Martinus Rail Pty Ltd v Qube RE Services

Supreme Court of NSW|2024-11-15|Before: Parker J

JUDGMENT

In this matter arising under the Building and Construction Industry (Security of Payment) Act 1999 ("the Act"), I published reasons on 30 September for orders which I had made on 26 September: Martinus Rail Pty Ltd v Qube RE Services (No 2) Pty Ltd (No 2) [2024] NSWSC 1223 ("J2"). My 30 September judgment did not deal with all of the claims made in the proceedings. This judgment deals with such of those remaining claims as are pressed. Terms defined in my 30 September judgment have the same meaning in this judgment.
At J2 [1] to [29], I identified the background to the proceedings, the parties, and the claims and applications to be determined. At [5], I stated that the Superintendent under the Contracts (implicitly throughout) was Mr Peter Marshall of RPS. In fact, shortly before the Contracts were terminated Mr Marshall was replaced as Superintendent by Ms Miff Storey of the same firm. The substitution does not affect the determination of any of the issues between the parties in these proceedings.

Judicial review proceedings

At J2 [30], I stated that counsel for Qube advanced challenges to a total of thirty-seven components of the two adjudications. Counsel also challenged the Adjudicator's costs determination in each adjudication. In my earlier judgment, I dealt with 18 of those of the challenges to the adjudications. All of them were challenges which arose in the INTS adjudication. I also dealt with the challenge to the INTS costs determination.

Preliminaries (INTS)

In the INTS Contract, the Contract Sum included a figure for "preliminary" costs incurred by Martinus. Generally speaking, these were costs of an overhead nature, as distinct from direct costs. The costs in question were specified in a spreadsheet attached to the Contract (Schedule K). The total figure was $31.405 million.
Clause 37 of the Contract provided for the Contract Sum to be paid progressively according to claims made by Martinus and assessed by the Superintendent. The Contract, however, contained no mechanism for determining when the preliminaries were to become payable.
This question was raised in one of the earlier adjudications before another adjudicator, Mr Stapleton (see J2 [8]). Mr Stapleton determined, with respect to the preliminary expenses then in issue, that they should be treated as accruing from day to day, on a "straight line" basis, from the beginning of the contract to the original date for practical completion.
It was common ground thereafter that, for most of the expenses in Schedule K, a time-based accrual method should be used, based on a completion percentage. Martinus' payment claim used a completion percentage of 96.59%. Qube's payment schedule used a lower completion percentage, namely 96.07%.
But, in some instances, one or other of the parties departed from the percentage completion approach. For at least one item, Martinus claimed the full amount of the expense on the basis that it had been fully incurred and its recovery should not be limited to a time-based accrual. For its part, Qube contended for some items that the cost had not been incurred as at the date of the assessment and there should be no allowance for it at all.
According to Martinus' payment claim, the total amount of preliminaries as at the claim date was $30.295 million. Qube's figure was $29.896 million, $469,000 less. There were four specific items where the parties differed about the appropriateness of a time-based accrual calculation. The details are set out in the following table which extracts the relevant information from Qube's payment schedule: Item Description Claimed Scheduled Reasons 1.1.4 Dis-establishment and removal of the Contractor's site accommodation compound $174,288.71 $0.00 The Contractor has not performed this work and therefore has no entitlement to claim or be paid for it. The Contractor's site compound remains on site. 1.2.1 Mobile Plant, Equipment & Subcontractors mobilisation $2,254,468.76 $2,165,966.89 Time based calculation, please refer to column AJ-AL, row 13-18. 1.2.2 Mobile Plant, Equipment & Subcontractors de-mobilisation $215,506.56 $53,876.64 The Contractor has duplicated this claim with its Termination Costs Claim. Any costs supported of the incurrance of true demobilisation costs has been assessed in the Termination Costs Claim CN-522. In addition, much of the plant and equipment remained on site. Vaughn Civil and Mainland Civil never demobilised, but are continuing their works under new contracts. It is acknowledged that some plant resources and equipment was off-hired, as such these amounts are valued here. 1.7.3 Installation of a Temporary Truck Shaker $134,294.85 $89,529.90 At termination, truck shakers were only installed in 2 locations. 1 was moved from one location to another and installed, refer to Appendix A, item 1.7.3.

In its adjudication application, Martinus maintained its claim for the full amount of the difference. The submissions continued (emphasis added): Martinus makes one comment in response to the Payment Schedule. With respect to Item 1.2.1 "Mobile Plant, Equipment & Subcontractors mobilisation", Qube has scheduled $88,501.87 less than what Martinus has claimed. Martinus has claimed 100% of the item because all of its subcontractors had mobilised to the site by the date of termination. Qube has assessed this item using a time-based calculation based on the original contract duration. Martinus accepts that the time-based method is the usual method of assessment for the Project. However, it is appropriate for Martinus to claim and be compensated for 100% of the subcontractor mobilisation when that work was completed at the date of termination.
In its adjudication response, Qube noted that Martinus was pursuing a delta of $469,000, identifying the four disputed items which gave rise to that amount. The response maintained that the scheduled amount was correct, giving the following further explanation, which referred to accompanying statutory declarations from Ms Storey and Mr Sam Broomfield (who had been seconded to RPS to work as a contract administrator for the Moorebank Intermodal Project): 7.11 Only one of these four disputed line items is addressed by Martinus in its Adjudication Application …. In respect of this item 1.2.1, Qube maintains that a time based calculation is entirely appropriate, not least because this item encompasses mobile plant and equipment as well as subcontractor mobilisation. Taking account of the works left to be completed as at termination, there would have been a need for further plant and equipment to be on-hired and off-hired as and when required when the remaining work activities were undertaken. Consequently, it is not correct to say that item 1.2.1 is 100% complete. This issue is explained by Mr Broomfield at paragraph 29 to 34 of the Broomfield Declaration and by Ms Storey at Section B of the Storey Declaration. Qube has assessed this item as 96% complete, in line with the same percentage complete as applied by the Adjudicator in the August 2023 Adjudication and maintains that this assessment is reasonable and appropriate. 7.12 A detailed explanation of Qube's assessment for items 1.1.4, 1.2.2 and the temporary truck shutter [item 1.7.3] is included in the Storey Declaration and the Broomfield Declarations.
In the Adjudicator's reasons, he began by addressing the dispute about the completion percentage. He accepted Qube's figure, concluding: 203) The Respondent's method for calculating the value of completed Item 1 Preliminaries indicates the Claimant is entitled to 96.07% of the total amount for Preliminaries. 204) Therefore, the Claimant is entitled to claim 96.07% of the Contract sum for this item (being; $31,405,498,730), which amounts $31,171,262.63.
Adjusting for the allocation of some of the preliminaries to variations, the Adjudicator derived a scheduled amount for the preliminaries claimed in the payment schedule of $29,501,235.28. He continued (emphasis original): 208) The Respondent has provided no reasons for withholding payment save for providing its method of calculating the value of the Preliminaries, which I accept. 209) It is clear from the Act, the Contract and the guidance provided in Multiplex Constructions Pty Ltd v Luikens & Anor [2003] NSWSC 1140 by HH Palmer J that the Respondent must consider the Payment Claim and, if it does not accept any part of that Payment Claim and decides to withhold payment, then the reasons for withholding payment set out in the Payment Schedule must be sufficiently clear that Claimant can understand the basis of rejection of any part of that Payment Claim and which parts of that payment Claim have been accepted and payment has been scheduled accordingly. Below at paragraphs 231) to 232) are the relevant paragraphs extracted from that case. 210) As set out above at paragraph 233), it is clear from Insite Construction Services Pty Ltd v Daniels Civil Pty Ltd & Anor [2023] QSC 33 that where the Respondent fails to provide its assessment of quantum, it is open to the adjudicator to accept the Claimant's valuation of the corresponding claimed item in the Payment Claim. 211) Save for the explanation of the method of calculating the value of the Preliminaries to which the Claimant is entitled, the Respondent has not provided any other reason explaining why the scheduled amount is less than the claimed amount. 212) The Claimant has claimed $30,334,965.30 for preliminaries up to the date of termination in the Payment Claim. 213) Accordingly, I have determined the Claimant is entitled to $30,334,965.30 for Item 1 Preliminaries.
Counsel for Qube contended that the adjudication on this issue involved two separate errors, each of which was jurisdictional.
The first error, in counsel's submission, was that the Adjudicator dealt only with the dispute between the parties concerning the completion percentage. The Adjudicator's statement at [208] that Qube had provided no other reason for withholding payment was simply wrong. Qube had in fact raised additional objections to the four items identified above. At least in the case of item 1.2.1, the existence of the dispute had been expressly acknowledged in Martinus' application. It followed that the decisions of Palmer J in Multiplex Constructions Pty Ltd v Luikens [2003] NSWSC 1140, referred to in [209], and of Copley J in Insite Construction Services Pty Ltd v Daniels Civil Pty Ltd [2023] QSC 33, referred to in [210], (which counsel submitted the Adjudicator had not properly understood anyway) could not justify simply awarding Martinus the amounts claimed.
In their written submissions, counsel argued that this error involved "legal unreasonableness" (see J2 [87]-[89]) and was therefore a jurisdictional one. But counsel accepted that on the view I took in my earlier judgment as to the scope of "legal unreasonableness" (see J2 [90]-[95], [176]-[178], [192], [222]), this argument could not prevail.
Counsel maintained, however, that the error also involved a failure to consider objections made in Qube's payment schedule and submissions duly made in support of those objections (s 22(2) of the Act; see J2 [51]). Those objections and submissions had not been dealt with, and there was no suggestion that the submissions had not been "duly made". The only inference that could be drawn from the Adjudicator's reasons was that he had not considered them. The error was jurisdictional for that reason.
The second error identified by counsel for Qube was an error of calculation. Applying the completion percentage of 96.07% adopted by the Adjudicator to the Contract Sum as claimed by Martinus ($31.405 million) resulted in a figure of $30.171 million, not $31.171 million as stated in [204]. That $30.171 million figure should have been used in [212] and [213] instead of the $30.335 million figure used in those paragraphs (the origin of the latter figure was unclear, but it was clearly erroneous). The result had been to award Martinus $164,000 more than it was, even on the Adjudicator's reasoning, entitled to.
Counsel submitted that this error was so obviously illogical as to amount to "legal unreasonableness", even on the approach I had taken in my earlier judgment. It was therefore a jurisdictional one.
Counsel for Martinus began their argument by advancing two general propositions which they sought to derive from prior Court of Appeal decisions. The first proposition was that an error by the Adjudicator in interpreting or understanding Qube's payment schedule was not a jurisdictional error. The second was that a failure to have regard to a submission which the Adjudicator regarded, even if incorrectly, as irrelevant, did not give rise to a breach of the Adjudicator's duty to consider the submissions under s 22(2).
For their first proposition, counsel relied on the decision of the Court of Appeal (Giles JA, with whom McColl and Young JJA agreed) in Perform (NSW) Pty Ltd v MEV-AUS Pty Ltd [2009] NSWCA 157 at [65]-[67]: In John Holland Pty Ltd v Roads & Traffic Authority of New South Wales (2007) NSWCA 19 whether a submission had been "duly made" (s 22(2) of the Act) was said to be a matter for the adjudicator, whose error in that respect would not invalidate his determination. It was not a matter for objective determination by the Court …. In Downer Construction (Australia) Pty Ltd v Energy Australia I held, referring to these cases and with the agreement of Santow and Tobias JJA, that determination of the scope and nature of the payment claim was similarly a matter for the adjudicator. …. In my opinion, what a payment schedule indicates as the reasons for the scheduled account being less than the claimed amount and for withholding payment is also a matter for the adjudicator, and if the adjudicator makes an error in that respect it does not invalidate the determination. Added reference to s 22(2)(d) does not take this further, see Brodyn Pty Ltd v Davenport at [56] [quoted at J2 [57]] holding that it is sufficient that the adjudicator bona fide address the requirements of s 22(2) as to what is to be considered. By s 22(2) the legislature has committed to the adjudicator consideration of the payment claim, any payment schedule, and all submissions duly made. There is no reason to regard a correct view of what a payment schedule indicates as more basic and essential to a valid determination than an adjudicator's view of what a payment claim identifies or indicates, or whether a submission has been duly made. See also J2 [46]-[50], referring to Icon Co (NSW) Pty Ltd v Australia Avenue Developments Pty Ltd [2018] NSWCA 339.
In developing the first proposition counsel submitted that mistakenly overlooking an argument, for instance because of a mistaken failure to appreciate that the argument was disclosed by the payment schedule, was also not a jurisdictional error. In support of that submission, counsel relied on the decision of Hodgson JA (Beazley JA agreeing) in John Holland Pty Ltd v Roads & Traffic Authority of New South Wales [2007] NSWCA 19.
That was a case where the principal (the RTA), as part of its adjudication response, made submissions which were described (perhaps inaccurately: see [39]) as "jurisdiction submissions". The Adjudicator decided that the submissions had not been "duly made" for the purposes of s 22(d) because they had not been foreshadowed in the RTA's payment schedule and therefore refused to consider them any further (see at [44]). The contention for the RTA was that even if this was correct, the jurisdiction submissions should have been taken into account under s 22(2)(a) or under s 22(2)(b) as additional submissions on the merits.
This contention by the RTA was rejected. On that view, it was unnecessary to consider what effect a failure to take account of some of the submissions on the merits would have had. Nevertheless, Hodgson JA said (at [54]-[55]): In my opinion, there may be a sense in which s.22(2) is breached … if there is any one of what may be numerous submissions duly made to the adjudicator which is not considered. However, in my opinion a mere failure through error to consider … such a submission, is not a matter which the legislature intended would invalidate the decision. The relevant requirement of s.22(2) is that the adjudicator consider … submissions duly made. If an adjudicator … considers those of the submissions that he or she believes to have been duly made, I do not think an accidental or erroneous omission to consider … a particular submission, could either wholly invalidate a determination, or invalidate it as regards any part affected by the omission. One could express this by saying that such an accidental or erroneous omission does not amount to a failure to comply with s.22(2), so long as the specified classes of considerations are addressed; or alternatively, if one takes the view that s.22(2) does require consideration of … each and every submission duly made, the intention of the legislature cannot have been that this kind of mistake should invalidate the determination. In a case where there were 1,000 submissions duly made, an accidental failure to consider one of them could not reasonably be considered as invalidating a whole determination; and there is no basis for partial invalidation of a determination, that is, invalidation only of that part affected by the omitted submission.
Counsel for Martinus acknowledged that, as a result of the enactment of s 32A of the Act, partial invalidation was available, and this reduced the force of the thousand-submission example given by Hodgson JA. But counsel submitted that s 32A should not be read as having expanded the scope of jurisdictional error for the purposes of the Act, or as confining the jurisdiction of an adjudicator. Counsel described his Honour's reasoning as "really a comment about the scope of the adjudicator's function and the scope of the adjudicator's jurisdiction".
For their second proposition, counsel relied on the decision of Payne JA (Ward ACJ and Basten AJA agreeing) in Ceerose Pty Ltd v A-Civil Aust Pty Ltd (2023) 112 NSWLR 225; at [52] (emphasis added): A duty to "consider" material will itself operate differentially depending on the context. For example, s 22(2)(a) and (b) require that the adjudicator consider the provisions of the Act and the provisions of the construction contract. The obligation must be understood as referring to those provisions of the Act and of the contract which are engaged by the claim and the response to the claim. There can be no breach of the statutory obligation by failing to consider material which is irrelevant; further, the question of relevance will be a matter for the satisfaction of the adjudicator. Because the adjudicator can err on questions of law and fact, mistakes as to what may be relevant and what may fall within the obligation for consideration will only be reviewable where the error is of the kind which is apt to invalidate the determination.
Counsel for Martinus did not accept that the Adjudicator had necessarily committed the first error attributed to him (namely, failure to deal with Qube's objections to the four items where the use of a completion percentage was in issue). But if any such error had been committed, it was not, in counsel's submission, a jurisdictional one. Rather, it was an error in the Adjudicator's understanding, or interpretation of the payment schedule.
Counsel did not offer any specific explanation for how the Adjudicator might have failed to deal with the four items in question, yet not have breached his duty to consider Qube's objections to them and the submissions made in support of those objections. But in the context of other challenges, counsel proposed that the Adjudicator might have considered, albeit incorrectly, that having regard to his understanding of the payment schedule, that Qube's submissions were irrelevant or had not been "duly made" for the purposes of s 22(2)(d), and I understood these suggestions to be part of Martinus' argument on the preliminaries as well.
Counsel did concede the second error attributed to the Adjudicator. They accepted that he had made a mathematical error in [204]. Although counsel did not expressly say so, I understood them to concede that the figures in [212] and [213] were also mathematically incorrect.
At the hearing, counsel suggested that the error(s) might not have been material. The suggestion was that the Adjudicator might have used the correct figure in undertaking the actual calculations at the end of his adjudication of the amount due. But in a supplementary submission, counsel accepted that this was not the case.
Counsel also submitted that an error of this type was one which ought to have been dealt with by way of application to the Adjudicator under s 22(5) of the Act (see J2 [84]). This raised a question as to whether, given the lapse of time and the intervening entry of an enforcement judgment, it would be possible to go back to the Adjudicator and have the correction made now. At the hearing, counsel were only prepared to say that that might now be possible. But in their supplementary submission, I was told that Martinus accepted that it would still be open to Qube to apply under s 22(5) and for the Adjudicator to correct it.
Counsel did not, however, accept that there was any other means of making the correction. As noted at J2 [93], counsel accepted that, in some extreme cases, an adjudicator's determination could be set aside for "legal unreasonableness". Examples given were if the determination was undertaken using a dart board or a Ouija board. But counsel did not accept that the arithmetical error(s) in the instant case rendered the determination "legally unreasonable". They contended that relief by way of judicial review had to be refused, or, alternatively, should be refused in the exercise of discretion, given Martinus' concession that the error could be corrected under s 22(5).
In reply, counsel for Qube submitted that the decisions in Perform and John Holland were irrelevant in the present case. In counsel's submission, those decisions arose in circumstances where there had been a debate before the adjudicator about whether submissions had been "duly made". Counsel accepted that, in such circumstances, if the Adjudicator formed a bona fide, even if incorrect, view that objections or submissions by Qube had not been "duly made", he could ignore them.
But counsel pointed out that no such suggestion had been made in the present case by the Adjudicator. Nor had any such suggestion been made by Martinus. To the contrary, Martinus' adjudication application had expressly addressed Qube's objections on the merits.
This led counsel to a further point. The debate between the parties, and therefore the matter to be determined by the Adjudicator, concerned the merits of Qube's objections. For the Adjudicator to take a point not taken by Martinus and reject Qube's objections on that point, at least without giving prior notice to the parties to allow them to be heard on that possible course, involved a failure to afford procedural fairness to Qube. That was so, quite independently of whether it could be said that the Adjudicator had "considered" Qube's submissions for the purposes of s 22(2)(d).
Despite the reservation from counsel for Martinus, I think it is clear that the Adjudicator did make the first error attributed to him by counsel for Qube. His reasoning did fail to address the four items where the use of a completion percentage was in dispute. I think this is clearly illustrated by the Adjudicator's conclusion on item 1.2.1. By simply awarding the amount claimed by Martinus, on the ground that the claim had not adequately been responded to, the Adjudicator actually awarded 100% of the cost of the item, even though, on his reasoning, Martinus was only entitled to 96.07% of the cost. The question is whether this error was a jurisdictional one.
In addressing the submission by counsel for Qube that the error was jurisdictional because it involved a failure to comply with the Adjudicator's duty to consider the payment schedule and the submissions made in support of it, I have followed the same approach that I took in my earlier judgment (see J2 [52]-[60]). Essentially, whether the Adjudicator failed to consider Qube's objections to the claims is ultimately a question of fact, which has to be determined as a matter of inference from the Adjudicator's reasons (after taking into account other possible explanations for why the objections advanced by Qube were not addressed expressly in the Adjudicator's reasons, such as those discussed by Payne JA in Ceerose at [62]-[69]).
I accept that, had it been contended that, as a matter of interpretation of the payment schedule, no objections had relevantly been made to the items in question, or that any such objections had not been "duly made", and had the Adjudicator decided that he did not need to deal with them for that reason, the failure to do so might not have amounted to jurisdictional error. But I agree with counsel for Qube that there is no sign in the Adjudicator's reasons that this is the explanation.
To the contrary, I think the explanation is quite clear from what the Adjudicator did say at [208]. As with some of the challenges dealt with in my earlier judgment (see J2 [136]-[147], [195]-[197], [236], [292]-[304]), the Adjudicator expressly stated that Qube had made no further objection to Martinus' claims. That statement was wrong in fact and the obvious inference to be drawn from it is that the Adjudicator failed to consider the objections that Qube did in fact make.
Read in isolation, the passage from Hodgson JA's judgment in John Holland may be open to the interpretation that a mistaken failure to deal with one of a number of grounds of objection or submission is not, at least in some circumstances, be a jurisdictional error. But I did not understand counsel for Martinus, and their reliance on the decision for the purposes of the present case, to go so far as to submit that a purely inadvertent failure to consider Qube's objections, as opposed to a conscious decision not to do so based on the Adjudicator's interpretation of the payment schedule, was not a breach of s 22(2). If they had, it might have been difficult to see how such a submission could be reconciled with the statutory language, but there is no need to pursue this further.
The obligation to "consider" does not necessarily require the Adjudicator to read and mentally process every single word in a complex or lengthy payment schedule or submission. The Adjudicator had no duty to take up, develop and then rule on every point which might have been extracted incidentally or by implication from Qube's payment schedule or submissions. But in the present case, the dispute was clear and the Adjudicator failed to deal with it.
For the same reasons as I gave for the successful challenges in my earlier judgment, I consider that this involved jurisdictional error. It is therefore unnecessary to consider whether, independently of s 22(2), the failure to deal with that dispute involved a denial of procedural fairness.
As there is no dispute about the existence of the second error identified by counsel for Qube, the question is whether it was a jurisdictional one, and, if so, whether I should nevertheless refuse relief on discretionary grounds.
As already noted, at J2 [87]-[95], I discussed the principles of "legal unreasonableness" laid down by the High Court in Minister for Immigration and Citizenship v Li (2013) 249 CLR 332 and identified some of the limitations which arise in applying those principles to adjudication determinations under the Act. Neither party invited me, for the purposes of this judgment, to reconsider what I said there.
As I noted at J2 [92], whether an error amounts to "legal unreasonableness" is ultimately a matter of statutory interpretation. The questions is whether it must have been intended that the making of such an error would result in the invalidation of the decision.
The error in the present case is a simple arithmetical one. The Adjudicator used a figure in [212] and [213] that was wrong, in that it did not reflect his conclusion that Martinus was only entitled to recover 96.07% of the preliminary costs which had been incurred. It was not a contestable error of legal logic, but an uncontestable error of mathematical logic.
At J2 [95], I suggested that one characteristic of reasoned decision making is that the decision maker acts consistently and in accordance with an external body of rules, so that, if the circumstances recur, the decision maker will make the same decision. I had in mind the application of legal rules, but I think the same observation applies with increased force to the rules of mathematics. To my mind, it cannot have been intended that an adjudicator's award based on adding 2 and 2 and getting 5, would be binding, even for the limited purposes of the Act.
As I noted at J2 [66]-[73], it may be possible to express the same conclusion in the language of the Adjudicator's obligation to give reasons under s 22(3). Because of the mathematical mistake in [212] and [213], the Adjudicator simply had no reason to award the amount which he awarded. For these reasons, I think that the Adjudicator's error was a jurisdictional one.
It is clear that s 22(5) is directed to the correction of errors of this type. In the usual case, I agree that it would be much better for all concerned for mathematical errors of this type to be raised with the Adjudicator. There is no reason whatever to think that they could not be readily corrected in that way.
If that had been the only challenge made to the adjudication, there might have been much to be said for exercising the discretion not to grant relief by way of judicial review, especially if Martinus had suggested that alternative at an earlier stage (I do not know whether in fact it did so). But this point is only one of numerous judicial review points which have been debated in these proceedings. It has not resulted in any significant delay and can be conveniently dealt with as part of the proceedings. In these circumstances I decline to exercise my discretion so to refuse relief.

Design management resources CN 421 (INTS)

This challenge concerned a variation claim submitted on 8 February this year (along with other variation claims and the payment claim itself: see J2 [120]). The claim was for further staffing costs allegedly resulting from a failure to provide adequate and timely designs for Martinus to work from. The amount claimed was $2,932,000.
Qube incorporated into its payment schedule a separate memorandum from the Superintendent dealing with the claim, as had been done with other variation claims. The claim was resisted on both liability and quantum grounds.
It is not necessary for the purposes of this judgment to say anything about the liability points, which were rejected by the Adjudicator. As to quantum, Qube accepted that some additional costs had been incurred, but contended that those costs had already been covered by VOs issued by the Superintendent which had been paid for. But other answers were advanced as well. In particular, Qube had retained Currie & Brown, a quantity surveying firm, to consider the claim by Martinus. By reference to that report, and separately, Qube contended that Martinus had failed to justify the claim.
The Superintendent's memorandum summarised the position on quantum as follows: To the extent that further design management resources were required (beyond those provided for already within the valuation of VO 054 works and the 45% mark-up applied to costs claimed for varied works which are the subject of VO 054 and VO 061): 2.20.1 the costs claimed are preliminary time-related costs and are not direct costs of a variation to which the 45% mark-up applies …; 2.20.2 the Superintendent instructed Currie & Brown to undertake an independent benchmarking exercise of the Contractor's rates, including for additional design management resources. The results of this benchmarking exercise confirmed that the rates applied by the Contractor are Sell Rates, inclusive of overheads and profit …; 2.20.3 the additional resources claimed include resources for non-design related works and have been claimed using incorrect rates; and 2.20.4 in any event, the Contractor has failed to substantiate or provide evidence of the costs allegedly incurred ….
The memorandum continued by describing the Currie & Brown benchmarking in more detail. This was followed by a series of comments from the Superintendent on the cost breakdown provided by Martinus in support of CN-421. As well as pursuing the question of the mark-up rate, these comments contested the necessity for employment of the personnel specified for the periods specified. For example (emphasis original): 2.28.1 Design Manager (Jason Chen) …. Within CN 421, the Contractor has claimed an additional 2.8 weeks for Jason Chen to account for the 70 weeks of actual design team requirements alleged to be required as at the date of contract termination. The Superintendent does not agree that Jason Chen was required to be on site for an additional 3 weeks. He was required to be on site for the duration of the works, and certainly in this instance until the date of termination in September 2023. 2.28.2 Design Manager (Nichole Darke/ Nicolas Jaramillo) The Contractor has claimed additional costs for a second Design Manager for 22 weeks between 6 March 2023 and 31 July 2023. The Superintendent notes that this is duration of 21 weeks. The Superintendent has no record of a second design manager and the supporting documents previously provided by the Contractor in its delay claim do not include any reference to a second design manager being included.
The claim was maintained in full in Martinus' adjudication application. In the statement of Mr Mitch Corrigan, which accompanied the application (see J2 [105]), he provided a description and justification for the amounts claimed.
In its adjudication response, Qube repeated the points made in the Superintendent's memorandum. The response was supported by references to Ms Storey's statutory declaration and another statutory declaration, from Mr Robin Watkins, a director at Currie & Brown, which accompanied the adjudication response.
In his reasons, the Adjudicator first referred to the position taken by Qube that it had acknowledged and dealt with additional staffing requirements through VOs. His reasoning continued: 1439) I am persuaded, therefore, [because of Qube's acknowledgement] that the Respondent considered the Claimant was entitled to payment for the provision of additional designers, commercial management / project management. 1440) The Respondent, however, provided no explanation about why it disputed the Claimant's claimed further resources for 3 designers for 70.8 man-weeks and 1 designer for 2.8 man-weeks. 1441) Further, the Respondent provided no explanation about why it disputed the Claimant's claimed further resources for 3 commercial administrators for a total of 61 man-weeks. … 1446) Accordingly, given the Respondent's acceptance that certain further resources were in fact a variation to the Contract (see above) a claim based on actual time applied by each person and the Contract schedule of rates is a reasonable basis for valuing that variation. 1447) Accordingly, I accept the Claimant's assessment of quantum [$2,932,000] for the design management and commercial management.
Counsel for Qube challenged this component of the adjudication on similar grounds as for the challenge on preliminaries. Again, counsel submitted that the adjudicator had been wrong in saying, at [1140] and [1441], that Qube had "provided no explanation" for its objections to the levels of resourcing claimed by Martinus. Qube had in fact given such explanations, and the Adjudicator had failed to deal with them.
Again, counsel only formally pressed the contention that the Adjudicator's decision was "legally unreasonable". But again, counsel submitted that the only inference to be drawn was that the Adjudicator had failed to consider Qube's quantum objections and the submissions made in support of those objections, and this amounted to jurisdictional error.
Counsel for Martinus characterised this as Qube's strongest challenge. They acknowledged the Adjudicator's statements in [1440] and [1441] were in error in saying that Qube had not made any quantum objections. But the error, in counsel's submission, was one of interpretation of the payment schedule and was therefore beyond the scope of judicial review under the Act.
In my view, this challenge falls to be determined in the same way as the challenge concerning the four disputed items in the preliminaries. Again, the Adjudicator expressly stated in his reasons that Qube had given no detail of its quantum objection when that was not so. Again, the compelling inference from what the Adjudicator said is that he failed to consider the parts of the payment schedule and submissions where those quantum objections were identified and developed. Again, jurisdictional error is established without the need to consider any separate challenge based on denial of procedural fairness.

Signal design management CN 422 (INTS)

This component of the adjudication concerned another variation claim, which was similar to CN-421. Again, Martinus' claim was for additional labour cost allegedly resulting from delays caused by inadequacies in the designs provided by Qube, and going beyond amounts allowed in VOs issued by the Superintendent. The amount of the claim was $672,000. This included $441,000 for the services of a "Signalling Manager" provided by "ConSig (Nathan Rice)" and then "Banelec (Bob Glover)" (I assume that "ConSig" and "Banelec" were contractors through whom the individuals' services were provided).
Again, Qube's payment schedule incorporated by reference a separate memorandum from the Superintendent dealing with the claim. The reasons given in the payment schedule were (I have added the numbering adopted by the Adjudicator in his reasons): CN 422 relates to a claimed variation for additional signalling design management required as a result of post-IFC design changes directed by VO 055. Further details of the Superintendent's response to CN 422 are provided at Appendix C.3 to the INTS and ISRA Payment Schedule 15. The Superintendent rejects the principal and quantum of CN 422. In summary, the Superintendent notes that: (1) the additional signalling design management resources which are subject of CN 422 do not constitute a variation to the WUC or additional works under the Contract; (2) the costs claimed were indirect job costs which should have been and/or were included as part of the Contractor's original tender price; (3) The costs claimed are time-related and relate to the cost of Martinus engaging a signalling manager for 47 weeks in circumstances where it had originally allowed for a duration of 17 weeks. The costs claimed are therefore additional preliminary costs arising from post-IFC design changes directed by and valued as part of VO 055. (4) The Contractor's preliminaries include an allowance for a Senior Project Engineer (signals), a Project Engineer (signals), a Grad Engineer (Signals) and a Trainee Engineer (signals) (as per the Tender Org Chart for the preliminaries base contained in the PMP). In fact, the Contractor has only provided one Signalling Manager as per the September 2023 Org Chart and although it has identified the role of a signalling engineer, that role has never been filled; (5) to the extent that additional signalling design management resources were required (beyond those accounted for within the valuation of VO 055 and the 45% mark-up determined by Alan Stapleton in adjudication determinations #525 and #526 (on an interim basis and until finally determined by arbitration) applied to costs claimed for varied works which are the subject of VO 055): (6) the costs claimed are preliminary time-related costs for the extended involvement of the Signalling Design Manager and are not direct costs of a variation to which the 45% mark-up applies; (7) the Contractor has failed to substantiate or provide evidence of the costs allegedly incurred; and (8) the Contractor has used incorrect rates in its calculations; (9) to the extent that the claimed costs constitute a variation (which is denied), the Contractor failed to submit CN 422 in accordance with clause 36.3A of the Contract and therefore has no entitlement to claim for any additional time or cost arising out of alleged "additional design management resources" arising from VO 055.
Again, the present challenge is confined to quantum objections (apart from the objection to the mark-up rate) and the Adjudicator's answers to the liability objections (numbered (1), (2), (3) and (9)) do not need to be considered.
The relevant quantum objections were introduced in the Superintendent's memorandum in the following way: 2.20 To the extent that further design management resources were required (beyond those provided for already within the valuation of VO 055 works and the 45% mark-up applied to costs claimed for varied works which are the subject of VO 055): 2.20.1 the Contractor has failed to substantiate or provide evidence of the costs allegedly incurred; and 2.20.2 the costs claimed are preliminary time-related costs and are not direct costs of a variation to which the 45.31% mark-up applies.
As for CN-421, the memorandum then set out comments from the Superintendent which raised questions as to whether the claims for additional staffing were justified, at least in the hours and at the rates claimed. Again, this had been dealt with in the benchmarking undertaken by Currie & Brown. The memorandum noted, in connection with a claim for $440,000 for the services allegedly provided by a "Signalling Manager": 2.22.1 There is no agreed rate for the role of Signalling Manager. The Contractor has applied contract rate for a Construction Manager at $294/hr. Pursuant to the Currie & Brown assessment, the Superintendent considers that the applicable rate for this role would be contract rates for a Senior Projects Engineer at $280/hr and a Project Engineer at $252/hr. 2.22.2 There is no substantiation of the 50-hour working week claimed for this resource. Pursuant to the Currie & Brown assessment, the Superintendent considers that the applicable working week to be 40 hours. 2.22.3 The Contractor has provided no substantiation for invoiced costs for the resource time claimed for the Signalling Manager role from either ConSig (Nathan Rice) or Banelec (Bob Glover). There also appears to be duplication in respect of the costs which are claimed for Bob Glover under this item (who is employed by a sub-contractor) and the costs claimed in respect of subcontractor prelims. Further in relation to Nathan Rice, the Superintendent has no record of him having being employed by the Contractor on the Project. 2.22.4 Taking the above changes into account, to the extent that the Contractor is entitled to any additional costs for the Signalling Manager (which is denied for the reasons set out above), the Superintendent assesses this value as the amount assessed by Currie & Brown.
In his reasons, the Adjudicator quoted the objections in the payment schedule (as set out at [67] above) at [1458]. He went on: 1459) This claim for provision of design management resources to assist in the completion of the signalling design referenced CN - 422 is similar in nature to the above claim for provision of design management resources to assist in the completion of the design of the WUC excluding signalling referenced CN - 421. 1460) The Respondent acknowledges that there is a variation relating at least to the matters set out in the 25 September 2023 and to any incidental to the signalling IFC design arising up to 30 September 2023. … 1464) I, therefore, do not accept the first four reasons for withholding payment in the Payment Schedule because they are at odds with the detailed explanation of variation order VO 055, which included a valuation of non-direct costs, by the Respondent providing an additional sum of $240,800 for additional preliminaries labelled arising from various events, including the extended duration of designers on site due to ongoing signalling design changes.
The Adjudicator then continued (emphasis original): 1465) It is clear, therefore, that this is only a dispute about quantum between the Respondent's assessment all design changes relating to signalling up to 30 September 2023 and the Claimant's claim referenced CN - 422 included in the Payment Claim. 1466) In the Payment Schedule, the Respondent has not explained how it determined the duration that the design management resource relating to signalling up to 30 September 2023 for which it assessed an amount payable of $240,800.00 nor did it explain why it objected to the claimed amount referenced CN - 422 in the Payment Claim. … 1471) I am satisfied that sufficient breakdown was provided by the Claimant in Appendix 5 of the Payment Claim and Appendix C.8 of the Payment Schedule for the Superintendent to assess given that it had concluded this work was a variation to the Contract. 1472) As set out above at paragraph 622), it is clear from Insite Construction Services Pty Ltd v Daniels Civil Pty Ltd & Anor [2023] QSC 33 that where the Respondent fails to provide its assessment of quantum, it is open to the adjudicator to accept the Claimant's valuation of the corresponding claimed item in the Payment Claim. … 1476) I accept that the Claimant is entitled to apply the margin determined in the decision by the adjudicator in the adjudication application ABCDRS NSW 526. 1477) Accordingly, I have decided that in relation to the claim for a Variation for Additional Signal Design Management CN - 422, the Claimant is entitled to payment of the claimed amount of $672,217.14.
The challenge to the adjudication on CN-422 was essentially the same as for CN-421. Again, counsel contended that the Adjudicator had erroneously dealt only with part of the quantum dispute between the parties, namely the issue about the mark-up rate. It was clear from [1472] that the Adjudicator had proceeded on the basis that Martinus' valuation of the claimed work was not otherwise disputed. In doing so, he had overlooked Qube's quantum objection, based on Currie & Brown's assessment, and the submissions made in support of that objection. Again, counsel submitted that this involved a jurisdictional error.
Counsel for Martinus submitted that the merits of Qube's challenge were less clear for CN-422 then they were for CN-421. Counsel submitted that, on the Adjudicator's reasons, he had at [1458] "identified", and thereafter, "engaged with", Qube's reasons for withholding payment. Any misunderstanding of Qube's position on any of the "sub issues" could not amount to a jurisdictional error.
In my view, the challenge to CN-422 is not materially different from the challenge to CN-421. I do not accept that the Adjudicator's reasons "engaged with" Qube's quantum objections as submitted by counsel for Martinus. The Adjudicator specifically identified and numbered Qube's quantum objections when quoting from the payment schedule (as objections (7) and (8)). His reasons simply did not deal with those objections. At [1466], the Adjudicator may have been saying that Qube had not made any further relevant objections, but even if he was saying something else in that paragraph, his reference to Insite at [1472] shows that his ultimate conclusion was based on that assumption. Accordingly, for the reasons given in connection with CN-421, there was a jurisdictional error with respect to CN-422.

Wet weather recovery variation CN 451 (INTS)

This component of the INTS adjudication concerned another variation claim, which was based on the alleged effects of wet weather. The amount claimed was $73,000.
CN-451 was one of a number of claims of the same type, one of which (CN-437) occurred only a few lines earlier in the payment claim. In the payment schedule, Qube rejected both claims. The reasons given went to both liability and quantum. One of the liability arguments was that, even if otherwise justified, Martinus had adopted the wrong contractual procedure for the claims. Martinus should have made an application for an extension of time ("EOT"). A claim for a variation was not permissible, if for no other reason than no VO had been issued and Martinus was out of time to apply for one (see J2 [117] for the relevant contractual provisions).
The reasons given in the payment schedule for rejecting CN-437 and CN-451 both stated (emphasis original): This item is rejected for the reasons given in the Superintendent's letter response to CN-370 (Aconex Ref: RAILPSPL-VARN-000036). 1) No entitlement to payment claimed under a design clash; 2) Superintendent has not directed a variation pursuant to 36.1; 3) The Contractor has not been required to carry out a variation under 36.3A; 4) Costs claimed by the Contractor are not clean up or repair costs, they are stand down costs to which the Contractor has no entitlement. 5) Contractors records do not match that of the Superintendent. 6) Contractors claim is time barred. CN 434 [sic.] relates to a claimed variation for additional works it was allegedly required to carry out as a result of delay caused by inclement weather. The principal and quantum of CN437 are disputed. The Contractor claimed $164,376.99 for this item in PC 15. Reference is made to the documents outlined in the supporting narrative for details of the Superintendent's assessment of $nil for this claim in PS 15. Further details of the Superintendent's response to CN437 are provided at Appendix C.8 to ISRA and INTS Payment Schedule 15. In summary, the Superintendent notes that: the EOT regime is the sole contractual remedy associated with delay attributable to wet weather; the Contractor has already been awarded delay and disruption costs as part of the sums claimed for CN436 (EOT-40). In accordance with cl 34.9, the Contractors entitlement to delay costs is in full sati faction of all Loss suffered or incurred by the Contractor in respect of any delay arising from the dates of delayed site access which are subject of EOT the works subject of CN437 do not constitute a variation under the Contract; the Contractor failed to submit CN437 in accordance with clause 3 6.3A and therefore has no entitlement to Claim for any additional time or cost arising out of or in any way connected with the direction or event; the Contractor has failed to substantiate the costs that it has claimed which do not correlate with site records and are not backed up by supporting documents; The Contractor has extended its application of the 45% mark up beyond the scope determined by the Adjudication Determinations of Alan Stapleton #525 and #526 dated 2 August 2023. The mark-up does not apply to items that are not genuine variations such as delay/ disruption claims.
It is evident that, in drawing up the payment schedule, the reasons for rejecting CN-437 (including the incorrect reference to CN-434) were copied to CN-451 without any modification. The reasons, as they appeared in CN-451, thus referred to the claim by reference to CN-437 rather than CN-451, and stated the amount claimed as $164,000 rather than $73,000.
In its adjudication application, Martinus addressed the two claims, CN-437 and CN-451, under the single heading "wet weather recovery costs". No point was taken about the reference to CN-437 (or the reference to CN-434) in the reasons for rejecting CN-451.
A similar approach was taken in Qube's adjudication response. The response provided detailed submissions under the heading "response to claim CN-437" from [11.89] to [11.125], arguing for a "$nil certification". Then, under the heading "claim CN-451", the response proceeded: 11.126 Qube submits identical submissions in relation to CN-452 [sic] as it did to CN-437. 11.127 Accordingly, the Adjudicator should value the claim at $nil.
In his reasons, the Adjudicator first dealt with CN-437. At [1496], after setting out relevant details of the claim, the Adjudicator quoted the reasons from Qube's payment schedule, emphasising the statement that "CN-434 relates to a claim variation for additional work it was largely required to carry out as a result of delay caused by inclement weather". The Adjudicator inserted "[sic]" after the reference in this sentence to CN-434.
The Adjudicator's dispositive reasoning on CN-437 appeared at [1499]-[1505] (emphasis original): 1499) The Claimant claims that as a consequence of rain events during the period 1 August 2023 to 30 September 2023, it was required to undertake additional work to repair damage caused by the rain and for delays caused by the rain. 1500) The Claimant asserts it was instructed to carry out a variation and provided notice under clause 36.3A of the Contract on 6 September 2023, requesting the Respondent to issue a variation order accordingly. 1501) Clause 36.3A requires the Respondent to have provided some direction to perform the work claimed under CN - 437 in circumstances where no variation order was issued. 1502) On 6 September 2023, the Claimant also issued a cost breakdown of its claim for additional work, which it claims was a variation. The cost breakdown discloses the number of hours claimed but provides no particulars of the work performed. 1503) I can find no account of where the Claimant describes the instruction to perform this additional work being claimed including in the Adjudication Application submissions and the statement of Mitch Corrigan dated 7 March 2024. 1504) Accordingly, I have determined that I am persuaded by the Respondent that it never instructed the Claimant to carry out any of the work claimed under CN - 437. 1505) Accordingly, I have decided that in relation to the claim for a Variation for Wet weather recovery 30th September to 1st August 23 CN - 437, the Claimant is not entitled to payment for the claimed amount.
After dealing with an unrelated variation (CN-434), the Adjudicator then dealt with CN-451. Again, he referred to the details of the claim and then quoted the rejection from the payment schedule in full. Again, the sentence about the claim relating to a variation for additional works was emphasised, and the Adjudicator inserted "[sic]" after the reference to CN-434. But in this instance the Adjudicator also emphasised the first sentence in the reasons ("this item is rejected for reasons given in the Superintendent's letter response to CN-370") and the statement which immediately followed the reference to CN-434 ("the contractor claimed $164,376.99 for this item in PC 15").
The Adjudicator's reasons continued (emphasis original): 1523) The Respondent has restated its reasons for withholding payment for claim referenced CN 437. 1524) The Respondent has not provided any reason for withholding payment in relation to claim CN-451. 1525) The Respondent did not provide any comment about the quantum of this claim. 1526) As set out above at paragraph 622), it is clear from Insite Construction Services Pty Ltd v Daniels Civil Pty Ltd & Anor [2023] QSC 33 that where the Respondent fails to provide its assessment of quantum, it is open to the adjudicator to accept the Claimant's valuation of the corresponding claimed item in the Payment Claim. 1527) Accordingly, I have decided that in relation to the claim for a Variation for Wet weather recovery 8.9.23 CN - 451, the Claimant is entitled to payment for the claimed amount of $73,263.83.
Counsel for Qube submitted that, in substance, Qube had objected to this claim on the same grounds as those on which it had (successfully) objected to CN-437. The references in the scheduled reasons to CN-437 were clearly erroneous (just as the reference to CN-434 was an error, as the Adjudicator acknowledged with his "[sic]"). Plainly, they were intended as references to CN-451. That was the way that Qube's objections had been understood by Martinus. Qube's adjudication response, (despite an erroneous reference to CN-452) had made this explicit.
Counsel submitted that, in these circumstances, [1523] was correct in stating that Qube had "restated" its objections to CN-437, if "restated" meant that Qube had adopted the same objections to CN-451. If so, it was simply inconsistent with [1524]. But on any view, [1524] was wrong. Qube had in fact given reasons for its objections. Nor was [1525] correct. Qube had addressed quantum, both in its payment schedule and in its adjudication response. The fact that Qube's objections repeated the objections to CN-437 did not prevent them from being valid objections to CN-451 as well.
Counsel submitted that the reference to Insite was particularly inapposite for this claim. That case concerned a claim where nothing was said in the payment schedule at all; in the present case, there was an entry in the payment schedule, albeit that the grounds given in the payment schedule referred, in what Qube characterised as an obvious typographical error, to a different claim number.
As for CN-421, counsel submitted that the Adjudicator's approach involved a failure to consider Qube's quantum objections to the claim, and the submissions advanced in support of those objections, amounting to jurisdictional error.
Counsel also maintained a submission that the error amounted to "legal unreasonableness" and was a jurisdictional error on that ground also. Counsel submitted that the present challenge was distinguishable from the challenges on this ground which I rejected in my earlier judgment. Qube's objection had been upheld for CN-437, but rejected, in relevantly identical circumstances, for CN-451. This manifested irrationality in the decision which was sufficient to make it "legally unreasonable".
Counsel for Martinus acknowledged that it might have been open to the Adjudicator to read the objections in the payment schedule as objections to the claim in CN-451 but on the same grounds as had been advanced for CN-437. But this was a matter of interpretation of the schedule, and a failure to do so, even if the Court considered that it was the obvious reading, did not amount to a jurisdictional error.
Counsel acknowledged that the reading appeared more clearly in Qube's adjudication response (as I understood it, counsel accepted that the reference to CN-452 in the submission quoted at [81] above was to be read as a reference to CN-451). But counsel suggested that, once the Adjudicator came to a conclusion that Qube's submissions were irrelevant or had not been "duly made", there was no obligation to deal with them any further. As I understood counsel's argument, they were saying that it would have been open to the Adjudicator, having interpreted the payment schedule literally, to ignore the further submissions in Qube's adjudication response.
In this regard, counsel accepted that the Adjudicator's task did not end with Qube's payment schedule. It was necessary to have regard to Martinus' adjudication application, if only to see whether the claim originally made in the payment claim had been pressed. But counsel submitted that the statement by Ball J in Binah Constructions Pty Ltd v PTMG Pty Ltd [2024] NSWSC 872 (see J2 [273]) that the scope of the debate was defined by the adjudication application was not "correct in an unqualified fashion". Counsel maintained that there was no obligation on the Adjudicator, if he had concluded that there was no relevant submission made in the payment schedule, and having satisfied himself that the claim was pressed in the adjudication application, to find in Martinus' favour without any further enquiry. Counsel relied for this conclusion upon Ceerose at [84].
Nor, in counsel's submission, did any question of failure to afford procedural fairness arise. The obligation was only to consider submissions which the Adjudicator regarded as relevant. In support of this submission, counsel repeated the third proposition, derived from Ceerose at [52], set out above.
As counsel for Martinus pointed out, read literally, the objection that appeared in the payment schedule against CN-451 did not respond to that claim. The Adjudicator evidently noticed that the reference to CN-434 was erroneous, because he went to the trouble inserting "[sic]" after that refence. It is therefore puzzling why he did not therefore likewise appreciate that the references to CN-437 were incorrect. In any event, that is not the end of the matter.
I agree with counsel for Qube that the Adjudicator was obliged, whatever he may have thought from reading the reasons in the payment schedule alone, to read the adjudication application, if only to see how Martinus has responded to it. Had he done so, he would have been left in no doubt that Qube was mounting the same objection to CN-451 as it had to CN-437.
Furthermore, as I understood their argument, counsel for Martinus accepted that, had Qube's payment schedule simply stated that Qube objected to CN-451 on the same grounds as for CN-437, the Adjudicator would have been obliged to deal with that objection (and, given his conclusion on CN-437, he would have upheld it). But that was the very submission made in Qube's adjudication response for CN-451 (passing over the obviously incorrect reference to CN-452). Counsel's argument therefore had to explain why the Adjudicator would have been justified in ignoring this submission.
Counsel's argument in reliance on their third proposition came down to saying that I should infer that the Adjudicator began by reading the payment schedule, concluded that the objections stated were entirely spurious and unintended, and was therefore entitled on the authority of Insite (as he perceived it) to accept whatever claim Martinus made. Then he must have turned to the adjudication application, but only for the purpose of verifying that the claim was maintained, and not so as to consider the substance of the dispute. Then he must have felt able to ignore whatever might have appeared in the adjudication response.
I do not find this at all persuasive. The Court should proceed on the assumption that the Adjudicator would have been open to dealing with objections to the claim as a matter of substance, rather than assuming that he was determined to find any reason that he could to avoid having to deal with Qube's objections and to find in Martinus' favour.
In my view, the proper inference is that the Adjudicator failed to consider Qube's adjudication response (and Martinus' adjudication application) and this was a jurisdictional error. It is therefore unnecessary to consider whether, having regard to the opposite decision on CN-437, the Adjudicator's decision on CN-451 was so capricious as to be "legally unreasonable".

Points interim arrangement CN 212 (ISRA)

This challenge concerned another variation claim. That claim was originally made before the termination of the Contract. The amount claimed was $75,000. Again, the Superintendent referred the claim to Currie & Brown, acting as Quantity Surveyor under the Contract, for an assessment. Currie & Brown took issue both with some of the items of cost included in the claim and with the mark-up which Martinus had applied, and assessed the amount payable as $29,000. This assessment was adopted by the Superintendent.
In its payment claim, Martinus reinstated the claim, seeking payment of the full $75,000. Qube's payment schedule maintained the $29,000 assessment. The reasons given were: The Superintendent has assessed the amount claimed for its additional costs in full, plus 11.1% (pursuant to the Contract) for items that are not priced using the Schedule of Rates. The Superintendent has only reduced the additional 45% added to the direct costs for overheads and profits. As stated throughout this document the Contractor is extending its application of the 45% mark up beyond the scope determined by the Adjudication Determinations of Alan Stapleton #525 dated 2 August 2023 [sic] and #551 dated 2 November 2023.
In its adjudication application, Martinus continued to maintain the full claim of $75,000.
Qube dealt with the claim in its adjudication response in a section devoted to variations (part 8). Part 8 addressed one specific variation worth $4.3 million together with other variations which were collectively described as "low value variations" and included CN-212. The response stated, at [8.5]: 8.5 There are a number of common themes in respect of Martinus' variation claims. These are as follows:- 8.5.1 Claims do not amount to variations; 8.5.2 Even if they are, Martinus' claims are time barred; 8.5.3 There is duplication of costs already recovered in other variations; 8.5.4 There is duplication of costs already recovered as delay costs; 8.5.5 Martinus is seeking to apply the 45.31% mark up beyond the scope determined in the August 2023 Adjudication; 8.5.6 New information included in Adjudication Submissions not previously included in the Final Payment Claims. 8.5.7 Lack of substantiation.
The response went on to develop each of these "themes". The final "theme", lack of substantiation, was dealt with in general terms at [8.51]-[8.57]. After addressing some of the claims specifically, the response dealt with the remaining claims (including CN-212) as follows: 8.185 For each of the remaining variations claimed by Martinus in Section K of the Adjudication Application, that Qube has not already addressed above, Qube repeats and relies on the reasons it gave for the valuation of those claims in the Final Payment Schedule. 8.186 In addition to this, Qube makes the following general submissions (and refers to its more detailed submissions at the beginning of this paragraph in respect of the common themes applicable to Martinus variation claims):- 8.186.1 Martinus sought to categorise the claims into variations where entitlement is allegedly not in dispute and those where entitlement is still in dispute. This is Martinus attempting to reframe Qube's arguments on Qube's behalf. This categorisation is a generalisation of the issues in dispute and is not appropriate, particularly in circumstances where notwithstanding any partial scheduled amounts in these claims, Qube maintains that Martinus is not entitled to any amount that was not awarded in the Final Payment Schedule. 8.186.2 the Additional Variations Claims fail to establish contractual entitlement under the clause 36.1 and 36.3A regimes. In particular, Martinus is time barred from making any Additional Variation Claims which relate to work undertaken prior to termination, as that is far longer than the 5 business days notice period prescribed by cl 36.3A; 8.186.3 many of the Additional Variation Claims are duplications of costs already claimed and awarded elsewhere. For example:- (a) CN 164 is a variation claim for additional works relating to the installation and removal of two groundwater temporary monitoring wells, for which RPS has already certified in part and Qube has already paid; (b) CN 202 is a variation claim for additional works associated with the disposal of asphalt from the ITV Road, which Currie & Brown has already assessed and Qube has already paid; (c) CN 294 is a variation claim for the relocation of track materials stored in Eagles Beak area, which Currie & Brown has already assessed and Qube has already paid; 8.186.4 many Additional Variations Claims inappropriately claim for a 45.31% markup in circumstances where it is not entitled to that markup. For example:- (d) CNs 329, 335, 353, 362 and 405 are variation claims for which Martinus claim that it is entitled to the 45.31% markup due to previous adjudication determinations. For the reasons set out above, this is denied.
In his reasons, after quoting Qube's reasons for withholding the delta in its payment schedule ([102] above), the Adjudicator continued (emphasis original): 703) The Claimant argues that I am bound by the decision of the adjudicator in his decision of adjudication application ABCDRS NSW 526 and ABCDRS NSW 550. 704) The issue of which is an acceptable margin on direct costs was determined by the adjudicator in the adjudication application ABCDRS NSW 525. I have summarised the adjudicator's determination above at paragraphs; 147) to 154). 705) Pursuant to the determination of adjudication application ABCDRS NSW 526, the Claimant is entitled to apply 'Margins' to its Direct Costs, comprised of: a) 27.92% for Onsite Overheads and Preliminaries (described as "Indirect Job Costs" or "IJC"); and b) 13.60% for Offsite/Head Office Overheads and Profits margin of (described as "OHP"). c) Adjudicator's decision; The Claimant is entitled to payment of the claimed amount. 706) The reasons for this determination are set out above at paragraphs; 636) to 644). 707) Accordingly, I have decided that in relation to the claim for a variation for the disposal of asphalt from ITV road for FW works referenced CN - 202, the Claimant is entitled to payment of the claimed amount of $74,761.27.
It is apparent from his reasons, from [703] to [705(b)], that the Adjudicator found for Martinus on the mark-up issue. But [705(c)] does not fit with the rest of [705] and evidently covers the same ground as [706] and [707]. Something seems to have gone wrong with the formatting, indeed [705(b)] may be some sort of placeholder accidentally left behind when the reasons were published.
Be that as it may, it is clear from [706] that the Adjudicator intended, after dealing with the mark-up issue, to incorporate by reference what he had written at [636]-[644]. In those paragraphs, the Adjudicator discussed the decisions in Luikens and Insite. That discussion concluded with the following: 641) The Respondent's determination was no more than a bald assertion in relation to those items where it unilaterally reduced the quoted hours. Accordingly, I do not accept that the Respondent's reason for withholding payment are valid reasons for withholding payment. … 643) It is clear from the Act, the Contract and the guidance provided in Multiplex Constructions Pty Ltd v Luikens & Anor [2003] NSWSC 1140 by HH Palmer J that the Respondent must consider the Payment Claim and, if it does not accept any part of that Payment Claim and decides to withhold payment, then the reasons for withholding payment set out in the Payment Schedule must be sufficiently clear that Claimant can understand the basis of rejection of any part of that Payment Claim and which parts of that payment Claim have been accepted and payment has been scheduled accordingly. 644) It is clear from Insite Construction Services Pty Ltd v Daniels Civil Pty Ltd & Anor [2023] QSC 33 that where the Respondent fails to provide any valid reason for withholding payment, it is open to the adjudicator to accept the Claimant's valuation of the value of the Payment Claim.
Counsel for Qube challenged the determination for CN-212 along the same lines as they had challenged the determination for CN-451. They accepted that the Adjudicator had addressed the mark-up argument, but submitted that, mathematically, it was clear that this could not account for the whole of the difference between the claimed amount and the scheduled amount. That difference was explained by the other quantum grounds on which the Superintendent had relied in her assessment. The Adjudicator had failed to deal with those grounds, and, in doing so, had failed to deal with objections in the payment schedule and submissions duly made by Qube in support of those objections. Thus, they submitted, the error was jurisdictional.
Counsel for Martinus again submitted that any error on the part of the Adjudicator was an error as to the interpretation or understanding of Qube's payment schedule. Furthermore, counsel pointed to the reference in the Adjudicator's reasons at [641] to Qube's objection to the claim there in question as being no more than "a bald assertion". Counsel submitted that it was an "available inference" that, in incorporating that paragraph into the reasons dealing with CN-212, the Adjudicator had not regarded the relevant objections to CN-212 as constituting "valid" reasons for withholding payment. Counsel submitted that any such conclusion, whether correct or not, was within the Adjudicator's jurisdiction.
This challenge is similar to the challenges to CN-421 and CN-422. But there is a difference which I think is significant. In CN-421 and CN-422, the objection in the payment schedule was expressed in such a way as to make it clear that objections were being pursued on quantum grounds independent of the mark-up point. I do not think that is so clear in the payment schedule objection to this claim. The quantum objections may have been more fully developed in the adjudication response, but they were developed in general terms. Neither in the payment schedule nor in the adjudication response was it expressly stated that the quantum objections in question were applicable to CN-212. Accordingly, I cannot infer that the Adjudicator would have found it necessary to consider them as applicable to that claim. The challenge fails.

Disposal of asphalt CN 202 (ISRA)

This challenge also concerned a disputed variation claim. The claim had very similar features to CN-212. Again: the claim (for $64,000) was originally made during the currency of the Contract; it was referred by the Superintended to Currie & Brown for assessment; in their assessment Curie & Brown took issue with some of the items claimed and the mark up, assessing the claim for a reduced amount (in this case $26,000); the assessment was adopted by the Superintendent; and the claim was reinstated as part of Martinus' payment claim.
In its payment schedule, Qube scheduled the figure which had been assessed by Currie & Brown. The reasons in the schedule referred to that assessment as the basis of Qube's refusal to pay the claim in full: Delta is due to the Contractor's application of 45.31% to all pay items. This is incorrect as the Schedule of Rates items used for the pricing of this variation are inclusive of overheads and profit. A reasonable amount of overhead and profit as noted by the QS is between 10-15% and in this instance, 13.6% was applied to non schedule of rates items for plant and material not covered under Schedule K. Please see CN-202 assessment within the folder appended to the July 2023 Payment Statement. 29/09/23 - The Contractor's claim has been directed under VO 010. The Quantity Surveyor has determined the value payable to be $25,962.40. Refer to RAILPSPL-VARN-000067.
Again, the full claim was pursued in Martinus' adjudication application. Again, it was dealt with in Qube's payment response as one the "low value variations". I have already summarised the adjudication response at [106]-[108] above.
The Adjudicator dealt with the claim in his reasons at [694]-[700]. Those paragraphs appear to have been copied from the corresponding paragraphs in CN-212, namely [701]-[707], or vice versa.
At [694], the Adjudicator identified the amount claimed as $64,000. At [695], the scheduled amount was correctly stated as $26,000 but the reasons reproduced the reasons given for CN-212. The wording of [696], [697] and [698] was the same as [703], [704] and [705], except that there was no equivalent to [705(c)] in [698]. The wording of [699] and [700] were again the same as [706] and [707], except that the amount awarded in [700] was $64,000, reflecting the claim amount recorded in [694].
Counsel for Qube began their challenge by pointing out that [695] was incorrect: the reasons quoted in that paragraph were the reasons for CN-212. The reasons given for CN-202, which have been set out above, were not quoted by the Adjudicator. Counsel submitted that this resulted in the Adjudicator failing to address the additional quantum arguments beyond the dispute about the mark-up rate. In this regard, counsel noted that CN-202 was expressly referred to in the part of Qube's adjudication response dealing with those additional arguments.
Counsel submitted that this was a further instance of the Adjudicator failing to consider all of Qube's objections and submissions. Alternatively, it amounted to a denial of procedural fairness, or, it was simply "illogical" because the Adjudicator had dealt with the wrong argument. All of these, in counsel's submissions, rendered the error a jurisdictional one.
Counsel for Martinus repeated the submissions made by them in opposition to the challenge to the determination concerning CN-212 ([110] above). Counsel acknowledged that the determination concerning CN-202 had the additional feature that the Adjudicator had set out the objections to CN-212, rather than the objections to CN-202, in his reasons. But counsel submitted that "if" the Adjudicator had made a mistake in doing so, there was still no jurisdictional error. The mistake was capable of correction in later arbitration proceedings, or "potentially" under s 22(5), but not in judicial review proceedings. They also submitted that any error was not material (see J2 [32]-[36]).
The considerations which apply to CN-202 are similar to those which apply to CN-212. The only difference is that, unlike CN-212, CN-202 was expressly referred to in Qube's adjudication response (see [8.186.3(b)], quoted at [105] above). But the reference was only given by way of "example" of a "duplication of costs already claimed and awarded elsewhere". I do not think that that was necessarily sufficiently clear to bring home to the Adjudicator that Qube was advancing the free-standing quantum objections which are the subject of the present challenge. Accordingly, I reject this challenge also.

Storm pit design clashes CN 299 (ISRA)

This challenge relates to another claimed variation under the ISRA Contract, numbered CN-299. The amount claimed was $97,000. Qube's scheduled amount was $nil. The reasons for scheduling that amount were (emphasis original): CN 299 relates to a claimed variation for additional costs incurred in overcoming stormwater pit design clashes arising from post- IFC design changes that were subject of VO-054. The principal and quantum of CN 299 are disputed. … Reference is made to the documents outlined in the supporting narrative for details of the Superintendent's assessment of $nil for this claim in ISRA PS 15. Further details of the Superintendent's response to CN 299 are provided at Appendix C.8 to ISRA Payment Schedule 15. In summary, the Superintendent notes that: the Contractor has already been awarded for additional costs associated with works required to overcome design clashes within the VO-054 remeasure for post-IFC design changes up to 16 June 2023, and is not entitled to claim for further additional costs; the works subject of CN 367 do not constitute a variation under the Contract; the Contractor failed to submit CN 367 in accordance with clause 36.3A and therefore has no entitlement to Claim for any additional time or cost arising out of or in any way connected with the direction or event;
Martinus' adjudication application began by quoting the reasons given by Qube in its payment schedule for rejecting the claim. The quotation included the reference to CN-367 in subparagraphs (b) and (c). Martinus' submissions continued: 777. Notwithstanding the fact that Qube's reasons above are not reasons for withholding payment for CN 299, Martinus addresses Qube's reasons below, including the further reasons in the "CN 299 RESPONSE" document.
In response to the argument at subparagraph (b), the application stated: 781. In the premises set out above, Qube cannot seriously dispute that Martinus is entitled to a variation for CN299 when Qube contends the work itself is covered by VO-54. 782. In any case, Mr Corrigan sets out the examples of the additional direct works Martinus completed which related to rectifying the clash and implementing solutions. Mr Corrigan identifies that the additional works subject of CN299 included, but were not limited to; (a) vacuum excavating sediment in existing pit; (b) excavating between pits and expose faces in prep for coring; (c) survey/mark out levels for coring; (d) set up and preparation for confined space entry; (e) installing sandbags and concrete to achieve levels; (f) replacing existing pits identified; and (g) installing new rockers pipes following the decision to reuse existing pits and core. 783. At [1056] of his statutory declaration, Mr Corrigan refers to and attaches Aconex correspondence beginning on 2 March 2023 in relation to CN299. That correspondence shows Nabin Koirala of Martinus seeking directions as to the proposed methodology Martinus would have to implement in order to rectify the clash in the various pit locations based on the IFC redesign. 784. It is evident that the additional work due to the varied methodology would constitute: (a) an increase in the WUC; (b) a change to the character or quality of the WUC; and/or (c) additional work. 785. Therefore, Martinus submits that CN299 is a variation pursuant to clause 36 of the contract.
In its adjudication response, Qube repeated the objections in the payment schedule (including the references to CN-367 (see [8.163]). The argument at subparagraph (b), as developed, was: No variation 8.176 The extended storage of equipment and material does not constitute a variation under the Contract. As such, Martinus has not entitlement to claim these additional costs as a variation under … clause 36.1 … of the Contracts. Clause 36.1 8.177 The Superintendent did not direct a variation pursuant to clause 36.1 for Martinus to undertake the additional works subject of CN 299. 8.178 As identified by Martinus, the Superintendent did direct a variation pursuant to VO 54 on 13 September 2023, which included an allowance as certified by the Quantity Surveyor for 'Clashes adjustment - Labor - for area noted by Martinus.' However, contrary to Martinus' claim in CN 299, this was not a 'provisional' allowance and therefore nor was it a direction for Martinus to incur additional costs for the works subject of CN 299. 8.179 In any event, Martinus infers that the stormwater pit design clash arose out of the design changes issued up to and including 16 June 2022, subject of VO0-54. The Superintendent noted that the latest designs issued and referenced in CN 299 do not contain any requirement or direction Martinus to undertake the additional works.
In his reasons, the Adjudicator first set out the amount of the claim. He then set out the scheduled amount and quoted the reasons given in the payment schedule, including the references to CN-367. He then addressed the argument concerning subparagraph (a), concluding at [745]: 745) I prefer the Claimant's argument on this point and I have determined that paragraph 3 of VO 054 constitutes an exercise of power that the superintendent did not have and is therefore, void. In other words, paragraph 3 of VO 054 dated 13 September 2023 is of no effect from the time it was issued.
The Adjudicator continued (emphasis original): 746) As to the Respondent's rejection of CN 367, that has nothing to do with the assessment of the Claimant's claim CN-299 and I will not consider the reasons for withholding payment further in this section. 747) The Respondent has not provided any assessment of the quantum of the Claimant's claim for this item. Accordingly, the Respondent has not directly responded to the claimed item in the Payment Claim as required by the Act and the Contract because it failed to explain to the Claimant its reasons for withholding payment sufficiently for the Claimant to decide whether it wished to dispute the Respondent's assessment of that claim. 748) It is clear from the Act, the Contract and the guidance provided in Multiplex Constructions Pty Ltd v Luikens & Anor [2003] NSWSC 1140 by HH Palmer J that the Respondent must consider the Payment Claim and, if it does not accept any part of that Payment Claim and decides to withhold payment, then the reasons for withholding payment set out in the Payment Schedule must be sufficiently clear that Claimant can understand the basis of rejection of any part of that Payment Claim and which parts of that payment Claim have been accepted and payment has been scheduled accordingly. 749) It is clear from Insite Construction Services Pty Ltd v Daniels Civil Pty Ltd & Anor [2023] QSC 33 that where the Respondent fails to provide any valid reason for withholding payment, it is open to the adjudicator to accept the Claimant's valuation of the value of the Payment Claim. 750) The reasons for the determination are set out above at paragraphs 636) to 644). … 754) Accordingly, I have decided that in relation to the claim for payment for work carried out under the claim referenced CN - 294, the Claimant is entitled to payment of the claimed amount of $96,842.89.
Qube's challenge to the determination of CN-299 was similar to the challenge for CN-422. Counsel for Qube submitted that the references in the payment schedule to CN-367 were clearly an error and obviously CN-299 was intended. Martinus' adjudication application proceeded on that basis, despite having noted the erroneous references.
Counsel submitted that at [746] the Adjudicator effectively refused to deal with Qube's objection that the claim was not a variation, and this amounted to a failure to consider Qube's payment schedule and the submissions made in support of it. It was also a denial of natural justice, in that the Adjudicator had disposed of Qube's arguments on a basis which had not been foreshadowed to the parties. The refusal was also said to be legally unreasonable, noting in particular the inconsistency between CN-367 (where the objection was upheld) and CN-299 (where, in materially the same circumstances, it was rejected). For all of these reasons, the Adjudicator had committed a jurisdictional error.
In response to these submissions, counsel for Martinus repeated the submissions they had made in relation to the challenge for CN-212 ([110] above).
I have rejected the challenge to CN-212 (and CN-202). But in my opinion, the present challenge does not necessarily give rise to the same considerations.
I rejected the challenge for CN-212 and CN-202 on the basis that the objections which were not addressed by the Adjudicator were not sufficiently clearly raised in Qube's payment schedule, or its adjudication response. That is not so for CN-299. The challenge has more in common with the challenge to CN-422. Indeed Qube's case is stronger because only some of the references in the payment schedule were incorrect; other references in the payment schedule correctly identified CN-299.
In my view, it was plain from the adjudication application and Qube's adjudication response that Qube was objecting to CN-299 on the same basis on which it had (successfully) objected to CN-267. That being so, the same conclusions follow as for CN-451 and the challenge succeeds.

Termination of intertrack drainage CN-353 (ISRA)

This component of the ISRA adjudication concerned another disputed variation claim by Martinus. In its payment claim, Martinus claimed $71,000. The scheduled amount was $25,000. The reason for the dispute was that Qube contested the 45% mark-up applied by Martinus.
In its adjudication application, Martinus reduced the value of its claim to $36,000, resulting in a delta of $11,000 (see [652], [707], [719]).
In his reasons, the Adjudicator began by setting out the amount claimed in the payment claim, Qube's scheduled amount of $25,000, and the reasons given by Qube in the payment schedule for the reduction. He then stated that Martinus had reduced its claim to $61,000. Where this figure came from is unclear.
The Adjudicator's reasoning followed the same pattern as for other claims where the 45% mark-up was in issue. He upheld Martinus' entitlement to charge a mark-up at that level, and therefore concluded that its claim succeeded in full. Using the figure given in earlier in his reasons, he awarded Martinus $61,000.
Counsel for Qube took no issue, at the level of jurisdictional error, with the Adjudicator's reasoning in disposing of the claim. But counsel submitted that the figure adopted by the Adjudicator of $61,000 was simply incorrect. The result was that in allowing the claim the Adjudicator had awarded $25,000 more than had in fact been claimed.
Counsel characterised this error as irrational and hence legally unreasonable. Counsel also submitted that the error involved a denial of natural justice in that the Adjudicator had allowed an amount that had not been claimed.
Counsel for Martinus characterised any error which may have been made by the Adjudicator as an error in his understanding of Martinus' adjudication application. Counsel submitted that any such error was not a jurisdictional one. Counsel did not accept that any error, to the extent it was a mathematical error, gave rise to "legal unreasonableness". Counsel submitted that such an error "might" be capable of being dealt with under s 22(5), but not by way of judicial review proceedings.
In my view, there is no significant difference between this challenge and the challenge to the second error in the Adjudicator's decision on the INTS preliminaries. The challenge therefore succeeds.

Costs of adjudication proceedings (ISRA)

The Adjudicator's costs determination in the ISRA Adjudication was expressed in the same language as the Adjudicator had used for his costs determination in the INTS Adjudication (see J2 [311]). For convenience, I set it out here: 17) There has been considerable overlap between the Contract, supporting documents and issues relating to this decision of the dispute under the ISRA contract and the decision of the dispute under the INTS contract. It has not been possible to apportion precisely the hours spent on each decision even though I have maintained a daily journal of time spent. 18) I have found the Respondent adopted a harsh contractual approach to the determination of the claimed amounts and to the termination. 19) For example, the Respondent did not apply the agreement to value IFC changes after the date of Contract as agreed by the parties consistently across all IFC design changes. I have considered that conduct and the cost of making this determination and determined that the Respondent is liable for 100% of the Adjudicator's fees and expenses accordingly.
In their submissions on the INTS costs determination, counsel for Qube complained that, having regard to the outcome of the adjudication in which Qube had been successful in significantly reducing the amount claimed, and having regard to the nature of the process, to say that Qube had adopted a "harsh" contractual attitude was not a justification for awarding the whole of the costs of the process against it. It was, however, my view that, whatever force that argument might have had so far as the costs of court proceedings were concerned, adopting it in the adjudication did not involve an error of law (J2 [314]).
Counsel for Qube did not raise that contention again so far as the ISRA costs determination was concerned. But counsel observed that the Arbitrator's reasons, at [18], referred to termination, which was not an issue which arose for determination in the ISRA adjudication. Counsel submitted that the Adjudicator had taken into an account an irrelevant consideration so far as the ISRA costs determination was concerned.
Counsel also submitted, in the alternative, that if they succeeded on other challenges, then the ISRA costs determination should be set aside and replaced by a 50/50 determination, as I had done for the INTS cost determination: see J2 [317].
Counsel for Martinus submitted that, should Qube succeed in its challenges to the ISRA adjudication, it would not automatically follow that the costs determination should be set aside. The Court was first required to conclude that the jurisdictional error(s) in question had "affected" the costs determination. Counsel submitted that the amounts challenged represented such a small proportion of the costs determination that this test would not be satisfied.
Counsel submitted that I should not be overly influenced by the reference in the Adjudicator's reasons to termination (which had evidently been copied from the INTS reasons). Counsel submitted that the "gist" of the ISRA costs determination was what counsel described as a "costs follow the event" reasoning. In both INTS and ISRA applications, Qube had scheduled a negative figure and Martinus had succeeded in recovering a substantial amount.
The debate gave rise to wider question. I asked counsel whether it would be more accurate to see the Adjudicator as effectively having made both costs determinations on a single combined basis, and, therefore, whether the successful challenge to the INTS costs determination would allow the Court to set aside the ISRA determination as well. Counsel replied that it would not. In counsel's submission, the Court's power, consequent on a finding or jurisdictional error in the INTS adjudication, was to set aside the cost determination in that adjudication. It did not extent to the ISRA adjudication, which was separate.
In reply, counsel for Qube pointed out that, according to the wording of s 32A, the Court's power is enlivened if a jurisdictional error has occurred "in relation to" an adjudicator's determination under the Act. The phrase "in relation to" was capable of operating broadly. Counsel submitted that, in the context, it was sufficient that the Adjudicator had made a jurisdictional error in connection with the INTS adjudication. If that error had "affected" the ISRA determination, that determination could be set aside.
Finally, counsel for Qube submitted that Martinus' argument on the "gist" of the costs determination involved putting a gloss on the language actually used by the Adjudicator. The Adjudicator had not explained his decision on a "costs follow the event" basis, but rather on the basis of Qube's allegedly "harsh" conduct. There was no warrant, in counsel's submission, for ignoring the Adjudicator's language and ascribing some other reason to the determination which would, or might, have supported it.
The first question is whether my findings of jurisdictional error in the INTS determination allow me to vary or set aside the ISRA costs determination. In my view, they do not. In the language of s 32A, the relevant determination is the ISRA costs determination. What is required is a finding that jurisdictional error has occurred "in relation to" that determination. In my view, it would not be a natural use of language to say that the findings of error in the INTS determination were also findings "in relation to" the ISRA determination simply because the two adjudications were undertaken together. I think this is reinforced by the wording of s 32A(2), which provides for the setting aside of part of the relevant determination "affected by jurisdictional error".
I think the reference in s 32A(1) to "proceedings" in this Court supports that conclusion. The set-aside order is made in the same proceedings as the proceedings in which the finding of jurisdictional error has been made. They are proceedings "relating to" a "matter arising under a construction contract". In the present case, the two determinations were made under different contracts and could have been brought in different proceedings. The fact that they have been brought under a single matter number should not obscure the fact that they are really two proceedings, one for each contract.
It follows that I must confine my attention for present purposes to the ISRA determination. As noted at J2 [315], it does not appear to have been suggested in the past, and it has not been suggested in the present case, that the standard of judicial review for a costs determination differs from the standard for judicial review of the relevant contractual determination. Following the same approach as I have followed for the other challenges, and confining my attention to the ISRA determination, I do not consider that the complaints by counsel for Qube amount to a jurisdictional error in the Adjudicator's reasoning on costs.
It is true that I have upheld two of the other challenges to the ISRA determination advanced by Qube in these proceedings. But I agree with counsel for Martinus that the financial effect is so small in the scheme of things that those errors do not relevantly "affect" the cost's determination. The ISRA costs challenge fails.

Conclusions

I conclude that Qube succeeds on four of the further challenges to the INTS determination which were pressed, and on two of the challenges to the ISRA determination. The other challenges fail.
Having reached these conclusions, I circulated the above reasons in draft to the parties and relisted the three proceedings on 15 November for the making of orders to give effect to them, and, if possible, to deal with costs.
The form of the orders to be made in the proceedings was, apart from the question of costs, agreed by the parties. The agreed orders provided for the INTS and ISRA adjudication and judgment amounts to be reduced to reflect the successful challenges. They also provided for enforcement of the judgments so varied, and payment under the bank guarantees given by Qube to secure the original judgments, to be deferred pending the determination of the appeal proceedings (which currently concern my previous judgment, but may be expanded to include the present judgment as well).

Costs

Qube has achieved partial, but not total, success in these proceedings. In the judicial review proceedings, Qube succeeded on some, but not all, of its challenges to the Adjudicator's determinations. The adjudications were left standing in the sum of $24 million. In the enforcement proceedings, Qube failed in its applications to have the judgments stayed on the adjudicated amounts which survived challenge.
In the judicial review proceedings, counsel for Martinus invited me to follow the approach I followed in Akierman Holdings Pty Limited v Akerman (No 3); In the matter of Akierman Holdings Pty Limited (No 2) [2021] NSWSC 869 at [54]-[86]. That was a multi-claim case where some claims were successful and some claims failed. In short, I approached the making of costs orders in that case on the footing that the rule that costs generally follow the event (Uniform Civil Procedure Rules 2005, r 42.1) should be applied on a claim-by-claim basis, so that the successful party would receive a costs order in its favour on the claims on which it succeeded, and be ordered to pay the other party's costs of the claims on which it failed. But individual issues arising as part of claims were to be treated differently: if a party succeeded on such an issue but failed overall on the claim, it would not receive an order in its favour for the costs of the issue, unless those costs were "clearly dominant or separable" (Waters v PC Henderson (Australia) Pty Ltd [1994] NSWCA 338; see Akierman at [67], [85]).
Counsel submitted that I should follow this approach by treating each of Qube's challenges to a component of one or other of the adjudications as a separate claim. Counsel pointed out that of the 39 challenges, 10 succeeded but 29 (74%) failed. In counsel's submission, the balance was in Martinus' favour and that should be reflected in the order for costs.
Counsel also relied on the decision of Ball J (as his Honour then was) in another judicial review case under the Act, Ceerose Pty Ltd v A-Civil Aust Pty Ltd (No 6) [2023] NSWSC 2023. In that case, the plaintiff (Ceerose) challenged two adjudications, totalling $2,390,000, which had been obtained by the defendant (A-Civil). As a result of the challenge, the adjudicated amounts were ultimately reduced by $287,000 (12%) of the amount originally awarded.
Counsel for Ceerose sought an order for costs in its favour. Counsel submitted that Ceerose had been successful in establishing jurisdictional error. According to counsel, Ceerose had also succeeded on a number of interlocutory applications and the overall costs award should treat Ceerose as being entitled to its costs of those applications.
Ball J did not accept these submissions. His Honour pointed out that Ceerose's success on the interlocutory applications was not total; Ceerose had failed on its stay application. And the applications on which it had succeeded raised case management issues where the parties' costs ought to follow the event.
His Honour continued at [9]: It seems to me that one other point is also relevant. This was a case in which the plaintiff took every possible point to avoid having to pay the amount of the adjudication determinations in the defendant's favour. Although its approach fell well short of an abuse of process, and although it might be said that the plaintiff complied with its obligations under s 56 of the Civil Procedure Act 2005 (NSW) in relation to each application, the overall result was a serious departure from the policy underlying the SOP Act. The plaintiff may have been entitled to do what it did, but ultimately it largely failed. It should have to bear the costs of doing so.
Taking these matters into account, Ball J ordered Ceerose to pay 90% of A-Civil's costs of the proceedings.
Counsel for Martinus submitted that Qube had taken a similar approach in the present case. Qube had been somewhat more successful than Ceerose, but it still only succeeded on 24% of its challenges. Counsel submitted that I should order Qube to pay 50% of Martinus' costs of the judicial review proceedings.
Counsel for Qube vigorously disputed this. While the challenges on which Qube had succeeded were fewer in number than the challenges on which it failed, the challenges on which it succeeded had a much greater financial consequence. The effect of my decision in the judicial review proceedings was to reduce the adjudicated amount from $70,136,000 to $24,184,000 (a reduction of $45,952,000, or 66%). Counsel submitted that Qube had clearly been successful overall in the judicial review proceedings and should receive an order in its favour for the costs of those proceedings.
Counsel for Martinus submitted that Qube had been wholly unsuccessful on the stay applications in the enforcement proceedings and should be ordered to pay the costs of those applications.
Counsel for Qube accepted that Qube should pay the costs of the stay applications in the enforcement proceedings. But counsel sought an exception for the costs of the expert accounting evidence (see J2 [339], [347]-[352]). Counsel submitted that I had found that the evidence of Martinus' expert was inadmissible, whereas I had accepted and relied upon evidence from Qube's expert. Counsel submitted that the costs order in favour of Martinus on the application should be qualified by an order requiring Martinus to pay the costs of the experts' evidence.
Akierman involved claims for relief based on several different legal and equitable causes of action. This may not be directly applicable to proceedings for judicial review of an administrative decision, but in the present case each challenge was separate from the others and depended upon the application of the relevant law to its own facts. In my view that makes the present litigation sufficiently similar to make the approach in Akierman appropriate.
I therefore accept that, in principle, the application of the general rule that costs follow the event should be undertaken on a challenge-by-challenge basis. I do not however agree with apportioning the costs of the judicial review proceedings between the parties based on the number of challenges which succeeded and failed, along the lines suggested by counsel for Martinus. This is for two reasons.
In the first place, such an allocation would bear no necessary relationship to the costs actually associated with each challenge. Although Qube may have succeeded on only one quarter of its challenges by number, to apportion only one quarter of the costs to Qube would not fairly reflect the balance, in terms of cost and time expended, between Qube's successful and unsuccessful challenges. Not all the unsuccessful challenges were fully addressed. Some were dealt with as a group, or were disposed of at the second hearing as a consequence of the rulings I made in my earlier judgment. My impression was that the amount of time devoted to the challenges which failed would have been well under half the time spent on the successful challenges.
Nor do I think there should be some sort of apportionment according to the value of the claims which succeeded as counsel for Martinus suggested by way of fallback. Again, the value of an individual challenge would not necessarily reflect the amount of costs expended on it.
The second reason for my disagreement is more fundamental. I do not think counsel's suggested approach would deal fairly with the general costs of the proceedings. In the present case, those general costs would probably be a significant, if not the major, part of the overall costs. They would include both interlocutory costs and a share of the costs of the hearing. Both parties devoted a significant part of their submissions, written and oral, to addressing the general principles applicable to judicial review applications under the Act, the costs of which would have been the same if Qube had not pursued the unsuccessful challenges. The same would be so for the affidavits and court books.
I usually take the view that where a plaintiff brings two claims, and succeeds on one but fails on the other, if the successful claim was itself sufficiently substantial to justify the bringing of proceedings, the costs order in favour of the plaintiff should cover the general costs of the proceedings as well as the costs specifically attributable to the successful claim. The result is that the plaintiff should only have to pay the defendant's costs solely referable to the unsuccessful claim (see Akierman at [57]-[59]).
Counsel for Martinus sought to characterise the three proceedings, taken together, as a debt recovery action in which Martinus had eventually enforced recovery of more than $24 million. I do not see it that way. Martinus' right to enforce the adjudications flowed automatically from the Act. If Qube was to resist enforcement, it was Qube who had to come to Court to obtain judicial review.
Through the judicial review proceedings, Qube had achieved a $46 million reduction in the adjudication amounts. This is a large sum both in relative and absolute terms. More importantly, in my view, it is a very large sum when compared with the costs of mounting the proceedings.
For these reasons, I think that this is a case in which I should follow my usual approach. The question should be: to what extent were the parties' costs increased by Qube's unsuccessful challenges? Qube should recover only the costs it would have incurred had its claim been confined to the successful challenges, and should pay Martinus the difference between what Martinus would have incurred in that scenario and the costs it actually incurred, which represent the costs solely attributable to the unsuccessful challenges.
Determining the additional costs solely attributable to the unsuccessful challenges is a matter of identifying any cost items solely referable to those challenges and apportioning the "mixed" costs items such as the costs of drafting pleadings, or submissions, between the successful and unsuccessful challenges (see Southern Oil Refining Pty Ltd v Hydrodec Australia Pty Ltd (No 2) [2021] NSWSC 336 at [35]-[39], referring to Smith v Madden (1946) 73 CLR 129, at 136-137). In Akierman, I was asked to make an apportionment as a percentage of the overall costs of the proceedings, but I declined to do so, on the ground that it would be no more than a guess as to what the parties' true entitlements were: see at [121]-[123]. The same would be so for these proceedings. To the extent that the parties cannot agree on the apportionment of the relevant items, that apportionment can be made as part of the costs assessment.
It is common ground that, apart from the debate concerning the expert evidence, Qube must be ordered to pay Martinus' costs of the stay applications in the enforcement proceedings. But because those applications were heard together with the first stage of the judicial review proceedings, a similar apportionment question arises concerning costs associated with the combined hearing. It is necessary to decide, for costs common to the three proceedings, which proceedings they should be allocated to.
I have already explained why I do not approach the task of apportioning costs on the basis that the three proceedings collectively should be seen as some form of debt recovery action. To the contrary, I see the stay applications as ancillary to the judicial review proceedings. It was only to the extent that Qube's challenges in those proceedings proved unsuccessful that it was necessary for Qube to seek the stays. I therefore consider that the orders in favour of Martinus in the enforcement proceedings should only cover the additional costs of the stay applications and that costs common to the three proceedings should follow the general costs of the judicial review proceedings.
I do not, however, propose to make any allowance in Qube's favour concerning the expert evidence in the stay applications. It is true that I considered that the opinions expressed by Martinus' expert were inadmissible. But those opinions were put forward by way of response to a report from Qube's expert which also advanced opinions which were probably inadmissible. More importantly, I see the experts' evidence as addressing a particular issue which arose in the stay applications, but which was neither clearly dominant nor separable. The experts' costs should be paid by Qube pursuant to the costs orders in the enforcement proceedings.
At the end of the costs argument on 15 November, I gave a brief oral outline covering the main points in the above reasons. Counsel for the parties then agreed on a form of costs orders giving effect to my conclusions and I made orders accordingly.

Orders

The orders made on 15 November in the judicial review proceedings were: INTS Determination 1. Order pursuant to s 32A of the Building and Construction Industry Security of Payment Act 1999 (NSW): 1. that the adjudication determination dated 22 July 2024 (ABCDRS NSW 586) (INTS Determination) is set aside in the amount over and above $17,247,488.19including GST; 2. that the said adjudication determination be confirmed as the Adjudicated Amount of $17,247,488.19including GST. 1. Order that the judgment entered in proceedings 2024/278963 on 31 July 2024 is varied by changing the "Claim amount" to $18,165,684.76and the "TOTAL" amount to $18,165,684.76. ISRA Determination 1. Order pursuant to s 32A of the Building and Construction Industry Security of Payment Act 1999 (NSW): 1. that the adjudication determination dated 22 July 2024 (ABCDRS NSW 585) (ISRA Determination) is set aside in the amount over and above $6,936,389.69 including GST; 2. that the said adjudication determination be confirmed as the Adjudicated Amount of $6,936,389.69 including GST. 1. Order that the judgment entered in proceedings 2024/278984 on 31 July 2024 is varied by changing the "Claim amount" to $7,447,619.38 and the "TOTAL" amount to $7,447,619.38. Bank Guarantees 1. Vary order 6 made on 26 September 2024 such that it reads: Order that the unconditional bank guarantees provided to the Court in compliance with order 1(b) of the orders made on 9 August 2024 be provided to the First Defendant on terms that: 1. the First Defendant may not make a demand under the unconditional bank guarantee provided to the Court in compliance with order 1(b)(i) of the orders made on 9 August 2024 in an amount exceeding the amount owing under the judgment entered in proceedings 2024/278963 as varied; and 2. the First Defendant may not make a demand under the unconditional bank guarantee provided to the Court in compliance with order 1(b)(ii) of the orders made on 9 August 2024 in an amount exceeding the amount owing under the judgment entered in proceedings 2024/278984 as varied. Stay 1. Vary order 7 made on 26 September 2024 such that it reads: Upon the Plaintiff: 1. giving the usual undertaking as to damages; and 2. Qube continuing to pay into court one month's interest at a daily rate of $16,942.76 on the last day of each month thereafter until this stay is dissolved or any appeal is determined, order that: 3. order 6 of these orders is stayed; 4. the First Defendant is restrained from taking any steps by way of enforcement of the judgments entered in proceedings 2024/278963 and 2024/278984, until further order of this Court in this Division or by the Court of Appeal. Costs 1. The Plaintiff is to pay the First Defendant's costs of the challenges to the components of the INTS and ISRA Determinations on which it was unsuccessful and/or not pressed, insofar as those costs were additional and incurred solely in respect of those challenges, and otherwise the First Defendant is to pay the Plaintiff's costs of the proceedings.
The orders made on 15 November in the first enforcement proceedings were: 1. The judgment debtor is to pay the judgment creditor's costs of the notice of motion filed 31 July 2024 (including as subsequently amended) insofar as those costs are solely referrable to the issues raised in this proceeding. 2. Order that the judgment entered in these proceedings on 31 July 2024 is varied by changing the "Claim amount" to $18,165,684.76and the "TOTAL" amount to $18,165,684.76.
The orders made on 15 November in the second enforcement proceedings were: 1. The judgment debtor is to pay the judgment creditor's costs of the notice of motion filed 31 July 2024 (including as subsequently amended) insofar as those costs are solely referable to the issues raised in this proceeding. 2. Order that the judgment entered in these proceedings on 31 July 2024 is varied by changing the "Claim amount" to $7,447,619.38 and the "TOTAL" amount to $7,447,619.38.

DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated. Decision last updated: 20 November 2024

(2023) 112 NSWLR 225

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