Prime Constructions (Qld) Pty Ltd v HPS (Qld) Pty Ltd

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SUPREME COURT OF QUEENSLAND

CITATION:

Prime Constructions (Qld) Pty Ltd v HPS (Qld) Pty Ltd & Ors [2019] QSC 301

PARTIES:

PRIME CONSTRUCTIONS (QLD) PTY LTD
(ABN 11 128 215 903)

(applicant)

v
HPS (QLD) PTY LTD (ABN 34 131 447 517)

(first respondent)
and
JOHN TUHTAN (REGISTERED ADJUDICATOR NUMBER J1190798)
(second respondent)
and
THE ADJUDICATION REGISTRAR, QUEENSLAND BUILDING AND CONSTRUCTION COMMISSION
(third respondent)

FILE NO/S:

No BS 10745/19

DIVISION:

Trial

PROCEEDING:

Originating application

ORIGINATING COURT:

Supreme Court at Brisbane

DELIVERED ON:

13 December 2019

DELIVERED AT:

Brisbane

HEARING DATE:

18 October 2019; further written submissions received on 23 and 28 October 2019

JUDGE:

Flanagan J

ORDERS:

1.     The originating application is dismissed.

2.     The sum of $1,072,568.28 paid into Court by the applicant pursuant to the order of Ryan J made 4 October 2019 be paid out to the solicitors for the first respondent.

3.     The applicant pay the first, second and third respondents’ costs of the proceedings.

CATCHWORDS:

CONTRACTS – BUILDING, ENGINEERING AND RELATED CONTRACTS – REMUNERATION – STATUTORY REGULATION OF ENTITLEMENT TO AND RECOVERY OF PROGRESS PAYMENTS – ADJUDICATION OF PAYMENT CLAIMS – where a subcontractor and head contractor entered into a construction contract for the installation of windows & glazing for a residential project – where there was a severe storm – where there were multiple sources of water ingress –  where the head contractor relied on an indemnity clause to deduct from the subcontractor’s payment claim the costs of rectifying water damage – where the adjudicator deducted a smaller amount than scheduled by the head contractor – where the head contractor asserted that the adjudicator committed jurisdictional error – whether the adjudicator failed to consider material that he was required to consider, give adequate reasons, or observe natural justice

Building Industry Fairness (Security of Payment) Act 2017 (Qld), s 88, s 89

Annie Street JV Pty Ltd v MCC Pty Ltd & Ors [2016] QSC 268, cited
Avopiling (NSW) Pty Ltd v Mernard Bachy Pty Ltd [2012] NSWSC 1466, applied
Caltex Refineries (Qld) Pty Ltd v Allstate Access Australia Pty Ltd [2014] QSC 223, applied
Craig v South Australia (1995) 184 CLR 163, cited
Northbuild Construction Pty Ltd v Central Interior Linings Pty Ltd [2012] 1 Qd R 525, cited

COUNSEL:

M D Ambrose QC for the applicant

B D O’Donnell QC, with J R Green, for the first respondent

No appearance for the second respondent
No appearance for the third respondent

SOLICITORS:

Holding Redlich for the applicant

Corrs Chambers Westgarth for the first respondent
No appearance for the second respondent
No appearance for the third respondent

  1. The applicant, Prime Constructions (Qld) Pty Ltd, seeks a declaration that the decision of the second respondent (adjudicator) dated 27 September 2019 under the Building Industry Fairness (Security of Payment) Act 2017 (Qld) (BIF Act) is void for want of jurisdiction.  Prime also seeks consequential injunctive relief.

  2. The declaration is sought on the basis that the adjudicator committed five jurisdictional…

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Details
Case
[2019] QSC 301
Decision Date

CaseChat Overview and Summary

The case of Prime Constructions (Qld) Pty Ltd v HPS (Qld) Pty Ltd involved a dispute between Prime, the head contractor, and HPS, a subcontractor, over a construction contract for the installation of windows and glazing for a residential project in Cairns. The dispute centred on a payment claim made by HPS, which Prime partially paid but sought to deduct costs related to water damage caused by a severe storm. The adjudicator, appointed under the Building and Construction Industry Payments Act 2006 (BIF Act), awarded a significantly smaller deduction than Prime had proposed, leading Prime to challenge the adjudicator's decision on grounds that it included jurisdictional errors.

The primary legal issues revolved around whether the adjudicator failed to consider material that he was required to consider, gave inadequate reasons, or did not observe natural justice. Prime argued that the adjudicator's decision was flawed because it did not sufficiently address the evidence regarding the water damage and its causes, and thus it failed to properly apply the indemnity clause in the contract. The court had to determine if the adjudicator's decision was legally sound and whether it adhered to the statutory requirements for adjudication under the BIF Act.

The court concluded that Prime had not established that the adjudicator committed any of the alleged jurisdictional errors. The adjudicator's 52-page decision demonstrated a thorough review of the relevant statutory provisions, the construction contract, the payment claim, and the payment schedule. Additionally, the adjudicator had noted the severe storm event and the multiple sources of water ingress, and had considered the competing assertions of both parties regarding the water damage. The court found that the adjudicator had exercised his discretion appropriately and had provided sufficient reasons for his decision, thus adhering to the principles of natural justice. The court dismissed Prime's application, ordering the funds paid into court to be released to HPS and directing Prime to pay the costs of the proceedings.

Orders

Orders of the court

1. The originating application is dismissed.

2. The sum of $1,072,568.28 paid into Court by the applicant pursuant to the order of Ryan J made 4 October 2019 be paid out to the solicitors for the first respondent.

3. The applicant pay the first, second and third respondents’ costs of the proceedings.

Background

Background to the litigation

For the reasons that follow, Prime has failed to establish that the adjudicator committed any of the alleged jurisdictional errors.Background On 23 May 2018, Prime and the first respondent, HPS (Qld) Pty Ltd, entered into a contract for glazing works on an apartment tower and a 217-room hotel tower, which were each under construction in Cairns.[1] The contract required HPS to supply and install aluminium and glass window and door assemblies and glazing to all windows for the project.[1] Affidavit of Kirsty Ellen Smith filed 4 October 2019, paragraph 5(a). On 27 May 2019, HPS served Prime with a payment claim in the sum of $1,461,674.24. On 14 June 2019, Prime served HPS with a payment schedule that responded to HPS’s payment claim and included Prime’s reasons for withholding payment. Prime scheduled an amount of $360,810.95. Prime has paid this amount to HPS. On 29 July 2019 HPS served Prime with an adjudication application made under the BIF Act.[2][2] Affidavit of Kirsty Ellen Smith filed 4 October 2019, paragraph 5(b)-(d). On 28 August 2019, Prime’s served its adjudication response on HPS and the adjudicator. The adjudication response included but was not limited to the following documents:(a) adjudication response submissions;(b) statutory declaration of Rick Stevens; and(c) a report of a quantity surveyor, Russell Welsh. The adjudicator made his decision on 27 September 2019. The adjudicator determined the amount payable to be $1,365,408.67. The only item that Prime challenges in these proceedings is the deduction made by the adjudicator for the cost of rectifying water damage to rooms in the hotel tower for which HPS is responsible. As stated above, Prime sought a deduction of $866,213.72; the adjudicator allowed $69,696.22. Subsequent to the adjudicator’s decision, Prime, on 3 October 2019, applied for an urgent interlocutory injunction restraining HPS from filing an adjudication certificate under the BIF Act. On 4 October 2019, consent orders were made by which HPS agreed not to take any steps to enforce the adjudicator’s decision pending the resolution of the present application. This agreement was made upon Prime giving the usual undertaking as to damages and undertaking to pay into Court the amount of $1,072.568.28 to secure payment of the adjudicated amount (including the adjudicator’s fees and interest) until the determination of the present application. The adjudicator’s decision The adjudicator’s decision is 52 pages in length.[3] [3] Exhibit KES-14 to the affidavit of Kirsty Ellen Smith filed 4 October 2019 (adjudicator’s decision). By way of background, the adjudicator notes that on 10 December 2018, the project suffered a severe storm event and rainwater penetrated the building from multiple locations. He states:[4]“Specifically, the parties claim that water penetrated the building from;(a) services penetrations in the roof;(b) from the fire stair in the roof;(c) from openings in the building façade where there were no windows installed;(d) from openings in the building façade occupied by the temporary man and materials hoist [Alimak]; and(e) from windows that were installed but which were either incomplete or defectively installed.”[4] Adjudicator’s decision, paragraph 7.

Evidence

Evidence Before The Court

Full text does not contain this section.

Decision

Reasons for decision

The adjudicator’s decision is 52 pages in length.[3] [3] Exhibit KES-14 to the affidavit of Kirsty Ellen Smith filed 4 October 2019 (adjudicator’s decision). By way of background, the adjudicator notes that on 10 December 2018, the project suffered a severe storm event and rainwater penetrated the building from multiple locations. He states:[4]“Specifically, the parties claim that water penetrated the building from;(a) services penetrations in the roof;(b) from the fire stair in the roof;(c) from openings in the building façade where there were no windows installed;(d) from openings in the building façade occupied by the temporary man and materials hoist [Alimak]; and(e) from windows that were installed but which were either incomplete or defectively installed.”[4] Adjudicator’s decision, paragraph 7. The adjudicator thereafter refers to and describes the payment claim, the payment schedule, the adjudication application and the adjudication response. The adjudicator notes that he required an extension for making the decision. The present payment claim was a complex payment claim and ordinarily an adjudication decision would be required within 15 days after the response date.[5] On 16 September 2019, the adjudicator, however, wrote to the parties requesting an extension of time up to 27 September 2019. Such an extension may be granted by the parties pursuant to s 86(1) of the BIF Act. The circumstances in which the adjudicator came to ask for an extension was that he sustained a severe injury to his knee on 5 September 2019, which caused him to be unavailable for work in deciding the adjudication application. Prime and HPS granted the extension on 16 September 2019.[5] BIF Act, s 85(1)(b). The adjudicator at paragraph 37 identifies the requirements of s 88(2) of the BIF Act, noting that in making his decision he had regard only to the following matters:“(a) the provisions of the BIF Act and, to the extent that they are relevant, the provisions of the Queensland Building and Construction Commission Act 1991, part 4A:(b) the provisions of the construction contract … from which the application arose;(c) the Payment Claim to which the application relates, together with all submissions, including relevant documentation, that have been properly made by [HPS] in support of the claim;(d) the payment schedule, if any, to which the application relates, together with all submissions, including relevant documentation, that had been properly made by [Prime] in support of the schedule;(e) the results of any inspection carried out by the adjudicator of any matter to which the claim relates.” In paragraphs 38 to 141 of the adjudicator’s decision, the adjudicator dealt with disputed claims relating to the original contract works, none of which are relevant for present purposes. The deduction claim is dealt with at paragraphs 142 to 194. The adjudicator commenced by identifying, at paragraphs 143 and 145, the competing assertions of Prime and HPS as to liability for water damage caused by the storm event.

Ratio Decidendi

Legal Principle Established

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