract price.[15]  The parties are free to dispute the final contract price independently of progress claims and progress payments. 

   It can be seen that the Act is concerned with the distribution of risk between principal and contractor in favour of the contractor on the principle of pay now, argue later.  This was explained by Keane JA (as he then was) in R J Neller Building Pty Ltd v Ainsworth[16] as follows:[17]

   It is evidently the intention of the BCIP Act, … that the process of adjudication established under that Act should provide a speedy and effective means of ensuring cash flow to builders from the parties with whom they contract, where those parties operate in a commercial, as opposed to a domestic, context.  This intention reflects an appreciation on the part of the legislature that an assured cash flow is essential to the commercial survival of builders, and that if a payment the subject of an adjudication is withheld pending the final resolution of the builder's entitlement to the payment, the builder may be ruined. 

   The BCIP Act proceeds on the assumption that the interruption of a builder's cash flow may cause the financial failure of the builder before the rights and wrongs of claim and counterclaim between builder and owner can be finally determined by the courts.  On that assumption, the BCIP Act seeks to preserve the cash flow to a builder notwithstanding the risk that the builder might ultimately be required to refund the cash in circumstances where the builder's financial failure, and inability to repay, could be expected to eventuate.  Accordingly, the risk that a builder might not be able to refund moneys ultimately found to be due to a non-residential owner after a successful action by the owner must, I think, be regarded as a risk which, as a matter of policy in the commercial context in which the BCIP Act applies, the legislature has, prima facie at least, assigned to the owner. 

   The mere existence of the very kind of risk on which the provisions of the BCIP Act in favour of the builder are predicated would not ordinarily be sufficient of itself to justify a stay of an execution warrant based on the registration of a certificate of adjudication.  There may, of course, be other circumstances, which, together with this risk, justify the staying of a warrant of execution based on the registration of an adjudication certificate.  For example, the builder may have engaged in tactics calculated to delay the ultimate determination of the rights and liabilities of the parties so as unfairly to increase the owner's exposure to the risk of the builder's insolvency.  Or the builder may have restructured its financial affairs after the making of the building contract so as to increase the risk to the owner of the possible inability of the builder to meet its liabilities to the owner when they are ultimately declared by the courts.  … 

   The Act grants a statutory entitlement to progress payments for the carrying out of work and the supplying of goods and services regardless of what is contained in the contract regarding progress payments. The Act is not intended to limit any other entitlement a claimant may have under a construction contract or any other remedy a claimant may have for recovering such entitlements. Accordingly, as the Full Court held in Romaldi,[18] an adjudication determination is subject to judicial review and, if an adjudicator acts beyond jurisdiction or the determination is otherwise vitiated under judicial review principles, the relevant court has jurisdiction to declare the adjudication void.[19] 

   [3]    Sections 8 – 11. 

   [4]    Section 12. 

   [5]    Section 13. 

   [6]    Section 14. 

   [7]    Section 17. 

   [8]    Sections 17 – 22. 

   [9]    Section 23(2). 

   [10]   Section 24(1)(a). 

   [11]   Section 25(1). 

   [12]   Section 25(1). 

   [13]   Grosvenor Constructions (NSW) Pty Ltd (In admin) v Musico [2004] NSWSC 344 at [14]; R J Neller Building Pty Ltd v Ainsworth [2008] QCA 397, [2009] 1 Qd R 390 at [7] – [8].

   [14]   Section 33. 

   [15]   Brodyn Pty Ltd t/a Time Cost and Quality v Philip Davenport & Ors [2003] NSWSC 1019 at [18] and on appeal (2004) NSWLR at 440 - 441.

   [16] [2009] 1 Qd R 390.

   [17] [2009] 1 Qd R 390 at [39] – [41].

   [18] [2013] SASCFC 124 at [36].

   [19]   See also Chase Oyster Bar Pty Ltd v Hamo Industries Pty Ltd [2010] NSWCA 190 at [36] – [45], [96] – [101] and [226] – [228], (2010) 78 NSWLR 393 at 403 – 405, 416 – 417 and 441.

   The application for judicial review

10. The application impugns three matters. 

11. First, the plaintiff alleges that the third defendant lacked jurisdiction to make the adjudication determination. The plaintiff alleges that the third defendant lacked jurisdiction because the exercise of the adjudicator’s jurisdiction pursuant to the Act depends upon the existence of a construction contract between the first defendant and the plaintiff. The plaintiff submits that the contract made on 15 December 2015 was void for illegality because of the contravention of s 269(1)(b) of the Bankruptcy Act by reason of the non-disclosure of the fact of the first defendant’s bankruptcy.

12. Second, in the alternative, the plaintiff alleges that the third defendant erred in finding it was not entitled, pursuant to the contract, to retain a retention amount of $35,454.  The plaintiff submits that the third defendant erred in determining that the retention amount was void and unenforceable pursuant to s 33 of the Act on the basis that the provisions in the contract entitling the plaintiff to retain amounts owing under the contract until the grant of a Certificate of Occupancy (CFO) were rendered ineffective by s 12 of the Act which proscribes “pay when paid” provisions.   The plaintiff submits that the requirements in clause 11 and schedule E of the contract providing for the return of 50 per cent of the retention amount within 90 days after CFO and the remaining 50 per cent within 365 days after CFO are not provisions which make the payment of money dependent upon the operation of another contract as found by the third defendant. 

13. Third, in addition, the plaintiff alleges that the third defendant erred in finding it was not entitled to deduct an amount of $22,500 (excluding GST) for administration costs incurred in paying invoices from suppliers of the first defendant for the supply of concrete and steel reinforcement in the work undertaken by the first defendant on the Bohem Apartments development.  The third defendant decided that the plaintiff was obliged pursuant to the special conditions of the contract to administer such invoices and accordingly those administrative costs did not fall outside the scope of the contract and could not be claimed as a back charge or additional work pursuant to clause 7.5(d) of the contract. 

    Is non-jurisdictional error reviewable?

14. As was noted in Romaldi Constructions Pty Ltd v Adelaide Interior Linings Pty Ltd (No. 2)[20] an adjudication determination is subject to judicial review and if an adjudicator acts beyond jurisdiction or the determination is otherwise vitiated under judicial review principles the court can declare the adjudication void.  This begs the question how might the adjudication determination be vitiated under judicial review principles?  

    [20] [2013] SASCFC 124 at [36].

1. The plaintiff submits that non-jurisdictional errors of law are amenable to judicial review relying on Probuild Constructions (Aust) Pty Ltd v Shade Systems Pty Ltd.[21] In Probuild Emmett AJA concluded that judicial review under s 69(3) of the Supreme Court Act 1970 (NSW) is available to quash a determination made by an adjudicator under the cognate legislation in New South Wales[22] where an error of law, that leads to an adjudicated amount that differs from the amount that would have been determined but for the error of law, appears on the face of the record.[23] 

   [21] [2016] NSWSC 770.

   [22]   Building and Construction Industry Security of Payment Act 1999 (NSW).

   [23] [2016] NSWSC 770 at [74].

2. I do not accept the plaintiff’s submission. 

3. In Kirk & Anor v Industrial Court of NSW & Anor[24] the High Court held that the erroneous construction of statutory provisions which leads a court or tribunal to misapprehend the limits of its functions and powers constitutes jurisdictional error.  Referring to the court’s earlier decision in Craig v South Australia[25] the plurality held that misconstruction of a provision of a statute regulating occupational health and safety led the Industrial Court to make orders convicting and sentencing the defendants where it had no power to do so because no particular act or omission was identified as constituting an offence under the statute.  An offence had not been proved.  The court also noted the continued need for, and utility of, the distinction between jurisdictional and non-jurisdictional error in the Australian constitutional context.[26]  In that context it considered the distinction between error of law on the face of the record and jurisdictional error.  The High Court analysed what constitutes the “record”.  The Court referred to its earlier decision in Craig which rejected including both the reasons for decision and the complete transcript of proceedings in the record of an inferior court.[27] 

   [24] [2010] HCA 1, (2010) 239 CLR 531.

   [25] (1995) 184 CLR 163.

   [26] [2010] HCA 1 at [100], (2010) 239 CLR 531 at 581.

   [27] [2010] HCA 1 at [84], (2010) 239 CLR 531 at 577.

4. The Court in Craig rejected this more expansive approach as going a long way towards transforming judicial review into a discretionary general appeal for error of law upon which the transcript of proceedings and the reasons for decisions could be scoured and analysed in a search for some internal error.  Because this would represent a significant increase in the financial hazards to which those involved in even minor litigation are already exposed, the Court held it to be a step best left to legislation.  In Kirk the plurality reasoned that if appeal or review for error of law is provided by the statute the availability of certiorari would not greatly alter the extent of the financial hazards to which those involved in litigation in an inferior court are exposed.  They held that to the extent to which appeal or review for error of law is available in relation to a decision the premise for the conclusion reached in Craig is denied.  But in Kirk the Court went on to consider the wider statutory context. In particular it referred to s 69 of the Supreme Court Act 1970 (NSW) which provides that the jurisdiction of the New South Wales Supreme Court to grant relief in the nature of certiorari includes jurisdiction to quash for error of law on the face of the record and that the face of the record includes the reasons expressed by the court or tribunal for its ultimate determination. In those circumstances the reasons in Craig confining the extent of the record of an inferior court did not apply. 

5. However, there is no equivalent to s 69 in either the Supreme Court Act 1935 (SA) or in the Rules. While 6SCR 199(2)(b) provides that the court may make an order for judicial review, including an order setting aside the decision of an authority because of absence or excess of jurisdiction, jurisdictional error or error of law on the face of the record, there is no equivalent provision to s 69(4) of the Supreme Court Act 1970 (NSW) which provides that the face of the record includes the reasons expressed by the court or tribunal for its ultimate determination.

6. It was the operation of s 69 that was central to the reasoning of the court in Probuild in holding that judicial review was available to quash a determination by an adjudicator infected by a non-jurisdictional error of law.  The absence of an equivalent provision in South Australia renders inapplicable in this State the reasons in Probuild for concluding that non-jurisdictional error of law, except error of law on the face of the record, is amenable to judicial review. 

7. Additionally, the Act does not create a statutory right of appeal or review for error of law.  On the reasoning in Kirk, that contraindicates the adjudicator’s determination being amenable to judicial review for non-jurisdictional errors of law.

8. I also agree with the reasoning of McDougall J in Musico v Davenport[28] and Hodgson JA in Brodyn Pty Ltd v Davenport & Anor,[29] with whom Mason P and Giles JA agreed, that the scheme of the Act contraindicates the availability of judicial review on the basis of non-jurisdictional error of law. The Act discloses a legislative intention to give an entitlement to progress payments, and to provide a mechanism to ensure that disputes concerning the amount of such payments are resolved with a minimum of delay. The payments themselves are only payments on account of a liability that will be finally determined otherwise. The procedure contemplates a minimum of opportunity for court involvement. The remedy provided by s 28 which permits a claimant to suspend work is only effective if a claimant can be confident of the protection given by that section. If the claimant faced the prospect that an adjudicator’s determination could be set aside on any ground involving doubtful questions of law, the risks involved in acting under s 28 would be prohibitive and s 28 could operate as a trap.

   [28] [2003] NSWSC 977 at [54].

   [29] (2004) 61 NSWLR 421 at 440 – 441.

9. While Emmett AJA in Probuild was of a different view,[30] the analysis of Hodgson JA was adopted by Mason P and Giles JA in Brodyn.  Subsequently, the New South Wales Court of Appeal in Chase Oyster Bar Pty Ltd v Hamo Industries Pty Ltd[31] revisited the correctness of the judgment in Brodyn in light of the High Court’s reasons in Kirk and while it reversed the conclusion in Brodyn that determinations by adjudicators are not amenable to judicial review for jurisdictional error, the Court of Appeal did not criticise the conclusion in Brodyn that judicial review would not lie for non-jurisdictional error of law on the face of the record. 

   [30] [2016] NSWSC 770 at [70] – [74].

   [31] (2010) 78 NSWLR 393.

10. Of course the adjudicator is not a court.  In Craig the Court considered a decision of an administrative decision maker was amenable to judicial review for an error of law which causes it to identify a wrong issue, to ask itself a wrong question, to ignore relevant material, to rely on irrelevant material or, at least in some circumstances, to make an erroneous finding or to reach a mistaken conclusion.  Where the decision maker’s exercise or purported exercise of power is thereby affected it exceeds its authority or powers.  This constitutes jurisdictional error which will invalidate any order or decision of the decision maker which reflects it.[32]  

    [32] (1995) 184 CLR 163 at 179.

11. In this case the first ground of judicial review alleges jurisdictional error.  The other two grounds are more difficult to categorise.  It is implicit in the plaintiff’s submissions that it asserts either that the adjudicator committed jurisdictional error because of an erroneous construction of the Act which led him to misapprehend his functions, or that he committed a non-jurisdictional error on the face of the record.

12. For the above reasons I do not consider that the latter is amenable to judicial review.  The court must recognise the limits of the exercise of its supervisory jurisdiction.  Judicial review lies to set aside decisions made in the absence or excess of jurisdiction or where there has been a failure to observe the requirements of procedural fairness, or where the decision has been vitiated by fraud or a failure to observe the requirements of procedural fairness, to correct jurisdictional error, or error on the face of the record.  Judicial review is not available to provide a discretionary general appeal for error of law.  As Lord Reid said in Anisminic Ltd v Foreign Compensation Commission[33] a decision maker who does not act in absence or excess of jurisdiction, or commit jurisdictional error, or an error of law on the face of the record, is as much entitled to decide the question before him or her wrongly as to decide it rightly. 

    [33] [1969] 2 AC 147 at 171.

13. The issue on grounds 2 and 3 will be whether the adjudicator fell into jurisdictional error by misconstruing the Act so as to misapprehend the limits of his functions and powers or committed an error of law on the face of the record.  The record for these purposes is the application for an adjudication by the first defendant’s payment claim and the adjudicator’s determination of the third defendant.  The record does not include his reasons.  This follows from the reasons of the Court in Craig that ordinarily, in the absence of statutory prescription, the record will comprise no more than the determination which initiates the proceedings and thereby grounds the jurisdiction of the tribunal, the pleadings (if any) and the adjudication i.e. the actual order or ruling.[34]

    [34] (1995) 184 CLR 163 at 182.

    Ground 1:  Did the third defendant lack jurisdiction to make the adjudication determination? 

14. The plaintiff’s submission that there was a want of jurisdiction for the third defendant’s adjudication determination depends upon two matters. First, that the first defendant contravened the provisions of s 269(1)(b) of the Bankruptcy Act, and second, that as a result, the subcontract between the plaintiff and the first defendant was void for illegality.

15. The first matter involves a finding of fact.  The evidence before the court comes from the first defendant and Mr Vlad Gorsovski, a senior project manager of the plaintiff. 

16. The first defendant gave evidence of telling Mr Gorsovski in the course of a telephone conversation, which he dates as occurring on 8 October 2015, while he was driving from Brisbane to the Gold Coast, that he was an undischarged bankrupt.  He said this occurred in the course of a conversation at an early stage in the negotiations between the parties concerning the first defendant’s safety record.  He said that it was Mr Gorsovski who raised the issue of the first defendant’s bankruptcy.  He said Mr Gorsovski said words to the effect of “There’s another thing, about you and your business.  You want to tell me about it?”  The first defendant responded by asking “You mean about bankruptcy?”  The first defendant said Mr Gorsovski responded by saying “Go on”.  The first defendant replied “I was put into bankruptcy in December 2010.  I have a builder’s licence from the Government of South Australia, who are aware of my bankruptcy, and my trustee is aware that I continue to run my business.”  The first defendant said that the discussion concluded with Mr Gorsovski saying “Yeah, well OK, leave it with me.”

17. Mr Gorsovski gave evidence denying a conversation in these terms had occurred. 

18. The first defendant said he was aware of his obligation to make disclosure to the plaintiff of the fact of his bankruptcy.  He said the disclosure was made in circumstances where the parties had been negotiating over a period since about June or July of 2015.  The negotiations had proceeded by email and telephone conversations between the first defendant and Mr Gorsovski.  He gave evidence that it was his intention to disclose the fact of his bankruptcy to the plaintiff at some time before any contract between them was executed.  He had not intended to make the disclosure as at 8 October 2015 until the matter was raised by Mr Gorsovski.  Once that conversation had occurred he said there was no need for any further disclosure to be made. 

19. Mr Gorsovski gave evidence of his extensive experience as a project manager over many years.  He gave evidence of the negotiations between the parties.  He said the Bohem Apartments development was the first development the plaintiff had undertaken in South Australia.  It was part of his duties as the senior project manager to recommend to the directors of the plaintiff the subcontractors who should be engaged for the work.  He had no prior experience of working with the first defendant.  The first defendant had contacted him and there had been numerous conversations and emails between them.  They had met in Melbourne on two occasions at the plaintiff’s offices prior to the execution of the subcontract.  He said that the first plaintiff did not mention the fact of his bankruptcy at any stage during this time.  He said that had he done so, he would not have recommended using the first defendant’s services for the work on the development.  He said that he would not take the risk.  There were five or six other tenders he could have recommended.  He considered that the fact of the first defendant’s bankruptcy, had it been known to him, would have been a sufficient basis to exclude him from consideration for the contracted work because of the risk he posed as an undischarged bankrupt when there were other alternatives available.   He pointed to provisions of the contract that reflect a company policy on the part of the plaintiff that precluded the engagement of a bankrupt.  He said he did not make any enquiries about the first defendant. 

20. The court received an affidavit of Mr Anthony Elzain, a director of the plaintiff, that he had no knowledge of the fact of the first defendant’s bankruptcy prior to entering into the contract.  No-one brought this to his attention.  There was no challenge to this evidence by the first defendant. 

21. I prefer the evidence of Mr Gorsovski to that of the first defendant.  I consider Mr Gorsovski’s evidence to be more plausible than the claim by the first defendant that he disclosed the fact of his bankruptcy to Mr Gorsovski.

22. In my view, Mr Gorsovski’s claim that had the disclosure been made by the first defendant, he would not have proceeded to recommend to Mr Elzain that the plaintiff retain the first defendant to perform the piling works, is compelling.  A consideration of the terms of the contract evidence a concern on the part of the plaintiff about the financial status of any party with whom it subcontracts.

23. Clause 19 imposes a duty on a subcontractor to honestly inform the plaintiff of its financial status at the time of tender and subsequently immediately to declare if it becomes aware that it is likely to enter into liquidation, administration or any other financial difficulties.  Any failure to do so is deemed to be a breach of the contract.  That duty is reinforced by the provisions of clause 7.5(e) which imposes an obligation on the subcontractor to notify the plaintiff if the subcontractor at any stage realises that he may be in a position of liquidating or bankrupting. 

24. In these circumstances I consider it unlikely that had the first plaintiff made the disclosure, Mr Gorsovski would have recommended retaining his services for the contract or, at least, would have done so without notifying Mr Elzain of the fact of the first defendant’s bankruptcy.  After all, there were other tenders, the first defendant had no prior relationship with the plaintiff which might have disposed the plaintiff to take a chance with the first defendant knowing his status. 

25. Even on the first defendant’s account of the conversation with Mr Gorsovski, that after being informed of the first defendant’s status, Mr Gorsovski indicated that the first defendant should leave it with him yet on the first defendant’s account Mr Gorsovski did not revert to him on this topic which was never raised again.  This seems improbable.  I further consider it unlikely that given this information, at the very least, Mr Gorsovski would not have made enquiries about the first defendant. 

26. Against that reasoning must be placed the possibility that the disclosure was made and Mr Gorsovski has forgotten it.  I think that unlikely.  Given the plaintiff’s evident attitude to the financial status of its subcontractors, I think it improbable that Mr Gorsovksi would have done nothing in response to being vouchsafed with this information and subsequently forgotten it.

27. Accordingly, I reject the first defendant’s evidence that the disclosure required by s 269(1)(b) was made.

28. That begs the question whether the failure to make the disclosure has the consequence that the subcontract is rendered void for illegality. 

29. The jurisdiction of the third defendant to make an adjudication determination under the Act depended upon the existence of a construction contract between the parties.  The existence of a construction contract was a jurisdictional fact being the criterion, satisfaction of which enlivened the power of the third defendant as the decision maker.[35] 

    [35]   Corporation of the City of Enfield v Development Assessment Commission [2000] HCA 5 at [28], (2000) 199 CLR 135 at 148, Gedeon v Commissioner of the NSW Crime Commission [2008] HCA 43 at [43], (2008) 236 CLR 120 at 139.

30. The plaintiff submits that if the subcontract between the parties is void for illegality then no construction contract within the meaning of the Act existed. 

31. Section 269(1) provides:

    (1)     An undischarged bankrupt or a debtor who is a party to a debt agreement shall not:

    (a)    either alone or jointly with another person, obtain credit to the extent of $3,000 or more from a person without informing that person that he or she is an undischarged bankrupt or a party to a debt agreement (as the case requires);

    (aa)   either alone or jointly with another person, obtain goods or services from a person:

    (i)by giving a bill of exchange or cheque drawn, or a promissory note made, by him or her either alone or jointly with another person, being a bill, cheque or note under which the sum payable is $3,000 or more; or

    (ii)by giving 2 or more such instruments under which the sums payable amount in the aggregate to $3,000 or more;

    without informing that person that he or she is an undischarged bankrupt or a party to a debt agreement (as the case requires);

    (ab)   either alone or jointly with another person, enter into a hire-purchase agreement with a person, or enter into a contract or agreement for the leasing or hiring of any goods from a person, being a hire-purchase agreement, contract or agreement under which the amounts payable to that person amount in the aggregate to $3,000 or more, without informing that person that he or she is an undischarged bankrupt or a party to a debt agreement (as the case requires);

    (ac)   either alone or jointly with another person, obtain goods or services from a person by promising to pay that person or another person an amount of, or amounts aggregating, $3,000 or more without informing that person that he or she is an undischarged bankrupt or a party to a debt agreement (as the case requires);

    (ad)   either alone or jointly with another person, obtain an amount of, or amounts aggregating, $3,000 or more from a person by promising to supply goods to, or render services for, that person or another person without informing that person that he or she is an undischarged bankrupt or a party to a debt agreement (as the case requires); or

    (b)     carry on business under an assumed name, in the name of another person or, either alone or in partnership, under a firm name without disclosing to every person with whom he or she or, if he or she is carrying on business in partnership under a firm name, the partnership deals, his or her true name and the fact that he or she is an undischarged bankrupt or a party to a debt agreement (as the case requires).

1. In Maxcon Constructions Pty Ltd v Vadasz (No. 1)[36] I considered the principles applicable to the issue of whether a contract is void for illegality.  Those principles were analysed by the High Court in a series of cases commencing with Yango Pastoral Company Pty Ltd v First Chicago Australia Ltd,[37] Nelson v Nelson,[38] Fitzgerald v F J Leonhardt Pty Ltd[39] and Gnych & Anor v Polish Club Ltd.[40]I said:[41]

   [36] [2016] SASC 148.

   [37] [1978] HCA 42, (1978) 139 CLR 410.

   [38] [1995] HCA 25, (1995) 184 CLR 538.

   [39] [1997] HCA 17, (1997) 189 CLR 215.

   [40] [2015] HCA 23, (2015) 255 CLR 414.

   [41] [2016] SASC 148 at [44] – [49].

   In Gnych French CJ, Kieffel, Keane and Nettle JJ considered the principles of statutory illegality as follows:[42]

   [42] [2015] HCA 23 at [35], [37] – [38], (2015) 255 CLR 414 at 424 – 425.

   In Equuscorp Pty Ltd v Haxton, French CJ, Crennan and Kiefel JJ explained that an agreement may be unenforceable for statutory illegality in three categories of case, where:

   “(i)     the making of the agreement or the doing of an act essential to its formation is expressly prohibited absolutely or conditionally by the statute;

   (ii)     the making of the agreement is impliedly prohibited by statute. A particular case of an implied prohibition arises where the agreement is to do an act the doing of which is prohibited by the statute;

   (iii)     the agreement is not expressly or impliedly prohibited by a statute but is treated by the courts as unenforceable because it is a ‘contract associated with or in the furtherance of illegal purposes’.

   In the third category of case, the court acts to uphold the policy of the law, which may make the agreement unenforceable. That policy does not impose the sanction of unenforceability on every agreement associated with or made in furtherance of illegal purposes. The court must discern from the scope and purpose of the relevant statute ‘whether the legislative purpose will be fulfilled without regarding the contract or the trust as void and unenforceable’.”

   (Footnotes omitted.)

   …

   In this regard, in Australian Competition and Consumer Commission v Baxter Healthcare Pty Ltd, Gleeson CJ, Gummow, Hayne, Heydon and Crennan JJ cited with approval the observation by Mason J in Yango Pastoral Co Pty Ltd v First Chicago Australia Ltd that:

   “the question whether a contract prohibited by statute is void is, like the associated question whether the statute prohibits the contract, a question of statutory construction.”

   Their Honours went on to state that whether a statute which:

   “contains a unilateral prohibition on entry into a contract … is void … depends upon the mischief which the statute is designed to prevent, its language, scope and purpose, the consequences for the innocent party, and any other relevant considerations. Ultimately, the question is one of statutory construction.”

   (Footnotes omitted.)

   Their Honours went on to consider where legislation provides a statutory penalty for an offence, whether the contravention of that provision should result in the avoidance of a contract.  They cited with approval the statement of Mason J in Yango:[43]

   [43] [2015] HCA 23 at [47], (2015) 255 CLR 414 at 427.

   “There is much to be said for the view that once a statutory penalty has been provided for an offence the rule of the common law in determining the legal consequences of commission of the offence is thereby diminished.”

   Gageler J approved the reasoning of Ipp JA in Tonkin v Cooma-Monaro Shire Council[44] that there is no universal rule that can be applied to the construction of statutes to determine whether the effect of a failure to comply with a provision of a statute is to render a contract to which that provision applied invalid or unenforceable.  Each statute has to be considered as a whole and as a separate entity.[45]  He said that where a statute expressly or impliedly denies legal operation to a contract it is the statute itself which operates to render that contract incapable of enforcement at common law.  A contract which is not denied legal operation by statutory force may still be unenforceable at the insistence of one or both parties by operation of the common law by reference to considerations of public policy.  The cases in which that might occur, however, must be closely confined.[46]  In this context he said:[47]

   The consideration of public policy that a person ought not to be permitted by law to found a cause of action on an immoral or illegal act is the product of an earlier age. The broader consideration of public policy is now rarely recognised by the common law to have application in relation to illegality which arises under a modern regulatory statute. … It is not the function of the common law to seek to improve on a regulatory scheme by supplementing the statutory sanctions for its breach. If a statute itself does not operate to deny legal operation to an agreement made in breach of one of its prohibitions, or to render that agreement unenforceable by reason of that breach, the coherence of the law is best served by a court respecting and enforcing that legislative choice.

   On the other hand, Gageler J, citing Nelson and Fitzgerald, considered that public policy considerations might warrant withholding a common law remedy from a person who has deliberately flouted the law but only if the consequence of doing so would be both proportionate to the seriousness of the illegality and not incongruous with the statutory scheme.[48]

   In this case s 269(1)(b) prohibits an undischarged bankrupt from carrying on business inter alia under a firm name without disclosing to every person with whom he deals the fact that he is an undischarged bankrupt.

   Section 269(1)(b) does not proscribe an undischarged bankrupt from entering into a contract. The provision imposes an obligation to make disclosure on the part of an undischarged bankrupt. The Bankruptcy Act does not expressly provide that any contract made in contravention of the obligation to make disclosure is void and unenforceable. It merely imposes a penalty for failure to comply with the obligation. The contract, while lawful according to its own terms, was entered into in circumstances where there was a failure to comply with an antecedent obligation, namely, disclosure. In Fitzgerald Dawson and Toohey JJ observed that it has sometimes been said that a contract is illegal if its performance involves breach of a statute passed for the protection of the public; but such a proposition is, they considered, too broad.  It may be that the purpose of the statute will be served by the imposition of a penalty, notwithstanding it is for the protection of the public.[49] Section 269(1)(b) is not concerned with the performance of the contract. The subject matter of the subsection is the circumstances in which the contract is made. Where the contract was capable of lawful performance, had disclosure been made, the issue is one of public policy. As the court in Fitzgerald held, regard must be had, primarily, to the scope and purpose of the statute, to determine whether the relevant legislative purpose can be fulfilled without regarding the contract as void and unenforceable.  In Fitzgerald where the contract was for the performance of drilling which required a permit, the court held that the penalty provisions prescribed for drilling without a permit adequately fulfilled the purpose of the legislation without rendering the contract void and unenforceable.

   [44] (2006) 145 LGERA 48 at [59].

   [45] [2015] HCA 23 at [66], (2015) 255 CLR 414 at 432.

   [46] [2015] HCA 23 at [70], (2015) 255 CLR 414 at 433.

   [47] [2015] HCA 23 at [73], (2015) 255 CLR 414 at 434 – 435.

   [48] [2015] HCA 23 at [75], (2015) 255 CLR 414 at 435.

   [49] (1997) 189 CLR 215 at 220.

2. I accept the plaintiff’s submission that s 269 of the Bankruptcy Act is concerned with the protection of creditors and other individuals from entering into a contract with a bankrupt without being aware of his or her status. In order to provide such protection the Act imposes an obligation of disclosure.

3. However, I do not accept the plaintiff’s submission that s 269(1)(b) evinces a legislative intention founded in considerations of public policy that where a contract is made in the absence of the requisite disclosure, there is an implication that the contract will be denied legal operation by operation of the common law.

4. Section 269(1)(b) is concerned to ensure that persons who deal with undischarged bankrupts are on notice as to their financial status. The failure on the part of an undischarged bankrupt to put a party with whom he or she contracts on notice of that fact exposes the bankrupt to a statutory penalty for that non-disclosure. The failure to disclose the bankrupt’s financial status does not necessarily affect the subsequent performance of that contract. That is the position in this case. In my view to render the contract unenforceable in those circumstances would be disproportionate to the seriousness of the unlawful conduct when the Act does not expressly require that result and it expressly imposes a different sanction for the protection of the Act’s objects and purposes.[50]  

   [50]   Nelson v Nelson (1995) 184 CLR 538 at 613.

5. The plaintiff sought to rely upon a decision of the Queensland Court of Appeal in Whiteford v Bailey.[51]In their joint reasons, Fitzgerald P, McPherson JA and Derrington J said:[52]

   The defendant appears to have obtained credit from the plaintiff without, so far as can be gathered, disclosing that he was an undischarged bankrupt. Doing so constitutes an offence under s 269(a)[sic] of the Bankruptcy Act, and there is authority to the effect that the contract by which such credit is obtained is not enforceable by the bankrupt. See De Choisy v Hynes [1937] 4 All ER 54.

   [51] [1994] QCA 426.

   [52] [1994] QCA 426.

6. It is apparent that these observations were made obiter.  They were not relevant to the ultimate disposition of the appeal.  More importantly, Whiteford v Bailey was decided before Nelson, Fitzgerald and Gnych.  The Court of Appeal’s observations in Whiteford obviously were not made with the advantage of the analysis of the principles relevant to statutory illegality found in that line of authority. In the circumstances I decline to apply the reasoning of the Court of Appeal in relation to s 269(1)(a) in deciding the consequences of a contract formed in contravention to the provisions of s 269(1)(b) of the Bankruptcy Act.

7. I would not hold the subcontract void for illegality.  Where the contract has been performed it would be disproportionate to permit the innocent party to be relieved of its lawful obligations pursuant to the contract on that basis.

8. This conclusion renders it unnecessary to consider the first defendant’s submission that the jurisdiction of the third defendant to make the adjudication determination was not excluded by a finding that the subcontract was void for illegality.  This submission has its basis in the definition of “construction contract”.  Section 4 provides that a “construction contract” means a contract or other arrangement under which one party undertakes to carry out construction work, or to supply related goods and services, for another party.  “Construction work” is defined in s 5.  Relying upon a passage in the reasons of Nicholas J in Okaroo Pty Ltd v Vos Construction & Joinery Pty Ltd & Anor[53] the first defendant submits that if the subcontract was void for uncertainty there existed an arrangement between the parties which satisfied the definition of “construction contract” in the Act.  Had it been necessary to decide this question, I would have rejected the first defendant’s submission.  The definition juxtaposes “contract” and “arrangement”.  An arrangement in the Act is, as Nicholas J found, a transactional relationship between parties which is not a legally enforceable contract.  In my view, the parties in this matter entered into a contract.  Had the contract been void for illegality, it is not open to find that there subsisted some separate and distinct “arrangement” within the terms of the definition.   There was only one agreement.  It was either a contract or an arrangement.  In this case it was a contract.  If it was void and unenforceable, the requisite jurisdictional fact did not exist.  It was not open to find that the contract being void transmogrified into an “arrangement”. 

   [53] [2005] NSWSC 45 at [39] – [41].

   Ground 2: The retention amount

9. The plaintiff submits that the third defendant erred in finding it was not entitled, pursuant to the construction contract, to retain a retention amount of $35,454.  The plaintiff submits that the third defendant erred in deciding that the retention amount was void and unenforceable pursuant to s 33 of the Act on the basis that the provisions in the contract entitling the plaintiff to retain amounts owing under the contract until the grant of a CFO certificate of occupancy were rendered ineffective by s 12 of the Act. 

10. Section 33 provides:

    33—No contracting out

    (1) The provisions of this Act have effect despite any provision to the contrary in any contract.

    (2) A provision of an agreement, whether in writing or not—

    (a)     under which the operation of this Act is, or is purported to be, excluded, modified or restricted, or that has the effect of excluding, modifying or restricting the operation of this Act; or

    (b)     that may reasonably be construed as an attempt to deter a person from taking action under this Act,

    is void.

11. Section 12 of the Act provides:

    12—Effect of “pay when paid” provisions

    (1) A pay when paid provision of a construction contract has no effect in relation to any payment for construction work carried out or undertaken to be carried out (or for related goods and services supplied or undertaken to be supplied) under the contract.

    (2) In this section—

    money owing, in relation to a construction contract, means money owing for construction work carried out or undertaken to be carried out (or for related goods and services supplied or undertaken to be supplied) under the contract;

    pay when paid provision of a construction contract means a provision of the contract—

    (a)     that makes the liability of 1 party (the first party) to pay money owing to another party (the second party) contingent on payment to the first party by a further party (the third party) of the whole or a part of that money; or

    (b)     that makes the due date for payment of money owing by the first party to the second party dependent on the date on which payment of the whole or a part of that money is made to the first party by the third party; or

    (c)     that otherwise makes the liability to pay money owing, or the due date for payment of money owing, contingent or dependent on the operation of another contract.

12. The third defendant concluded that this requirement constituted a “pay when paid” provision pursuant to paragraph [c] of the definition in s 12(2).

13. Clause 11 of the construction contract provides for retention amounts and their release.  Specifically clause 11(e) provides for the release of retention amounts by reference to schedule E.   Fifty per cent of the retention amount is to be released within 90 days after CFO is achieved, and the remaining 50 per cent, 365 days after the date of CFO.  “CFO” is defined to mean the certificate of occupancy and any other approvals required under building legislation and which are required to enable the works lawfully to be used for their respective purposes in accordance with the principal’s project requirements. 

14. “Principal” is defined to mean the project client or the client’s representative.  “Project requirements” are defined to mean design intent and intended application and use of the design and its equipment’s [sic] and facilities. 

15. Clause 7.5(g) provides that the plaintiff maintains the right to enforce the conditions of the subcontract and withhold all retention as per the conditions of release. 

16. The third defendant reasoned that the release of retention money pursuant to the construction contract is contingent upon a certificate of occupancy being granted.  He construed this to refer to the principal’s contractual project requirements under the head contract.  This made the liability to pay retention money contingent and dependent upon the operation of another contract.  He said:[54]

    The retention provision makes the payment of retention monies subject to the respondent’s performance under the head contract; specifically its procurement of a certificate of occupation upon its achievement of practical completion.  The due date for the release of such retention monies is tied to such an event as unable to be determined, as a third party event (the granting of CFO) must occur under the head contract, in order for a due date of the retention release to be calculated, under the parties’ contract.

    [54]   Paragraph [105] of the reasons for determination, Affidavit of Dimitrios Jimmy Diakou sworn 25 May 2016 page 289.

17. At the conclusion of the trial I granted permission to the parties to address the question of whether there was evidence of the head contract before the adjudicator.  The plaintiff subsequently filed a submission contending that if the third defendant knew of a provision in the head contract requiring the provision of a certificate of occupancy this was not brought to the plaintiff’s attention nor was the plaintiff afforded the opportunity to address the adjudicator’s assumption.  This constituted a denial of natural justice.  There is no ground in the application for judicial review which complains of a denial of procedural fairness.  Whether there was a denial of procedural fairness would require evidence of what occurred before the adjudicator and between the adjudicator and the parties.  Given the absence of a ground that raises this issue, unsurprisingly evidence in relation to this issue was not adduced before me.  Accordingly, I do not address this submission. 

18. The plaintiff submits that the retention monies do not fall within the definition of “pay when paid” provisions in s 12(2)(c) of the Act.  The plaintiff submits that the construction contract does not make liability for the release of the retention money or its due date for payment contingent or dependent on the operation of another contract.  Rather, release of retention money is to occur at a specific date after a specific event irrespective of whether the plaintiff has been paid or not.  Accordingly, the third defendant improperly exercised his power and no reasonable decision maker could find that the construction contract infringed the “pay when paid” prohibition. 

19. The first defendant submits that there is no error.  The third defendant determined that the timing of the return of the retention monies depended upon the builder’s performance under the head contract, specifically the builder’s procurement of a certificate of occupation.  Accordingly, the due date for the return of the retention monies was dependent upon the builder’s performance under the head contract and was independent of the construction contract. 

20. In my view ground 2 does not involve any question of jurisdictional error as a result of the third defendant misconstruing the Act.  The third defendant construed the Act correctly.  He proceeded on the basis that the particular issue to be decided relevant to this ground was whether there was a provision in the construction contract which fell within the definition of a “pay when paid” provision in s 12.  If so, that rendered the contractual provision void pursuant to s 33 of the Act.  The real issue is whether there was evidence to support the factual finding made by the third defendant that the payment of the retention monies was dependent upon the procurement of a certificate of occupancy under the head contract. 

21. It appears to be common ground that the head contract was not in evidence before the third defendant.  It appears the third defendant has based his reasons on an assumption or understanding of the provisions of the head contract between the builder and the principal.  That may well be so.  To be eligible to be an adjudicator a person must have such qualifications, expertise and experience as may be prescribed by regulations under the Act.[55]  The experience of the third defendant may justify this assumption but the head contract was not in evidence before the third defendant on the adjudication.  The Court cannot know whether the adjudicator’s assumption is correct.  The head contract is not in evidence.  Although the first defendant in submissions to the third defendant contended that the procurement of the CFO was a condition of the head contract, the plaintiff did not put the head contract into evidence.  Unlike the plaintiff, the first defendant was not a party to the head contract.  While this is a Blatch v Archer situation the fact is there was no evidence of the head contract before the third defendant.  In my view, in the absence of evidence that establishes the requirement for the achievement of a certificate of occupancy is grounded in the head contract between the plaintiff and the principal, the third defendant’s reasons disclose error.  The issue is whether it discloses jurisdictional error or error on the face of the record. 

    [55]   Section 18(1)(b) of the Act. 

1. The relevant error is an absence or want of evidence of the terms of the head contract upon which the reasons of the third defendant are based.  The plaintiff propounds its argument on the basis that the third defendant’s reasons exhibit Wednesbury unreasonableness i.e. that the third defendant’s decision is so unreasonable, no reasonable decision maker could have made it.  That submission represents the other side of the same coin.  It takes no further the argument that the third defendant’s decision was based on an absence of evidence of a particular fact.[56] 

   [56]   Kostas v HIA Insurance Services Pty Ltd [2010] HCA 32 at [16], (2010) 241 CLR 390 at 396.

2. In Australian Broadcasting Tribunal v Bond[57] Mason CJ discussed the common law in relation to judicial review of factual findings in the following terms:[58]

   The question whether there is any evidence of a particular fact is a question of law: McPhee v. S. Bennett Ltd.; Australian Gas Light Co. v. Valuer-General. Likewise, the question whether a particular inference can be drawn from facts found or agreed is a question of law: Australian Gas Light; Hope v. Bathurst City Council. This is because, before the inference is drawn, there is the pre1iminary question whether the evidence reasonably admits of different conclusions: Federal Commissioner of Taxation v. Broken Hill South Ltd. So, in the context of judicial review, it has been accepted that the making of findings and the drawing of inferences in the absence of evidence is an error of law: Sinclair v. Maryborough Mining Warden.

   But it is said that “[t]here is no error of law simply in making a wrong finding of fact”: Waterford v. The Commonwealth, per Brennan J. Similarly, Menzies J. observed in Reg. v. District Court; Ex parte White:

   “Even if the reasoning whereby the Court reached its conclusion of fact were demonstrably unsound, this would not amount to an error of law on the face of the record. To establish some faulty (e.g. illogical) inference of fact would not disclose an error of law.”

   Thus, at common law, according to the Australian authorities, want of logic is not synonymous with error of law. So long as there is some basis for an inference - in other words, the particular inference is reasonably open - even if that inference appears to have been drawn as a result of illogical reasoning, there is no place for judicial review because no error of law has taken place.

   On the other hand, there are statements in the English cases which support a “no sufficient evidence” test in the context of judicial review of findings of fact: see, for example, Reg. v. Governor of Brixton Prison; Ex parte Armah. It remains to be seen whether these statements convey any more than a “no probative evidence” test. So far no occasion has arisen to determine whether this is the case and, if so, whether the statements are to be seen as expressing what is or should be the law of Australia on the topic. There are also statements in the English cases which suggest that findings and inferences are reviewable for error of law on the ground that they could not be reasonably made on the evidence or reasonably drawn from the primary facts: Edwards (Inspector of Taxes) v. Bairstow; Cooper v. Stubbs; British Launderers' Research Association v. Borough of Hendon Rating Authority; Ashbridge Investments Ltd. v. Minister of Housing and Local Government. Further, in Mahon v. Air New Zealand the Judicial Committee stated that natural justice requires that “the decision to make [a] finding must be based upon some material that tends logically to show the existence of facts consistent with the finding and that the reasoning supportive of the finding, if it be disclosed, is not logically self-contradictory”. These statements may be traced back to the observations of Diplock L.J. in Reg. v. Deputy Industrial Injuries Commissioner; Ex parte Moore; see also Minister for Immigration and Ethnic Affairs v. Pochi, per Deane J. (an appeal from a decision of the Administrative Appeals Tribunal under the A.A.T. Act). The approach adopted in these cases has not so far been accepted by this Court. 

   [Citations omitted].

   [57] (1990) 170 CLR 321.

   [58] (1990) 170 CLR 321 at 355 – 357.

3. A tribunal or decision maker that decides a question of fact when there is no evidence in support of the finding commits an error of law[59] or, to put it another way, a finding of fact made in the absence of supporting evidence is an error of law.  But is it a jurisdictional error or an error on the face of the record?

   [59]   Kostas v HIA Insurance Services Pty Ltd [2010] HCA 32 at [91], (2010) 241 CLR 390 at 418.

4. A distinction exists between conclusions of fact which are intended to be the province of a decision maker and factual matters which constitute conditions on which the existence of the decision maker’s power depends in law.[60]  At common law a finding of fact based on no evidence must be of a critical fact in order to constitute jurisdictional error.

   [60]   R v Australian Stevedore Industry Board; Ex parte Melbourne Stevedoring Company Pty Ltd (1953) 88 CLR 100 at 119 – 120; Corporation of the City of Enfield v Development Assessment Commission [2000] HCA 5 at [28] and [38], (2000) 199 CLR 135 at 148 and 151.

5. The terms of the definition contained in s 12(2)(c) required the third defendant to determine whether there was a provision of the construction contract that made the liability to pay money owing, or the due date for payment of the money owing, contingent or dependent on the operation of another contract.  The existence of that fact in this case was critical to the determination of whether clause 11 and schedule E constituted a “pay when paid” provision for the purpose of s 12(1).  Section 12(1) renders such provisions of no effect in relation to any payment for construction work under a construction contract.  Accordingly, it can be seen that the existence of a construction contract is a jurisdictional fact.  Whether a provision within that contract constitutes a “pay when paid” provision involves a question of law but not a question of jurisdictional fact.  It is not a precondition to the exercise of the adjudicator’s jurisdiction.[61]  An error as to whether the evidence supports a conclusion that payment of retention monies is dependent upon the operation of the head contract is not an error which caused the third defendant to misapprehend his function.  This was an issue he was required to decide.  Accordingly, an error of law in relation to whether there is evidence to support that finding is not an error that goes to a jurisdictional fact.  It is not a jurisdictional error.  It is an error within jurisdiction. 

   [61]   Minister for Immigration and Multicultural and Indigenous Affairs v  S G L V [2004] HCA 32 at [39], (2004) 78 CLJR 992 at 998 – 999.

6. Is it an error on the face of the record? 

7. The record is the initiating adjudication application and the determination pursuant to s 22.[62] 

   [62]   Craig v South Australia (1995) 184 CLR 163 at 182.

8. What constitutes the initiating adjudication application is to be determined by reference to the Act.  Section 17(3) provides:

   (3)     An adjudication application—

   (a)     must be in writing; and

   (b)     must be made to an authorised nominating authority chosen by the claimant; and

   (c)     in the case of an application under subsection (1)(a)(i)—must be made within 15 business days after the claimant receives the payment schedule; and

   (d)     in the case of an application under subsection (1)(a)(ii)—must be made within 20 business days after the due date for payment; and

   (e)     in the case of an application under subsection (1)(b)—must be made within 15 business days after the end of the 5 day period referred to in subsection (2)(b); and

   (f)      must identify the payment claim and the payment schedule (if any) to which it relates; and

   (g)     must be accompanied by such application fee (if any) as may be determined by the authorised nominating authority; and

   (h)     may contain such submissions relevant to the application that the claimant chooses to include.

9. In my view the adjudication application includes any submission relevant to the application included by the claimant.  In this case the first defendant in submitting an adjudication application in accordance with s 17(3) included a submission.  The adjudication application identified the details of the claimant, namely, the first defendant, the details of the respondent, namely, the plaintiff, and details of the construction contract including the payment claim amount, the payment claim date, the payment due date and the amount the respondent agreed to pay in accordance with the payment schedule pursuant to s 14. 

10. The submission provided that there were three reasons for the difference between the claimed costs and the payment schedule.  One of those reasons was the unlawful failure to pay to the first plaintiff the retention monies in the sum of $35,454.  It was submitted that the retention provision in the subcontract made the payment of retention monies subject to the plaintiff’s performance under the head contract, specifically its procurement of a certificate of occupation upon its achievement of practical completion.  This made the provision a “pay when paid” provision within s 12 of the Act.[63] 

    [63]   The first defendant’s submission to the third defendant, affidavit of Dimitrios Jimmy Diakou sworn 25 May 2016 page 14. 

11. The determination is in the following terms:

    Adjudication Application No. 2016SAAT006

    This is a determination made under the Building and Construction Industry Security of Payment Act 2009 (SA).

    Authorised Nominating Authority:      Adjudicate Today Pty Ltd

    Adjudicator:  Callum Campbell

    Claimant:Michael Vadasz t/as Australasian Piling Company ABN 70 564 737 205

    Respondent:  Maxcon Constructions Pty Ltd ABN 69 152 259 820

    Project:Bohem Apartments, 150 Wright Street, Adelaide

    Payment Claim:  25 February 2016 for $204,864.55 (including GST)

    Payment Schedule:  8 March 2016 for $141,163.55 (including GST)

    S. 17(2) Notice, if any:                   Not applicable

    Adjudication Application:                18 March 2016

    Adjudicator’s Acceptance:              23 March 2016

    Adjudication Response:                  29 March 2016

    Adjudication Determination:             6 April 2016

    Adjudicated Amount:  $204,864.55 including GST

    Due Date for Payment:                  31 March 2013

    Rate of Interest:  The rate prescribed under the Supreme Court Act 1935 in respect of judgment debts of the Supreme Court

    Apportionment of Adjudication Fee:     Respondent 100%

    Determination

    This is a determination made under the Building and Construction Industry Security of Payment Act 2009 (SA) (“The Act”).

    In respect of the claimant’s payment claim, I determine that:

    ·the amount of the progress payment to be made by the respondent to the claimant is the adjudicated amount shown above;

    ·the date upon which the payment became due is the due date for payment shown above;

    ·the rate of interest on the adjudicated amount is the rate shown above; and

    ·the Respondent is responsible for 100% of the adjudication fees.

12. The initiating adjudication application does not refer expressly to the failure to pay the retention monies.   The submission refers to the provisions of the construction contract providing for retention monies being contrary to the proscription of “pay when paid” provisions in s 12 on the basis that the condition for payment of retention monies is subject to the operation of the head contract.  The determination does not refer to the issue of the retention monies, “pay when paid” provisions or s 12 of the Act.  As a result, the error by the third defendant in making a finding of fact in relation to the provisions of the head contract, where there was no evidence of that contract before him, is not apparent on the face of the record. 

    Ground 3:  The administration charges

13. The plaintiff submits that the third defendant misconstrued the subcontract.  It submits that the adjudicator fell into error by misconstruing clauses 7.5(d), 10(1) and schedule B clauses B27, B28, B29 and B30 in finding that they did not permit the plaintiff to charge for administrative services provided to the first defendant. 

14. The plaintiff also submits that the third defendant failed to consider and give appropriate weight to what it described as an admission by the first defendant in an email to the plaintiff of 22 January 2016, which, in relation to administrative charges, said:

    I understand you need something for your inconvenience.  That’s fair enough. 

15. Clause 7.5(d) of the subcontract provides:

    If the builder agrees to assist the subcontractor in administration of their business and which is not part of this subcontract agreement, the builder shall charge the subcontractor a rate of $80 per hour subject to rise and fall.

16. Clause 10(1) of the subcontract provides:

    If the Builder is required to manage the subcontractors accounts more than what should be normally required, the Builder shall be entitled to charge the sub-contractor without prior notice, a reasonable sum from that months progress claim and of which shall be deducted as required.

17. Pursuant to special conditions B27, B28, B29 and B30 the concrete supplier was specified to be Hanson and the steel reinforcement supplier was specified to be Bianco.  Each supplier was required to invoice the plaintiff directly and to be reimbursed on 30-day payment terms. 

18. The plaintiff submits that there were in excess of 50 invoices rendered by the suppliers which required significance administrative work. 

19. The third defendant found that the plaintiff agreed to be invoiced directly by the suppliers and therefore such work did not fall outside the scope of the contract.  Accordingly, the underlying premise of clause 7.5(d) of the contract was not satisfied.  He further found there was no evidence of any alternative arrangement agreed between the parties that should more than one invoice per month be issued by the suppliers the costs involved in processing those invoices could be back charged to the first defendant.  Accordingly, he found that the administration costs of $22,500 were not justified.

20. In my view there are three answers to the plaintiff’s submissions. 

21. First, I do not consider that the third defendant misconstrued the contract.  The special conditions B27 to B30 in schedule B provide that the steel and concrete suppliers are to invoice the plaintiff directly.  Accordingly there was no agreement by the plaintiff to assist the first defendant in the administration of the first defendant’s business which was not part of the subcontract agreement in accordance with clause 7.5(d).  Further, clause 10(l) of the subcontract did not entitle the plaintiff to charge the first defendant the administration cost of $22,500 because the evidence does not establish the condition which gives rise to the entitlement to charge the subcontractor for those costs.  It is difficult to make commercial sense of the provision.  The condition, namely, that the builder is required to manage the subcontractor’s accounts more than what should be normally required, establishes an objective test.  It is not conditional on the plaintiff’s subjective view of what is reasonably required.  Yet it fails to identify any objective yardstick by which it could be ascertained.  The terms of the contract give no indication of what is the normal requirement for management of subcontractor’s accounts.  In those circumstances it is impossible to determine whether more than that was required.  In the absence of any concession by the first defendant that the condition was satisfied, I fail to see how the clause becomes enforceable.  In that context I do not accept that the email of 22 January 2016 constitutes such a concession. 

22. In order to understand this submission it is necessary to refer to the evidence of the emails relied upon.  On 21 January 2016 Mr Gorsovski sent an email to the first defendant.  It said:

    Mike

    We are reviewing your claim

    As you are aware, Onesteel and Bianco are invoicing Maxcon on a daily basis.

    As you are aware, I said to you that if Maxcon get more them [sic] one invoice off them per month, then Maxcon will back charge you, Maxcon’s time to administer this process.

    You promised me that Maxcon will only receive one invoice per company for the end of each month.

    As you are aware, this did not happen.

    As this did not happen – I am sticking with the agreement between myself and you and that Maxcon will backcharge you our administration costs accordingly

    If you do recall – I mentioned to you on numerous of times, should maxcon get more than one invoice per company per month, then you will be charged accordingly

    And you agreed to this

    Maxcon will issue you our administration costs in due course

23. In response the first defendant on 22 January 2016 saying, inter alia:

    No, I don’t recall any admin charges being discussed, BUT, I understand you need something for your inconvenience.  That’s fair enough.

24. In my view that cannot constitute any concession by the first defendant that the operative condition to clause 10(l) has been satisfied.  It simply does not address it in terms. 

25. Second and in any event, even if I was to accept the plaintiff’s submission that the third defendant has misconstrued the subcontract and should have found that the plaintiff was entitled to charge for the administrative services it performed in processing the supplier’s invoices, that does not constitute jurisdictional error.  It would be an error within jurisdiction.  The adjudicator’s function is prescribed pursuant to s 22 of the Act.  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 respondent have both requested the adjudicator not to include those reasons in the determination).

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

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

    (b)     the value of 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 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 a 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.

1. The Act provides that the adjudicator is to determine the amount of any progress payment, when it became or becomes payable and the rate of any interest payable on such amount. In making a determination the adjudicator is confined to considering the matters prescribed by s 22(2). Those matters include the provisions of the construction contract from which the application arose.

2. I have referred to the terms of the initiating adjudication application earlier in these reasons. 

3. The plaintiff’s submissions are directed to the identification of error by the adjudicator in the interpretation of the construction contract. The Act confers jurisdiction on the adjudicator to interpret the provisions of the construction contract pursuant to s 22(2)(b). The third defendant did not misapprehend his function by construing the contract. If there is an error in the interpretation of the construction contract it is an error within jurisdiction. Moreover it is not an error of law on the face of the record because the reasons do not form part of the record. For the reasons explained above, the record in this case is the initiating adjudication application, including the first defendant’s submission, and the determination by the third defendant.

4. The submission provided that there were three reasons for the difference between the claimed costs and the payment schedule.  One of those reasons was the back charge for administrative costs in the sum of $22,500.   The submission addressed these additional administrative charges at some length.[64]  Insofar as the submission refers to the interpretation of the construction contract it submits that the plaintiff failed to identify any contractual basis for the back charge and submits that the first defendant has been unable to discern any valid contractual basis for the back charge.  

   [64]   Paragraphs 55 – 63 of the submissions p 12 – 13 of the affidavit of Dimitrios Jimmy Diakou sworn 25 May 2016. 

5. I have set out the terms of the determination earlier in these reasons. 

6. The initiating adjudication application does not refer expressly to the interpretation of the construction contract either in relation to the administration charges or otherwise.   The interpretation of the construction contract in relation to the administration charges is only referred to in the submission forming part of the application obliquely.  The submission does not descend into any analysis of the provisions of the construction contract relating to the administration charges.  I have set out the terms of the determination earlier in these reasons.  The interpretation of the construction contract in relation to the administration charges is not referred to in the determination.  Accordingly, it does not appear on the face of the record.  

7. Third, the submission that the third defendant failed to consider and give appropriate weight to the so-called “admission” in the first defendant’s email of 22 January 2016 fails for three reasons.  First, the third defendant did consider the so-called “admission” and found it deserved little weight.[65]  Second, for the reasons set out above, I do not consider the email constitutes a relevant admission.  Third, in any event, if the error submitted was made, it was an error within jurisdiction and does not appear on the face of the record. 

   [65]   Paragraphs [76], [81], [83] and [85] of the reasons for adjudication, Affidavit of Dimitrios Jimmy Diakou sworn 25 May 2016 page 287. 

   Conclusion

8. None of the grounds of judicial review have been made out.  I would dismiss the application for judicial review.  I will hear the parties as to costs.