CONTRACTS – BUILDING, ENGINEERING AND RELATED CONTRACTS –
REMUNERATION – STATUTORY REGULATION OF ENTITLEMENT TO
AND RECOVERY OF
PROGRESS PAYMENTS – ADJUDICATION OF PAYMENT CLAIMS – where the first
Source
Original judgment source is linked above.
Catchwords
CONTRACTS – BUILDING, ENGINEERING AND RELATED CONTRACTS –REMUNERATION – STATUTORY REGULATION OF ENTITLEMENT TOAND RECOVERY OFPROGRESS PAYMENTS – ADJUDICATION OF PAYMENT CLAIMS – where the firstrespondent served a copy of a paymentclaim on the applicant for works completedunder a contract – where there have been more than one statutoryadjudication decision– where previous adjudication has determined anissue – where subsequent adjudication application agitates an issuedeterminedin a previous adjudication decision – whether issue estoppel isapplicable under the Building Industry Fairness (Security of Payment) Act2017EQUITY – EQUITABLE REMEDIES – INJUNCTIONS – GENERALLY– where there is a claim of apprehended bias by an adjudicatorin astatutory adjudication process – whether there is apprehended biasdemonstrated by the adjudicatorBuilding and Construction Industry Security of Payment Act 1999
(NSW)
Building and Construction Industry (Security of Payment) Act
2009 (ACT)
Building Industry Fairness (Security of Payment) Act
2017, ss 81, 27, 84, 88, 90
Acciona Agua Australia Pty Ltd v Monadelphous Engineering Pty Ltd
CONTRACTS - BUILDING, ENGINEERING AND RELATED CONTRACTS - REMUNERATION - STATUTORY REGULATION OF ENTITLEMENT TO AND RECOVERY OF PROGRESS PAYMENTS - ADJUDICATION OF PAYMENT CLAIMS - where the first respondent served a copy of a payment claim on the applicant for works completed under a contract - where there have been more than one statutory adjudication decision - where previous adjudication has determined an issue - where subsequent adjudication application agitates an issue determined in a previous adjudication decision - whether issue estoppel is applicable under the Building Industry Fairness (Security of Payment) Act2017
[2]
EQUITY - EQUITABLE REMEDIES - INJUNCTIONS - GENERALLY - where there is a claim of apprehended bias by an adjudicator in a statutory adjudication process - whether there is apprehended bias demonstrated by the adjudicator
Watpac Construction (NSW) Pty Ltd v Austin Corp Pty Ltd[2010] NSWSC 168, cited
[28]
Wiggins Island Coal Export Terminal Pty Ltd v Monadelphous Engineering Pty Ltd[2016] QSC 96, cited
[29]
[1] Karam Group Pty Ltd (Karam) seeks final injunctive relief in respect of a dispute with HCA Queensland Pty Ltd (HCA) which is being adjudicated by the second respondent (the Adjudicator).
[2] The relief sought by Karam is:
[30]
(a) an injunction restraining:
(i) HCA from pursuing a claim that Karam is not entitled to liquidated damages; and
(ii) the Adjudicator from deciding that Karam is not entitled to liquidated damages;
(b) an injunction restraining the Adjudicator from:
(i) giving to Karam, HCA or the third respondent any adjudicator's decision under Chapter 3, Part 4 of the Building Industry Fairness (Security of Payment) Act2017 (BIF Act), in response to HCA's adjudication application number 2303273 dated 29 May 2023; and
(ii) accepting any further appointment as adjudicator under Chapter 3, Part 4 of the BIF Act in response to an adjudication application by HCA in respect of the contract.
[31]
[3] There were two issues ventilated at the hearing:
[32]
(a) whether, in a statutory adjudication process, a party may be estopped from pursuing a particular argument or can be prevented from pursuing that argument because to do so would be an abuse of process; and
(b) whether some actions of the Adjudicator give rise to a reasonable apprehension of bias.
[33]
[4] The Adjudicator and the third respondent had no active role in this proceeding.
[34]
The circumstances which led to the adjudication
[35]
[5] In July 2020, Karam and HCA entered into a building contract (the Contract) for the design and construction of apartments in Coorparoo with a contract price of $38,000,000 (excluding GST).
[6] The Contract is in the form of an AS 4000-1997 standard form contract with amendments.
[7] In April 2022, HCA submitted an adjudication application (the First Adjudication Application). In August 2022, the adjudicator in the First Adjudication Application gave a decision (the First Adjudication Decision). In December 2022, it was set aside as invalid as it was not made in accordance with ss 85 and 86 of the BIF Act.[1]
[8] In January 2023, HCA submitted a second adjudication application (the Second Adjudication Application). Karam submitted its adjudication response (the Second Adjudication Response) and, on 27 March 2023, Mr Gemmell made a determination (the Second Adjudication Decision). He determined, among other things, that Karam was entitled to liquidated damages under the Contract.
[9] On 24 March 2023, HCA submitted an adjudication application seeking $5,757,991.22 (the Third Adjudication Application). Karam submitted its adjudication response (the Third Adjudication Response) and, in June 2023, Mr Taylor made a determination (the Third Adjudication Decision). He determined that Karam was entitled to liquidated damages in the sum of about $4,000,000.
[10] In May 2023, HCA lodged the current adjudication application (the Fourth Adjudication Application) seeking the amount of $5,156,321.40 (including GST). The Fourth Adjudication Application includes an argument by HCA that Karam is not entitled to claim liquidated damages. On 2 June 2023, the Adjudicator was appointed to determine the Fourth Adjudication Application.
[11] On 9 August 2023, the Adjudicator issued a request for further submissions from Karam and HCA. On 14 August 2023, HCA and Karam submitted their submissions in response to the request. On 17 August 2023, HCA and Karam each made further submissions.
[12] On 17 August 2023, Karam sent a letter to HCA outlining why Karam considered the Adjudicator's request gave rise to a reasonable apprehension of bias. Karam requested that HCA withdraw its adjudication application. HCA refused.
[13] On 5 September 2023, the adjudicator issued a second request to the parties for further submissions.
[36]
[14] An adjudicator is appointed under the BIF Act pursuant to procedures set out in s 81. An adjudicator must decide the adjudication application as quickly as possible. Section 84 sets out some of the powers and responsibilities of an adjudicator, in particular:
[37]
"(2) For a proceeding conducted to decide an adjudication application, an adjudicator -
[38]
(a) must decide -
(i) whether he or she has jurisdiction to adjudicate the application; and
[39]
(ii) whether the application is frivolous or vexatious; and
[40]
(b) may ask for further written submissions from either party and must give the other party an opportunity to comment on the submissions; ..."
[41]
[15] Section 88(2) confines the matters which the adjudicator may consider:
[42]
"(2) In deciding an adjudication application, the adjudicator is to consider the following matters only -
(b) the provisions of the relevant construction contract;
(c) the payment claim to which the application relates, together with all submissions, including relevant documents, that have been properly 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 documents, that have been properly 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."
[44]
[16] A respondent must pay an adjudicated amount to the claimant on or before the day that is five business days after the day on which the adjudicator "gives a copy of the adjudicator's decision to the respondent" - see s 90(2)(a).
[45]
[17] Most of the amount claimed by HCA in the Fourth Adjudication Application is premised on the proposition that Karam is precluded from claiming liquidated damages on the basis of the "prevention principle", i.e., the general legal principle that a party cannot insist on the strict performance of an obligation that he or she has prevented the other party from performing. Karam says that its entitlement to liquidated damages has been determined in its favour in the Second and Third Adjudication Decisions. It says that an issue estoppel arises in its favour or that it is an abuse of process for HCA to argue this point again.
[46]
[18] The consideration of this question commences with the decision of the New South Wales Court of Appeal in Dualcorp Pty Ltd v Remo Construction Pty Ltd[2] which examined issue estoppel in the context of the Building and Construction Industry Security of Payment Act1999 (NSW) (NSW SoP Act). Macfarlan JA (with whom Handley AJA agreed):
[47]
"[60] ... When a claim is made, a dispute arises and an adjudication determination resolves that dispute. I consider that determination to be final and binding between the parties as to the issues determined, except to the extent that the Act allows the determination to be revisited. It would in my view be quite contrary to the scheme of the Act to permit claimants simply to resubmit the already adjudicated claims if they were dissatisfied with the adjudication."
[48]
[19] Macfarlan JA then considered s 22(4), the New South Wales equivalent of s 87(2) of the BIF Act, and said:
[49]
"[67] I do not consider however that s 22(4) should be regarded as an exhaustive statement of the matters determined by an earlier adjudication which are binding on a subsequent adjudicator. For reasons I have given, I consider that the Act when read as a whole manifests an intention to preclude reagitation of the same issues. Thus, if questions of entitlement have been resolved by an adjudication determination, those findings may not in my view be reopened upon a subsequent adjudication. ..."
[50]
"[70] ... The view that the claimant once disappointed by an adjudicator can seek a different determination from another, or indeed from a succession of others, until a favourable decision is reached would in my view conflict with the policy of the Act to render adjudicators' determinations final on issues which they resolved, subject only to provisions of the Act conferring limited rights of correction of determinations."
[51]
[21] Allsop P agreed with Macfarlan JA's orders but for different reasons. His Honour held that the NSW SoP Act generally manifests an intention to prevent repetitious re-agitation of the same issues which is covered by ss 13(5) and 22(4) of the NSW SoP Act. Allsop P left the question of estoppel for another occasion.
[22] I observe that, as a judge sitting at first instance, I should follow persuasive authority of an intermediate appellate court on a similar question, unless persuaded that it was wrongly decided or that the reasoning in substance is distinguishable from the present case.
[23] Further consideration was given to this question in Urban Traders v Michael.[3] The issue in that case was whether the defendant's engagement of the NSW SoP Act was an abuse of process or otherwise liable to be restrained. After an analysis of Dualcorp and the cases that had since come after it, McDougall J said:
[52]
"[41] It does not follow from the decisions to which I have referred that every repetition, in a subsequent payment claim, of a claim made in an earlier payment must amount to an abuse of process. That is so even if that earlier payment claim has been the subject of an adjudicator's determination. The relevant concept is not abuse of process at large. It is abuse of the processes of the Act: specifically, the processes of the Act designed to ensure that builders and subcontractors (and of course others) received prompt and progressive payment for construction work performed or related goods and services provided. The question of whether there has been an abuse the processes [sic] of the Act must take into account relevant provisions of the Act. Specifically:
[53]
(1) s 13(6) of the Act recognises that a claimant may include in a payment claim an amount that has been the subject of a previous payment claim; and
[54]
(2) s 22(4) of the Act deals, to an extent, with a repeated claim by providing that if particular construction work or related goods and services have been valued by an adjudicator, an adjudicator in a subsequent adjudication application is to give them the same value unless satisfied that the value has changed since that previous determination.
[55]
[42] Further, whether or not the repetition of a claim amounts to an abuse of process requires consideration of all relevant contextual facts. In addition, it requires consideration of the reasons why the courts intervene to prevent abuse of process. Those reasons include intervention to prevent a person from being vexed by having to reargue an issue already authoritatively decided. Thus, in deciding whether a repetition of a claim amounts to abuse of process, it may be relevant to take into consideration whether, because of fresh claims that are advanced, the respondent will be required to defend itself in any event.
[56]
[43] I do not think that it is possible to state in some exhaustive fashion what combination of factors, including repetition, will lead to the conclusion that there is an abuse of process. (See, as to this, French CJ, Gummow, Hayne and Crennan JJ in Jeffery & Katauskas Pty Ltd v SST Consulting Pty Ltd[2009] HCA 43 at [27].) My concern is simply to make it clear that,in my opinion, it would be inconsistent with the provisions of the Act to which I have referred above to hold that repetition, by itself and without more, always amounts to abuse of process."
[57]
[24] His Honour then found that the claim by the builder was "foredoomed to fail" due to issue estoppel.[4]
[25] McDougall J gave a more detailed analysis of the concern he had expressed (in Urban Traders) in Watpac Construction (NSW) Pty Ltd v Austin Corp Pty Ltd[5] where he said that he had some difficulty with part of the reasoning of McFarlan JA in Dualcorp. But that related to the repetition of a claim which had been made earlier and not about the determination of a broad contractual right.
[26] Nevertheless, in that case, his Honour proceeded to find the builder's payment claim was barred by the principle of issue estoppel and that it was an abuse of the NSW SoP Act's processes.[6]
[27] A detailed analysis of Dualcorp and other New South Wales cases which were decided after it was undertaken by Applegarth J in AE & E Australia Pty Ltd v Stowe Australia Pty Ltd[7] and I gratefully adopt it without setting it all out_._
[28] Applegarth J revisited Dualcorp and the question of issue estoppel in John Holland Pty Ltd v Schneider Electric Buildings Australia Pty Ltd.[8] His Honour said:
[58]
"[48] I adopt, with respect, the conclusions reached by the Court in Dualcorp that the NSW Act as a whole generally manifests an intention to prevent repetitious re-agitation of the same issues. The same construction should be applied to the Queensland Act. The conclusion that, subject to certain exceptions, the Act precludes the re-agitation of the same issues that have been earlier determined does not mean that the same issue may not arise in a later adjudication. The issue that is later sought to be re-agitated must have been earlier determined for the principle of issue estoppel to apply. As Macfarlan JA observed by way of illustration in Dualcorp, if a progress claim were rejected by an adjudicator because it was premature by reason of the date stipulated for payment by the contract, a later claim made on a timely basis would not be precluded. A further illustration arises in the facts of O'Brien in which the first adjudicator did not determine the date for practical completion and therefore the entitlement of the applicant to liquidated damages. It was therefore open to seek a determination from a later adjudicator about the date of practical completion and a claimed entitlement to deduct any liquidated damages on the hearing of a later, different claim, and on the basis of additional material and submissions.
[59]
[49] The reservation expressed by McDougall J in Urban Traders and in Watpac about certain statements in the majority judgment in Dualcorp, being a reservation that I respectfully adopted in AE & E, does not detract from the point of substance determined in Dualcorp. I should follow Dualcorp in respect of the parallel provision of the Queensland Act. The Queensland Act as a whole manifests an intention to preclude the re-agitation of the same issues and, subject to s 27, does not permit the re-agitation of the same issues that have been determined by an earlier adjudicator."
[60]
[29] In Spankie v James Trowse Construction Pty Ltd,[9] Fraser JA (with whom Holmes JA as her Honour then was and Chesterman JA agreed) cited Dualcorp for the following proposition:
[61]
"[25] Of course the re-agitation of a payment claim may be impermissible for other reasons. In particular, it may be impermissible in particular cases where a previous payment claim has been the subject of a valid adjudication determination. ... "
[62]
[30] Dualcorp was distinguished in Spankie as the facts in that case lacked the critical feature of a preceding valid adjudication determination.
[31] In Caltex Refineries (Qld) Pty Ltd v Allstate Access (Australia) Pty Ltd,[10] McMurdo J expressed the view that Dualcorp was not authority for issue estoppel applying in all respects. His Honour held:
[63]
"[51] ... Recognising this effect of s 32, Macfarlan JA confined the inability of a claimant to reagitate issues determined by a previous adjudication to a context of a further claim for a progress payment.
[64]
[54] Although Macfarlan JA described the outcome as a result of an issue estoppel, it is clear that his Honour had in mind something less than the operation of the common law doctrine of issue estoppel as it is usually understood. The doctrine of issue estoppel has been said to reflect 'a central and pervading tenet of the judicial system [which] is that controversies, once resolved, are not to be reopened except in a few, narrowly defined, circumstances'. Where the doctrine does apply, then subject to any qualification by legislation or agreement, it precludes the reagitation in any forum of the same issue. Yet, the estoppel for which Allstate contends, in attempted reliance upon Dualcorp, at its highest is one in which the issue could be reagitated in some forums but not others. It is a remarkable species of issue estoppel where, having regard to s 32 of the New South Wales Act, the 'entitlements inter se under the contract' are unaffected by it. The source of this more limited estoppel must be found, if at all, within the legislation. In my view, the legislation does not provide it. A contrary indication is that such an estoppel would be problematic in many ways. Take, for example, a case where a court declares the effect of the parties' contract, inconsistent with an adjudicator's decision. Is a future adjudicator, dealing with another claim under that contract, bound by the decision of the earlier adjudication (if not set aside) or that of the court?
[65]
[55] The limited finality described by Macfarlan JA was founded, as his Honour explained, upon the combined effect of several provisions within this statute. Contrary to the submission for Allstate, the judgment of Macfarlan JA did not hold that the doctrine of issue estoppel applies in this context in all respects. The judgment identifies a finality of an adjudicator's decision in the sense of precluding a claimant from pursuing a progress payment inconsistently with determination of an issue by an adjudicator which was fundamental to that decision."
[66]
[32] In Sunshine Coast Regional Council v Earthpro Pty Ltd,[11] Byrne SJA considered whether the re-agitation of claims could result in jurisdictional error in construction adjudications. His Honour held that the BIF Act inferentially precludes re-agitation of the same issue where that issue was essential to a determination in an earlier adjudication.[12]
[33] There was no discussion of issue estoppel directly. Instead, it was determined on a jurisdictional basis.
[34] Jackson J considered whether there is a form of estoppel in construction adjudication in Wiggins Island Coal Export Terminal Pty Ltd v Monadelphous Engineering Pty Ltd.[13] After an analysis of Dualcorp, Caltex, and Sunshine Coast Regional Council, his Honour stated that: "any issue estoppel that arises under the [Act] is a unique species of estoppel. For brevity, I will call it 'Dualcorp issue estoppel"'.
[35] His Honour then proceeded to determine whether Dualcorp issue estoppel applied to the facts of each variation and claim. His Honour declined to determine whether an abuse of process applied as:
[67]
"[175] The questions raised were all about re-agitation of earlier claims. In my view, such questions are properly analysed in the frameworks of the Dualcorp issue estoppel or extended or Anshun estoppel, to the extent that they operate in this field of discourse."
[68]
[36] The cases show the accepted position in Queensland is that Dualcorp issue estoppel applies in construction adjudication. I do not accept HCA's submission that the Queensland authorities show considerable caution in the operation and application of Dualcorp issue estoppel.
[37] There have been two developments since Wiggins which HCA submitted changes the established position.
[38] First, HCA referred me to Civil & Allied Technical Construction Pty Ltd v Resolution Institute[14] where Kourakis CJ said:
[69]
"[63] The problem of multiple determinations of the same issue by an administrative tribunal is usually addressed by a provision allowing the tribunal to dismiss frivolous or vexatious applications. That power is absent in the Security of Payment Act."
[70]
[39] According to HCA, this power is expressly addressed in s 84(2)(a)(ii) which states:
[71]
"(2) For a proceeding conducted to decide an adjudication application, an adjudicator--
[72]
(ii) whether the application is frivolous or vexatious."
[73]
[40] This section was not in the legislation in place at the time of Wiggins. It also is not present in the New South Wales, South Australia and Australian Capital Territory equivalents.
[41] It was argued that this task corresponds to the task that a court would have otherwise undertaken with respect to the re-agitation of claims, as discussed in Urban Traders, AE & E and Wiggins. Any task of determining whether something is vexatious, in the sense that it is a re-agitation of claims which would have otherwise been addressed by Dualcorp issue estoppel, is statutorily required to be addressed by the adjudicator.
[42] I do not agree.
[43] I can discern no express intention either in the BIF Act or in the explanatory memorandum that this section is to act instead of the Dualcorp issue estoppel which was accepted at the time the BIF Act came into force.
[44] Section 84(2)(a)(ii) was considered by Bond J where his Honour said:
[74]
"[29] ... The Act does not provide for what an adjudicator must do if the adjudicator determines that the application is frivolous or vexatious. However, I think it is obvious enough from the association of ss 84(2)(a)(i) and (ii) that the legislature must be taken to have contemplated that the adjudicator should only proceed further to determine the adjudication application within those tight time limits if the adjudicator has (1) decided that he or she has jurisdiction and (2) decided that the adjudication application is not frivolous or vexatious.
[75]
[30] Section 85(3) seems to contemplate that course because it prohibits the adjudicator from deciding an adjudication application before receiving the adjudication response, but provides an exception where the adjudicator has decided that he or she has no jurisdiction or that the application is frivolous or vexatious. ..."[15]
[76]
[45] Bond J concluded that the intention behind s 84(2)(a)(ii) is that an adjudicator's jurisdiction is conditional on the adjudicator determining, as a threshold issue, whether the application is frivolous or vexatious. The 'subjective jurisdictional fact' is the adjudicator having a particular state of mind, namely, the state of mind of having decided that the application is not frivolous or vexatious.
[46] The BIF Act requires an assessment of whether 'the application' is frivolous or vexatious. If it is, the adjudicator ought not proceed. But, this is a test to be applied early in the life of the adjudication and before all arguments have been heard. Section 84 is a blunt weapon. It does not easily accommodate the case where, as here, there was an adjudication application which, on its face, was neither frivolous nor vexatious but one part of which was based upon an argument which had already been rejected in two earlier adjudications. If the argument that a particular contention may not be pursued - whether because it is subject to some form of estoppel or because it is an abuse of process - is successful, that does not mandate a finding that the entire application is frivolous or vexatious.
[47] The Third Adjudication Decision demonstrates this point. The Third Adjudicator determined that the Third Adjudication Application was not frivolous or vexatious for the purpose of s 84(2)(a)(ii), but still found that estoppel applied to parts of HCA's arguments.
[48] Secondly, HCA referred me to Harlech Enterprises Pty Ltd v Beno Excavations Pty Ltd.[16]
[49] In Harlech, Lee J held that the Building and Construction Industry (Security of Payment) Act2009 (ACT) "manifests an intention to preclude abuse of the statutory scheme by repetitive claims for the same work or related goods or services including an abuse of the process of obtaining a judgment".[17]
[50] His Honour held, citing Urban Traders, that a re-agitation of claims previously decided would be an abuse of the Act, even before a judgment on a second or subsequent adjudication is obtained. However, his Honour was critical of the " issue estoppel", saying:
[77]
"[88] A considered survey of the Dualcorp line of authorities reveals that 'issue estoppel' in the context of security of payment legislation deviates from the principles of issue estoppel as commonly understood. Even where the doctrine has been found to operate, it is characterised as inchoate, narrow in scope, and based upon broader principles of preclusion."
[78]
[51] Lee J was of the view "Dualcorp issue estoppel" is not actually issue estoppel, but a species of preclusion best described as an abuse of process. He said:
[79]
"[96] Finally, eschewing the use of the term issue estoppel is also consistent with recognising that the starting point is the Act itself: Dualcorp (at [42] per Macfarlan JA, Handley JA agreeing at [76]); Kuligowski (at [9] per Gleeson CJ, McHugh, Gummow, Kirby, Hayne, Callinan and Heydon JJ). In a statutory context, common law principles operate so as to complement acts of Parliament, not to overwhelm them. The present source of any form of preclusion must be the SOP Act itself: Caltex Refineries (at [54] per Philip McMurdo J)." (citations omitted)
[80]
[52] His Honour held that the ACT legislation manifested an intention to preclude abuse of the statutory scheme by repetitive claims for the same work or related goods or services including an abuse of the process of obtaining a judgment.
[53] Kennett J disagreed with the majority in Dualcorp that the principles of issue estoppel arose in that case. Instead, his Honour viewed the decision in Dualcorp as correct for the reasons of Allsop P.
[54] Elkaim J, the third member of the Court, expressed himself in this way:
[55] There is, then, appellate authority from another jurisdiction in which the court disagreed with Dualcorp and the application of "issue estoppel", preferring instead to rely on "abuse of process" or "abuse of the statutory scheme" to achieve a similar result.
[56] For completeness, it should be noted that both Tasmania and Western Australia have actually broadened the range of 'issues' to which, in those jurisdictions, issue estoppel can apply.
[57] In Modscape Pty Ltd v Francis, [18] Blow CJ held that issue estoppel applies to findings of fact in adjudications.
[58] In Salini-Impregilo S.P.A v Francis,[19] Archer J in reference to what her Honour termed 'adjudication estoppel' stated:
[83]
"[387] In my view, a form of issue estoppel applies under the Act to prevent, at least, the re-agitation of an issue that was fundamental to the assessment of the liability to pay and the quantum of the amount found to be payable under s 32(2)(b). The Adjudicator did not err in finding that the negative variation defence could not be re-agitated."
[84]
[59] The position then is that there are inconsistent decisions of interstate appellate courts concerning the existence of "Dualcorp issue estoppel". There is, though, agreement that a party may be prevented from arguing for a particular conclusion on an issue where that issue has been raised and decided in an earlier arbitration decision. In this State, there has been a general acceptance of the availability of a form of issue estoppel and in the absence of a compelling argument to do otherwise I will follow the position in this State.
[85]
[60] HCA argued that, even if it is applicable in Queensland, Dualcorp issue estoppel is not applicable to this case.
[61] This argument was put forward on two grounds.
[62] First, it was argued that the Second Adjudication Decision makes no mention of the prevention principle.
[63] Secondly, the Third Adjudication Decision only determined that HCA was estopped from arguing the prevention principle. It did not make any determination on whether the prevention principle did apply. Instead, the Third Adjudicator only made observations on the law and the Third Adjudication Decision even showed the Third Adjudicator formed the opposite view of the Second Adjudicator.
[64] Karam submitted that the Second Adjudication Decision did determine whether the prevention principle could apply, even if it did not expressly mention it. It was also submitted that the Third Adjudication Decision also made such a determination.
[65] I accept the submission that the Second Adjudication Decision and the Third Adjudication Decision addressed the prevention principle.
[86]
[66] HCA made two submissions in its Second Adjudication Application with respect to liquidated damages being claimable by Karam. The first ground was based on what date the Second Adjudicator should determine as the date for practical completion. This argument, at its highest, would have resulted in liquidated damages still being claimable by Karam, but for a lesser amount. The second ground put forward by HCA was that Karam was precluded from claiming any liquidated damages due to the prevention principle.
[67] The Second Adjudication Application states:
[87]
"547. As a secondary position, [HCA] submits that the prevention principle applies to restrain [Karam] from applying liquidated damages by reason of its conduct in respect of the design documentation and the resultant ongoing Variations that are affecting the Works after the adjusted Date for Practical Completion.
[88]
[HCA] submits that [Karam] has breached its obligations under the Contract and/or otherwise committed acts of prevention, such that the prevention principle applies to preclude [Karam] from applying liquidated damages at all (and benefitting from its own wrongs).
The essence of the prevention principle is that a party cannot insist on the performance of a contractual obligation by the other party if it itself is the cause of the other party's non-performance: refer to paragraph 114 to 116 and 128 of Probuild Constructions (Aust) Pty Ltd v DDI Group Pty Ltd[2017] NSWCA 151 (at TAB 8.4) for a summary of the general principles and associated legal authorities.
[HCA] submits that [Karam] breached its obligations under the Contract and/or otherwise committed acts of prevention by:
issuing and presiding over an enormous array of Design Issues that has resulted in additions and alternations to the Contract Works;
failing to properly coordinate the various elements of design (which are [Karam's] responsibility) resulting in further charges, errors, inconsistencies and omissions in the design; and
by way of the above requiring [HCA] to perform extensive Variation works after the adjusted Date for Practical Completion."
[89]
[68] HCA then makes submissions as to the application of the prevention principle with respect to the various claims. HCA concluded:
[90]
"563. Having regard to [Karam's] breaches of the Contract and/or acts of prevention ... and underlying rationale of the prevention principle, [Karam] has no entitlement to apply liquidated damages. According, [HCA] submits that it is within the adjudicator's power to consider [HCA's] position regarding the prevention principle and ultimately determine that [Karam] is not entitled to deduct liquidated damages."
[91]
[69] HCA then notes that the claimed amount is calculated without any liquidated damages being deducted and also claims back any amount not paid by Karam due to purported liquidated damages set offs.
[70] Karam's arguments in the Second Adjudication Response include:
[92]
(a) the prevention principle must always be considered in light of the particular contract;
(b) a principal retains the right to enforce liquidated damages in circumstances where there is a clause which provides for an extension of time and the contract-caused delay can be disentangled from the principal-caused delay; and
(c) HCA misguidedly placed reliance on Probuild.
[93]
"35.1 [Karam] notes that what [HCA] has attempted to do (in claiming back amounts previously deducted), however, [Karam's] position remains for the reasons explained above, that it is entitled to levy liquidated damages because:
[94]
(a) [HCA] is not entitled to any further extension of time, however, even if [HCA] were entitled to the extensions of time as claimed in full, by their own admission, they remain late; and
[95]
[72] Both parties made submissions on the prevention principle. Critically, HCA's submissions on the prevention principle meant that any award of liquidated damages would require a rejection of the application of the prevention principle.
[73] In the Second Adjudication Decision, the Second Adjudicator said:
[96]
"76. In making this decision, I have regard to the following matters only, pursuant to section 88(2) of the Act:
[97]
the Payment Claim to which the Application relates, together with all submissions, including relevant documentation, that has been properly made by [HCA] in support of the claim.
[98]
the Payment Schedule, if any, to which the Application relates, together with all relevant documentation, that has been properly made by [Karam] in support of the Schedule."
[99]
"187. I have found that [HCA] is not entitled to an extension of time and have found that liquidated damages of $2,216,136.00 therefore apply as contended by [Karam] and as stated in the Payment Schedule."
[100]
[74] The Second Adjudication Decision then sets out in [468] to [490] the total sum of liquidated damages able to be off set.
[75] While it is not explicit, the Second Adjudication Decision makes a determination on the prevention principle.
[76] First, the Second Adjudicator states that he had regard to the submissions of both parties. Both parties made submissions on the prevention principle extracted above.
[77] Secondly, HCA's argument of the prevention principle was that in allowing any liquidated damages to be claimed the prevention principle had to be rejected.
[78] Thirdly, the Second Adjudication Decision stated that liquidated damages apply "as contended" by Karam. This is a determination that Karam's position on the liquidated damages issue, and therefore the prevention principle, is correct.
[79] Fourthly, the Second Adjudication Decision has not been set aside. HCA made a submission that even if the Second Adjudication Decision did make a determination on the prevention principle it would be jurisdictionally invalid as it would not meet the requirements of s 88(5)(b) of the Act.
[80] Section 88(5) states:
[101]
(b) include the reasons for the decision, unless the claimant and the respondent have both asked the adjudicator not to include the reasons in the decision."
[102]
[81] I was referred to Acciona Agua Australia Pty Ltd v Monadelphous Engineering Pty Ltd[20] where Bond J (as his Honour then was) said:
[103]
"Fourth, the valid exercise of an adjudicator's jurisdiction is conditioned on the inclusion in the decision of written reasons for the decision in compliance with s 88(5)(b). Failure to meet this condition would amount to jurisdictional error by the adjudicator and would result in invalidity: Sierra Property Qld Pty Ltd v National Construction Management Pty Ltd[2016] QSC 108, [56]-[67] (Jackson J); Annie Street JV Pty Ltd v MCC Pty Ltd[2016] QSC 268, [23] (Flanagan J)."
[104]
[82] HCA's submission that the Second Adjudication Decision did not make a valid determination is at odds with the subsequent conduct of the parties and the decision itself. In awarding liquidated damages, the Second Adjudicator had to reject or completely ignore and not take into consideration HCA's submissions on liquidated damages.
[83] Parties are entitled to proceed on the position that an adjudication decision is valid until it is set aside.
[105]
[84] The Third Adjudication Decision determined that HCA was "estopped" from arguing the prevention principle.
[85] In written submissions, HCA argued:
[106]
"As for the Third Adjudication Decision of Mr Taylor, the passages at [207] to [209], it is clear that Mr Taylor formed the opposite view of Mr Gemmell's decision, and because of that, expressly stated at [209]:
[107]
'I did not have further regard to it [i.e. the prevention principle] when I decided the issue of liquidated damages...'"
[108]
(underlined emphasis in original, bold emphasis added)
[109]
[86] It was further argued in written submissions that this was the Third Adjudicator's central position. The observations made between [663] to [665] of the Third Adjudication Decision were on a pure question of law regarding Probuild. It was added for the sake of completeness only. This was repeated in oral submissions, where it was submitted the Third Adjudication Decision does not go into the prevention principle until the observations in [663] to [668] which contain no factual findings.
[87] I reject this submission. It disregards [656] to [662] of the Third Adjudication Decision which relevantly states:
[110]
"656. ... [HCA's] material before me does not support the submission that the respondent breached its obligation by failing to remove the walers thereby causing a significant delay. To the extent a delay was incurred to the project as a result of this issue it has been accommodated by the requisite extension of time being approved together with the corresponding delay costs being paid. It cannot go beyond that to invoke the prevention principle.
[111]
As to the remainder of the argument as to an asserted failure by the respondent to co-ordinate the various elements etc, in my opinion there is no substance to it able to be found in the material before me.
[112]
... anybody with a reasonable level of experience in the construction industry on projects such as the one the subject of this adjudication would know such is not uncommon and could readily give rise to many of the 'complaints' Mr McCormack raises. But in my opinion, in the present matter it cannot be said as a blanket statement that those complaints, in whole or even in part, are breaches of the contract by the respondent and/or causes of the claimant's non-performance.
[113]
... [HCA's] material itself disputes its own assertion that it was the respondent who caused delay, thus bringing into question its reliance on the operation of the prevention principle.
[114]
... As such, [HCA's] material presented is simply inadequate to support any reliance on the operation of the prevention principle.
[115]
All that being said, if it were open for the claimant to have pressed this argument as its Secondary Position in this adjudication I would not have accepted it."
[116]
[88] Paragraph [668] is a contradiction of HCA's submission that the Third Adjudicator had clearly formed the opposite view of the Second Adjudicator.
[89] These sections of the Third Adjudication Decision, read in full, directly address the points raised by HCA in their Third Adjudication Application as to why they contended the prevention principle was enlivened.
[90] The reasons in the Third Adjudication between [655] to [668] are set out so that, if for any reason the Third Adjudicator was wrong about issue estoppel, the Third Adjudicator made a determination on the prevention principle.
[117]
Has apprehended bias on the part of the Adjudicator been established?
[118]
[91] Karam's second ground of relief sought in the application is for an injunction restraining the Adjudicator from hearing the Fourth Adjudication Application on the basis that there is a reasonable apprehension of bias by the Adjudicator.
[119]
[92] HCA made a submission that it would be an abuse of process to seek, and that Karam is estopped from seeking, an injunction against the Adjudicator. The reason for this, it is contended, are the orders of Muir J where her Honour dismissed Karam's application for an interlocutory injunction against the Adjudicator preventing him from making an adjudication application or accepting any further adjudication appointments under the Contract.[21]
[93] It was submitted by HCA that there was no reason in principle why an issue might not be finally determined on an interlocutory proceeding. HCA argued that the matter was fully agitated before Justice Muir.
[94] It was also submitted by HCA that without any additional grounds of complaint, there runs a real risk of inconsistent findings between my decision and the decision of Justice Muir.
[95] Justice Muir did not approach the decision as if it was on a final basis. The application in that matter was for an interlocutory injunction. That required the application of a different test than the one required for final relief. Justice Muir applied the relevant test for interlocutory injunctions.[22] I am to apply a different test.
[120]
[96] The relevant principles on an application of this type were correctly summarised by Archer J in Salini-Impregilo S.P.A. v Francis:[23]
[121]
"[306] The governing principle for apprehended bias is whether a fair-minded lay observer might reasonably apprehend that the decision-maker might not bring an impartial mind to the decision. The question is largely a factual one, but must be considered in the legal, statutory and factual contexts in which the decision is made. It is an objective test of 'possibility (real and not remote), not probability'. The court does not need to be satisfied that the fair-minded lay observer 'would' have such an apprehension; nor is it necessary that any apprehension involve a state of satisfaction on the probabilities."
[122]
[97] In CNY17 v Minister for Immigration and Border Protection,[24] Kiefel CJ and Gageler J affirmed the well-known test in Ebner v Official Trustee in Bankruptcy[25] and summarised the accepted three step test for assessment of apprehended bias in the following way:
[123]
(a) first, identification of the factor which it is postulated might have led the decision-maker to decide the review otherwise than on an independent and impartial evaluation of the merits;
(b) second, articulation of how that factor might lead the decision-maker to decide the matter otherwise than on an independent and impartial evaluation of the merits; and
(c) third, assessing whether the fair-minded lay observer might reasonably apprehend in the totality of the circumstances that the articulated departure might have occurred. In taking that third step, "it is the court's view of the public's view, not the court's own view, which is determinative".[26]
[124]
[98] The factual context in which the Adjudicator's conduct is questioned requires a brief consideration of the relevant part of the Contract. Clause 39 of the Contract contains provisions which entitle the Contractor to an extension of time in the event of a "qualifying cause of delay". In order to claim an extension, certain notices must be given and clause 39 goes on to provide that the Contractor will be entitled to an extension of time if, among other things, the Contractor is delayed in reaching practical completion by a qualifying cause of delay.
[99] In the Fourth Adjudication Application, HCA claims an extension of time and also makes a claim for delay damages. In that application, HCA contends that Karam is precluded from claiming any liquidation damages by virtue of the prevention principle. It does, though, concede that if Karam is entitled to liquidated damages then the amount of liquidated damages will remain at the 10% cap. Thus, if there were to be a finding in favour of HCA with respect to its claim to an extension of time, this would not reduce the amount of liquidated damages owing to Karam.
[100] The adjudicator has made a number of requests for information and submissions. It is those requests which, according to Karam, give rise to apprehended bias.
[101] The grounds are:
[125]
(a) the request for further submissions contains an assertion by the Adjudicator that amendments to the standard form of the AS 4000 - 1997 Amended General Conditions of Contract involve misleading conduct;
(b) another request implicitly criticises clause 21.1 of the Contract and requests submissions on whether clause 21.1 is a "contracting out" within the meaning of s 200 BIF Act;
(c) in the context of clause 21.1, a request stating:
[126]
"The second sentence directly contradicts the requirements of the first requiring the actions of the Superintendent to have regard solely for the interests of the Principal when deciding whether to exercise, or in exercising, any description provided to it by the contract. In carrying out his duties to certify the WUC the Superintended appears to have complied with the requirement in the second sentence, particularly in relation to variations, delays etc"
[127]
(d) another request criticises the language of clause 21.2 of the Contract and suggests that it is also an attempt to "contract out" of the provisions of the BIF Act in a manner inconsistent with s 200 BIF Act;
(e) the request refers to Hervey Bay (JV) Pty Ltd v Civil Mining and Construction Pty Ltd[27] and seeks to distinguish the decision that the request in that case was not in respect of construction works;
(f) the request questions the compatibility of clauses 21.1 and 21.2 with s 70 of the BIF Act;
(g) the request states:
[128]
"In the present case, the duties of the Superintendent seem to include an obligation to act in a manner that is normally expected of a superintendent, but subject to the normality being overridden by an imposition of obligations to act with bias in favour of [Karam] when exercising a discretion."
[129]
[102] Karam argues that, among other things, the various requests:
[130]
(a) contain implicit criticism of Karam;
(b) raise matters which were not the subject of debate between the two parties;
(c) raise matters (such as the question of copyright) which are irrelevant to the to the claim to be adjudicated;
(d) identify matters which give rise to a reasonable apprehension that the adjudicator is critical of the party which prepared the contract; and
(e) disclose a view that changes made to the standard form contract governing the role of the Superintendent are favourable to Karam.
[131]
[103] Section 84(2)(b) of the BIF Act allows an adjudicator to ask for further written submissions from the parties and affords the parties an opportunity to comment on those submissions. An adjudicator is not confined to the matters raised by the parties in making such a request. In this case, each of the requests made by the Adjudicator was made to each of the parties. In each case, the Adjudicator sought submissions from both parties.
[104] While it might be readily agreed that the requests appear to be unrelated to the task of the Adjudicator or that they disclose at least a tentative misunderstanding of the role of an adjudicator, that is not sufficient to establish apprehended bias. Rather, if the Adjudicator were to take into account some of the items of information sought by him, for example, with respect to the so-called "contracting out", then he would run the risk of jurisdictional error. Similarly, were he to take into account many of these matters which have generated his requests, then he would trespass outside the boundaries in s 88(2).
[105] Merely asking questions of the parties which could, on one reading, contain an implication unfavourable to one of the parties, but which invite submissions from both parties, is not sufficient to demonstrate that the Adjudicator will decide the matter otherwise than on its merits. The "articulated departure" referred to in CNY17 v Minister for Immigration and Border Protection has not been demonstrated.
[132]
[106] I will hear the parties on the form of orders to be made, in particular, whether an injunction or a declaration is the more suitable remedy for the first part of this application.
[107] I will hear the parties on costs.
[133]
[1]Karam Group Pty Ltd AFT Karam (No. 1) Family Trust v HCA Queensland Pty Ltd & Ors[2022] QSC 290.