Acciona Infrastructure Australia Pty Ltd v Chess Engineering Pty Ltd

Submissions

Acciona submits that the effect of the judgment is that the Adjudicator committed a jurisdictional error and, as a consequence, the Determination should be quashed and the money held in Court, together with accrued interest, should be paid out to it.
Acciona submits that the existence of jurisdictional error means that the Determination is void ab initio and does not confer any rights or impose any obligations on the parties, whether or not the relief it seeks issues.
Acciona acknowledges that the amount directly affected by the error is small but says that the error was, nonetheless, jurisdictional which means that there was no determination for the purposes of s 22(2) of the SoP Act and that Chess Engineering has no right to be paid any part of the purportedly determined amount.
In support of its submissions, Acciona referred to the decisions of Stevenson J in New South Wales Netball Association Limited v Probuild Construction (Aust) Pty Ltd [2015] NSWSC 1339 (NSW Netball), Ball J in Parrwood Pty Ltd v Trinity Constructions (Aust) Pty Ltd [2020] NSWSC 208 (Parrwood), which was upheld on appeal in Parrwood Pty Ltd v Trinity Constructions (Aust) Pty Ltd [2020] NSWCA 172, and general principles of administrative law as referred to in Minister for Immigration and Multicultural Affairs v Bhardwaj (2002) 209 CLR 597; [2002] HCA 11 (Bhardwaj) at [51], [53]; Plaintiff S157/2002 v Commonwealth of Australia (2003) 211 CLR 476; [2003] HCA 2 (Plaintiff S157) at [76]; Lee v R (2014) 253 CLR 455; [2014] HCA 20 at [36] and Public Service Association of South Australia Inc v Industrial Relations Commission of South Australia (2012) 249 CLR 398; [2012] HCA 25 at [57].
Acciona also submits that, as there is no determination at law, the Court has no power to require payment of any part of the money held in Court to Chess Engineering or to condition the grant of any relief on the making of such a payment. It says that, were the Court to do so, it would be giving legal effect to the Determination where the Court has found the Determination has no such effect. Acciona advances this submission accepting that it cuts against the provisional stance reached in the judgment, but has done so having read paragraph [217] of the judgment as suggesting that the Court may be assisted (correctly) on further submissions on the nature of any orders to be made in this case.
Acciona's alternative position on the orders to be made is that the Determination should be quashed to reflect that the Court has concluded that it was affected by jurisdictional error with the money paid into Court (and interest) to be allocated between the parties, with Chess Engineering to be paid the adjudicated amount less the $2,760, and the balance (including interest) paid to Acciona. This alternative submission is made on the assumption that relief is to be conditioned on the payment of money to Chess Engineering, as referred to at [218] of the judgment. Acciona also submits that the payment to Chess Engineering should be by way of an interim payment on account, rather than a final payment as s 32 of the SoP Act is concerned with interim rights and not final rights.
Chess Engineering submits that, in the exercise of the Court's discretion, the appropriate orders are for the summons to be dismissed and for the money paid into Court (and accrued interest) released to Chess Engineering save for the sum of $2,760, which should be paid to Acciona.
The matters relied on by Chess Engineering as justifying the Court exercising its discretion in that manner can be summarised as: 1. the invalidation of the Determination by reason of a proportionately insignificant error that barely affects Chess Engineering's entitlement to a progress payment would undermine the purpose and object of the SoP Act, particularly in the context where clerical mistakes, accidental slips, material miscalculations and defects in form may be corrected: SoP Act, s 22(5); 2. the bulk of Chess Engineering's affidavit evidence related to an allegation made by Acciona that the Determination was invalid because the adjudication application was not properly served, which Acciona did not press at the hearing; 3. the amount affected by the error, namely $2,760, is far less than the interest that has accrued on the amount that is sought to be released to Chess Engineering since 4 June 2020, when payment into Court was made; and 4. the sole issue on which Acciona had success, namely the challenge to V17, was not an issue that was particularised in Acciona's List Statement but was raised for the first time in its written submissions.
Chess Engineering also submits that, in any event, the Determination is not infected by jurisdictional error. I understand this submission to mean that Chess Engineering contends that the Determination should not be quashed, Acciona's summons should be dismissed and all amounts held in Court should be released to it.
In support of the submission that the Determination is not infected by jurisdictional error, Chess Engineering says that: 1. the judgment does not say that the Adjudicator committed a jurisdictional error but should be read as accepting that the Adjudicator exceeded his jurisdiction in relation to one component of a single item in dispute and not that he exceeded his jurisdiction in relation to Chess Engineering's claim as a whole; 2. the finding of error in relation to the one component of V17 was so small as a proportion of the overall claim that, even if it constituted error, it was not jurisdictional because it was not substantial enough to disclose a failure by the Adjudicator to perform the function that the SoP Act imposed on him and was so insignificant that it did not materially affect the Determination, relying on Hossain v Minister for Immigration and Border Protection (2018) 264 CLR 123; [2018] HCA 34 (Hossain) and the maxim de minimis non curat lex; 3. de minimus challenges are not a sound basis for obtaining relief that an adjudication determination is void, referring to the recent decision of Bond J in SHA Premier Constructions Pty Ltd v Niclin Constructions Pty Ltd (No 2) [2020] QSC 323 (Niclin No 2); and 4. the SoP Act should not be construed as providing that an insignificant error of the type found in this case would render a determination invalid or void and to do so would frustrate its expressed object of assisting and supporting contractors who carry out construction work.
Consistent with its position at the hearing, Chess Engineering submits that the Court has the discretion to grant relief on condition that the unaffected parts of the Determination are paid to it. It also takes issue with Acciona's submission that the Court has no power to do so, contending that the Court had already made findings on those matters.
Chess Engineering also submits that the Court could sever the Adjudicator's decision in relation to the unaffected component of the Determination from the affected part, noting there is much support for such an approach and referring to some of the authorities referred to in the judgment at [208] and [212].

Consideration and decision

At the outset, it is appropriate to say something about V17 and my findings.
In the Payment Claim, Chess Engineering claimed payment of $22,586 for V17 against which Acciona scheduled $19,826, leaving $2,760 in dispute in the Adjudication. The dispute related to the labour cost of project managing the works that were also the subject of V17. The Adjudicator determined that Chess Engineering was entitled to the amount claimed for V17.
Acciona raised three grounds of challenge to the Adjudicator's decision in relation to V17. I rejected Acciona's challenges that the Adjudicator had failed to consider the Payment Schedule and had denied Acciona procedural fairness, but upheld its challenge that the Adjudicator erred in failing to form a view as to what was properly payable.
I held that the Adjudicator's reasons did not indicate that he had assessed the merits of Chess Engineering's claim and valued the works having regard to the materials before him. Rather, I found that the Adjudicator accepted the claim based on a rejection of Acciona's submissions: at [196] - [199].
To the extent it is not clear from my reasons, my finding that the Adjudicator erred in his statutory task and went beyond jurisdiction was in respect of the disputed amount of $2,760 only. In my view, the Adjudicator's error was his failure to form a view as to what was properly payable in respect of Chess Engineering's claim to that amount in circumstances where he rejected Acciona's submissions that dealt with the disputed amount only and accepted that part of the claim.
As noted in the judgment, at the hearing, Chess Engineering reserved the right to make submissions that the Determination should not be declared void at all if only a small part of the Determination was identified as subject to jurisdictional error: at [209]. Acciona submitted that any jurisdictional error would mean the Determination was void and that the Court had no discretion in that regard, but also acknowledged that an error in respect of a minor part of the claim might be something that impacts whether or not it is properly characterised as jurisdictional error, contending that it would be a matter for Chess Engineering to establish that the error was not so bad to infect the whole of the Determination: at [213].
Having regard to those submissions and my finding that the Adjudicator erred in relation to the disputed part of V17 only, the parties were invited to make further submissions on relief and the question of whether the Adjudicator's error constituted jurisdictional error that infects the Determination as a whole is still to be decided.
As Chess Engineering submits, the finding of error relates to one component of a discrete and proportionately small aspect of the Determination, rather than a finding that the Adjudicator exceeded his jurisdiction in relation to Chess Engineering's claim as a whole. This is to be contrasted with the position in NSW Netball and Parrwood, both cases that involved jurisdictional errors that undermined all aspects of the claims in issue.
In NSW Netball, the adjudicator's determination was made in excess of jurisdiction as the payment claim with which it dealt was served in contravention of the SoP Act: at [48]. As the Determination was vitiated by jurisdictional error, Stevenson J held that the decision was null and void whether or not he granted the relief sought (at [49]), referring to the principle enunciated by the High Court in Plaintiff S157, that an administrative decision which involves jurisdictional error is "regarded, in law, as no decision at all": at [76] (Gaudron, McHugh, Gummow, Kirby and Hayne JJ).
In Parrwood, Ball J held that a determination was void as the adjudicator failed to determine the amount of the progress payment after the adjudicator concluded that the right to payment had been suspended under the contract, leaving nil payable: at [35], [36]. An issue in that case was whether the party asserting that the determination was void needed to commence proceedings seeking relief to that effect before pursuing a second determination in relation to the same issues. Ball J concluded that it was not necessary to do so as the determination was void and had no effect at law: at [30]. Ball J's decision was upheld by the Court of Appeal: Parrwood Pty Ltd v Trinity Constructions (Aust) Pty Ltd [2020] NSWCA 172 at [46].
The above cases and those referred to at [9] establish that adjudication determinations that involve jurisdictional error are treated as decisions which are properly regarded for the purposes of the law as "no decisions at all" and, to that extent, are "invalid" or "void": see for example, Bhardwaj at [17], [46], and [51]. There is also authority that jurisdictional error that affects a part but not all of a claim is sufficient to render an entire determination void: see for example, Anderson Street Banksmeadow Pty Ltd v Helcon Contracting Australia Pty Ltd [2013] NSWSC 657 at [24], [25]. I note that, in Anderson Street, the aspect of the determination found to have been made in error related to a little under half of the entire adjudicated amount and was also found to involve a denial of procedural fairness.
As noted above, Acciona acknowledged at the hearing that an error in respect of a minor part of a progress claim might be something which impacts whether the error is properly characterised as jurisdictional error.
The amount affected by the error is very small in proportion to the rest of the adjudicated amount - only 0.43% of the total amount. The error was also not critical to and did not determine the outcome of the Adjudicator's findings on the other aspects of Chess Engineering's claim.
The question that arises from the parties' submissions and my finding in relation to V17 is whether the Adjudicator's error constitutes jurisdictional error that infects the Determination such that an order should be made that quashes the Determination. I am persuaded by Chess Engineering's submissions that the answer to that question is no.
Jurisdictional error in a statutory context ordinarily incorporates a threshold of materiality in the event of non-compliance with a condition to be observed in the course of a decision-making process: Hossain, at [29] (Kiefel CJ, Gageler and Keane JJ), [39] (Nettle J), [67] (Edelman J).
As the plurality in Hossain stated: [27] Just as identification of the preconditions to and conditions of an exercise of decision-making power conferred by statute turns on the construction of the statute, so too does discernment of the extent of non-compliance which will result in an otherwise compliant decision lacking the characteristics necessary to be given force and effect by the statute turn on the construction of the statute. The question of whether a particular failure to comply with an express or implied statutory condition in purporting to make a particular decision is of a magnitude which has resulted in taking the decision outside the jurisdiction conferred by the statute cannot be answered except by reference to the construction of the statute. … [30] Whilst a statute on its proper construction might set a higher or lower threshold of materiality, the threshold of materiality would not ordinarily be met in the event of a failure to comply with a condition if complying with the condition could have made no difference to the decision that was made in the circumstances in which that decision was made. The threshold would not ordinarily be met, for example, where a failure to afford procedural fairness did not deprive the person who was denied an opportunity to be heard of "the possibility of a successful outcome", or where a decision-maker failed to take into account a mandatory consideration which in all the circumstances was "so insignificant that the failure to take it into account could not have materially affected" the decision that was made.
The SoP Act requires an adjudicator to determine the "amount and timing of the progress payment": SoP Act, s 22(1); Probuild Constructions (Aust) Pty Ltd v Shade Systems Pty Ltd (2018) 264 CLR 1; [2018] HCA 4 at [80]. This requires an adjudicator to come to a view as to what was properly payable having regard to the value and merits of a claim: Laing O'Rourke Australia Construction Pty Ltd v Monford Group Pty Ltd [2018] NSWSC 491 at [1] to [5] and the cases there cited.
While required to come to that view and make a determination on the amount of a progress claim, the SoP Act does not expressly mandate that an adjudicator is required to fully consider, assess and value each individual element of what may be a sizeable payment claim separately, failing which their decision is a nullity.
The SoP Act also makes clear that not every error by an Adjudicator will invalidate a decision. It provides that an error arising from an accidental slip or omission may be corrected on an adjudicator's own initiative or on the application of the claimant or respondent: SoP Act, s 22(5).
The object of the SoP Act is to ensure any person who carries out construction work can recover progress payments: SoP Act, s 3. The regime has been described as providing for a unique form of fast track adjudication procedure to enable progress payments to be made promptly, on account, and without prejudice to disputes under the parties' contract or other rights at law being effected: Style Timber Floor Pty Ltd v Krivosudsky (2019) 100 NSWLR 133; [2019] NSWCA 171.
In my view, the above matters indicate that the SoP Act should be interpreted as incorporating a threshold of materiality in the event of non-compliance by an adjudicator in undertaking their statutory task of determining the amount and timing of a progress payment such that legal force and effect should not be denied to a decision made in the event of every error in undertaking that task: Hossain at [29].
In John Holland Pty Ltd v Roads & Traffic Authority of New South Wales [2007] NSWCA 19, Hodgson JA, with whom Beazley JA (as her Excellency then was) agreed, considered that a mere failure through error to consider a provision of the SoP Act or a contract or a submission of a party to an adjudication was not a matter which the legislature intended would invalidate a decision even though the relevant requirements of s 22(2) are that the adjudicator consider the provisions of the SoP Act, the provisions of the contract and submissions duly made: at [54] and [55]. His Honour said (at [55]): One could express this by saying that such an accidental or erroneous omission does not amount to a failure to comply with s 22(2), so long as the specified classes of considerations are addressed; or alternatively, if one takes the view that s 22(2) does require consideration of each and every relevant provision of the Act and the contract and each and every submission duly made, the intention of the legislature cannot have been that this kind of mistake should invalidate the determination. In a case where there were 1,000 submissions duly made, an accidental failure to consider one of them could not reasonably be considered as invalidating a whole determination; and there is no basis for partial invalidation of a determination, that is, invalidation only of that part affected by the omitted submission.
In SHA Premier Constructions Pty Ltd v Niclin Constructions Pty Ltd [2020] QSC 307, Bond J concluded that an adjudicator's failure to value a number of discrete alleged defect items was insufficient to establish jurisdictional error as they represented accidental or erroneous omissions by an adjudicator that could not be characterised as anything other than an error within jurisdiction: at [86]. This was in the context where there were multiple defect items that were not valued in respect of three adjudication decisions, some of which were valued at $450 and one valued at $102,100: at Annexure A.
As referred to in Chess Engineering's submissions, in Niclin No 2, Bond J observed that the adjudicator's errors could only have led to reduction in the adjudication decisions in amounts which were de minimus for two of the three decisions, and were never a sound basis for obtaining declarations that the decisions were void: at [27].
In McNab Developments (Qld) Pty Ltd v MAK Construction Services Pty Ltd (2014) 1 Qd R 350; [2014] QCA 232 (McNab), the Queensland Court of Appeal upheld a decision of Mullins J that an adjudicator had not failed to consider the merits of a payment claim in circumstances where the adjudicator did not deal with a claim for a backcharge item amounting to $11,727. While separate reasons for judgment were given by each member of the Appeal Court, they each accepted that the adjudicator's failure to deal with the item did not invalidate the decision for jurisdictional error, notwithstanding that the equivalent Queensland Act required the adjudicator to consider that part of the claim.
Jackson J, with whom Morrison JA agreed, expressed the view that the presence of the equivalent to s 22(5) of the SoP Act in the Queensland legislation reflected an intention that an accidental or erroneous omission to consider part of a claim did not invalidate a decision for jurisdictional error. His Honour also concluded that, based on the adjudicator's reasons and the absence of any evidence to the contrary, it was open to infer that the adjudicator's error arose from an accidental slip or omission, and that this was sufficient to preserve the decision as one which may be corrected: at [109] and [110].
As Morrison JA observed in McNab, there seems to be no logical (or substantive) difference between an accidental or erroneous omission to consider a particular submission and an adjudicator's accidental or erroneous omission to deal with part of a claim: at [92].
Gotterson JA concluded that the omission was an oversight, which was mechanistic in nature, relating to a comparatively minor part of the claim and considered that there was no jurisdictional error as there was no basis for inferring a lack of good faith on the adjudicator's part in the omission: at [72].
The concept of materiality as a requirement for jurisdictional error in the context of the SoP Act is not concerned with whether the Adjudicator acted bona fide or in good faith in seeking to comply with his statutory function: Goodwin Street Developments Pty Ltd v DSD Builders Pty Ltd (2018) 98 NSWLR 712; [2018] NSWCA 276 at [23], [24], [29]. The concept is concerned with the extent of non-compliance; whether an error results in a decision lacking the characteristics necessary for it to be given force and effect by the SoP Act and whether the error is sufficiently insignificant that it could not have materially affected the decision that was made.
As noted above, the error in this case affected only 0.43% of the adjudicated amount.
In this case, the Adjudicator was also aware of his obligation under the SoP Act to determine the amount of the progress payment and did not misconceive his statutory task as part of his decision-making process. He referred to the need for Chess Engineering to establish an entitlement to be paid the amounts claimed and to his obligations under sections 9 and 10 of the SoP Act to value the entitlements to payment for works claimed in the Payment Claim based on the evidence presented to him and having regard to the submissions made by Acciona: Determination at [118] and [172].
The Adjudicator applied himself to the statutory task of coming to a view as to what was properly payable. He assessed the merits and values of the aspects of Chess Engineering's claim that were challenged by Acciona in these proceedings (V9, V10, V16 and V18). Presumably, he also did so in respect of the variation claims that were not the subject of a challenge on that basis.
The Adjudicator's error was that he failed to consider the merits and value of Chess Engineering's claim in respect of the disputed amount of V17, one of many variations in respect of which the Adjudicator had many issues to decide. His error was made in the context where he stated in his reasons that he was satisfied of Chess Engineering's entitlement to V17 in a conclusory way having considered and rejected Acciona's submissions. The error was not part of a pattern of dealing with the disputes by the Adjudicator that reflected an overall failure by him to discharge his obligations under the SoP Act (judgment at [220]) but represented a failure that was out of line with his general approach.
This was also not a finding of error where there was no material before the Adjudicator from which to form a view as to what was properly payable or that involved a denial of procedural fairness: judgment at [220].
Chess Engineering made submissions and provided evidence to the Adjudicator which was sufficient for him to assess the merits of and value the disputed part of V17: see for example, [178] to [184] of the Haddo statement and [94] to [97] of the Adjudication Application. Acciona also had an opportunity to present submissions on the disputed part of V17. Those submissions were considered and rejected by the Adjudicator such that I found that there was no failure to afford Acciona procedural fairness in relation to that aspect of the claim.
I am persuaded by Chess Engineering's submission that the Adjudicator's error in this case was de minimus. To my mind, the error was so insignificant that it did not materially affect the decision that the Adjudicator made. Nor could it be said that the Determination bears no resemblance to what would have been the outcome had the error not occurred.
At its highest, the error might have led to a very slight decrease in the amount of the adjudication decision. However, given the material that was before the Adjudicator and his approach to valuing aspects of other variation claims, such as to V16 and V18, it may be expected that the outcome of the Determination would likely have been the same in the absence of the identified error. In other words, the nature, gravity and effect of the error did not work practical injustice sufficient to vitiate the Determination: Trysams Pty Ltd v Club Constructions (NSW) Pty Ltd [2007] NSWSC 941 at [33], [34].
Just as the SoP Act recognises that errors in the nature of mistakes do not invalidate a determination, it seems to me that it would also undermine the object of the SoP Act if the Determination was rendered a nullity by an error in respect of a proportionately insignificant amount that did not reflect a pattern of failure by the Adjudicator in his decision making process and where there was material before him on which he could be expected to have come to same decision.
Further, and having regard to the whole of the content and tenor of the Determination, the material before the Adjudicator and his approach to his obligations, it seems to me to be open to infer that the Adjudicator's error should be regarded as arising from an accidental or erroneous omission to value and assess the merits of the disputed part of V17, rather than a jurisdictional error that gives rise to invalidity of the whole of the Determination.
For these reasons, I accept Chess Engineering's submission that the Determination is not infected by jurisdictional error. It follows that the Determination should not be quashed for jurisdictional error and Acciona's summons should be dismissed.
As I have decided that the Determination should not be quashed for jurisdictional error, the question of whether a finding of jurisdictional error by the Adjudicator warrants the exercise of my discretion to make orders that include the conditioning of relief on the release of the monies paid into Court to Chess Engineering to the extent of the unaffected parts of the Determination does not strictly arise.
Had it been necessary to do so, I would have exercised my residual discretion and refused relief in the nature of certiorari to quash the Determination as a whole even if jurisdictional error was established in relation to V17: Hossain at [73] (Edelman J).
The circumstances in which the Court might exercise its discretion to refuse relief even though jurisdictional error is established include if a more convenient and satisfactory remedy exists, if no useful result could ensue, if the party has been guilty of unwarrantable delay or if there has been bad faith on the part of the applicant, either in the transaction itself or towards the Court to which the application has been made: R v Commonwealth Court of Conciliation and Arbitration; Ex parte Ozone Theatres (Aust) Ltd (1949) 78 CLR 389; [1949] HCA 33 at 400, referred to with approval by Edelman J in Hossain, at [74].
In my view, a more convenient and satisfactory remedy exists in this case. That remedy is to grant relief of a limited nature on the condition that the monies paid into Court are released to Chess Engineering to the extent of the unaffected parts of the Determination, similar to the approach referred to by Ball J in Rhomberg Rail Australia Pty Limited v Concrete Evidence Pty Limited [2019] NSWSC 755 and Hanson Construction Materials Pty Ltd v Brolton Group Pty Ltd [2019] NSWSC 1641 and the Court of Appeal's decision in YTO Construction Pty Limited v Innovative Civil Pty Limited [2019] NSWCA 110 (YTO).
Rather than making the orders proposed by Acciona's alternative submission, I would have decided to sever that part of the Determination that is within jurisdiction from the part that is not and grant relief to Acciona in relation to the latter by setting aside the Determination to the extent that the Adjudicator determined Chess Engineering was entitled to recover the amount of $2,760 in relation to the disputed part of V17. I would also have made orders that the monies paid into Court were allocated on a proportionate basis, as referred to in more detail below.
I accept that YTO may be read in a narrow way and there are conflicting decisions on the ability to sever adjudication determinations in other jurisdictions: BM Alliance Coal Operations Pty Ltd v BGC Contracting Pty Ltd (2015) 1 Qd R 228; [2013] QCA 394; Maxcon Constructions Pty Ltd v Vadasz (No 2) (2017) 127 SASR 193; [2017] SASCFC 2; Duro Felguera Australia Pty Ltd v Samsung C&T Corporation (2018) 52 WAR 323; [2018] WASCA 28. That said, YTO supports the conclusion that a determination affected by jurisdictional error can be severed. In my view, such an order would best reflect a finding that part of the Determination was infected by jurisdictional error and the other circumstances of this case outlined earlier in these reasons.
It also seems to me that, if jurisdictional error has been found, it would be appropriate to exercise my discretion and make a severance order as no useful result would ensue by having a further adjudication or hearing in respect of a proportionately insignificant sum.

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