Ceerose Pty Ltd v A-Civil Aust Pty Ltd

Supreme Court of NSW|2023-04-20|Before: Darke J

Introduction

A judgment was delivered in these two matters on 20 March 2023 (see Ceerose Pty Ltd v A-Civil Aust Pty Ltd [2023] NSWSC 239 - "the earlier judgment"). It was held that jurisdictional error had occurred in relation to two adjudicator's determinations under the Building and Construction Industry Security of Payment Act 1999 (NSW) ("the Act"). It was found that the adjudicator fell into jurisdictional error in five respects in relation to the Determination concerning the York Street site. It was found that the adjudicator fell into jurisdictional error in one respect in relation to the Determination concerning the Elizabeth Bay site.
In those circumstances, I expressed the tentative view (at [186] of the earlier judgment) that it may be appropriate in each case to make orders under s 32A of the Act, as in each case the adjudicated amount is in reality the sum of a number of distinct parts, only some of which are affected by jurisdictional error.
Section 32A is in the following terms: (1) If, in any proceedings before the Supreme Court relating to any matter arising under a construction contract, the Court makes a finding that a jurisdictional error has occurred in relation to an adjudicator's determination under this Part, the Court may make an order setting aside the whole or any part of the determination. (2) Without limiting subsection (1), the Supreme Court may identify the part of the adjudicator's determination affected by jurisdictional error and set aside that part only, while confirming the part of the determination that is not affected by jurisdictional error.
The parties were given the opportunity to make further submissions in respect of relief. In accordance with directions made by the Court on 23 March 2023, the first defendant provided written submissions on 31 March 2023, the plaintiff provided written submissions on 11 April 2023, and the first defendant provided written submissions in reply on 17 April 2023.
This judgment deals with the form of orders I consider should be made as a result of the conclusions I reached in the earlier judgment.

Overview

The competing submissions raised numerous points concerning the meaning and operation of s 32A of the Act, which has not yet been the subject of extensive consideration by the Court. I note that the section was raised in another case involving the present parties that was heard by Richmond J (see Ceerose Pty Ltd v A-Civil Aust Pty Ltd (No 2) [2023] NSWSC 345). In that case, his Honour expressed the view that where an adjudication determination is set aside in part under s 32A, the part of the determination which is not set aside is to be regarded as always having statutory force (see at [81] to [84]). Otherwise, the judgment merely records the agreement of the parties that if jurisdictional error was found, an order under s 32A should be made, and that the parties were to be given an opportunity to be heard on the precise form of orders (see at [71]).
I have read and considered the submissions of the parties, including the suggested forms of orders that accompanied the submissions. I do not propose to summarise the submissions, but rather refer to aspects of them as appropriate in seeking to explain the basis for the orders I consider should be made in each matter.
It is convenient to commence by making some general observations about s 32A of the Act, and by noting some of the issues that arise in relation to the operation of the provision.
The section was introduced into the Act by the Building and Construction Industry Security of Payment Amendment Act 2018 (NSW) with effect from 21 October 2019. In the course of the Second Reading Speech in the Legislative Council, Mr Scot MacDonald (on behalf of the Hon Sarah Mitchell) stated: New powers will enable the Supreme Court to sever part of an adjudicator's determination affected by jurisdictional error and confirm the balance to be enforceable. In Multiplex Constructions Pty Ltd v Luikens & Anor [2003] NSWSC 1140, the New South Wales Supreme Court held that jurisdictional error invalidates the whole of an adjudicator's determination. This is the case even where the error is confined to one part of the determination and does not affect the remaining part or parts. This outcome unfairly and unnecessarily deprives a party of an interim payment with adverse consequences for cash flow. It also serves to incentivise a party to challenge unfavourable determinations. The purpose of section 32A is to address this by making clear that decisions can be set aside in part and as such are theoretically severable where jurisdictional error has infected a part but not the whole of the decision.
Section 32A(1) confers a discretionary power upon the Court to make an order setting aside the whole or any part of an adjudicator's determination. The discretion is enlivened if, in any proceedings before the Court relating to any matter arising under a construction contract (as defined under the Act), the Court makes a finding that a jurisdictional error has occurred in relation to an adjudicator's determination under Part 3 of the Act. That pre-condition has been satisfied in each of the proceedings presently before the Court.
Further, s 32A(2) provides, without limiting the power under s 32A(1), that the Court may set aside an identified part of an adjudicator's determination that is "affected by jurisdictional error" while confirming the part of the determination that is "not affected by jurisdictional error". Again, a discretionary power is conferred upon the Court. In my view, the discretion is enlivened where a finding has been made by the Court that a jurisdictional error has occurred (or jurisdictional errors have occurred) in relation to an adjudicator's determination, and the Court can identify that part of the determination is affected by the error or errors and that part of the determination is not affected by the error or errors. Findings of jurisdictional error have been made in each case, but there are issues between the parties concerning the identification of parts of the determinations that are, or are not, affected by the jurisdictional errors found.
Another issue that emerges from the submissions is the extent to which the powers may (or should) be exercised in relation to the reasons for the determination.
Related to that issue is the proposition that the powers do not allow the Court to "rewrite" an adjudicator's determination. That proposition is advanced by the plaintiff as a basis for its contentions as to how an adjudicated amount may be reduced pursuant to s 32A. The defendant advanced a different contention as to how an adjudicated amount may be so reduced. This difference has a marked effect on the outcome in respect of the York Street site Determination.
I turn now to consider the question of relief in relation to that Determination.

York Street site Determination

Jurisdictional error was found in five respects in relation to this Determination. These were: 1. Ground 1 in respect of Item 4 in the payment claim (see the earlier judgment at [28] and [40]); 2. Ground 2 in respect of Item 6 in the payment claim (see the earlier judgment at [42] and [50]); 3. Ground 4 in respect of Item 8 in the payment claim (see the earlier judgment at [61] and [69]); 4. Ground 5 in respect of Item 15 in the payment claim (see the earlier judgment at [70] and [78]); and 5. Ground 6 in respect of variation 6 in the payment claim (see the earlier judgment at [79] and [93]).
In relation to each of the above items, the adjudicator included an amount (described in the table at paragraph 363 of his reasons as an "adjudicated amount") that was a component of a total amount of $3,996,402.31 (described as "Adjusted value claimed completed"). After deducting an amount, said to have been previously paid, of $2,136,898.70, an amount of $1,859,503.61 remained (described as "This Claim excl GST"). When an amount for GST of $185,950.36 was added, the total became $2,045,453.97 (described as "This claim incl. GST"). The adjudicator stated at paragraph 364 of his reasons that he had decided that the plaintiff must pay that amount to the defendant. That amount is described as the Adjudicated Amount in the Determination.
Both parties seem to accept the proposition that the Adjudicated Amount may be regarded as the sum of a number of distinct parts, only some of which are affected by jurisdictional error. It further seems to be common ground that in those circumstances it is open to the Court to make orders under s 32A of the Act to set aside the Determination in part. The parties differ, however, as to how the affected parts should be dealt with in the process of making such orders. The differing approaches may be illustrated by taking, as examples, items 4 and 6 in the payment claim.
Item 4 concerned demolition works. By its payment claim, the defendant sought an amount of $145,790.50 on the basis that the works were 85% complete. That is, an amount of $145,790.50 in addition to the amount previously claimed in respect of the item ($349,897.20). By its payment schedule, the plaintiff said that the works were only 65% complete so the claim should be only $29,158.10. That is, an amount of $29,158.10 in addition to the amount of $349,897.20 previously claimed. The amount in issue was thus $116,632.40. (The disputed amount is incorrectly stated in the table at paragraph 363 of the adjudicator's reasons as $116,632.60, but nothing of significance turns upon that.)
The adjudicator accepted the defendant's claim. He thereby arrived at an "adjudicated amount" of $495,687.70 in respect of the item. That is, $349,897.20 plus $145,790.50.
Pausing here, the defendant submitted that in making orders under s 32A it would be appropriate to sever and set aside, as affected by jurisdictional error, the sum of $116,632.60 in respect of this item. That is, the amount in dispute between the parties that was found in favour of the defendant. (The amount is actually $116,632.40, and I will henceforth adopt that figure.) The plaintiff, on the other hand, submitted that in making orders under s 32A, it would be appropriate to sever and set aside, as affected by jurisdictional error, the "adjudicated amount" found by the adjudicator (that is, $495,687.70).
Item 6 concerned render removal. By its payment claim, the defendant sought an amount of $11,700 on the basis that the works were 100% complete. That is, an amount of $11,700 in addition to the amount previously claimed in respect of the item ($66,300). By its payment schedule, the plaintiff said that the works were only 70% complete and hence it had overpaid the defendant by $11,700. The amount in issue was thus $23,400. The adjudicator accepted the defendant's claim. He thereby arrived at an "adjudicated amount" of $78,000 in respect of the item. That is, $66,300 plus $11,700.
Here, the defendant submitted that it would be appropriate to sever and set aside the sum of $23,400, being the amount in dispute that was found in favour of the defendant. The plaintiff submitted that it would be appropriate to sever and set aside the sum of $78,000, being the "adjudicated amount" found by the adjudicator.
The defendant's approach, based on severing the disputed amounts found in its favour, would result in the following amounts being severed: Ground 1 - Item 4 $116,632.40 Ground 2 - Item 6 $23,400.00 Ground 4 - Item 8 $20,250.00 Ground 5 - Item 15 $38,689.50 Ground 6 - Variation 6 $687,214.19 Total $886,186.09

If those amounts were extracted from the table at paragraph 363 of the adjudicator's reasons: 1. the figure for "Adjusted value claimed completed" would reduce by $886,186.09 to $3,110,216.22; 2. after taking into account the amount previously paid of $2,136,898.70, the figure for "This Claim excl. GST" would become $973,317.52; and 3. once GST of $97,331.75 is added, the figure for "This claim incl. GST" would become $1,070,649.27. That is, the figure which is the source of the Adjudicated Amount in the Determination would reduce from $2,045,453.97 to $1,070,649.27.
The plaintiff's approach, based on severing the "adjudicated amounts" found by the adjudicator would result in the following amounts being severed: Ground 1 - Item 4 $495,687.70 Ground 2 - Item 6 $78,000.00 Ground 4 - Item 8 $27,000.00 Ground 5 - Item 15 $348,205.50 Ground 6 - Variation 6 $687,214.19 Total $1,636,107.39

If those amounts were extracted from the table at paragraph 363 of the adjudicator's reasons: 1. the figure for "Adjusted Value Claimed Completed" would reduce by $1,636,107.39 to $2,360,294.92; 2. after taking into account the amount previously paid of $2,136,898.70, the figure for "This Claim excl. GST" would become $223,396.22; and 3. once GST of $22,339.62 is added, the figure for "This claim incl. GST" would become $245,735.84. That is, the figure which is the source of the Adjudicated Amount in the Determination would reduce from $2,045,453.97 to $245,735.84. (I was unable to reconcile the above calculations with the plaintiff's suggested figure of $252,335.84.)
There is also an issue as to the adjudicator's determination that liability for his fees and expenses be apportioned 20% to the defendant and 80% to the plaintiff. The plaintiff submitted that this part of the Determination should be set aside because, as a matter of realistic possibility, it could have been affected by the jurisdictional errors found. The defendant submitted that this part of the Determination was not challenged and not the subject of any findings of jurisdictional error, and should thus not be set aside.
Where jurisdictional error is found in relation to an adjudicator's determination, s 32A(1) allows the Court to set aside the whole or any part of the determination. It is implicit in the notion of a power to set aside part of an adjudicator's determination that the part to be set aside (and the other part that is not set aside) are identified. They must be identified if they are to be the subject of an order of the Court. Section 32A(2), which does not limit s 32A(1), further allows the Court to set aside the part of an adjudicator's determination "affected by jurisdictional error" while confirming the part of the determination that is "not affected by jurisdictional error". It is expressly provided that any part so set aside must be identified by the Court, and it is implicit that any part so confirmed will also be identified.
An initial question arises as to what constitutes an adjudicator's determination for the purposes of s 32A that may be set aside, or confirmed, by an order of the Court. Guidance is given by s 22(1) of the Act which provides: (1) An adjudicator is to determine - (a) the amount of the progress payment (if any) to be paid by the respondent to the claimant (the adjudicated amount), and (b) the date on which any such amount became or becomes payable, and (c) the rate of interest payable on any such amount.
Reference should also be made to s 22(3) which provides: (3) The adjudicator's determination must - (a) be in writing, and (b) include the reasons for the determination (unless the claimant and the respondent have both requested the adjudicator not to include those reasons in the determination), and (c) be served by the adjudicator on the claimant and the respondent.
Section 22(3)(b) indicates that, normally, the reasons for a determination are "included" in the determination. However, I do not read the paragraph as providing that any such reasons form part of the determination itself. By describing the reasons as "reasons for the determination" the paragraph seems to recognise a distinction between the reasons and the determination. Further, when read in the context of a sub-section that provides for a determination to be in writing, and served, I think that the term "included" indicates no more than an intention that the reasons must be included in the writing that is to be served. Even if this is wrong, such that the reasons form part of the determination, and are capable of being the subject of an order under s 32A, I would be reluctant to make orders setting aside, or confirming, parts of the reasons for an adjudicator's determination. The legal effect of a determination comes, not from the reasons, but rather from the matters referred to in s 22(1), together with any determination made pursuant to s 29(3) concerning the adjudicator's fees and expenses. In my view, the making of orders to set aside or confirm any part or parts of the reasons would generally be neither necessary nor desirable.
In the present case, both parties suggested forms of orders that included detailed orders setting aside and/or confirming various parts of the adjudicator's reasons. However, for the reasons stated above, I am not inclined to make orders of that character. The orders proposed do not seem to me to serve any useful purpose. Indeed, such orders would likely give rise to unnecessary complexity in an area where complexity is already rife.
I do not agree with the submission made by the plaintiff that such orders may assist in achieving certainty as to the reasons which would justify the adjudicated amount that exists following an exercise of power under s 32A. It was put that such certainty is necessary, for example, because the principles of issue estoppel apply to adjudication determinations. However, if an adjudication determination is set aside in part by the Court pursuant to s 32A, the reasons for the decision (which might give rise to an estoppel) will be those of the Court read, to the extent necessary, with the adjudicator's reasons. Ascertaining the basis or groundwork of the decision, for the purposes of identifying any issue estoppel, would not be aided by orders setting aside part or parts of the adjudicator's reasons. They would remain the reasons of the adjudicator for the determination which has been set aside in part by the Court.
Accordingly, in considering the making of orders under s 32A, I propose to focus attention upon the three matters referred to in s 22(1), and the determination made by the adjudicator concerning his fees and expenses.
The first such matter is the adjudicated amount, being the amount of the progress payment to be paid by the respondent (plaintiff) to the claimant (defendant) (see s 22(1)(a) of the Act). As noted earlier, the adjudicator determined the adjudicated amount to be $2,045,453.97 including GST. A question arises as to whether part of that determination can be identified as affected by jurisdictional error or errors, and whether part of that determination can be identified as not affected by jurisdictional error or errors.
Both parties agree that amounts that form part of the adjudicated amount can be severed and set aside, leaving a part remaining that can be confirmed. However, the parties differ as to how much can be severed, as described above.
In my opinion, the approach taken by the defendant in this regard is to be preferred. That is the approach based on severing the disputed amounts that were found in its favour for each of the five items where jurisdictional error was found. Taking that approach, the figure which is the source of the Adjudicated Amount in the Determination reduces from $2,045,453.97 to $1,070,649.27.
The remaining amount of $1,070,649.27 can be seen as an amount that is not affected by the jurisdictional errors found.
That approach removes the effect of the adjudicator's errors in respect of those items. In relation to item 4, for example, the adjudicator was faced with a position where the defendant claimed that the work was 85% complete and the plaintiff claimed that it was only 65% complete. In finding in favour of the defendant, the adjudicator allowed an additional amount of $145,790.50 over the opposition of the plaintiff who said the additional payment should be only $29,158.10. The amount in dispute of $116,632.40 represents the ambit of the dispute the adjudicator was called upon to determine in respect of item 4. The effect of his erroneous finding in favour of the defendant can be removed by deleting the sum of $116,632.40 (incorrectly recorded by the adjudicator as $116,632.60).
Put another way, had the adjudicator not fallen into error, he would have awarded an additional amount somewhere between the $29,158.10 accepted by the plaintiff and the $145,790.50 claimed by the defendant. It is not known what that amount would have been, but deleting $116,632.40 leaves a minimum amount that would have been awarded in any event. Having taken the position it did, the plaintiff should not now be heard to contend that the adjudicator, without error, could have awarded a lesser amount.
I do not accept the plaintiff's submission that the defendant's approach would involve impermissible "rewriting" of the Determination. It merely involves the deletion of the effect of the adjudicator's erroneous award of $116,632.40 more than the amount accepted by the plaintiff. Nor do I accept that the approach gives rise to uncertainty as to the reasons for the reduced amount. In circumstances where the Court has found jurisdictional error in relation to the item, the reduced amount reflects the Court's assessment, pursuant to s 32A of the Act, as to parts of the Determination that are affected, or are not affected, by the error. Similarly, the application of s 22(4) of the Act (if it applies at all) should not be rendered uncertain where the Court identifies the part or parts of an adjudicator's determination that are not affected by jurisdictional error. Further, contrary to the plaintiff's submission, no uncertainty is created as to what work is the subject of the reduced amount.
Finally, I should add that the approach favoured by the plaintiff seems to give rise to anomalous results. For example, if $495,687.70 were deleted instead of $116,632.40 in relation to item 4, the plaintiff would be substantially better off than had the adjudicator determined the dispute without error. This type of anomaly is present, in varying degrees, in relation to each of the items affected by error, except for variation 6.
For substantially the same reasons as are set out above, the defendant's approach should be adopted for all of the items affected by jurisdictional error.
Accordingly, the amounts referred to above at [23], totalling $886,186.09, should be severed, with the result that the figure which is the source of the Adjudicated Amount in the Determination would reduce to $1,070,649.27. That amount ought be regarded, for the purposes of s 32A of the Act, as a part of the Adjudicated Amount that is not affected by jurisdictional error.
The other matters referred to in s 22(1), namely, the date on which the Adjudicated Amount became payable (s 22(1)(b)), and the rate of interest payable (s 22(1)(c)), are also not affected by jurisdictional error.
I turn now to consider whether the adjudicator's determination under s 29(3) of the Act concerning his fees and expenses is affected by jurisdictional error.
The adjudicator determined that liability for his fees and expenses should be apportioned 20% to the defendant and 80% to the plaintiff. It is true that no specific challenge was made to that determination and, further, that it was not the subject of the findings of jurisdictional error made by the Court. However, I do not think that this determination can be regarded as unaffected by the jurisdictional errors found. The adjudicator did not give any reasons for his conclusion as to apportionment, but it can be safely inferred that the conclusion was based at least in part upon the adjudicator's assessment of the relative successes and failures of the parties on the various issues the subject of the adjudication. In circumstances where jurisdictional error was found in respect of five items, and the monetary effect of the errors is substantial, as reflected in the amount of the severance to be made from the Adjudicated Amount, I think that the determination concerning fees and expenses must be regarded as having been affected by jurisdictional error. Accordingly, I consider that this part of the Determination should be set aside. The result of that is that the parties would each be liable to contribute to the fees and expenses in equal proportions.
In summary, it seems to me that it is possible to identify parts of the adjudicator's determination that are affected by jurisdictional error, and parts of it that are not affected by jurisdictional error. The parts that are not affected by jurisdictional error are: 1. the Adjudicated Amount up to $1,070,649.27; 2. the due date for payment of the Adjudicated Amount, being 28 June 2022; 3. the rate of interest payable, being 6.85% p.a.; and 4. the formal parts of the Determination (that is, those parts that identify it as such, identify the parties to it, and identify the payment claim and payment schedule to which it relates).
The parts of the Determination that are affected by jurisdictional error are: 1. the Adjudicated Amount above $1,070,649.27; and 2. the apportionment of the adjudicator's fees and expenses.
In my opinion, it would be appropriate to order, pursuant to s 32A of the Act, that the parts of the Determination identified as affected by jurisdictional error be set aside, and that the parts of the Determination identified as not affected by jurisdictional error be confirmed.
As noted earlier, the orders will not extend to the adjudicator's reasons, which I regard as separate from the Determination itself. They will remain the adjudicator's reasons for his Determination which the Court has found to be affected by jurisdictional error, and ordered to be set aside in part.

Elizabeth Bay Determination

Jurisdictional error was found in only one respect in relation to this Determination. That was Ground 3 concerning concrete saw cutting costs. The amount in issue was only $3,740 (see the earlier judgment at [158] and [166]). The sum of $3,740 had been claimed by the plaintiff in its payment schedule as part of a deduction or offset against what was claimed by the defendant. The adjudicator rejected the plaintiff's claim, but did so in a manner that involved jurisdictional error by failing to afford natural justice. The rejection of the claim meant that no deduction or offset, up to an amount of $3,740 (excl. GST), was included in the adjudicator's calculation of the Adjudicated Amount. The adjudicator calculated that amount to be $349,324.36 incl. GST.
The defendant submitted that paragraphs 97 and 98 of the adjudicator's reasons should be severed pursuant to s 32A of the Act, but that there should be no adjustment of the Adjudicated Amount. The defendant accepted that the jurisdictional error found was material to the extent that the $3,740 was claimed as a set off or back charge. However, it was submitted that as the plaintiff did not truly claim the amount as a set off or back charge, any error in that regard was not material to the ultimate outcome.
The plaintiff submitted that the proper application of s 32A of the Act in the circumstances was that there be no severance at all, and that the Determination be set aside in its entirety. It was accepted that, at first blush, that would be a "surprising outcome" where the only error concerned a claim which, had it been allowed in full, could only realistically have resulted in the Adjudicated Amount being $3,740 (excl. GST) less. However, it was submitted that it was the proper approach in circumstances where the $3,740 was not claimed as a pure set off, but was rather claimed as a deduction in the assessment of items 10, 12 and 13, which together contributed an amount (of $433,588.02) to the Adjudicated Amount. The plaintiff further submitted that as s 32A did not give the Court the power to "rewrite" an adjudicator's determination, there was nothing the Court could do to bring about a result where the Adjudicated Amount was reduced by $3,740 (excl. GST). That was said to be the case even if the claim was treated as one of set off or back charge.
I am unable to accept the suggested approaches of either party.
As far as the defendant's approach is concerned, I would not, for the reasons given earlier, be prepared to set aside the two paragraphs of the adjudicator's reasons. Further, I do not consider it appropriate to proceed on the basis that the $3,740 was not truly claimed as a set off or back charge. It is apparent from paragraphs 88 to 91 of the adjudicator's reasons that there was some uncertainty about the nature of the claim, but in that state of uncertainty, the adjudicator proceeded to deal with the claim as a set off (at paragraphs 92 to 98). The jurisdictional error found by the Court was made only in relation to that claimed set off, and the error was found to be material.
Similarly, I do not accept the plaintiff's submission that rests upon the assertion that the $3,740 was not claimed as a pure set off. I note further, in that regard, that the plaintiff's submissions to this Court at the earlier hearing proceeded on the basis that the adjudicator addressed the claim as a back charge (see paragraph 144 of the plaintiff's submissions). Had the claim been merely part of the assessment of items 10, 12 and 13, there would have been no need for the plaintiff to raise Ground 3, which was the only ground that succeeded. I should add that I also do not accept the plaintiff's submission that the jurisdictional error found affected other parts of the Determination, namely, items 10, 12 and 13. The error occurred only in relation to the claimed set off that was dealt with separately by the adjudicator at paragraphs 92 to 98 of his reasons.
Finally, I do not accept the plaintiff's submission that there is nothing the Court can do to bring about a result where the Adjudicated Amount is reduced by $3,740 (excl. GST). In my view, the Court can make an order to that effect under s 32A of the Act, and should do so.
The Adjudicated Amount determined by the adjudicator is $349,324.36 incl. GST. $3,740 plus GST is $4,114. If that amount were subtracted from the Adjudicated Amount it would become $345,210.36. Had the concrete saw cutting costs item been determined by the adjudicator without error, the Adjudicated Amount could not have been any lower than $345,210.36. That is a minimum amount that would have been awarded in any event. In my view, it is an amount that ought be regarded, for the purposes of s 32A of the Act, as a part of the Adjudicated Amount that is not affected by jurisdictional error.
Again, I do not see that as involving any impermissible "rewriting" of the Determination. It is merely the deletion from the Adjudicated Amount of a part of it ($4,114) that can be said to be affected by jurisdictional error. The part can be said to be "affected" by jurisdictional error for the purposes of s 32A as it is the monetary expression of a claim that was rejected in a manner that involved jurisdictional error, and had the error not occurred, some or all of that part might have been upheld. Construing "affected" in that fashion seems to me to be justified by the ordinary meaning of the word (which includes "influenced"), and in keeping with the statutory purpose, as expressed in the Second Reading Speech, of avoiding an unfair result where, as here, jurisdictional error is confined to one part of a determination and does not affect the remaining part or parts.
Accordingly, the amount of $4,114 should be severed, with the result that the Adjudicated Amount in the determination would reduce to $345,210.36. As I have said, that amount ought be regarded, for the purposes of s 32A of the Act, as a part of the Adjudicated Amount that is not affected by jurisdictional error.
It is clear that neither the date on which the Adjudicated Amount became payable (28 June 2022), nor the rate of interest payable (6.85% p.a.), are affected by the jurisdictional error found.
I turn now to consider whether the adjudicator's determination under s 29(3) of the Act concerning his fees and expenses is affected by jurisdictional error.
The adjudicator determined that the liability for his fees and expenses should fall entirely upon the plaintiff. As was the case with the York Street site Determination, the adjudicator did not give any reasons for his conclusion. Again, however, it can be safely inferred that the conclusion was based at least in part upon the adjudicator's assessment of the relative successes and failures of the parties on the various issues the subject of the adjudication. An examination of the adjudicator's reasons (including the table at paragraph 156) reveals that the defendant was the successful party on each item that remained in dispute (that is all items, other than item 13, which became the subject of agreement). The monetary value of the item where jurisdictional error was found is very small, only slightly greater than 1% of the Adjudicated Amount found by the adjudicator. Had the item been determined without there being a denial of natural justice, it is conceivable that the plaintiff would have been successful. In those circumstances, and even allowing that further submissions may have been required in respect of the item, it seems unlikely that such a modest victory for the plaintiff would have caused the adjudicator to make a different determination concerning liability for his fees and expenses. Nevertheless, I agree with the plaintiff's submission that there is a realistic possibility that the determination would have been different in the absence of jurisdictional error, so the determination should be regarded as affected by jurisdictional error for the purposes of s 32A of the Act. This part of the Determination should thus be set aside. The result of that is that the parties would each be liable to contribute to the fees and expenses in equal proportions.
Again, it seems to me that it is possible to identify parts of the adjudicator's determination that are affected by jurisdictional error, and parts of it that are not affected by jurisdictional error.
The parts that are not affected by jurisdictional error are: 1. the Adjudicated Amount up to $345,210.36; 2. the due date for payment of the Adjudicated Amount, being 28 June 2022; 3. the rate of interest payable, being 6.85% p.a.; and 4. the formal parts of the Determination (that is, those parts that identify it as such, identify the parties to it, and identify the payment claim and payment schedule to which it relates).
The parts of the Determination that are affected by jurisdictional error are: 1. the Adjudicated Amount above $345,210.36; and 2. the apportionment of the adjudicator's fees and expenses.
In my opinion, it would be appropriate to order, pursuant to s 32A of the Act, that the parts of the Determination identified as affected by jurisdictional error be set aside, and that the parts of the Determination identified as not affected by jurisdictional error be confirmed.
Again, the orders will not extend to the adjudicator's reasons, which I regard as separate from the Determination itself.

Conclusion

In respect of each Determination, the Court will make orders pursuant to s 32A of the Act setting aside the parts identified as affected by jurisdictional error and confirming the parts identified as not affected by jurisdictional error.
The making of such orders will not dispose of all issues in the proceedings. As discussed at the directions hearing held on 23 March 2023, certain issues remain for determination, including an application by the plaintiff for what is described as a "Grosvenor stay" (see Grosvenor Constructions (NSW) Pty Ltd (in administration) v Musico [2004] NSWSC 344), and costs. The plaintiff has also foreshadowed a possible application for a stay pending appeal.
The plaintiff has in each matter paid an amount into Court to cover the Adjudicated Amount, the adjudicator's fees and expenses, and interest. As a result of the orders to be made today, the defendant is prima facie entitled to be paid sums of $1,070,649.27 (plus interest) and $345,210.36 (plus interest). The defendant asks that orders be made now for moneys to be paid out to it. However, having regard to the discussion that occurred at the directions hearing, I think that directions ought be made to facilitate a further hearing, to take place as soon as practicable, to deal with what should happen to the funds in Court. Accordingly, the matter will be listed for directions before the List Judge on 21 April 2023.

DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated. Decision last updated: 20 April 2023

Building and Construction Industry Security of Payment Amendment Act 2018(NSW)

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Judgment (8 paragraphs)

Parties

Legislation Cited (2)

Cases Cited (4)

Cited By (3)