[2006] NSWCA 372
Coordinated Construction Co Pty Ltd v JM Hargreaves (NSW) Pty Ltd (2005) 63 NSWLR 385
[2005] NSWCA 228
Minister for Aboriginal Affairs v Peko-Wallsend Ltd (1986) 162 CLR 24
[1986] HCA 40
Minister for Immigration and Ethnic Affairs v Wu Shan Liang (1996) 185 CLR 259
[1996] HCA 6
Probuild Constructions (Aust) Pty Ltd v Shade Systems Pty Ltd [2018] HCA 4
Source
Original judgment source is linked above.
Catchwords
[2006] NSWCA 372
Coordinated Construction Co Pty Ltd v JM Hargreaves (NSW) Pty Ltd (2005) 63 NSWLR 385[2005] NSWCA 228
Minister for Aboriginal Affairs v Peko-Wallsend Ltd (1986) 162 CLR 24[1986] HCA 40
Minister for Immigration and Ethnic Affairs v Wu Shan Liang (1996) 185 CLR 259[1996] HCA 6
Probuild Constructions (Aust) Pty Ltd v Shade Systems Pty Ltd [2018] HCA 492 ALJR 248
Re Minister for Immigration and Multicultural and Indigenous AffairsEx parte Palme (2003) 216 CLR 212[2003] HCA 56
Shade Systems Pty Ltd v Probuild Constructions (Aust) Pty Ltd (No 2) [2016] NSWCA 379344 ALR 355
Weal v Bathurst City Council [2000] NSWCA 88
Judgment (7 paragraphs)
[1]
Background
The first respondent head contractor (Fulton Hogan) engaged the appellant (Cockram) to design and construct car parks at Manly Vale, Narrabeen and Warriewood by a major works subcontract dated 4 April 2017 (the Subcontract). On 12 December 2017, Cockram served a payment claim under SOP Act, s 13(1) for $12,606,129.29. In response, Fulton Hogan on 2 January 2018 served a payment schedule under s 14(1) certifying only $62,695.12 (excluding GST) as the amount it proposed to pay. Of the reduction, $1,603,000 was justified on the basis of a right to set off, under cl 23.5(2) of the Subcontract, two amounts due from Cockram: $928,000 as liquidated damages for delay, under cl 24.4(1); and $675,000 to indemnify Fulton Hogan for liquidated damages payable to its principal, Transport for New South Wales, under cl 24.5.
On 16 January 2018, Cockram applied for adjudication of its payment claim under s 17(1). Its 110-page application included claims to various extensions of time (EOTs) and denied that Fulton Hogan could rely on contractual provisions in answer to those claims. Those provisions included cl 22.2(1), which entitled Cockram "to an Extension of Time only if", amongst other things:
(e) the Contractor has received an equivalent extension of time under clause 10.10 of the Head Contract [with Transport for New South Wales]
Cockram submitted, rhetorically, "can the Respondent even attempt to rely on clause 22.2(1)(e) …when to do so would be relying on its own breach and failure to claim the same EOT under the Head Contract".
On 24 January 2018, Fulton Hogan lodged its 99-page adjudication response under s 20. That response referred to Lahey Constructions Pty Ltd v Trident Civil Contracting Pty Ltd [2013] NSWSC 176 as a case "in which an adjudication determination was set aside on the basis that the adjudicator essentially ignored the terms of the relevant contract in making a determination in a claimant's favour". It asserted with respect to each of the claimed EOTs that "the scant reasoning provided by the Claimant in its Notice of Delay and EOT Claim: … failed to establish that the Respondent had been granted (or even that it should have been granted) an EOT under the Head Contract (noting the requirements of clause 22.2(1)(e)".
On 20 February 2018, the adjudicator issued a 192-page purported determination under s 22(1). In considering Cockram's claims to EOTs, it recorded Fulton Hogan's submission "that the Claimant has no entitlement [to any EOT] as the Notice of Delay and EOT failed to meet the requirements of the contract as follows: … Failed to establish that the Respondent has been granted an EOT under the Head Contract, noting the requirements of clause 22.2(1)(e)". It then recorded the following with respect to EOT 28:
EOT under the Head Contract - clause 22.2(1)(e): I do not consider that this is a legitimate condition precedent as it relies on a contract relationship, and the attendant obligations, to which the Claimant is not a party. Further, there is no information to suggest that the Respondent even sought an EOT from the Head Contractor's Principal.
After recording the same submission made with respect to each other EOT, the determination similarly concluded:
EOT under the Head Contract - clause 22.2(1)(e): I do not consider that this is a legitimate or workable condition precedent as it relies on a contract relationship, and the attendant obligations, to which the Claimant is not a party. Further, it appears to require the Claimant to demonstrate that the Respondent has been granted an EOT in submitting an EOT for same issue when the Claimant has no way of knowing if the Respondent has even sought an EOT from the Principal of the Head Contract.
Finally, the determination recorded that the adjudicator was satisfied that the Claimant had demonstrated an entitlement with respect to each of the EOTs remaining in dispute and accordingly that the Claimant was entitled to the working days pressed for those EOT claims. The amount initially determined as payable, $8,189,348.54, was corrected under s 22(5) to $8,307,337.72 by an amended determination issued on 28 February 2018.
[2]
The decision below
By a summons filed on 26 February 2018, Fulton Hogan sought a declaration that the determination was void and, in the alternative, an order in the nature of certiorari quashing it. It also sought interlocutory and final injunctions against the taking of steps to enforce it.
Before the primary judge, Fulton Hogan challenged the adjudicator's determination on two bases. First, it claimed that the adjudicator failed to perform her statutory function by not applying what she considered to be the correct construction of cl 22.2(1)(e) because the condition precedent was not "legitimate": Judgment [10], [20]. Secondly, it claimed that the determination was irrational as to the valuation of a claim for preliminaries: Judgment [11]. His Honour rejected the latter claim, and the challenge to that rejection by ground 2 of Fulton Hogan's notice of contention is not pressed.
In addressing the first claim, the primary judge recorded that, "as the argument developed", whether the adjudicator failed to apply cl 22.2(1)(e) "merged into the question whether the Adjudicator gave adequate reasons for refusing to apply that clause of the Subcontract": Judgment [22]. The primary judge considered it was "simply a matter for speculation why the Adjudicator thought that cl 22.2(1)(e) did not apply". On that basis, his Honour concluded that the adjudicator had "failed to give reasons for a critical aspect of her decision", which constituted a failure to comply with s 22(3)(b) (extracted at [33] below) and jurisdictional error: Judgment [28].
[3]
The appeal
By its notice of appeal, Cockram challenged the conclusion that any failure to comply with the requirement for reasons involved a jurisdictional error. Fulton Hogan supported the orders on two bases. Its primary position, supporting ground 1 in its notice of contention, was that the paragraphs extracted at [25] and [26] above recorded the adjudicator's reasons for upholding Cockram's claim for the EOTs and those reasons indicated a refusal to apply cl 22.2(1)(e) of the Subcontract and consequent failure to perform the adjudicator's statutory function. In the alternative, and in answer to Cockram's appeal ground, Fulton Hogan posited that, if those paragraphs did not manifest such a refusal, the adjudicator must have had additional and unstated reasons for upholding the claim to the EOTs and accordingly failed to comply with s 22(3)(b).
For reasons that will become apparent, Fulton Hogan's case as ultimately made on appeal asserted a false dilemma, which is more readily exposed by considering the issues in the following order:
1. Whether the determination complied with s 22(3)(b) and, if not, whether it was invalid (the notice of appeal ground); and
2. Whether the adjudicator failed to perform her statutory function with respect to the condition precedent in cl 22.2(1)(e) (notice of contention ground 1).
[4]
The inclusion of reasons (notice of appeal ground)
Subsection (3) in SOP Act, s 22 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).
Paragraph (b) in its terms only requires that the adjudicator's determination "include the reasons for the determination", not that the reasons so included be adequate according to any objective criterion. Confronted with that fact, Fulton Hogan conceded that the express requirement would be satisfied if the adjudication determination included the reasons that caused the adjudicator to determine as she did. I am content to proceed on the basis of that concession.
Fulton Hogan's position on this ground was that the first sentence in each of the paragraphs extracted at [25] and [26] above and the conclusion paraphrased at [27] demonstrated the adjudicator's failure to record the existence of some other reason critical to her determination. On their face, however, those parts of the determination recorded a complete argument for the conclusion that Cockram was entitled to each EOT notwithstanding that the condition precedent in cl 22.2(1)(e) was not satisfied. The stated minor premise was that the condition precedent depended on something happening under a contract to which Cockram was not a party. Its first major premise, also stated, was that such a condition is not legitimate or workable. And its second major premise, which the adjudicator plainly assumed to be obvious, was that the condition so characterised need not be satisfied to demonstrate the contractual entitlement.
Whether those major premises proceeded on a correct understanding of any applicable law is not to the point. Neither necessarily depended on any other, unstated proposition, derived from the SOP Act, the general law or elsewhere. Accordingly, these parts of the determination could not support an inference that the adjudicator must have relied on any further and unarticulated reason. In the absence of some other evidentiary basis for that finding, Fulton Hogan failed to make out non-compliance with s 22(3)(b). Whether the omission of any reason or reasons from a determination would constitute jurisdictional error does not arise, and the resolution of that hypothetical question of law would be inappropriate.
[5]
The consideration of the contract (notice of contention ground 1)
According to Fulton Hogan's primary position, the reasons extracted above established that the adjudicator had construed cl 22.2(1)(e) as stipulating a condition precedent, but refused to apply that condition solely because, in her view, it was not "legitimate" or "workable". Those reasons were said to be not merely erroneous in law, but "extrinsic to the contract", associated with "general notions of justice", and distinct from "contractually acceptable" reasons for not applying a contract (e.g. voidness for uncertainty). The adjudicator's asserted refusal to apply what she considered "to be the true construction of the contract" for such reasons was then characterised as a departure from her statutory function: cf Coordinated Construction Co Pty Ltd v JM Hargreaves (NSW) Pty Ltd (2005) 63 NSWLR 385; [2005] NSWCA 228 at [52] (Hodgson JA).
In my view, this argument did not fairly represent the adjudicator's stated reasons. The descriptions as not "legitimate" and "workable" were themselves supported by the reasoning explained in [35] above. And those descriptions were capable of amounting to reasons for not applying a contract, notwithstanding that they included normative language which may or may not have corresponded to any established legal category.
More fundamentally, the argument does not allow for the extent of the authority conferred on the adjudicator by SOP Act, s 22, which relevantly 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.
(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.
The adjudicator's ultimate function is thus "to determine the amount and timing of a progress payment": Probuild Constructions (Aust) Pty Ltd v Shade Systems Pty Ltd [2018] HCA 4; (2018) 92 ALJR 248 at [80] (Gageler J). In performing that function, the adjudicator is bound "to consider" the matters in paras (a)-(e) of sub-s (2) and not "to consider" other matters: Hargreaves at [65] (Basten JA).
By its nature, the obligation in s 22(2) required "a process of evaluation, sufficient to warrant the description" as consideration in the particular context, and not mere "formalistic reference" to those matters: Weal v Bathurst City Council [2000] NSWCA 88; (2000) 11 LGERA 181 at [80] (Giles JA, Priestley JA agreeing); Azriel v NSW Land & Housing Corporation (2006) 67 NSWLR 256; [2006] NSWCA 372 at [49] (Basten JA, Santow and Ipp JJA agreeing). The process adopted by the adjudicator did not cease to warrant that description merely because it included a conclusion that one provision of the contract was not to be applied. That remained so whether or not that conclusion proceeded from an error in construction or wrong understanding of the applicable law.
BARRETT AJA: I joined in the orders of 10 May 2018 for the reasons given by Meagher JA.
[6]
Endnotes
Fulton Hogan Construction Pty Ltd v Cockram Construction Ltd [2018] NSWSC 264 at [28].
Fulton Hogan at [25].
Fulton Hogan at [28].
(2003) 216 CLR 212; [2003] HCA 56.
Palme at [41] (Gleeson CJ, Gummow and Heydon JJ).
(1986) 162 CLR 24 at 39 (Mason J); [1986] HCA 40.
[2016] NSWCA 379; 344 ALR 355.
[2018] HCA 4; 92 ALJR 248.
(1996) 185 CLR 259 at 271-272 (Brennan CJ, Toohey, McHugh and Gummow JJ); [1996] HCA 6.
[7]
Amendments
22 May 2018 - Decision date corrected to date of reasons
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: 22 May 2018
Solicitors:
Vincent Young (Appellant)
Maddocks (First Respondent)
File Number(s): 2018/81325
Decision under appeal Court or tribunal: Supreme Court
Jurisdiction: Equity
Citation: [2018] NSWSC 264
Date of Decision: 07 March 2018
Before: Ball J
File Number(s): 2018/63885
Meagher JA, Basten JA and Barrett AJA agreeing (at [2], [18], [42]):
i. As the impugned parts of the determination recorded a complete argument for the adjudicator's conclusion, they could not support an inference that the adjudicator must have relied on some further reason not stated in the determination: at [35]-[36].
ii. The adjudicator's obligation was to consider the contract in s 22(2)(b) of the Act, which required a process of evaluation sufficient to warrant that description. The process adopted by the adjudicator did not cease to do so merely because it included a conclusion that one provision of the contract was not to be applied, whether or not that conclusion proceeded from an error in construction or wrong understanding of the applicable law: at [40]-[41].
Probuild Constructions (Aust) Pty Ltd v Shade Systems Pty Ltd [2018] HCA 4; (2018) 92 ALJR 248; Coordinated Construction Co Pty Ltd v JM Hargreaves (NSW) Pty Ltd (2005) 63 NSWLR 385; [2005] NSWCA 228; Weal v Bathurst City Council [2000] NSWCA 88; (2000) 11 LGERA 181; Azriel v NSW Land & Housing Corporation (2006) 67 NSWLR 256; [2006] NSWCA 372 applied.
Basten JA:
iii. Section 22(3) of the Act requires that the determination include the explanation for the outcome which the adjudicator wishes to present, not a written account of the subjective process by which the determination was reached: at [6]-[7].
Re Minister for Immigration and Multicultural and Indigenous Affairs; Ex parte Palme (2003) 216 CLR 212; [2003] HCA 56 referred to.
iv. If the adjudicator's conclusion cannot be challenged as legally erroneous, the reasoning cannot be challenged as legally inadequate to justify the conclusion. Even if it could be so challenged, the language of a decision-maker, who need not be a lawyer, nor legally trained, is not to be viewed through the prism of legal concepts: at [17].
Minister for Immigration and Ethnic Affairs v Wu Shan Liang (1996) 185 CLR 259; [1996] HCA 6 applied.