ABB Australia Pty Ltd v James Engineering Pty Ltd & Anor [2018] NTSC 91

[24] The summary did not characterise ABB's references to liquidated damages as amounting to a set-off.

[25] The Adjudicator set out his "REASONS FOR THE DETERMINATION" beginning at p 19. These begin:

1. Pursuant to section 34 of the CCA, I have considered the following matters in making this determination:

   1. the application for adjudication and its attachments;

   2. the response and its attachments; and

   3. the further written submissions validly made by the parties.

1. I have considered the claims for variations and the respondent's claim for liquidated damages separately.

[26] The adjudicator dealt with liquidated damages in a separate section beginning on p 62 in the following way.

1. The respondent has made submissions regarding liquidated damages it considers it is entitled to set-off against money otherwise payable to the applicant (if any).
2. The applicant submitted the Payment Claim on 22 December 2017 for $2,129,234.80 incl. GST
3. The respondent issued a payment schedule on 11 January 2018 that indicated the respondent proposed to pay $0.00 (nil).
4. The payment schedule indicated that the adjusted Contract Price was $15,525,171.95 + GST. The payment further indicated that "ABB agreed backcharges were $69,668.99 + GST".
5. There is no mention of liquidated damages in the amount of $1,746.160.00 being applied in the payment schedule.
6. The respondent attached a letter of demand dated 4 August 2017 that it sent to the applicant demanding payment of liquidated damages in the amount of $1,746,160.00 and that letter concluded by stating:

"7. ABB further confirms that any other back charges and/or offset amount, due to James acts or omissions, (including any James Punch list items rectification and/or previously detailed Quality issues) are not considered for the purposes of calculating liquidated Damages.

ABB reserves its rights under the Contract and at law in relation to any failure by James to pay the liquidated damages by the 4th September 2017."

1. The respondent never set-off the liquidated damages in relation to which on 4 August 2017 it had notified the application were owing and accordingly, there can be no liquidated damages in dispute for the purposes of this application for adjudication.
2. In order for a dispute relating to liquidated damages to be adjudicated, the respondent was required make its claim for liquidated damages by way of the payment schedule and then, if the applicant rejected the respondent's claim for liquidated damages, either party was entitled to make an application for adjudication in relation to the payment dispute.
3. Section 4 of the CCA states;

"payment claim means a claim made under a construction contract:

(a) by the contractor to the principal for payment of an amount in relation to the performance by the contractor of its obligations under the contract; or

(b) by the principal to the contractor for payment of an amount in relation to the performance or non-performance by the contractor of its obligations under the contract."

1. For the avoidance of doubt, a payment claim includes a claim made by the respondent on the applicant.
2. Section 8 of the CCA states;

(a) a payment claim has been made under a contract and either:

• (i) the claim has been rejected or wholly or partly disputed;

(ii) when the amount claimed is due to be paid, the amount has not been paid in full; or

(b) when an amount retained by a party under the contract is due to be paid under the contract, the amount has not been paid; or

(c) when any security held by a party under the contract is due to be returned under the contract, the security has not been returned.

1. In this case if the respondent had applied liquidated damages, then that would be a payment claim for the purposes of the CCA and the respondent would have accrued a right to have the payment disputed adjudicated when the applicant rejected the respondent's claim.
2. If the respondent did not accept the applicant's rejection of its claim for liquidated damages, under section 28 of the CCA, the respondent had 90 days from the date that the dispute had arisen to make an adjudication application.
3. Alternatively, the respondent could have applied the liquidated damages by way of the payment schedule and if the applicant had considered that to give rise to a payment dispute, then the applicant was entitled to make an application for adjudication in relation to the liquidated damages.
4. For the above stated reasons, there is no claim for liquidated damages in relation to this application for adjudication and, therefore, there can be no payment dispute in relation to liquidated damages for me to determine.

[27] The Adjudicator misunderstood the nature of ABB's contention in relation to liquidated damages. He characterised it as a "claim" by ABB for a determination that James Engineering pay the amount demanded by way of liquidated damages. It wasn't. ABB was contending that it had a right to liquidated damages under the contract and that it was entitled to set that off against any amount owing to James Engineering under the contract. In the words of Le Miere J in Cooper & Oxley[18] ABB was seeking to "raise its set-off claim as a shield but not a sword."

[28] The difficulty is in characterising the nature of this error by the Adjudicator. Is it a jurisdictional error? In one respect, it is very like the error made by the adjudicator in Cooper & Oxley: both adjudicators misunderstood the nature of the contention being made by their respondents; and this led both to fail to take into account a claimed defence by way of set-off to the claims of their respective applicants. I do not think that the fact that the adjudicator in Cooper & Oxley miscategorised the respondent's claim to a set-off as a payment dispute and the current Adjudicator miscategorised the set-off defence as a claim to a determination that the applicant owed money to the respondent represents a material difference in the nature of the error.

[29] However, it is possible that the cause of the error may make a material difference. In Cooper & Oxley, Le Miere J found that the adjudicator had misconstrued the Act. In particular, in the passage quoted at [13](e) above, Le Miere J found that the adjudicator had misconstrued the section defining a payment dispute; which led him to misapply the section precluding him from adjudicating more than one payment dispute at the same time except by consent.

[30] It seems to me that the Adjudicator's misconstruction of ABB's claimed set-off in this case arises from a different cause. I can see no evidence that the Adjudicator misconstrued the Act.

[31] It is more difficult to pin down the exact nature of the Adjudicator's error. It is possible to categorise it in different ways depending on the level of detail at which one examines what the Adjudicator did.

[32] ABB was contending that it had a right to liquidated damages under the Contract and that it was entitled to set that off against any amount owing to James Engineering under the Contract. What the Adjudicator should have done was to look at the arguments of ABB and James Engineering and decide whether ABB was entitled to liquidated damages and, if so, how much, and whether the Contract allowed ABB to set these off against amounts otherwise owing to James Engineering. He should then have reduced the amount which he determined to be owing to James Engineering by the amount of liquidated damages (if any) he assessed was owing and able to be set-off. If he had made a factual or legal error in that process, then that error would not have been reviewable by this Court.

[33] The Adjudicator did not embark on that process at all. Nevertheless, looking at what occurred through the very broadest lens, one might say that it doesn't matter what kind of error led to his failure to embark on the process: he was making a bona fide attempt to do what was required under s 33(1)(b), namely to determine on the balance of probabilities whether ABB was liable to make a payment to James Engineering and, if so, determine how much was owing. From that view point, any errors he made in the process were errors within jurisdiction.

[34] However, examined at a somewhat finer level of detail, one might say that the Act requires the Adjudicator to determine whether ABB was liable to make a payment to James Engineering and, if so, how much [s 33(1)(b)], on the basis of the Adjudication Application and its attachments and the Adjudication Response and its attachments [s 34(1)(a)]. This is the core function conferred on the Adjudicator by the scheme of the legislation. In deciding that he would not enquire into whether or not ABB was entitled to liquidated damages, and whether it was entitled to set these off against any amounts otherwise owing to James Engineering, the Adjudicator failed to take into account a matter which the Act requires he take into account in determining the payment dispute. That was a failure to perform that core function, and the purported Determination is therefore not a determination protected from review by s 48(3).

[35] Looking at the situation in finer detail again, one might enquire into the precise reason or reasons why the Adjudicator failed to embark upon the process of considering whether ABB was entitled to set-off liquidated damages against the Payment Claim. At paragraphs 299) and 301) of his reasons the Adjudicator said:

1. There is no mention of liquidated damages in the amount of $1,746.160.00 being applied in the payment schedule.

2. The respondent never set-off the liquidated damages in relation to which on 4 August 2017 it had notified the application were owing and accordingly, there can be no liquidated damages in dispute for the purposes of this application for adjudication. (sic)

[36] That is to say, the Adjudicator formed the view that in the Payment Schedule, ABB did not rely on its right to set-off liquidated damages against any amount otherwise owing to James Engineering as a reason for saying that no money was owing to James Engineering. That is, arguably, a factual error, but that factual error alone would not render the Determination a nullity reviewable by this Court.

[37] Although the Payment Schedule suffers from a certain lack of clarity of expression, it is clear that James Engineering understood that the Payment Schedule relied on a set-off of liquidated damages. In its Application, James Engineering did not contend that ABB had not set-off liquidated damages in the Payment Claim. Rather, at paragraph 17 of its submissions in the Adjudication Application, James Engineering stated:

In item 5 of its payment schedule ABB has purported to off-set against the amount claimed in the payment claim a sum of $1,746,160.00 for liquidated damages. [emphasis added]

[38] At paragraph 19 of its submissions, James Engineering set out its contentions as to why ABB is not entitled to do this. Those contentions are (in summary):

• (a) that the liquidated damages clause in the Contract is a penalty and not enforceable;

• (b) that ABB is estopped from claiming liquidated damages under the Contract by an agreement made with James Engineering; and

• (c) that the dates for delivery of various items under the Contract were extended as a result of various Purchase Orders issued by ABB.

[39] ABB responded to each of those contentions at paragraphs 36.1 to 36.57 of its submissions in the Adjudication Response. In his Determination the Adjudicator did not refer to any of this material.

[40] The Adjudicator said, at paragraph 302) of his reasons:

1. In order for a dispute relating to liquidated damages to be adjudicated, the respondent was required make its claim for liquidated damages by way of the payment schedule and then, if the applicant rejected the respondent's claim for liquidated damages, either party was entitled to make an application for adjudication in relation to the payment dispute.

[41] Then, after setting out the definition of "payment claim" in s 4 of the Act and the definition of "payment dispute" in s 8 of the Act, the Adjudicator said, at paragraphs 306) to 308):

1. In this case if the respondent had applied liquidated damages, then that would be a payment claim for the purposes of the CCA and the respondent would have accrued a right to have the payment disputed adjudicated when the applicant rejected the respondent's claim.

2. If the respondent did not accept the applicant's rejection of its claim for liquidated damages, under section 28 of the CCA, the respondent had 90 days from the date that the dispute had arisen to make an adjudication application.

3. Alternatively, the respondent could have applied the liquidated damages by way of the payment schedule and if the applicant had considered that to give rise to a payment dispute, then the applicant was entitled to make an application for adjudication in relation to the liquidated damages. [emphasis added]

[42] In other words, the factual error made by the Adjudicator (that ABB had not purported to set-off liquidated damages against any amount otherwise owing in the Payment Schedule) had no operative effect on the Determination. The Adjudicator said that even if the Payment Schedule had set-off liquidated damages against the Payment Claim, he would not have dealt with the set-off. He determined that the only way a decision could be made about whether ABB was entitled to set-off liquidated damages against James Engineering's Payment Claim was if a separate payment dispute within the meaning of the Act arose in relation to the claim for liquidated damages and either ABB or James Engineering applied for adjudication of that payment dispute. That is not correct. ABB was entitled to rely on its claim that James Engineering was indebted to it for liquidated damages as a defence to James Engineering's Payment Claim. Further, the mechanism set out by the Adjudicator could never lead to a determination of ABB's claim that it was entitled to set-off liquidated damages against the Payment Claim because it necessitated the existence of two payment disputes; an adjudicator cannot adjudicate two payment disputes simultaneously, except by consent [s 34(3)(c)]; and in any case the payment dispute arising out of James Engineering's Payment Claim had already been determined (or at least purportedly determined).

[43] Examined at that level of detail, what is the nature of the Adjudicator's error? It does not seem to me that it involved a misunderstanding of the definition of either "payment claim" or "payment dispute". Rather, the Adjudicator appears not to have understood the nature of a set-off as a defence to a payment claim. That, it seems to me, is an error of law. Did that error of law cause the Adjudicator to misconstrue the nature of his functions under the Act? That is a difficult question, but, on balance, I think it did. It led the Adjudicator to fail entirely to deal with the merits of ABB's claimed set-off which constituted a substantial part of ABB's Adjudication Response and which, had it been entirely successful, would have been a complete answer to James Engineering's claim. This it seems to me cannot be said to constitute a bona fide attempt to carry out the Adjudicator's core function under s 33(1)(b). There is no challenge to the Adjudicator's bona fides, but the task he embarked upon was not the one he was required to perform - namely to determine on the balance of probabilities whether there was an amount owing by ABB to James Engineering and, if so, how much [s 33(1)(b)] on the basis of the Adjudication Application and the Adjudication Response [s 34(1)].

Alleged breach of natural justice in relation to clause 18.1

[44] ABB contends that the Adjudicator made a critical finding about how clause 18 of the Contract General Terms and Conditions applied, which neither ABB nor James Engineering submitted was the case, without first giving them the opportunity to make submissions on that issue. ABB submits that this was both a failure to comply with the requirements of s 34(1)(a) of the Act, which required the Adjudicator, if possible, to make his determination on the basis of the Adjudication Application and its attachments and the Adjudication Response and its attachments, as well as being a failure to accord procedural fairness.

[45] In the Payment Schedule and in the Adjudication Response, one of the reasons given by ABB for assessing the amount owing under the Payment Claim to be $nil was that the Payment Claim was invalid. Among the asserted reasons for invalidity were:

• (a) that James Engineering was not contractually entitled to issue the Payment Claim, because it was issued without ABB having first issued a Change Order for each of the variations, as required by the Contract;[19]

(b) that James Engineering had not delivered notices under clause 18.1[20] which complied with all the requirements of clause 18; and

(c) that the Payment Claim had not been delivered within 30 days after the completing the last Contract Milestone in accordance with the Contract.[21]

[46] ABB made no submissions about whether James Engineering would have been contractually entitled to issue the Payment Claim if James Engineering had provided ABB with valid notices under clause 18 in relation to the claimed variations in the Payment Claim without ABB first issuing Change Orders for those variations.

[47] In the Adjudication Application, James Engineering submitted that

• (a) it had delivered valid notices under clause 18.1 for each of the variation claims in the Payment Claim; and
• (b) as the Contract did not contain any provisions dealing with the making of progress claims for variations, s 18 of the Act implies into the Contract the provision in Division 3 of the Schedule of the Act, which provides:

The contractor is entitled to make one or more claims for a progress payment in relation to the contractor's obligations it has performed and for which it has not been paid by the principal.

Therefore, James Engineering contended, the Payment Claim had been validly made, because neither the 30 day time limit, nor the requirement for ABB to make a Change Order applied.

[48] James Engineering made no submissions about the contractual effect of James Engineering providing a valid notice under clause 18.1 if the implied terms in the Schedule to the Act did not apply.

[49] The Adjudicator rejected James Engineering's contention that the implied terms in the Schedule to the Act applied.[22] In relation to some of the claimed variations, the Adjudicator accepted that James Engineering had given valid notices under clause 18.1; in relation to others he found that no valid notice had been given. ABB accepts that this was a valid exercise of the Adjudicator's functions under the Act.

[50] The Adjudicator went on to determine that "clause 18.1 provides that if James Engineering gave notice of a claim pursuant to clause 18.1, it would have accrued a right to make a claim at any future time".[23] ABB takes issue with that and claims that it was not open to the Adjudicator to make a determination based on that finding: neither party had contended that that would be the effect of James Engineering giving valid notices under clause 18.1, and the Adjudicator did not give the parties an opportunity to make submissions on that issue.

[51] ABB contends further, that the Adjudicator's failure to afford it the opportunity to make submissions on this issue deprived it of the possibility of a successful outcome. ABB claims that, if it had been asked to provide further submissions about this issue, it would have submitted that, on the true construction of clause 18, providing a valid notice under clause 18.1 did not result in the parties not having to comply with the requirements of clauses 8 and 12 of the Contract. The only purpose of clause 18.1 is to ensure that ABB had timely notice of any claims of any kind which James Engineering intended to make. It was still necessary for the parties to comply with all of the other provisions of the Contract. Hence it was still necessary for ABB to issue Change Orders before James Engineering had an entitlement to payment for variations; and it was still necessary for James Engineering to comply with the other time requirements under the Contract before it was contractually entitled to make a valid payment claim in relation to the claimed variations.

[52] ABB contends that, therefore, the Determination is void for breach of procedural fairness. I do not agree.

[53] Procedural fairness required that the Adjudicator notify the parties of "proposed conclusions that were not put forward by the parties and could not be easily anticipated".[24] The Court will set aside a purported determination by an adjudicator where there has been a failure by an adjudicator to provide procedural fairness and, as a result, a party has been deprived of the possibility of a successful outcome.[25]

[54] The statutory framework within which a decision-maker operates is of critical importance when considering what procedural fairness requires.[26] Like the scheme of the New South Wales legislation under consideration in Probuild, the Act "creates an entitlement that is 'determined informally, summarily and quickly, and then summarily enforced without prejudice to the common law rights of both parties which can be determined in the normal manner'."[27] As the Court of Appeal pointed out in JKC v Inpex, the Act provides for extremely abbreviated time frames and a very limited time frame within which adjudicators are required to make decisions on what are often complex claims involving substantial volumes of documents.

The tight time limits the Act imposes on an adjudicator, the possibility that the adjudicator may have no legal qualifications, and the interim nature of an adjudication inform the content of the requirements of procedural fairness in any adjudication.

For these reasons, adjudications are not intended to be scrutinised in the same way as considered final determinations; and, as the New South Wales Court of Appeal has observed, where "the issues ... were on the table before the adjudicator, there can be no denial of procedural fairness".[28]

[55] However, as McDougall J said in Musico v Davenport:[29]

Nonetheless, what an adjudicator is required to do is to decide the dispute between the parties. Under the scheme of the Act, that dispute is advanced by the parties through their adjudication application and adjudication response (which, no doubt, will usually incorporate the antecedent payment claim and payment schedule). If an adjudicator is minded to come to a particular determination on a particular ground for which neither party has contended then, in my opinion, the requirements of natural justice require the adjudicator to give the parties notice of that intention so that they may put submissions on it. ...

It follows, in my opinion, that where an adjudicator determines an adjudication application upon a basis that neither party has notified to the other or contended for, and that the adjudicator has not notified to the parties, there is a breach of the fundamental requirement of natural justice that a party to a dispute have "a reasonable opportunity of learning what is alleged against him and of putting forward his own case in answer to it".

[56] The test is an objective one: did the party asserting the breach of procedural fairness receive express notice that either the adjudicator or the other party would rely upon the issue or principle concerned, or should that party reasonably have anticipated that that would be the case?[30]

[57] In my view, the question of whether James Engineering had given valid notices of its variation claims the subject of the Payment Claim, and the effect that had on the validity of the Payment Claim under the Contract was "on the table" in the relevant sense. The question of whether James Engineering had given valid notices under clause 18.1 in relation to each of the claimed variations was squarely in issue, as was the question of what effect that had on the validity of the Payment Claim under the Contract. The fact that the Adjudicator arrived at an answer to that question by a process of reasoning different from that put forward by either of the parties does not amount to a breach of procedural fairness in the context of an adjudication to which the principles set out above apply. Given the tight time limits the Act imposes, the fact that the Adjudicator had no legal qualifications, and the interim nature of the Determination, it is not appropriate for this Court to scrutinise the Adjudicator's reasoning process with the level of detail entailed in ABB's submissions. There has been no substantial denial of procedural fairness on this issue such as would amount to jurisdictional error. For the same reason, the Adjudicator did not, in this respect, fail to comply with the requirements of s 34(1)(a) of the Act, requiring him to make his determination on the basis of the Adjudication Application and the Adjudication Response.

Alternative Breach/es of Procedural fairness claim

[58] ABB has applied for leave to amend its originating motion to add claims that the Adjudicator failed to follow the requirements of procedural fairness by making six very specific findings or conclusions in nominated paragraphs of the Determination (paragraphs 173 and 299, 301, 302, 306, 307 and 308) without seeking further submissions from the parties on those specific issues.

[59] James Engineering objects to ABB being given leave to amend its originating motion.

The nature of the statutory scheme/the principles in Aon Risk Services

[60] James Engineering relies on the nature of the statutory scheme under consideration as a "pay now, argue later" scheme designed to provide a speedy and effective means of ensuring cash flow to builders from the parties with whom they contract,[31] and contends that in such a scheme, any potential delay occasioned by proposed amendments, must carry special significance. James Engineering points out that the Payment Claim was served on 22 December 2017 and the validity of the Adjudication remains uncertain some twelve months later.

[61] However, the chronology supplied by counsel demonstrates that the major part of the delay was occasioned by inaction on the part of the parties - no doubt for their own good reasons. The Determination was made on 15 May 2018. The originating motion seeking to have the Determination quashed was filed on 23 May 2018. Grant CJ granted an injunction staying execution of the Determination on 5 June 2018. Thereafter nothing seems to have been done until an amended originating motion was filed on 6 November 2018; the Registry allocated expedited hearing dates and the matter was heard on 30 November 2018. Were I to consider that it was otherwise just to allow the amendments, I would not be dissuaded from doing so by the submission about delay. At the hearing on 30 November 2018 I made directions for ABB to file and serve written submissions in relation to its application for leave to amend the originating motion within seven days and for James Engineering to file and serve submissions in reply within a further seven days (ie by 10 December 2018). I indicated that I would deliver judgment within seven days of receiving James Engineering's submissions. By consent, James Engineering was given an extension of time until close of business on 14 December 2018 to file and serve its submissions. If it had stuck to the original time-table it would have had judgment by 17 December 2018. As it is, judgment will be handed down on or before 21 December.

[62] The same analysis applies to James Engineering's submissions based on Aon Risk Services Limited v Australian National University[32] that "the question of amendment of a pleading is not simply subject to the payment of costs by way of compensation, but necessarily involve questions of delay, wasted costs and concerns of case management with an explanation for any delay in applying for amendment". In this case there will be no additional delay as a result of any amendments beyond the time taken for the parties to argue whether the amendments should be allowed. Submissions on that issue and on the issues raised by the amendments were to be in writing and filed and served within the times set out above.

[63] James Engineering relies on the fact that ABB has issued proceedings in the Supreme Court of Queensland claiming payment of liquidated damages under the contract and makes the following submissions at paragraphs 15 to 17 of its written submissions.

1. This Court is presently seized with a controversy that arises in part out of questions of contractual construction, for instance, whether the last date for the First Defendant to make a payment claim of any nature in respect to the construction contract has passed.
2. Whether the First Defendant can bring a payment claim falls to be determined on the proper construction of the contract.
3. The Supreme Court of Queensland is now also seized with the same contractual controversy.

1. The First Defendant is not submitting that the Plaintiff was not entitled to pursue the Contract Proceeding [in the Supreme Court of Queensland]. However, having made that election during this proceeding it is a matter which weighs heavily against exercising the Court's discretion to allow the proposed amendments.

[64] That is simply incorrect. Had the Adjudicator performed his role as he ought to have done, he would have been required to determine whether ABB was entitled to liquidated damages under the Contract (which may have involved the issue of construction referred to) but no such issue arises in this proceeding. The only issue in this proceeding is whether the Determination is in truth a determination under the Act immune from review under s 48, or whether the purported Determination is void because the basic requirements of the Act have not been complied with, or there has been a substantial denial of the measure of natural justice that the Act requires to be given. In relation to the proposed amendments (if leave is given to amend) the only issue/s will be whether the Determination is void because the Adjudicator failed to accord procedural fairness in the manner pleaded.

[65] James Engineering also submits that there would be no prejudice to ABB if leave to amend were not given because the Determination is presently stayed; the Adjudication amount has been paid into Court; ABB is pursuing a claim in the Supreme Court of Queensland to recover the liquidated damages; if it succeeds it will recover those and the evidence is that James Engineering will be able to pay the liquidated damages. That is all rather by the way. ABB has brought these proceedings to set aside the Determination for jurisdictional error. If there is a reasonable prospect of ABB succeeding in establishing that the Adjudicator failed to accord procedural fairness in the way alleged in the amendments, then a refusal of leave may mean that ABB is denied an opportunity to set aside a purported determination which is void for breach of procedural fairness.

[66] James Engineering also submits that giving leave to make the amendments in the proposed third amended originating motion would be futile as they have no reasonable prospects of success. I agree.

[67] The Adjudicator failed to consider ABB's claim that it was entitled to set-off an entitlement to liquidated damages against any amounts otherwise owing to James Engineering, having apparently failed to understand what was meant by a defence of set-off. The discussion during the trial of the proceeding which led to this application for leave to amend the originating motion concerned the fact that neither party had advanced the position finally adopted by the Adjudicator and the Adjudicator failed to give the parties advance notice that he intended to ignore ABB's claimed set-off, and of the reasons why he believed he was obliged to do so,[33] and failed to give the parties an opportunity to make submissions on the point.

[68] I remain of the view that it is at least strongly arguable that it was a substantial breach of procedural fairness for the Adjudicator not to give advance notice to the parties that he was intending not to determine the merits of ABB's claimed set-off and to invite submissions on whether it would be correct for him to proceed that way.

[69] I do not think it can be said that the basis upon which the Adjudicator decided not to consider ABB's claim to set-off liquidated damages was "on the table" in the sense that the clause 18.1 issues were. James Engineering did not contend, in its submissions in support of the Application, that ABB could not set-off the claimed liquidated damages against amounts owing to it unless they were the subject of a separate payment dispute and a separate application for adjudication. Nor did the Adjudicator call for submissions on the issue. ABB therefore had no express notice that there was a possibility that the Adjudicator might refuse to deal with the merits of its claimed set-off on that basis.

[70] Nor, in my opinion, could it have been reasonably anticipated that the Adjudicator would decline to deal with the merits of ABB's claim to set-off liquidated damages on that basis. The submissions of both parties were directed at the merits of the claimed set-off. I do not think it could reasonably have been anticipated that the Adjudicator would fail to understand the nature of a set-off. In those circumstances, it is at least strongly arguable that the Adjudicator was obliged to give notice to the parties that he was considering making his Determination on the basis that ABB's claim for liquidated damages was a separate payment claim that could only be adjudicated by way of a separate adjudication application, and to give ABB in particular an opportunity to make submissions on the issue. He failed to do so and, accordingly, it is at least strongly arguable that there has been a breach of the fundamental requirement of natural justice that a party to a dispute have "a reasonable opportunity of learning what is alleged against him and of putting forward his own case in answer to it".

[71] However, the proposed amendments to the originating motion do not squarely raise that issue. Rather, ABB has isolated six different findings or conclusions made by the Adjudicator in the paragraphs of the Determination in which he deals with the issue of liquidated damages, and has pleaded that the Adjudicator failed to follow the requirements of procedural fairness in not seeking further submissions in relation to each of those findings or conclusions. That is not the gravamen of the Adjudicator's failure to accord natural justice. The failure to accord natural justice (arguably) consisted of deciding not to deal with the parties' arguments on the merits of ABB's claim to a set-off without telling the parties' what he was thinking of doing and giving them an opportunity to be heard on the subject.[34]

[72] I do not think the amendments have any reasonable prospect of succeeding as presently framed. Nor do I think it would be reasonable to allow ABB yet another opportunity to amend the originating motion to plead the cause of action as discussed at the hearing. Were this matter to be adjourned further, there would, in my view, be much more force in James Engineering's submissions based on delay and the principles in Aon.

[73] Counsel for ABB has indicated that ABB is happy for me to determine this application on the papers, on the basis of its current proposed amendments and the written submissions of the parties. James Engineering has requested an opportunity to make further oral submissions on the issue of whether ABB should be permitted to amend. I do not require further submissions, and James Engineering will not be prejudiced by not being permitted to make them as I have determined not to permit the amendments. (Nor do I think ABB will be unduly prejudiced by not being afforded an opportunity to seek leave to further amend the originating motion as it has been successful on another ground.) I indicated that I would hand down my decision on the proceeding as a whole within seven days of receiving the last of the submissions on the amendment issue and I intend to do so.

[74] ORDERS:

There will be a declaration that the Determination is a nullity and an order in the nature of certiorari setting aside the Determination.

[1] [2010] HCA 1; (2010) 239 CLR 531

[2] That was the intent of the notice; the wording was somewhat obscure.

[3] North Australian Aboriginal Justice Agency Limited v Northern Territory [2015] HCA 41 at [39] and [41]

[4] Section 48(1) provides a right to have a decision by an adjudicator under s 33(1)(a) to dismiss an application without determining the merits reviewed by the Local Court.

[5] (2004) 61 NSWLR 421; [2004] NSWCA 394

[7] AJ Lucas Operations Pty Ltd v Mac-Attack Equipment Hire Pty Ltd [2009] NTCA 4; (2009) 25 NTLR 14 at [29]; [2009] NTCA 4; Trans Australian Constructions Pty Ltd v Nilsen (SA) Pty Ltd [2008] NTSC 42; (2008) 23 NTLR 123 at 138 [43]; Independent Fire Sprinklers (NT) Pty Ltd v Sunbuild Pty Ltd [2008] NTSC 46; (2008) 24 NTLR 15 at 25 [49]; Hall Contracting Pty Ltd v MacMahon Contractors Pty Ltd (2014) 34 NTLR 17 at 31 [34];See also Probuild Constructions (Aust) Pty Ltd v Shade Systems Pty Ltd [2018] HCA 4

[8] [2016] WASC 386

[9] Like the NT Act, the WA Act precludes an adjudicator from adjudicating more than one payment dispute at a time, except by consent.

[10] Like the NT Act, s 6 of the WA Act relevantly provides that a payment dispute arises if by the time when the amount claimed in a payment claim is due to be paid under the contract, the amount has not been paid in full, or the claim has been rejected or wholly or partly disputed.

[11] This is s 33(1)(b) in the NT Act.

[12] This is s 34(3)(b) in the NT Act.

[13] Le Miere J cited Alliance Contracting Pty Ltd v James [2014] WASC 212 at [50] and [76] for the proposition that an adjudicator is required to take into account the respondent's response, including the merits of any counterclaim or set-off, in reaching his determination.

[15] The respondent contended in written submissions that Probuild Constructions (Aust) Pty Ltd v Shade Systems Pty Ltd [2018] HCA 4 ("Probuild") is "authority for the contrary proposition ie no jurisdictional error". It is not. The only issue for determination in Probuild was "whether the scheme established by the [New South Wales] Security of Payment Act for claims for, and payment of, progress payments ousts the jurisdiction of the Supreme Court of New South Wales to make an order in the nature of certiorari to quash a determination by an adjudicator for error of law on the face of the record that is not a jurisdictional error" (at [2]). The High Court did not consider or analyse the nature of the error that was said to have been made by the adjudicator. A brief statement of the decision of the adjudicator which was sought to be challenged appears at para [22]: Pursuant to s 17 of the Security of Payment Act, Shade Systems applied for adjudication of its payment claim. The adjudicator rejected Probuild's liquidated damages claim on the basis that liquidated damages could not be calculated until either "practical completion" (being actual completion of the works) or termination of the subcontract. The adjudicator determined that the amount of the progress payment payable by Probuild to Shade Systems was $277,755.03 (including GST). Presumably this was considered, by the court below to be characterised as an error of law on the face of the record. It is not the same kind of error considered in Cooper & Oxley.

[16] (2009) 25 NTLR 14; [2009] NTCA 4

[17] The two Acts have the same general scheme which is different to the "East coast" model in the New South Wales, Victorian, Queensland, South Australian, Tasmanian and ACT legislation.

[19] clause 8.2 of the General Terms and Conditions of the Contract

[20] Clause 18.1 18 required James Engineering to give ABB written a notice of any claim it wished to make "however arising, including for negligence" "within 15 days after [it] became aware, or ought reasonably to have become aware, of the event or circumstances on which the Claim is based". Clause 18 goes on to prescribe details of the claim that would need to be provided in such notices.

[21] clause 12.1 of the Contract General Terms and Conditions, Schedule 3 and Attachment A1

[22] Determination [78] (page 24)

[23] Determination [80], [172] (pages 25 and 44)

[24] Zurich Bay Holdings Pty Ltd v Brookfield Multiples Engineering and Infrastructure Pty Ltd [2014] WASC 40 ("Zurich Bay") at [10]

[25] Stead v SGIO [1986] HCA 54; (1986) 161 CLR 141 at 147; Zurich Bay at [12]

[26] SZBEL v Minister for Immigration and Multicultural and Indigenous Affairs [2006] HCA 63; (2006) 228 CLR 152 at 160-161, [26]

[27] Probuild at [44], citing Falgat Construction Pty Ltd v Equity Australia Corp Pty Ltd [2005] NSWCA 49; (2005) 62 NSWLR 385 at 389 [22]; JKC Australia LNG Pty Ltd v Inpex Operations Australia Pty Ltd [2018] NTCA 6 ("JKC v INPEX") at [34]

[28] JKC v Inpex at [38] and [39] citing Probuild Constructions (Aust) Pty Ltd v DDI Group Pty Ltd [2017] NSWCA 151 at [105]

[29] [2003] NSWSC 977 at [107] and [108]

[30] JKC v Inpex at [41]; M & P Builders Pty Ltd v Norblast Industrial Solutions Pty Ltd (2014) 34 NTLR 162 at [41]

[31] RJ Neller Building Pty Ltd v Ainsworth [2008] QCA 397; [2009] 1 Qd R 390 per Keane JA; and see Probuild Constructions (Aust) Pty Ltd v Shade Systems Pty Ltd [2018] HCA 4; (2018) 351 ALR 225 at [36]- [44], [51]

[33] These are set out at paragraph 302) and paragraphs 306) to 309) of the Determination.

[34] The proposed third amended originating motion does include a pleading that it was a denial of procedural fairness not to seek further submissions on individual components of the Adjudicator's reasoning, but not on the Adjudicator's vital conclusion not to deal with ABB's claim for a set-off.