Parliament Square Hobart Landowner Pty Ltd v Tonkin
[2020] TASSC 30
•3 July 2020
[2020] TASSC 30
COURT: SUPREME COURT OF TASMANIA
CITATION: Parliament Square Hobart Landowner Pty Ltd v Tonkin [2020] TASSC 30
PARTIES: PARLIAMENT SQUARE HOBART LANDOWNER PTY LTD
v
TONKIN, Max
HANSEN YUNCKEN PTY LTD
FILE NO: 2668/2019
DELIVERED ON: 3 July 2020
DELIVERED AT: Hobart
HEARING DATE: 30 June 2020
JUDGMENT OF: Estcourt J
CATCHWORDS:
Contracts – Building, engineering and related contracts – Remuneration – Statutory regulation of entitlement to and recovery of progress payments – Adjudication of payment claims – Adjudicator deciding dispute on points not contended for by either party – Denial of natural justice – Jurisdictional error – Date of adjudicator's determination.
Building and Construction Industry Security of Payment Act2009 (Tas), s 25(2), (4)(b).
Probuild Constructions (Aust) Pty Ltd v Shade Systems Pty Ltd [2018] HCA 4, 246 CLR 1; Cockram Construction Ltd v Fulton Hogan Construction Pty Ltd [2018] NSWCA 107, 97 NSWLR 77; Minister for Immigration and Multicultural Affairs v Yusuf [2001] HCA 30, 206 CLR 323; Australian Broadcasting Tribunal v Bond (1990) 170 CLR 321; Forico v Sive [2018] TASSC 21; Re Refugee Review Tribunal; ex parte Aala [2000] HCA 57, 204 CLR 82; Valeo Construction Pty Ltd v Tiling Expert (Vic) Pty Ltd [2019] VSC 291; Concut Pty Ltd v Worrell [2000] HCA 64, 176 ALR 693; Multiplex Constructions Pty Ltd v Luikens [2003] NSWSC 1140; Wooding v Eastoe [2006] NSWSC 277; Perform (NSW) Pty Ltd v MEV-AUS Pty Ltd [2009] NSWCA 157; Walton's Stores (Interstate) Ltd v Maher (1988) 164 CLR 387; Commonwealth v Verwayen (1990) 170 CLR 394; Sidhu v Van Dyke [2014] HCA 19, 251 CLR 505; Ostwald Bros Pty Ltd v Jaylon Pacific Pty Ltd [2016] QSC 240; Craig v South Australia (1995) 184 CLR 163; Bauen Constructions v Westwood Interiors [2010] NSWSC 1359, 28 BCL 153; Modscape Pty Ltd v Sive [2017] TASSC 71; MPM Constructions v Trepcha Constructions [2004] NSWSC 103; Chase Oyster Bar Pty Ltd v Hamo Industries Pty Ltd [2010] NSWCA 190, 78 NSWLR 393, referred to. Cranbrook School v JA Bradshaw Civil Contracting [2013] NSWSC 430, followed.
Aust Dig Contracts [279.6]
REPRESENTATION:
Counsel:
Appellant: K Naish
Second Respondent: S B McElwaine SC, A Rollnik
Solicitors:
Appellant: King & Wood Mallesons
Second Respondent: Crawford Legal
Judgment Number: [2020] TASSC 30
Number of paragraphs: 211
Serial No 30/2020
File No 2668/2019
PARLIAMENT SQUARE HOBART LANDOWNER PTY LTD v
MAX TONKIN AND HANSEN YUNCKEN PTY LTD
REASONS FOR JUDGMENT ESTCOURT J
3 July 2020
This proceeding is an application seeking an order in the nature of certiorari to quash a determination under the Building and Construction Industry Security of Payment Act 2009 (Tas) (SOP Act). The applicant, Parliament Square Hobart Landowner Pty Ltd (PSHL or the applicant), was the respondent to an application for adjudication (the application) made by the second respondent, Hansen Yuncken Pty Ltd (HY). The first respondent, Max Tonkin, (Mr Tonkin or the Adjudicator) was the adjudicator appointed under the SOP Act to determine the adjudication. Mr Tonkin has filed a notice of submission in the proceeding.
The general order to show cause was made, relevantly, in the following terms:
"4Upon the return for hearing of this general order, the Respondent shall show cause why an order in the nature of certiorari to quash the whole (alternatively, part) of the adjudication determination of the Respondent numbered 2019 TASAT018 (Determination) purportedly made on 9 September 2019 under section 25 of the Building and Construction Industry Security of Payment Act 2009 (Tas) (SOP Act) should not be granted, on the following grounds:
aThe Determination found that an amount of $920,000.00 was payable in respect of 'Delay Costs' (Delay Costs Amount), in circumstances where:
i the Delay Costs Amount does not constitute a 'progress payment' under a 'construction contract' within the meaning of the SOP Act; and
ii further and alternatively, the Delay Costs Amount does not constitute a 'progress payment' under the 'construction contract' the subject of the Determination, in each instance constituting substantive ultra vires, and therefore the Determination should be quashed in whole, alternatively in such part as determines the entitlement to the Delay Costs Amount.
b The Determination found that the Delay Costs Amount was payable:
i where there was no evidence;
ii further and alternatively, on a basis not contended for by either party; and
iii further and alternatively, on an irrational basis, in each instance denying the Applicant procedural fairness and constituting procedural ultra vires, and therefore the Determination should be quashed in whole, alternatively in such part as determines the entitlement to the Delay Costs Amount.
cThe Determination found an entitlement to variations in the sum of $4,307,014.54 (Variation Costs Amount), and in so doing the Determination purports to grant an equitable estoppel, in circumstances where:
i no jurisdiction is conferred by the SOP Act to grant such an estoppel; and
ii no jurisdiction otherwise exists at law to grant such an estoppel, in each case constituting substantive ultra vires, and therefore the Determination should be quashed in whole, alternatively in such part as determines the entitlement to the Variation Costs Amount.
dThe Determination found an entitlement to the Variation Costs Amount, and purports to grant an equitable estoppel:
i where there was no evidence;
ii further and alternatively, on a basis not contended for by either party; and
iii further and alternatively, on an irrational basis, in each instance denying the Applicant procedural fairness and constituting procedural ultra vires, and therefore the Determination should be quashed in whole, alternatively in such part as determines the entitlement to the Variation Costs Amount.
e In respect of the whole of the Determination:
i the Determination fails to have regard to evidence duly submitted by the Applicant, namely a report of Stephen Coogan dated 12 August 2019, which report dealt with the whole of the matters the subject of the adjudication other than the matters of costs and adjudicator's fees (Coogan Report);
ii further or alternatively, the Determination fails to give reasons in respect of the matters to which the Coogan Report relates; and
iii further or alternatively, if the Coogan Report was not accepted as duly submitted, the Determination fails to give reasons for that non-acceptance, in each instance denying the Applicant procedural fairness and constituting procedural ultra vires, and therefore the Determination should be quashed in whole.
5Upon the return for hearing of this general order, the Respondent shall show cause why an order in the nature of certiorari to quash the fee determination of the Respondent purportedly made at the same time as the Determination under section 37 of the SOP Act (Fee Determination) should not be granted upon the ground that the Respondent failed to determine the application the subject of the Determination within the time allowed by section 24 of the SOP Act, and therefore had no jurisdiction to make the Fee Determination, constituting substantive ultra vires.
6Upon the return for hearing of this general order, the Respondent shall show cause why further or other relief should not be granted, namely an order for restitution to be made by Hansen Yuncken to the Applicant of:
athe total amount of the Determination and Fee Determination of $5,311,274.54;
bfurther and alternatively, the Delay Costs Amount of $920,000.00;
cfurther and alternatively, the Variation Costs Amount of $4,307,014.54; and
dfurther and alternatively, the amount of the Fee Determination of $84,260.00, and such consequential orders as may be appropriate."
The issues arising on this application were conveniently adumbrated by counsel for HY, Mr McElwaine SC, in his written submissions, as follows:
"Issues raised
6 There are, in essence, five issues raised by PSHL. They are:
(a) Was PSHL afforded natural justice on, and was there sufficient evidence to support, the Adjudicator's finding that the parties agreed to amend the Contract with respect to $920,000.00 in delay costs? (First issue: Delay costs);
(b) Is it beyond the authority of an adjudicator to have regard to principles of waiver or estoppel when determining the rights or obligations of the parties pursuant to a building and construction contract? (Second issue: estoppel);
(c) Did the Adjudicator consider all submissions duly made (including the Coogan Report)? (Third issue: The Coogan Report);
(d) Is severance open, if the Adjudicator committed a jurisdictional error in a way that does not infect the entirety of the determination? (Fourth issue: severance);
(e) Is PSHL liable to pay the Adjudicator's fees? (Fifth issue: Adjudicator's fees)."
I will adopt Mr McElwaine's rubrics in these reasons. In setting out the background to the Determination and the Determination, I have adopted the relevant parts of the PSHL written submissions, which are not disputed in the submissions filed on behalf of HY. I have also used PSHL's defined terms, which are adopted by HY in its submissions, except where expressly defined by HY, or the context appears, otherwise.
The background to the Determination
PSHL is a property developer and HY is a builder. PSHL is the principal and HY is the contractor under a construction contract dated 5 December 2014 (the Contract) for Stage 1A of the Parliament Square Redevelopment Project, namely the construction of a mixed-use development known as the Salamanca Building in Hobart. By the Contract, PSHL was contracting to HY certain construction obligations PSHL had under a development agreement with the State of Tasmania (the Development Agreement).
The key terms of the Contract are set out in the applicant's written submissions as follow:
"B.1 Key terms of the Contract
11The Contract provided for two main heads of work for Stage 1A: 'Project Works' (sometimes referred to in the material as 'Base Building Works') and 'Fitout Works'.
12In the usual way, where the scope of the Works changed under either head of Works, HY was entitled to claim for Project Works Variations or Fitout Works Variations, as the case may be and a Variation Cost Order was to be made.
13 The Contract made provision for payment for each of those works as follows:
avariations to the Project Works were to be claimed and directed under clause 42 (CB 1363 to 1369);
bpayments for the Project Works (inclusive of variations) were to be assessed and made under clause 42B (CB 1369 to 1373);
cthe Fitout Works Contract Sum is established under clause 56 (CB 1385 to 1387);
dvariations to the Fitout Works were to be claimed and directed under clause 58 (CB 1390 to 1392); and
epayments for the Fitout Works inclusive of variations) were to be assessed and made under clause 59 (CB 1393 to 1396).
14In addition to entitlement to payment for the works undertaken, HY was also entitled to claim for delay costs for certain costs incurred by HY directly as a result of any delay to the Works in respect of which HY is granted an extension of time under clause 66.2, to the extent that the cause of the delay was a Qualifying Cause of Delay (as defined) (Delay Costs).
15The Contract made provision for extensions of time and for Delay Costs as follows:
a extensions of time in clause 66.2 (CB 1403 to 1405); and
b Delay Costs in clause 66.3 (CB 1405)."
Under the Contract, PSHL did not have the final say in assessing claims for Variation Costs, extensions of time and Delay Costs, or for assessing (contractual) progress claims. These roles were performed by a third party called the Sub-Independent Certifier (Sub-IC).
Under the Development Agreement, there was also an Independent Certifier, who performed a similar role to the Sub-IC, as well as a Quantity Surveyor who performed certain assessment tasks. To the extent that claims under the Contract had already been assessed by the Independent Certifier or Quantity Surveyor, the Sub-IC was obliged to adopt those assessments.
The Certificate of Stage Practical Completion was issued to HY on 20 September 2017. From February 2018, some 5 months after, HY sent to PSHL what were later described as "a flurry of VCOs" (Variation Cost Orders).
On 28 June 2019, HY served Payment Claim 53 (a payment claim under s 17 of the SOP Act) on PSHL, claiming payment of $7,329,390.06 (including GST) (Payment Claim). The Payment Claim sought payment of four categories of claim:
aclaims for variations to the Project Works under cl 42 of the Contract (Project Works Variations) in the sum of $3,430,013.63;
bclaims in respect of Provisional Sums under cl 42B.11 of the Contract (Provisional Sum Claims) in the sum of $312,136.33;
cclaims for variations to the Fitout Works under cl 58 of the Contract (Fitout Works Variations) in the sum of $1,306,270.63; and
dclaims for an extension of time of 115 days under cl 66.2 of the Contract, and associated delay costs under cl 66.3 of the Contract (Delay Claims) in the sum of $1,612,300.00.
On 12 July 2019, PSHL served Payment Certificate 53 (a payment schedule under s 18 of the SOP Act) on HY, scheduling payment of $2,597.43 (including GST) (Payment Schedule).
On 26 July 2019, HY lodged an adjudication application under s 21 of the SOP Act with Adjudicate Today, a nominating authority under s 31 of the SOP Act (Nominating Authority). The application comprised 23 lever-arch folders and relevantly included:
aHY's written submissions including annexures A - D (Application Submissions);
ba statutory declaration of Bruce Maher, HY's state manager (Maher Statement); and
ca bundle of documents in respect of HY's extension of time claim.
On 12 August 2019, PSHL lodged an adjudication response under s 23 of the SOP Act with the Nominating Authority. The response comprised 2 lever-arch folders and relevantly included:
aPSHL's written submissions including annexures A1 and A2 (Response Submissions);
ba witness statement of Alex Mozziconacci, PSHL's contracts manager (Mozziconacci Statement); and
cthe Coogan Report.
The determination
The Adjudicator made two requests from the parties for extensions of the time in which he was to deliver the Determination. Each of those was agreed to and, as a result, the Determination was due to be made on 9 September 2019, being 20 business days after PSHL had delivered its Response Submissions.
On 12 September 2019 at 11:34am, PSHL received an email from the Nominating Authority enclosing a letter and an invoice. The letter stated relevantly:
"We refer to the abovementioned matter and confirm receipt of the adjudicator's determination.
Under section 37(5)(a) of the Building and Construction Industry Security of Payment Act 2009 (Tas) ('the Act'), the adjudicator is entitled to withhold the determination until the adjudicator's fees and expenses are paid. The adjudicator has instructed Adjudicate Today not to release the determination until the invoice has been paid. …
The claimant has the right to recover from the respondent (and have included in an adjudication certificate) any portion of fees as adjudicated."
On 13 September 2019 at 9:34am, PSHL received an email from the Nominating Authority enclosing a letter, the Determination and the Fee Determination. The letter stated that the Adjudicator's invoice had been paid by HY.
On 20 September 2019, PSHL paid $5,297,185.42 to HY, being the adjudicated amount stated in the Determination of $5,227,014.54 plus interest at 7% as agreed between the parties. PSHL did not immediately pay the adjudicator's fee of $83,435 (Fee). The amount of the Fee Determination was subsequently paid by PSHL to HY.
The First issue: Delay costs – PSHL submissions
The issues here are whether PSHL was afforded natural justice on, and whether there was sufficient evidence to support the Adjudicator's finding that the parties agreed to amend the Contract with respect to $920,000 in Delay Costs, and whether there was an agreement in respect of Delay Costs which constituted a "building or construction contract", attracting the application of the SOP Act, or in respect of which a valid reference date for the Delay Costs claim might have arisen.
The applicant characterises these issues as both procedural ultra vires, submitting that the Delay Costs Amount was awarded without evidence, on a basis which was not contended for by either party, and on an irrational basis, and also as substantive ultra vires, submitting that the SOP Act conferred no power on the Adjudicator to award the Delay Costs Amount, because it was not a claim under the building or construction contract the subject of the Determination.
The applicant notes that the Adjudicator found that the Delay Costs Amount was part of the progress payment to which HY was entitled under the SOP Act and he assessed the entitlement and quantum by reference to a "purported agreement" between PSHL and HY (the Purported Delay Costs Agreement), which HY claimed was made in October 2017. It notes that the Adjudicator found that the Delay Costs agreement was effective as an amendment to the Contract, and therefore formed part of the "building or construction contract" (as that term is defined by the SOP Act), the subject of the adjudication.
The applicant submits that the Adjudicator should have found that HY had failed to demonstrate that the Purported Delay Costs Agreement was entered into by the parties prior to the reference date for the Payment Claim, or at all, and that if the Purported Delay Costs Agreement was entered into by the parties, it was not effective as an amendment to the Contract but was a separate agreement.
The applicant contends that the denial of procedural fairness was threefold.
First, because HY did not contend that there was a counter-offer made, or that such a counter-offer was accepted after October 2017, the Adjudicator came to these conclusions without either party arguing for them, and without giving the parties an opportunity to respond.
Second, because HY led no evidence that its counter-offer was accepted (in writing or otherwise), or of when this occurred, and the Adjudicator determined these issues in the absence of evidence.
And third, the Determination was illogical or irrational.
Procedural ultra vires
The applicant's first reason
In its Application, HY had asserted, as its primary argument, an entitlement to Delay Costs under the Contract. That is to say that HY contended that it had met the preconditions set out in the Contract for it to claim to be entitled to payment for delay under cl 66.3 of the Contract. Consistent with the applicant's submissions to the contrary, the Adjudicator found that the claim "falls at the first hurdle" to meet the contractual preconditions for such a claim, and that HY had "failed to lead evidence to substantiate that it has incurred Delay Costs, or the quantum of those costs". The applicant observes that the Adjudicator did not find there was any entitlement to Delay Costs, absent an agreement
In the alternative, HY submitted that there was "an agreement in principle" as to Delay Costs, to the effect that PSHL agreed to pay HY an amount of $920,000 plus GST under the Purported Delay Costs Agreement.
The agreement in principle was said to be formed by an exchange of correspondence in October 2017, an offer by PSHL to pay $920,000, on conditions set out in a letter of offer dated 5 October 2017 (including that liquidated damages would not be applied and that there would be no entitlement to acceleration costs), and a response by HY on the same day, purporting to accept the offer, but adding a further clause in handwriting "clarifying" that it would still be entitled to other variations, including an amount (of some $60,000) for the costs of airfreighting aluminium partition materials to Hobart.
The applicant contends that no further or later act was relied on by HY as constituting an agreement as to an entitlement to Delay Costs, and submits that a response to an offer on different terms is not an acceptance, but a counter-offer. That submission was made by the applicant in its Adjudication Response, and the applicant says that "so much was accepted, correctly, by Mr Tonkin."
The applicant submits therefore that given that was the extent of the submission HY had made in respect of its alternative argument for Delay Costs, and it had been rejected, the Adjudicator was obliged to reject the alternative claim for Delay Costs.
The applicant submitted to the Adjudicator in its Adjudication Response:
"The Claimant does not contend - and therefore the Adjudicator must not consider [fn [22] [a reference to John Holland Pty Ltd v TAC Pacific Pty Ltd [2009] QSC 205] - that the Counter-offer was accepted by the Respondent's conduct, or that acceptance might be inferred from the non-application of Liquidated Damages in the Respondent's assessment of the Payment Claim."
Accordingly, the applicant now submits that, having rejected both HY's primary and alternative Delay Costs submissions, it was incumbent on the Adjudicator to reject the whole of the claim for Delay Costs.
The applicant's second reason
However, the Adjudicator did not do so. Instead, he found that HY's counter-offer must have been accepted by PSHL because, when assessing the payment claim in 2019, the Sub-IC, the independent certifier whose role was to assess payment claims by HY under the Contract, stated in his assessment that "we have been advised" that an agreement between the parties meant that liquidated damages was not payable, and that this must mean the October 2017 counter-offer had been accepted by PSHL.
The Adjudicator's reasoning was as follows (emphasis added):
"The Sub-IC's statement in the payment schedule is: 'Liquidated damages should be liable to be paid by the contractor [HY], however we have been advised there is an agreement in place between Citta Hobart [PSHL] and Hansen Yuncken deferring any payment due.'
This indicates the Respondent advised the Sub-IC of the 'agreement' between the Respondent and Claimant "deferring any payment due" in relation to liquidated damages.
The parties' submissions indicate that the 'agreement' can only be an agreement in relation to delay costs and liquidated damages based on the Offer Letter as amended by the Claimant as the submissions do not reveal any other agreement that relates to liquidated damages. This tells me that, at some point, the Respondent accepted the Counter-offer, which was the only offer available to the Respondent on which the agreement to defer liquidated damages could have been formed.
On the basis that offer, counter-offer, followed by acceptance, forms a binding agreement, I am satisfied that there was a binding agreement between the parties in the terms of the Counter-offer."
The applicant submits that in so finding, the Adjudicator did not identify when the counter-offer was accepted, "save implicitly that it must have occurred after the counter-offer was made", and did not identify how the counter-offer was accepted. And submits that the Adjudicator could not have made findings on those matters, because there was no evidence of them. The only evidence it says, was from Mr Mozziconacci, who stated that "No agreement was reached between the parties".
Put differently, the applicant submits that the finding that there was an acceptance of the counter-offer was made with "no evidence of the timing, the content, the terms or the form of the acceptance" and with no submissions from either party to the effect that the counter-offer had been accepted.
The applicant cites Soliman v University of Technology Sydney [2012] FCAFC 146, 207 FCR 277 [25] as authority for the proposition that "reliance cannot be placed upon material which has no probative weight, particularly when it would be procedurally unfair to do so."
The applicant says it was prejudiced by the finding in that there were arguments that could have been put by it, but which it had no opportunity to put because it had no indication from the Adjudicator that he intended to rule on the basis he did. For example, it is said that the applicant could have made the following three submissions.
First, that there could not have been any communication by PSHL to HY of the acceptance of the counter-offer, since HY was unaware of it, made no submissions that it had been accepted, and filed no evidence of acceptance. In the absence of communication, the counter-offer cannot have been accepted.
Second, that for acceptance of the counter-offer to form an agreement entitling HY to make a payment claim under the SOP Act, the agreement must have been in existence at the time the Payment Claim was served. That for the Purported Delay Costs Agreement to have created any entitlement, it must have been binding as at the reference date underpinning the Payment Claim. That in the absence of any agreement at that time, there was no entitlement to any payment for Delay Costs and thus no entitlement to serve a payment claim. But in the absence of evidence of (or findings about) when the agreement was made, the reference date could not be ascertained. It might be that the date of the Purported Delay Costs Agreement was after the reference date, or indeed after service of the Payment Claim, in either case meaning that it could not be taken into account in determining the amount of the progress payment as at the reference date.
And third, that any amendment to the Contract is required to be signed and in writing. The Adjudicator found that this requirement was satisfied because the initial offer and the counter-offer were in writing, but there was no evidence of, or finding about, whether the counter-offer was accepted in writing or whether the parties otherwise agreed that the requirement for writing was itself varied, as it would need to be for the oral variation to be effective.
The applicant submits that the authorities demonstrate that a determination made on a basis not contended for by either party is liable to be set aside as in breach of natural justice. It cites Ostwald Bros Pty Ltd v Jaylon Pacific Pty Ltd [2016] QSC 240, where Burns J held at [30]:
"It is well settled that a substantial denial of natural justice may invalidate an adjudication decision with the consequence that such a decision may be declared void. Where an adjudicator decides a dispute on a basis for which neither party contended, there will be a substantial denial of natural justice unless it can be said that no submission could have been made to the adjudicator which might have produced a different result."
The applicant also relies on Musico v Davenport [2003] NSWSC 977, where, at [107], McDougall J held:
"Where an adjudicator is minded to decide a dispute on a basis for which neither party has contended, then natural justice requires the adjudicator to notify the parties of that intention, so that they could put submissions on it".
The applicant submits that as the Adjudicator did not notify the parties of his intention to find as he did, or allow submissions to be put, the Determination was made in breach of natural justice and should be set aside on the basis of procedural ultra vires.
The applicant's third reason
The applicant contends that the absence of any relevant evidence renders the decision an irrational one. It relies on Saunders and Ward v Resource Management and Planning Appeal Tribunal [2016] TASFC 3, 28 Tas R 120 and also on Forico v Sive [2018] TASSC 21 [74], [86]. The applicant submits that in Saunders and Ward at [24] the Full Court accepted that:
"In a case of suggested illogicality, or a faulty inferential reasoning, the decisive test is not whether there was an error in logic or reasoning but whether there was no foundation for the conclusion reached."
That quotation, from my judgment in that case, is contained within a recitation of counsel for the appellant's written submission that:
"2.15 In Tisdall v Webber [2011] FCAFC 76 (2011) 193 FCR 260 Greenwood J, Tracey J concurring, reiterated his earlier views as expressed in Wecker v Secretary, Department of Education, Science & Training [2008] FCAFC 108 (2008) 168 FCR 272 whereby his Honour endorsed the view that review is open where the impugned decision is properly characterised as 'irrational, illogical and not based on findings or inferences of fact supported by logical grounds'. Buchanan J expressed the view that 'it may not be correct to reject illogicality as constituting an error of law in every case. In a case of suggested illogicality, or a faulty inferential reasoning, the decisive test is not whether there was an error in logic or reasoning but whether there was no foundation for the conclusion reached." (Emphasis added.)
I note however, that there is ample authority for the proposition that a critical finding of fact based upon no evidence may constitute jurisdictional error.
Substantive ultra vires
As to substantive ultra vires, the applicant contends that the Adjudicator ought not to have found that the Purported Delay Costs Agreement formed a part of a building or construction contract as defined in the SOP Act, but rather, should have found that it was not, and that therefore it did not create any entitlement to a progress payment.
Alternatively, the applicant submits that if the Purported Delay Costs Agreement is a building or construction contract, it is a separate building or construction contract to the Contract, and therefore cannot be the basis for any award in an adjudication concerning the Contract.
It is submitted that the Adjudicator's error in this regard is a jurisdictional error because the existence of a building or construction contract is a jurisdictional fact which must be established in order to entitle a claimant to a progress payment under the SOP Act.
Section 4 of the Act defines "building or construction contract" as:
"a contract, or other arrangement, under which one party undertakes to carry out building work or construction work for, or to supply building or construction-related goods and services to, another party".
The applicant's submission is that the Purported Delay Costs Agreement was not an agreement under which either party undertook to carry out building work or construction work, or to supply building or construction-related goods and services. Rather, it contends that no work was undertaken under it and the payment of money related solely to work HY said it had already carried out under the Contract, prior to entry into the Purported Delay Costs Agreement.
The argument runs that, if the Purported Delay Costs Agreement was binding, the parties' rights to payment would arise, not in respect of the undertaking to carry out construction work in the Contract, but from the settlement effected by the Purported Delay Costs Agreement itself. And, if the Purported Delay Costs Agreement were effective as a settlement agreement, it would have the effect of taking the entitlement to payment of delay costs out of the operation of the SOP Act. Any requirement to pay would not be pursuant to a building or construction contract, but pursuant to a settlement agreement.
The applicant relies on the decision in Valeo Construction Pty Ltd v Tiling Expert (Vic) Pty Ltd [2019] VSC 291, a case under the Victorian counterpart of the SOP Act, where Digby J held that a settlement agreement was enforceable, but that the parties' respective rights under the construction contract merged in the settlement agreement. As a result it was held that there was no reference date under the existing construction contract, with the result that the amount of the settlement agreement could not be the subject of a payment claim.
The applicant further contends that there is a second consequence to all of this. That is that the entitlement to payment under the Purported Delay Costs Agreement was not under the Contract, but pursuant to a different arrangement, yet both were contained in the one payment claim. So that even if it were the case that the Purported Delay Costs Agreement was a building or construction contract, the Delay Costs Amount was referable to a different building or construction contract from the Contract the subject of the remainder of the payment claim, and the SOP Act does not authorise a payment claim to be made for work performed under more than one building or construction contract.
First issue: Delay costs – HY submissions
Procedural ultra vires
As to the applicant's contention that the Delay Costs Determination was arrived at on a basis not contended for by either party, HY submits:
"This contention is not correct and should not be accepted for four reasons: first, the basis on which the Adjudicator found that the Contract had been varied – the agreement for PSHL to pay Hansen Yuncken $920,000.00 – was squarely raised by Hansen Yuncken and agitated in the adjudication; second, viewed in context, Hansen Yuncken did raise the 'acceptance by conduct' issue concerning the formation of the agreement complained of by PSHL; third, PSHL was alive to the issue in the adjudication response in any event and so has not been denied procedural fairness; and fourth, there has been no substantial denial of the measure of natural justice that the SOP Act requires to be given. Each of these four reasons is explored in further detail below."
HY's first reason
HY says that it put its claim for delay costs on two bases in the adjudication. First, it said that it was entitled to extensions of time and consequent delay costs of $1,612,300. Second, and in the alternative, it said that the parties agreed PSHL would pay HY $920,000 in respect of HY's extension of time claims. Accordingly, HY submits the $920,000 agreement was squarely in issue and the Adjudicator found that the agreement amended the Contract sum (by way of an increase) in the amount of $920,000.
HY says that importantly PSHL raised the issue in the adjudication of whether the agreement to pay $920,000 in delay costs could or should amount to an amendment of the Contract. It says that PSHL submitted to the Adjudicator that the $920,000 agreement on delay costs would not amend the Contract unless it was signed in writing by the Principal and Contractor. HY submits that the Adjudicator determined, contrary to PSHL's submissions, that the $920,000 agreement did in fact amend the Contract, but that this shows that PSHL was heard on, and made submissions about the contention, so no procedural unfairness arises.
HY's second reason
Second, HY submits that in its adjudication submissions it said that:
"Consistent with the October 2017 agreement, the Payment Schedule states at page 4 there 'is an agreement in place between Citta Hobart and Hansen Yuncken deferring any payment due' on account of liquidated damages."
HY argues that the Payment Schedule was provided by PSHL in response to HY's Payment Claim and that consequently, PSHL's provision of the Payment Schedule, under the SOP Act, which referred to the agreed position on liquidated damages, was conducted by PSHL consistent with the making of an amendment to the Contract. Accordingly, HY submits that while it did not say explicitly in its submissions that the parties' conduct amounted to an acceptance at law, it did not need to do so as PSHL's conduct was raised by HY, and being consistent with an agreement to amend the Contract, it was a matter properly relied upon by the Adjudicator in his analysis and in his finding that such an agreement was reached.
HY submits, in reliance on the authority of Brodyn Pty Ltd t/a Time Cost and Quality v Davenport [2004] NSWCA 394, 61 NSWLR 421 at 441-442 [55], that even if I do not agree with the Adjudicator's analysis as to the creation of an agreement to amend the Contract, that does not amount to jurisdictional error, and the Determination cannot be set aside for an error of law on the face of the record, only for jurisdictional error.
HY argues that it is common ground that the parties entered into a building and construction contract, of the statutory character, which founded the payment claim and the application for the adjudication, and that, properly understood, PSHL's complaint is that the Adjudicator wrongly interpreted the subsequent conduct of the parties and concluded that the building and construction contract was varied by adjusting the lump sum price. HY says that any error in the Adjudicator's reasoning that led to that conclusion is non-jurisdictional in character as it turns upon an erroneous interpretation of the construction contract: Probuild Constructions (Aust) Pty Ltd v Shade Systems Pty Ltd [2018] HCA 4, 246 CLR 1 at [79]-[83], Gageler J; CockramConstruction Ltd v Fulton Hogan Construction Pty Ltd [2018] NSWCA 107, 97 NSWLR 773 at [11]-[15] and [39]-[41].
HY's third reason
Third, HY submits that PSHL was acutely aware that "acceptance by conduct" may well give rise to an agreement, and it had every opportunity to address the issue in its adjudication submissions. It says that, given that HY directly referred to PSHL's Payment Schedule, and that, "in effect", the submission of that document supported the view that an agreement had been reached, PSHL was on notice that the parties' conduct after the offer and counter-offer was made in respect of the $920,000 was in issue.
HY says that PSHL could have addressed the matter in further detail had it chosen to do so "given it was alive to the issue", but instead it determined (erroneously) that that conduct was not in issue. HY argues that, given the issue of the parties' conduct in connection with the agreement was squarely raised, PSHL cannot now complain that it was denied procedural fairness.
HY also submits that whilst PSHL relies on John Holland Pty Ltd v TAC Pacific Pty Ltd [2009] QSC 205, [2010] 1 Qd R 302, for the proposition that the Adjudicator should not have found that an agreement was reached, because, PSHL says, HY did not precisely say how and when acceptance of the offer took place, John Holland was a very different case. HY submits that the case involved circumstances where an adjudicator proceeded on a basis that was not contended for by either party, and on the basis that an authority relied upon by one of the parties in a crucial respect was incorrect. HY says that John Holland does not assist PSHL in this case as there was no need for HY to do more – "it had made it known that it relied upon an agreement, it explained the facts relied upon to support the agreement, and that was sufficient in the circumstances".
HY's fourth reason
Finally, HY submits that, despite PSHL's submissions to the contrary, no prejudice arose by the manner in which the Determination was made in any event. HY notes that PSHL points to the following submissions it says it could have made, but did not make, because of the alleged denial of procedural fairness, namely, that there was no evidence of communication of the counter-offer and in the absence of a communication there can be no acceptance; that the agreement had to have crystallised before the relevant reference date; and any amendment to the Contract needed to be signed and in writing.
HY argues that none of those points would have made any substantive difference if made by PSHL during the adjudication, because:
"(a)a specific communication of acceptance is not required to establish that an agreement has been reached – conduct consistent with an agreement is sufficient;
(b)reference dates for progress payments crystallised under the Contract on the 28th day of each month, and the relevant payment claim was submitted on 28 June 2019, with the relevant payment schedule served on 11 July 2019. Accordingly, while it can be accepted that the agreement to amend the Contract had to have been made by the reference date, (ie by 28 June 2019), the relevant conduct relied on was the submission of the payment schedule, on 11 July 2019, which referred to the historical agreement between the parties and so it is clear that the agreement to amend, as found by the Adjudicator, must have been reached before the 28 June 2019 reference date;
(c)in relation to the requirement for writing, PSHL made submissions in the adjudication that the requirement for writing was not met which the Adjudicator rejected."
As to the applicant's contention that the Adjudicator reached his determination as to the Delay Costs agreement when there was no evidence, HY submits that it is misleading to speak of a requirement for "evidence" pursuant to the SOP Act. And that in any event, that contention is correct, as HY relied on the following material to support its Delay Costs claim in the adjudication:
"(a) Hansen Yuncken's payment claim dated 28 June 2019;
(b)the documents identified at paragraph 259 of Hansen Yuncken's adjudication submissions as follows:
(i) Hansen Yuncken's claim for EOT 10;
(ii) the Sub-Independent Certifier's determination in respect of EOT 10;
(iii) Hansen Yuncken's claim for EOT 11;
(iv) the Sub-Independent Certifier's determination in respect of EOT 11;
(v)the Minister's approval of design documents relating to ground floor works dated 21 February 2017, (being after the certified Date of Practical Completion); and
(vi)the 5 October 2017 Agreement;
(c)the statutory declaration of Bruce Maher, declared 29 July 2019, on behalf of Hansen Yuncken, at [32] to [37]."
HY submits that an adjudication does not proceed upon a forensic examination of evidence that is tested in the manner of a trial. The function is much more confined and limited. It submits that s 25(2) of the SOP Act identifies exclusively the matters that an adjudicator is to consider. There is no mention of "evidence" in s 25(2), rather the Adjudicator is bound to consider the Act, the contract, the payment claim and payment schedule and "all submissions (including relevant documentation) that have been duly made."
HY submits that the Adjudicator's reasoning is clearly based on the submissions "duly made" by the parties and the documents provided in the adjudication, in accordance with s 25(2) of the SOP Act and that his reasoning is not perverse, arbitrary or capricious. Put simply, HY says the Adjudicator has fulfilled his obligations under the SOP Act and PSHL's case "fails to grapple with the high threshold test that must be met before a court can conclude that irrational, arbitrary or capricious reasoning amounts to jurisdictional error." (Minister for Immigration & Border Protection v Eden [2016] FCAFC 28, 240 FCR 158 at [65] and DCP16 v Minister for Immigration & Border Protection [2019] FCAFC 91 at [81]-[88].)
HY notes that in relation to the statement in the Payment Schedule that an agreement had been reached, which statement was used by the Adjudicator as a basis for finding that PSHL had agreed to pay HY $920,000 in delay costs, PSHL says that the evidence had no probative weight and that it had no opportunity to respond to it. HY says that is not correct. First, HY says, the Adjudicator was entitled to draw an inference from the Payment Schedule in the circumstances. It says, "[p]ut simply, the Payment Schedule suggested that the agreement – set out in the letter dated 5 October 2017 – was in fact agreed and in place". This HY says, was a matter that the Adjudicator was bound to consider. Second, HY contends that PSHL had every opportunity to respond to HY's assertion that the Payment Schedule was consistent with the $920,000 delay damages agreement having been made – because it was squarely raised in HY's adjudication submissions. On this basis, HY submits that PSHL's contention that there was "no evidence" to support the $920,000 Delay Costs Agreement, should be rejected.
Delay costs payable "on an irrational basis" and substantive ultra vires
HY notes that PSHL says, in effect, that the agreement reached by PSHL and HY by which PSHL agreed to pay $920,000 is not a building and construction contract and that it involves an error on the part of the Adjudicator as to a jurisdictional fact, which renders the determination liable to be set aside.
However, HY says careful analysis of the Adjudicator's reasons in the Determination reveal that he did not uphold the $920,000 agreement and enforce it as a stand-alone agreement as part of his determination. Instead, he found that the parties had agreed to amend the Contract sum in the amount of $920,000. HY submits that the Adjudicator made this finding at [1292]-[1294] of his reasons as follows:
"It is common ground that the Contract is a construction contract for the purposes of the Act. I am satisfied that the Agreement amended the Contract and the amended Contract is also a construction contract for the purposes of the Act.
Clause 42B.1, which is not affected by the Agreement, provides that 'As consideration for carrying out the Project Works, the Principal must pay to the Contractor the Project Works Contract Sum for Project Works completed in accordance with this Deed in accordance with clause 42B.' The Project Works Contract Sum is defined in clause 1.1 as 'the fixed lump sum price set out in Schedule 21, as adjusted in accordance with this Deed' [my underlining].
The words I underlined must mean as adjusted in accordance with the Deed as amended by the Agreement. Accordingly, I am satisfied that pursuant to the Deed as amended by the Agreement, the Claimant is entitled to delay costs of $920,000.00."
HY says that finding was open to him in the circumstances and that the Contract was clearly a building and construction contract, as amended, and was one "within the four corners of the SOP Act". Put differently, HY says, all the Adjudicator did, in making his finding about the payment of the agreed $920,000, was to make a determination of the amount payable under the Contract. HY submits that such a determination was one within his power to make, given, as was noted by the High Court in Southern Han Breakfast Point Pty Ltd (in liq) v Lewence Construction Pty Ltd [2016] HCA 52, 260 CLR 340, where at [59], per Kiefel, Bell, Gageler, Keane and Gordon JJ, it was stated:
"… in the event of a dispute between a claimant and a respondent, the ascertainment of the amount, if any, of the progress payment to be recovered is committed to the jurisdiction of an adjudicator to determine …".
HY argues that an error of law made by an adjudicator in the interpretation of the construction contract is a non-jurisdictional error - Probuild Constructions (Aust) Pty Ltd v Shade Systems Pty Ltd (above) at [79]-[83] per Gageler J.
HY notes that PSHL asserts that this issue turns upon a jurisdictional fact question by reference to Forico v Sive (above) at [54], but HY says that proposition is stated too broadly and Forico was a very different case. HY argues that it is common ground that there is a building and construction contract, of the statutory character, and that contract founded the adjudication application. HY says the issue in Forico turned upon the threshold question as to whether the parties had entered into any contract in relation to the fees claimed by engineers in the payment claim that was served. Conversely, in this matter, it is plain, HY contends, that the statutory condition precedent for the exercise of power by the Adjudicator existed as a fact in the "real world" (as opposed, I infer, to a criterion conditioning the exercise of a statutory power which involves assessment and value judgments on the part of the decision-maker.)
Accordingly, HY contends, the finding by the Adjudicator of the amount of the progress payment to be recovered is one made by him within jurisdiction, and even if he was wrong in coming to his view that the agreement amended the Contract sum by $920,000, such a finding is not one reviewable by this Court.
HY submits that the variation to amend the Contract Sum by $920,000 did not operate to rescind the Contract and substitute a new one – Commissioner of Taxation (Cth) v Sara Lee Household & Body Care (Australia) Pty Ltd [2000] HCA 35, 201 CLR 520 at [95] per Gleeson CJ, Gaudron, McHugh and Hayne JJ and Concut Pty Ltd v Worrell [2000] HCA 64, 176 ALR 693 at [19] per Gleeson CJ, Gaudron and Gummow JJ. Instead, it submits, the change to the Contract was a modest change in the overall scale of the Contract and all the terms of the Contract (except the Contract Sum), remained on foot.
HY notes that PSHL relies on Valeo Constructions Pty Ltd v Tiling Expert (Vic) Pty Ltd [2019] VSC 291 in support of the proposition that, following a commercial settlement, the amount of the settlement agreement could not be the subject of a payment claim. HY submits that in Valeo, the parties settled their entire dispute, so that all rights, entitlements and claims merged on the execution of the settlement agreement (see at [89]). HY says that Valeo involved a very different set of facts and it offers no support to PSHL in this case, given the Adjudicator's finding that the $920,000 agreement was an agreement to amend the Contract sum, and given the Contract remained on foot following the amendment.
Accordingly, HY concludes, no jurisdictional issue arises.
Discussion as to the first issue – delay costs
It will be recalled that the applicant characterises this issue as involving procedural ultra vires, submitting that the Delay Costs Amount was awarded without evidence, on a basis which was not contended for by either party, and on an irrational basis, and also as substantive ultra vires, submitting that the SOP Act conferred no power on the Adjudicator to award the Delay Costs Amount, because it was not a claim under the building or construction contract the subject of the Determination.
As a result of the decisions of the High Court in Probuild Constructions (Aust) Pty Ltd v Shade Systems Pty Ltd (above) and Maxcon Constructions Pty Ltd v Vadasz [2018] HCA 5, 246 CLR 46, determinations of adjudicators can only be reviewed in the Court's supervisory jurisdiction for jurisdictional error.
McHugh Gummow and Hayne JJ in Minister for Immigration and Multicultural Affairs v Yusuf [2001] HCA 30, 206 CLR 323 at [82], said generally, as to jurisdictional error:
"It is necessary, however, to understand what is meant by 'jurisdictional error' under the general law and the consequences that follow from a decision-maker making such an error. As was said in Craig v South Australia, if an administrative tribunal (like the Tribunal) 'falls into an error of law which causes it to identify a wrong issue, to ask itself a wrong question, to ignore relevant material, to rely on irrelevant material or, at least in some circumstances, to make an erroneous finding or to reach a mistaken conclusion, and the tribunal's exercise or purported exercise of power is thereby affected, it exceeds its authority or powers. Such an error of law is jurisdictional error which will invalidate any order or decision of the tribunal which reflects it.'
'Jurisdictional error' can thus be seen to embrace a number of different kinds of error, the list of which, in the passage cited from Craig, is not exhaustive. Those different kinds of error may well overlap. The circumstances of a particular case may permit more than one characterisation of the error identified, for example, as the decision-maker both asking the wrong question and ignoring relevant material. What is important, however, is that identifying a wrong issue, asking a wrong question, ignoring relevant material or relying on irrelevant material in a way that affects the exercise of power is to make an error of law. Further, doing so results in the decision-maker exceeding the authority or powers given by the relevant statute. In other words, if an error of those types is made, the decision-maker did not have authority to make the decision that was made; he or she did not have jurisdiction to make it. Nothing in the Act suggests that the Tribunal is given authority to authoritatively determine questions of law or to make a decision otherwise than in accordance with the law." (Footnotes omitted.)
As to illogicality and lack of evidence, Crennan and Bell JJ said in Minister for Immigration v SMZDS [2010] HCA 16, 240 CLR 611 at [135]:
"On the probative evidence before the Tribunal, a logical or rational decision maker could have come to the same conclusion as the Tribunal. Whilst there may be varieties of illogicality and irrationality, a decision will not be illogical or irrational if there is room for a logical or rational person to reach the same decision on the material before the decision maker. A decision might be said to be illogical or irrational if only one conclusion is open on the evidence, and the decision maker does not come to that conclusion, or if the decision to which the decision maker came was simply not open on the evidence or if there is no logical connection between the evidence and the inferences or conclusions drawn. None of these applied here. It could not be said that the reasons under consideration were unintelligible or that there was an absence of logical connection between the evidence as a whole and the reasons for the decision." (Emphasis added.)
As to procedural fairness, Deane J in Australian Broadcasting Tribunal v Bond (1990) 170 CLR 321 at 365-367 said:
"Subject to any such statutory provision, denial of natural justice or procedural fairness will ordinarily involve failure to comply with a condition of the exercise of decision-making power, and jurisdictional error."
So, if there was no evidence, or no logical connection between the evidence as a whole and the Delay Costs Determination, or if there was a denial of procedural fairness, relief in the nature of certiorari would lie to correct any jurisdictional error. And if the claim for the alleged agreed Delay Costs was not a claim under a "building or construction contract" within the meaning of the SOP Act, then the factual criterion, satisfaction of which is necessary to enliven the power of the Adjudicator, would not have existed, and error as to a "jurisdictional fact" would be manifest.
To my mind however, none of these errors are apparent in the Adjudicator's Determination. There was evidence of an agreement as to the amendment of the Contract in respect of the Delay Costs (as set out above in HY's submissions), and the basis for the Adjudicator so finding was apparent on the materials before him submitted by HY and PSHL. The Adjudicator said in his Determination at [1284]:
"The Sub-IC's statement in the payment schedule is: 'Liquidated damages should be liable to be paid by the contractor [HY], however we have been advised there is an agreement in place between Citta Hobart [PSHL] and Hansen Yuncken deferring any payment due.'
This indicates the Respondent advised the Sub-IC of the 'agreement' between the Respondent and Claimant 'deferring any payment due' in relation to liquidated damages.
The parties' submissions indicate that the 'agreement' can only be an agreement in relation to delay costs and liquidated damages based on the Offer Letter as amended by the Claimant as the submissions do not reveal any other agreement that relates to liquidated damages. This tells me that, at some point, the Respondent accepted the Counter-offer, which was the only offer available to the Respondent on which the agreement to defer liquidated damages could have been formed." (Emphasis added.)
In these circumstances no illogicality or denial of procedural fairness arises. The "agreement" was raised by the parties' submissions. And, it is clear to me that a finding that the Contract was amended by agreement as to the Delay Costs, so that the agreement that enlivened the Adjudicator's jurisdiction, and was the subject of his Determination, was "a building or construction contract" within the meaning of the SOP Act is warranted.
I accept HY's submission that the issue in Forico (above) turned upon the threshold question as to whether the parties had entered into any contract in relation to the fees claimed by the engineers in the payment claim that was served. Conversely, in this matter, as HY submits, "it is plain that the statutory condition precedent for the exercise of power by the Adjudicator existed as a fact in the real world."
That Forico is a quite different case to the present is clear from the following passages from the reasons of Marshall AJ:
"Ground (c)
53 Under this ground Forico alleges that the adjudicator reconstructed the terms of the PMSC to create a building or construction contract between Forico and SEMF, and thereby overlooked the fundamental jurisdictional question raised on the adjudication, whether SEMF had undertaken to supply construction-related services, the subject of the payment claim under the terms of a building or construction contract.
54 It is not in dispute that an adjudicator is not entitled to construct, vary or add to a contract which founds jurisdiction, although it is open to an adjudicator to wrongly interpret the terms of a contract.
55 Forico points to various passages from the adjudicator's reasons to support the view that he constructed a new contract between the parties. At [21] of those reasons, the adjudicator referred to four contracts between the parties which related to works on the relevant site, having earlier identified them at [19]. I agree with the submission of SEMF that the adjudicator did not add any terms at [21], but considered how the four contracts operated concurrently, and noted the term concerning the engagement of sub-contractors in the PMSC.
…
59 Forico submits that at [32] of the adjudicator's reasons, he resurrects the PMSC to impose liability upon Forico, despite its refusal to enter into a new agreement on 7 September 2015. The better view of that paragraph is that the adjudicator makes a finding (albeit one with which the Court has disagreed), that the PMSC was still on foot as at 17 September 2015, and as at the time of the determination in September 2017. This finding is an error within jurisdiction and reflects the adjudicator's views about whether the PMSC was on foot, rather than any suggestion that it be revived.
60 At [37] of the adjudicator's reasons, he discusses whether there was an obligation on Forico to pay fees and disbursements as a consequence of SEMF's liability to investigate the cause of the pavement failure. The adjudicator was not thereby manufacturing a contractual obligation to pay fees which were never agreed. He was simply giving his view about what was covered by the PMSC, apart from the standard fees contained in cl 7 of the PMSC.
61 At [39] of the adjudicator's reasons, he discusses what he considered to be work within the scope of works in the PMSC. If, in doing so, he imposed a liability pursuant to the PMSC for work beyond the agreed scope of the engagement, he made an error within jurisdiction.
62 Forico submits that at [70]-[75] of the adjudicator's reasons, he used 'the created contract' as the jurisdictional basis for his determination. I disagree. I consider that at those paragraphs the adjudicator gave his reasons as to why the PMSC applied to the claim before him. If he erred in so doing, it was an error within jurisdiction. This is on the basis that the conclusions of the Court on ground (aa) are in error."
In the present case I consider that the Adjudicator was using the amended Contract as his jurisdictional basis. If he was wrong in his reasons as to how the amended Contract was formed, then that was an error within jurisdiction. In no sense, in my view, was the relevant contract, of necessity, other than a building or construction contract within the meaning of the SOP Act.
The Adjudicator's dispositive reasoning in this matter is apparent from the following passages from his Adjudication at [1293]–[1294], which are already set out above:
"It is common ground that the Contract is a construction contract for the purposes of the Act. I am satisfied that the Agreement amended the Contract and the amended Contract is also a construction contract for the purposes of the Act.
Clause 42B.1, which is not affected by the Agreement, provides that: 'As consideration for carrying out the Project Works, the Principal must pay to the Contractor the Project Works Contract Sum for Project Works completed in accordance with this Deed in accordance with clause 42B.' The Project Works Contract Sum is defined in clause 1.1 as 'the fixed lump sum price set out in Schedule 21, as adjusted in accordance with this Deed' [my underlining].
The words I underlined must mean as adjusted in accordance with the Deed as amended by the Agreement. Accordingly, I am satisfied that pursuant to the Deed as amended by the Agreement, the Claimant is entitled to delay costs of $920,000.00."
It is readily apparent that there was "evidence" in the form of the documents and submissions before the Adjudicator as to the formation of the agreement in relation to the Delay Costs. As such it cannot be said, to paraphrase the words of Crennan and Bell JJ in SMZDS (above), that the Adjudicator's reasons were unintelligible or that there was an absence of a logical connection between the material as a whole and the reasons for his Determination.
Short of that, if the Adjudicator was wrong, then any error of fact or law involved is not amenable to relief in the nature of certiorari. As was noted in Re Refugee Review Tribunal; ex parte Aala [2000] HCA 57, 204 CLR 82, by Hayne J at [163]:
"There is a jurisdictional error if the decision maker makes a decision outside the limits of the functions and powers conferred on him or her, or does something which he or she lacks power to do. By contrast, incorrectly deciding something which the decision maker is authorised to decide is an error within jurisdiction."
Equally, it is clear to my mind that there was no denial of procedural fairness, either by the Adjudicator reaching a decision on a basis not contended for by the parties, or in failing to give PSHL an opportunity to make further submissions. It must be accepted that PSHL was alive to and raised the issue in the adjudication of whether the agreement to pay $920,000 in delay costs could or should amount to an amendment of the Contract, and PSHL was heard by, and made submissions to the Adjudicator about its contention that the $920,000 agreement on delay costs would not amend the Contract unless it was signed in writing by the Principal and Contractor.
In the main, the applicant's submission as to substantive ultra vires is based on a bald assertion that the Adjudicator ought not to have found that the Purported Delay Costs Agreement formed a part of a building or construction contract as defined in the SOP Act. The difficulty for the applicant is that the Adjudicator did so find. The same difficulty arises in relation to the applicant's alternative submission that, if the Purported Delay Costs Agreement is a building or construction contract, it is a separate building or construction contract to the Contract, and therefore cannot be the basis for any award in an adjudication concerning the Contract.
And the same difficulty exists with the contended "second consequence", that the entitlement to payment under the Purported Delay Costs Agreement was not under the Contract, but pursuant to a different arrangement, yet both were contained in the one payment claim. With the result, it is said, that even if it were the case that the Purported Delay Costs Agreement was a building or construction contract, the Delay Costs Amount was referable to a different building or construction contract and the SOP Act does not authorise a payment claim to be made for work performed under more than one such contract.
As I apprehend it, unless I can be persuaded that as a matter of law the Purported Delay Costs Agreement could not have been an amendment to the Contract, as found by the Adjudicator, then the claimed errors are not amenable to the relief sought by the applicant.
As I have already noted, the applicant relies on the decision in Valeo Construction Pty Ltd (above), a case in which Digby J held that a settlement agreement was enforceable, but that the parties' respective rights under the construction contract merged in the settlement.
As submitted by HY, Valeo is a very different case from the present. So much is evident from the following passages from Digby J's reasons as to the effect of the settlement agreement and a later deed of release as to practical completion:
"89 I also observe that the probable consequence of the February 2018 Settlement Agreement was that the agreement made between Valeo and Tiling Expect effected a merger of all Tiling Expert's earlier rights, entitlements and potential claims Tiling Expert had or thereafter may have against Valeo arising from, incidental to, or in connection with the Trade Contract, the works or the retention moneys. The February 2018 Settlement Agreement expressly released all such rights, entitlements and potential claims and in substance exchanged them for Tiling Expert's entitlements under the Deed.
90 Further, after early February 2018 Valeo part-performed its obligations under the Deed, although it is common ground that Valeo failed to pay $60,000 of the overall sum of $120,000 payable in respect of the projects the subject of the February 2018 Settlement Agreement.
91 Accordingly, the February 2018 Settlement Agreement prima facie resulted in Tiling Expert being entitled to be paid thereunder and to enforce the payment and other terms of that settlement agreement and after it was entered into, amongst other things, brought to an end Tiling Expert's entitlement to make any further progress claims under the construction contract."
Nor is it the law that a variation to amend the Contract Sum by $920,000 must of necessity have operated to rescind the Contract and substitute a new one. In Concut Pty Ltd v Worrell (above) Gleeson CJ, Gaudron and Gummow JJ said at [19]:
"The relevant principles are well settled. In Commissioner of Taxation v Sara Lee Household & Body Care (Australia) Pty Ltd, Gleeson CJ, Gaudron, McHugh and Hayne JJ said:
'When the parties to an existing contract enter into a further contract by which they vary the original contract, then, by hypothesis, they have made two contracts. For one reason or another, it may be material to determine whether the effect of the second contract is to bring an end to the first contract and replace it with the second, or whether the effect is to leave the first contract standing, subject to the alteration. For example, something may turn upon the place, or the time, or the form, of the contract, and it may therefore be necessary to decide whether the original contract subsists.'
Their Honours went on to refer to the judgment of Taylor J in Tallerman & Co Pty Ltd v Nathan's Merchandise (Victoria) Pty Ltd. Taylor J had rejected submissions that (a) 'it is impossible by a subsequent agreement, merely, to vary or modify an existing contract' and (b) '[an] agreement which purports to vary an existing contract operates ... first of all to abrogate entirely the existing contractual relationship and, then, to reinstate the terms of the old contract as varied or modified by the new agreement'. His Honour, to the contrary, accepted the propositions that (a) the earlier contract might be rescinded altogether, the determining factor being the intention of the parties disclosed by the later agreement; (b) partial rescission is a variation, not the destruction, of the contractual relationship between the parties; and (c) the earlier contract may be varied by way of (i) partial rescission with or without the substitution of new terms for those rescinded and (ii) the addition of new terms with or without any partial rescission at all. In Tallerman, Kitto J spoke in terms which involved acceptance of propositions (a) and (b) as identified above, adding that whilst 'in strict logic' a variation may be a new contract, "the discharge of an old contract is a matter of intention". (Footnotes omitted.)
Moreover, even if the effect of the second contract, "in strict logic" is to bring an end to the first contract and replace it with the second, it does not follow that the character of the contract was changed. I do not accept the applicant's submission, in effect, that I must find that the amended Contract was not an agreement under which either party undertook to carry out building work or construction work, or to supply building or construction-related goods and services, or that the Purported Delay Costs Agreement was effective as a settlement agreement, which would have the effect of taking the entitlement to payment of delay costs out of the operation of the SOP Act.
In my view there is no jurisdictional error arising from or in connection with the Adjudicator's Determination to the Delay Costs as suggested on first issue.
The second issue: estoppel
Substantive ultra vires
In respect of the Project Cost Variations, Project Works provisional sums and Fitout Works Variations, the Determination found that HY was entitled to the Variation Costs Amount of $3,831,831.40 plus GST.
The claims making up the Variation Costs Amount were subject to Time Bar Clauses under the Contract. However, the Adjudicator found that the Time Bar Clauses were not effective, because the applicant was estopped from enforcing them.
It was common ground between the applicant and HY that the claims making up the Variation Costs Amount were subject to "time bars" under the Contract, namely clauses which required that a written claim notice for a variation (a Variation Notice) must be given within a stated time frame. It was common ground that HY gave Variation Notices for most or all of the amounts claimed outside of the stated time frame.
The Time Bar Clauses were to the following effect:
"(a)In respect of Base Build Variations, clause 42.5(c) provides that, in respect of variations formally directed in writing by the Respondent:
'… no later than 8 Business Days after receipt of a Principal's Variation Notice or a Minister's Variation Notice, the Contractor must give to the Principal a Variation Cost Order setting out:
i if the relevant Variation to the Project Works will result in a net additional cost to the Contractor, specifying the Variation Cost in respect of the relevant Variation (which must include, and will be taken to include, any amount payable by the Principal under clause 66.3 in respect of the Variation);
ii if the relevant Variation to the Project Works will result in a net saving to the Contractor, specifying the Variation Savings Amount in respect of the relevant Variation (which must include, and will be taken to include, any amount payable by the Principal under clause 66.3 in respect of the Variation)' …
(b) Clause 42.7(a) provides that, in respect of other directions:
'If the Contractor receives a direction from the Principal that it considers to be a Variation, but which is not communicated in accordance with clause 42.4, then the Contractor will have no entitlement to claim that the direction is a Variation and be entitled to any benefit payment or extension of time in relation to the direction on any basis, including in contract, tort, equity or restitution, unless the Contractor gives to the Principal a written notice of that view at the earlier of within 2 Business Days of receiving the direction and prior to commencing work in relation to the direction'; and
(c)In respect of Fitout Variations, clause 58.4 creates identical notice requirements to clause 42.5(c), requiring a Variation Cost Order to be given to the Respondent within 8 Business Days of a Minister's Variation Request."
However, HY contended that the applicant should be estopped from insisting on formal compliance with the variation processes under the Contract, submitting that the elements to be established were those identified in Walton's Stores (Interstate) Ltd v Maher (1988) 164 CLR 387. HY set out conduct alleged to have been engaged in by the applicant which it said which created certain assumptions or expectations, and that HY acted in reliance on those assumptions or expectations induced.
On the authority cited of Multiplex Constructions Pty Ltd v Luikens [2003] NSWSC 1140 at [58]–[59], HY submitted that it was beyond doubt that an adjudicator under the SOP Act has the power to determine issues of waiver or estoppel.
The applicant submitted to the Adjudicator that he had no power to go outside the Contract and award an equitable remedy, and that if HY wished to press for such a remedy, it must go to a Court having equitable jurisdiction. The applicant told the Adjudicator that if he purported to give an equitable remedy, he would fall into jurisdictional error.
The Adjudicator accepted HY's submission and after setting out relevant passages from Multiplex at [58]-[59], wrote:
"Based on this authority, I am satisfied that in order to make a determination of the amount of the progress payment, I am entitled to, and must, form a view on whether Variation Claims that do not comply with the Time Bar Clauses are barred. I do not accept that my forming a view on this matter equates to granting, or purporting to grant, equitable relief as is suggested by the Respondent." (Emphasis added.)
The Adjudicator then proceeded to examine issues of waiver and estoppel, finding in favour of HY on the latter.
The applicant's submissions
The applicant submits that the Adjudicator ought to have applied the Time Bar Clauses to bar all Variation Claims, because HY's sole estoppel argument was for equitable estoppel, which the Adjudicator has no jurisdiction to determine.
The applicant submits that the Determination is affected by substantive ultra vires, because the Adjudicator purported to make a decision which he had no power to make. It relies for this proposition on the passage in Craig v South Australia (1995) 184 CLR 163 at 177 where the Court stated:
"Jurisdictional error is at its most obvious where the inferior court purports to act wholly or partly outside the general area of its jurisdiction in the sense of entertaining a matter or making a decision or order of a kind which wholly or partly lies outside the theoretical limits of its functions and powers. An inferior court would, for example, act wholly outside the general area of its jurisdiction in that sense if, having jurisdiction strictly limited to civil matters, it purported to hear and determine a criminal charge. Such a court would act partly outside the general area of its jurisdiction if, in a matter coming within the categories of civil cases which it had authority to hear and determine, it purported to make an order of a kind which it lacked power to make, such as an order for specific performance of a contract when its remedial powers were strictly limited to awarding damages for breach."
The applicant says that the Adjudicator's jurisdiction was conferred by s 25 of the SOP Act, under which he was to determine, among other things, the amount of the progress payment due to HY. Section 12(2) provides that "[t]he amount of the progress payment is to be the amount calculated in accordance with the terms of the contract". Read together, the applicant submits these sections "both create and delineate the jurisdiction of the Adjudicator".
The applicant submits that Multiplex is not authority for the proposition that an adjudicator has jurisdiction to grant equitable relief by way of estoppel, as the facts in that case concerned whether an oral agreement to waive compliance with a time bar clause effected a prospective waiver or a retrospective waiver of the clause.
The applicant submits that the reference to estoppel at [58] of Multiplex is obiter and that the case was not one about equitable estoppel but about the common law doctrines of waiver by election.
The applicant puts its argument in these terms:
"A common law estoppel by convention may require the parties to interpret a contract in accordance with a common assumption about its interpretation, because each is estopped from denying that interpretation. Determining such an estoppel is an activity in finding the relevant or applicable terms of a contract, analogous to other examples cited in Multiplex, of 'construction of the express terms of the contract, or upon whether a term is to be implied in order to give the contract business efficacy'. These are the types of determinations which Multiplex authorises to be performed by an adjudicator. A finding of equitable estoppel and a consequent grant of relief is not an activity of this nature."
The applicant submits that the Adjudicator had neither a power to grant an equitable remedy, nor a power to award damages. It says that the sole power relevantly conferred on the Adjudicator by the SOP Act is to determine the amount of a progress payment, namely "the amount calculated in accordance with the terms of the contract". It argues that progress payments are entitlements "on and from each reference date", whereas damages in equity would only be available as at the date they were awarded by a court of equitable jurisdiction. Thus, at most, the applicant submits HY had a chose in action as at the reference date.
The applicant submits that there is authority for the proposition that an adjudicator under security of payment legislation has no equitable jurisdiction "more broadly".
The applicant first cites Wooding v Eastoe [2006] NSWSC 277 at [29], where Young CJ in Equity rejected an argument that an adjudicator ought to have found that an equitable assignment of property had been made, with the consequence that the respondent to the payment claim would not have been a party to a construction contract and therefore not liable to make a progress payment.
And the applicant also relies on Perform (NSW) Pty Ltd v MEV-AUS Pty Ltd [2009] NSWCA 157 at [140]-[141], in which case Young JA considered it "doubtful" that a respondent to a payment claim may raise an equitable set-off, stating, without deciding the issue, that it was "most doubtful whether adjudicators have the right to consider any equitable rights and titles".
HY's submissions
HY submits that Multiplex is authority for the proposition that an adjudicator has jurisdiction to consider acts that may found an estoppel in order to determine whether a contracting party is entitled to insist upon strict adherence to the terms of the contract. Put another way, it says in making a determination under the SOP Act, in circumstances where one party to a construction contract (the first party) has conducted itself in such a manner so as to lead the second party to believe that it (the first party) will not rely on its strict contractual rights, then it is open to an adjudicator to consider that conduct in order to form a view as to whether a party may insist upon strict contractual performance in answer to a payment claim.
HY also relies upon Agricultural and Rural Finance Pty Ltd v Gardiner [2008] HCA 57, 238 CLR 570 at [126], per Kirby J, as authority for the proposition that the meaning of the contract, which is within the jurisdiction of an adjudicator, even if he makes an error in its construction (non-jurisdictional error of law), is inseparable from whether a party is prevented from insisting upon strict performance by waiver, estoppel or election. It must follow HY says, that it is open to an adjudicator to determine issues of that character if before him.
HY says that the applicant, in attempting to distinguish Multiplex on the basis that the case concerned the common law doctrine of waiver by election, obfuscates rather than illuminates the matters in issue, given that the same set of facts may found an estoppel or waiver.
HY points out that in Commonwealth v Verwayen (1990) 170 CLR 394, Deane and Dawson JJ grounded their decision in estoppel whereas Toohey and Gaudron JJ relied on waiver, and HY refers to Agricultural and Rural Finance Pty Ltd (above) where the plurality said at [51]:
"Waiver has often been used in senses synonymous with election or estoppel. It has been suggested that waiver is indistinguishable from one or other of those doctrines. Sometimes, although expressed in terms of waiver, the reasoning adopted in cases reveals the elements for applying a more specific principle, typically election or estoppel. And it may be that in cases of the several kinds last mentioned, the term is used as no more than a conclusionary word stating the consequences of the operation of that more specific principle, rather than as indicating the application of any distinct and independent principle."
HY says that "the short point" is that in Multiplex there was a dispute about the extent to which the parties had agreed to waive compliance with time bar clauses for the making of variation claims. The adjudicator found, despite Multiplex's position to the contrary, that there was an agreement between the parties that Multiplex would not rely on the time bar clauses.
Even accepting that the Adjudicator may have been wrong about his finding of reliance, which would have been an error within jurisdiction, it simply cannot be said that he made that finding with no evidence. He was acting on the material before him, as he was both authorised and required to do pursuant to s 25(2) of the SOP Act.
As he said in his Determination at [73] in the passage I have italicised, the Adjudicator accepted HY's contention that, absent a contrary signal from the applicant, it continued to perform Variations in reliance on the assumption or expectation that these would be similarly approved.
And he accepted that contention on the basis of material before him under the SOP Act, namely, the substantial quantum of Variations that HY undertook that did not comply with the Time Bar Clauses, and yet were approved by the applicant. It is misleading to speak of the need to lead evidence and it is wrong to suggest that such was necessary with respect to each variation.
In accepting HY's contention, the Adjudicator was quite clearly, rightly or wrongly, acting within jurisdiction. There was no procedural ultra vires in so doing. Indeed I embrace Mr McElwaine's epithet that the Adjudicator in so doing was performing "exactly his task".
Procedural ultra vires – arguments not advanced
The applicant's submissions
The applicant's argument here is that, in the adjudication, HY contended that the applicant's conduct or representations led to it becoming estopped from enforcing Time Bars. However, while the applicant asserted the applicability of the Time Bars, the actual rejection of the Variation Notices was done by the Independent Assessors. Hence, the applicant submitted, the Independent Assessors were obliged to apply the Time Bars in accordance with the Contract, irrespective of the applicant's wishes, and, because there was no contention by HY that the Independent Assessors were estopped from applying the Time Bars, it was irrelevant whether the applicant was estopped from asserting reliance on them.
The applicant submits that the Adjudicator accepted its argument, but determined against the applicant on a different basis at [81] of the Determination as follows:
"The Respondent has submitted that even if an estoppel or waiver by election arising out of the conduct of the Respondent binds the Respondent to not assess claims inconsistently with that election or estoppel, the conduct cannot bind the Independent Assessors. I agree. However, the Independent Assessors are not being called on to make a progress payment. It is the Respondent who is required to make the progress payment and it is the Respondent who is estopped from applying the Time Bar Clauses. This would be the case even if it were the Independent Assessors who allowed Prior Variation Claims, because even if it the Independent Assessors allowed Prior Variation Claims, it was the Respondent who made the payment on them, and it is the Respondent's conduct in doing this that led to the Claimant's assumption or expectation that the Time Bar Clauses would not be applied."
The applicant says that HY did not advance any argument from which that conclusion might have followed and that HY did not allege that the conduct by which the applicant induced it to adopt an assumption or expectation giving rise to an estoppel, included the mere act of making payment in respect of HY's prior payment claims or of payment claims previously certified by the Independent Assessors.
The applicant says that the Adjudicator did not give the applicant an opportunity to engage with that line of reasoning. Had the Adjudicator done so, the applicant says that it may simply have answered that "it paid prior progress payment claims (which were payments on account only) in accordance with the assessment made by the Independent Assessors, as it was required to do under the Contract".
The applicant says that it is clear that deciding a dispute on a basis for which neither party contended for, effects a substantial denial of natural justice, unless it can be said that no submission could have been made to the Adjudicator which might have produced a different result. It says that such is not the case and the Adjudicator failed to afford the applicant natural justice in respect of a finding which was central to his decision to award the adjudicated amount.
HY's submissions
HY says that the applicant's submissions should be rejected.
First, it submits that on a fair and proper reading of HYs adjudication submissions on this point, including Annexure D to those submissions (which sets out a list of variations that were approved by the respondent outside of the strict contractual timeframes), HY overtly submitted that a number of variations were approved and paid outside of the strict contractual timeframes. The applicant did not deny that a number of variations were approved and payments made outside of those strict timeframes, but rather that the determinations (and timing of such determinations) by the Sub-Independent Certifier in this regard was non-binding on the applicant.
Second, HY says, there is no prejudice in any event.
HY notes that the applicant claims in its written outline of submissions that, had it been given the opportunity to engage with the Adjudicator's reasoning, it would have submitted that it paid prior progress payment claims in accordance with the assessment made by the Independent Assessors as it was required to do under the Contract. HY says that this is no answer because the applicant cannot obtain the benefit of standing by while no point is taken for non-compliance with time bars at one time, and then change its position later by insisting on strict compliance, to defeat claims for payment.
In other words, HY says that while the assessment of payment claims may have been made by Independent Assessors, this does not divorce the applicant from the assessment process, and to suggest that it does ignores that reality.
HY also points out that Mr Mozziconacci observed in his witness statement that the administration of the Contract was a key responsibility of his to be fair in the administration of the Contract by paying Variations submitted outside of the timeframes prescribed by the Contract.
HY says that the applicant's submission is inconsistent with their own evidence and the practical way in which the Contract was administered by the parties and that, accordingly, given that no sensible submission could have been made to effect a different result, there has been no denial of procedural fairness.
Discussion as to procedural ultra vires – arguments not advanced
I have read HY's submissions to the Adjudicator and considered Table D. At [158] of those submissions HY said, albeit with respect to its first and primary submission as to waiver:
"The Claimant submits that this is precisely the case here. The Respondent was entitled to either reject the Claimant's claims for non-compliance with the notice regime, or waive such non-compliance. By continually assessing, approving and paying claims which did not comply, the Respondent waived its right to insist upon compliance with this regime in the future. This is not a case where the Respondent can waive compliance with some claims but not others. Such a waiver is a waiver once and for all." (Emphasis added.)
Clearly, the relevance of the act of payment by the applicant was raised before the Adjudicator and, in my view, had he alerted the parties to his thinking as to that fact, divorced from the conduct of the Independent Assessor in assessing and approving HY's claims, there could have been no principled answer. That the applicant could have responded that all it was doing was complying with the Contract, would not have been a suggestion that could abnegate its own personal conduct giving rise to an estoppel.
In holding that it was the applicant who was required to make the progress payment and that it was the applicant who was estopped from applying the Time Bar Clauses, because its conduct led to the claimant's assumption or expectation that the Time Bar Clauses would not be applied, the Adjudicator was doing nothing more, in my view, than stating the clear result of the facts before him. In accepting and avoiding the specious submission made to him as to identity of the person estopped, the Adjudicator was reasoning fairly and predictably in my view. The answer to the applicant's submission should have been obvious to it.
As has already been mentioned, in Ostwald Bros Pty Ltd v Jaylon Pacific Pty Ltd (above), Burns J, citing John Holland Pty Ltd v TAC Pacific Pty Ltd [2009] QSC 205; [2010] 1 Qd R 302; Walton Construction (Qld) Pty Ltd v Corrosion Control Technology Pty Ltd [2011] QSC 67; [2012] 2 Qd R 90 at [60]; Northbuild Construction Sunshine Coast Pty Ltd v Beyfield Pty Ltd [2014] QSC 80; [2015] 1 Qd R 463 at [35], followed in John Holland Pty Ltd v Chidambara [2017] WASC 179 at [53], held at [30]:
"It is well settled that a substantial denial of natural justice may invalidate an adjudication decision with the consequence that such a decision may be declared void. Where an adjudicator decides a dispute on a basis for which neither party contended, there will be a substantial denial of natural justice unless it can be said that no submission could have been made to the adjudicator which might have produced a different result."
In my view, the submission postulated by the applicant, if made to the Adjudicator, would not have produced a different result as to the finding of estoppel against the applicant. This is not a case of an adjudicator deciding a dispute on a basis for which neither party contended, waiver and estoppel were clearly the relevant bases and they were contested at length and in detail in the submissions. The Adjudicator preferred to approach the matter on the basis of estoppel. Having done so he was entitled to reason by reference to all of the material before him.
An adjudicator is not obliged to let the parties into every aspect of his or her thinking. Indeed, unlike the Socratic dialogue that occurs between counsel and judges, the adjudication process established by the SOP Act does not facilitate exchange about every available way of applying the contested law to the available material.
The third issue: the Coogan Report
In support of its Adjudication Response, the applicant submitted a report of Mr Stephen Coogan, a quantity surveyor and director of the firm TBH. The report was dated 12 August 2019 and entitled "Expert Quantum Report on Hansen Yuncken's Adjudication Application" (the Coogan Report).
The Coogan Report is 183 pages long. Its purpose is stated as follows:
"I, Stephen Coogan, have been requested by [King & Wood Mallesons] to provide an opinion in relation to selected amounts claimed by Hansen Yuncken Pty Ltd ('HY') under an Adjudication Application ('Quantum Assessment'). Specifically, my brief requests me to:
(a) review the material provided by HY under the Adjudication Application and provide an opinion as to whether the material is sufficient to value the claimed amounts in accordance with the relevant Contract provisions; and
(b) if the material is sufficient, provide an independent valuation of the amounts claimed by HY."
The applicant contends that the Adjudicator did not have regard to the Coogan Report, and did not give any reason for excluding it. This is said to amount to jurisdictional error.
The applicant relies on the decision in Craig v South Australia (above), where at [179], Brennan, Deane, Toohey, Gaudron and McHugh JJ stated that if an administrative decision maker "falls into an error of law which causes it to … ignore relevant material … and the tribunal's exercise or purported exercise of power is thereby affected, it exceeds its authority or powers. Such an error of law is jurisdictional error which will invalidate any order or decision of the tribunal which reflects it". (Emphasis added.)
The applicant's contention is, in my view, misconceived.
In his Determination at [32]-[34], the Adjudicator directed himself in the following terms as to the status of the Coogan Report:
"32 … In other words, I do not accept I am bound to adopt assessments made by the Sub-IC or the Quantity Surveyor. Similarly, the expert report of TBH [the Coogan Report] provided by the Respondent with the adjudication application, presents the author's assessments of the Claimant's entitlement of a number of items in dispute based on the materials referenced in the report and, presumably, the author's expertise. I do not believe I am bound by the author's assessments.
33 Similarly, as submitted by the Respondent in the adjudication response, it is not appropriate for me to make a default determination of any of the claimed amounts.
34 For these reasons, I propose to form my own view of the Claimant's entitlement under the Contract in respect of each item in dispute, based on the materials referred to in section 25(2) of the Act, in order to determine the amount of the progress payment." (Emphasis added.)
The applicant submits that this was a peremptory dismissal of the Coogan Report. I do not accept that submission. In those three paragraphs the Adjudicator made it clear that he had read and considered the report, and he explained, correctly in my view, why he was not bound by Mr Coogan's assessments.
In taking that view and in choosing to form his own view based on the materials referred to in s 25(2) of the SOP Act, it cannot be said, as was pre-conditioned in Craig (above), that the Adjudicator's exercise of power, or even, if you like, his "purported" exercise of power, was thereby affected. He was correctly exercising his power under the Act.
Far from falling into jurisdictional error for a failure to take into account relevant material, the Adjudicator "considered" the Coogan Report and rejected Mr Coogan's postulated assessments in favour of forming his own, on all of the materials, which of course included the Coogan Report itself, albeit the Adjudicator chose not to base his own determination on that report. As was said in Cockram Construction Ltd v Fulton Hogan Construction Pty Ltd (above) at [40] per Meagher JA, Basten JA and Barrett AJA agreeing:
"The adjudicator's ultimate function is thus 'to determine the amount and timing of a progress payment': Probuild Constructions (Aust) Pty Ltd v Shade Systems Pty Ltd [2018] HCA 4; (2018) 92 ALJR 248 at [80] (Gageler J). In performing that function, the adjudicator is bound 'to consider' the matters in paras (a)–(e) of sub-s (2) and not 'to consider' other matters: Hargreaves at [65] (Basten JA).
Mr Tonkin was the Adjudicator and not Mr Coogan. In no way was the Adjudicator required to weigh each of his own assessments against Mr Coogan's. If in reaching his own assessment he in fact erred by comparison to Mr Coogan's figures or methodology, that would be an error within jurisdiction. Again, as was noted in Cockram at [41]:
"By its nature, the obligation in s 22(2) required 'a process of evaluation, sufficient to warrant the description' as consideration in the particular context, and not mere 'formalistic reference' to those matters: Weal v Bathurst City Council [2000] NSWCA 88; (2000) 11 LGERA 181 at [80] (Giles JA, Priestley JA agreeing); Azriel v NSW Land & Housing Corporation (2006) 67 NSWLR 256; [2006] NSWCA 372 at [49] (Basten JA, Santow and Ipp JJA agreeing). The process adopted by the adjudicator did not cease to warrant that description merely because it included a conclusion that one provision of the contract was not to be applied. That remained so whether or not that conclusion proceeded from an error in construction or wrong understanding of the applicable law." (Emphasis added.)
In Bauen Constructions v Westwood Interiors [2010] NSWSC 1359, 28 BCL 153 at [23] it was noted that:
"Just as there is with judges, so too with adjudicators there is a presumption that the stated reasons are all of the reasons for coming to the conclusion expressed."
And in Modscape Pty Ltd v Sive [2017] TASSC 71, Blow CJ said at [37]-[38]:
"The reasons should show that the adjudicator has turned his or her mind to the dispute entrusted to his or her determination, and has addressed the issues raised by the parties in support of or opposition to the payment claim. There is no requirement that they be lengthy, elaborate or detailed. On the contrary, it may be thought, the scheme of the Act tells strongly against any such requirement …
To put the matter compendiously, the reasons should be sufficient to show that the adjudicator has engaged actively with the dispute tendered for his or her decision, and dealt with it in a way that is reasoned, and not perverse, arbitrary or capricious."
To my mind the Determination is a careful and well-reasoned document which shows that the Adjudicator "engaged actively" with the dispute, including the Coogan Report and, in my view, it cannot be said that the reasons were not sufficient to show that the Adjudicator had turned his mind to the dispute entrusted to him, much less that they were "perverse, arbitrary or capricious". And there is no reason to think that the reasons the Adjudicator gave for the Determination were not "all of the reasons for coming to the conclusion he expressed".
Fourth issue: Severance
The applicant submits that the entire Determination – that is, the determinations in respect of both the Variations and the Delay Costs – is affected by jurisdictional error, and submits, further and alternatively, that a jurisdictional error affecting either aspect of the Determination renders the whole of the Determination liable to be quashed.
Recent Court of Appeal authority in Western Australia (Duro Felguera Australia Pty Ltd v Samsung C&T Corporation [2018] WASCA 28, 52 WAR 323 (Buss P and Murphy JA; Martin CJ contra) and South Australia (Maxcon Constructions Pty Ltd v Vadasz (No 2) [2017] SASCFC 2, 127 SASR 193 (per Blue J, Lovell J agreeing; Hinton J in dissent) both support severance in circumstances where some part, but not all, of an adjudication determination is held to be ultra vires. The Victorian Supreme Court (Gantley Pty Ltd v Phoenix International Group Pty Ltd [2010] VSC 106 at [93]-[120]) and the New South Wales Supreme Court (Emergency Services Superannuation Board v Davenport [2004] NSWSC 697 at [71]-[75]) at first instance have come to the same conclusion.
Having found the Adjudicator's Determination not to be tainted by any discernible jurisdictional error, any comment I might make about severance would be obiter. Moreover the question of severance would depend on the nature and extent of any finding made by a court as to jurisdictional error found. On any appeal from my decision, were jurisdictional error to be found, the parties would be permitted to make further submissions on the appropriate remedy, including severance of the offending part of the determination if available.
Fifth issue: Fee Determination
The applicant submits that, even if the Determination is within jurisdiction and enforceable, it was delivered late, and thus the Adjudicator is not entitled to his fees in any event.
Section 24 of the SOP Act, provides, relevantly:
"Adjudication proceedings
(1) An adjudicator is to determine an adjudication application as soon as practicable and, in any case –
(a) within –
(i) 10 business days after the date on which the adjudicator receives the adjudication response; or
(ii) if the respondent lodged a payment schedule in relation to the payment claim to which the application relates, 10 business days after the date by which the respondent may, under section 23, lodge with the adjudicator an adjudication response; or
(iii) if the respondent did not lodge a payment schedule in relation to the payment claim to which the application relates, 10 business days after the date on which the adjudicator accepted the application under section 22(4); or
(b) within a further period, if any, agreed to by the claimant and the respondent."
In the present case the Adjudicator was required to determine the adjudication application within the period agreed to by the applicant and HY, namely, ten business days, plus two extensions, each of five business days. In other words, 20 business days after the Adjudicator received the applicant's adjudication response.
The applicant says that the Adjudicator received the applicant's adjudication response on Monday 12 August 2019 and accordingly was required to determine the adjudication application by Monday 9 September 2019.
In the present case, the Adjudicator did not request payment of his fee until Thursday 12 September 2019, when a tax invoice bearing that date was issued in respect of the fee. The Determination was then notified to the parties on Friday 13 September 2019, following the payment of the fee by HY.
The applicant's submissions
The applicant's submissions are somewhat lengthy but they nonetheless, in my view, need to be set out in in full, for ease of comprehension. They are as follow:
"An otherwise valid adjudication determined out of time is still valid.[8] There is only one remedy available under the SOP Act for a respondent if the adjudicator does not provide the adjudication in the prescribed time. The adjudicator is not entitled to be paid fees or expenses in connection with the adjudication of the adjudication application if he fails, within the time allowed by section 24, to determine the application.[9]
[8] Ian Street Developer Pty Ltd v Arrow International Pty Ltd [2018] VSCA 294.
[9] SOP Act section 37(4).
The relevant provisions are SOP Act sub-ss 37(4) and (5):
'(4)An adjudicator is not entitled to be paid fees or expenses in connection with the adjudication of an adjudication application if he or she fails, within the time allowed by section 24, to determine the application (other than because the application is withdrawn or the dispute between the claimant and respondent is otherwise resolved).
(5)Subsection (4) does not apply –
(a)if the adjudicator refuses to notify the parties of his or her determination until his or her fees or expenses are paid; or
(b)in other circumstances that are prescribed for the purposes of this paragraph.'
PSHL submits that the purpose of sub-section (5) is clear. It allows the adjudicator to avoid delivering his adjudication first and then seeking to recover his fee from a disappointed party, which may present practical difficulty. Instead, the adjudicator may, as here, decide to notify the parties that the adjudication is available, but not deliver the adjudication until his fees are paid.
However, PSHL submits that the purpose of s 24 is only maintained if an adjudicator's advice that the adjudication is available upon the payment of the adjudicator's fee is delivered within the timeframe established by s 24. That is, an adjudicator could not escape the consequences of an otherwise overdue adjudication simply by refusing to notify the parties of his determination until his fees or expenses were paid, even though the adjudication was, say, already two weeks late by that time.
The question then arises as to when the Determination was 'determined'. In considering the (relevantly identical) NSW provisions in MPM Constructions v Trepcha Constructions,[10] McDougall J endorsed the view that the determination needed to be provided to the parties to be 'determined':[11]
[10] MPM Constructions v Trepcha Constructions [2004] NSWSC 103.
[11] Ibid [2].
'However, the [adjudicator] did not determine the application until 27 January 2004 when, his fees having been paid, he made available to the parties his determination. The determination bears date 25 January 2004. The plaintiff uplifted the determination from the second defendant on 28 January 2004.'
However, the same judge, in Cranbrook School v JA Bradshaw Civil Contracting,[12] held that a determination may be made even it is was not provided to the parties:
[12] [2013] NSWSC 430 [60].
'… [T]he evidence does not satisfy me that the determination was in fact made late. It was dated 2 November 2012. The adjudicator's cost records show that this was the last date he performed chargeable work on it. I accept that it was not until the following Monday that he sent the document to the authorised nominating authority. I accept, further, that thereafter there were minor changes made, to correct typographical errors. But it does not follow that it was not made on the date that it bears, namely, 2 November 2012. In this context there is, as I pointed out in Chase Oyster Bar at [192], a distinction between the determination and the reasons for it.'
Mr Tonkin, by reference to the Cranbrook authority above, contends that the work he performed after 9 September 2019 (the due date) was in the nature of reviewing and correcting typographical errors (CB 1486 to 1487). The argument would run that the determination had been made on 9 September 2019, even if it was not delivered to the parties or otherwise available on payment of a fee.
PSHL accepts that if the above passage from Cranbrook is correct, Mr Tonkin's determination was made within time. However, PSHL submits that the appropriate measure of when the determination is made is when it is complete and available to the parties, either by serving it on them or (by reference to s 24(5)) when an adjudicator makes the determination available upon the payment of his or her fees.
There are consequences that arise upon the failure of an adjudicator to provide the adjudication within time, which militate against Mr Tonkin's preferred interpretation.
Most obviously, under the SOP Act s 28, a claimant may, within 5 Business Days of the expiry of the time for a determination, serving notice in writing withdrawing the adjudication application, and make a new application. If the adjudication is 'determined' when it is substantially complete, but the adjudicator is entitled to retain the adjudication for an indefinite period after determination without providing it to the parties, then they are left unable to know whether any rights under s 28 have accrued.[13] At the very least, that reduces the already limited time period available to the claimant to consider exercising its rights to obtain a new adjudication. At the worst, its rights may be dissipated entirely.
[13] Cf MPM Constructions v Trepcha Constructions [2004] NSWSC 103 [27].
In any event, the parties are entitled to a swift, and prompt adjudication. The time limits in the SOP Act reflect 'a mandatory regime regardless of the parties' contract with extremely abbreviated time frames for the exchange of payment claims, payment schedules, adjudication applications and adjudication'.[14] In the present case, it took 3 Business Days for the review and amendment of the Determination before it was available to the parties. That is a delay that would be unacceptable in any other aspect of the regime established by the SOP Act.
[14] Saville v Hallmarc Construction Pty Ltd [2015] VSCA 318; (2015) 47 VR 177 [80].
An indefinite period available for review by the nominating authority, and exchange between the nominating authority and the adjudicator (whether or not the adjudicator charges for that time) is not expressly provided for in the SOP Act, and PSHL submits that there is no basis upon which to imply such a review period.
Finally, PSHL notes that provision exists for correction of the types of error that the Nominating Authority and Mr Tonkin spent so long checking. By SOP Act s 25(8):
'An adjudicator may, on his or her own initiative or on the application of a claimant or respondent, correct –
(a) a clerical mistake in a determination under this section; or
(b)an error arising from an accidental slip or omission in a determination under this section; or
(c)a material miscalculation of figures or a material mistake in the description of a person, thing or matter referred to in a determination under this section; or
(d) a defect of form in a determination under this section.'
In other words, following the Cranbrook authority would not be necessary to prevent such kinds of errors. They can be corrected in any event. In short, the purpose of the SOP Act is not advanced by Mr Tonkin's preferred construction."
HY's submissions
HY submits as follows:
"PSHL says that the adjudication determination was delivered late and so the fee determination is void. This is not correct as explained below.
As PSHL rightly acknowledges[15], an otherwise valid adjudication determination determined outside of the timeframe prescribed by the SOP Act is still valid and enforceable[16].
[15] PSHL's Outline at [198].
[16] See Ian Street Developer Pty Ltd v Arrow International Pty Ltd [2018] VSCA 294.
PSHL, in its Outline, refers to what McDougall J said in Cranbrook School v JA Bradshaw Civil Contracting[17] (Cranbrook) and rightly acknowledges that if what McDougall J said in that case is correct then the adjudication determination was made within time[18].
[17] [2013] NSWSC 430 [60].
[18] PSHL's Outline at [205].
Hansen Yuncken submits that what McDougall J said in Cranbrook is correct and the facts of this case support a conclusion that the adjudication determination was made within time.
In Cranbrook, in the passage quoted by PSHL at [203] of its Outline, (which is set out in [60] of the Cranbrook judgment under the heading 'Third issue: determination made too late?'), McDougall J squarely:
(a)addressed the issue of when a determination is made; and
(b)provided reasons why the determination was made (or determined) on the date that it bears[19].
McDougall J held that the fact the determination was actually delivered a few days later (and that minor changes were made to it) did not change the fact that the determination was made on the date that it bears.
The facts of Cranbrook are analogous to the facts of this case. The adjudication determination was made on 9 September 2019 with minor changes made to it after that date to address typographical errors.[20] The Adjudicator did not charge any fees associated with addressing such minor changes.[21] The delivery of the determination after 9 September 2019 does not change the date of the determination.
PSHL points to another decision of McDougall J, being his Honour's decision in MPM Constructions v Trepcha Constructions[22] (MPM Constructions), and relies on what his Honour said in that case in an attempt to show that his Honour came to conflicting views as to when an adjudication determination is 'determined' in two separate cases. However, PSHL's reliance on what was said in MPM Constructions is misplaced (and of no assistance to the Court) because in that case McDougall J was doing nothing other than setting out background facts and describing the dispute to be determined.
In paragraph 1 of the judgment in MPM Constructions, McDougall J described the parties and the background to the dispute, and in paragraph 2 of the judgment, his Honour gave a further recitation of the facts and circumstances leading to the delivery of the adjudication determination. His Honour then commented, after providing the factual description, that '[t]his evidence was not challenged' and it seems tolerably clear that the matters set out in paragraph 2 were not in dispute and were agreed. In other words, McDougall J had no need to consider when the adjudication determination was made because it appears that the parties were in agreement about that issue. The issue for determination in MPM Constructions was the consequences that arose from the late determination (for example, did it mean the adjudication was ultra vires?); not whether the determination was in fact delivered late contrary to the SOP Act.
Accordingly, there is no conflict between what McDougall J said in Cranbrook and what his Honour said in MPM Constructions. McDougall J's recitation of uncontested matters in MPM Constructions does not assist the Court. However, his Honour's reasoning in Cranbrook is directly on point and Hansen Yuncken submits that this Court should be slow to come to a different view in determining when the adjudication determination was made.[23]
For these reasons, the Adjudicator is entitled to be paid his fees as determined because the adjudication application was not determined outside the time allowed by the SOP Act."
Discussion as to the fifth issue
[19] McDougall J's reasons at [60] were strictly obiter dicta, given his Honour had already determined that there was no construction contract and on that basis the determination made by the adjudicator was set aside (in other words, there was no need to determine the time when the determination was made because the matter was decided on other grounds). Nevertheless, the reasoned obiter dicta of his Honour on this point is still persuasive and ought to be followed in this Court.
[20] See Frinsdorf Affidavit at CAF-7 (CB1485 – 1487 inclusive) and affidavit of Ms Lorraine Djuricin affirmed on 10 January 2020 (CB1505 – 1509 inclusive).
[21] See Frinsdorf Affidavit at CAF-7 (CB1485 – 1487 inclusive).
[22] [2004] NSWSC 103.
[23] Seymour Whyte Constructions Pty Ltd v Oswald Bros Pty Ltd (In Liquidation) (2019) 99 NSWLR 317; [2019] NSWCA 11 at [222] (Sackville AJA with whom Payne JA, White JA, Leeming JA and Emmett AJA agreed).
I prefer the submissions advanced by HY on this issue. For the reasons HY sets out in its written argument, I am of the view that when MPM Contructions is properly understood, there is no tension between the decisions of McDougall J in that case and in Cranbrook.
I see no reason to depart from his Honour's reasoning in Cranbrook, notwithstanding the purposive and contextual arguments raised by the applicant to suggest that the determination is made when it is complete and available to the parties, either by serving it on them or, by reference to s 24(5) of the SOP Act, when an adjudicator makes the determination available upon the payment of his or her fees.
In Cranbrook at [60] his Honour said:
"First, the evidence does not satisfy me that the determination was in fact made late. It was dated 2 November 2012. The adjudicator's cost records show that this was the last date he performed chargeable work on it. I accept that it was not until the following Monday that he sent the document to the authorised nominating authority. I accept, further, that thereafter there were minor changes made, to correct typographical errors. But it does not follow that it was not made on the date that it bears, namely, 2 November 2012. In this context there is, as I pointed out in Chase Oyster Bar at [192], a distinction between the determination and the reasons for it." (Emphasis added.)
In my view, the fact that Cranbrook was not an unwitting departure from something said by McDougall in MPM Constructions, decided nine years earlier, but rather, a considered decision, albeit one delivered ex tempore, is clear from what his Honour actually said in Chase Oyster Bar Pty Ltd v Hamo Industries Pty Ltd [2010] NSWCA 190, 78 NSWLR 393 at [192], namely:
"192 Section 22(1) sets out what it is that an adjudicator is to do and s 22(2) – (4) set out how the adjudicator is to carry out that task. The 'determination' is the performance of the tasks described in subs (1). What is determined is the amount of the progress payment, its due date for payment and the rate of interest payable. The issues of fact and law dealt with in the reasons required to be given pursuant to s 22(3)(b) are not 'determined' in that sense, although undoubtedly they may (and in the ordinary case will) explain the determination that was made." (Emphasis added.)
In my opinion, McDougall J's view on this question in Cranbrook is determinative, and, not being persuaded that his Honour was clearly wrong, or that the facts of that case were materially different to the present, I propose to follow it. The result is that Mr Tonkin's Determination, dated 9 September 2019, was made on that date and was within time, and his fee Determination is valid and enforceable.
Disposition
It follows from all that I have said that none of the grounds set out in the general order to show cause are made out. Accordingly I decline to grant the relief sought by the applicant and I discharge the general order.
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