Nova Builders Pty Ltd v Civil & Civic Corporation Pty Ltd
[2022] ACTSC 209
•19 August 2022
SUPREME COURT OF THE AUSTRALIAN CAPITAL TERRITORY
Case Title: | Nova Builders Pty Ltd v Civil & Civic Corporation Pty Ltd |
Citation: | [2022] ACTSC 209 |
Hearing Date: | 15 December 2021 |
Submissions last received: | 18 January 2022 |
DecisionDate: | 19 August 2022 |
Before: | McWilliam AsJ |
Decision: | In proceedings SCA 30 of 2021: (1) Leave is granted to appeal the orders made on 31 August 2021 in relation to application number ABCDRS ACT 29. (2) The appeal is allowed. (3) The orders of 31 August 2021 are set aside and the matter is remitted to the adjudicator for further determination according to law. (4) The first respondent is to pay the appellant’s costs of the appeal. (5) In the event that either party seeks to vary order 4 within 7 days of the making of these orders, Order 4 is stayed until further order. In proceedings SC 377 of 2021: (1) The application is dismissed. (2) The first defendant is to pay the plaintiff’s costs of the application. (3) In the event that either party seeks to vary order 2 within 7 days of the making of these orders, Order 2 is stayed until further order. |
Catchwords: | BUILDING AND CONSTRUCTION – adjudication of progress payment claims under Building and Construction Industry (Security of Payment) Act 2009(ACT) – validity of payment claim – whether statutory cause of action merged by court orders in other proceedings – whether payment of claimed sum into court was sufficient to constitute payment under the statute –– whether payment claim had the same reference date as an earlier claim – whether failure to give reasons PRACTICE AND PROCEDURE – abuse of process – whether adjudication application and adjudication were an abuse of process in circumstances where money paid into court |
Legislation Cited: | Building and Construction Industry (Security of Payment) Act 2009 (ACT) ss 10, 13, 15, 17, 18, 19, 24, 25, 26, 27, 43 |
Cases Cited: | AK v Western Australia [2008] HCA 8; 232 CLR 438 Alexandria Landfill Pty Ltd v Transport for NSW [2020] NSWCA 165; 103 NSWLR 479 470 St Kilda Road Pty Ltd v Reed Constructions Australia Pty Ltd [2012] VSC 235 |
Parties: | Nova Builders Pty Ltd (Plaintiff/Appellant) Civil & Civic Corporation Pty Ltd (First Defendant/First Respondent) Jonathan H Sive (Second Defendant/Second Respondent) |
Representation: | Counsel R J Arthur (Plaintiff/Appellant) Dr A.J. Greinke (First Defendant/First Respondent) |
| Solicitors Lexicon Lawyers (Plaintiff/Appellant) Chamberlains (First Defendant/First Respondent) | |
File Number: | SC 377 of 2021 SCA 30 of 2021 |
McWilliam AsJ:
Nova Builders Pty Ltd (Nova Builders) is the owner of a development site located at Block 4, Section 28 Greenway (the Site). It is in a dispute with Civil & Civic Corporation Pty Ltd (Civil & Civic), who says that it has conducted earthworks on the Site over a period of time commencing on 3 March 2020, and has made a payment claim which it pursued to adjudication under the Building and Construction Industry (Security of Payment) Act 2009 (the Security of Payment Act) in the amount of $462,003.93 (including GST) (disputed sum).
Presently before the court is an appeal from the relevant adjudicator’s decision ordering Nova Builders to pay the disputed sum to Civil & Civic, and an application for injunctive relief. The adjudicator, Mr Jonathan Sive, is the second respondent on the appeal. No submitting appearance or notice of intention to respond has been formally filed, but he did not take any part in the proceedings and I have assumed from that conduct that, consistent with the usual practice, the adjudicator intended to submit to the orders of the Court.
Nova Builders has not paid the disputed sum to Civil & Civic, but it has paid the equivalent sum into court in separate proceedings (SC 276 of 2020) involving both Civil & Civic and a third entity, Beno Excavations Pty Ltd (Benex). The director of the first respondent, Mr Ben Moseley, was previously the General Manager for Benex at a time when Benex contracted with Nova Builders to carry out the earthworks for which Civil & Civic now claims payment. The details of that dispute are set out in the interlocutory judgment dealing with whether the proceedings were properly the subject of interpleader relief or were of a broader nature: see Nova Builders Pty Ltd v Beno Excavations Pty Ltd [2021] ACTSC 295 (Nova Builders v Benex). The proceeding is progressing through the Court and has not yet been finally determined.
Relief sought
The adjudicator made orders on 31 August 2021. They are, in summary:
(a)That Nova Builders pay to Civil & Civic a progress payment in the sum of $462,003.93 including GST;
(b)The date which any amount became payable was 3 August 2021;
(c)Interest is payable on any amount at the rate of interest applying under the Court Procedures Rules 2006 (ACT); and
(d)The fees and expenses of the adjudication are to be apportioned equally between Nova Builders and Civil & Civic.
Nova Builders has appealed the orders in their entirety, seeking to set them aside.
Nova Builders has also brought a separate application (filed on 13 September 2021 and amended on 21 September 2021) seeking to stay the enforcement of the orders, including restraining Civil & Civic from seeking an adjudication certificate and filing any such certificate as a judgment debt, pursuant to ss 26 and 27 of the Security of Payment Act respectively. The application was heard concurrently with the appeal.
The Court’s power to grant relief
Under the provisions of the Security of Payment Act, leave is required for any appeal if the opponent does not consent (s 43(3)(b)). As Civil & Civic does not consent to leave being granted, Nova Builders has applied for such leave through the initiating process filed on 23 September 2021.
Under s 43(4), in order to grant leave, the Court must be satisfied that having regard to all the circumstances:
(a)the determination of the question of law concerned could substantially affect the rights of 1 or more parties to the adjudication decision (s 43(4)(a)); and
(b)there was a manifest error of law on the face of the adjudication decision; or strong evidence that the adjudicator made an error of law and that the determination of the question may add, or may be likely to add, substantially to the certainty of the law (s 43(4)(b)).
It was agreed between the parties that the question of leave be heard together with the substantive appeal. The parties were content to argue the appeal on the basis that the outcome of the question of leave would effectively rise or fall with the success of the appeal.
Subject to the grant of leave provisions, an appeal may be made to the Supreme Court on any question of law arising out of an adjudication decision (s 43(2)). On determining an appeal under subsection (2), the Court may confirm, amend or set aside the adjudication decision, or remit the decision together with the Supreme Court’s opinion on the question of law to either the same or a different adjudicator (s 43(6)).
The appeal and application to stay the effect and enforcement of the adjudicator’s decision were filed before any adjudication certificate had been obtained. That means the orders of the adjudicator have not yet become a judgment for a debt. Accordingly, and contrary to the submissions made by Civil & Civic, no payment into court by way of security was necessary. Such security is only required under s 27(4) of the Security of Payment Act if a judgment debt has been obtained.
Issues on Appeal and Application
The Amended (draft) Notice of Appeal (filed 20 December 2021) contains the following grounds of complaint, summarised below.
(a)Jurisdictional error: The adjudicator’s decision was made without jurisdiction for the following reasons –
(i)Merger upon payment into court: Orders had been made in separate proceedings on 17 September 2020 and 19 July 2021 for the payment of the disputed sum into Court. Any entitlement of Civil & Civic ceased to exist on that date and was converted into a right to payment out of Court upon demonstrating its entitlement to the disputed sum, such that a necessary precondition for the application of the Security of Payment Act was absent.
(ii)Error of law: In addition, or in the alternative, the adjudicator erred in misconstruing s 15 of the Security of Payment Act or misapplying the section to the facts, by failing to find that Civil & Civic was not “a person entitled to a progress payment” due to the payment into Court being a sufficient discharge of Nova’s obligations under the contract.
(iii)Invalid payment claims: Alternatively, the payment claims dated 20 July 2021 were prohibited by s 15(5) of the Security of Payment Act and were invalid, such that a requirement of the Act for the making of a valid adjudication application was absent.
(b)Failure to give reasons: The adjudicator failed to give reasons for concluding that there was a construction contract or other arrangement between Nova Builders and Civil & Civic for the purposes of the Security of Payment Act. The Adjudicator’s Decision discloses no clear path of reasoning or explanation of the bases for the factual findings made and the drawing of inferences.
Those matters form the four issues on the appeal.
The fifth issue arises on the separate application, which effectively seeks injunctive relief to restrain Civil & Civic from taking out judgment following the adjudicator’s orders and then enforcing the judgment. Nova Builders argued that the entire adjudication proceedings were an abuse of process in its particular circumstances, because it has already paid the $462,003.93 referable to the same work into court in the related proceeding, which is ongoing.
Summary of findings on appeal and on the application
For the reasons that follow, I consider that there was no merger, no error in how the adjudicator construed the meaning of ‘payment’ under the statute, and no error in the adjudicator finding that the later payment claim had a different reference date. However, I have concluded that the adjudicator failed to give adequate reasons for the findings made, and that otherwise, in the particular circumstances of this case, where the adjudicated sum has been paid into Court before the statutory scheme interim processes were invoked, an abuse of process or miscarriage of justice would arise if Civil & Civic were not restrained from enforcing the adjudication. Were it not for the earlier error of law established on the appeal, the relief sought in the application would have been appropriate.
Issue 1 – did the adjudicator have jurisdiction to deal with the dispute or had the action merged by earlier court orders?
The first issue is whether the statutory cause of action under the Security of Payment Act merged upon payment by Nova Builders of the disputed sum into court. The payment followed the making of two orders in the Nova Builders v Benex proceeding, the first of those orders being made on 17 September 2020 (in respect of $438,078.93) and the second made at the hearing of the interlocutory applications on 19 July 2021 (a further $23,925).
Adjudicator’s Decision
The adjudicator dealt with this issue in the reasons for decision published on 31 August 2021 (Adjudicator’s Decision) at [129] (emphasis added):
[129] It is clear on the evidence that the payment claim the subject matter of this payment dispute does not involve the same debt or duties being claimed by the claimant that is the same as claimed by both parties against whom the relief Nova Builders demands from the court in interpleader proceeding number 276 of 2020 in the Supreme Court of the Australian Capital Territory. Nor, as outlined and discussed in the preceding paragraphs, that the claim is derived from the same source. The claimant presents evidence that this claim is derived from work performed after, not before, the critical date of 3 March 2020 notwithstanding the fact the rights [and] duties under the Benex Pipeline contract were assigned to the claimant on 3 March 2020.
Although the above paragraph is a little difficult to understand, the emphasised words seem to be the gist of the adjudicator’s finding.
The adjudicator’s finding is also difficult to reconcile with what the adjudicator had said earlier at [3] (emphasis added):
…The issue is not whether the Act is adequate for ordinary cases but whether it is supple and precise enough to afford fair guidance for disposition of this extraordinary case in which the material before me shows that part of the claim includes a request for payment for performance occurring before the critical date of 3 March 2020. I believe it does. My reasons are set out in the paragraphs that follow.
I have assumed that what is set out at [129] is what the adjudicator intended to find, namely that the performance of the work occurred after 3 March 2020.
Competing submissions of the parties
Nova Builders challenged that finding and argued that the disputed sum paid into court in the Nova Builders v Benex proceeding was for work that: (a) had been done after 3 March 2020; and (b) was the same amount as the payment claims made by Civil & Civic.
The position of Nova Builders was that, upon the orders granting the interpleader relief sought being made and payment of the sum into Court, the right of Civil & Civic to pursue payment from Nova Builders was put at an end. The orders created merger by judgment.
In that regard, Nova Builders relied on J Hutchinson Pty Ltd v Galform Pty Ltd [2008] QSC 205 (Hutchinson v Galform), which in turn cited (at [33]) the established principle articulated in Blair v Curran (1939) 62 CLR 464 at 531 and 532, where Dixon J said the following about the operation of res judicata:
A judicial determination directly involving an issue of fact or of law disposes once and for all the issue, so that it cannot afterwards be raised between the same parties or their privies. …
…The very right or cause of action claimed or put in suit has in the former proceedings passed into judgment, so that it is merged and has no longer an independent existence.
Nova Builders contended that an order granting interpleader relief finally determined the rights of the parties subject to it. Nova Builders was relieved of any liability to the claimants (whether Civil & Civic or Benex) in respect of the disputed sum; and the right of a claimant to the disputed sum no longer lies against it, but in the entitlement to be paid the sum on demonstration of that entitlement to the court.
Nova Builders drew attention to Kennett v Charlton [2007] NSWSC 190, a case where a solicitor had acted on a conveyance and was seeking to pay accounting fees out of the proceeds. The accountant’s fees were disputed and because the payment to the accountant could not be settled, the solicitor formed the view that there were rival claims on that sum of money and paid the proceeds into court by way of interpleader summons. In that case, Gzell J stated at [3]:
The application is for relief by way of interpleader. Draft orders have been prepared and there is no contention with respect to an order that the plaintiff pay into court the moneys held in the bank account. There is no dispute that consequent upon that order and consequent upon dealing with other matters the subject of the draft orders, the plaintiff should be dismissed from the proceedings.
The plaintiff in those proceedings sought indemnity costs and an indemnity in respect of any contingent liabilities (there was a possibility of penalty or interest being incurred as a result of tax liabilities owed to the Australian Tax Office). In answer to an argument that the solicitor had a right of exoneration and reimbursement from the trust fund, Gzell J said at [14]:
… So he does, as the trustee of the fund in the bank account. But the effect of the interpleader relief is to put an end to that trust by payment of the fund into court and, by so doing, the plaintiff loses that right of exoneration and reimbursement against the fund. In my view, the need for an indemnity arises by reason of the payment into court.
Civil & Civic argued that in the circumstances here, the statutory cause of action under the Security of Payment Act did not merge because the order was interlocutory (relying upon McNair & Co v Audenshaw Paint & Colour Co Ltd (1891) 2 QB 502 at 506 per Bowen LJ) and further, because the Court in Nova Builders v Benex found that interpleader relief was inappropriate.
Determination – no merger arose
The conclusion I have reached is that the adjudicator’s finding at [129] was in error insofar as it expressed the view that the debt the subject of the payment claims was not the same as the disputed sum that had been paid into court in the Supreme Court proceeding SC 276 of 2020. However, that error had no consequence because merger did not occur upon payment of the disputed sum into court.
It must be acknowledged that while the facts of what was in dispute in the court proceedings were properly put before the adjudicator, he did not have the benefit of the judgment in Nova Builders v Benex at the time of the adjudication. An overview of the dispute that was before the court is contained in the reasons for judgment at [2]-[6]:
2. A dispute has emerged as to which of the two defendants in this proceeding is entitled to a sum of money, initially $438,078.93 but increased to $462,003.93 during the hearing (the disputed sum). The disputed sum has been paid into Court.
3. By way of a general summary of the parties’ respective positions, Civil and Civic claims an entitlement to the disputed sum because the moneys in dispute relate to invoices that it had issued for completing the work. On the other hand, Benex claims to be entitled to the disputed sum because of what it says was an earlier incorrect receipt of $550,000 by Civil and Civic, the details of which are set out below.
4. Nova Builders makes no initial claim to the disputed sum. It acknowledges the sum is due and payable in respect of the works carried out on the Site. However, Nova Builders does not know which of the two defendants should be paid. At the time Nova Builders commenced this proceeding on 7 August 2020, the grounds of its application were that it had received separate claims of entitlement to payment for works performed under contract. Since then, both defendants have filed a statement of claim – debt or liquidated demand (statement of claim) against Nova Builders, which I directed to be filed in the same proceeding.
5. Nova Builders sought interpleader relief pursuant to r 2600 of the Court Procedures Rules 2006 (ACT) (Rules). On 17 September 2020, the Court granted that relief, and orders were made for $438,078.93 to be paid into court. At that time, the first defendant consented to the order being made. The second defendant was on notice of the application and hearing date but did not appear.
6. Each defendant subsequently filed a competing application in proceeding, which effectively requires the Court to decide what should happen next. The applications were heard on 19 July 2021. During the substantive hearing of the applications, Nova Builders informed the Court that it had been issued a further invoice by Civil and Civic for an additional sum of $23,925. Nova Builders sought to pay those additional moneys into court on the same basis. This time, Civil and Civic opposed that course, on the basis that the matter was in fact not appropriate for the grant of interpleader relief. I ordered that the additional sum be paid into court on the basis that the argument put by Civil and Civic would be preserved and ultimately resolved by the delivery of this judgment.
Paragraphs [11] and [36]-[38] demonstrate that the disputed sum was referable to the earlier invoices which were then reissued as the payment claims that ultimately came before the adjudicator. The invoices relate to the same period of work that was in question in the matter before the adjudicator. They are as follows (emphasis added):
The application brought by Civil and Civic
11. The application filed by Civil and Civic on 30 April 2021 claims payment for works conducted at the Site from 3 March 2020 onwards. It claims:
(a) It contracted to complete the works on the Site for Nova Builders from 3 March 2020. That was not ultimately in dispute at the hearing.
(b) The disputed sum is referable to invoices that Civil and Civic has issued since 3 March 2020 totalling $438,078.93, and a further invoice issued on 30 April 2020 for $23,925.
(c) As there is no dispute that such work was done, Civil and Civic is entitled to be paid and the moneys paid into court should be released to it.
…
36. I accept that these proceedings were in fact not appropriate for interpleader relief for any and each of the following reasons:
(a) The debt to which the disputed sum attaches is not the same.
(b) The circumstances of the case indicate that Nova Builders may be liable to both defendants.
(c) Nova Builders has been unable to extricate itself from the proceedings due to an earlier payment made to Civil and Civic.
37. As to the first of those matters, if the amount that had been paid into court was the $550,000 that was the subject of the two invoices issued by Civil and Civic before 3 March 2020, there would clearly have been an appropriate case for granting interpleader, as it would be plain that the defendants’ competing claims were in relation to the same debt or property.
38. However, the $550,000 amount has already been paid by Nova Builders to Civil and Civic. It forms no part of the disputed sum that is the subject of consideration and adjudication in the applications before the Court. What has been paid into court is an amount that reflects payment for work done after 3 March 2020, which Benex admits (a) it did not do, and (b) are moneys to which it does not otherwise have a contractual entitlement, given that its contract with Nova Builders was terminated on 3 March 2020.
From the above reasoning, it can be seen that the adjudicator’s view at [129] (that the disputed sum in the court proceeding was different from the payment claims before him) is inconsistent with the facts set out above. The material facts emphasised in the above extract were not in dispute. The controversy was that the dispute was broader than the work that was the subject of the invoices in question, and that had an impact on the legal consequences for the disputed sum sitting in Court.
However, it does not follow from that finding that the statutory cause of action under the Security of Payment Act merged upon each of the orders for payment of the monies into court.
In Clayton v Bant [2020] HCA 44; 385 ALR 41, Edelman J explained the concept of merger by judgment at [66]:
… [W]here a cause of action, or “the very right ... claimed”, has previously been established by a local court then at common law the “merger of the right or obligation in the judgment” can be relied upon to preclude re-assertion of the extinguished right. Thedoctrine of mergeris not merely based upon principles of finality. It exists because when a court order “replicates” the prior right, with added consequences such as enforcement mechanisms, the prior right “has no longer an independent existence”. No action can be brought upon that extinguished right. The successful plaintiff’s only right is a right on the local judgment, which is “of a higher nature”…
It is understandable why Nova Builders contended before the adjudicator that no right to proceed under the Security of Payment Act arose once the orders had been made and the disputed sum paid into Court. In McPherson, Thom & Co v Coombie Pastoral Co Pty Ltd [1929] VLR 295 (McPherson), Lowe J stated at 300 (emphasis added):
… it must be remembered that the procedure in interpleader which the rules of Court now regulate has its roots both in equity and at. common law. The equity procedure is the older, and may be traced in any standard work on Equity. By way of illustration I refer to Ashburner, Principles of Equity, at p. 8. The requisites of a bill of interpleader were substantially the same as under our present rules, and Ashburner states that "upon his [the applicant's] bringing into Court the amount of the debt, the Court restrained the conflicting claimants from taking or prosecuting any action at law against him, and either put them to litigate their rights between one another at law or decided the matter for itself by a reference to a Master.
McPherson was referred to more recently by Ward J (as her Honour then was) in Vertical Australia Pty Ltd v Air Company Vertical-T LLC; Air Company Vertical-T LLC v Vertical Australia Pty Ltd [2012] NSWSC 719 at [72].
The difficulty for Nova Builders is that the circumstances in Nova Builders v Benex were not what occurred in Kennett v Charlton (the facts of which are described above), where there was no dispute that the plaintiff should be dismissed from the proceeding. Nova Builders was not able to extricate itself from the proceeding and at the time of the adjudication, it was clear that the proceeding was ongoing.
The circumstances here also differ from what occurred in Hutchinson v Galform, where the claimant had obtained an adjudication in its favour, then a certificate and then judgment which it sought to enforce (see Hutchinson v Galform at [36]), and then filed a second adjudication application which included a claim that had been the subject of the earlier adjudication (see Hutchinson v Galform at [20]).
In Maganja v Arthur [1984] 3 NSWLR 561, Yeldham J said at 563 (quoting Halsbury’s Laws of England 4th ed. Vol 26 par 551 at 274, emphasis added):
When judgment has been given in an action, the cause of action in respect of which it was given is merged in the judgment and its place is taken by the rights created by the judgment, so that a second action may not be brought on that cause of action. Merger is not effected by an order which is not a judgment, nor by a judgment which is interlocutory and not final, or which is void.
There will be no merger unless the cause of action is the same in both actions, and the plaintiff had an opportunity of recovering in the first action ... what he seeks to recover in the second ... .
Although Nova Builders brought into Court the amount of the debt and the order was based on the grant of interpleader relief, for reasons that were set out in Nova Builders v Benex, what occurred was not a final order insofar as it affected the right of Nova Builders to the disputed sum, nor was it an order that could properly be said to be a judgment by which the statutory cause of action merged.
Accordingly, in not making any finding that the cause of action had merged, the adjudicator did not err in relation to the jurisdiction to determine the payment claim.
Issue 2: Did the adjudicator err in misconstruing or misapplying the concept of payment under the Act?
Nova Builders argued that because it had paid the money referable to the payment claim into court, it should be taken to have “paid” the claimed amount to Civil & Civic as “the claimant”, following an order for interpleader relief being made.
It drew the Court’s attention to the various provisions in ss 15, 17, 18 and 19 of the Security of Payment Act. Those provisions provide for an entitlement to make a payment claim (s 15), the consequences of not paying the claimant when no payment schedule is provided and of not paying in accordance with a payment schedule (ss 17 and 18 respectively), and the right to make an application for adjudication (s 19). It argued that Civil & Civic was not entitled to make the adjudication application under s 19 of the Security of Payment Act because Nova Builders was not a respondent who had failed to pay the claimed amount. In failing to construe the Security of Payment Act in the manner for which Nova Builders contended, the adjudicator made an error of law which went to the jurisdiction of the adjudicator to determine the application.
Adjudicator’s finding
The adjudicator addressed the question of payment into court at [19]-[35] of the Adjudicator’s Decision. Paragraphs [19]-[34] set out in detail the decision of Beckhaus v Brewarrina Council [2002] NSWSC 960 and then the Court of Appeal’s decision in Brewarrina Shire Council v Beckhaus Civil Pty Ltd [2005] NSWCA 248. The circumstances in that case involved a payment conditional on the provision of a bank guarantee. Monies had been quarantined and earmarked for the bank guarantee but it was held that such an arrangement was not payment under the statutory equivalent in NSW.
The critical finding is at [35] of the Adjudicator’s Decision:
Setting aside the claimant’s concern that the money deposited into the court by Nova Builders was triggered by two events – the claimant’s claim for work performed after 3 March 2020 and [Benex’s] claim for work performed from 8 November 2019 to 3 March 2020, the suggestion of payment made by the respondent at paragraph 11 of the response is not a payment under the Act but rather is a payment into court with respect to interpleader relief. Payment has not occurred under the Act.
Civil & Civic’s submissions
Civil & Civic submitted that the provisions of the Security of Payment Act are clear and require actual payment.
Section 10 of the Security of Payment Act gives a contractor a statutory right to payment on progress claims. Section 13 prescribes the due date for the payment. Section 19 provides for adjudication of payments claims where the respondent “fails to pay the whole or any part” of either the scheduled amount or the claimed amount.
Civil & Civic emphasised s 25 of the Security of Payment Act, which deals with the consequences of the adjudication and requires the respondent to pay the adjudicated amount within 5 days of receiving notice of the decision. The words of that section are that the respondent “must pay the amount to the claimant”.
Civil & Civic argued that the plain words of the legislation were supported by the policy behind the legislation, which was described as “pay first argue later”. Consistent with that policy, payment must be assessed as receipt by the claimant, and not receipt by a court.
Determination – payment into court did not constitute payment under the Act
The argument by Nova Builders requires consideration of the words of the statute and whether payment should be construed to include payment into court, in addition to payment directly to the claimant.
Starting with the plain words of the Security of PaymentAct, the relevant parts of s 15 are as follows (notes omitted, emphasis added, italics in original):
Payment claim
(1) A person who is or who claims to be entitled to a progress payment under section 10 (1) (the claimant ) may give a claim (a payment claim ) to the person who, under the construction contract concerned, is or may be liable to make the payment (the respondent ).
…
(2) A payment claim must—
…
(3) The claimed amount may include any amount—
(a) that the respondent is liable to pay the claimant under section 29 (3); 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 given only before the later of—
…
(5) …
(6) …
Sections 17(1) and 18(1) of the Security of Payment Act include the following words relevant to this argument (emphasis added):
17 Consequences of not paying claimant—no payment schedule
(1) This section applies if a respondent—
(a) becomes liable to pay a claimed amount to a claimant because the respondent failed to provide a payment schedule to the claimant within the time allowed under section 16 (4); and
(b) fails to pay the whole or any part of the claimed amount on or before the due date for the progress payment to which the payment claim relates.
…
18 Consequences of not paying claimant in accordance with payment schedule
(1) This section applies if—
(a) a claimant gives a payment claim to a respondent; and
(b) the respondent provides a payment schedule to the claimant …; and
(c) the payment schedule states a scheduled amount that the respondent proposes to pay to the claimant; and
(d) the respondent fails to pay the whole or any part of the scheduled amount to the claimant on or before the due date for the progress payment to which the payment claim relates.
…
Section 19(1) of the Security of Payment Act then provides (again, emphasis added, italics in original):
Adjudication applications
(1) A claimant may apply to an authorised nominating authority, chosen by the claimant, for adjudication of a payment claim (an adjudication application) if—
(a) the respondent provides a payment schedule under this part, but—
(i) the scheduled amount indicated in the payment schedule is less than the claimed amount indicated in the payment claim; or
(ii) the respondent fails to pay the whole or any part of the scheduled amount to the claimant by the due date for payment of the amount; or
(b) the respondent fails—
(i) to provide a payment schedule under this part within the time allowed by section 16(4); and
(ii) to pay the whole, or any part of, the claimed amount to the claimant by the due date.
…
It can be seen that the words of those sections expressly and repeatedly refer to payment to the claimant. There is no real scope for treating the payment as being deemed to be paid where it has been paid to someone else, including payment of the sum into court.
The purpose or objects of the Security of Payment Act favour the same construction. The rationale behind the legislation and the general operation of the Security of Payment Act have been summarised in earlier decisions such as Pines Living Pty Ltd v John O’Brien & Walton Construction Pty Ltd [2013] ACTSC 156 (Pines Living) per Mossop M (as his Honour then was) at [17]-[25] and my decision in Canberra Drilling Rigs Pty Ltd v Haides Pty Ltd [2018] ACTSC 282 at [29]-[42] (Canberra Drilling Rigs) (upheld on appeal; see Canberra Drilling Rigs Pty Ltd v Haides Pty Ltd [2019] ACTCA 15 (Canberra Drilling (Appeal)).
Those decisions are consistent with the leading statement by the High Court on the topic, contained in Probuild Constructions (Aust) Pty Ltd v Shade Systems Pty Ltd [2018] HCA 4; 264 CLR 1 (Probuild v Shade Systems). The plurality, consisting of Kiefel CJ, Bell, Keane, Nettle and Gordon JJ, discussed in detail the legislative intention behind the NSW equivalent of the Security of Payment Act at [35]-[44]. In the course of doing so, their Honours stated (references omitted):
[36] First, … the Security of Payment Act was enacted "to reform payment behaviour in the construction industry" by seeking to ensure that a person who undertakes to carry out construction work under a construction contract is entitled to receive, and is able to recover, progress payments promptly in relation to the carrying out of that work…
[37] Second, …The Security of Payment Act is not concerned with finally and conclusively determining the entitlements of parties to a construction contract. Section 8 confers an entitlement to a progress payment, which may be the final payment, a single or one-off payment or what is described as a "milestone payment". Part 3 of the Security of Payment Act creates a distinct procedure for enforcing that statutory entitlement, which includes the making of a payment claim, the provision of a payment schedule in response and the determination of a payment claim by an adjudicator (at the option of the claimant).
[38] The statutory entitlement to a progress payment and the procedure for recovery of a progress payment are separate from, and in addition to, a contractor's entitlement under a construction contract to receive payment for completed work. The statutory entitlement is predicated upon the existence of a construction contract, but the entitlement and the means available for its enforcement stand apart from the parties' rights under that contract. Indeed, the Security of Payment Act has effect despite any contractual provision to the contrary: any purported derogation is void. Moreover, the Security of Payment Act acknowledges and preserves parties' contractual entitlement. Importantly, the Security of Payment Act provides that in any proceedings before a court or tribunal in relation to any matter arising under a contract, the court or tribunal must allow for, and may make such orders as it considers appropriate for the restitution of, any amount paid under or for the purposes of Pt 3.
[39] As was described in Southern Han Breakfast Point Pty Ltd (In liq) v Lewence Construction Pty Ltd, the Security of Payment Act was the subject of substantial amendments in 2002. Introducing the Bill for the Building and Construction Industry Security of Payment Amendment Act 2002(NSW), the responsible Minister stated:
"[The Security of Payment Act] was designed to ensure prompt payment and, for that purpose, [the Security of Payment Act] set up a unique form of adjudication of disputes over the amount due for payment. Parliament intended that a progress payment, on account, should be made promptly and that any disputes over the amount finally due should be decided separately. The final determination could be by a court or by an agreed alternative dispute resolution procedure. But meanwhile the claimant's entitlement, if in dispute, would be decided on an interim basis by an adjudicator, and that interim entitlement would be paid."
…
[40] Third, underpinning the "interim" statutory entitlement is an understanding that "[c]ash flow is the lifeblood of the construction industry". Put another way, any interruption to the cash flow of a person carrying out construction work is apt to create the risk of financial failure. Consistent with that understanding, the procedure in Pt 3 is designed to operate quickly. So much is apparent from the detailed time limits that apply at each stage and have been described earlier in these reasons. These time limits are "carefully calibrated". The time limits have been rightly described as imposing "brutally fast" deadlines on the claimant, the respondent and the adjudicator to ensure the prompt resolution of payment disputes.
The scheme and its objectives has also recently been restated at appellate level in this jurisdiction by Lee J (with whom Elkaim J agreed) in Harlech Enterprises Pty Ltd v Beno Excavations Pty Ltd [2022] ACTCA 42 at [46]-[48]:
46. In all Australian jurisdictions, a contractor and subcontractor’s entitlement to payment for building and construction work is protected by legislation. The SOP Act is one such statute. It is based upon the Building and Construction Industry Security of Payment Act 1999 (NSW) (NSW Act), and largely similar to the acts across all other states: Pines Living Pty Ltd v John O’Brien and Walton Construction Pty Limited[2013] ACTSC 156 (at [18] per Mossop M).
47. The SOP Act was intended to establish a system for the rapid adjudication and interim resolution of payment disputes. It provides a “minimalist, hands-off” alternative to “costly and protracted” court proceedings, with the aim of alleviating pressure on subcontractors and small business operators: Presentation Speech, Hansard (Thursday 15 October 2009) (at 4541–4543); Explanatory Statement, Building and Construction Industry (Security of Payment) Bill 2009 (ACT) (at 3). The statute is commercial in focus, designed to protect against the failure of any one party in a chain of “cascading payment obligations” to pay for work, goods or services: Presentation Speech (at 4541). The building and construction industry is particularly vulnerable to security of payment issues because it is uniquely reliant on subcontracting relationships with inherent imbalances in bargaining power: Explanatory Statement (at 3).
48. When the nature of this “pay now, argue later” scheme is appreciated, it is unsurprising that a cardinal component of the statutory regime is that the SOP Act does not decide final rights: it preserves them for later resolution: Probuild Constructions (Aust) Pty Ltd v DDI Group Pty Ltd [2017] NSWCA 151; 95 NSWLR 82 (at 106–107 [102] per McColl JA, Beazley ACJ and Macfarlan JA agreeing at 85 [1] and 116 [146] respectively); John Holland Pty Limited v Roads and Traffic Authority of New South Wales [2006] NSWSC 874 (at [33] per McDougall J)…
Given those clear objectives, it would clearly run contrary to the statutory scheme for the Court to construe “payment” under the Security of Payment Act as including payment to a court in other proceedings (with the consequence that such payment is withheld from a claimant until that dispute is determined). Such a construction of the legislation would not serve to enable cash flow for contractors as a measure designed to prevent financial failure.
In On Forbes Developments Pty Ltd v Chase Building Group (Canberra) Pty Ltd [2020] ACTSC 163, Crowe AJ was faced with circumstances where an adjudication had taken place and rather than pay the adjudicated amount to the claimant, the respondent to the claim had belatedly paid the money into court. The reasons for doing so were the real focus of the judgment, which addressed when a builder was taken to have “received” payment insofar as it affected the right to suspend work under the Security of Payment Act. However, in reference to the payment of the adjudicated amount into Court, Crowe AJ said at [77]:
I have no doubt that the payment into Court was not a payment to the first defendant. It was thus not relevantly received by the first defendant. This argument was made in correspondence from the plaintiff’s solicitor. I note that it was not pressed at the hearing.
I respectfully agree with his Honour, and accept Civil & Civic’s submissions that the plain words of the statute, and the clear legislative intention behind the scheme it creates, favour a construction that payment and liability under the Security of Payment Act are tied to paying the sum directly to the claimant.
Accordingly, there was no error in the adjudicator’s finding at [35].
Issue 3: Was the payment claim invalid?
The payment claim consisted of four invoices numbered 39, 40, 89 and 3391. Each was dated 20 July 2021. None of the invoices specified a reference date. The failure to identify any particular reference date in the payment claim did not invalidate the payment claim. All that is necessary is that a reference date exists, not that it is specified or nominated at the time of service: see Southern Han Breakfast Point Pty Ltd (in Liquidation) v Lewence [2016] HCA 52; 260 CLR 340 (Southern Han) at [27] and [61].
The gist of this ground of complaint by Nova Builders was that the payment claim was invalid because the invoices served by Civil & Civic had each been served at least once prior to that date in identical form, save for the date of the invoice. In the case of invoice 3391, it had previously been served on 17 March 2020, 24 July 2020 and 11 September 2020. The service of successive payment claims was said to be contrary to s 15(5) of the Security of Payment Act.
Adjudicator’s finding
The adjudicator’s finding is at [137] (emphasis added, italics in original):
Reference date. Section 10 of the Act regulates the right to progress payments and says that for a person entitled to payment, this right accrues, “On and from each reference date under a construction [contract]”. As previously outlined and discussed under the headings “Background” and “Subject Matter Jurisdiction”, I am satisfied the claimant is a person entitled to a progress payment and in this regard the claimant performed construction work under the construction contract or other arrangement between the parties. Section 10 of the Act says that the reference dated for a construction contract is the date stated in, or worked out under, the construction contract. The construction contract or other arrangement being oral does not provide for the matter of submitting claims. Section 10 of the Act provides the necessary term in this regard and says that the last day of the calendar month in which the related goods and services were first supplied under the agreement and the last day of each subsequent month are the dates on which the claimant is permitted to submit a claim. An available reference date under the construction contract or other arrangement is 30 June 2021.
Submissions of Nova Builders
Nova Builders submitted that the effect of a number of authorities was that where a person has undertaken to carry out construction work and is thus an “eligible person” for the purposes of s 10(1) (set out below), they become entitled to a progress payment on the next available reference date.
The entitlement then continues from that date, but there is only one reference date in respect of the particular work the subject of the payment claim. The reference date is tied to the particular work that was done; it triggers an entitlement but does not change. Nova Builders drew attention in submissions to the opening words of the section, emphasising that it is the entitlement that operates “on and from each reference date”.
The submission was that the reference date for the work done here was 31 March 2020, being the first available reference date using the method supplied by s 10(3)(b). The entitlement to make a claim in respect of the work done operated from that date.
Nova Builders focused its complaint on the earlier invoices for the work comprised in invoice 3391, arguing that the earlier invoice dated 24 July 2020 had the same reference date of 31 March 2020. Because the work for which payment was claimed in invoice 3391 was identical, the reference date was the same, and the second payment claim dated 20 July 2021 was invalid.
From that submission, it may be inferred that Nova Builders also impliedly asserted error in the finding that 30 June 2021 was an available reference date.
Nova Builders then argued that a payment claim that does not answer the statutory description in the Security of Payment Act (because it is invalid) cannot found an adjudication application. Hence, any adjudication of the claim would be without jurisdiction: see Southern Han at [44].
In order to succeed on this ground, Nova Builders accepted it faced a challenge to existing authority in this Court which has held to the contrary, namely Canberra Drilling Rigs (upheld on appeal) and Denham Constructions Pty Ltd v Islamic Republic of Pakistan (No 2) [2016] ACTSC 215 (Denham Construction (No 2)).
It argued that those decisions in the Territory were inconsistent with Southern Han and All Seasons Air Pty Ltd v Regal Consulting Services Pty Ltd [2017] NSWCA 289 (All Seasons) and should not be followed.
Submissions of Civil & Civic
Civil & Civic argued that Canberra Drilling Rigs and Denham Constructions (No 2) followed decisions of intermediate courts of appeal, namely Brodyn Pty Ltd t/as Time Cost and Quality v Davenport [2004] NSWCA 394;61 NSWLR 421 (Brodyn) and Falgat Constructions Pty Ltd v Equity Australia Corp Pty Ltd [2006] NSWCA 259 (Falgat).
Southern Han and All Seasons dealt with contractual provisions where the reference date was determined pursuant to the equivalent of s 10(3)(a) of the Security of Payment Act. No part of the reasoning in either Southern Han or All Seasons challenged what had been found in the decisions of Brodyn and Falgat which have been followed in this jurisdiction. Accordingly, there was no basis to depart from the previous decisions of single judges of this Court.
Determination – no error in determining the reference date as founding a valid payment claim
Sub-sections 15(4), 15(5) and 15(6) of the Security of Payment Act are relevant to the construction complaint. They are in the following terms:
(4) A payment claim may be given only before the later of—
(a) the end of the period worked out under the construction contract; and
(b) the end of 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.
(5)A claimant must not give more than 1 payment claim for each reference date under the construction contract.
(6) However, subsection (5) does not prevent the claimant from including in a payment claim an amount that has been the subject of a previous claim.
For s 15 of the Security of Payment Act to be enlivened, the claimant must be entitled (or at least claim an entitlement) to a progress payment. That directs attention to s 10, which creates the statutory entitlement to progress payments and defines what a reference date is. The section is in the following terms (emphasis added, italics in original):
10 Right to progress payments
(1) On and from each reference date under a construction contract, a person is entitled to a payment (a progress payment) if the person has undertaken, under the contract, to—
(a) carry out construction work; or
(b) supply related goods and services.
(2) A progress payment may include—
(a) the final payment for construction work carried out, or for related goods and services supplied, under a construction contract; or
(b) a single or one-off payment for carrying out construction work, or for supplying related goods and services, under a construction contract; or
(c) a milestone payment.
(3) In this section—
milestone payment means a payment that is based on an event or date.
reference date, for a construction contract, means—
(a) a date stated in, or worked out under, the contract as the date when a claim for a progress payment is to be made in relation to work carried out or undertaken to be carried out, or related goods and services supplied or undertaken to be supplied, under the contract; or
(b) if the contract does not provide a date mentioned in paragraph (a)—
(i) the last day of the calendar month in which the construction work was first carried out, or the related goods and services were first supplied, under the contract; and
(ii) the last day of each subsequent named month.
NoteCalendar month—see the Legislation Act, dictionary, pt 1.
In The Trustee for Allway Unit Trust t/as Westside Mechanical Contracting Pty Ltd & R&D Airconditioning Pty Ltd & Ors [2018] SASC 46, Doyle J helpfully described the equivalent definition of “reference date” in the South Australian legislation at [103]:
… In the case of both a ‘limb (a)’ reference date and a ‘limb (b)’ reference date, the reference date assumes the existence of, and is determined by reference to, an underlying right to make a progress claim. The former may be described as a contractually determined, or contractually generated, reference date; it being a date depending upon, and determined by reference to, a contractual right to make a progress claim. The latter may be described as a statutorily generated reference date; it being a date dependent upon, and determined by reference to, a statutorily conferred right to make a progress claim.
The emphasised words in s 10(3)(b) of the Security of Payment Act are what applies to the present case, as there was no provision for progress payments to be made under a construction contract. “Construction contract” is defined in the Dictionary. The term is considered separately below in relation to the fourth ground of appeal.
The effect of what was previously held in Canberra Drilling Rigs was that on the proper construction of s 10(3)(b) of the Security of Payment Act, where the construction contract does not provide for the working out or stipulation of reference dates for progress payments, there may be multiple reference dates arising for particular work that has been carried out. The temporal limits on payment claims being made where the applicable circumstances are by reference to the statutorily generated or ‘limb (b)’ reference date are:
(a) The existence of a reference date is essential for a valid payment claim, because the entitlement to a progress payment only arises ‘on and from’ each reference date: Southern Han at [61]. The first time a reference date arises or exists is the end of the month in which the work was carried out (s 10(3)(b)(i)). Accordingly, the first time a payment claim may be made is at the end of the month in which the work to which it refers was undertaken.
(b) There can only be one valid payment claim per month, because the next reference date will only arise at the end of the next month and a claimant cannot give multiple payment claims with the same reference date (s 10(3)(b)(ii) and s 15(5));
(c) A payment claim must be given within 12 months of the end of the period after the construction work to which the claim relates was “last carried out” (s 15(4)).
The jurisdictional requirements of s 15(4) were considered in the Canberra Drilling (Appeal), but will not be expanded upon here as no argument was made by Nova Builders that the claims in question were issued contrary to that section or that the work was “last carried out” more than 12 months before the payment claim.
The relevant discussion for how to determine the reference date in the absence of a contractual term is contained in the first instance decision of Canberra Drilling Rigs at [70]-[83], the reasoning of which was not challenged on appeal. Those paragraphs are as follows (emphasis added):
70. A payment claim or purported payment claim under the SOP Act should be interpreted in the same way as commercial contracts are interpreted: Fernandes Constructions Pty Ltd v Tahmoor Coal Pty Ltd (trading as Centennial Coal) [2007] NSWSC 381 at [37]. This involves an objective approach and requires that the document be considered as a whole and in its commercial context:Creative Building Services Pty Ltd v TIO Air Conditioning Pty Ltd [2016] ACTSC 367 at [26]. The documents brought into existence should not be approached in an “unduly technical manner” but rather, insofar as they “are used in relation to events occurring in the construction industry, they should be applied in a common sense practical manner”: see Probuild at [109] and the authority there-cited.
71. The second payment claim had a “claim date” of 16 June 2017, and the third payment claim had a “claim date” of 31 August 2017. The contents of the work claimed was identical.
72. Although these two dates are different, an objective approach to each document and its commercial context is that those dates merely record the dates each claim was made, and not the ‘reference date’ as defined in the SOP Act. Both the plaintiff and Haides appear to have read the dates on the second and third payment claims in that manner. Thus, there is no ‘reference date’ expressly stated on either of the payment claims.
73. The plaintiff submitted that both claims were made in respect of the same reference date of 30 June 2017. That is because each schedule recording the work for the claim is for work that occurred up to 1 June 2017. The plaintiff says no further reference date can have arisen after that date. That submission is consistent with the decision in Perform (NSW) Pty Ltd v Mev-Aust Pty Ltd (trading as Novatec Construction Systems) [2009] NSWSC 416, in which Rein J held (at [39], [42]) that where no further work has been done since a payment claim is served, then if that claim is made again the following month, the reference date for the second claim will be the same as the first claim, and therefore not permissible. Similarly, in Grid Projects NSW Pty Ltd v Proyalbi Organic Set Plaster Pty Ltd [2012] NSWSC 1571 (Grid)at [23]-[39], it was held by Stevenson J that for reference dates to arise on the last day of a month, it is necessary that some construction work be undertaken in that month.
74. However, in Brodyn at [63], Hodgson JA (with whom Mason P and Giles JA agreed) held that reference dates that are calculated by reference to the equivalent of s 10(3)(b) of the SOP Act (as opposed to a date specified in the construction contract itself) do not cease on termination of a contract or cessation of work.
75. In Veer Build Pty Ltd v TCA Electrical and Communication Pty Ltd [2015] NSWSC 864 (Veer Build)at [44], Darke J considered that this particular finding in Brodyn was not affected by the later decisions of Dualcorp and Chase Oyster Bar, so that a single judge at first instance should still follow that authority.
76. The reasoning in Brodyn is applicable to s 10(3)(b) of the SOP Act. All that the section provides is that the reference date is the last day of the “calendar month in which the construction work was first carried out” (in this case 30 April 2016) and then the last day of each subsequent named month.
77. The SOP Act does not require work to have been carried out in a particular month in order for it to be a ‘named month’ and thus come within the definition of a reference date. That construction was confirmed with regard to the NSW Act by both Darke J in Veer Build at [42]and McDougall J in Broadview Windows Pty Ltd v Architectural Project Specialists Pty Ltd [2015] NSWSC 955 (Broadview Windows) at [31]-[43], who each considered that the words ‘named month’ simply referred to the names of the months, such as January, February etc.
78. The reasoning in each of Veer Build and Broadview Windows was based on s 21 of the Interpretation Act 1987 (NSW)which defined “named month” as meaning “January, February, March, April, May, June, July, August, September, October, November or December.”
79. In the Territory, although the Legislation Act 2001 (ACT)does not contain a definition of ‘named month’ the definitions of “month” and “calendar month” (noted in the SOP Act itself) achieve the same result. “Calendar month” means “one of the twelve months of the year”.
80. Accordingly, and consistent with Brodyn, Veer Build and Broadview Windows,the only limits on when a payment claim may be given are those provided by s 15(4) of the SOP Act, …
81. In my view, this construction of the SOP Act is supported by s 19(2)(a) of the SOP Act, which provides that a claimant who wants to apply for adjudication must notify the respondent of an intention to do so within 20 business days immediately following the due date for payment.
82. If no further ‘reference date’ could arise after a payment claim had been served because the claimant had not done any further work in the months that followed, then a claimant who allowed a respondent some time to pay before embarking upon an adjudication process would be prevented from subsequently enlivening that process by issuing a fresh payment claim with a fresh due date for payment, because the reference date would not have changed. I do not consider that furthers the object of the SOP Act.
83. The preferable construction is one that allows a claimant time to issue a payment claim any time up to 12 months (in the absence of any time stipulated in the contract) from the date the work was last carried out.
Denham Constructions (No 2) related to a claim where the claim in question was described as a ‘limb (a)’ claim: see Denham Constructions (No 2) at [50]. The cases of Southern Han and All Seasons were also cases dealing with contractually generated reference dates.
What was held in Southern Han was that no valid reference date existed because under the terms of the contract there in question, payment had been suspended or there was a valid exercising of the right to terminate the contract: see Southern Han at [76] and [80].
If payment had been suspended, no reference date arose until after completion of that assessment process. If the contract had been terminated, any further reference dates under the contract ceased to exist, with the right to pursue future progress payments replaced by a right to claim damages or restitution: Southern Han at [81].
There is nothing that I have been able to discern in the reasoning of Southern Han to indicate that an interpretation of a statutorily generated ‘reference date’ as permitting a number of available reference dates was incorrect.
The same may be said of the reasoning of the NSW Court of Appeal in All Seasons. In that case, there was a contractual provision which provided for a reference date of the 20th of each month. A claim was served on 20 June 2016 and then another payment claim was served on 12 July 2016. There was a contractual provision which provided that an early progress claim was deemed to have been made on the date for making that claim: see All Seasons at [2]. The reasoning of the NSW Court of Appeal was a result of construing that deeming provision. The Court rejected an argument that a payment claim served on 12 July 2016 (before the next contractual reference date arose) could be taken as having been made on 20 July 2016 by the operation of the deeming provision: see All Seasons at [35]-[41]. Again, the case was not directed to construction of a reference date that is supplied by statute, which is the applicable definition in the present circumstances.
I was otherwise not taken to any authority to suggest that the reasoning in Canberra Drilling Rigs had been overtaken or was in error. The construction for which Nova Builders contended only gives effect to the first limb of the definition. and ignores the second limb of the statutory definition in s 10(3)(b), which, by the use of the word “and”, is expressly additional to the creation of a reference date on the last day of the month in which the work was carried out. I therefore continue to adhere to the view that, as seems plain from the words of the definition in s 10(3)(b), a fresh reference date for particular work carried out may arise at the end of each month, providing that the date work is “last carried out” does not extend beyond 12 months after the claim is made.
Accordingly, Ground 3 is not made out.
Issue 4: Was there a failure to give adequate reasons?
By this ground, Nova Builders challenged the adequacy of the adjudicator’s reasons for finding that a construction contract existed, and accordingly, that the adjudicator had what he described as ‘subject matter jurisdiction’.
The statutory obligation to provide reasons
Section 24 of the Security of Payment Act sets out what the adjudicator must decide and consider, what reasons must be provided, requirements for valuing work done where there is an earlier adjudication, and the power for the adjudicator to correct clerical mistakes or miscalculations of figures. Subsections (1)-(3) are material here. They are in the following terms (emphasis added, italics in original):
Adjudicator's decision
(1)The adjudicator for an adjudication application must decide—
(a)the amount of the progress payment, if any, to be paid by the respondent to the claimant (the adjudicated amount ); and
(b)the day on which the amount became or becomes payable; and
(c)the rate of interest payable on the amount.
(2) In deciding an adjudication application, the adjudicator must only consider the following:
(a)this Act;
(b)the construction contract to which the application relates;
(c)the payment claim to which the application relates, together with any submission, including relevant documentation, properly made by the claimant in support of the claim;
(d)the adjudication application;
(e)the payment schedule, if any, to which the application relates, together with any submission, including relevant documentation, properly made by the respondent in support of the schedule;
(f)the adjudication response, if any;
(g)the result of any inspection by the adjudicator of any matter related to the claim.
(3) The adjudicator's decision must—
(a)be in writing; and
(b)include the reasons for the decision, unless the claimant and the respondent have both asked the adjudicator not to include the reasons in the decision.
Applicable Principles
The complaint is about a failure to provide adequate reasons. The established principles applying to challenges of this type have been articulated in various ways. A convenient summary is provided in Alexandria Landfill Pty Ltd v Transport for NSW [2020] NSWCA 165; 103 NSWLR 479 (Alexandria Landfill) (application for special leave refused: see [2020] HCASL 271).
The NSW Court of Appeal there referred to the cases establishing the principles, such as Pettitt v Dunkley [1971] 1 NSWLR 376; Resource Pacific Pty Ltd v Wilkinson [2013] NSWCA 33; Boele v Rinbac Pty Ltd [2014] NSWCA 451; 88 NSWLR 381; Soulemezis v Dudley (Holdings) Pty Ltd (1987) 10 NSWLR 247 (Soulemezis); Beale v Government Insurance Office (NSW)(1997) 48 NSWLR 430 (Beale) and Li v Attorney General for New South Wales [2019] NSWCA 95; 99 NSWLR 630.
In the case under consideration here, the reasons in question are of a person in the equivalent position of a tribunal not a judge, and the statutory context involves appeals from an adjudicator being limited to questions of law (s 43(2) Security of Payment Act).
Accordingly, principles that I consider to be relevant in those circumstances include:
(a)The adequacy of reasons is not to be judged against a standard of perfection, but the question is whether they attained the minimum acceptable standard: Alexandria Landfill at [316].
(b)Where there is a right of appeal, the minimum standard for the reasons given is that they must be sufficient for the parties to understand why the decision was made, so as to allow that right to be exercised. Unless the basis of the decision is properly articulated, the losing party may be effectively deprived of the right of appeal: Soulemezis per McHugh JA at 280; and per Mahoney JA at 269; Beale at 444 per Meagher JA.
(c)Where an appeal is confined to questions of law, the standard of reasons is such that it must be shown that the decision has not been reached capriciously or arbitrarily, but rationally. The reasons must therefore reveal that all material factors have been identified and addressed, and that no prohibited considerations have been operative: Alexandria Landfill at [29].
(d)The adequacy of the reasons that are required (in this case under s 24(3)) is informed by the statutory context in which the obligation is imposed. In State Water Corporation v Civil Team Engineering Pty Ltd [2013] NSWSC 1879, in relation to the equivalent statutory requirement in NSW, Sackar J stated at [10]:
The strict timeframes imposed by the Act, and the complexity of some of the cases, means adjudicators are often required to make their determinations in an intense, “pressure cooker environment”, and therefore considerable latitude should, in my view, be afforded to an adjudicator as to the manner and form of the determination ...
In some cases, the failure to give reasons may constitute a failure to exercise jurisdiction: Soulemezis at 277F-G. Cases where the failure to give reasons may constitute jurisdictional error may include cases where specific findings of facts are necessary to ground the power of the decision-maker to make the order that he has made (see Sasterawan v Morris [2008] NSWCA 70 at [35], discussing Soulemezis at 273B). They may also include circumstances where a statutory scheme has made the giving of reasons a condition precedent to the validity of a decision. If it has, a decision that does not give reasons will be made without authority: Re Minister for Immigration and Multicultural and Indigenous Affairs; Ex parte Palme [2003] HCA 56; 216 CLR 212 (Ex parte Palme) at [55] per McHugh J (who reached the same result as the majority).
Otherwise, an appeal court will generally intervene where there are no reasons given in circumstances where there was an obligation to provide them, and where a statement of reasons is so inadequate as to constitute a miscarriage of justice: Beale at 444.
Submissions of the parties
Nova Builders argued that, having found the contract to perform the earthworks was between Nova Builders and Benex, the reasons do not adequately disclose the basis for the adjudicator forming the view that the contract was then assigned or novated, with Civil & Civic being substituted for Benex.
It was submitted by Nova Builders that, before any finding could be made that an “arrangement” between Nova Builders and Civil & Civic formed on 3 March 2020, the adjudicator was required to find that each of the three parties agreed with the other two that:
(a)Civil & Civic would complete the work; and
(b)Nova Builders would be liable to pay Civil & Civic, and not Benex, in respect of that work.
Nova Builders argued that the adjudicator’s reasoning process did not sufficiently disclose how he reached a finding that Nova Builders agreed it would be liable to pay Civil & Civic, and not Benex, in respect of the work Civil & Civic subsequently completed. Further, on the material that was before the adjudicator, no such inference can be drawn to that effect.
Nova Builders emphasised the bilateral requirement that was required, relying on Machkevitch v Andrew Building Constructions [2012] NSWSC 546 where McDougall J stated at [27]-[28] (emphasis added):
[27] In my view, what is required is that there be something more than a mere undertaking; or something which can be said to give rise to an engagement, although not a legally enforceable engagement, between two parties; or a state of affairs under which one party undertakes to the other to do something; or an arrangement between parties to like effect.
[28] In those circumstances, the court must look for a concluded state of affairs, which is bilateral at least, which can amount to an arrangement under which one party to it undertakes to perform construction work for another party to it. It is not necessary that the arrangement be legally enforceable; but an "arrangement" which is legally enforceable may be, a priori, a construction contract.
Nova Builders complained that there was no evidence of any undertaking by Civil & Civic to carry out the works, but that if such an undertaking was assumed, it did not do so as a party to any arrangement to which Nova Builders was also a party. The adjudicator did not provide any reasoning which leads to such a result.
All that the evidence disclosed was that Nova Builders told Benex and Civil & Civic that it was not involved in their dispute beyond ensuring that the work was completed, and that it put the amount invoiced by Civil & Civic into a trust fund and advised the other parties of this and, on receiving a further invoice, sought interpleader relief. Nova Builders plainly did not see itself as relieved of any obligation to Benex from 3 March 2020 or of being liable to pay Civil & Civic instead. It accepted that it was liable to pay for the work done, and that it would pay, but only once Benex and Civil & Civic had agreed on the entity to be paid. If Nova Builders was a party to any arrangement at all, it was an arrangement with both Benex and Civil & Civic to that effect, and not with Civil & Civic alone, undertaking to perform the works.
Civil & Civic accepted that there was a requirement under s 24(3)(b) of the Security of Payment Act to give reasons. It argued that the adjudicator provided adequate reasons for finding that an arrangement existed for construction work with Civil & Civic. The remainder of the submissions were directed to taking the Court through the salient parts of the Adjudicator’s Reasons, and the paragraphs relied upon by Civil & Civic are considered below. Civil & Civic argued that the requirement to give reasons must be assessed in the context of the robust procedure provided for in the Security of Payment Act, citing 470 St Kilda Road Pty Ltd v Reed Constructions Australia Pty Ltd [2012] VSC 235 at [92].
In the event that the Court found there was a failure to provide adequate reasons, Civil & Civic submitted that the appropriate remedy was not to quash or set aside the determination, but to exercise the power provided under s 43(6)(b) of the Security of Payment Act to remit the matter to the adjudicator for reconsideration in accordance with the Court’s reasons. It argued for that result, in part, because there had been no actual challenge to the factual finding itself.
In reply, Nova Builders argued that it was unable to properly make the case challenging the finding until adequate reasons were provided. However, Nova Builders submitted that it was clear from its submissions that it disputed the factual finding of a construction contract between it and Civil & Civic. It indicated that if leave were granted and the court considered it necessary to formalise the submission as a separate ground, it would file an amended notice of appeal reflecting the challenge to (a) the jurisdictional fact as found, and (b) the reasons said to support it. The foreshadowed application to amend on that issue was opposed and ultimately not pressed, in part because it would have involved the parties calling evidence.
Consideration
The starting point is to understand what the adjudicator’s task was. He had to determine whether there was a construction contract under which a payment claim was made.
(a) The existence of a construction contract is a jurisdictional fact
A payment claim must relate to work performed “under the construction contract concerned”: s 15 of the Security of Payment Act.
The existence of a construction contract between Civil & Civic and Nova Builders was therefore an essential condition for there to be in truth an adjudicator’s determination. The existence of a construction contract has been held to be one of the jurisdictional matters that must be determined by each adjudicator to provide a valid decision: Brodyn Pty Ltd t/as Time Cost and Quality v Davenport [2004] NSWCA 394; 61 NSWLR 421 at [52]- [53] per Hodgson JA, with whom Mason P and Giles JA agreed. It may therefore be described as a jurisdictional fact.
In Primelime (NSW) Pty Ltd v BAEC Contracting Pty Ltd [2018] NSWSC 372, McDougall J said at [16]:
It is common ground, and rightly so, that the existence of a construction contract between the parties, ….is a matter that goes to jurisdiction. It was common ground also, and again rightly so, that the findings of the adjudicator could not conclude the existence of jurisdiction where, on a correct view of the parties’ dealings, there was no jurisdiction.
(b) What constitutes a construction contract?
A construction contract is defined in the Dictionary to the Security of Payment Act as follows:
…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.
Considerable judicial attention has been devoted to the topic and the history of the discussion may be seen in Seabreeze Manly v Toposu [2014] NSWSC 1097 (Seabreeze) at [26]—[29], which drew together previous decisions including Machkevitch, Okaroo Pty Ltd v Vos Construction & Joinery Pty Ltd [2005] NSWSC 45 and Class Electrical Services v Go Electrical [2013] NSWSC 363 (Class Electrical).
What is meant by “arrangement” in the above definition is as submitted by Nova Builders, namely that there needs to be a concluded state of affairs which is bilateral: Machkevitch at [27]-[28], cited in Seabreeze at [26]. The principles articulated in Machkevitch were also applied by Mossop J in Justar Property Group Pty Ltd v Chase Building Group (Canberra) Pty Ltd [2020] ACTSC 231 at [52].
A qualification is the reference to “one party undertakes”, which was described in Class Electrical at [33] as the agreement, acceptance or promise by the person to do that work. However, at [35] emphasis was placed on the fact that the undertaking must be “under” either a contract or other arrangement:
Nonetheless, what is important is that the undertaking be one under a contract or other arrangement. To put it the other way around, there must be a contract or other arrangement under which an undertaking of the relevant kind is given and accepted.
In Seabreeze, McDougall J went on to consider a situation where there was one contract between a developer (“Seabreeze”) and a builder (“Castle Projects”), and an instruction by the developer for the builder to enter into subcontracts on the basis that the subcontractors would invoice, and be paid directly by, Seabreeze as the developer. His Honour found (at [39]) that was an arrangement sufficient to entitle the sub-contractor to make a payment claim against Seabreeze, but importantly for the present circumstances, his Honour stated at [39]-[40]:
[39] …That is so because Seabreeze instructed Castle Projects to put in place a system whereby subcontractors would look to Seabreeze for payment. Castle Projects did so. It communicated that system to [the subcontractor]. [The subcontractor] took the job on that express and authorised basis.
[40] …the documents and the course of dealings are entirely consistent with the existence of a trilateral arrangement under which, among other things, [the subcontractor] undertook to carry out construction work for Seabreeze. I repeat that Seabreeze has effectively acknowledged this on four occasions by paying [the subcontractor] direct, in accordance with the payment schedule created in its name by Castle Projects…
Paragraph [66] is similarly directed to whether Benex might have a claim against Mr Moseley as its agent, or Civil & Civic as recipient of funds that should have been paid to it. Part of that paragraph is as follows (emphasis added):
… Whether Benex Pipelines knew that it was being held out as a joint venture partner or gave authority to become one, although a relevant consideration, is not the real issue to be resolved. The determinative factor focuses on the fact that Mr Moseley’s conduct did not occur in a vacuum. Although it is well beyond the scope of this review, when considered with the fact that Civil & Civic elected not to have Mr Moseley provide evidence and relied only on written submissions, a careful assessment may provide some personal explanations for Mr Moseley’s motivation and conduct. More importantly, however, the facts and circumstances as they have been presented to me give insight into Benex controls, or lack thereof, and culture. This concern on my part provides an explanation as to the reason why the court granted the interpleader relief for Nova Builders and “has reserved its decision of which of the Claimant and a third party is contractually entitled to the money”.
The emphasised words from that paragraph are telling. The reasons in that paragraph similarly do not bear at all on the adjudicator’s task under s 24(1) of the Security of Payment Act. The adjudicator’s published commentary on an issue upon which judgment was reserved at the time was unnecessary and (inadvertently) inappropriate.
The very next paragraph [67] is critical to Nova Builders’ complaint. It is in the following terms (emphasis added):
Therefore, on the evidence before me I am satisfied that a construction contract or other arrangement exists between Civil & Civic and Nova Builders with the other arrangement occurring on 3 March 2020 when Benex Pipelines abandoned the Project and the director for Benex Pipelines told Mr Pierlot that the Project was now Ben’s.
This finding comes at the end of a consideration of extraneous matters immediately before the adjudicator’s statement that “therefore” he was “satisfied that a construction contract or other arrangement exists”. I will return to the words emphasised when considering [85] of the adjudicator’s reasoning below. As I have endeavoured to demonstrate by setting out, at length, the reasons preceding that conclusion, no part of the adjudicator’s reasons addressed any communication Nova Builders and Civil & Civic had in relation to any “arrangement” or contract whereby Nova Builders was to pay Civil & Civic directly for work that Benex had contracted to do. There is no explanation of how the adjudicator had reached the view that there was a construction contract between those parties. Certainly, there is nothing approaching the requisite reciprocity or acceptance of mutual rights and obligations relating to payment by Nova Builders to Civil & Civic directly and in its own right.
“Appointment”, “Service of Application” and “Commencement of Proceeding” (paragraphs [68]-[79])
The Adjudicator’s Decision (at [68]-[79]) next deals with his appointment, service of the application and commencement of the proceeding, and the material that was provided by the parties. Those paragraphs may be passed over.
“Subject Matter Jurisdiction” (paragraphs [80]-[81])
The adjudicator then returns to the question of “Subject Matter Jurisdiction” stating at [80]-[81]:
[80] For the reasons outlined and discussed under the heading “Background” and expanded upon in the paragraphs that follow, the respondent has unsuccessfully challenged the subject matter jurisdiction of the Act.
[81] Here subject matter jurisdiction to decide the non-interpleader issues, however, becomes an exercise in carefully unravelling a tangled ball of wax. If I unravel this tangled mess without due care given to the essence of the dispute causing the interpleader action taken by Nova Builders, it would be nothing more than an exercise of rearranging the deck chairs on the Titanic or the sinking ship of jurisdictional error.
“Construction Contract (Benex) and Other Arrangement (Civil & Civic)” (paragraphs [82]-[96])
The relevant part of the reasons under this heading is at [85] (emphasis added):
The critical date in this application is 3 March 2020. It is critical because it establishes two important considerations. First, it is the date on which assignment of the construction contract from Benex Pipelines to Civil & Civic occurred. It is also the date on which Benex Pipelines abandoned the Project. Mr Pierlot describes the events of 3 March 2020 as follows: “…On 3 March 2020, I received an email message from Ben at around 6 AM telling me that he was moving a contractor off-site and asking me to use a new phone number and email address. … Later this morning David Bencic (David) who introduces himself as director of Benex called me and asked that we meet on Site. I then told Drago and arranged to meet him at the site. At around 9 AM we met David. We then had a conversation about [what] was happening in the course of which David said words to the effect Ben left me this morning and said this job is his.”
Again, there are difficulties with this paragraph, in that there are no reasons to indicate how assignment occurred, which would have required the consent of both Benex and Nova Builders, even assuming (without deciding) the earlier finding of a joint venture between Civil & Civic and Benex.
The actual evidence relied upon by the adjudicator is also inconsistent with what the adjudicator had earlier recorded at [67] of the reasons, which has been set out above. The director for Benex did not say to Nova Builders that the Project was now Ben’s. He said that Ben had said the job was his. In communicating what Mr Moseley (Ben) had said, Benex did not communicate its acceptance of that view and the adjudicator has mistaken the evidence in that regard. Moreover, knowledge of what a third party is doing that may affect its contractual rights does not necessarily equate to consent to change any separate contractual relationship. Importantly, the reasons do not disclose any evidence relied upon by the adjudicator to indicate that Nova Builders had agreed to a change in contractual responsibility.
Again then, the language is that of assigning a contract, but the reasons do not address how there was the necessary reciprocity of both Benex and Nova Builders agreeing that Civil & Civic would both do the work in its own right and be paid directly by Nova Builders. That is such a critical part of the finding of assignment which in turn founded the finding of a construction contract that I consider the reasons to be inadequate to explain the jurisdictional fact that was found.
“Construction Contract – Nova Builders and Benex Pipelines” (paragraphs [97]-99])
As this heading suggests, the adjudicator recorded the written contract between Nova Builders and Benex. The adjudicator concluded at [99]:
[99] For the preceding reasons, I prefer the respondent’s version of how the construction contract formed between Nova Builders and Benex Pipelines.
The adjudicator’s clear and unchallenged finding in that paragraph was that Benex Pipelines held the contract with Nova Builders.
“ ‘Or Other Arrangement’ – Nova Builders and Civil & Civic” (paragraphs [100]-[106])
It is this section of the reasons where the adjudicator appears to make a finding that the contract between Benex and Nova Builders was novated. The adjudicator states as follows at [104]-[105] (emphasis added):
[104] Rights, as made known in the statements of the stakeholder and the first and second defendants, are capable of being transferred. Once a transfer has been accomplished, the transferor’s interest in the right is extinguished. As previously stated, it makes no difference whether the construction contract was between Nova Builders and [Benex] as a sole venturer or Nova Builders and [Benex] as a joint venturer. I have concluded that [Benex] was not deprived of any benefits. The fact that [Benex] immediately collapsed on 3 March 2020 and could not continue with the works raises the question of whether a joint venturer would better describe the contractual circumstances. Nothing turns on this point. What is clear is that [Benex] could not continue with the works. This is made known by [Benex] in its statement of claim and confirmed by the direct evidence of Mr Pierlot (“Ben left me this morning and said this is his job”). Once the transfer has been accomplished, the transferor’s interest in the right is extinguished. The right transferred by [Benex] becomes the property of Civil & Civic. On the other hand, duties are not transferable in the sense that rights are. Many duties are delegable, but the delegator remains responsible for the performance. If the party to whom the duty is owing, here Nova Builders, agrees to the delegation and promises to release the delegator, a novation results and the delegator is released.
[105] Novation or “other arrangement” – the term used by the claimant – is a transaction involving the original parties to the contract plus a newcomer. In the usual novation, one of the original parties to the contract is removed from the transaction and the newcomer is substituted in his place. This may not occur without the mutual assent of all three. Here the evidence before me shows all three were in agreement: (1) Nova Builders (Mr Pierlot) – “interest in ensuring that the works which I agreed with Ben are completed in a timely fashion”; (2) [Benex] – “Benex upon the departure of the GM was not in a position to continue any works at Greenway”; and (3) Civil & Civic – “Works completed by [Civil & Civic] pursuant to an agreement commencing on 3 March 2020 between [Nova Builders] and [Civil & Civic] to complete excavation, civil and topsoil works at Greenway”. Acceptance of the substitution by Benex is confirmed by the solicitor for Benex: “When Mr Moseley put his company in on the job in place of our client our client took no step to frustrate completion of your client’s job” and “We not[e] your client again wrote to our client yesterday advising that Civil and Civic had agreed to continue working on the Greenway Project”.
This reasoning is the only place in the reasons where any attention is directed to the reciprocity that is a necessary component of the formation of an arrangement within the definition of a construction contract. The statement attributed to Nova Builders is an extract from paragraph [16] of an affidavit sworn by Mr Kieran Pierlot on behalf of Nova Builders which was made for the purpose of the separate court proceedings but was part of the material read by the adjudicator. What was said at [15] and [16] of that affidavit was this:
[15] Later this morning [3 March 2020] David Bencic (David) who introduced himself as a director of Benex called me and asked that we meet on Site. I then told Drago and arranged to meet him at the site. At around 9 AM we met David. We then had a conversation about what was happening in the course of which David said words to the effect “Ben left me this morning and said this job is his”.
[16] Since then I have communicated with Ben and David directly and through our respective solicitors. The position I have sought to express is that Nova is not involved in the dispute between David and Ben beyond having an interest in ensuring that the works which I agreed with Ben are completed in a timely fashion.
It is important to recognise that the agreement Mr Pierlot was referring to in that statement was the agreement he made with Mr Moseley when he was the general manager and representative of Benex. This is a statement made in an affidavit well after the event and all that Nova Builders communicated by it was that it wanted the works it had engaged Benex to do completed in a timely fashion. The statement provides no support for the inference drawn by the adjudicator of any agreement to vary or novate the contract. If the adjudicator was taking the words “the works which I agreed with Ben” as permitting such an inference, then the line has been taken out of its context, and has been misconstrued. When the context of the paragraph from the affidavit is included, any such inference is plainly wrong and a mischaracterisation of the evidence of Mr Pierlot.
I have refrained from discussing any of the material that was not referred to by the adjudicator as forming part of his reasons for the finding, as I am concerned not to give any impression of considering the jurisdictional fact itself. In Nova Builders not seeking to overturn the jurisdictional fact, the Court will not undertake that task. It is only necessary to find that to cherry pick that one line out of the material that was before the adjudicator as demonstrative of an agreement to novate a contract was inadequate in both taking the line entirely out of the context in which it was made and using it in a way that was misleading, and otherwise ignoring the competing evidence on a critical point.
Similarly, Benex’s conduct in not seeking to prevent Civil & Civic from completing the works does not of itself equate to consent to novate a contract. However, the above finding means that it is unnecessary to deal further with that aspect of the novation that was found.
The reasons conclude at [106] (emphasis added):
[106] Here there exists an agreement under which Beno Excavations is obligated to perform construction work at the Project for Nova Builders. Beno Excavations is unable to continue with its obligation on 3 March 2020, and there is a mutual agreement of all parties to the old and new “construction contract or other arrangement”. It is clear on the material before me that there was an apparent intention immediately to extinguish the duties of the parties under the old agreement, and the new contract is valid and enforceable under the Act as a construction contract or other arrangement under the authority of Olbourne v Excell Building Corp Pty Limited [2009] NSWSC 349.
Again, the repetition of there being a “mutual agreement of all parties” does nothing to advance the reasoning. The adjudicator also appears to introduce the concept of an old and new contract, creating confusion as to what the adjudicator determined. The reference to “the new contract” appears to be a finding that there was a fresh contract. Yet it remains unclear who the parties to that contract were or what the “arrangement” referred to by the adjudicator was.
“Value of Performance Before and After 3 March 2020” (paragraphs [107]–[131])
This part of the reasons deals with the invoices and the objection by Nova Builders to the claim on the basis of the money paid into Court. It may be passed over for the purposes of the present complaint.
“General Matters Pertaining to Subject Matter Jurisdiction” (paragraphs [132]-[136])
The only paragraphs of relevance in this section are the adjudicator’s bare statements at [132]-[133]:
[132] The respondent is the person who, under the construction contract concerned, is or may be liable to make the payment.
[133] The construction contract was entered into after the commencement of the Act…
No additional reasons are provided for the conclusions already made by the adjudicator.
Paragraphs [137]-[161]
For completeness, those paragraphs also do not address any aspect of the present complaint. They deal with the following:
(a) Payment Claim
(b) Payment Schedule
(c) Adjudication Application
(d) Adjudication Response
(e) Statutory Consideration (s 24(2) of the Act)
“Contract” (paragraphs [162]-[164])
The final section where there are reasons relevant to the finding in question is at [162]-[164]. Paragraph [162] is as follows (emphasis added, italics and underlining in original):
162. I am satisfied, as discussed more fully and completely under the heading “Background” and “Subject Matter Jurisdiction” that at the very least an arrangement formed on 3 March 2020 between Civil & Civic when Benex Pipelines left the Project by reason of being unable to proceed after Mr Moseley’s departure from Benex Pipelines, as asserted in the letter of demand issued by the solicitors for Benex Pipelines, and assigned rights and duties to Civil & Civic with acceptance of the assignment coming from Nova Builders. The claimant relies on the authority of Olbourne v Excell Building Corp Pty Ltd [2009] NSWSC 349. Olbourne follows Okaroo Pty Ltd v Vos Construction & Joinery Pty Ltd [2005] NSWSC 45. In Okaroo the Trial Court was required to consider whether the word arrangement, after considering the language of section 13(1), meant giving rise to an enforceable liability to pay the person by whom the work was carried out.
The adjudicator’s finding was that “at the very least an arrangement formed… between Civil & Civic” and someone, but it is not clear who the arrangement was with – Nova Builders, or Benex or both. I have already discussed why the reasoning does not adequately disclose Nova Builders as being a party to any arrangement. On one version of the facts, the only recourse Civil & Civic had against Nova Builders was potentially on a quantum meruit basis, not a statutory recovery process under the Security of Payment Act.
Further, it is difficult to see how Benex may be taken to have assigned anything to Civil & Civic. It plainly did not know that earlier invoices had been issued in the name of Civil & Civic prior to 3 March 2020. After that date, it knew that Civil & Civic was undertaking work that it had been contracted to provide, but there is nothing referred to by the adjudicator to give rise to the inference that it consented to its contract being “assigned” to Civil & Civic.
The adjudicator then proceeded at [163] to set out paragraphs from the judgment of Nicholas J in Okaroo at [40]-[42]. Those paragraphs deal with what was meant by an “arrangement”. Nicholas J there stated that “arrangement” was a word without precise meaning, that it has a wide definition and encompassed transactions or relationships which were not legally enforceable agreements.
The adjudicator concluded at [164] (emphasis added):
164. Accordingly, I am satisfied that the contract between the parties is a construction contract or other arrangement as defined by the Act. I am also satisfied that the claimant is the person who carried out the construction work after 3 March 2020 and has satisfied the requirements for a progress payment under the construction contract as set out in section 10 of the Act.
That finding does not clarify the earlier uncertainty, because the adjudicator refers to the definition of an arrangement but then finds that “the contract” was “between the parties” and was either a construction contract or other arrangement. It appears that the adjudicator was unsure what existed on the findings he had made. Again though, the language is that of assigning or novating a contract, but the reasons are silent on whether that was with the necessary reciprocity of both Benex and Nova Builders agreeing that Civil & Civic would be paid directly by Nova Builders.
Remaining parts of the reasons: paragraphs [165]-[188].
The remainder of the reasons deals with a number of topics, under various headings which are immaterial to the present complaint.
(d) Conclusion on Issue 4 – error has been established
Drawing those various parts of the adjudicator’s reasons together, including the erroneous findings, the consideration of matters that were irrelevant to the finding to be made and the failure to grapple sufficiently with how anything that Nova Builders did created the arrangement found, I accept that there has been a failure to provide adequate reasons to the minimum standard articulated in the authorities. The reasons were inadequate because a necessary step to the final conclusion and the resolution of competing arguments was not explained (see DL v The Queen [2018] HCA 26; 266 CLR 1 at [32]-[33]; AK v Western Australia [2008] HCA 8; 232 CLR 438 at [85].
I am mindful of the submission made by Civil & Civic that the reasoning was sufficiently disclosed and the real complaint is about the reasons that were given. That type of submission is reflected in the caution expressed in Soulemezis at 281G that great care needs to be taken that dissatisfaction with a finding of fact does not mislead the Court into holding that the learned judge (or in this case, adjudicator) has failed to give reasons for the finding.
If the skerrick of reasoning referred to at [105] of the adjudicator’s reasons is considered sufficient to provide an intelligible basis for finding that Nova Builders agreed to an arrangement, the reason given indicates a misunderstanding of what was said, and an illogical leap to draw an inference of consent to novation from a comment after the event that Nova Builders had an interest in the work being completed in a timely fashion. In that sense, it is inadequate to ground the finding the adjudicator made.
In Pines Living, Mossop J expressed the view at [31] that the statutory requirement to give reasons meant that the reasons formed part of the face of the record. I respectfully agree with that analysis.
In Steel Contracts Pty Limited v Simons t/as Little Lifter, Poiner and Adjudicate Today Pty Limited [2014] ACTSC 146, Refshauge J gave detailed consideration (at [29]-[40]) to the criteria for a grant of leave set out in s 43 of the Security of Payment Act. In the course of that discussion, his Honour referred to Westport Insurance Corporation v Gordian Runoff Ltd [2011] HCA 37; 244 CLR 239 where the High Court found that inadequacy of reasons constituted an error that enlivened both limbs for the grant of leave.
It is clear that on the above findings, Nova Builders has established “a manifest error of law on the face of the adjudication decision”. Civil & Civic argued for remittal of the matter to the adjudicator without setting aside the orders. The basis for that submission was that inadequacy of reasons does not generally constitute an error going to jurisdiction. Cases such as Ex parte Palme at [41]-[48] and [55] provide some support for that outcome as an available remedy.
Here, however, it is not necessary to find jurisdictional error before the Court will intervene on appeal. Basten JA in Campbelltown City Council v Vegan & Ors [2006] NSWCA 284; 67 NSWLR 372 at [130] said (references omitted):
There is extensive authority for the proposition that a failure, on the part of a tribunal exercising judicial functions, to give reasons for its decision will constitute an error of law which will permit the decision to be set aside on appeal, where the right of appeal is limited to errors of law…
In any event, the effect of the error identified is that there are no or substantially no valid reasons for the Adjudicator’s Decision with regard to a jurisdictional fact and it is therefore appropriate that the decision be set aside.
Thus, had it been necessary to find jurisdictional error, because of the nature of the error (by which I mean the lack of reasoning directly relates to a jurisdictional fact), and the other difficulties with the reasons in the context of a statutory regime which both mandates and limits the matters for consideration, I would also have concluded that the adjudicator had misconceived the statutory task, such that there was a constructive failure to exercise jurisdiction (as to which see Sasterawan at [46] and the authorities there-cited), leading to the same result that the adjudicator’s orders must be set aside.
Issue 5: Is there an abuse of process that has arisen?
The court has an inherent power to prevent misuse of its procedures in a way which, although not inconsistent with the literal application of its procedural rules, would nevertheless be manifestly unfair or unjustifiably oppressive to a party to litigation before it, or otherwise bring the administration of justice into disrepute: Hunter v Chief Constable of the West Midlands Police [1981] UKHL 13; [1982] AC 529at 536; Tomlinson v Ramsey Food Processing Pty Ltd [2015] HCA 28; 256 CLR 507 at [24]-[26]; UBS AG v Tyne [2018] HCA 45; 265 CLR 77 at [126].
Civil & Civic is a defendant in the interpleader proceeding, along with another entity. It did not take any step opposing the initial payment of the first part of those funds ($438,078.93) into court on a summary basis.
A further sum of $23,925 was paid into court following orders made on 19 July 2021. At that time, the interpleader proceeding was listed to hear competing applications about what should happen to the moneys that had been paid into Court. Judgment was delivered in November 2021: Nova Builders v Benex.
While judgment was reserved, and indeed, the day after that dispute was heard, Civil & Civic issued a payment claim under the Security of Payment Act in the form of the invoices previously issued but re-dated 20 July 2021. The total sum of the amounts claimed in those invoices was equal to the sum of money that had been paid into Court and over which the parties had been litigating the previous day.
On 16 August 2021, Civil & Civic then lodged an application for adjudication under the Security of Payment Act, and it was that application that gave rise to the adjudication decision and orders on 31 August 2021.
Nova Builders asserted that as a result of the adjudication, it is obliged to pay again the sum it has already paid into Court, and is at risk of having judgment entered for that sum and enforcement proceedings commenced against it.
Nova Builders relied on J Hutchinson Pty v Galform, where Chesterman J had found (at [46]) a lack of jurisdiction to embark upon an adjudication where judgment had already been entered in the party’s favour. His Honour went on to determine that there was a second basis on which the applicant in that case was entitled to relief, stating at [47] as follows (emphasis added):
[47] … The first respondent’s invocation of the peremptory procedures to protect subcontractors to invite Part 3 of the Act was in the circumstances of this case, an abuse of process. The second payment claim and adjudication application subverted, and were no doubt intended to circumvent, the orders of the Court made by consent in November and December 2007. Galform knew that Hutchinson disputed the legal validity of the first adjudication on the basis that its submissions had not been taken into account. It agreed to the payment of the judgment sum into court pending the outcome of proceedings to determine the legal efficacy of the adjudication. It undertook not to enforce the adjudication until further order. It agreed to directions designed to obtain a speedy determination of the disputed question. Galform only had to succeed in its contention that the adjudication was valid to obtain payment out of court of the judgment sum. Instead it sought to disregard the agreed procedures to resolve its entitlement to the judgment sum by seeking a second adjudication on the very same claim.
In the present case, even if error in relation to the failure to give reasons had not been established, or if I was wrong that the error found did not warrant setting aside of the orders, I would have been satisfied that the adjudication proceedings constituted an abuse of process in the unique set of procedural circumstances that has arisen.
Money was paid into Court on the basis of interpleader relief being granted. As observed in the Nova Builders v Benex at [5], the payment of the money into court was not opposed by Civil & Civic and at that stage, there was no foreshadowing of any pursuit of the sum paid into court using the summary or interim processes facilitated by the Security of Payment Act.
Compounding that, after Civil & Civic applied for relief in relation to the money paid into Court by seeking that the disputed sum be paid out to it, the Court found that the proceeding was not properly an interpleader proceeding, but declined to order that the money be repaid to either the plaintiff or Civil & Civic, because it was apparent that there remained a serious issue to be tried, which may have resulted in Nova Builders not owing any money to Civil & Civic at all: see Nova Builders v Benex at [58].
Nova Builders has accordingly not received back the money it paid into Court pursuant to the order that had earlier been made on the basis of interpleader relief, which deprives it of the ability to use that money to satisfy any outstanding debt that might subsequently be found to be owing to Civil & Civic on the basis of any future adjudication pursuant to the Security of Payment Act.
In those circumstances, for Civil & Civic to seek to obtain the same amount that had been paid into Court by the different means of adjudication is what I would characterise as an abuse of process in the sense described in the authorities referred to earlier in these reasons at [176].
Had Civil & Civic raised its objection to the payment of the disputed sum into court before the order was made, the issue would have been fully ventilated and it is likely that, given what followed in the subsequent interlocutory judgment, the interpleader relief sought by Nova Builders would not have been granted at that initial stage.
Further, had there been any indication that an adjudication proceeding was to be pursued in respect of payment claims for the amount that had been paid into court at the time the parties were arguing the application, that would no doubt have influenced the submissions made by the parties and it may have affected what relief was sought in those proceedings. It is to be remembered that the second tranche of moneys claimed by Civil & Civic was only paid into Court following an order made at the hearing, which was made in the absence of any suggestion that Civil & Civic intended – the next day – to commence the statutory process for recovery created by the Security of Payment Act.
In Falgat Constructions Pty Ltd v Equity Australia Corporation Pty Ltd [2005] NSWCA 49; 62 NSWLR 385 (Falgat Constructions), Handley JA referred at [24] to an injunction being possible against statutory proceedings (that is, adjudication proceedings under the Security of Payment Act) where those proceedings were commenced shortly before a common law trial was due to start, and where the statutory procedures would interfere with the orderly preparation and presentation of the parties’ cases in court.
Counsel for Civil & Civic submitted that in light of that reasoning, Civil & Civic had deliberately waited until the day after the hearing of the interlocutory application in the interpleader proceedings, so that no criticism could be made of it in that regard, and otherwise, Falgat Constructions was authority for the proposition that common law proceedings may proceed concurrently with an adjudication under the Security of Payment Act.
That situation is not the only circumstance where unjustifiable oppression may arise, and I consider that permitting the enforcement of any adjudicated amount in circumstances where the identical amount referable to the same invoices had been paid into court initially without opposition, and where orders have subsequently been made before the Security of Payment Act processes were invoked, would have been manifestly unfair to Nova Builders. I would have stayed the filing of any certificate for judgment and enforcement of the adjudicator’s orders pending the completion of the proceedings currently before the Supreme Court. However, as the orders have been set aside following the appellant’s success on the appeal, there is no stay or other order presently required.
Costs
Nova Builders has succeeded on the appeal and sought its costs. It is appropriate for costs to follow the event and I will so order.
The orders made on the appeal overtake the orders sought in the application. However, the application was fully argued and accordingly, the application has now been heard on the merits. On the reasoning above, Nova Builders would have succeeded. I consider it appropriate, in the exercise of the Court’s discretion, and having regard to what was said in Re Minister for Immigration & Ethnic Affairs (Cth); Ex Parte Lai Qin (1997) 186 CLR 622 at 625 per McHugh J, that costs should also follow the event. However, if any party seeks a different order on the basis of matters outside the knowledge of the court, they are contact my associate within 7 days.
Conclusion
The appellant (Nova Builders) has established a manifest error of law on the face of the adjudicator’s decision. The orders of the Court are as follows:
In proceedings SCA 30 of 2021
(1) Leave is granted to appeal the orders made on 31 August 2021 in relation to application number ABCDRS ACT 29.
(2) The appeal is allowed.
(3) The orders of 31 August 2021 are set aside and the matter is remitted to the adjudicator for further determination according to law.
(4) The first respondent is to pay the appellant’s costs of the appeal.
(5) In the event that either party seeks to vary order 4 within 7 days of the making of these orders, Order 4 is stayed until further order.
In proceedings SC 377 of 2021
(1) The application is dismissed.
(2) The first defendant is to pay the plaintiff’s costs of the application.
(3) In the event that either party seeks to vary order 2 within 7 days of the making of these orders, Order 2 is stayed until further order.
| I certify that the preceding one hundred and ninety-five [195] numbered paragraphs are a true copy of the Reasons for Judgment of her Honour Associate Justice McWilliam. Associate: Kristen Cummings Date: 19 August 2022 |
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Amendments
| 14 September 2022 | Replace “appeal” with “application”. | Page 1, under heading “In proceedings SC 377 of 2021”, order (2). |
| Replace “appeal” with “application”. | Page 42, under heading “In proceedings SC 377 of 2021”, order (2). |
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