Tagara Builders P/L v AP & L Services P/L
[2015] SASC 30
•27 February 2015
SUPREME COURT OF SOUTH AUSTRALIA
(Civil: Application for Judicial Review)
TAGARA BUILDERS P/L v AP & L SERVICES P/L & ORS
[2015] SASC 30
Judgment of The Honourable Justice Blue
27 February 2015
ADMINISTRATIVE LAW - JUDICIAL REVIEW - GROUNDS OF REVIEW - JURISDICTIONAL MATTERS
CONTRACTS - BUILDING, ENGINEERING AND RELATED CONTRACTS - REMUNERATION - STATUTORY REGULATION OF ENTITLEMENT TO AND RECOVERY OF PROGRESS PAYMENTS - ADJUDICATION OF PAYMENT CLAIMS
STATUTES - ACTS OF PARLIAMENT - STATUTORY POWERS AND DUTIES - CONSTRUCTION - CONFERRAL AND EXTENT OF POWER
Action for judicial review.
The plaintiff, Tagara Builders, entered into a contract with the first defendant, AP & L Services, for AP & L to supply and install ceilings and linings. Unbeknown to Tagara, AP & L did not hold a contractors licence in contravention of section 6 of the Building Work Contractors Act 1995 (SA). Section 6(2) disentitles an unlicensed contractor to any fee, other consideration or compensation under or in relation to a contract unless a court is satisfied that the contractor’s failure to be so authorised resulted from inadvertence only.
AP & L lodged monthly progress claims with Tagara. It sought adjudication under the Building and Construction Industry Security of Payment Act 2009 (SA) of its August and September 2014 progress claims. An adjudicator determined that it was entitled to payment of $42,963.79 in respect of the August progress claim. An adjudicator was appointed to adjudicate the September 2014 progress claim.
Upon learning that AP & L did not hold a contractor’s licence, Tagara instituted the action seeking an order quashing the adjudication of the August 2014 progress claim and prohibiting the consideration and determination of the September 2014 progress claim on the ground that the adjudicators did not have jurisdiction because the Building Work Contractors Act disentitled AP & L to the consideration under the contract.
Held:
1. An adjudicator does not have jurisdiction under the Building and Construction Industry Security of Payment Act if the claimant is disentitled to the consideration under the contract by section 6 of the Building Work Contractors Act (at [34], [35], and [51]).
2. Orders made quashing the adjudication determination in respect of the August 2014 progress claim and prohibiting further consideration or determination of the September 2014 progress claim (at [52]).
Building and Construction Industry Security of Payment Act 2009 (SA) s 3, s 4, s 7, s 8, s 9, s 10, s 11, s 12, s 13, s 17, s 22; Building and Construction Industry Security of Payment Act 1999 (NSW); Building and Construction Industry Payments Act 2004 (Qld) s 17, s 18, s 19; Builders Licensing Act 1986 (SA) s 39; Building Work Contractors Act 1995 (SA) s 6; Fast Track Rules 2014 (SA); Home Building Act 1989 (NSW) s 10, s 94; Queensland Building Services Authority Act 1991 (Qld) s 42, referred to.
Brodyn Pty Ltd v Davenport [2003] NSWSC 1019; Lamprell v The Guardians of the Poor of the Billericay Union, in the County of Essex [1849] EngR 216; (1849) 154 ER 850; 3 Exch 283; Re Sanders Constructions Pty Ltd and Eric Newham (Wallerawang) Pty Ltd [1969] Qd R 29, applied.
Brodyn Pty Ltd v Davenport [2004] NSWCA 394; (2006) 61 NSWLR 421, distinguished.
Chase Oyster Bar Pty Ltd v Hamo Industries Pty Ltd [2010] NSWCA 190; (2010) 78 NSWLR 393; Cant Contracting Pty Ltd v Casella [2006] QCA 538; [2007] 2 Qd R 13; Nunkuwarrin Yunti v A L Seeley Constructions Pty Ltd (1998) 72 SASR 21; Tea Tree Gully Builders Co Pty Ltd v Martin (1992) 59 SASR 344; Zullo Enterprises Pty Ltd v Sutton [1998] QCA 417; [2000] 2 Qd R 196, discussed.
TAGARA BUILDERS P/L v AP & L SERVICES P/L & ORS
[2015] SASC 30Civil
BLUE J.
This in an action for judicial review. It is the first action in this Court to proceed in the Fast Track Stream.[1]
[1] Under the Fast Track Rules 2014 (SA).
The plaintiff Tagara Builders Pty Ltd (Tagara) seeks orders in the nature of certiorari quashing an adjudication determination in favour of the first defendant AP & L Services Pty Ltd (APL) and prohibition in respect of a second application by APL for an adjudication determination under the Building and Construction Industry Security of Payment Act 2009 (SA) (the Act).
The application is made on the ground that APL does not and did not hold a building work contractors licence (a contractors licence) and was not entitled to a fee or other consideration under section 6 of the Building Work Contractors Act 1995 (SA) (the Contractors Act) and by reason thereof the adjudicator did not have jurisdiction under the Act.
The issues for consideration are:
1Does the jurisdiction of an adjudicator under the Act depend on there being in existence a contract in respect of which the claimant is not disentitled to the consideration by other legislation?
2Does the Contractors Act so disentitle APL?
Background
In March 2014, Tagara and APL entered into a subcontract (the Contract) for APL to supply and install ceilings and linings for a two storey Specialist Learning Centre at Noarlunga Downs for $355,000.
The Contract provided for progress claims to be submitted on the 26th day of each month. APL served monthly progress claims in the form of payment claims under section 13 of the Act.
APL was dissatisfied with Tagara’s payment schedule served in response to its August 2014 progress claim and applied for adjudication under section 17 of the Act (the First Adjudication). The second defendant Tony Covino was appointed adjudicator by the fourth defendant The Institute of Arbitrators and Mediators Australia (IAMA). On 3 December 2014, Mr Covino determined under section 22 of the Act that the amount payable by Tagara in respect of the August progress claim was $42,963.79 plus GST (the Determination).
APL was dissatisfied with Tagara’s payment schedule served in response to its September 2014 progress claim and applied for adjudication (the Second Adjudication). On 10 December 2014, the third defendant Colin Fullerton was appointed adjudicator by IAMA.
On 11 December 2014, Tagara learnt that APL did not hold a contractors licence.
On 15 December 2014, Tagara instituted this action seeking to quash the Determination and prohibition in respect of the Second Adjudication.
The sole director of APL, Trudi Hotstone, held a contractors licence at all material times, but it was subject to conditions that the value of any contract was not to exceed $280,000 and building work was not to exceed one storey. The supervisor employed by APL, Alan Schnaars, was registered as a building work supervisor, but as a supervisor for Ms Hotstone and not APL. APL accepts that, unless and until a court makes a determination under section 6(2)(b) of the Contractors Act that it is satisfied that APL's failure to be authorised resulted from inadvertence only (excusal), section 6(2) provides that APL is not entitled to any fee or other consideration under the Contract. However, APL contends that this does not deprive an adjudicator of jurisdiction under the Act and, upon the point being raised during an adjudication, an adjudicator is required to note the point but proceed to make an adjudication on the merits without further regard to the point.
On its part, Tagara accepts that section 6(2) of the Contractors Act does not preclude APL bringing an action for restitution notwithstanding that APL does not hold a contractors licence, but contends that the Contract as such is unenforceable by APL and this deprives an adjudicator of jurisdiction under the Act.
APL contends that its failure to be licensed was inadvertent within the meaning of the Act. Tagara takes issue with this contention. It is agreed that I am to determine this action on the basis that no finding is made one way or the other on this question and that a court has not made a determination under section 6(2)(b) of the Contractors Act.
Mr Covino, Mr Fullerton and IAMA have taken no active part in the action and agree to abide the event. It is accepted that at the relevant times they were not aware, and there was no reason for them to be aware, that APL did not hold a contractors licence. They have only been joined as defendants to the action because the nature of the relief sought by Tagara renders them necessary parties and the other parties agree not to seek costs against them regardless of the event.
The legislation
Sections 3, 4, 7, 8, 13, 17 and 22 of the Act relevantly provide:
3—Object of Act
(1) The object of this Act is to ensure that a person who undertakes to carry out construction work (or who undertakes to supply related goods and services) under a construction contract is entitled to receive, and is able to recover, progress payments in relation to the carrying out of that work and the supplying of those goods and services.
(2) The means by which this Act ensures that a person is entitled to receive a progress payment is by granting a statutory entitlement to such a payment regardless of whether the relevant construction contract makes provision for progress payments.
(3) The means by which this Act ensures that a person is able to recover a progress payment is by establishing a procedure that involves—
(a)the making of a payment claim by the person claiming payment; and
(b)the provision of a payment schedule by the person by whom the payment is payable; and
(c)the referral of any disputed claim to an adjudicator for determination; and
(d)the payment of the progress payment so determined.
(4) It is intended that this Act does not limit—
(a)any other entitlement that a claimant may have under a construction contract; or
(b)any other remedy that a claimant may have for recovering any such other entitlement.
4—Interpretation
In this Act, unless the contrary intention appears—
…
construction contract means a contract or other arrangement under which 1 party undertakes to carry out construction work, or to supply related goods and services, for another party;
…
reference date, in relation to a construction contract, means—
(a) a date determined by or in accordance with the terms of the contract as the date on which a claim for a progress payment may be made in relation to work carried out or undertaken to be carried out (or related goods and services supplied or undertaken to be supplied) under the contract; or
(b) if the contract makes no express provision with respect to the matter—the last day of the named month in which the construction work was first carried out (or the related goods and services were first supplied) under the contract and the last day of each subsequent named month;
…
7—Application of Act
(1) Subject to this section, this Act applies to any construction contract, whether written or oral, or partly written and partly oral, and so applies even if the contract is expressed to be governed by the law of a jurisdiction other than South Australia.
…
8—Rights to progress payments
On and from each reference date under a construction contract, a person—
(a) who has undertaken to carry out construction work under the contract; or
(b) who has undertaken to supply related goods and services under the contract,
is entitled to a progress payment.
13—Payment claims
(1) A person referred to in section 8 who is or who claims to be entitled to a progress payment (the claimant) may serve a payment claim on the person who, under the contract concerned, is or may be liable to make the payment.
…
17—Adjudication applications
(1) A claimant may apply for adjudication of a payment claim (an adjudication application) if—
(a)the respondent provides a payment schedule under Division 1 but—
(i)the scheduled amount indicated in the payment schedule is less than the claimed amount indicated in the payment claim; or
(ii)the respondent fails to pay the whole or a part of the scheduled amount to the claimant by the due date for payment of the amount; or
(b)the respondent fails to provide a payment schedule to the claimant under Division 1 and fails to pay the whole or a part of the claimed amount by the due date for payment of the amount.
(2) An adjudication application to which subsection (1)(b) applies cannot be made unless—
(a)the claimant has notified the respondent, within the period of 20 business days immediately following the due date for payment, of the claimant's intention to apply for adjudication of the payment claim; and
(b)the respondent has been given an opportunity to provide a payment schedule to the claimant within 5 business days after receiving the claimant's notice.
…
22—Adjudicator's determination
(1) An adjudicator is to determine—
(a)the amount of the progress payment (if any) to be paid by the respondent to the claimant (the adjudicated amount); and
(b)the date on which any such amount became or becomes payable; and
(c)the rate of interest payable on any such amount.
(2) In determining an adjudication application, the adjudicator is to consider the following matters only:
(a)the provisions of this Act;
(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 duly made by the claimant in support of the claim;
(d)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;
(e)the results of any inspection carried out by the adjudicator of any matter to which the claim relates.
Section 6 of the Contractors Act provides:
6—Obligation of building work contractors to be licensed
(1) A person must not—
(a)carry on business as a building work contractor except as authorised by a licence under this Part; or
(b)advertise or otherwise hold himself or herself out as being entitled to carry on business as a building work contractor unless authorised to carry on business as such a contractor by a licence under this Part.
(2) A person required by this Act to be licensed as a building work contractor is not entitled to any fee, other consideration or compensation under or in relation to a contract with another on whose behalf the person performed work as a building work contractor unless—
(a)the person was authorised to perform the work under a licence; or
(b)a court hearing proceedings for recovery of the fee, other consideration or compensation is satisfied that the person's failure to be so authorised resulted from inadvertence only.
Contentions of the parties
Tagara contends that the rights of a claimant to progress payments under section 8, to serve payment claims under section 13 and to apply for adjudication of payment claims under section 17 of the Act are contingent upon the existence of a contract enforceable against the principal. Tagara contends that the jurisdiction of an adjudicator under sections 17 and 22 of the Act is therefore contingent upon the existence of a contract enforceable against it.
APL accepts that a claimant’s rights under sections 8, 13 and 17 of the Act are contingent upon the existence of a contract but denies that the mere fact that the contractor does not hold a contractors licence detracts from those rights. APL contends that an adjudicator has jurisdiction provided that a contract exists regardless of whether it may be enforceable by the contractor in a court or whether the contractor’s entitlement to enforce the contract in a court is contingent upon the court’s satisfaction that the contractor’s failure to be licensed resulted from inadvertence only.
APL accepts that an adjudicator does not have jurisdiction under section 6(2)(b) of the Contractors Act to excuse a contractor’s failure to be licensed or to determine whether such failure resulted from inadvertence only. APL contends that, if the failure of the contractor to be licensed is brought to the attention of an adjudicator, the adjudicator is to proceed to make a determination under section 22 of the Act ignoring the fact that the contractor is not licensed. APL does not contend that the adjudicator in those circumstances is to make an assessment whether it is more likely than not that a court would excuse the failure to be licensed under section 6(2)(b) of the Contractors Act.
Preconditions of adjudicator’s jurisdiction
It is clearly established that the jurisdiction of an adjudicator under the Act is dependent on objective compliance with those requirements that, on the proper construction of the Act, are intended to be preconditions to a valid adjudication. In other words, it is a matter for the court and not the adjudicator to determine the existence of those requirements imposed by the Act that are preconditions to jurisdiction. If those requirements are objectively satisfied, the adjudicator then has power to determine the amount of the progress payment to be paid, date of payment and rate of interest thereon.
In Brodyn Pty Ltd v Davenport,[2] Hodgson JA (with whom Mason P and Giles JA agreed) said of the Building and Construction Industry Security of Payment Act 1999 (NSW) which is in materially the same terms:
However, it is plain in my opinion that for a document purporting to an adjudicator’s determination to have the strong legal effect provided by the Act, it must satisfy whatever are the conditions laid down by the Act as essential for there to be such a determination. If it does not, the purported determination will not in truth be an adjudicator’s determination within the meaning of the Act: it will be void and not merely voidable. A court of competent jurisdiction could in those circumstances grant relief by way of declaration or injunction, without the need to quash the determination by means of an order the nature of certiorari. What then are the conditions laid down for the existence of an adjudicator’s determination? The basic and essential requirements appear to include the following:
1.The existence of a construction contract between the claimant and the respondent, to which the Act applies (s 7 and s 8).
2.The service by the claimant on the respondent of a payment claim (s 13).
3.The making of an adjudication application by the claimant to an authorised nominating authority (s.17).
4.The reference of the application to an eligible adjudicator, who accepts the application (s 18 and s 19).
5.The determination by the adjudicator of this application (s 19(2) and s 21(5)), by determining the amount of the progress payment, the date on which it becomes or became due and the rate of interest payable (s 22(1)) and the issue of a determination in writing (s 22(3)(a)).[3]
[2] [2004] NSWCA 394, (2006) 61 NSWLR 421.
[3] Ibid at [52]-[53].
Hodgson JA went on to say that the more detailed requirements contained in the Security of Payment Act were not necessarily preconditions to the adjudicator’s jurisdiction. Hodgson JA said that the question which requirements comprised preconditions was to be determined in accordance with the principles identified by the High Court in Project Blue Sky Inc v Australian Broadcasting Authority.[4]
[4] (1998) 194 CLR 355.
In Chase Oyster Bar Pty Ltd v Hamo Industries Pty Ltd,[5] the New South Wales Court of Appeal took a more expansive view of which requirements comprise preconditions to an adjudicator’s jurisdiction. In particular, it held that compliance with the time limit prescribed by section 17(2)(a) is a precondition to an adjudicator’s jurisdiction.
[5] [2010] NSWCA 190, (2010) 78 NSWLR 393 per Spigelman CJ, Basten JA and McDougall J.
Legislation disentitling contractor to contract price
It is clearly established, and common ground in this case, that an adjudicator has no jurisdiction under the Act unless there is in existence a construction contract between the parties. The parties make opposing contentions whether this includes or extends to a construction contract in respect of which legislation disentitles the contractor to payment of the contract price and in particular to a construction contract subject to section 6(2) of the Contractors Act.
The parties make opposing contentions on the construction and effect of the Contractors Act. Tagara contends that section 6(2) negates a contractual right of an unlicensed contractor to payment unless and until a court excuses the contravention on the grounds of inadvertence with the effect that there can be no entitlement to a progress payment for the purposes of the Act. APL contends that the contractual right to payment still exists when the contravention is inadvertent and the subsequent satisfaction of a court that it was inadvertent merely confirms the anterior position with the effect that the entitlement to a progress payment for the purposes of the Act is unimpaired.
I first address these issues as a matter of construction of the legislation from first principles before considering interstate authorities on interstate legislation.
I reject the contention of APL that there is a lacuna in the Act and that the disentitlement to payment under section 6(2) of the Contractors Act neither affects the adjudicator’s jurisdiction - a question to be determined by the court – nor is a matter to be determined by the adjudicator within the adjudicator’s jurisdiction. It is the evident intention of the Act that all matters bearing on the liability of the principal will either be preconditions to the adjudicator’s jurisdiction or will be determined by the adjudicator himself or herself.
At common law, a progress payment is regarded simply as a payment by the principal to the contractor on account of the final contract price.[6] A progress payment does not determine the ultimate rights of the parties, nor does it represent the final determination of the amount payable for work completed to date. The parties are at liberty to make contentions concerning the final contract price independently of progress claims and progress payments. Progress payments under the Act are treated in the same way in that they are merely payments on account of the final contract price.[7]
[6] Lamprell v The Guardians of the Poor of the Billericay Union, in the County of Essex [1849] EngR 216, (1849) 154 ER 850, 3 Exch 283 at 305 per Rolfe B; Re Sanders Constructions Pty Ltd and Eric Newham (Wallerawang) Pty Ltd [1969] Qd R 29 at 39 per Hoare J (Stable J agreeing).
[7] Building and Construction Industry Security of Payment Act 2009 (SA) ss 3 and 32 and definition of “progress payment” in s 4. See Brodyn Pty Ltd v Davenport [2003] NSWSC 1019 at [18] per Einstein J; Brodyn Pty Ltd v Davenport (2004) 61 NSWLR 421 at [51] per Hodgson JA (with whom Mason P and Giles JA agreed).
The Act does not address the ultimate contractual rights of the parties: they are left to be dealt with under the contract and the general law. The Act leaves it to the contract to determine the frequency, method of calculation and other terms determining entitlement to progress claims.[8] If the contract is silent on progress claims, the Act creates the entitlement.[9] If the contract is silent on the frequency, calculation or date for payment of progress claims, the Act supplies default provisions.[10]
[8] The Act does however outlaw “pay when paid” provisions in the contract: Building and Construction Industry Security of Payment Act 2009 (SA) s 12.
[9] Building and Construction Industry Security of Payment Act 2009 (SA) s 8.
[10] Building and Construction Industry Security of Payment Act 2009 (SA) ss 9-11.
The Act proceeds on the fundamental basis that the entitlement of the contractor to a progress claim is derivative of the contractor’s ultimate right to payment under the contract and the general law. If the contractor has no such ultimate right to payment, the contractor will have no right to payment of a progress claim. This will be either because the adjudicator has no jurisdiction – the prerequisite to jurisdiction being absent - or because the adjudicator will in those circumstances determine that no amount is payable. Thus, if section 6(2) of the Contractors Act operates to disentitle the contractor to a fee or other consideration, either the adjudicator has no jurisdiction or the adjudicator should determine that no amount is payable.
The Act applies to construction contracts[11] and a contractor’s right to progress payments under section 8 depends on the contractor having undertaken to carry out construction work under a construction contract. An adjudicator’s determination is confined by section 22(1) to determining the amount of, timing of, and interest on the progress payment due under the contract (taking into account, where necessary, the default provisions in the Act as to calculation and timing). An adjudicator is constrained by section 22(2) to considering limited matters only, namely the provisions of the Act and of the construction contract, the parties’ payment claim and responding payment schedule and submissions and any inspection. This is why it has been held that the existence of a contract is a precondition to jurisdiction of an adjudicator.
[11] Building and Construction Industry Security of Payment Act 2009 (SA) s 7 and definition in s 4 of “construction contract”.
If there is no contract in existence, the contractor will have no contractual entitlement to payment of a fee or other consideration. If there is a contract in existence, but other legislation disentitles the contractor to payment of the contract price, the contractor will likewise have no contractual entitlement to payment of a fee or other consideration. If the contractor has no ultimate entitlement to payment of the contract price, the contractor can have no entitlement to a progress payment under section 13. An adjudicator can have no jurisdiction to determine whether other legislation disentitles the contractor to payment of the contract price because that falls outside the matters to which the adjudicator can have regard under section 22(2).
Section 13 refers to a person “who is or who claims to be entitled to a progress payment”. The reference to “claim[ing] to be entitled” is necessary because the principal may well contend on the merits that the contractor has already been paid under previous progress payments for the work undertaken to date. The reference does not contemplate that there is no contract at all or that legislation precludes any entitlement of the contractor to payment of the contract price.
On its proper construction, section 6(2) of the Contractors Act negates what would otherwise be the contractual entitlement of an unlicensed contractor to any fee, other consideration or compensation under the contract. The subsection operates to deny to the contractor any right to recover the contract price or any portion thereof. It is a condition precedent to the ability of the contractor to recover the contract price that a court with jurisdiction first determines that it is satisfied that the contractor’s failure to hold the necessary licence was due merely to inadvertence.
The Act and section 6(2) of the Contractors Act operate in harmony. Unless and until a court determines that it is satisfied of the necessary inadvertence, the Contractors Act negates the contractor’s right to payment, the contractor has no entitlement to a progress payment under section 13 of the Act and an adjudicator has no jurisdiction under sections 17 and 22 of the Act.
I turn to consider whether this construction of the legislation is consistent with authority. In Brodyn Pty Ltd v Davenport,[12] one of the grounds of challenge to the adjudicator’s jurisdiction was that Dasein, the contractor, did not hold a licence under section 4 of the Home Building Act 1989 (NSW) to undertake specialist plumbing work. Section 10 of that Act provided that an unlicensed contractor:
[12] (2004) 61 NSWLR 421.
… is not entitled to damages or to enforce any other remedy in respect of a breach of the contract committed by any other party to the contract, and the contract is unenforceable by the person who contracted to do the work. …
By contrast, section 94(1) of that Act provided that an uninsured contractor:
(a)is not entitled to damages, or to enforce any other remedy in respect of a breach of the contract committed by any other party to the contract, in relation to that work, and
(b)is not entitled to recover money in respect of that work under any other right of action (including a quantum meruit).
Section 94(1A) provided that:
Despite section 92(2) and subsection (1), if a court or tribunal considers it just and equitable, the contractor, despite the absence of the required contract of insurance, is entitled to recover money in respect of that work on a quantum meruit basis.
The Court of Appeal assumed (apparently without deciding) that, if section 10 of the Home Building Act operated in a manner that precluded an entitlement to progress payments under the Security of Payment Act, the adjudicator’s determination would have been void.[13] However, the Court of Appeal held that section 10 of the Home Building Act did not preclude the entitlement of a contractor to progress payments. Hodgson JA (with whom Mason P and Giles JA agreed) said:
In my opinion, the civil consequences for an unlicensed contractor for its breach of s 4 are those set out in s 10, and not any wider deprivation of remedies. In my opinion this is confirmed by the different provisions of s 94, which explicitly precludes, in the event of breach of the insurance provisions, the obtaining of a quantum meruit unless a court considers it just and equitable. In my opinion, the remedy given by the Act is not of the nature of damages or any other remedy in respect of breach of contract nor is it enforcement of the contract: it is a statutory remedy, albeit one that in part makes reference to the terms of a contract, and thus it is not affected by s 10 of the Home Building Act.
Accordingly, in my opinion Dasein’s failure to have a licence could not be a ground on which the adjudicator’s determination could be considered void, or for otherwise giving relief in respect of the determination.[14]
[13] Ibid at [83].
[14] Ibid at [82]-[83].
In this passage, it appears that, because section 94 contained an express provision disentitling the contractor to payment for work performed, the Court read down the provision in section 10 providing that the contract was unenforceable by the contractor so as not to disentitle the contractor to payment of the contract price for work performed under the contract. Hence it followed that the contractor was not disentitled to progress payments on account of the contract price. If so, Brodyn Pty Ltd v Davenport[15] stands as authority on the proper construction of section 10 and has no wider application.
[15] (2004) 61 NSWLR 421.
While the passage might be read as construing section 10 such that it disentitled the contractor to ultimate payment of the contract price without disentitling the contractor to progress payments in the interim under the Security of Payment Act, this would be a surprising outcome and further would result in the decision being inconsistent with the later decision of the Queensland Court of Appeal in Cant Contracting Pty Ltd v Casella.[16]
[16] [2006] QCA 538, [2007] 2 Qd R 13.
In Cant Contracting Pty Ltd v Casella,[17] the Casellas obtained summary judgment under sections 18 and 19 of the Building and Construction Industry Payments Act 2004 (Qld) because Cant Contracting failed to serve a payment schedule in response to a payment claim under that Act. The Casellas did not hold a contractors licence under the Queensland Building Services Authority Act 1991 (Qld). Cant Contracting contended that the Casellas were not “entitled to a progress payment” within the meaning of section 17 of the Payments Act (the equivalent of section 13 of the Act) and accordingly were not entitled to judgment under sections 18 and 19. Section 42 of the Queensland Building Services Authority Act provided:
[17] Ibid.
(1)A person must not carry out, or undertake to carry out, building work unless the person holds a contractor’s licence of the appropriate class under this Act.
(2)…
(3)Subject to subsection (4), a person who carries out building work in contravention of this section is not entitled to any monetary or other consideration for doing so.
(4)A person is not stopped under subsection (3) from claiming a reasonable remuneration for carrying out building work, but only if the amount claimed-
(a) is not more than the amount paid by the person in supply materials and labour the carrying out the building work; and
(b) does not include allowance for any of the following –
(i)the supply of the person’s own labour;
(ii)the making of a profit by the person for carrying out the building work;
(iii)costs incurred by the person in supply materials and labour if, in the circumstances, the costs were not reasonably incurred; and
(c) is not more than any amount agreed to, or purportedly agreed to, as the price for carrying out the building work; and
(d) does not include any amount paid by the person that may fairly be characterised as being, in substance, an amount paid for the person’s own direct or indirect benefit.
The Queensland Court of Appeal upheld Cant Contracting’s contention. Williams JA (with whom Jerrard JA agreed) said:
… s. 10 of the Home Building Act only disentitles the unlicensed contractor to damages or other remedy in respect of a breach of contract committed by the principal, where s. 42(3) of the Building Act disentitles an unlicensed contractor to any monetary consideration for work done pursuant to the contract. Hodgson J.A. may well have been right in concluding that, under the legislation in question in Brodyn, a claim for a progress payment was not "enforcement of the contract"; but it is not necessary to consider that aspect further because of the different statutory provision in question here. The words "any monetary or other consideration" are of very wide import and must be given full effect.
It follows that the conclusion in Brodyn is of no assistance when considering the present appeal. …
…
Counsel for the respondent relied heavily on the reference in s. 17 of the Payment Act to a person "who is or claims to be entitled to a progress payment"; he submitted that in consequence a person could come within the section even though at the end of the day it was shown that his claim was unjustified. The inclusion of the expression "claims to be entitled" is intended, in my view, to meet the situation where a claim is made under the Payment Act in the face of an ongoing dispute between the parties as to such entitlement. But that does not meet the present situation where, given the provisions of the Building Act, the respondent has no legal entitlement to any monetary consideration for work done pursuant to the contract.[18]
[18] Ibid at [28]-[29], [31].
Jerrard JA added:
Assuming the New South Wales Court of Appeal is correct in Brodyn Pty Ltd v. Davenport as to the essential requirements for a valid adjudicator’s determination, and accepting that the 2004 Act has as its object ensuring that a person entitled to receive progress payments is able to recover them if the person undertakes to carry out construction work, the respondent plaintiff was not entitled in relation to the construction contract, under s .13, to an amount calculated on the basis of the value of the construction work the plaintiff had carried out. Section 42(3) of the 1991 Act prevented his being entitled. Mr O’Shea conceded the 1991 Act had the effect that the plaintiff was not entitled under s. 17 to a progress payment. In my opinion the plaintiff could not claim to be entitled to those payments. It pleaded an entitlement pursuant to s. 13 which it did not have, and pleaded that only after pleadings in this Court had raised the issue of its being unlicensed. If it was unlicensed, no investigation (prompt or slow) could advance its s. 13 claim to entitlement to a progress payment.[19]
McMurdo J (with whom Jerrard JA agreed) said:
… In Brodyn, the alleged entitlement to a progress payment was simply outside the terms of the statutory limitation upon recovery by unlicensed builders. In Queensland, that alleged entitlement is apparently within the terms of s. 42. The present question, for which Brodyn does not indicate an answer, is whether the Payments Act was intended to override the disentitlement to any payment resulting from s. 42.
…
In some cases, which the arguments agree is the case here, there could be a genuine question as to whether the builder is relevantly unlicensed. In particular, there could be questions of fact going to the classification of the work for the purposes of the licensing requirements, which cast doubt on whether the builder held the licence appropriate for the agreed work. But, that is not a matter which could be investigated by the adjudicator, who would be confined to a consideration of the matters listed in s. 26(2). Nor could the respondent to a payment claim, dispute the claim on that basis, within its “payment schedule” given under s. 18, because if this regime applies to unlicensed builders then the absence of a licence would have no relevance in the valuation of the progress claim.
In these ways, the operation of the Payments Act in the case of an unlicensed builder would lead to a result in at least many cases which is unjust, judged by the policy of the licensing provisions of the Building Act. The operation of this scheme by the overpayment of unlicensed builders pending a final reconciliation, is likely to have effects which cannot be cured by an order under s. 100. There is no sensible explanation for the Payments Act to have an operation of that kind.
The purpose of a scheme of progress payments is to permit a builder to be paid the agreed consideration for the works progressively, by a part payment which is commensurate with that part of the works performed to that point. This scheme for progress claims and their recovery is evidently unsuitable for the case of unregistered builders, because it operates from a premise of the builder’s entitlement being according to its contract. The long title of the Payments Act describes it as an “Act to imply terms in construction contracts …”. It is unlikely the Act was intended to benefit builders who cannot enforce the payment provisions of their contracts, especially when the making of such a contract involved an offence by the builder. Ultimately, it far from appears that the Payments Act was intended to override the disentitlement according to s. 42; the contrary appears. In my view, the Payments Act operates only when there is a construction contract of which the terms as to payment are enforceable by the builder. The respondent’s claim in these proceedings, even when given its new appearance as a purported progress claim, is precluded by s. 42 if the respondent did not hold the relevant licence. … [20]
[19] Ibid at [47].
[20] Ibid at [51], [59]-[62].
The provisions of section 6(2) of the Contractors Act are similar to the provisions of section 42(3) of the Queensland Building Services Authority Act. They both refer to the contractor being not entitled to consideration for undertaking the work. The Queensland provision refers to “monetary or other consideration” and the South Australian provision refers to “any fee, other consideration or compensation”. The Queensland provision refers to the consideration being for carrying out building work and the South Australian provision refers to the consideration being for the performance of building work. These are not material differences for present purposes.
The South Australian provision is confined to consideration “under or in relation to a contract” and thereby, Tagara accepts, does not extend to quantum meruit. The Queensland provision is not so confined and does extend to common law quantum meruit.[21] This is not a material difference for present purposes. Section 42(1) of the Queensland Building Services Authority Act prohibits an unlicensed contractor carrying out or undertaking to carry out building work and section 6(1) of the Contractors Act prohibits an unlicensed contractor carrying on business as a building work contractor. This is not a material difference given that part of carrying on business entails carrying out and undertaking to carry out building work.
[21] Although s 42(4) provides a statutory equivalent.
Both the South Australian and Queensland provisions are similar to section 94(1) of the New South Wales Security of Payment Act, which also provides that the contractor “is not entitled” to recover money in respect of the work performed.
The provisions of section 6(2) of the Contractors Act are different from the provisions of section 10 of the New South Wales Home Building Act. Section 10 of the Home Building Act is not expressed to preclude the entitlement of the contractor to recover money under the contract.
The construction of the Act and the Contractors Act that I articulated at [34] and [35] above is consistent with and supported by the decision of the Queensland Court of Appeal in Cant Contracting Pty Ltd v Casella.[22] If the decision of the New South Wales Court of Appeal in Brodyn Pty Ltd v Davenport[23] is to be understood as articulated at [38] above, that decision turned on the different wording of the Home Building Act and is not inconsistent with the construction that I have articulated at [34] and [35] above. On the other hand, if the decision in Brodyn Pty Ltd v Davenport[24] is to be understood as articulated at [39] above, it is inconsistent with the later decision of the Queensland Court of Appeal in Cant Contracting Pty Ltd v Casella[25] (particularly the judgment of McMurdo J with whom Jerrard JA agreed), which I follow in preference to the decision in Brodyn Pty Ltd v Davenport.[26]
[22] [2007] 2 Qd R 13.
[23] (2004) 61 NSWLR 421.
[24] Ibid.
[25] [2007] 2 Qd R 13.
[26] (2004) 61 NSWLR 421.
APL contends that the Contractors Act can be distinguished from the Queensland Building Services Authority Act because subsection 42(1) of the Queensland Act renders illegal contracts entered into by unlicensed contractors such that it had been held, before the enactment of subsection 42(4), that an action in quantum meruit was precluded; whereas the South Australian Act has not been so regarded.
In Nunkuwarrin Yunti v A L Seeley Constructions Pty Ltd,[27] the Full Court of this Court held that section 39 of the Builders Licensing Act 1986 (SA), the predecessor of section 6 of the Contractors Act, did not preclude an action in quantum meruit. Prior J (Olsen J agreeing) observed that the Act did not make contracts illegal. The Full Court followed an earlier decision of Bollen J in Tea Tree Gully Builders Co Pty Ltd v Martin.[28]
[27] (1998) 72 SASR 21 per Doyle CJ, Prior and Olsson JJ.
[28] (1992) 59 SASR 344.
In Zullo Enterprises Pty Ltd v Sutton,[29] the Queensland Court of Appeal held that, on its proper construction, section 42 of the Queensland Building Services Authority Act precluded an action in quantum meruit and this was in part because subsection 42(1) rendered it illegal for an unlicensed contractor to enter into a contract to carry out building work. The Court of Appeal did not refer to the decision in Nunkuwarrin Yunti v A L Seeley Constructions Pty Ltd.[30] However, McPherson JA respectfully disagreed with the conclusion reached by Bollen J in Tea Tree Gully Builders Co Pty Ltd v Martin.[31] Subsection 42(4) was subsequently enacted to provide a statutory remedy to an unlicensed contractor in the nature of quantum meruit.
[29] [1998] QCA 417, [2000] 2 Qd R 196 per McPherson and Pincus JJA and Jones J.
[30] (1998) 72 SASR 21.
[31] (1992) 59 SASR 344.
When the Queensland Court of Appeal decided Cant Contracting Pty Ltd v Casella,[32] section 42 had already been amended to afford a remedy in the nature of quantum meruit. Each of section 42 of the Queensland Building Services Authority Act and section 6 of the Contractors Act prescribes the consequences of entry into a building contract by an unlicensed contractor, namely that the contractor is disentitled from recovering the contract price but is not precluded from bringing an action in the nature of quantum meruit. Whether such a contract be characterised as “illegal” or not has no effect upon the consequences. Contrary to the submission of APL, the reasoning of the Queensland Court of Appeal in Cant Contracting Pty Ltd v Casella[33] remains applicable to the South Australian legislation.
[32] [2007] 2 Qd R 13.
[33] Ibid.
Conclusion
APL is and at all material times has been disentitled by section 6(2) of the Contractors Act to payment of the contract price or other consideration under the Contract for performing work. It was therefore not entitled to payment of any progress payments within the meaning of section 13 of the Act. IAMA had no jurisdiction to appoint Mr Covino or Mr Fullerton as adjudicators. Mr Covino had no jurisdiction to make an adjudication determination and the Determination is void. Mr Fullerton has no jurisdiction to embark upon a determination of the Second Adjudication.
Tagara is entitled to orders in the nature of certiorari and prohibition.
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