2.0 Payment and Security
2.1 On the day of the month states [sic] in the Appendix the Subcontractor must submit [to] INTEN a progress claim in a form provided by Inten Constructions Pty Ltd showing:
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(b) Subject to clauses 16.0, 20.0 and 21.0, other amounts to which the Subcontractor is entitled under the Subcontract; and
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3.0 Execution of the Works
3.1 The Subcontractor must comply with all directions of INTEN in relations [sic] to the execution of the Works.
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4.0 Variations
4.1 INTEN may by written notice instruct the Subcontractor to carry out variations. The Subcontractor must comply with INTEN instruction within the time stated by INTEN or, if no time stated, within a reasonable time.
4.2 The Subcontract Sum will be adjusted by a reasonable amount in respect of variations which are instructed in writing by INTEN. In determining a reasonable amount regard will be had to any rates or prices specified in or agreed to under the Subcontract or any other Agreement or similar work.
4.3 The Subcontract Sum will not be adjusted and the Subcontractor will not be entitled to payment for a variation unless it is instructed in writing by INTEN and the instruction states that it is an instruction for a variation under this clause 4.0.
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16.0 Barring of Claims
16.1 INTEN will not be liable upon any claim by the Subcontractor in respect of any matter arising out of or connected with the Subcontract, including but not limited to a breach of the Subcontract or negligence, unless within 5 working days after the first day upon which the Subcontractor could reasonably have been aware of the first of any breach, act, omission, direction, approval, circumstance or other fact or facts on which the claim is based the Subcontractor has given written notice to INTEN of the claim, or its intention to make a claim, stating in either case that it is a notice under this clause 16.
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20.0 Final Statement
20.1 Within 5 working days after the Subcontractor received INTEN notice of Substantial Completion of the Works in relation to each Site the Subcontractor must submit to INTEN a statement ("Final Statement") in the form of the proforma Final Statement annexed hereto.
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21.0 Definitions and Interpretation
21.1 In this Subcontract:
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j) "Variation" means any of the following:
i) An increase or decrease in or omissions from the Works;
ii) A change in the character or quality of material or Work;
iii) A change in the levels, lines, positions or dimensions of a part of the Works;
iv) Execution of additional work; and
v) A change to the scope of the Works which result from a direction or instruction issued to INTEN under the Head Contract.
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The determination
33 The adjudicator dealt first of all with the claim for the "Variations" component of the payment claim. No complaint is made of this aspect of his determination.
34 He then turned his attention to the claim for prolongation costs. He recorded the paucity of information contained in the payment claim, but concluded that he was satisfied that "due to the suspension of work directed by [Inten] … and due to other directions of [Inten] the work was prolonged and [Refine] incurred additional office overheads." To jump ahead: Inten attacks this part of the determination, asserting that the basis upon which the adjudicator was satisfied of the matters to which he referred was not made plain, and that his satisfaction appeared to be based on nothing more than mere assertion. However, as was common ground, the material before the adjudicator included some three folders of material, mostly business records and the like, upon which Inten relied. It also included a report from Tracey, Brunstrom and Hammond Pty Ltd (TBH), a report on which Inten relied - presumably, as evidence - in its adjudication response. (In a submission that was at the time, and remains, entirely obscure, Mr Sirtes submitted that the adjudicator had displayed his want of Brodyn good faith by taking into account, in finding for Refine, the TBH report.)
35 Mr Sirtes did not refer me to the detail of the three volumes of material that were before the adjudicator, or to much of the detail of the TBH report, in support of his submission that the adjudicator had acted with a lack of Brodyn good faith in achieving the state of satisfaction to which I referred in the previous paragraph. As I made plain to both counsel, I did not intend myself to trawl through the numerous and repetitive documents that had been tendered, but relied on them to take me to any aspect that they considered to be relevant. Mr Sirtes did not explain, except by way of assertion, how it was that the adjudicator was not entitled to be satisfied, on the basis of all the material before him, that the work was prolonged, and Refine incurred additional office overheads, because of a suspension of work and other directions of Inten.
36 I return to the determination.
37 The adjudicator relied on the TBH report to quantify the claim for prolongation costs, assessing it at $6,813.34 (the amount assessed by TBH, on the assumption - with which it did not agree - that the claim was allowable) rather than the amount of $20,440.02 claimed by Refine.
38 The adjudicator then turned to the claim for loss of productivity. He adverted once more to the paucity of information provided in the payment claim. He concluded, however, that he was "satisfied … that [Refine] incurred considerable extra man hours as a consequence of complying with directions from [Inten] … and many other matters for which [Inten] is responsible." However, he concluded, he was not satisfied of the number of hours claimed by Refine, and preferred instead one of the alternative assessments performed by TBH. Again to jump ahead: Inten complained that the adjudicator had acted capriciously in preferring one assessment given by TBH (for 1,876 hours) over an alternative assessment (of 140 hours). However, and contrary to the submission put at T 5.30, the adjudicator did not "ignore" the alternative calculation: he referred to it expressly, and said that he did not accept that it was "an appropriate conclusion".
39 The adjudicator then turned his attention to the legal arguments. He rejected Refine's claim that s 51AC prevented Inten from relying on its contractual defences. He then turned to the substance of those defences, referring to Inten's submission that the claim for prolongation costs was not "sanctioned by the Contract". He said:
" … what is being claimed is recompense for construction work carried out under a construction contract. What is being claimed is reimbursement of costs allegedly incurred in carrying out construction work."
40 He referred to the authorities on which Inten relied (Hargreaves and Quasar) - I shall return to his treatment of them - and considered the operation of clause 1.7. He stated that clause 1.7 "must be read in context": a proposition that could hardly be denied, being supported by a number of authorities including (to name but one) the decision of Gibbs J in Australian Broadcasting Commission v Australasian Performing Right Association Limited (1973) 129 CLR 99, 109.
41 The adjudicator noted that the context included the power to direct variations (clause 4.1) and the entitlement to be paid for variations (clause 4.2). He said that, where a variation causes delay or disruption, its reasonable cost would include an amount to compensate Refine for that delay or disruption.
42 The adjudicator turned his attention to the definition of "variation" in clause 21.1(j). He then referred to the provisions of clause 3.1, whereby Refine was obliged to comply with Inten's directions in relation to the execution of the works. He said:
"It appears to me that directions of [Inten] and acts or omissions of [Inten] that disrupt or delay [Refine] can be said to be Variations that entitled [Refine] to claim an adjustment to the Contract Sum.
It appears to me that [Refine's] claims for Loss of Productivity and Prolongation Costs are essentially variation claims and claims for adjustment of the Contract Sum rather than claims for damages for breach of contract. Therefore, I am not satisfied that clause 1.7 exempts [Inten] from liability."
43 Inten did not submit that this aspect of the adjudicator's reasoning displayed error of a kind that would entitle this Court to intervene on the principles laid down in Brodyn. It submitted, however, that in so reasoning, the adjudicator had dealt with the claim and its defence on a basis for which neither party had contended, so that he was obliged to give the parties (specifically, Inten) an opportunity to make submissions: relying on, among other cases, my decision in Musico v Davenport [2003] NSWSC 977 at paras [107] and [108] and the decision of Einstein J in Procorp Civil Pty Limited v Napoli Excavations and Contracting Pty Limited [2006] NSWSC 205 at para [10(xii)].
44 The adjudicator then turned his attention to clause 16.1. He said in substance that it could not operate to bar a progress claim (ie, a claim for payment construction work pursuant to clause 2.1) where the progress claim was made within the time specified by the Act: relying on s 34. Again, Inten did not submit that this aspect of his reasoning displayed error of the kind that it would entitle this Court to intervene.
45 The adjudicator then turned to clause 20. Again, he said, this clause could not bar a progress claim if it were brought in accordance with the Act: referring again to s 34. Again, Inten did not submit that this aspect of his reasoning displayed error of the kind that would entitle this Court to intervene. Although it had initially raised this aspect of the determination as also involving a denial of natural justice, the challenge was not pressed in the issues as they were ultimately formulated (see para [6] above).
Analysis: denial of natural justice
46 I do not think that it is necessary to consider separately the three issues formulated by Mr Sirtes. The proposition that is common to them all, and on which they all depend, is that the terms of the dispute that the parties had submitted to the adjudicator did not permit him to reason as he did without giving them (specifically, Inten) the opportunity to be heard.
47 The first point to be observed is that the progress claim did not identify specifically the claimed "basis of contractual entitlement" (Coordinated Construction Co Pty Ltd v Climatech (Canberra) Pty Ltd [2005] NSWCA 229 at [25] (Hodgson JA, with whom Ipp JA agreed)). However, Inten did not rely upon this, either before the adjudicator or before me, as a ground of invalidity (either of the payment claim or of the adjudicator's determination in respect of it).
48 On a fair reading, the payment claim is one that is made for construction work claimed to have been performed pursuant to the contract, and is comprised of the three components that I have identified. Thus, it is a fair inference that the third component - the claim for commercial costs - is a claim said to be for construction work.
49 It is not apparent, at least on the face of the payment claim, that the claim for prolongation and loss of productivity costs is related to the claim for variations. However, the adjudication application identifies that this is so at pages 49 and 50 (77 and 78 of exhibit PX 1). Thus, by the time the dispute had come to the attention of the adjudicator, it was reasonably plain that the claim for prolongation and loss of productivity costs was said to be related to the variations for which claim was also made (or for which claims had been made in the past).
50 Mr Hicks submitted that the relationship between the claim for prolongation and loss of productivity costs and variations was made plain (or plainer) in the three folders of documentation furnished to the adjudicator. He referred to some of that material, where indeed the relationship between these items is addressed. That seems to be the case: or at least, it was a conclusion that the adjudicator, acting reasonably, could draw from the material to which Mr Hicks referred.
51 If, as I think it is open to infer from the material to which I was referred, Refine was basing its claim for prolongation and loss of productivity costs on the various variations that had been directed, then it follows necessarily that the claim had a contractual foundation in clause 4.
52 Mr Sirtes, however, submitted that Refine had eschewed reliance on the contract as the source of its rights. He referred to the various statements that I have quoted in para [30] above, whereby Refine from time to time contended "that the contract has no application" or did not accept, or denied, "the application of the terms of the [contract]".
53 It is not a fair reading of those passages of the adjudication application, either in context or, indeed, in isolation, that Refine was intending to deny that the contract had any relevance to its claim, or that its claim was based on the contract. It is reasonably clear that Refine was intending to deny that the terms of the contract upon which Inten relied by way of defence (clauses 1.7, 16.1 and 20.1) had any "application" to its claim. This could be read as either or both of the following propositions: that it was unjust (because of the alleged unconscionable conduct of Inten) to permit Inten to rely upon, and in that sense "apply", those provisions; or that on a proper reading of the contract those provisions had no "application" to the basis on which the claim was made.
54 Mr Hicks placed great weight on the way that Refine had formulated its claim, both expressly (in relating it to variations) in the submissions, and through the documents. He placed great weight also on the propositions advanced by Inten (both in its payment schedule and in its adjudication response) in opposition to the claim: that the claim was not one made under any provision of the contract, and was not one "sanctioned" by the contract. In substance, he submitted, by advancing those negative propositions, Inten had created a situation where the adjudicator was either permitted or, indeed, required (see s 22(2)(b), (d) of the Act) to have regard to all the terms of the contract before deciding whether or not to accept the submission.
55 Mr Sirtes submitted that this was not how the payment schedule or adjudication response should be read. He submitted that his client was intending to do no more than make the (rather obvious) point that claims for prolongation and loss of productivity costs were not expressly recognised by the contract.
56 It is not appropriate to subject payment claims and payment schedules (or adjudication applications and adjudication responses) to the degree of close textual analysis usually reserved for Acts of Parliament. That is particularly so in the case of the latter category: adjudication applications and responses. They are prepared to identify and frame the dispute that an adjudicator is to resolve. The adjudicator has a short period of time within which to resolve them. The disputes are often of considerable complexity, involving a great deal of documentation. Adjudicators do not have the time that lawyers do after the event to subject those documents to detailed analysis, with a view to finding fault in their expression.
57 In a practical sense the real question is what could an adjudicator, acting reasonably, take to be the scope of the dispute propounded by the adjudication application and response? In the present case, an adjudicator, acting reasonably, could have taken the view that the dispute propounded for consideration involved the following elements:
· a claim for payment for construction work
· articulated as a claim for prolongation and loss of productivity costs
· arising from variations ordered or other directions given by Inten to Refine
· in respect of which Inten asserted that there was no contractual entitlement to payment.
58 Clearly, in this case, that is how the adjudicator in substance regarded the dispute propounded for his determination.
59 The assertion that a claim is not "made under any provision of", or is not "sanctioned" by a contract could be read, by an adjudicator acting reasonably, as an assertion that no term of the contract provides a foundation for, or gives an entitlement to, the amount claimed. That is different in substance to an assertion that a claimed entitlement is barred by a provision of the contract. In the latter case, it is necessary to look at the alleged barring provision, to understand whether it has the effect for which its proponent contends. But in the former case, it is necessary to consider the provisions of the contract as a whole, to see whether the assertion is made good. In substance, that is what the adjudicator did in the present case.
60 If the dispute propounded for the adjudicator's consideration included, by way of defence, the proposition that certain aspects of the claim lacked contractual foundation, it was open to him to consider the contract as a whole to see if he agreed. Indeed, I would go further and say that, the contention having been properly advanced through the payment schedule and within the framework of the adjudication (and neither party suggested that it was not properly advanced), s 22(2)(b), read in conjunction with para (d), made it incumbent upon the adjudicator to do so.
61 In substance, I think, the reality is that: