Fulton Hogan Construction Pty Ltd v Brady Marine & Civil Pty Ltd

[2015] ACTSC 384

JUDICIAL REVIEW - Application for leave to appeal from adjudication decision under the Building and Construction Industry (Security of Payment) Act 2009 (ACT) - whether manifest error of law on the face of the record - whether question of law could substantially affect the legal rights of the parties - whether failure to rely on a contractual provision suffices without more to prevent a party from subsequently relying on that contractual provision - whether waiver or estoppel may be established in absence of finding of reliance - adjudication decision remitted to original adjudicator

Building and Construction Industry (Security of Payment) Act 2009 (ACT) ss 24, 38, 43

Commercial Arbitration Act 1986 (ACT) s 38

Commercial Arbitration Act 1984 (NSW)

Court Procedures Rules 2006 (ACT) r 5115

Agricultural and Rural Finance Pty Ltd v Gardiner (2008) 238 CLR 570

Ipswich Borough Council v Fisons PLC [1990] 1 Ch 709

State Water Corporation v Civil Team Engineering Pty Ltd [2013] NSWSC 1879

Suttor v Gundowda Pty Ltd [1950] HCA 35; (1950) 81 CLR 418

Vodafone Pty Ltd v Supercall Pty Ltd [2003] NSWSC 302

Westport Insurance Corporation v Gordian Runoff Ltd [2011] HCA 37; (2011) 244 CLR 239

1. This is an application for leave to appeal pursuant to s 43(3)(b) of the Building and Construction Industry (Security of Payment) Act 2009 (ACT) (the SOP Act). The decision in relation to which leave is sought is a decision dated 17 July 2015 of an adjudicator under the SOP Act.

43 Judicial review of adjudication decision

(1) Except as provided for in this part, a court does not have jurisdiction to set aside or remit an adjudication decision on the ground of error of fact or law on the face of the decision.

(2) An appeal may be made to the Supreme Court on any question of law arising out of an adjudication decision.

(3) An appeal under subsection (2) may be brought by any of the parties to an adjudication decision -

(a) with the consent of the parties to the decision; or

(b) with the leave of the Supreme Court.

(4) The Supreme Court must not grant leave under subsection (3) (b) unless it considers that -

(a) having regard to all the circumstances, the determination of the question of law concerned could substantially affect the rights of 1 or more parties to the adjudication decision; and

(b) there is -

(i) a manifest error of law on the face of the adjudication decision; or

(ii) strong evidence that the adjudicator made an error of law and that the determination of the question may add, or may be likely to add, substantially to the certainty of the law.

(5) The Supreme Court may make any leave which it grants under subsection (3) (b) subject to the applicant complying with any conditions it considers appropriate.

(6) On the determination of an appeal under subsection (2) the Supreme Court may by order -

(a) confirm, amend or set aside the adjudication decision; or

(b) remit the adjudication decision, together with the Supreme Court's opinion on the question of law which was the subject of the appeal, to -

(i) the adjudicator for reconsideration; or

(ii) if a new adjudicator is appointed by the Supreme Court - to that adjudicator for consideration.

(7) If an adjudication decision is remitted under subsection (6) (b) the adjudicator must make the new adjudication decision -

(a) within 10 business days after the day the decision was remitted; or

(b) within the time directed by the Supreme Court.

(8) If the adjudication decision of an adjudicator is amended on an appeal under subsection (2), the adjudication decision as amended has effect as if it were the adjudication decision of the adjudicator.

3. The defendant was the claimant under the SOP Act and the plaintiff was the respondent. The defendant made a payment claim under the SOP Act dated 24 May 2015 for $1,428,764.10 in respect of piling works under a contract between the parties for a project which formed part of the construction of the Majura Parkway. The payment schedule dated 28 May 2015 indicated that the plaintiff proposed to pay no part of the claim. The adjudication application was dated 12 June 2015. The adjudicator served notice of his acceptance of the adjudication application on the plaintiff and defendant on 15 June 2015. The adjudicator received an adjudication response dated 26 June 2015. The time in which the decision was required to be made was extended to 17 July 2015.

4. The question of law identified in the application for leave to appeal is:

Whether a failure to rely on a contractual provision (or representation that such a provision would not be relied upon) suffices, without more, to alter (or prevent a party from thereafter relying on) the rights and obligations for which the parties stipulated in their contract.

5. In answer to both the application for leave to appeal and, if leave is granted, the appeal itself, the defendant relies upon a notice of contention which provides relevantly:

4 On a proper construction of the Determination, the Adjudicator found that:

1. the respondent's entitlement to be paid for a Variation under the Subcontract is subject to the giving of a Subcontractor's Claim under, and in accordance with, clause 52.9 of the GC21 Conditions (First Finding);
2. further or alternatively, the respondent's entitlement to an adjustment to the Subcontract Price for a Site Condition is subject to the giving of a notification under, and in accordance with, clause 41.2 of the GC21 Conditions (Second Finding).

1. The First Finding is an error of law; on a proper construction of the Subcontract, the failure to give a Subcontractor's Claim under, and in accordance with, clause 52.9 of the GC21 Conditions in respect of a Variation is not a condition precedent to the respondent's entitlement to payment for that Variation.
2. Further or alternatively, the Second Finding is an error of law; on a proper construction of the Subcontract, the failure to give a notification under, and in accordance with, clause 41.2 of the GC21 Conditions in respect of a Site Condition is not a condition precedent to the respondent's entitlement to an adjustment to the Subcontract Price for that Site Condition.

6. The amount of $1,428,764.10 claimed in the payment claim was made up of seven different items. In its adjudication response the plaintiff conceded that the defendant was entitled to be paid amounts relating to two of those items. That left five items in dispute which are summarised in the following table:

Dealing with concrete in pilecap excavation at Pier 2 northbound

Dealing with delays in supply of concrete to pile NAA-02

Dealing with delays in supply of concrete at casting yard

Dealing with Pier 1 northbound adverse site conditions

7. As will be apparent from the amounts claimed, the most significant issue was the dispute in relation to adverse site conditions at Pier 1.

8. After dealing with some preliminary issues relating to the content of the payment schedule and the terms of the contract, the adjudicator addressed general submissions relating to claims based on variations and upon adverse site conditions. In particular, the adjudicator dealt with the defendant's submission that the plaintiff had either waived the contractual time requirements or was estopped from relying upon them.

9. The relevant portion of his reasons is as follows:

1. At paragraphs 97 to 99 [of the adjudication application], the claimant asserts that in respect of variations, the respondent has either waived the contractual time requirements or is estopped from relying on them. In support of this assertion, the claimant has referred me to variations, for which either no notice was given or the notice was outside the time provided by the contract, and yet have been paid by the respondent.
2. The claimant also contends that in regard to the variations the subject of this adjudication, the respondent has not raised time of notification as a reason for non-payment.
3. With reference to clauses 10, 41, 52 and 84 of the contract, it is the respondent's contention that the claimant is confused as to what constitutes a variation, how a variation differs from an entitlement to payment for adverse site conditions and the requirements to be fulfilled in order for the claimant to have an entitlement under the contract.
4. The respondent has not specifically addressed the claimant's submissions concerning payments made for claims where no notice was given or the notice was out of time. The respondent has also not specifically addressed the claimant's assertions in respect of waiver and estoppel or that time of notification was not raised as a reason for non-payment of the variations subject to this adjudication.
5. Because the respondent has previously paid for variations which were not submitted in accordance with the requirements of the contract and did not use the claimant's lack of compliance with the contract as reason for withholding payment in respect of the variations subject to this adjudication, I find that the respondent cannot now rely on the claimant's failure to comply with the contractual requirements as a reason for non-payment of these claims.

10. The adjudicator then dealt with submissions related to claims based on site conditions. The issue was which party bore the risk of encountering adverse site conditions. It is not necessary to set out the opposing contentions of the parties as recorded in the adjudication decision except to note that the plaintiff relied upon the terms of clause 41.2 of the contract which described the circumstances in which the defendant may be entitled to claim for adverse site conditions and the notice requirements that related to such a claim.

11. The adjudicator recorded the plaintiff's contentions and his conclusions as follows:

1. The respondent quotes sub clause 41.2 of the contact [sic] and asserts that the purpose of this sub clause is two-fold:
   1. First, it describes the circumstances in which the claimant may be entitled to recourse under clause 41. Namely, when the claimant encounters a site condition that is materially different than the claimant should, having regard for the claimant's warranty under clause 40.2, reasonably have been foreseen as at 22 October 2013; and
   2. Secondly, it sets out the notice requirements to which the claimant must adhere prior to making a claim.

1. Having carefully considered both parties' submissions on the site risk, site information and the like, I am in broad agreement with the respondent on entitlement, but not in respect of the notice requirements.
2. That is, I find:
   1. ... the claimant may be entitled to the costs of dealing with site conditions which are materially adverse in comparison to the site conditions which the claimant should have reasonably foreseen at the date of the contract, but
   2. as found under my heading 'Variations' above (i.e. concerning waiver and estoppel) the respondent cannot rely on the claimant's failure to comply with the contractual requirements as a reason for non-payment.

12. Because of his conclusion that the plaintiff could not rely on the defendant's failure to comply with the contractual requirements for notice, the adjudicator then concluded that he needed to deal with each of the disputed items relating to site conditions.

13. Subsequently, when dealing with each of the contentious claims which he allowed either in whole or in part (allowing four out of the five of them), the adjudicator either expressly referred to his finding that the plaintiff could not rely upon the defendant's failure to comply with the contractual requirements as a reason for non-payment or necessarily adopted that conclusion even though he did not specifically refer to it.

1. I have previously found that the respondent cannot rely on the claimant's failure to comply with the contractual requirements as a reason for non-payment.

15. He allowed the variation in the amount claimed.

1. I have previously found that the respondent cannot rely on the claimant's failure to comply with the contractual requirements as a reason for non-payment.

17. He allowed the variation in the amount claimed.

18. In relation to V016, the adjudicator referred to the plaintiff's contention that the defendant had "not complied with the contractual notice provisions". Notwithstanding this submission, without expressly referring back to his earlier conclusion he allowed this variation as claimed.

19. In relation to V019 he did not allow this claim.

20. In relation to Pier 1 he addressed this claim by reference to three different components of the work. The first component was described as "Pier 1 Crane Pad". It was a claim of $477,119. He did not allow this claim. The second component was described as "Lack of overburden". It was a claim for $629,323. This claim was allowed in full and the adjudicator said (at [108]):

1. I have previously found that the respondent cannot rely on the claimant's failure to comply with the contractual requirements as a reason for non-payment.

21. The third component was described as "Pilecap Obstructions". The adjudicator found (at [120]) "that the site conditions were materially adverse to [those] which the claimant could reasonably have foreseen and the claimant is therefore entitled to payment for resulting additional works". He made no specific reference to his earlier findings as to waiver and estoppel but, having regard to the nature of the claim, he must have proceeded on a basis similar to that in relation to the second component, namely, that the plaintiff could not rely on the defendant's failure to comply with the contractual requirements as a reason for non-payment.

22. As a consequence, it can be seen from the above summary that the adjudicator's conclusions on the issues of waiver and estoppel were significant for his conclusions in relation to four out of the five contested claims, namely, V014, V015, V016 and Pier 1. The amount awarded in relation to those four claims was $706,615.15 excluding GST.

23. The contract is identified as an "Amended GC21 Subcontract". The relevant provisions are as follows:

41 Site Conditions

Early warning should serve to reduce the severity of possible cost and time implications when adverse Site Conditions are encountered. For this purpose, the Subcontractor is encouraged to obtain Further Site Information in advance of construction.

.1 The Subcontractor agrees that it has no other entitlement arising out of or in connection with Site Conditions other than as referred to in this clause 41.

.2 If the Contractor encounters, in the execution of the Subcontract Works (including when obtaining Further Site Information), Site Conditions which are materially adverse in comparison to the Site Conditions which the Subcontractor should have reasonably foreseen at the Date of Subcontract, having regard to the warranty in clause 40.2, the Subcontractor must notify the Contractor in writing forthwith and in any event within 7 days of encountering these Site Conditions (and prior to making any related Subcontractor's Claim), giving full details of:

.1 the Site Conditions encountered;

.2 the manner in which they are said to be materially adverse (having regard to the warranty in clause 40.2), together with information supporting this contention;

.3 the effect on the Subcontract Works;

.4 subject to clause 41.8, the estimated additional cost (if any) of dealing with the Site Conditions encountered and the additional work and resources involved;

.5 the delay (if any) to progress of the Subcontract Works; and

.6 any other relevant matters.

The Contractor may request the Subcontractor to provide any further information relating to the circumstances of the Site Conditions encountered.

.3 The Subcontractor is solely responsible for dealing with the Site Conditions encountered in a manner so as to minimise any extra costs and in a manner to which the Contractor has no objection.

.4 Subject to clause 41.8:

.1 the Subcontractor will be entitled as an adjustment to the Subcontract Price to its direct, reasonable additional costs (including costs of delay or disruption), necessarily and unavoidably incurred by the Subcontractor in dealing with materially adverse Site Conditions, from the date of provision to the Contractor of the written notice required by clause 41.2, having taken all reasonable steps to minimise the costs in dealing with materially adverse Site Conditions; and

.2 the Subcontractor may also be entitled to an extension of time for Completion under clause 54 for delays caused by the materially adverse Site Conditions occurring from the date of provision to the Contractor of the written notice required by clause 41.2.

.5 If a Variation is instructed or agreed as a result of Site Conditions shown by Further Site Information given to the Contractor no later than 21 days before construction on the relevant part of the Site would have started, but for the Variation, it must be dealt with (including the matters of value and extension of time for Completion) under the Variation procedures in clause 52.

.6 If a Variation is instructed or agreed as a result of Site Conditions, but the Subcontractor does not give to the Contractor the Further Site Information within the time provided in clause 41.5;

.1 the Variation must be valued under clause 52 but the value of the Variation must exclude the costs of any aborted work arising out of the Variation; and

.2 no payment will be made to the Subcontractor for costs of delay or any aborted work under any other provision of the Contract or otherwise.

.7 Clause 41.6 applies regardless of any provisions to the contrary in the Subcontract.

.8 Notwithstanding anything in clause 41, when specified in Contract Information item 41 that the Subcontractor is to bear the full risk of encountering and dealing with materially adverse Site Conditions:

.1 the Subcontractor is not entitled to the costs of dealing with materially adverse Site Conditions; and

.2 notwithstanding clause 54, if the Subcontractor is or will be delayed in reaching Completion as a result of dealing with materially adverse Site Conditions, the Subcontractor will not be entitled to an extension of time for Completion.

.9 If a Variation is instructed or agreed as a result of Site Conditions, the parties' rights and obligations are not affected by clause 41.8.

...

Changes to work

52 Variations

Variation instructions

...

Disputed Variations

.7 If the parties do not agree that a Variation applies, all issues relating to the claimed Variation must be dealt with under the Issue resolution procedure in clauses 72 to 75.

.8 The Subcontractor acknowledges that the development of Design by the Subcontractor does not constitute a Variation.

.9 Regardless of any other provision of the Subcontract, if the Subcontractor considers that a Variation applies but the Contractor has not instructed a Variation, the Subcontractor must make its Subcontractor's Claim within 5 days from the start of the event giving rise to the Variation, or from the time when the event should have become known to the Subcontractor with reasonable diligence on its part (as applicable).

Refer also to clause 72.3.

...

65 Final payment

This clause contains provisions which apply to the Subcontractor's Final Payment Claim and the Contractor's Final Subcontract Payment Schedule in addition to those in clauses 62 and 63.

.1 The Subcontractor must submit a Final Payment Claim within 12 weeks after achieving Completion of the whole of the Subcontract Works ...

...

.4 Any other Subcontractor's Claim not previously brought which the Subcontractor is then entitled under the Subcontract to bring must be made (separate from the Final Payment Claim) within 12 weeks after achieving Completion of the whole of the Subcontract Works. Otherwise it is barred. If the Contractor agrees to a Subcontractor's Claim involving money under this clause 65.4, the Contractor will make payment within 35 days of such agreement or of it being determined in accordance with the Contract.

...

67 Set-off

.1 If the Contractor claims a sum under or arising out of the Subcontract, in circumstances when Subcontractor's Insolvency applies, or in relation to a matter for which the Principal has claimed a sum under the Contract, then it may:

.1 withhold, deduct or set-off the claimed sum against any sum to which the Subcontractor is otherwise entitled under or arising out of the Subcontract; and

.2 ...

...

Claim resolution

72 Subcontractor's Claims

.1 Any Subcontractor's Claim not made, assessed and determined under another provision of the Subcontract must be made, assessed and determined under this clause 72 (unless determination of the Subcontractor's Claim is regulated by a separate procedure under any applicable legislation).

These clauses deal with Subcontractor's Claims made, assessed and determined under another provision of the Subcontract:

41 Site Conditions

42 Ambiguities (in part)

44 Adopting Contractor's Documents

49 Testing

51 Acceptance with Defects not made good

53 Changes in Statutory Requirements

52 Variations (in part)

54 Extensions of time

55 Delay costs

62 Payment Claims

65 Final payment (in part).

.2 Where the Subcontractor is entitled to make a Subcontractor's Claim under a provision of the Subcontract including under clause 65.4, which does not specify a time for making the Subcontractor's Claim or otherwise in relation to the Subcontract or the Subcontract Works, then the Subcontractor's Claim must be made within 21 days from:

.1 the start of the event giving rise to it; or

.2 the time the event should have become known to the Subcontractor, with reasonable diligence on its part.

.3 If the Subcontractor fails to make a Subcontractor's Claim within the specified time, the Subcontractor is not entitled to interest on any amount involved in the Subcontractor's Claim for the period before the Subcontractor made the Subcontractor's Claim. However, any Subcontractor's Claim not made within the times specified in clause 65 is barred.

...

24. The issues that need to be decided in order to determine this case are:

(a) whether there was a manifest error;

(b) whether the question of law could substantially affect the rights of the parties;

(c) whether the matters identified in the notice of contention mean that leave should be refused or the decision of the adjudicator confirmed;

(d) whether leave to appeal should be granted;

(e) if leave to appeal is granted, what should be the outcome of the appeal.

25. Plaintiff's submissions: The plaintiff contended that the adjudicator misapprehended the law in relation to waiver and estoppel. It will be apparent from paragraph [60] of the reasons set out above that payment for previous variations, which had not been submitted in accordance with the contractual requirements, and the failure to rely upon the defendant's lack of compliance with the contract as a reason for withholding payment, precluded either by reason of waiver or estoppel the plaintiff from now relying on the defendant's failure to comply with the contractual requirements as a reason for non-payment of these claims.

26. The plaintiff contended that this amounted to an error of law. In support of that proposition the plaintiff relied upon the decision of the High Court in Agricultural and Rural Finance Pty Ltd v Gardiner (2008) 238 CLR 570 at [1]-[3], [94]-[97], [98]-[100] ('Agricultural and Rural Finance'). In that case an indemnity from liability under a loan was given which was conditional upon a borrower punctually paying amounts due under the loan. Payments had been made late but accepted by the lender. The Court was required to consider whether or not there had been waiver in any sense of the obligation to pay punctually so as to prevent the indemnifier from relying on the late payment so as to avoid the indemnity. It is important to note that there was no pleading of estoppel because the borrower could not establish detrimental reliance: [72]. The plurality judgment of Gummow, Hayne and Keifel JJ found that even if the lender and the indemnifier had unequivocally represented to Mr Gardiner (the borrower) that the indemnity remained effective and enforceable despite his past failures to pay punctually the representation was not sufficient to hold those parties to that represented state of affairs. Their Honours said (at [95]-[96]):

1. If, as the particulars alleged, both ARF [the lender] and OAL [the indemnifier] unequivocally represented to Mr Gardiner, in effect, that the indemnity remained effective and enforceable despite his past failures to pay punctually, his several arguments about waiver depended upon attributing determinative significance to the fact of the representation. That is, no matter which of the three ways in which the argument for waiver was put, the fact that ARF as Lender and OAL as Indemnifier represented that the indemnity remained effective and enforceable, despite past defaults, was said to be sufficient to hold those parties to that represented state of affairs. But if, as is the case here, there was no election between inconsistent rights, there was no variation of the contract, and there was no detrimental reliance upon the representation, no reason is given for holding the party concerned to its earlier expressed attitude beyond the fact that the representation was made. To hold that the making of the representation, without more, suffices to alter the rights and obligations for which the parties stipulated by their contract is a step that should not be taken.
2. It should not be taken for two reasons. First, to hold that the making of a representation, without more, alters the rights and obligations of parties to a contract would be to supplant accepted principles governing whether an estoppel is established and whether a contract has been varied. It would supplant those principles by dispensing with the need to show detrimental reliance to establish an estoppel and by discarding as irrelevant the need to show consideration for an agreement to vary an existing contract. The second reason, which in a sense is no more than the obverse of the first, is that no reason is proffered to hold the person making the representation to it. The person to whom the representation is made has not relied on it; it is not demonstrated that departure from the representation would be unjust; there was no consideration to support a bargain.

27. Their Honours therefore rejected Mr Gardiner's arguments that the indemnity given remained enforceable despite his failure to make payments due under the loan agreement punctually.

28. The plaintiff submitted that it was apparent from the terms of paragraph [60] of the adjudicator's reasons that the adjudicator had proceeded on the basis that it was not necessary to establish reliance by the defendant upon the conduct of the plaintiff in previously paying for variations which were not submitted in accordance with the requirements of the contract in order to establish either waiver of those requirements or an estoppel preventing the plaintiff from relying upon those requirements in answer to the payment claim. In other words, the adjudicator had proceeded on the basis that a mere failure to rely on contractual rights will in and of itself cause a party to lose or be otherwise prevented from exercising those rights.

29. That the adjudicator had proceeded on that basis was consistent with the submissions put to the adjudicator by the defendant which made no reference to any requirement for reliance in order to establish the waiver or estoppel that was contended for.

30. Therefore the plaintiff contended that the reasons of the adjudicator disclosed an error of law.

31. As to whether or not the error was "a manifest error of law on the face of the adjudication decision" the plaintiff pointed to the decision of the High Court in Westport Insurance Corporation v Gordian Runoff Ltd [2011] HCA 37; (2011) 244 CLR 239 at [42] ('Westport'). That was a decision dealing with the provisions of the Commercial Arbitration Act 1984 (NSW) which were in relevantly similar terms to the provisions of the Commercial Arbitration Act 1986 (ACT) upon which the terms of s 43 of the SOP Act were based. The provision in question referred to "a manifest error of law on the face of the award". The plurality judgment said in relation to that phrase (at [42]):

Paragraph (b)(i) of s 38(5) may be awkwardly expressed, but the words "a manifest error of law on the face of the award" comprise a phrase which is to be read and understood as expressing the one idea. An error of law either exists or does not exist; there is no twilight zone between the two possibilities. But what is required here is that the existence of error be manifest on the face of the award, including the reasons given by the arbitrator, in the sense of apparent to that understanding by the reader of the award.

32. In the light of this the plaintiff submitted that the term "manifest error" did not involve any statement as to the quality of the error but simply indicated that it was apparent to a reader of the reasons. The plaintiff submitted that having regard to the reasons of the adjudicator the error was, therefore, "manifest".

33. Defendant's submissions: The defendant did not contest that Agricultural and Rural Finance correctly identified that reliance was a necessary element of either waiver or estoppel. However the defendant submitted that any error was not "manifest" because it arose only by inference from the absence of a reference to a particular fact.

34. The defendant drew attention to what was said by the High Court in Westport in relation to the obligation of arbitrators to provide reasons. That extended to an obligation to "explain succinctly why the various integers in [a] complex statutory provision were satisfied" including providing "factual findings" supporting the inapplicability of a particular proviso and the "considerations tending to support" the application of the proviso: see Westport at [55]-[56]. It submitted that the objects of the SOP Act and the purpose of rapid adjudication that it set up were very different to the Commercial Arbitration Act 1984 (NSW). The regime under the SOP Act was not intended to achieve finality and the time periods were short so as to achieve a decision about interim payment quickly. Hence the defendant submitted that when determining the approach to reasons given by an adjudicator, regard should be had to the fact that the regime is not intended to give a final and binding outcome but instead is the subject of a very compressed timetable for the resolution of disputes on an interim basis.

35. As a result, the defendant submitted that the Court should take care not to adopt a "nitpicking" or "fine tooth comb" approach to the reasons of an adjudicator. The defendant relied upon the statement of Sackar J in State Water Corporation v Civil Team Engineering Pty Ltd [2013] NSWSC 1879 at [10]:

The strict timeframes imposed by the Act, and the complexity of some of the cases, means adjudicators are often required to make their determinations in an intense, "pressure cooker environment", and therefore considerable latitude should, in my view, be afforded to an adjudicator as to the manner and form of the determination ...

36. The defendant submitted that the adjudicator had clearly engaged with the issues in dispute and that the Court should not, in those circumstances, find that the reasoning of the adjudicator was inadequate insofar as it did not expressly identify the findings or matters that were considered by the adjudicator in the course of arriving at his decision. In particular the mere fact that the adjudicator did not expressly set out a finding as to reliance or detriment does not mean that the adjudicator failed to give reasons within the meaning of s 24(3)(b) of the SOP Act. Further, it contended that it was open to the adjudicator to infer that there had been reliance upon the conduct engaged in by the plaintiff in continuing to pay variations in circumstances where the notices had not been provided within the time required by the contract. The defendant noted that the plaintiff in its adjudication response had not provided any guidance to the adjudicator as to what matters ought to be found in the context of the adjudication.

37. Conclusion: In my view a manifest error of law exists upon the face of the adjudication decision. That is because the reasons disclose that the adjudicator found waiver or estoppel in circumstances where there was no finding of reliance that could support either waiver or estoppel. In other words, as the plaintiff contended, the reasons of the adjudicator indicate that the decision was made on the basis that a failure to rely on a contractual provision (or representation that such a provision would not be relied upon) suffices, without more, to alter (or prevent a party from thereafter relying on) the party's rights and obligations. The reasons are not ambiguous or defective in that they explain the basis for the decision that was made. Instead, they disclose that the adjudicator proceeded on a basis that the identified facts give rise to legal consequences when in law they do not. I do not consider that to reach this conclusion involves any nitpicking or a fine tooth comb approach to the adjudicator's reasons. I do not think that it is possible to read into the reasons of the adjudicator findings which are not there and which other aspects of the reasons do not suggest should be there. This does not involve a failure to recognise that adjudicators often work under extreme time pressure and face great difficulties in diligently attempting to disentangle the contentions of parties in disputes over complex factual and legal issues. I completely accept that the reasons of an adjudicator are not to be scrutinised with an eye keenly attuned to the detection of error. However, having regard to the fact that the legislature has made a deliberate decision to permit review of decisions in the circumstances identified in s 43 of the SOP Act it is necessary to give effect to the ordinary understanding of an adjudicator's reasons and not ignore errors when they are manifest. The error in this case is not in my view in that category of borderline cases where reasons could be read one way or another. Rather, it is an error which is apparent and, being apparent, satisfies the requirements of s 43(4)(b)(i) of the SOP Act.

38. Further, to the extent which it might be relevant to either the grant of leave or the question of whether relief should be granted, it is clear that in adopting the approach that he did, the adjudicator adopted the submission that was put to him by the defendant in its adjudication application. That document identified the facts relating to the failure of the plaintiff to insist upon compliance with the notice requirements and the payment of claims where those requirements had not been complied with but the defendant did not submit or identify any facts which would support a finding of reliance. Instead, focusing on the conduct of the plaintiff in failing to insist upon compliance, the defendant submitted in its adjudication application:

Accordingly, [the defendant] assert that the [plaintiff], by conduct, has waived the time requirements in the Contract related to the notification of claims or otherwise is estopped from reliance upon them.

39. In those circumstances it is easy to see why the adjudicator adopted the approach that he did. Nothing in the adjudication response provided by the plaintiff addressed this issue in a manner which would have drawn the adjudicator's attention to either Agricultural and Rural Finance or the principle stated therein which is now relied upon by the plaintiff.

40. As will be apparent, contrary to the submissions made by the defendant, I do not consider this to be a case which involves a failure to give reasons in breach of s 24(3)(b) of the SOP Act. Rather, it is a case where reasons have been given but those reasons disclose that the adjudicator proceeded on the basis that he could be satisfied that a waiver or estoppel was established even without any finding of reliance.

Could the question of law substantially affect the rights of one or more of the parties to the adjudication?

41. Plaintiff's submissions: The plaintiff submitted that the question of law raised by the error "could substantially affect the rights of 1 or more parties to the adjudication decision". It submitted that the purpose of this requirement was directed to ensuring that leave is not granted in respect of what might be considered academic or substantially academic questions. It relied upon the decision in Ipswich Borough Council v Fisons PLC [1990] 1 Ch 709 at 721H ('Ipswich Borough Council') which described the requirements of the Arbitration Act 1979 (UK) that leave should not be granted unless the determination of the question of law could substantially affect rights as follows:

In other words, questions of law, however important, should not be referred to the High Court for decision if, as between the immediate parties, the matter was largely academic.

42. The plaintiff emphasised the word "could" and drew attention to the decision of Nicholas J in Vodafone Pty Ltd v Supercall Pty Ltd [2003] NSWSC 302 at [57] where his Honour found that the word "could" presented the issue of whether the question of law was capable of, or had the capacity to, substantially affect the rights of the parties and that the Court was not required to consider whether the determination "would" as a matter of fact substantially affect those rights. In the context of the present application the plaintiff submitted that if the question was answered favourably to the plaintiff then that "could" substantially affect the plaintiff's rights because the plaintiff could be substantially successful in the adjudication and could avoid the statutory obligation to make a substantial payment pursuant to the SOP Act. The plaintiff submitted that notwithstanding that the SOP Act does not ultimately affect civil rights or obligations (s 38), the outcome "could" substantially affect the plaintiff's rights. It would render the appeal provision nugatory if the interim nature of the scheme under the SOP Act meant that there could never be a substantial effect on rights.

43. Defendant's submissions: The defendant submitted that if the adjudicator had committed an error of law that was manifest on the face of the record then the error could not substantially affect the rights of one or more of the parties because on a proper construction of the contract the notifications required by clauses 52 and 41 were not conditions precedent to any entitlement in the defendant to payment. As a result, the adjudicator's findings as to estoppel or waiver were irrelevant. This is, in effect, the argument that is articulated in the notice of contention.

44. Conclusion: I accept the plaintiff's submissions as to the approach to whether or not an error could substantially affect the rights of a party. In particular, I accept that in the context of s 38 of the SOP Act that test must not be read as requiring that there be a finalised determination of the rights of the parties. Instead it must relate to the rights of the parties to interim payment under the SOP Act. To require more would render the provision nugatory.

45. The defendant's submissions based on the matters raised in the notice of contention were submissions that were correctly made in relation to the grant of leave, insofar as they were directed to whether or not there could be a substantial effect on the rights of one or more parties. I will consider them separately below when I consider the notice of contention. Therefore, subject to consideration of the defendant's arguments raised in the notice of contention, I find that the error could substantially affect the rights of each of the parties.

Does the notice of contention mean that leave should be refused or the adjudication decision confirmed?

46. In the event that the Court was satisfied that there was a manifest error of law on the face of the award, the defendant relied upon its proposed notice of contention:

(a) in order to demonstrate that the requirement that the error of law "could" have a substantial effect on the rights of a party was not made out; and

(b) in the event that leave to appeal was granted, in order to contend that relief should not be given because even if the error was corrected the outcome of the adjudication would be the same.

47. Contentions of the plaintiff: The plaintiff put forward a number of reasons why the defendant was not entitled to rely upon the notice of contention.

(a) the defendant was not entitled to raise matters in the notice of contention that were not raised below and which could have been the subject of evidence below: Suttor v Gundowda Pty Ltd [1950] HCA 35; (1950) 81 CLR 418 at 438 ('Suttor');

(b) that as drafted it was in the nature of a cross appeal, for which leave had not been sought, because it involved contentions in the alternative which, unless both contentions were made out, would not support the decision of the adjudicator;

(c) that the reasons given by the High Court in Westport at [70] appear to indicate that the only point at which the notice of contention could be relied upon was at the point of the grant of leave because once leave was granted the subject matter of the appeal was the error of law;

(d) the contention was in any event wrong because clause 41 of the contract makes it clear that the defendant could only be entitled to payment on account of adverse site conditions from the date upon which notice was given and either there was no written notice or there was an entitlement to payment only from the date of the written notice.

49. Having regard to the conclusion that I have reached, it is only necessary to address the last of these submissions which relates to the second of the defendant's contentions (that is, paragraph 6 in the notice set out above at [5]).

50. Defendant's contention in relation to clause 41: The contention of the defendant is that on a proper construction of the contract the requirement to give a notification under, and in accordance with, clause 41.2 in respect of a site condition is not a condition precedent to the defendant's entitlement to an adjustment to the subcontract price for that site condition.

51. The defendant referred to clause 52.9 which was relied upon by the plaintiff as being a time bar. It submitted that in the context of clause 72.3 it falls within the general suite of provisions that concern the resolution of subcontractor's claims generally and that clause 72.3 merely disables a subcontractor from claiming interest on any amount involved in the claim for the period before the subcontractor made the subcontractor's claim. It is only where the time period in clause 65 has expired that there is in fact a bar on a claim. The period specified in clause 65.4 is "12 weeks after achieving Completion of the whole of the Subcontract Works".

52. The defendant then submitted that clause 41 has a similar operation. It submitted that while clause 41.2 imposes an obligation to give notice within seven days of encountering the site conditions, that provision does not mean that there is no entitlement whatsoever to payment under the clause. It pointed to the fact that the opening words of clause 41.4 do not expressly make the entitlement to an adjustment of the subcontract price subject to compliance with clause 41.2. That might easily have been achieved if in addition to a reference to clause 41.8 in the chapeau, there was also a reference to clause 41.2. The defendant appeared to accept that by reason of the terms of clause 41.4.1, the entitlement to an adjustment of the subcontract price could only apply to additional costs "from the date of provision to the Contractor of the written notice required by clause 41.2". The defendant submitted that the mechanism in clause 41.4 is similar to the mechanism in clause 72.3 in that it expressly provides a mechanism for addressing the failure of the subcontractor to provide timely notice. The fact that such a mechanism is built into the contract is inconsistent with a construction of the contract that would entirely bar a subcontractor from any claim whatsoever in the event that notification was not given within the seven days referred to in clause 41.2. Had there been an intention to actually bar such a claim then the term "barred" would have been used as it is in clause 65. It also pointed to the reference to clause 72.3 at the end of clause 52.9. That is inconsistent with the word "must" in clause 52.9 presenting a bar to the making of a subcontractor's claim, but instead provides an interest consequence if the claim is made outside the time provided for in clause 52.9.

53. As a consequence, the defendant submitted that even if the adjudicator made an error in not requiring reliance to be demonstrated, he arrived at the correct conclusion because the contractual provisions relied upon by the plaintiff did not preclude the defendant from claiming amounts under the contract because of variations or adverse site conditions. In those circumstances the defendant relied on the statement in Ipswich Borough Council at 726F for the proposition that in such circumstances leave should not be given. In that case Lord Donaldson said:

Nor, I would add, does it matter whether the arbitrator's reasons may have been faulty, unless this cast doubt upon his conclusions, it is always possible to arrive at the right answer for the wrong reasons and in such a case leave should never be given.

54. Conclusion: In the adjudication application the defendant initially referred to the date of the claim for adverse site conditions as being raised in correspondence dated 9 April 2015 (see application at [94]). Later in the application, at [156], the defendant asserted that "notice of the elements of this variation" was given in correspondence dated 20 September 2013, 21 October 2013, 10 February 2014, 26 March 2014 and 17 December 2014. This led to correspondence from the plaintiff dated 17 February 2015 and a reply from the defendant on 9 April 2015. The correspondence dated 17 December 2014 was not in evidence. The correspondence dated 20 September 2013 and 21 October 2013 did not involve formal notice under clause 41. The correspondence dated 10 February 2014 and 26 March 2014 was included and did involve notification for the purposes of clause 41.

55. In relation to the two aspects of adverse site conditions where the adjudicator allowed the defendant's claim (lack of overburden and pilecap obstructions), the adjudication application made reference to the notices said to have been given to the plaintiff.

(a) In relation to the issue of site conditions generally, the defendant asserted at [156] that it had given notice of those issues.

(b) In relation to the lack of overburden, it referred at [180] to having raised that issue in correspondence. In the adjudication response the plaintiff contended at [130] that the correspondence referred to at [156] of the application could not be notice of the overburden issue but did not specifically refer to the correspondence at [180] of the application. In correspondence from the defendant to the plaintiff dated 9 April 2015 (see adjudication application at tab 29) the notices from October 2013 that were relied upon for the purposes of clause 41.2 were identified. They were emails which did not in terms give contractual notice but instead appeared to be operational correspondence between engineers or project managers.

(c) In relation to the issue of pilecap obstructions the defendant asserted that it had given notice on 10 February 2014, 20 February 2014 and 26 March 2014 (see adjudication application at [192]). Those notices were in the form of contractual notices under, inter alia, clause 41 of the contract. In the adjudication response the plaintiff did not identify the inadequacy of notices as an issue but contested the defendant's contractual entitlement and said that at the time of the contract the defendant was fully aware of the site conditions.

56. In my view it is clear that any entitlement to an adjustment of the subcontract price under clause 41.4 can only occur from the date of the provision of written notice required by clause 41.2. The defendant appeared to accept as much in submissions. The factual issue that would therefore be raised is when contractual notice complying with clause 41.2 was given. If contractual notice was given prior to the date upon which the work forming the basis for the claim for the second and third categories of site conditions (lack of overburden and pilecap obstructions) was carried out, then it may become necessary to determine whether or not the giving of the notice within the time period in clause 41.2 was a condition precedent to any payment for that category of claim. However, if it is not established that the work was carried out only after notice was given then, even if non-compliance with the time requirements in relation to the giving of notice in clause 41.2 is not fatal to the claim, it would not be possible to say that the whole of the amount claimed was due under clause 41.4. In other words, unless the defendant can establish that the whole of the work was done after the provision of written notice under clause 41.2 then it cannot establish that its contention would be a basis for upholding the whole of that aspect of the adjudicator's award and hence a basis for denying leave to appeal.

57. While part of the adjudication application addressing when the relevant costs were incurred was not included in the material that was tendered (most particularly under tab 27 of the adjudication application), the spreadsheet showing the calculation of the amount of the claims relating to Pier 1 which was included (under tab 46) disclosed that costs in relation to the overburden issue appear to have been incurred between October 2013 and August 2014. The document also disclosed that so far as the defendant's employees' time was concerned, the additional time involved was a total of two and a half weeks at some point or points over that period. The period during which the half week delay caused by the pilecap obstructions issue was not disclosed in that document.

58. On the principal issue, namely that relating to overburden, I cannot be satisfied on the material available to me that all of the amounts claimed were incurred after a notice that complied with the form (if not the timing) requirements of clause 41.2 had been given. As a consequence I cannot be satisfied that the whole of the amount would be able to be recovered because of the restriction in clause 41.4 which confined recovery to additional costs incurred after notice had been given.

59. Consequences for decision on leave to appeal: As will be apparent, in order for the notice of contention to provide a basis for refusal of leave or ultimately to provide a basis for the refusal of relief if leave was granted, it would need to establish that the whole of the amount found by the adjudicator to be payable was payable. Alternatively it might provide a basis for refusal of leave, or alternatively refusal of relief, if it was demonstrated that any error on the part of the adjudicator would only have had a modest or negligible impact on the overall outcome. As the plaintiff submitted, even though the notice itself referred to its two contentions in the alternative, it would be necessary for the defendant to succeed on both in order to uphold the adjudicator's decision. However, in the light of my conclusion above I cannot be satisfied that that is the case. This means that even if the defendant was otherwise successful in establishing its interpretation of the contract, the notice of contention would not result in the adjudicator's decision being upheld.

60. In those circumstances I consider it unnecessary and potentially unhelpful to consider the other issues which I would otherwise have been required to consider if the notice of contention would have provided a basis for refusal of leave to appeal or, if leave was granted, a basis for confirming the adjudication decision. Those issues are:

(a) whether the time requirements in the notice provisions in clause 41.2 and clause 52.9 preclude the making of claims outside those time periods or alternatively merely specify other consequences for that non-compliance;

(b) whether the defendant was precluded from raising matters of contention that had not been raised below by reason of the principle in Suttor.

(a) I am satisfied that the adjudicator made a manifest error of law on the face of the record;

(b) I am satisfied that that error could have a substantial effect on the rights of the parties by reason of the fact that it could alter substantially the amount that the plaintiff was required to pay on an interim basis under the SOP Act;

(c) in reaching the conclusion in (b) I have found that the terms of the notice of contention, if it was permitted to be raised, would not prevent there being a substantial effect on the rights of the parties because I cannot be satisfied on the material available to me that the work that formed the basis of the overburden claim in relation to Pier 1 was carried out after notice was given under the contract and hence that the cost of that work was potentially recoverable by the defendant from the plaintiff under clause 41.4;

(d) having reached that conclusion, I have declined to determine the other legal issues about the interpretation of the contract that would be necessary to determine if I had been satisfied that the whole or substantially the whole of the amount awarded for the lack of overburden claim was otherwise recoverable.

62. In those circumstances I must consider whether, as a matter of discretion, leave to appeal should be granted. In particular I must consider whether there are any other factors which would tell against the grant of leave to appeal and, if leave to appeal was granted, against the granting of relief. Most obvious is the fact that the issue in relation to which the error has been demonstrated is one which was not clearly raised by the plaintiff in its contentions to the adjudicator. In my view, notwithstanding this fact (which may be relevant to costs), I consider it is appropriate to grant leave as an error of law has been established that could substantially affect the obligations upon the plaintiff to make interim payments to the defendant. The legislature has seen fit, notwithstanding the interim nature of the scheme, to permit appeals to cure manifest errors of law. Ultimately the burden lies upon the adjudicator to apply the terms of the contract and, necessarily, to correctly apply the law which might lead to a departure from the operation of the contract in accordance with its terms.

64. In the light of the conclusion reached above and the fact that argument upon the application proceeded as if on appeal, I consider it appropriate that the appeal should succeed. Section 43(6) of the SOP Act provides that the Court may either confirm, amend or set aside the adjudication decision or remit the adjudication decision. If it is remitted it may be remitted either to the adjudicator or to a new adjudicator appointed by the Court. When it is remitted it must be remitted "together with the Supreme Court's opinion on the question of law which was the subject of the appeal". Section 43(7) requires the adjudicator to make a new decision either within ten business days after the day of the Court's decision or within the time directed by the Court.

65. In my view it is appropriate to remit the adjudication decision rather than to amend it or set it aside. Notwithstanding the error of law that I have found to exist, it is not so clear that the defendant's claim for any payment under the SOP Act, which is not conceded by the plaintiff, should fail. Whether or not the actual element of reliance can be established upon the whole of the material that was before the adjudicator is a question of fact and is fundamentally one for the adjudicator. Similarly, the issues raised by the proposed notice of contention are ones which may be able to be raised before the adjudicator and which are ultimately dependent upon factual findings.

66. So far as the status of the notice of contention is concerned, an order permitting it to be filed is required because it was not filed within the 28 day period required by r 5115(2)(a) of the Court Procedures Rules 2006 (ACT). Although the subject matter of the appeal is the error of law and the giving of the Court's opinion in relation to that error, the matters raised in the notice of contention might have formed a basis upon which the adjudication decision should in any event have been "confirmed" for the purposes of s 43(6)(a) of the SOP Act. In addressing the contentions for the purposes of the grant of leave I have concluded that if it were filed then it would not provide a basis for confirming the adjudication decision because the evidence does not disclose that expenses arising from a lack of overburden were incurred after the giving of notice under clause 41.2 of the contract. I note that the High Court in Westport appears to have been divided on the permissibility of notices of contention in a case where the subject matter of the appeal comprised errors of law: compare the plurality judgment of French CJ, Gummow, Crennan and Bell JJ at [70] with the decision of Heydon J at [76]-[83]. In those circumstances:

(a) having concluded for the purposes of the leave application that the notice of contention would not, if it was permitted to be filed, lead to the adjudicator's decision being confirmed; and

(b) that any decision to permit it to be filed would involve resolution of issues which are otherwise unnecessary to resolve;

it is appropriate that leave to file the notice of contention be refused.

67. In my view it is appropriate to remit the adjudication decision to the adjudicator who made the original decision. That is because there will be cost and time efficiencies in having the original decision-maker reconsider the claim. I do not accept that the fact that the adjudicator has been found to have made an error of law is a reason for remitting the decision to a different adjudicator. The reasons given by the adjudicator reflect a diligent attempt to disentangle the complicated factual and legal arguments put forward by the parties and there is nothing to suggest that it would not be appropriate for the same adjudicator to complete the adjudication upon remittal from this Court.

68. The opinion of the Court on the question of law identified in the notice of appeal is: A failure to rely on a contractual provision (or representation that such a provision would not be relied upon) does not suffice, without more, to alter (or prevent a party from thereafter relying on) the rights and obligations for which the parties stipulated in their contract.

69. In terms of the time frame for the new adjudication decision, I consider that it is appropriate to permit the extension of the period beyond the ten business days contemplated by s 43(7) of the SOP Act.

70. Having regard to the remittal of the decision to the adjudicator, the amount paid into Court by the plaintiff pending the determination of the case may be paid out to it.

71. The regime for rapid determination of disputed payment claims under the SOP Act is a scheme which is of considerable commercial significance in the building and construction industry. The provision made by s 43 of the SOP Act is one which is not mirrored in other jurisdictions. Section 38 of the Commercial Arbitration Act 1986 (ACT), upon which s 43 of the SOP Act is based, is a provision permitting appeals from decisions of arbitrators which relate to the final rather than interim determination of the rights of the parties. Thus the progenitor of s 43 of the SOP Act was enacted in a context which did not involve the time pressure which is reflected in the other provisions of the SOP Act. Because of the complexity of the factual and legal bases for applications for leave to appeal, it is usually not possible to deal with such applications in a summary fashion and often more efficient to hear the argument on the appeal for the purposes of determining the application for leave. The necessity for detailed argument and the necessity to reserve decisions will often lead to substantial delays before an appeal under s 43 can be determined. Such delays, while necessitated by the legislative decision to include s 43, tend to run counter to the policy of rapidity reflected in the balance of the SOP Act. While it is not possible for the legislature to exclude review of adjudicator's decisions on the grounds of jurisdictional error, the existence of the statutory appeal under s 43 is a matter of legislative choice. I draw to the attention of those responsible for legislative policy in this area, the desirability of continuing to monitor whether the legislative goals implemented through the legislation and intended to be substantially consistent with similar legislation in other jurisdictions are undermined by the potential for delay built into a provision such as s 43.

1. The plaintiff is granted leave to appeal under s 43(3)(b) of the Building and Construction Industry (Security of Payment) Act 2009 (ACT), from the adjudication decision made by Paul Roberts (the adjudicator) dated 17 July 2015.
2. The draft notice of appeal filed 27 July 2015 shall be taken to be the notice of appeal.
3. The appeal is allowed and the adjudication decision is remitted to the adjudicator for reconsideration together with the Supreme Court's opinion on the question of law identified in the notice of appeal which opinion is set out in the Court's reasons for decision published on 9 December 2015.
4. The Court directs that the adjudicator must make the new adjudication decision within 15 business days after the date of these orders or within such further time as the parties agree in writing prior to the expiration of that period.
5. The amount of $777,276.67 paid into Court by the plaintiff pursuant to orders made on 30 July 2015 shall be paid out to the plaintiff.
6. The issue of costs is reserved.
7. The parties are directed to file and serve written submissions no longer than three pages together with any evidence to be relied upon in relation to costs within seven days.
8. Liberty is granted to the parties to apply within seven days to vary the orders made in relation to remittal if there is a practical difficulty in having the original adjudicator complete the adjudication.

I certify that the preceding seventy-two [72] numbered paragraphs are a true copy of the Reasons for Judgment of his Honour Associate Justice Mossop.