"The project included in the payment schedule for which the damages are submitted to have occurred is Level 2, 31 Market Street, Sydney. This is a separate project and is not included in the contract between the parties and [sic] which is relevant to this adjudication."
38 The adjudicator then turned briefly to those other claims in respect of which costs were to be advised, and said that she would not consider them because there was no amount advised.
The issues
39 Mr Hicks submitted that the adjudication determination was void for two reasons. The first related to that which was submitted to adjudication. He submitted that there was but one payment claim, being the bundle of more than 40 individual invoices received by Jigsaw on 2 March 2007. He submitted that neither the whole "Payment Claim" thus constituted, nor any individual invoice within it, was referred to adjudication. He submitted that it was not open to Downsouth to do as it had done: extract from the original bundle of invoices those relating to the Atrium project, and refer only those to adjudication.
40 Secondly, Mr Hicks submitted that the determination was void because the adjudicator had failed to consider the set-off relating to the alleged overpayment of $100,000.00, or alternatively had failed to exercise her powers in good faith for the purposes for which they were given, because she had excluded that set-off from consideration on an irrelevant ground (namely, s 20(2B) of the Act).
41 In oral address, Mr Hicks accepted that if this aspect of his client's case failed on the ground of denial of natural justice, it could not succeed on the alternative "want of good faith" (in the "Brodyn" sense) ground. (My reference to Brodyn is of course a reference to the decision of the Court of Appeal in Brodyn Pty Ltd t/as Time Cost and Quality v Davenport & Anor [2004] 61 NSWLR 421; see in particular the decision of Hodgson JA (with whom Mason P and Giles JA agreed) at 441-442 [55]). Thus, and consistent with what I have said in a number of cases (see, by way of example only, John Goss Projects v Leighton Contractors & Anor [2006] NSWSC 798 at [56] to [59]), I shall say no more about good faith in this sense.
First issue: contents of the adjudication application
42 Each individual invoice in the bundle of more than 40 received by Jigsaw on 2 March 2007 was itself a payment claim. Mr Hicks accepted that this was so. Thus, each could have been referred to adjudication. Mr Hicks submitted that this was what the Act required, when it said in s 17 that "[a] claimant may apply for adjudication of a payment claim".
43 Mr Hicks referred also to Hodgson JA's (non exhaustive) list of "basic and essential requirements" that, in his Honour's view, were "the conditions laid down for the adjudicator's determination" (Brodyn at 441 [53]). The list given by his Honour was as follows:
"53 What then are the conditions laid down for the existence of an adjudicator's determination? The basic and essential requirements appear to include the following:
1. The existence of a construction contract between the claimant and the respondent, to which the Act applies (ss.7 and 8).
2. The service by the claimant on the respondent of a payment claim (s.13).
3. The making of an adjudication application by the claimant to an authorised nominating authority (s.17).
4. The reference of the application to an eligible adjudicator, who accepts the application (ss.18 and 19).
5. The determination by the adjudicator of this application (ss.19(2) and 21(5)), by determining the amount of the progress payment, the date on which it becomes or became due and the rate of interest payable (ss.22(1)) and the issue of a determination in writing (ss.22(3)(a))."
44 Mr Hicks relied on Downsouth's statement in its adjudication application, that the "Payment Claim" was comprised of all the documents served by it, that were received by Jigsaw on 2 March 2007. However, that ignores the covering letter (dated 22 February 2007, and said to have been "re issued by post - 23/2/07") under cover of which those invoices (and the two summaries to which I have referred) were served. That letter said (omitting formal parts):
"Please find enclosed copies of all outstanding invoices and summaries, with detail of request to confirm and clarify all costs."
45 Each individual invoice, and for that matter each summary, had at its foot the following words:
"All invoices are issued under the [Act] … ".
46 I see nothing in this to indicate that Downsouth intended the whole of the invoices served by it to constitute together one payment claim. Each invoice was served as a separate payment claim. To the extent that Downsouth in its adjudication application may have sought to categorise them together as one payment claim (and I am not sure that it sought to do so), I do not see why the Court should be bound by that.
47 As Mr Hicks accepted, it was open to Downsouth to refer all or any one of those separate payment claims to adjudication.
48 If Mr Hicks' construction of s 17 were to be adopted, absurd results might follow in a particular case. Suppose, for example, that Jigsaw had admitted liability for some of the invoices, and had not asserted any cross-claim or set-off in respect of them. There would be no dispute in respect of those invoices; but, on Mr Hicks' approach, Downsouth would be required to refer them (together with all the disputed invoices) to adjudication, and the adjudicator would be required to consider them.
49 Mr Hicks conceded that his client could suffer no prejudice by the reference to adjudication of a sub group of the payment claims received on 2 March 2007. I think it is possible to express the point more generally: the practice adopted by Downsouth would not be capable of causing prejudice in any likely or "real world" situation. On the contrary, it is likely to lead to efficiency, and to substantial savings of both time and money. I do not see why the Court should adopt a construction that compels it to ignore those matters, and to accept potentially absurd results, unless there is no alternative. I do not think that the language of s 17 is intractable to the point where it offers no alternative but the construction proposed by Mr Hicks.
50 Thus, I reject this aspect of Downsouth's challenge to the determination. I note, in connection with this aspect of the challenge, that Mr Hicks did not put any submission based on s 13(5) of the Act.
Second issue: denial of natural justice
51 Hodgson JA said in Brodyn at 441-442 [55] that a number of matters, including "a substantial denial of the measure of natural justice that the Act required to be given" will mean that "a purported determination will be void". That concept has been explored and developed in a number of cases subsequently. Without wishing to be thought to be disrespectful either to those decisions or to the submissions founded on them, it is not necessary to refer to them. The basic principle is clear. The question is one of its application.
52 Mr Hicks' submissions on this point encompassed two elements. The first was that it was not open to the adjudicator to conclude, as she did in that part of her reasons that I have set out in para [31] above, that the set-off based on mutuality of dealings had not been raised in the payment schedule, and was therefore something that should not have been included in the adjudication response.
53 The second element of this aspect of Mr Hicks' submissions was based on the adjudicator's failure to refer to "a substantial matter of payment that was expressly referred to in the payment schedule/s and submissions of" Jigsaw: the reference to the alleged overpayment of $100,000.00 and the claim for its repayment.
54 There is a substantial overlap between those two elements of the "denial of natural justice" challenge.
55 At this point I note that there is one aspect of Jigsaw's submissions that is difficult to accept. Jigsaw raises as an issue in its points of claim and submissions dated 21 May 2007 (para 29) that Downsouth did not assert that "the sum of $100,000.00 was not referable to the claims made in relation to the [Atrium] project … ". However, it is clear on the face of Jigsaw's payment schedules that Jigsaw accepted that this payment (or, as it would have it, overpayment) was not referable to the Atrium payment. Item 2(b) of the payment schedule says that it was "overpaid pursuant to other contract". Further, if anyone had troubled to refer the adjudicator to the set-off invoice, it would have been plain that Jigsaw's position was that the credit related not to the Atrium project but to the Walker Street project.
56 I have to say that I have some difficulty in seeing why Downsouth should have asserted that the sum of $100,000.00 was not referable to the Atriuim project, when on a fair reading of the material provided by Jigsaw to the adjudicator, it was clear that this was Jigsaw's position also.
57 Leaving that aside, the question in relation to the first aspect (s 20(2B)) is whether it was reasonably open to the adjudicator, in the exercise of her powers and duties under the Act, to conclude as she did that the defence of set-off arising out of mutual dealings, raised in para 15 and again in item B of Jigsaw's adjudication response, was not a "reason … included in the payment schedule".
58 The resolution of that question depends in part on an analysis of the payment schedule. The following matters bear on that analysis: