Raw Build v JBK Industries (No 3)

[2017] VSC 766

IN THE SUPREME COURT OF VICTORIA Not Restricted

AT MELBOURNE

COMMERCIAL COURT

TECHNOLOGY ENGINEERING AND CONSTRUCTION LIST

S ECI 2015 000374

RAW BUILD PTY LTD (ACN 159 255 142)	Plaintiff
v
JBK INDUSTRIES PTY LTD (ACN 106 713 115)	First Defendant
and
RICHARD HAPGOOD (IN HIS CAPACITY AS ADJUDICATOR IN AN ADJUDICATION UNDER THE BUILDING AND CONSTRUCTION INDUSTRY SECURITY OF PAYMENT ACT 2002 (VIC))	Second Defendant

---

JUDGE:	VICKERY J
WHERE HELD:	Melbourne
DATE OF HEARING:	7 February 2017
DATE OF JUDGMENT:	7 February 2017
CASE MAY BE CITED AS:	Raw Build v JBK Industries & Anor (No 3)
MEDIUM NEUTRAL CITATION:	[2017] VSC 766

---

BUILDING AND CONSTRUCTION – Building and Construction Industry Security of Payment Act 2002 (Vic) – Application for judicial review of a determination of an adjudicator – Application for writ of certiorari to quash a decision of an adjudicator – Jurisdictional error – Calculation of due date for payment of a progress payment – Application of s 12(1) of the Building and Construction Industry Security of Payment Act 2002 (Vic).

ADMINISTRATIVE LAW – Judicial review – Determination of an adjudicator appointed under the Building and Construction Industry Security of Payment Act 2002 (Vic) - Whether certiorari should be granted to quash the decision.

---

APPEARANCES:	Counsel	Solicitors
For the Plaintiff	Mr D Cain	Kliger Partners
For the First Defendant	Mr A McKellar	Macpherson Kelley Lawyers

HIS HONOUR:

1. This proceeding arises under the Building and Construction Industry Security of Payment Act 2002 (Vic) (‘the Act’).

1. By originating motion dated 25 October 2015, the Plaintiff, Raw Build Pty Ltd (formerly known as Cubic Constructions Pty Ltd) (‘Raw Build’), seeks, amongst other things, firstly, an order by way of certiorari to quash the adjudication determination of the Second Defendant (‘the Adjudicator’), dated 16 October 2015 (‘the Adjudication Determination’), which is the second adjudication determination in this proceeding, and secondly, a declaration that the Adjudication Determination is unlawful and void.

Background

1. The background to this proceeding was outlined in Raw Build Pty Ltd v JBK Industries Pty Ltd.[1]

   [1][2016] VSC 547.

1. By way of summary, Raw Build is a commercial and residential construction contractor. It was engaged as head contractor in the construction of a multi-storey residential development located at 486 Victoria Street, Richmond in the State of Victoria. 

1. On or about 26 March 2014, Raw Build entered into a contract with the First Defendant in this proceeding, JBK Industries Pty Ltd (‘JBK’). Pursuant to this sub-contract, JBK was to undertake the mechanical works and services package for the project. The sub-contract sum was $130,000 plus GST. 

1. On 25 July 2015, JBK issued a payment claim under the Act.

1. Raw Build did not provide a payment schedule under the Act in response to that payment claim.

1. On 22 September 2015 JBK served a notice of its intention to proceed to adjudication purportedly pursuant to s 18(2) of the Act.

1. Raw Build did not provide a payment schedule under the Act in response to the purported s 18(2) notice.

1. On 30 September 2015, JBK lodged an adjudication application with Rialto Adjudications Pty Ltd for an adjudication determination in relation to the payment claim.  The Adjudicator, Mr Richard Hapgood, the Second Defendant in this proceeding, accepted the nomination and undertook the adjudication.

1. On 16 October 2015, the Adjudicator delivered his Adjudication Determination. The adjudication determination determined that JBK was entitled to be paid by way of an interim payment under the Act, the sum of $81,415 including GST and Adjudicator's fees.

The Separate Question

1. The separate question for hearing ordered by the court pursuant to Rule 47.04 of the Supreme Court General Civil Procedure Rules 2015 is:

a.   Was it open to the adjudicator to find that the due date for payment of the payment claim was 14 September 2015 and if not, should the adjudication determination be set aside?

1. The answer to this question will turn principally upon the proper construction of the relevant terms of the sub-contract.  The relevant terms for present purposes are as follows: 

(a)   As set out in the Reference Schedule to the sub-contract at 10.1A, the date for commencement of the contract was 22 July 2014;

(b)  Under clause 12.1 of the Reference Schedule, the claim date, that is the date for submission for payment claims is defined to be 25th, that is the 25th of each month for work done up to that date, except in respect to December, which shall be the 15th of the month. 

(c)   Under 12.2 of the Reference Schedule a reference to payment date, is defined as follows–

Subject to the sub-contract satisfying its obligations under the sub-contract, [Raw Build] will pay the amount shown in the payment schedule within 45 days of the following month in which the claim date for the relevant claim fell.

(d)  Then follows in the body of the sub-contract clause 12.1 ‘Claims for Payment’.  For present purposes sub-paragraph 12.1(a) provides:

If the sub-contractor wishes to make a claim on a claim date and within the time prescribed by clause 15.2(a), the sub-contractor may deliver to [Raw Build] claims for payment.

That is defined as the ‘Payment Claim’.

(e)   Under clause 12.1(b), the following is provided:

The sub-contractor agrees with Raw Build that the claim date and the date determined in accordance with clause 15.2(a) are, for the purposes of the SOP Act, the reference date.

The ‘SOP Act’ is a reference to the Act.

(f)    Under clause 12.2, provision is made for certification, payment schedules and payment. 

(g)  Under clause 12.4(a) the following is provided:

Within ten business days after the receipt of a payment claim, including the final statement made under clause 15.2(a), Raw Build may assess the claim and may issue to the sub-contractor a payment schedule.

That is, in lower case identified in the ‘Payment Claim’, in upper case, for the first capital letters, to which the payment schedule relates (Payment Schedule), which Payment Schedule sets out and then follows a regime, which is defined in clause 12.4(a).

(h)  Under clause 12.4(b) the sub-contractor agrees that the amount referred to in the Payment Schedule in respect of clause 12.4(a) above is for the purposes of the SOP Act, the amount of the progress payment as defined by the SOP Act, calculated in accordance with the terms of this sub-contract, which the sub-contractor is entitled to, in respect of the sub-contract.

1. Central to the determination of the issue before the Court is the proper construction of the Reference Schedule cl 12.1 relating to the payment date in its contractual context.

1. Clause 12.4 is critical. It provides for Raw Build to issue a ‘payment schedule’, (note specified in the lower case), which is defined as ‘Payment Schedule’ (upper case for first letters and in bold). The provisions in clause 12.4 which follow set out the contractual contents for the payment schedule which are consistent with that provided for a Payment Schedule under s 15 of the Act, together with some further requirements there specified.

The submissions of the First Defendant

1. It is common ground that a Payment Schedule was not provided either under the sub-contract provision, cl 12.4, or under the Act pursuant to its s 15. The submissions of the JBK were, in essence, that–

(a) in the circumstances, the provisions of s 15(4) of the Act were clearly within the contemplation of the parties at the time of execution of the contract;

(b) S 15(4) of the Act provides that, if a respondent does not provide a payment schedule in response to a payment claim, the respondent becomes liable to pay the claimed amount to the claimant on the due date to which the payment claim relates;

(c)   the payment terms adopt the expression ‘The payment schedule’ (noted in lower case);

(d)  the payment terms could readily have been confined by using precise words such as ‘a payment schedule issued pursuant to clause 12.4 of the sub-contract’;

(e)   precise terms are not used and the meaning of the ‘Payment Schedule’ is equivocal; and

(f) in the absence of a payment schedule, it was open to the adjudicator to find that the intent of the parties disclosed by the payment terms was that the Plaintiff became liable to pay the First Defendant the amount claimed or the amount the Plaintiff was deemed by the Act to have scheduled, within 45 days of the following month, on which date the claim date for the relevant claim fell due, or 14 September 2015.

1. In support of its submissions, JBK further contended that, if the position were otherwise, in effect, two payment date regimes are provided by the sub-contract, depending upon whether or not Raw Build provided a payment schedule. If it did provide a payment schedule, the 45 day period applied. On the other hand, if it did not, the default position under s 12(1)(b) of the Act would apply, which provides that if the contract makes no express provision, it is the date occurring ten business days after the payment claim is made.

1. This, it was contended, made no commercial sense. 

Analysis

1. In this case, it is common ground that the payment claim was served on 25 July 2015 and ten days later was 8 August 2015, which, on the Plaintiff's case was the due date for payment. 

1. On these facts, it was not open to the Adjudicator to find that the due date for payment was 14 September 2015.  The Adjudicator however, found that the due date for payment was in fact 14 September 2014. In paragraph [74] of the Adjudication Determination the Adjudicator said:

The Subcontract in the Reference Schedule at Payment Date states that in that payment will be made "within 45 days of the following month in which the Claim Date for the relevant claim fell".

1. The Adjudicator continued at [75]:

In accordance with this term, I determine that the Due Date for Payment is 14 September 2015.

1. However, I am satisfied that the Adjudicator fell into error in making these findings.

1. The Adjudicator, regrettably, ignored the qualifying language contained in the relevant clause of the sub-contract, namely that Raw Build will pay the amount shown in the payment schedule within 45 days of the following month, in which the claim date for the relevant claim fell due.

1. I find that the Subcontract made no express provision for the situation where no payment schedule was provided, which was the case here. The default position under s 12(1)(b) therefore applied. It is to be noted that, in my view, the claim date relevant to the payment claim in issue in this case for the purposes of the Act was defined by cl 12.1(b) of the sub-contract to be the reference date for the purposes of the Act. Therefore, properly construed, clauses 12.1 and 12.2 of the Reference Schedule in the sub-contract, in so far as they define ‘Claim date’ and ‘Payment date’ respectively, seek to invoke the Act and make reference to it.

1. The reference to a payment schedule in cl 12.2 is to be fairly construed as a payment schedule made under s 15 of the Act.

1. By way of summary, it is common ground that no such payment schedule under the Act or indeed under the contract, was provided. This generated a contractual lacuna and there was no express provision in the sub-contract to fill the gap. It is not open to properly construe the contract to find an express provision which has the effect of removing the operation of s 12(1)(b) of the Act. The default provision is therefore to the filled by s 12(1)(b) of the Act in this case.

1. In these circumstances, the Adjudication Determination must be set aside. The error made by the Adjudicator went directly to his jurisdiction, namely the purported notice issued by JBK under s 18(2) of the Act dated 22 September 2015 and the adjudication application made by JBK on 3 September 2015 under s 18(1)(b) of the Act. This arises because, pursuant to s 18(2) of the Act, an adjudication application to which s 18(1)(b)of the Act applies cannot be made unless the claimant has notified the respondent within ten business days immediately following the due date for payment of the claimant's intention to apply for an adjudication of the payment claim.

1. Second, s 18(2) of the Act is framed in mandatory terms and an adjudication application cannot be made unless the requisite notice under s 18(2)(a) is given within the period of ten days immediately following the due date for payment.

1. This is clear from the authorities I have been taken to, in particular the decision of the New South Wales Court of Appeal in Chase Oyster Bar v Hamo,[2] particularly the judgment of McDougall J at paragraph [222], the judgment of this Court in Sugar Australia Pty Ltd v Southern Ocean Pty Ltd,[3] and the judgment of the Court of Appeal of this State in Saville v Hallmarc Construction,[4] and which are to be followed.

   [2][2010] NSWCA 190.

   [3][2013] VSC 535.

   [4][2015] VSCA 318.

Conclusion and orders

1. The result is that the adjudication determination must be set aside, there being no discretionary considerations which may properly apply to find otherwise.

1. Accordingly, an order in the nature of certiorari will be made to quash the Adjudication Determination of the Second Defendant dated 16 October 2015 and it must follow that the Plaintiff's costs of this proceeding will be paid by the First Defendant on a standard basis. 

---