Chen Shi Hai v Minister for Immigration and Multicultural Affairs [2005] NSWCA 229 | Case summary

Chen Shi Hai v Minister for Immigration and Multicultural Affairs [2005] NSWCA 229 | Case summary | Zoe

The original date for practical completion was 30 March 2004 (see Item 11 of Annexure A to the subcontract). On or about 3 September 2004, the Respondent's Subcontract Superintendent notified the Claimant of altered dates for "practical completion". The final completion date specified in the attachment to this letter was 1 February 2005. In its response, apparently sent on 6 September 2004, this last date was stated by the Claimant to be "achievable". Not withstanding that the cautious language of its letter of 3 September avoided reference to an extension of time, the Respondent's letter is headed "Works Progress & Practical Completion". It contained an instruction to complete "your agreements for the nominated levels as the determined practical completion dates as listed in the attached schedule". Furthermore it referred to revised dates as having been assessed in accordance with Clause 34 and 34.5. It seems to me that thereby the Respondent brought about an extension of time under the subcontract, opening the door for the Claimant to proceed with a claim for delay costs under the contract. Resulting as they do from an extension of time for completion, these claims are variation claims and are properly included in progress claims. 11 As noted by the primary judge, the adjudicator made the following additional findings: · The Contract Superintendent had directed an extension of time under clause 34.5 of the Contract which was "necessary" to enable the defendant to complete the work and to remain on site beyond the original contract period which contemplated completion by 30 March 2004 (par 22); · The delay in question was a compensable cause within the meaning of clause 34.9 that entitled the defendant to claim damages (par 23); · The tax invoices and the relevant progress claims satisfied the requirements of clause 41.2 (par 25); · When a claim is made under clause 34.9, the circumstances on which the claim for "delay damages" or "delay costs" is based is the default of others which establishes the compensable claim, and the granting by the Contract Superintendent of the EOT, without which "delay damages would not be payable" (par 26); · The defendant did as required by clause 41.3, giving notice in accordance with the requirements of clause 41.2 quantifying month by month the "monthly delay costs" (par 28); · The legal basis for each claim is identified as being clause 34.9 of a Contract and the facts relied on clearly enough were the delay in time for completion month by month after 30 March 2004 (par 30); and · The details provided in the attachments to the invoices are the basis of the claimed variations and on their face they seem to comprise proper components of "delay costs" which should be accepted as being incurred because of the delay occasioned by others so as to make them compensable costs (par 37).

22 Adjudicator's determination (1) An adjudicator is to determine: (a) the amount of the progress payment (if any) to be paid by the respondent to the claimant (the adjudicated amount ), and (b) the date on which any such amount became or becomes payable, and (c) the rate of interest payable on any such amount. (2) In determining an adjudication application, the adjudicator is to consider the following matters only: (a) the provisions of this Act, (b) the provisions of the construction contract from which the application arose, (c) the payment claim to which the application relates, together with all submissions (including relevant documentation) that have been duly made by the claimant in support of the claim, (d) the payment schedule (if any) to which the application relates, together with all submissions (including relevant documentation) that have been duly made by the respondent in support of the schedule, (e) the results of any inspection carried out by the adjudicator of any matter to which the claim relates. (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). (4) If, in determining an adjudication application, an adjudicator has, in accordance with section 10, determined: (a) the value of any construction work carried out under a construction contract, or (b) the value of any related goods and services supplied under a construction contract, the adjudicator (or any other adjudicator) is, in any subsequent adjudication application that involves the determination of the value of that work or of those goods and services, to give the work (or the goods and services) the same value as that previously determined unless the claimant or respondent satisfies the adjudicator concerned that the value of the work (or the goods and services) has changed since the previous determination. (5) If the adjudicator's determination contains: (a) a clerical mistake, or (b) an error arising from an accidental slip or omission, or (c) a material miscalculation of figures or a material mistake in the description of any person, thing or matter referred to in the determination, or (d) a defect of form, the adjudicator may, on the adjudicator's own initiative or on the application of the claimant or the respondent, correct the determination.

30 It seems to me that the second defendant fell into error in his construction of the Contract in concluding that these were variation claims. Such an error is not in my view a failure to comply with the "basic and essential requirements" of the Act as that concept is explained in Brodyn Pty Ltd v Davenport . This adjudicator was making a bona fide attempt to comply with his obligations under the Act and all other ancillary matters to give to him the jurisdiction to do so had been complied with. In those circumstances the plaintiff is not entitled to the relief sought in the Summons. I do not need to decide whether such an error and the consequential awarding of the claimed amounts is conduct that would extend the Brodyn categories because there is, in my view, a further basis upon which the second defendant was entitled to allow the claims, dealt with below in what I have referred to as the broader arguments of the parties. 14 She went on to consider Coordinated's submissions which raised similar issues to those raised in Coordinated Constructions Co. Pty. Ltd. v. J.M. Hargreaves (NSW) Pty. Ltd. [2005] NSWSC 77, to the effect that the amounts claimed in the variation claims were delay damages, and thus not able to be included in progress payments under the Act because they were not for "construction work" as defined in the Act. 15 The primary judge referred to a contention of Climatech that construction work should not be limited to work actually done, and to the example of the cost of a crane that is on site for the duration of a construction contract, but which may be inoperative for periods of time; and she continued: 37 The crane example seems to me to be more appropriately utilised in analysing s 8(1)(b) of the Act, pursuant to which a person who has undertaken to supply related goods and services under the contract is entitled to a progress payment, and s 13(2)(a) of the Act, pursuant to which a payment claim must identify the related goods and services to which the progress payment relates. "Goods" include "plant or materials (whether supplied by sale, hire or otherwise) for use in connection with the carrying out of construction work": (s 6 (1)(a)(ii)). The crane example falls squarely within the provision of "goods" as defined in the Act "for use in connection with the carrying out of construction work". The words in brackets referring to the alternatives of sale or hire, contemplate those costs of provision of that plant being recoverable in the progress payment and in the payment claim. The fact that the crane is not in actual operation for 20% or 50% of the time does not mean that the cost of hiring it for its provision "in connection with the carrying out of construction work" is to be reduced. The provision of this plant is obviously in connection with the carrying out of construction work and the so-called "down-time" is neither here nor there. If the contract is not completed by the anticipated practical completion date and there is a necessity for the crane to stay on the site for a longer period of time, the cost of the additional hiring fees of the crane for the extra time the crane is on site seems to me to be clearly claimable in a payment claim as a related good supplied for use in connection with the carrying out of construction work: s 13(2)(a); s 6(1)(b).

45 It follows from this discussion that delay damages and interest under this contract could be claimed to be due for construction work carried out or for related goods and services supplied; and in my opinion, even if s.13 is construed as limiting claims to claims for payment for construction work carried out or for related goods and services supplied, it would be for the adjudicator to determine whether or not such amounts should be included in the amount determined, having regard particularly to s.9(a) and other provisions of the Act and the contract. This appears to be what each adjudicator did; and I am not satisfied even that any error of law on the face of the record has been established, much less an error of the kind that could invalidate a decision. 23 As regards John Holland, in my opinion some parts of what was said in that case may require qualification on the basis of views I have expressed in Minister of Commerce v. Contrax Plumbing (NSW) Pty. Ltd. [2005] NSWCA 142 at [33]-[36] and in Hargreaves at [50]-[53]. 24 However, I accept that what is referred to an adjudicator for determination is a claimant's payment claim, and what an adjudicator is to determine is the amount of the progress payment to be paid on the basis of that claim and on the basis of other considerations in s.22(2) of the Act. Accordingly, the task of the adjudicator is to make a determination within the parameters of the payment claim, although that is not to say that, if an adjudicator were to make an error which can later be seen as taking the determination outside those parameters, it necessarily invalidates the determination. 25 I note also that s.13(2)(a) requires that a payment claim "identify" the construction work or related goods or services to which the payment relates. This requirement must be interpreted, in my opinion, having regard to the requirement in s.14(3) that the payment schedule indicate the respondents' reasons for withholding payment, the limitation on the adjudication response in s.20(2B) to those reasons, and the corresponding limitation in s.22(2)(c), as well as the circumstance that, for the reasons given above, payment claims may include amounts that are not (in a narrow sense) for construction work that has actually been carried out for related goods and services that have actually been supplied. In my opinion, the relevant construction work or related goods and services must be identified sufficiently to enable the respondent to understand the basis of the claim; and in the case of "delay damages" of the kind involved in this case, it is generally sufficient (assuming that the contract itself is sufficiently identified) that the basis of contractual entitlement be shown. In my opinion, that would generally be enough to ground identification, at least by way of inference, of the construction work or related goods or services to which the payment relates. 26 In my opinion, failure adequately to set out in a payment claim the basis of the claim could be a ground on which an adjudicator could exclude a relevant amount from the determination. Further, even if in such a case a claimant adequately set out the basis of the claim in submissions put to the adjudicator, the adjudicator could take the view that, because the respondent was unable adequately to respond to this subsequent material (because of the provisions of s.20(2B) and s.22(2)(c) of the Act), he or she is not appropriately satisfied of the claimant's entitlement. Generally however, in my opinion, it is for the adjudicator to determine if the basis of the claim is adequately set out in the payment claim, and if not, whether on this ground a relevant amount claim should be excluded from the amount of the progress payment determined under s.22(1). 27 So far as this case is concerned, there is no suggestion that the contractual basis for the amounts claimed was not adequately indicated in the payment claim. The complaint is that the payment claim did not indicate that the claim was for related goods or services supplied. However, in my opinion, if a claim is in substance a claim for related goods or services supplied, it is not essential that it be explicitly identified as such in the payment claim: generally it is enough that the claim and its basis (in the contract and/or as a matter of valuation) be set out with sufficient clarity. 28 Accordingly, it is not to the point that the payment claim in this case on its face indicated its contractual basis as being for delay damages rather than the supply of goods and services. Any contention by Coordinated that the adjudication was invalidated, because the claim was not one which could validly be made under the Act, was for Coordinated to establish before the primary judge or before this Court; and in my opinion, Coordinated has not established that. It is not to the point that the adjudicator made no finding that the claim was for related goods and services supplied.

ORDER 33 For those reasons, in my opinion the appeal should be dismissed with costs. 34 IPP JA: I agree with Hodgson JA, for the reasons set out in [38] to [45] of his reasons in Coordinated Construction Co Pty Ltd v J M Hargreaves (NSW) Pty Ltd & Ors [2005] NSWCA 228 that "delay damages" can amount to payments "for construction work". 35 This is sufficient, in my view, to dispose of the appeal. I agree with the orders proposed by Hodgson JA. 36 I would not comment on the other issues raised. These are not essential to the decision. 37 BASTEN JA: The Appellant (the plaintiff in the proceedings below) sought relief in the nature of prohibition and certiorari in relation to a determination made by an adjudicator under s 22 of the Building and Construction Industry Security of Payment Act 1999 (NSW) ("the Act"). The basis on which such relief was sought was that there had been a failure to comply with the basic and essential requirements of the Act: Coordinated Construction Co Pty Ltd v Climatech (Canberra) Pty Ltd [2005] NSWSC 312 at [13]. The requirements said not to be satisfied were those provided for in s 13(2)(a) and (b) of the Act. The primary focus of the argument was the proposition that a claim for damages where there was delay, for a compensable cause, under clause 34.9 of the contract, did not constitute a claim for payment "for" construction work. It was conceded by the Appellant that the preconditions to a valid determination identified in Brodyn Pty Ltd v Davenport [2004] NSWCA 394 at [53] did not include a failure to comply with s 13(2). Nevertheless, it was argued before her Honour that, the list set out in Brodyn not being exhaustive, this failure nevertheless rendered the determination invalid. 38 The error in fact made by the adjudicator, identified by her Honour at [30], set out at [13] above, was the treating of the extensions of time as "variation claims". That, her Honour held, did not constitute a jurisdictional error, but rather an error within jurisdiction. Her Honour correctly held that such an error would not render the determination invalid, in the sense explained in Brodyn. 39 Her Honour did not reach a final conclusion in relation to the argument that claims for payment on account of delays were not payment claims "for construction work", because, she held, they were in substance claims for payment in relation to a related service, namely "the provision of labour to carry out construction work": see s 6(1)(b)(i) and [38], set out at [15] above. As noted at [20], the Appellant challenged this approach on the basis that it had not been the subject of a finding by the adjudicator. 40 At [21] above, Hodgson JA refers to the decision of Einstein J in John Holland Pty Ltd v Cardno MBK (NSW) Pty Ltd [2004] NSWSC 258. His Honour expresses the view that "some parts of what was said in that case may require qualification, in part because of the views expressed in Hargreaves at [52] in relation to the material which the adjudicator was entitled to take into account. I have expressed my views in relation to that matter in Coordinated Construction Co Pty Ltd v J M Hargreaves [2005] NSWCA 228 at [64]-[68]. However, the reference to John Holland v Cardno MBK in this context requires further explanation. 41 That case was concerned with a problem for which the Act appeared not to provide, namely where a contractor makes a claim on one basis, or even without specifying a basis, and then seeks to raise a new or additional justification before the adjudicator. Einstein J was of the view that the contractor was entitled to take that step, because s 13(2) does not require a payment claim to identify the contractual basis on which the claim is made, nor to provide supporting documents as part of the claim. Accordingly, a valid claim could be made without taking those steps. The principal must then respond by way of a payment schedule, which is likely to deal with the basis for claim relied upon, rather than that which is not identified or relied upon. It is then supposed that the claimant, by "submissions" made under s 17(3)(h), on an application for adjudication, can supply the missing detail, by reference to contractual terms, or supporting documentation. The principal can respond by making submissions, pursuant to s 20(2)(c), but cannot include in those submissions "any reasons" for withholding payment which were not included in the payment schedule: s 20(2B). Nevertheless, Einstein J noted that the claimant's submissions must be supportive of a payment claim already made, and cannot "constitute" a payment claim by adding a fresh basis of claim: ibid at [25]. However, his Honour took a different view in relation to an absence of supporting documentation. If the principal complained in the payment schedule that it could not verify the amounts because of absence of supporting documentation, which documentation was forthcoming on the adjudication application, it could not then provide reasons based on that documentation for withholding payment: ibid at [30]. However, his Honour held that, at least in the particular circumstances of the challenges before him, the contractor could not succeed on the basis of the new material, either because it made out a claim which was not established by the "payment claim" or because the result was to deny the principal procedural fairness.

Essential preconditions 42 In John Holland v Cardno MBK, Einstein J expressed the view that, in order to satisfy the statutory scheme, a payment claim did not need to be "comprehensible by the respondent in terms of its supporting materials": ibid at [21]. However, as Hodgson JA notes at [25] above, the claim must "identify" the work, goods or services to which the payment sought relates. The term "identify" should be given a purposive construction: what must be done must be sufficient to draw the attention of the principal to the fact that an entitlement to a payment is asserted, arising under the contract to which both the contractor and the principal are parties. In that sense, the claim, to be valid, must be reasonably comprehensible to the other party. If the entitlement does not arise absent the supply of supporting documentation, then the claim must be accompanied by that documentation, unless it has already been provided. On the other hand, it may be that the distinction between a "claim" and a "reply" by way of a payment schedule (see s 14(1)), on the one hand, and "submissions" on the other, suggest that the precise contractual basis for the entitlement may not need to be identified in the claim, nor addressed in the response. Rather, the claim should assert, in full, the factual basis upon which it is made, including the provision of documents where necessary, whereas the reliance on a relevant contractual provision may be dealt with by way of submissions, if the matter comes before an adjudicator. It would then follow that the requirement in s 20(2B) that the "reasons" for withholding payment must be limited to those identified in the payment schedule, would not preclude the principal from undertaking the same exercise it its submissions, namely the identification of the absence of justification in terms of specific contractual provisions. 43 The next question is whether the existence of a valid payment claim, which complies with s 13(2) is an essential precondition to a valid determination. A related question is whether, even if there is a valid claim, a determination which appears to go beyond the parameters of the claim is itself a valid determination: see [24] and [26] above. 44 For reasons explained in Hargreaves at [72]-[77], it is not possible to construe s.13(2) as doing otherwise than imposing mandatory requirements with respect to the making of payment claims. However, it does not follow that the Court should set aside a determination in circumstances where, in its view, the claim does not satisfy those requirements, or the determination goes beyond the parameters of the claim, properly understood. Intervention on that basis will only be justified if the legislature has imposed an objective requirement, rather than one which the adjudicator has power to determine. It is well established that the mere fact that a requirement is objectively expressed, rather than by reference to the satisfaction of the officer or tribunal concerned, is not decisive of the construction issue. Indeed, in relation to inferior courts, it has been said that there is a strong presumption against any jurisdictional qualification being interpreted as contingent upon the actual existence of a state of facts, as opposed to the decision-maker's opinion in that regard: see Parisienne Basket Shoes Pty Ltd v Whyte (1938) 59 CLR 369 at 391 (Dixon J). A factor favouring that approach is "the inconvenience that may arise from classifying a factual reference in a statutory formulation as a jurisdictional fact": Timbarra Protection Coalition Inc v Ross Mining NL (1999) 46 NSWLR 55 at 72 (Spigelman CJ). 45 In the present case, three factors militate in favour of treating elements identified in s 13(2) as properly dependent upon the satisfaction or opinion of the adjudicator. First, what is or may be a sufficient identification of matters for the purposes of a claim falls within the special experience which a qualified adjudicator is intended to bring to the task and is one which may well require evaluative judgment. Secondly, the requirement relates to a procedural step in the claim process, rather than some external criterion. Thirdly, the overall purpose of the Act, as reflected in its objects and procedures, is to provide a speedy and effective means of ensuring that progress payments are made during the course of the administration of a construction contract, without undue formality or resort to the law. 46 In my view the omission of reference to s 13(2) in the list of mandatory requirements identified in Brodyn, should be understood as giving effect to these principles. 47 It does not follow that the formation of a relevant opinion by an adjudicator with respect to compliance with s 13(2) will in all circumstances be beyond review. The principle stated by Latham CJ in R v Connell; Ex parte Hetton Bellbird Collieries Ltd (1994) 69 CLR 407 at 432, as applied by Gummow J in Minister for Immigration and Multicultural Affairs v Eshetu (1999) 197 CLR 611 at [133], was to the following effect: "If the opinion which was in fact formed was reached by taking into account irrelevant considerations or by otherwise misconstruing the terms of the relevant legislation, then it must be held that the opinion required has not been formed. In that event the basis for the exercise of power is absent, just as if it were shown that the opinion was arbitrary, capricious, irrational or not bona fide."

Claim for related services 49 It is now convenient to return to the basis upon which the primary judge refused relief in reference to the challenge that the payment claim was not for construction work. Her Honour's reasoning relied upon the proposition that the claim could properly have been supported as a claim for payment for services, namely the provision of labour to carry out construction work. As noted at [21] above, the Appellant challenged that approach on the basis that it was not litigated before the adjudicator, who made no findings in that regard. 50 At [27]-[28] above, Hodgson JA dismisses this argument on two bases: first, the Appellant did not demonstrate that the payment claim was not "in substance a claim for related goods or services supplied", and, secondly, that it was "not to the point that the adjudicator made no finding that the claim was for related goods and services supplied". However, there is, in my opinion, a difficulty with each of these propositions. 51 First, for the reasons set out above, it was for the adjudicator to determine the scope and nature of the payment claim. Furthermore, if the adjudicator had been inclined to determine the claim on the basis of a contractual entitlement other than that asserted by the claimant, he would have been required to make the relevant findings of fact and law to support his conclusion. If, in accordance with Brodyn and as suggested above, those matters are entrusted to the adjudicator by the Act, it is not open to the Court to form a view on those matters and act upon the view so formed, even to demonstrate that the adjudicated amount may be upheld on a different basis. The circumstances in which a court exercising a power of judicial review can reach a conclusion different from that reached by the repository of the power will be extremely rare: see Minister for Immigration and Ethnic Affairs v Guo Wei Rong (1997) 191 CLR 559 at 579. If the decision-maker has found all the necessary factual elements to justify a particular conclusion but has wrongly added a further element, which was not satisfied, a court may conclude that the proper result has constructively been reached: see Chen Shi Hai v Minister for Immigration and Multicultural Affairs (2000) 201 CLR 293 at [41]-[43]. However, in the present case, her Honour was not entitled to uphold the decision of the adjudicator, on the assumption that he had committed jurisdictional error, on a different basis, unless affirmatively satisfied that all the relevant facts had been found and the error was an immaterial misconception of law. 52 Her Honour did not state her conclusions in that way and the Appellant challenges the legitimacy of her Honour's approach. However, it is not necessary to rule on that challenge because the underlying assumption, namely that the adjudicator's determination was otherwise infected by jurisdictional error, has not been made out. That assumption was based upon the argument that "delay damages" could not amount to payments "for construction work", a conclusion which I would reject for the reasons given in Hargreaves at [59]-[63].

Chen Shi Hai v Minister for Immigration and Multicultural Affairs

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