McNab NQ Pty Ltd v Walkrete Pty Ltd & Ors [2013] QSC 128

[1] CHIEF JUSTICE: The applicant ("McNab") seeks a declaration that an adjudication decision dated 13 January 2013, made by the third respondent under the Building and Construction Industry Payments Act 2004, in respect of a dispute between McNab and the first respondent ("Walkrete"), is void for want of jurisdiction. (The second and third respondents played no active part in this proceeding in the court.)

[2] Walkrete was a sub-contractor to McNab, for concrete work on a building project at Rockhampton. On 12 November 2012 Walkrete delivered a payment claim dated 1 November 2012, which was referred to the third respondent adjudicator and substantially upheld.

[3] McNab's present challenge is essentially based on its claim to have terminated the relevant sub-contract on 10 September 2012, which it contends excludes the operation of the Act (drawing support from the decision of Peter Lyons J in Walton Constructions (Qld) Pty Ltd v Corrosion Control Technology Pty Ltd [2011] QSC 67; (2012) 2 Qd R 90, para 56).

[4] Two days before that, Walkrete's employees Mr Hammond and Mr Porter had removed a prop from panel 51, and that gave rise to a substantial safety risk. McNab's site manager Mr Port says that he had instructed them to remove all of the props except the prop for panel 51 (as confirmed in his diary note made later that day, and consistently with what he had said to Walkrete's managing director Mr Walker the day before, and consistently with exchanges between Mr Port and the engineer Mr Tapsell). When Mr Port first realized that they had taken down the prop for 51 as well, he at once instructed them to re-establish it, and that was done.

[5] Clause 53(a)(i) of the sub-contract entitled McNab to terminate the sub-contract should Walkrete default "in the performance or observance of any serious condition". The term "serious condition" is not defined. It therefore carried its natural meaning.

[6] McNab, in terminating the sub-contract on 10 September 2012, relied expressly on a contractual provision relating to safety, cl 17(a) - though to my mind that did not directly apply, but in submissions before me, referred also to drawing 01.02 revision one note TP3 (as to maintaining panels in a stable condition until all permanent bracing is in place), and cl 15 of the head contract (as to taking all measures necessary for the protection of "people and property" - rendered applicable by para 3(b) of the sub-contract). Those provisions were applicable. There is also cl 2(a) of the sub-contract as to carrying out the work "in a proper and tradesman-like manner...to a first class standard".

[7] A termination may be justified by available grounds even if not specified at the time and even if contrary to a ground then assigned (Shepherd v Felt and Textiles of Australia Ltd (1931) 45 CLR 359, 377-8).

[8] Notwithstanding the adjudicator's concern about the level of particularity, an aspect raised again before me, the purport of the letter of termination, as an act of termination under cl 53, was abundantly clear. There was actually no need for McNab to include any further particulars of the ground.

[9] The efficacy of the purported termination of the sub-contract bears on whether a "reference date" arose to which the post-termination payment claim served on 12 November 2012 could under the statutory regime attach. In Walton, Lyons J canvassed the presently relevant aspects of that regime, which I need not repeat.

[10] If McNab had effectually terminated the sub-contract on 10 September 2012, then - it was submitted - no reference date could subsequently arise. If that is so, then

s 26(2) of the Act, on which Walkrete now relies, cannot avail it, because the termination of the contract rendered the mechanisms of the Act inapplicable.

[11] Whether or not the sub-contract was determined therefore bore the character of what has become known as a jurisdictional fact - a circumstance determinative of whether or not the adjudicator had jurisdiction to make his decision, and this court may review an adjudicator's approach to that. Compare Thiess Pty Ltd v Warren Brothers Earthmoving Pty Ltd (2012) QCA 276, para 101.

[12] Reference was made, for Walkrete, to the provisional nature of an adjudicator's determination, and to the Second Reading Speech. None of that means an adjudicator can endow himself with jurisdiction by wrongly deciding a "jurisdictional fact".

[13] The adjudicator held that the removal of the props from panel 51, carried out by Walkrete's employees, was not the breach of a "serious condition". Paragraph 60 of his reasons suggests that he reached that view because - as he found - McNab knew that the employees were removing the panels when they did so.

[14] Whether a condition is "serious" is not determined by the circumstances of its observance or non-observance. If McNab acquiesced in an unauthorized removal of the props, that might deny it the right to terminate on the basis of that non-compliance. The way in which a contract is carried out does not, however, determine the issue of its proper construction.

[15] But in any case, the only basis for the factual conclusion could be the evidence from the employees that Mr Port had instructed them to remove all of the props, without exception. Yet in para 49(e) of his reasons, the adjudicator accepted that Mr Port specifically instructed Walkrete's employee Mr Hammond "on a number of occasions" not to remove the panel 51 prop - and as previously mentioned, that is consistent with what he said the day before to Mr Walker, and his subsequent diary note, and a statement of position which he firmly shared with the engineer Mr Tapsell.

[16] In para 61(c) of the reasons, the adjudicator says that the Walkrete labourers "appeared to (Port) to be uncertain as to what props were not to be removed". There is simply no evidence to warrant that conclusion drawn unfavourably to Mr Port.

[17] The adjudicator observed that Mr Port (in the absence of Walkrete's supervisor Mr Walker) took control of the work on 8 September 2011 such that McNab was "liable under s 20 of the (Workplace Health and Safety Act 2011) for the health and safety" of the labourers. But no injury was sustained because of this situation, so that that observation seems to be of no moment.

[18] On the evidence before the adjudicator, Mr Port instructed the employees not to remove the relevant props (as the adjudicator found), and on first discovering that they had done so, instructed them to re-establish them. In any event, Walkrete was through Mr Walker fixed with knowledge of what Mr Port had told Mr Walker the day before: the support for panel 51 was not to be removed.

[19] Mr Port gave oral evidence before me, and so far as it presently matters (in circumstances where one should be circumspect about questioning findings reasonably open) I should record that I accepted Mr Port's evidence. Mr Porter and Mr Hammond gave different accounts, but on my respectful assessment less compellingly. Basically, I though it improbable that appreciating the risk, Mr Port would not in what he said to the concrete workers have excepted the props to panel 51, consistently with his direction for their reinstatement forthwith upon his discovery that they had been removed, and his statement to Mr Walker the day before, and - as mentioned - the position he and Mr Tapsell had discussed.

[20] His account also gains support from his diary note.

[21] On the other hand, Mr Porter referred to making a diary note later that day, but it was not produced in evidence and no reason for that was advanced.

[22] It may be that Mr Porter and Mr Hammond misunderstood Mr Port's direction, notwithstanding its clarity. (I note the submission that having been dismissed, they had particular cause to reflect on the preceding events.) But nevertheless the critical point is that on the adjudicator's finding, reasonably supported by evidence, Mr Port gave a direction excepting panel 51, and forthwith upon discovering that the 51 prop has been removed, he required that it be reinstated.

[23] As I said at the conclusion of the oral hearing, Mr Walker of Walkrete was in my view a candid witness. But his evidence did not bear directly on the presently critical issues.

[24] In para 60 of his reasons, the adjudicator appears to conclude that Walkrete's breach was not "serious" because McNab knew of it. I have already said that observation is untenable as a matter of law. But there was, again, simply no evidence to support the factual conclusion. There is no evidence that anyone on behalf of McNab saw the panel 51 prop being removed, or in any way knowingly acquiesced in the removal. The evidence was that the Walkrete employees did what they were asked not to do, and that when McNab (through Mr Port) saw what had been done, steps were at once taken to rectify the situation.

[25] On the evidence before the adjudicator, the removal of the props involved serious potential risk to others on the site. Carried out contrary to the instructions which the adjudicator reasonably found were given, the adjudicator should have characterized that as a breach of a "serious" condition within the meaning of the contract with the consequence that McNab was entitled to terminate the contract as it purported to do.

[26] In the absence of a limiting definition in the contract, any provision in a construction contract relating to safety should ordinarily attract the characterization "serious". The "two honest businessmen" to whom Isaacs J referred in Cohen & Co v Ockerby & Co Ltd (1917) 24 CLR 288, 300 would without hesitation construe such a provision in that way.

[27] In their application in this case to the issue of bracing, the provisions previously identified as applicable must be regarded as "serious" because of the possible consequence in the event of non-observance. If evidence be needed as to the drastic nature of those consequences, one need not go beyond the evidence of the engineer Mr Tapsell.

[28] As to whether a "reference date" (s 12 and schedule 2) can arise, for the purposes of the Act, subsequently to the effectual termination of the relevant contract, I respectfully adopt the reasoning of Lyons J in Walton.

[29] I do not regard the absence, from the instant sub-contract, of an express provision in terms of cl 44.10 of the contract which was before that Judge, as warranting a different conclusion here. That clause equated the rights and liabilities of the parties on termination to the common law situation where a repudiation is accepted. Such a provision does no more than reflect the common law. See also Re Dingjan; ex parte Wagner [1995] HCA 16; (1995) 183 CLR 323, 341.

[30] Another submission from Mr Arthur, who appeared for the first respondent, was that Lyons J did not take account of s 99, which avoids an attempt to "contract out" of the Act. (The submission was based on the absence of reference to s 99.) There was however no such attempt in Walton, and there was none here.

[31] The invoking of the dispute resolution procedure under cl 55, on which Mr Arthur also relied, does not in my view maintain the sub-contract, if otherwise determined under cl 53, even in light of cl 55(m) (which provides that during a dispute "the parties must, subject to the sub-contract, continue to perform the sub-contract"). The sub-contract must be read as a whole, and cl 55(m) must yield in this situation to cl 53(a)(B).

[32] It has been unnecessary for me to deal with McNab's contentions as to denial of natural justice, particularly in relation to ventilation of the significance of McNab's alleged knowledge that the props were being removed. My tentative view is that this matter was sufficiently flagged.

[33] As to the question of estoppel said to arise from the evidence that Mr McEvoy on 10 September 2012 invited the submission of a final payment invoice, which I would accept, it suffices to note that the forthcoming "final claim" was the claim furnished on 24 September 2012, not the payment claim given later on 10 November 2012 - being the claim which founded the determination of the adjudicator.

[34] I conclude that the adjudication was made without jurisdiction, because prior to the making of the relevant claim McNab had validly terminated the sub-contract, excluding recourse under the Act. The adjudicator's erroneous conclusion the other way could not insulate his decision from judicial review. There should be a consonant declaration and a consequential order in relation to the monies in court.

[35] Costs should follow that event: in other words, Walkrete should pay McNab's costs, to be assessed on the standard basis.

[36] The extent to which copying was or was not warranted - an issue raised by Mr Arthur, is a matter for consideration by an assessor. The general observation I made at the hearing was not intended to be definitive as to that: I expressly reserved that consideration to any assessor who become involved.

[37] Walkrete seeks an indemnity certificate under s 15 of the Appeal Costs Fund Act 1973. A certificate was in similar circumstances granted in Walton Construction (Qld) Pty Ltd v Plumber by Trade Pty Ltd (No 2) 2012 QSC 280. I reserve however the question of its being granted pending submissions on costs generally. A relevant consideration may be whether the stance taken by Walkrete contributed to the adjudicator's error.

[38] I make this declaration and these orders:

1. a declaration that the adjudication decision of the third respondent dated 13 January 2013 (as subsequently amended on 22 January 2013), purportedly made pursuant to the Building and Construction Industry Payments Act 2004 in respect of adjudication application 1064504_957 ("the adjudication decision"), is void;

2. an order that the adjudication decision be set aside;

3. an injunction restraining the first respondent from asking the second respondent to provide an adjudication certificate with respect to the adjudication decision;

4. an injunction restraining the first respondent from seeking to rely upon or enforce the adjudication decision in any manner;

5. an order that the monies paid into court by the applicant on or about 1 February 2013, together with any accretions thereto, be paid out to the applicant;

6. a direction that the applicant and the first respondent file and serve any written submissions as to costs within 14 days; and