Woonona-Bulli RSL Memorial Club Ltd v Warrane-Design Construct Fit-Out Pty Ltd

Case •

[2025] NSWSC 271

•

27 March 2025

No judgment structure available for this case.

Supreme Court


New South Wales

Medium Neutral Citation: Woonona-Bulli RSL Memorial Club Ltd v Warrane-Design Construct Fit-Out Pty Ltd [2025] NSWSC 271
Hearing dates: 6 March 2025
Date of orders: 27 March 2025
Decision date: 27 March 2025
Jurisdiction:Equity - Technology and Construction List
Before: Rees J
Decision:

Dismiss application.

Catchwords:

BUILDING AND CONSTRUCTION — RSL club engages builder under ‘cost plus’ contract to replace bowling green with carpark — subcontractor encounters asbestos on day 1 — subcontractor obtains adjudication determination against builder for delay costs — builder includes adjudicated amount for subcontractor’s delay costs in payment claim under head contract — adjudicator allows delay costs — Building and Construction Industry Security of Payments Act 1999 — jurisdictional error — procedural fairness — principles at [41]-[48] — adjudicator rejected RSL club submission by reference to ss 22(4), to which neither party referred — adjudicator said to have misconstrued the provision.

Legislation Cited:

Building and Construction Industry Security of Payment Act 1999 (NSW) ss 10, 20(2), 22(2)(a), 22(2)(b), 22(4).

Contractors Debts Act 1997 (NSW)

Cases Cited:

Acciona Agua Australia Pty Ltd v Monadelphous Engineering Pty Ltd (2020) 4 QR 410; [2020] QSC 133

Anderson Street Banksmeadow Pty Ltd v JCM Contracting Pty Ltd [2014] NSWSC 102

Brodyn Pty Ltd v Davenport (2004) 61 NSWLR 421; [2004] NSWCA 394

Brodyn, Northbuild Construction Pty Ltd v Central Interior Linings Pty Ltd [2012] 1 Qd R 525; [2011] QCA 22

Ceerose v A-Civil (2023) 112 NSWLR 225

Clyne v Deputy Federal Commissioner of Taxation (1981) 150 CLR 1

CMF Projects Pty Ltd v Masic Pty Ltd [2014] QSC 209

Cockram Construction Ltd v Fulton Hogan Construction Pty Ltd & Anor (2018) 97 NSWLR 773; [2018] NSWCA 107

Coordinated Construction Co Pty Ltd v JM Hargreaves (NSW) Pty Ltd (2005) 63 NSWLR 385; [2005] NSWCA 228

Demex Pty Ltd v McNab Building Services Pty Ltd (2023) 113 NSWLR 282; [2023] NSWCA 261

Goodwin Street Developments (atf Jesmond Unit Trust) v DSD Builders Pty Ltd (2018) 98 NSWLR 712; [2018] NSWCA 276

Liang O’Rourke Australia Construction Pty Ltd v H&M Engineering and Construction Pty Ltd [2010] NSWSC 818

Lo v Chief Commissioner of State Revenue (2013) 85 NSWLR 86; [2013] NSWCA 180

LPDT v MICSMA [2024] HCA 12

Minister for Aboriginal Affairs v Peko-Wallsend Ltd (1986) 162 CLR 24

Minister for Commerce (formerly Public Works & Services) v Contrax Plumbing (NSW) Pty Ltd [2005] NSWCA 142

MZAPC v Minister for Immigration & Border Protection [2021] HCA 17; (2021) 390 ALR 590

Nathanson v Minister for Home Affairs [2022] HCA 26; (2022) 403 ALR 398

Probuild Constructions (Aust) Pty Ltd v DDI Group Pty Ltd (2017) 95 NSWLR 82; [2017] NSWCA 151

Warrane Design Construct Fit-out Pty Ltd v Woonona Bulli RSL Memorial Club Ltd [2025] NSWSC 123

Category:Principal judgment
Parties: Woonona-Bulli RSL Memorial Club Ltd (Plaintiff)
Warrane-Design Construct Fit-Out Pty Ltd (First Defendant)
Jonathan Sive (Second Defendant)
Representation:

Counsel:
T Lynch SC / A Sivanathan (Plaintiff)
G Campbell (Defendants)

Solicitors:
Pigott Stinson (Plaintiff)
APJ Law (Defendants)
File Number(s): 2025/68603

JUDGMENT

  1. HER HONOUR: The plaintiff owner, Woonona-Bulli RSL Memorial Club Ltd, seeks to quash part of an adjudication determination made under the Building and Construction Industry Security of Payment Act 1999 (NSW). The Club had a ‘cost plus’ head contract with builder, Warrane-Design Construct Fit-Out Pty Ltd. The adjudicator concluded that the builder was entitled to ‘upstream’ delay costs charged by its subcontractor, All Civil Solutions Group Pty Ltd, to the Club.

  2. The Club contends that the adjudicator fell into jurisdictional error by, effectively, accepting an adjudication determination of the delay costs as between the builder and its subcontractor (the subcontractor determination) as determining the value of the works. The adjudicator was said to have failed to determine the value of the delay costs by reference to the terms of the head contract, in accordance with ss 10 and 22(2) of the Act. The adjudicator was said to have mis-applied s 22(4) instead and, in having regard to the subcontractor determination, took an irrelevant consideration into account. Perhaps ironically, the Club also submitted orally (but not squarely pleaded or addressed in its written submissions) that it had been denied procedural fairness, to the extent that the adjudicator considered and applied s 22(4) at all.

  3. An issue also arose as to whether the monies that have been paid by the Club into Court in respect of the delay costs should be paid to the builder or to the subcontractor, given a series of notices which the subcontractor served on the Club under the Contractors Debts Act 1997 (NSW). At the commencement of the hearing, the subcontractor sought to be joined as a party or, alternatively, to be heard before orders were made for payment of any amount owing under the adjudication determination. It was agreed to deal with this application by notifying the subcontractor’s legal representatives in advance of judgment being delivered on the application to quash the adjudication determination, so that the subcontractor could argue that the funds should be paid to it, rather than the builder. It is convenient, nonetheless, to set out the facts in respect of the notices in this judgment.

  4. The Club tendered some of the documents which were before the adjudicator. The builder also relied on the evidence of managing director Joseph Stephen and solicitor Bruin Hutchings.

The contract

  1. The construction project involved the upgrade of the Club’s carpark. The bowling green was to be removed and replaced with 83 car parks and an ANZAC memorial. As the adjudicator later described it, the Club was keen to have the Anzac memorial constructed by Anzac Day in April 2024. To this end, the Club pressed the builder to start work before all site investigations requested by the builder had been completed. In these circumstances, the builder insisted that the contract be on a ‘cost plus’ basis, so that the Club bore the risk of any increasing cost due to unanticipated underground conditions: determination at [213]-[214], [234].

  2. On 7 December 2023, the Club and builder executed an amended form of the Master Builders Association “Head Contract cost plus (commercial)”. The estimated contract sum was $4.17 million but this depended on a number of things, including “Costs of the works as set out in the Contract; Referred to in Schedule 1.” In Schedule 1, the Club agreed to pay the builder the Cost of the works plus 10%, which costs included:

The Cost of the works which are payable by the Owner include:

…

(d)   The cost of all work carried out by trade contractors engaged by the Builder to carry out work at the work site or in relation to the works … . This cost is conclusively evidenced by an invoice or statement of costs from the trade contractor.

…

(j)   Any other cost or expense which the Builder is liable for or incurs by reason of the Builder carrying out work pursuant to this contract … .

  1. The construction period was 182 days after commencement, subject to (relevantly) cl 10, “Delays and Extensions of Time”. Clause 10 provided:

10.   Delays and Extensions of Time

(a)   Should the progress of the works be delayed by any of the following causes or conditions resulting from them:

(i)   variations;

(ii)   suspension of the works under Clause 18 [by the builder for inter alia the Owner’s failure to pay];

…

(iv)   latent conditions affecting the site, the ability to carry out work or requiring work;

…

(vii)   any act, default, delay or omission on the part of the Owner … including but not limited to, providing instructions, making payment or doing a thing necessary to allow the works to proceed;

…

(ix)   any other cause, thing or matter beyond the reasonable control of the Builder …

then in any such case the Builder must receive a fair and reasonable extension of time to the Construction period. This cl 10(a) does not apply [to delay] that is caused by the default or negligence of the Builder or its officers, employees or contractors.

  1. The builder was obliged to notify the Club in writing of any delays within a reasonable time: cl 10(b). However, cl 10(d) provided:

Delay in notifying or a failure to notify the Owner of a delay or matter causing delay will not of itself prohibit an extension of time being granted or allowed provided the cause of the delay is shown to cause delay to the works being carried out.

  1. Further, if the delay resulted from any of the matters in cl 10(a)(i), (ii), (iv) or (vii), then to the extent that the builder was entitled to an extension of time, the cost of works were to include an amount to cover the loss, cost or expense of the delay incurred by the builder; any such cost would be treated as a cost of the works: cl 10(f).

Works begin

  1. In January 2024, the builder entered into a subcontract with All Civil. As the adjudicator later described it, on the same day that works commenced under the subcontract, asbestos was found in the landscaping surrounding the bowling green: determination at [238].

  2. It is necessary to touch on an earlier adjudication determination obtained by the subcontractor. On 27 May 2024, the subcontractor served Progress Claim 5 on the builder in the sum of $932,856.17. The next day, the builder issued Progress Claim 7 to the Club in the amount of $1,183,407.76. However, on 4 June 2024, the Club issued a payment schedule in respect of Payment Claim 7 to the builder in the amount of $nil.

  3. As Mr Stephen later described events to the adjudicator, the Club instructed the builder to “go hard” on the subcontractor claims, including in respect of the subcontractor’s Progress Claim 5. At a meeting on 7 June 2024, Mr Stephen told the Club that the cost of any adjudication that resulted from the payment schedule issued to the subcontractor, on the basis of those instructions, would be a cost of the works that the Club would have to pay for.

  4. On 11 June 2024, the builder issued a payment schedule to the subcontractor for Progress Claim 5 in the amount of $nil. The subcontractor lodged an adjudication application. On 29 July 2024, adjudicator Dean Beresford gave a determination, concluding that the subcontractor was entitled to $961,365.96.

  5. On 16 August 2024, the subcontractor issued the Club with a certificate under the Contractors Debts Act 1997 (NSW) for the amount of the adjudication determination plus costs and interest. The builder suspended works given the Club’s failure to pay outstanding amounts. On 12 September 2024, the Club paid the subcontractor the amount required by the certificate, being $989,183.55. The builder lifted the suspension on the works.

Subcontractor determination

  1. On 25 September 2024, the subcontractor served Progress Claim 9 on the builder for $1,591,446.78. On 10 October 2024, the builder provided a payment schedule certifying the amount of $nil. The subcontractor lodged an adjudication application. The main item was Variation 31, for costs associated with delays to the contract works.

  2. On 20 November 2024, Mr Beresford gave the subcontractor determination with which this case is principally concerned, concluding that the subcontractor was entitled to $1,067,584.78. Mr Beresford considered whether the subcontractor was entitled to claim Variation 31 under the subcontract at all, and concluded that it was. He was satisfied that the variation was supported by documentation, detailed costings and a revised project program. He allowed 118 calendar days and determined the value of the item to be $936,619.81.

  3. The next day, the builder’s solicitor emailed the subcontractor determination to the Club’s solicitor. The subcontractor also rendered an invoice to the builder in respect of the adjudicated amount, in the amount of $970,531.62 plus GST.

Payment claim

  1. On 29 November 2024, the builder submitted Progress Claim 13 to the Club, in the amount of $2,203,564.59. Attached to the progress claim was a spreadsheet with details of the claim, including “Variation 40 in the amount of $936,619.81 in respect of “Delay Costs – ACSG”. The cover email included a link to the supporting bills, which included the subcontractor’s invoice for the adjudicated amount in the subcontractor determination.

Payment schedule

  1. On 6 December 2024, the Club served a payment schedule in the amount of $81,978.47. Nil was allowed for Variation 40 for the following reason:

No notification for this claim was given in accordance with cl. 10 of the contract and has not been substantiated. No supporting variation folder for Variation 40 has been provided this month in relation or to reflect PC 13’s claimed amount of $936,619.81. Substantiation and evidence is required in relation to this variation to enable assessment. …

  1. The Club further advised in the cover email:

24.   The issue is whether delay costs are payable under your contract with the Club. We note that no notification was given in accordance with cl. 10 of that contract within a reasonable time of any putative delay.

25.   It may be that your company is liable to All Civil for delays, but that circumstance does not establish any delay entitlement under your contract with the Club.

  1. The Club also suggested that the variation was not allowable as it resulted from the “default or negligence of the Builder”: cl 10(a).

  2. On 13 December 2024, the subcontractor served a second certificate on the Club under the Contractors Debts Act 1997 in respect of the subcontractor determination. On 20 December 2024, the Club paid $81,978.47 to the subcontractor, being the amount in the payment schedule for the builder’s Progress Claim 13.

Adjudication application

  1. The builder lodged an adjudication application, accompanied by a statutory declaration of Mr Stephen. In short, Mr Stephen said that, contrary to the builder’s advice, the Club was in a rush to have the carpark built and had limited interest in undertaking site investigations. Although the Club acceded to the builder’s advice and retained a geotechnical engineer, limited bore holes were drilled. The builder recommended that the Club undertake further geotechnical investigations, but the Club was not prepared to do so.

  2. Mr Stephen said that the contract was signed on 7 December 2023 but, in January 2024, the subcontractor discovered asbestos contaminated material, which had to be removed before works could progress. This added considerable time and cost to the project. Whilst the Club initially paid for these additional costs, it then refused to do so and instructed the builder to “go hard” on the subcontractor claims, including in respect of the subcontractor’s Progress Claim 5: see also [13]. This approach, in turn, led to further time, adjudication applications, administrative burden and delay. In respect of Variation 40, Mr Stephen explained:

Variation 40 relates to costs determined to be payable to All Civil in PC 9 Adjudication Determination for All Civil alleged delay costs, which was an amount of $936,619.81. The findings in PC 9 Adjudication Determination [are] exhibited at JS-308 in relation to variation 31. Warrane are liable to pay this amount to All Civil.

  1. In its submissions to the adjudicator, the builder pointed to the simple nature of the ‘cost plus’ contract: the builder’s claim was based on costs incurred plus 10%, supported by evidence of these costs, “This is not a difficult claim to understand, however, the [Club]’s attitude to the [builder]’s payment claims has been that if they consider the cost to have increased too much, they will not pay for those costs regardless of how they have been incurred. That is a breach of their obligations under the cost plus Contract [and] is particularly egregious as the cause of the increases in costs was ultimately the decision of the [Club] to commence constructions works before proper investigations and design had been completed”.

  2. The builder noted that the items claimed in the payment claim had been broken up into the various contract item descriptions and variation claim descriptions for the convenience of the Club “but all are made up of costs that have been incurred by the [builder], plus the [builder]’s fee … Regardless of where they are categorised, if they are a “cost of works” as defined in the Contract, the [builder] may claim them and the [Club] is obliged to pay them, plus the [builder]’s 10% fee …”. In respect of Variation 40, the builder submitted: (emphasis in original)

51.   This amount was awarded to the [builder]’s subcontractor on an adjudication determination of its payment claim 9, a copy of which is exhibited at JS-211-309. A summary table of the Adjudicator’s findings on the adjudication is exhibited at JS-307-8. In that determination, the adjudicator found that All Civil was entitled to the amount of $936,619.81 on a variation, which was numbered 31 in the All Civil claim. That variation is now claimed upstream by the [builder] against the [Club].

52.   The fact that there has been an adjudication determination in favour of the [builder]’s subcontractor and against the [builder] means that the amount of the adjudication is a direct “cost of works” under the Contract. In particular, Part A of Schedule 1 of the Contract states that “The cost of all work carried out by a trade contractors engaged by the Builder to carry out work at the work site or in relation to the works including any amounts paid in advance” [i]s a cost of works under the Contract.

Adjudication response

  1. On 7 January 2025, the Club provided its adjudication response, accompanied by a statutory declaration of Mr Brennan. (Mr Brennan’s statement attached to his statutory declaration is not in evidence, nor the exhibits to his or Mr Stephen’s statements. This has made it a little difficult to follow the adjudication determination.)

  2. In its submissions to the adjudicator, the Club noted that the delay costs were obtained by the subcontractors for the delay consequence of variations to the subcontract works. The Club submitted that the $936,619.81 had not been claimed by reason of a variation to the head contract or a delay in the performance of the head contract; the builder had made no attempt to comply with the contractually prescribed procedures for such claims.

  3. Further, the Club submitted that the amount was not payable as a “cost of the works”, in respect of which the onus was on the builder. The only evidence in support of this amount was the subcontractor determination. Further:

The findings, reasoning and conclusion of the All Civil/Warrane adjudication are not in this adjudication evidence of the correctness of those findings, or the reasoning for those conclusions. Such issues, to the extent they are said to be relevant in this application, are to be established by primary evidence, and the legal significance of what is provided in this adjudication is to be determined by the adjudicator herein for himself. The All Civil/Warrane adjudication determination is evidence only of its terms.

  1. The Club submitted that the subcontractor determination determined the position arising under the subcontract but did not operate to establish the builder’s entitlement to be paid under a different contract with the Club. The builder’s entitlement to payment for “delay” as a “cost of the works” was to be determined having regard to the provisions of the contract between the builder and the Club. The Act was said to make the same point: ss 22(2)(a) and (b). The Act did not confer an entitlement to payment that had not accrued under the relevant construction contract. Whilst the head contract did provide for delays and variations, Variation 40 was not a claim made in accordance with those provisions. The builder could not “outflank” the provisions of the contract agreed with the Club for delay and variations by the terms of any subcontract it may make.

  1. Further, the Club submitted that “Delay Costs – ACSG” could not be “cost of … work carried out by a trade contractor engaged but by the Builder … to carry out work at the site or in relation to the works”: Schedule 1. A claim for delay costs was inherently a claim for compensation for the cost for being impeded in the performance of a contract, not a cost of trade work performed at the site. Such compensation could not be conclusively evidenced by an invoice of the subcontractor.

Paying the subcontractor

  1. On 20 January 2025, Jonathan Sive gave an adjudication determination, allowing Variation 40 in full. I will return to the details of the determination shortly. On 24 January 2025, the Club and the builder agreed that, of the adjudicated amount (which was $2,094,018.14 in total), the subcontractor should be paid its entitlement under the Contractors Debts Act 1997 and the balance paid to the builder. The Club and the builder also agreed that the Club would resolve the builder’s next Payment Claim 14 in the amount of $284,318.94.

  2. On 30 January 2025, an adjudication certificate was issued in the sum of $2,141,780.73. The next day, the Club paid the subcontractor $284,318.94, being the agreed amount for the builder’s Payment Claim 14. On 3 February 2025, judgment was entered in this Court in the adjudicated amount.

  3. On 13 February 2025, the subcontractor served a further claim on the Club under the Contractors Debts Act 1997 on the Club, seeking $464,008.78. The builder filed a motion seeking a garnishee order to enforce the judgment entered in respect of the adjudication determination. On 20 February 2025, the Club commenced these proceedings.

  4. On 27 February 2025, Stevenson J heard an application by the Club to stay the judgment entered in favour of the builder, together with the garnishee order. His Honour traced the various debt certificates which had been served by the subcontractor on the Club, and partly paid. His Honour observed that the effect of these payments was that the judgment, albeit obtained regularly under the procedure set out in the Act, overstated the amount due by the Club to the builder under the head contract by $1,200,670.24. Further, that amount was now due by the Club to the subcontractor, not the builder: Warrane Design Construct Fit-out Pty Ltd v Woonona Bulli RSL Memorial Club Ltd [2025] NSWSC 123 at [17]. His Honour stayed the judgment to that extent to achieve a harmonious interaction between the Act and the Contractors Debts Act, such that the balance of the judgment, which remained owing by the Club to the builder, was $941,110.49: Warrane Design at [19]-[20]. The Club was ordered to pay that amount into Court, as a condition of the stay.

Submissions

  1. The Club submitted that the determination was vitiated by jurisdictional error. The builder had submitted to the adjudicator that the subcontractor determination could be relied upon under s10 of the Act as a determination of the value of work. But the Act required a valuation of the work claimed for a progress claim be made “… in accordance with the terms of the contract …” pursuant to which the progress claim was made, being the Head Contract. The adjudicator recognised this and directed himself to s 22(4). But the “construction contract” referred to in ss 22(4) was that which was the subject of the adjudication application, not an adjudication determination in respect of a different contract.

  2. The Club submitted that a failure to address the provisions of the head contract was a failure to consider a matter the adjudicator was statutorily bound to do. Equally, the effect of s 22(2) was to exclude any consideration of the subcontractor determination, this being an irrelevant consideration: Ceerose v A-Civil (2023) 112 NSWLR 225 at [52], [62]-[81]; LPDT v MICSMA [2024] HCA 12 at [2]-[3]. Either way, there was jurisdictional error. Whilst the adjudicator referred to the contractual provisions, it was said that he did not rely on those provisions for the resolution of the matter. The provisions of the contract did not form part of the reasons for his determination. Further, the Club submitted that the adjudicator decided the determination on a basis other than advanced by the parties. Neither party relied on s 22(4) in their submissions. The parties were not invited to deal with his construction of s 22(4).

  3. The builder submitted that, contrary to the Club’s submissions, the adjudicator extensively considered whether the subcontractor’s delay costs were recoverable under the Head Contract. The adjudicator referred to and considered the operation of cls 1, 2, 2A, 5, 9, and 10 of the head contract.

  4. As to whether the subcontractor determination was irrelevant, the builder submitted that it was within the jurisdiction of the adjudicator to determine what was relevant to the determination of the matters before him. The consideration of whether or not the adjudicator’s interpretation of the law and the facts in that regard was incorrect was a matter for him; that was not something that could be the subject of jurisdictional error. Further, the adjudicator was permitted by s 22(2)(b) of the Act to assess whether the subcontractor’s determination was a relevant consideration, as that sub-section provides that provisions of the head contract are to be considered. As a matter of fact, the provisions of the head contract made the subcontractor determination a relevant consideration as the “Cost of Works” encompassed that determination: cl 17, cl 30(d), Schedule 1 Part A. These provisions were broad and encompassed a determination that required the builder to pay a subcontractor amounts that had been determined in relation to a payment claim that they have served on the builder. The adjudicator considered these provisions, which the builder specifically relied on. The adjudicator also went beneath the face of the subcontractor determination to the merits of the claim in relation to the head contract.

  5. Further, the builder submitted that the adjudicator was obliged to consider the provisions of the Act separately to the parties’ submissions. The fact that he did so was simply following the dictates of the Act. Section 22(4) was one such provision, and specifically referred to an earlier adjudication determination determined by “an adjudicator” in relation to “a construction contract”. There is no limitation in that provision – as there was in section 22(2)(b) – which referred instead to “the construction contract from which the application arose”. Nothing in s 22(4) limited the consideration to the same construction contract under which the payment claim was made. If the legislature had intended to so limit the provision, they would have used similar wording to that in s 22(2)(b), but did not. There must be some reason for the difference in the wording, which told against the Club’s construction: Clyne v Deputy Federal Commissioner of Taxation (1981) 150 CLR 1. In considering evidence of the value of the works, the adjudicator considered that it could be an adjudication determination of a downstream determination. Even if he was wrong, the fact that the adjudicator did so was not reviewable. His determination that s 22(4) applied to the subcontractor’s determination was not a jurisdictional error, even if it was an error of law. In any event, the Club could not raise this issue, as it did not do so in the payment schedule: ss 22(2)(d) and 20(2).

Principles

  1. The principles were extensively reviewed in Ceerose v A-Civil by Payne JA, whose analysis I gratefully adopt. A decision maker, including an adjudicator under the Act, is obliged to take into account all relevant (or “mandatory”) considerations in making a decision: Minister for Aboriginal Affairs v Peko-Wallsend Ltd (1986) 162 CLR 24 at 39 (per Mason J); Lo v Chief Commissioner of State Revenue (2013) 85 NSWLR 86; [2013] NSWCA 180 at [9] (per Basten JA, with whom Beazley P agreed). A decision-maker will fail to exercise a statutory power, that is to say, there will be a jurisdictional error if they fail to take into account a mandatory consideration: Coordinated Construction Co Pty Ltd v JM Hargreaves (NSW) Pty Ltd (2005) 63 NSWLR 385; [2005] NSWCA 228 at [65] (per Basten JA); Goodwin Street Developments (atf Jesmond Unit Trust) v DSD Builders Pty Ltd (2018) 98 NSWLR 712; [2018] NSWCA 276 at [19] (per Basten JA, with whom Leeming and White JJA agreed), citing Liang O’Rourke Australia Construction Pty Ltd v H&M Engineering and Construction Pty Ltd [2010] NSWSC 818 at [34] (per McDougall J). In that event, a determination is void: Brodyn Pty Ltd v Davenport (2004) 61 NSWLR 421; [2004] NSWCA 394 at [53] (per Hodgson JA, with whom Mason P and Giles JA agreed) CMF Projects Pty Ltd v Masic Pty Ltd [2014] QSC 209 at [30] (per Daubney J), citing Brodyn, Northbuild Construction Pty Ltd v Central Interior Linings Pty Ltd [2012] 1 Qd R 525; [2011] QCA 22.

  2. Section 22(2) of the Act prescribes these considerations: Coordinated Construction at [52] (per Hodgson JA), [65] (per Basten JA). Section 22(2) provides:

22   Adjudicator’s determination

…

(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.

  1. While the adjudicator must give consideration to these matters, it is generally for the adjudicator to determine the appropriate weight to be given to each when exercising their statutory power: Peko-Wallsend at 40-1 (per Mason J); Goodwin Street Developments at [23] to [25] (per Basten JA with whom Leeming and White JJA agreed).

  2. Despite the apparently emphatic language of s 22(2), an adjudicator may in some circumstances take into account other matters: Ceerose at [31], citing Minister for Commerce (formerly Public Works & Services) v Contrax Plumbing (NSW) Pty Ltd [2005] NSWCA 142. In that case, the appellant complained that the contractor was permitted to rely on s 34 of the Act, when that matter had not been raised in its payment claim. Hodgson JA (Bryson JA and Brownie AJA agreeing) concluded at [34]-[35]:

34 In my opinion, this suggested anomaly loses force when one considers the true effect of s.22(2). It is true that paragraph (d) of s.22(2) limits the submissions of the respondent that can be considered under that paragraph to submissions duly made by the respondent in support of the payment schedule; and in my opinion, that does have the effect of excluding, from consideration under that paragraph, reasons included in the adjudication response that were not included in the payment schedule.

35 However, paragraphs (a) and (b) of s.22(2) require the adjudicator to consider the provisions of the Act and the provisions of the construction contract; and in my opinion, that entitles and indeed requires the adjudicator to take into account any considerations (other than considerations arising from facts and circumstances of the particular case not otherwise before him or her) that he or she thinks relevant to the construction of the Act, the construction of the contract, and the validity of terms of the contract having regard to provisions of the Act. …

  1. Further, failure to take a matter into account must be “material” in order to constitute appealable jurisdictional error: Probuild Constructions (Aust) Pty Ltd v DDI Group Pty Ltd (2017) 95 NSWLR 82; [2017] NSWCA 151 at [99]-[101] (per McColl JA, with whom Beazley ACJ and Macfarlan JA agreed); Anderson Street Banksmeadow Pty Ltd v JCM Contracting Pty Ltd [2014] NSWSC 102 at [47] (per Ball J). As the High Court explained in Nathanson v Minister for Home Affairs [2022] HCA 26; (2022) 403 ALR 398, the question is “whether the decision that was in fact made could have been different” as a “matter of reasonable conjecture” if the particular consideration had been taken into account: at [32]-[33] (per Kiefel, Keane and Gleeson JJ), [84] (per Gordon J), citing MZAPC v Minister for Immigration & Border Protection [2021] HCA 17; (2021) 390 ALR 590.

  2. As to procedural fairness, the adjudicator’s obligations in this regard were extensively considered by Kirk JA in Demex Pty Ltd v McNab Building Services Pty Ltd (2023) 113 NSWLR 282; [2023] NSWCA 261, whose analysis I gratefully adopt. In short, the features of the dispute resolution process prescribed by the Act has the consequence that a substantial departure from the general requirements of procedural fairness is required before jurisdictional error will be made out. Those features include tight timeframes, the interim nature of an adjudication determination, and that adjudicators may not be lawyers but have practical building experience. Kirk JA observed, “generally a conclusion of invalidity would only be reached if there was a significant departure from what would ordinarily be the requirements of procedural fairness for a person exercising a statutory power, and where that departure could be characterised as leading to substantial practical injustice in all the circumstances: at [32].

  3. This Court does not have jurisdiction to quash an adjudicator’s determination for non-jurisdictional error of law on the face of the record (in other words, the adjudicator is conferred with decision-making authority to err in law): Probuild at [83] (per Gageler J). The difference between jurisdictional and non-jurisdictional error is illustrated by Cockram Construction Ltd v Fulton Hogan Construction Pty Ltd & Anor (2018) 97 NSWLR 773; [2018] NSWCA 107, where the applicant challenged a determination on the basis that the adjudicator had failed to consider the terms of the contract. In rejecting that challenge, Basten JA observed at [13]:

The adjudicator construed the provision as not a valid precondition to the claimant’s application for an extension of time. By so holding, the respondent submitted the adjudicator had “put the contract aside” or “declined to apply” the contract. But that was no more than a rhetorical expression of strong disagreement with the construction of the contract adopted by the adjudicator. She may have been wrong in law … But … that was not, of itself, a basis to set aside the adjudication.

Likewise, Meagher JA (with whom Barrett AJA agreed) observed that the process followed by the adjudicator did not cease to comply with s 22(2) simply because a conclusion “proceeded from an error in construction or wrong understanding of the particular law”: at [41].

  1. Similarly, in Acciona Agua Australia Pty Ltd v Monadelphous Engineering Pty Ltd (2020) 4 QR 410; [2020] QSC 133, Bond J explained at [35]:

The valid exercise of an adjudicator’s jurisdiction is not conditioned on the adjudicator reaching what is objectively the correct conclusion on all of the questions of fact or law required by the consideration of the matters set out in s [22](2). Or, to put it another way, there are many errors of fact and law which might be made by an adjudicator which would not be regarded as going to jurisdiction.

…

Adjudicators under the Payment Act do not have to get the answer right, but if it is demonstrated that they have not gone about their task by carrying out the active process of intellectual engagement with the issues and the submissions before them that the Payment Act requires, then they will have fallen into jurisdictional error because they will not have done the very thing s [22](2) of the Payment Act required them to do.

Consideration

  1. To some extent, the parties’ arguments before the adjudicator ‘passed like ships in the night’. The builder was, quite transparently, seeking to pass on the delay costs awarded to its subcontractor in the subcontractor determination. The builder did not cavil with the rights or wrongs of the subcontractor determination, although appears to have made some effort to summarise Mr Beresford’s findings (the summary is not in evidence). The builder simply contended that it was liable to pay the adjudicated amount to the subcontractor and, given the terms of the head contract, the Club was also obliged to pay this figure to the builder as part of the Cost of the works. The delay costs awarded to the subcontractor fell within the definition of the “Cost of the works” described in Schedule 1 of the head contract, being “The cost of all work carried out by trade creditors engaged by the Builder … conclusively evidenced by an invoice … from the trade creditor.”: sub-para (d). Whilst the subcontractor had rendered an invoice following the subcontractor determination, the builder relied on the subcontractor determination itself as evidence of the “Cost of the works”.

  2. For its part, the Club focussed on the description of the item in the payment claim, as a “variation” and for “delay”, contending that the builder had not followed the correct procedures under the head contract in respect of variations and delay: cl 10. The Club contended that it was not enough to simply give the Club the subcontractor’s invoice for delay costs. In the alternative, the Club contended that the subcontractor determination was not sufficient evidence of the Cost of the works, where the determination was based on a different contract and was not binding on the Club. The Club relied on s 22(2)(a) and (b) of the Act in aid of that argument.

  3. At the outset, and repeatedly, the adjudicator observed that s 22(2) of the Act set out the only matters to be considered by an adjudicator in determining an application: for example, determination at [8], [116], [188].

  4. The suggestion that Mr Sive did not determine the adjudication application by reference to the provisions of the head contract may be readily dismissed. The adjudicator examined the circumstances in which the contract was formed, as earlier described. The adjudicator laid blame at the feet of both parties, where the builder failed to properly scope the initial geotechnical investigation: determination at [41]. The adjudicator considered the provisions of the head contract at length, noting its ‘cost plus’ nature. As such, the Club bore the risk of any cost increase due to unanticipated underground conditions: determination at [119]-[204], [213]-[214]. The discovery of asbestos was a latent condition: determination at [155]. While both parties contributed to the lack of geotechnical investigation, the Club had weighed up time delays against the risk of finding contaminants and took a calculated risk when forcefully directing the builder to proceed to enter a contract and start work: determination at [234]. The builder protested and was not willing to accept any contractual risk, which lead to the ‘cost plus’ contract: determination at [235]. As events had unfolded, cl 10 became the most important provision in the contract, in particular cl 10(d); this provision nullified the Club’s complaint that the builder had not earlier notified a delay claim: determination at [250].

  5. The adjudicator then turned to the Club’s submission as to whether the builder could rely on the subcontractor determination, which he noted “represents a complex issue”: determination at [258]. He noted that the builder considered that it did not matter that the determination was given in different proceedings and between different parties; the builder contended that it could still be relied on to determine the value of the work under s 10 of the Act, where the value of the work had not changed since that determination: determination at [259]. He noted the builder’s submission that the value determined in the subcontractor determination fell within the definition of the “Costs of the works” in Schedule 1 of the head contract.

  1. The adjudicator considered that a “reasonable interpretation of the [builder’s] submissions, as they relate to the same value as that previously determined in the [subcontractor determination] and how that same value becomes cost of works under the Head Contract, means that I must start with section 22(4) of the Act: determination at [266]. Section 22(4) provides:

(4) If, in determining an adjudication application, an adjudicator has, in accordance with section 10, determined—

(a)   the value of any construction work carried out under a construction contract, or

(b)   the value of any related goods and services supplied under a construction contract,

the adjudicator (or any other adjudicator) is, in any subsequent adjudication application that involves the determination of the value of that work or of those goods and services, to give the work (or the goods and services) the same value as that previously determined unless the claimant or respondent satisfies the adjudicator concerned that the value of the work (or the goods and services) has changed since the previous determination.

  1. While Mr Sive had earlier set out s 10 of the Act in his determination, for ease of reference, s10(1) of the Act provides:

10   Valuation of construction work and related goods and services

(1)   Construction work carried out or undertaken to be carried out under a construction contract is to be valued—

(a)   in accordance with the terms of the contract, or

(b)   if the contract makes no express provision with respect to the matter, having regard to—

(i)   the contract price for the work, and

(ii)   any other rates or prices set out in the contract, and

(iii)   any variation agreed to by the parties to the contract by which the contract price, or any other rate or price set out in the contract, is to be adjusted by a specific amount, and

(iv)   if any of the work is defective, the estimated cost of rectifying the defect.

  1. The adjudicator noted that this was effectively the position being asserted by the builder, that the adjudicator in the subcontractor determination had determined the value of the delay costs and those costs had not changed value: determination at [267]-[271]. The adjudicator considered at [272]: (emphasis in original)

“Section 22(4) of the Act clearly notes that if an adjudicator, when determining an application, has, in accordance with section 10 of the Act, determined the value of any construction work carried out under a construction contract, the adjudicator (or any other adjudicator) is, in any subsequent adjudication application that involves the determination of the value of that work to give the work the same value as that previously determined unless the claimant or the respondent satisfies the adjudicator concerned that the value of the work has changed.”

  1. The findings made by the adjudicator in the subcontractor determination were exactly the same facts as those now asserted by the builder: determination at [273]. Mr Sive was asked by the builder to follow the value determined in the subcontractor determination, “I must therefore decide, among other things, whether substantial evidence supports the [builder’s] position and whether the findings made by the adjudicator in [the subcontractor determination] support the conclusion being asserted by the [builder] in these proceedings which involves the determination of the value of that work and assessment of whether all applicable legislative requirements for the value determined in [the subcontractor determination] can pass upstream to be claimed against the Club”: determination at [278].

  2. The adjudicator considered the extent to which he could rely on the findings made by Mr Beresford, particularly where the subcontractor determination enabled him to trace and examine the analysis undertaken; Mr Sive described Mr Beresford’s findings as “statutory road signs” leading him to “follow the law and draw legally relevant conclusions supportive of the ultimate decisions to be made under section 22(2) of the Act for the purpose of determining the matter under section 22(1) of the Act”: determination at [280], [283]. The adjudicator formed the view that he could analyse Mr Beresford’s findings and reasoning process, rather than “be forced into unguided and resource-consuming explorations” to consider whether that adjudicator’s assessment of delay costs was supported by the facts and law”: determination at [284].

  3. The adjudicator was satisfied that Mr Beresford’s findings were “properly constituted”, supported by the facts presented by the builder in those proceedings: determination at [285]. The builder did not seek to present different facts on this adjudication. Mr Sive considered, “These properly constituted findings enable me to proceed to decide whether the value is the same value as that previously determined by the adjudicator in [the subcontractor determination]”: determination at [285]. At [286]:

“Contrary to the suggestions being advanced by the [Club] … I have determined there is no conflict in the evidence. More importantly, however, I must decide under section 22(2) subsections (c) and (d) of the Act what evidence, if any, to believe.”

  1. That is, Mr Sive did not consider himself to be bound by the subcontractor determination but regarded it as evidence he could take into account, along with the parties’ submissions (including relevant documentation) made in the adjudication before him. Indeed, it may have been a simpler course for Mr Sive to have regard to the subcontractor determination as “relevant documentation” put forward by the builder in support of its submission, rather than taking a detour through s 22(4). But that detour was prompted by the Club’s submission that the builder could not rely on the subcontractor determination given s 22(2)(b). In considering that submission, the adjudicator was entitled to consider the provisions of the Act, including provisions of the Act to which the Club did not refer but which the adjudicator considered answered that submission: s 22(2)(a).

  2. Mr Sive proceeded to also have regard to Mr Sheehan’s statutory declaration and his minutes of a meeting with the Club, at which the builder was instructed to “go hard” on the subcontractor. The adjudicator considered that the Club had sufficient proper notice under the head contract of the delay costs claim that the builder would eventually be presenting, and did present on 29 November 2024, shortly after the subcontractor adjudication determination: determination at [288]. Mr Sive continued:

“289. There is nothing in section 22(4) of the Act that limits the other adjudicator’s review to only the same parties and to the same contract.

290. The review is open ended, and the Parliament intentionally uses open-ended statements in section 22(4) of the Act as a means to capture the contractual hierarchy that might, as here, become operative. The open-ended nature of the critical facts stated in section 22(4) of the Act is the free-form way envisioned in section 3 of the Act to allow respondents to answer in as much detail as becomes necessary and as they want to address the issue of value and whether it changes from the subcontract to the head contract.

291. The open-ended nature of section 22(4) of [the] Act is intentional because it assists the subsequent adjudicator to understand the respondent’s perspective and to obtain an accurate response with respect to changed circumstances that may exist from the subcontract to the head contract and whether this changed circumstance is enough to cause the value to change or to stay the same, as here. I am unable to agree with the respondent’s suggestions at all because the nature of the subcontract and the nature [of] the head contract, as discussed above, means that the head contract overlays on the subcontract and captures all costs because it is a cost-plus arrangement, whereas the subcontract is a standard subcontract issued by the Master Builders Association of New South Wales.”

  1. The adjudicator considered that nothing had changed between the subcontractor determination and the builder’s payment claim for delay costs: determination at [292]-[293]. For these (extensive) reasons, the adjudicator did not accept the Club’s submission that the subcontractor determination could not be relied upon: determination at [295]. Mr Sive considered that the issue was not whether the builder was entitled to a payment which had accrued under the head contract, but whether the entitlement to payment related to the subject matter of s 22(4): determination at [296]. The adjudicator then appears to have attached some significance to the Club’s failure to squarely address s 22(4), which may have been a little unfair where the builder did not raise it. Rather, the adjudicator raised s 22(4) in answer to the Club’s submission.

  2. The adjudicator then returned to the ‘cost plus’ nature of the head contract, noting that the builder was entitled to be reimbursed for the actual costs of the project plus a fee as profit: determination at [312]. The adjudicator concluded that the ‘cost plus’ contract was flexible enough to allow for adjustments to the project scope and the changes which had occurred: determination at [313]. It followed that the builder was entitled to make the claim it did for “Delay Costs – ACSG” and entitled to the full amount claimed: determination at [315]-[316].

  3. Having regard to how the adjudicator’s consideration of s 22(4) arose, being in the course of considering and dealing with the Club’s submission in respect of s 22(2)(b), I do not consider that the Club was denied procedural fairness. The parties submitted their adjudication application and adjudication response in writing and Mr Sive effectively determined the matter ‘on the papers’. He did so within a tight timeframe, on an interim basis, and without necessarily having any legal qualifications to address the point raised. But the adjudicator was entitled to have regard to the provisions of the Act, including those to which the Club did not refer, in addressing that submission. He did so. I do not think it can be said that the adjudicator’s failure to go back to the parties and seek their further submissions on s 22(4) led to substantial practical injustice in all of the circumstances: Demex at [32].

  4. The bigger question is whether the adjudicator could get it wrong in respect of his construction of s 22(4) but nonetheless have delivered a determination which is valid and binding. I should not be taken to be saying that Mr Sive did get it wrong; his construction of the section was certainly available. Another construction would be that the earlier adjudication application was in respect of the same construction contract. The proper construction and operation of s 22(4) was not fully argued on this application and it is not necessary to resolve that question.

  5. It is apparent from the adjudication determination that Mr Sive considered the provisions of the Act, including provisions to which the Club did not refer but in answer to the Club’s submission, in accordance with s 22(2)(a). He considered, in great detail, the provisions of the head contract, in accordance with s 22(2)(b).

  6. The adjudicator also considered, at length, all submissions made by the parties, including relevant documentation. In the builder’s case, that documentation included the subcontractor determination. He considered whether, in the circumstances which had occurred and given the provisions of the head contract, the builder was entitled to claim the delay costs incurred by its subcontractor. The adjudicator ultimately appears to have concluded the adjudication determination on the basis that the builder’s submissions in this regard should be accepted.

  7. The adjudicator also considered, at length, the Club’s submission that the subcontractor determination did not bind the Club, including by reason of s 22(2)(b). Ultimately, Mr Sive proceeded on the basis that he was not bound by the subcontractor determination but was entitled to take it into account, including having regard to the other evidence relied upon by the parties. In the result, he was satisfied on the evidence before him, which was consistent with the findings made by Mr Beresford, that the facts sought to be advanced by the builder had been established.

  8. It is apparent from the adjudication determination that Mr Sive considered only the matters prescribed by s 22(2) of the Act. His determination is, thus, the product of a valid exercise of his jurisdiction. Where the adjudicator carried out the task conferred by the Act, his determination does not cease to comply with s 22(2) if his conclusion proceeded from an error in construction or a wrong understanding of the particular law: Cockram Construction at [41]. If Mr Sive mis-construed or mis-applied s 22(4), then I consider that this was a non-jurisdictional error of law, which this Court does not have jurisdiction to quash. The validity of the determination does not depend on the adjudicator reaching the correct conclusion on all questions of fact or law. Nor do I think any error much matters, where the adjudicator appears to have ultimately decided the point by accepting the builder’s main argument, rather than his analysis of the Club’s submission in respect of s 22(2)(b).

Orders

  1. For these reasons, I make the following orders:

  1. Dismiss prayer 1 of the Summons, with costs.

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Decision last updated: 27 March 2025

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