R v Macdessi; ex parte
[2014] TASSC 64
•18 December 2014
[2014] TASSC 64
COURT: SUPREME COURT OF TASMANIA
CITATION: R v Macdessi; ex parte Walton [2014] TASSC 64
PARTIES: THE QUEEN
v
MACDESSI, Steven
Ex parte, WALTON, Tamara
HOPWOOD, Fraser
FILE NO: 416/2014
DELIVERED ON: 18 December 2014
DELIVERED AT: Hobart
HEARING DATE: 28 November 2014
JUDGMENT OF: Blow CJ
CATCHWORDS:
Contracts – Building, engineering and related contracts – Remuneration – Statutory regulation of entitlement to and recovery of progress payments – Adjudication of payment claims – Natural justice – Failure to consider adjudication response – Time for lodging adjudication response – Statutory holidays not counted as business days.
Building and Construction Industry Security of Payment Act 2009 (Tas), ss 4A, 23(2).
Aust Dig Contracts [279.6]
REPRESENTATION:
Counsel:
Prosecutor: C Groves
Defendant: No appearance
Blockker Built Pty Ltd: No appearance
Solicitors:
Prosecutor: Leonard Fernandez
Defendant: Moray & Agnew
Blockker Built Pty Ltd: Gunson Williams
Judgment Number: [2014] TASSC 64
Number of paragraphs: 33
Serial No 64/2014
File No 416/2014
THE QUEEN v STEVEN MACDESSI ex parte TAMARA WALTON
and FRASER HOPWOOD
REASONS FOR JUDGMENT BLOW CJ
18 December 2014
On 28 November 2014, at the conclusion of the hearing of this matter, I made an order quashing a determination made by the defendant on 17 March 2014. These are my reasons for making that order.
The quashed determination was made by the defendant as an adjudicator for the purposes of the Building and Construction Industry Security of Payment Act 2009 ("the Act"). The determination related to a contract for the construction of a residence. The prosecutors, Tamara Walton and Fraser Hopwood ("the proprietors"), are the owners of the property in question. They engaged a builder named Blokker Built Pty Ltd to construct the residence. A dispute developed as to the amount payable by the proprietors to the builder. The builder sought to invoke the provisions of the Act. The following steps were taken:
· On 3 January 2014 the builder sent the proprietors a series of emails, apparently intending them to constitute a payment claim for the purposes of the Act. The amount claimed was $62,627.41.
· On 3 February 2014 the proprietors delivered to the builder a "payment schedule", indicating that they proposed to pay the builder nothing.
· The builder made an adjudication application to a nominating authority named Adjudicate Today Pty Ltd. The proprietors received that application on 17 February 2014.
· Adjudicate Today appointed the defendant, Steven Macdessi, to be the adjudicator, and he accepted that appointment. The proprietors received notification of his acceptance of the adjudication application on 19 February 2014.
· The proprietors lodged an adjudication response.
· On 17 March 2014 the adjudicator made his determination. He determined that the proprietors were to pay $62,627.41 inclusive of GST, as well as 100% of an adjudication fee of $1,936.
The proprietors' primary claim is for relief in the nature of certiorari. Writs of certiorari may no longer be issued by this Court: Judicial Review Act 2000, s 43. However relief in the nature of certiorari is still available: Supreme Court Rules 2000, r 627(2)(a); Tasman Quest Pty Ltd v Evans (2003) 13 Tas R 16 at [8], [9]. Relief in the nature of certiorari is available, in an appropriate case, to quash an adjudication determination, or a purported adjudication determination, under the Act: Chase Oyster Bar Pty Ltd v Hamo Industries Pty Ltd (2010) 78 NSWLR 393; Skilltech Consulting Services Pty Ltd v Bold Vision Pty Ltd [2013] TASSC 3.
On 6 August 2014 Holt AsJ made a general order requiring the adjudicator to show cause why his determination should not be quashed. That order and other documents were served on both the adjudicator and the builder. Both of them, through solicitors, filed notices advising that they would submit to any order that the Court decided to make. Neither of them was represented at the hearing before me.
The grounds upon which certiorari can be granted were summarised by the High Court of Australia in Craig v South Australia (1995) 184 CLR 163 at 175-176, as follows (omitting footnotes):
"Where available, certiorari is a process by which a superior court, in the exercise of original jurisdiction, supervises the acts of an inferior court or other tribunal. It is not an appellate procedure enabling either a general review of the order or decision of the inferior court or tribunal or a substitution of the order or decision which the superior court thinks should have been made. Where the writ runs, it merely enables the quashing of the impugned order or decision upon one or more of a number of distinct established grounds, most importantly, jurisdictional error, failure to observe some applicable requirement of procedural fairness, fraud and 'error of law on the face of the record'. Where the writ is sought on the ground of jurisdictional error, breach of procedural fairness or fraud, the superior court entertaining an application for certiorari can, subject to available procedural and evidentiary rules, take account of any relevant material placed before it. In contrast, where relief is sought on the ground of error of law on the face of the record, the superior court is restricted to the 'record' of the inferior court or tribunal and the writ will enable the quashing of the impugned order or decision only on the ground that it is affected by some error of law which is disclosed by that record."
The principal grounds upon which the proprietors sought the quashing of the adjudicator's determination were as follows:
· They contended that the emails sent to them by the builder on 3 January 2014 did not amount to a valid payment claim for the purposes of the Act.
· They contended that the adjudicator failed to observe a requirement of procedural fairness in that he ignored, or almost totally ignored, their adjudication response.
In order to make clear the context of those contentions, it is appropriate to summarise the significant provisions of the Act. The Act is modelled on similar legislation in other States, including the Building and Construction Industry Security of Payment Act 1999 (NSW), and the Building and Construction Industry Security of Payment Act 2002 (Vic). The object of the Act is to ensure that those who carry out construction work have enforceable rights to receive progress payments. The Act provides a mechanism for prompt adjudications in relation to disputes concerning entitlements to progress payments. It includes provisions in relation to claiming and disputing progress payments, and the adjudication of such disputes, which can be summarised as follows:
· A person who has undertaken to carry out building work or construction work under a building or construction contract is entitled, on and from each "reference date", to a progress payment: s 12(1)(a).
· A claimant who is, or claims to be, entitled to a progress payment under s 12 may serve a "payment claim" on the person who is, or may be, liable under the contract to make the payment: s 17(1). Section 17 also contains provisions as to the contents, frequency and timing of payment claims.
· In particular, a payment claim must "identify the building or construction work, or building or construction-related goods and services, to which the progress payment relates, in sufficient detail to enable the person on whom it is served to assess the claim": s 17(1)(d).
· If a respondent on whom a payment claim is served wishes to pay less than the claimed amount, that respondent may provide to the claimant a "payment schedule" which identifies the payment claim, indicates the amount (if any) that the respondent proposes to pay, specifies why the amount is less than the claimed amount, and specifies the reasons for withholding any payment: s 18.
· In that situation, subject to certain formal requirements, the claimant may make an "adjudication application" under s 21: s 20(2)(a)(ii).
· A claimant may, in writing, apply to a nominating authority, chosen by the claimant, to have a payment claim adjudicated: s 21(1). Section 21 goes on to place restrictions on the circumstances in which applications for adjudication may be made, and on the timing of such applications.
· An adjudication application must identify the payment claim and the payment schedule to which it relates, and may contain any submissions relating to the application that the applicant thinks fit: s 21(5)(a) and (c).
· When an adjudication application is made to a nominating authority, the nominating authority is required to refer the matter as soon as practicable to a person who is a qualified adjudicator: s 22(1).
· Subject to certain procedural requirements, a respondent may lodge with the adjudicator a response to the adjudication application: s 23(1). In particular, an adjudication response may be lodged within 10 business days after the respondent receives a copy of the adjudication application, or within five business days after receiving notice of an adjudicator's acceptance of the application, whichever period expires later: s 23(2). An adjudicator may not consider an adjudication response if it was made after the end of whichever period expires later: s 23(6). An adjudication response may contain any submissions relevant to the response that the respondent thinks fit: s 23(3)(c).
· If the respondent is entitled to lodge an adjudication response, and lodges one within the permitted time, the adjudicator is required to determine the adjudication application within 10 business days after receiving that adjudication response: s 24(1)(a)(i). That time limit can be extended by a period agreed to by the parties: s 24(1)(b).
· An adjudicator is required to determine whether all or part of a progress payment is to be paid by the respondent: s 25(1)(a). He or she is required to determine the amount to be paid, the date when the payment becomes payable, and the applicable rate of interest: s 25(1)(b).
· The adjudicator's determination must be in writing, and must include the reasons for the determination, unless both parties have requested that they not be included: s 25(4).
· If an adjudicator determines that a respondent is required to pay an adjudicated amount, that respondent must pay the amount within five business days after service of the adjudicator's determination, or by any later date determined by the adjudicator: s 26(1).
· If the respondent does not pay on time, the claimant may request the nominating authority to issue an "adjudication certificate": s 26(2)(a). An adjudication certificate specifies the names of the parties, the adjudicated amount, and the date when payment was due to be made: s 26(5).
· An adjudication certificate may be filed as a judgment for a debt in a court of competent jurisdiction, and is enforceable as a judgment for a debt: s 27(1) and (2).
· An adjudication determination in respect of a s 17 payment claim does not affect any right that a party to the contract may have under the contract or the general law: s 10(1). As a general rule, nothing done under ss 17–39 affects any civil proceedings arising under the contract: s 10(2).
The procedural fairness issue
It is convenient to address this issue first. It concerns the proprietors' contention that the adjudicator ignored, or almost totally ignored, their adjudication response.
In pars 11 and 12 of the reasons for his determination, the adjudicator said the following about the adjudication response:
"11At this point of the determination it is worthwhile to comment on the submission of the Adjudication Response. The Claimant included a hand written note on the Adjudication Application that the Adjudication Application was hand delivered to the Respondents on 17 February 2014. The Respondents make no submission as to when the Adjudication Application was served. Therefore based on the submissions before me I determine that the Adjudication Application was served on the Respondents on 17 February 2014. In accordance with the Act, the Adjudication Response was due on 3 March 2014 (being the later of 10 business days after the Respondents' receipt of the Adjudication Application and 5 business days after receiving the notice of the adjudicator appointment). The Adjudication Response was received on 4 March 2014 which is out of time and hence will not be considered in making this determination.
12In any case, even if the Adjudication Response was considered, it does not (in my view) add any weight to the determination made."
I have already referred to the time limits imposed by s 23(2) of the Act. That subsection reads as follows:
"(2) An adjudication response may be lodged under subsection (1) within —
(a) 10 business days after receiving a copy of the adjudication application; or
(b) 5 business days after receiving notice of an adjudicator's acceptance of the application —
whichever period expires later."
It appears that the adjudicator overlooked the definition of "business day", which is to be found in s 4A of the Act. That section reads as follows:
"(1) In this Act, unless the contrary intention appears —
business day means any day other than —
(a)a Saturday or Sunday; or
(b)a day specified in section 4 of the Statutory Holidays Act 2000; or
(c)a day specified in Part 1 of Schedule 1 to the Statutory Holidays Act 2000; or
(d)a day specified in Part 1 or 2 of Schedule 2 to the Statutory Holidays Act 2000; or
(e)the 27th, 28th, 29th, 30th or 31st of December.
(2) For the purposes of the definition of business day in subsection (1), a day referred to in that definition is a holiday for all of the day and in the whole of the State."
The last Wednesday in February is specified as a statutory holiday in both Pt 1 and Pt 2 of Sch 2 to the Statutory Holidays Act 2000. It is Launceston Cup Day. This year that holiday fell on 26 February. It was a statutory holiday only in part of the State. However s 4A(2) of the Act requires it to be treated as a holiday, not a business day, in the whole of the State.
The first Tuesday in March is specified as a statutory holiday in Pt 1 of Sch 1 to the Statutory Holidays Act. It is King Island Show Day. This year that holiday fell on 4 March. It was only a statutory holiday in the municipal area of King Island. However s 4A(2) of the Act requires it to be treated as a holiday, not a business day, in the whole of the State.
The result is that, as a matter of law, because the copy of the adjudication application was received on 17 February 2014, the time limit of 10 business days imposed by s 23(2)(a) expired on 5 March 2014. The adjudicator erred in law in concluding that the adjudication response was "due on 3 March 2014".
Section 25(2)(d) of the Act requires an adjudicator to consider "the payment schedule, if any, to which the application relates, together with all submissions (including relevant documentation) that have been duly made by the respondent in support of the schedule". An adjudication response, if lodged on time, is a submission duly made in support of a payment schedule, and must therefore be considered by an adjudicator pursuant to that provision. If, as the adjudicator said, the adjudication response in this case was lodged on 4 March, then he was obliged to consider it. At the hearing before me, counsel for the proprietors read an affidavit of a para-legal named Caroline Elizabeth Fernandez, who said that she personally delivered the adjudication response on 3 March 2014. That evidence is uncontradicted. Whether the adjudication response was delivered on 3 March or 4 March, the adjudicator was obliged by s 25(2)(d) to consider it. A failure to do so is, in the words of the High Court in Craig, a failure to observe an applicable requirement of procedural fairness. If, as foreshadowed in par 11 of the adjudicator's reasons, the adjudication response was not considered by him at all, then this was plainly a case for the granting of relief in the nature of certiorari.
But it is not as simple as that. The adjudicator went on to say a number of things in his reasons that could conceivably be treated as indicating that he gave some consideration to the adjudication response after all. He made comments indicating that he may have given some attention to parts of it in pars 21 and 25 of his reasons. He made general comments, possibly suggesting that he had considered the whole of it, in pars 12 and 22 of his reasons. It is necessary to consider his comments in those paragraphs, and the context of those comments.
In pars 16-20 of his reasons, the adjudicator considered the adequacy of the builder's payment claim, and reached a conclusion to the effect that it was adequate. In par 21, he added this comment:
"21In any case, even if I was to consider the submissions made in the Adjudication Response, the Respondents had the opportunity to refute the correctness of the supporting dockets/receipts that were included in the Adjudication Application (albeit missing from the Payment Claim) in so far as they support the values being claimed. The Respondents failed to do so."
In pars 23-25 of his reasons, the adjudicator considered the question of whether the payment schedule included in the adjudication application differed from the payment schedule served on the proprietors on 3 February 2014. In par 25 of his reasons, he said this:
"25It has been observed that the Payment Schedule that is included in the Adjudication Application is not exactly the same as the Payment Schedule that is included by the Respondents in the Adjudication Response (albeit issued out of time). In any case, given that the Payment Schedule included in the Adjudication Application has been signed by the Respondents, I accept this to be the correct version."
In par 12 of his reasons, quoted above, the adjudicator said that the adjudication response did not, in his view, "add any weight to the determination made". In par 32 of his reasons, he made a similar, though lengthier, comment. He said this:
"32In making the Adjudication Determination I have carefully considered the issues raised in the Claimant's Adjudication Application. Although I have determined that the Adjudication Response was received out of time, even if I was to consider it I find that the Adjudication Response added no weight to my determination to the extent permitted by s 23(4) of the Act and while maintaining procedural fairness so as not to prejudice the Claimant. If I have not mentioned a submission or a document, it is not because I have not had regard to it. It is because I do not consider that the submission or the document assists me in determining the amount of the progress payment."
In pars 12 and 32, the adjudicator did not choose his words well. When he said in par 12 that the adjudication response did not "add any weight to the determination made", I take him to have meant that it would not have made a difference to his determination. In par 32 he referred to s 23(4), which provides that a person in the position of the proprietors in this case "must not include in an adjudication response reasons for withholding payment, unless those reasons have already been included in the payment schedule provided to the claimant". When the adjudicator said that "the Adjudication Response added no weight to [his] determination to the extent permitted by s 23(4) of the Act", I take him to have meant that the adjudication response added no weight to the payment schedule submitted by the proprietors. The added words, "and while maintaining procedural fairness so as not to prejudice the Claimant", do not seem to have any meaning at all. They do not appear to have any sort of grammatical relationship to the rest of the sentence to which they have been added.
There is an inconsistency between the final sentence of par 11 of the reasons, in which the adjudicator said that the adjudication response "will not be considered in making this determination", and the latter part of par 32, in which he said that if he had not mentioned a submission, that was not because he had not had regard to it, but because he did not consider that it assisted him. As the comments in par 32 were general comments, and those in par 11 related specifically to the adjudication response, it is reasonable to infer that the comments in the latter part of par 32 were not intended to relate to submissions in the adjudication response.
It is by no means unknown for adjudicators to use general statements, like those at the end of par 32, in the hope of avoiding allegations that they have failed to consider matters that they were obliged to consider. The use of such statements has been deprecated in a case in New South Wales.
In Shell Refining (Australia) Pty Limited v A J Mayr Engineering Pty Limited [2006] NSWSC 94, an adjudicator included the following on the first page of his determination:
"I have considered all the material. The fact that I do not specifically refer to any submission or document must not be taken as any indication that I have not considered it. The reason why I have not specifically referred to any submission or document is that I have not considered it of sufficient relevance to warrant specific comment."
In that case at [27], Bergin J said the following in relation to that passage:
"It is perhaps understandable that some adjudicators whose determinations have been the subject of administrative law challenge may regard it as appropriate to utilise a catch-all statement, similar to the one used in the Determination, to fend off an allegation that they have failed to consider a relevant matter. Notwithstanding the somewhat pressure cooker environment in which adjudicators provide their determinations, it seems to me that it would be unhelpful for adjudicators to develop such a practice. It is assumed that adjudicators will comply with their statutory duties under s 22(2) of the Act [the equivalent of Tasmania's s 25(2)], which sets out the matters to which they are to give consideration. A consideration of whether they have so complied is made from the content of their determinations rather than from a statement or claim by the adjudicator in the determination that he/she has so complied. I am not persuaded that the defendant is able to obtain any assistance or support for its submissions from this statement by the adjudicator on the first page of the Determination."
In Clyde Bergemann v Varley Power [2011] NSWSC 1039, McDougall J considered an adjudicator's statutory obligations to consider certain matters, and to give reasons. At [66]-[67] his Honour said:
"As s 22(3)(b) [the equivalent of Tasmania's s 25(4)(b)] makes clear, the obligation to give reasons is, in substance, an obligation to state the basis of the determination that the adjudicator has made: compare Housing Commission of NSW v Tatmar Pastoral Co Pty Ltd (1983) 3 NSWLR 378 at 386 (Mahoney JA). 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: in particular, the extremely compressed time (ten business days following acceptance of the nomination, unless the parties agree to extend time - see s 21(3) [the equivalent of Tasmania's s 24(1)]) and the obvious statutory intent that valid payment claims should be paid as quickly as possible. Indeed, s 21(3) recognises this, because it sets an outer time limit; the primary obligation on adjudicators 'is to determine an adjudication application as expeditiously as possible'.
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."
In the light of those two cases, the comments of the adjudicator in pars 12 and 32 of his reasons should not be treated as indications that he gave the adjudication response document proper consideration.
The adjudication response comprised a little over 17 pages of text and 99 pages of annexures. The annexures included two reports, each four pages long, by a builder whom the proprietors had engaged as an expert in relation to their dispute with the builder. The adjudicator's reasons are a little over seven pages in length. Except for the comments in pars 21 and 25, quoted above, he appears to have ignored the adjudication response. In those paragraphs he addressed two points that were covered in the adjudication response, but there were many more points that he plainly did not consider.
The adjudicator was required by s 25(2)(d) to consider the adjudication response. Because of an error of law as to the time limit for the adjudication response, he decided not to consider it. In fact he went on to consider two aspects of it, but he did not give it consideration to the extent required by the Act. For the reasons stated earlier, his failure to give that document proper consideration amounted to a failure to observe an applicable requirement of procedural fairness, entitling the proprietors to relief in the nature of certiorari.
The payment claim issue
As I have said, the proprietors contended that the emails sent to them by the builder on 3 January 2014 did not amount to a valid payment claim for the purposes of the Act. They relied on s 17(2)(d) of the Act, which provides:
"(2) A payment claim must —
…
(d) identify the building work or construction work, or building or construction-related goods and services, to which the progress payment relates, in sufficient detail to enable the person on whom it is served to assess the claim ...".
The proprietors contended that the emails in question did not identify the building work to which the claimed progress payment related in sufficient detail to enable them to assess that claim. They contended that, as a result, there was no valid payment claim made on 3 January, none of the steps taken in reliance on the Act in respect of the alleged payment claim were valid, and the adjudicator's determination was a nullity.
Those contentions raised a question of law as to whether, and in what circumstances, an adjudication determination can be quashed on the basis that a payment claim was a nullity. In Skilltech Consulting Services Pty Ltd v Bold Vision Pty Ltd (above), at [47] and [87], I took the view that, on the facts of that case, it was for the adjudicator, not the Court, to decide whether the payment claim was valid, and that the adjudicator in that case had been correct in holding a payment claim to be valid. There are some cases in which it has been suggested that a judge can hold a payment claim to be a nullity for the purposes of the Act, at least when the payment claim is defective on its face: Gantley Pty Ltd v Phoenix International Group Pty Ltd [2010] VSC 106 at [130]; Nepean Engineering Pty Ltd v Total Process Services Pty Ltd (2005) 64 NSWLR 462; Brookhollow Pty Ltd v R and r Consultants Pty Ltd [2006] NSWSC 1.
The documents relied upon as a payment claim comprised 19 pages. Without information that is not to be found in those 19 pages, it would be impossible to assess the reasonableness of the sums claimed therein. It may well be that the information available to the proprietors when they received those 19 pages was insufficient for them to make the assessment contemplated by s 17(2)(d). It may be that, if that was the situation, it was open to me to conclude that there was no valid payment claim, and that the adjudication determination was therefore a nullity. However, because I had concluded that it was a nullity as a result of the adjudicator's denial of procedural fairness resulting from him almost totally ignoring the adjudication response, I did not think it necessary to reach a conclusion in relation to the payment claim issue.
Conclusion
It was solely on the basis of the adjudicator's denial of procedural fairness in relation to the adjudication response that I decided to quash his determination.
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