Niclin Constructions Pty Ltd v Robotic Steel Fab Pty Ltd & Anor [2023] QSC 218

• [1] The first respondent (Robotic) made a payment claim for $72,324.39 (excluding GST) for works carried out for the supply and installation of metal at a project at Stafford. The applicant (Niclin) submitted a Payment Schedule and the matter proceeded to an adjudication. The second respondent adjudicated the matter and provided 38 pages of reasons for deciding the adjudicated amount to be $70,148.17.
• [2] The issue in the proceeding is whether the adjudication decision is void for jurisdictional error. The point essentially relates to the adequacy of the adjudicator's reasons for accepting Robotic's submission about a deficiency in the Payment Schedule in relation to one of the eight items in dispute. That item related to an alleged set-off by Niclin for liquidated damages. The adjudicator accepted Robotic's submission that because the Payment Schedule omitted to include the Statement of Claim upon which an alleged set-off relied, the Payment Schedule did not give reasons for the alleged set-off, and a deduction for the alleged set-off should not be allowed because it had not been substantiated.

• [3] Niclin began a proceeding in this Court seeking a declaration that the adjudication decision is void and has no effect. It sought interlocutory relief restraining Robotic from taking any steps to enforce the adjudication decision. An amount was paid into Court and the application for interlocutory relief came before me on 21 September 2023 in the Applications List.
• [4] The issues canvassed by the parties' submissions were whether Niclin had a prima facie case that the adjudication decision was void, and whether the balance of convenience favoured the adjudicated amount being paid to Robotic, pending a final hearing. Expressed differently, the issue was whether Niclin's prospects of success at the final hearing were sufficient to justify Robotic being deprived of the benefit of the adjudication decision.
• [5] That question arose in the context of an Act that provides a statutory right to a payment claim and an expedited process to adjudicate disputed claims. The Act reflects an appreciation by the legislature that "an assured cashflow is essential to the commercial survival of builders, and that if a payment the subject of an adjudication is withheld pending the final resolution of the builder's entitlement to the payment, the builder may be ruined".[1] The BIF Act, like the earlier Building and Construction Industry Payments Act 2004 (Qld), seeks to preserve cashflow to a builder, notwithstanding the risk that the builder might ultimately be required to refund the adjudicated amount. That said, the policy to which Keane JA adverted in R J Neller about cashflow and the allocation of risk does not apply in respect of an adjudication decision that clearly is, or conceded to be, void for jurisdictional error.
• [6] If the interlocutory application had proceeded, as the parties proposed, then I would not have granted an interlocutory injunction. Niclin's claim of jurisdictional error did not appear to me to have sufficient prospects of success to deprive Robotic of the benefit of the adjudication decision, even for a relatively short time. However, during the hearing on 21 September 2023 it became apparent to me that the final hearing of the substantive application would reagitate, on the basis of the same evidence, the arguments before me about the validity of the adjudication decision. Therefore, I proposed, and the parties agreed, that I determine the point of substance.

• [7] Niclin's Payment Schedule advanced an array of arguments. One was whether it could set off an amount (variously described as $405,000 and $476,000) for liquidated damages. In Annexure A to the Payment Schedule it stated:

"For the reasons set out in the attached statement of claim, Niclin is entitled to set off the sum of $476,000.00 owing under the Stafford Subcontract as a debt against any amounts found to be payable under the Subcontract."

However, the Payment Schedule did not, in fact, attach the Statement of Claim.

• [8] Robotic's Adjudication Application raised that point. It submitted that:

"The Payment Schedule and email associated with it, appear not to include a copy of the Statement of Claim. Accordingly, it is submitted that as the Statement of Claim forms part of the reasons given in the Payment Schedule, no reasons have actually been given in the Payment Schedule. Accordingly, the deduction claimed should not be allowed."

• [9] Niclin's Adjudication Response submitted that its omission of the Statement of Claim did not matter because Robotic knew of the document, and that it was open to Niclin to substantiate the submissions it made in the Payment Schedule with information known to the parties, but which was not included in or attached to its Payment Schedule. That Robotic knew about the Statement of Claim was said to be apparent in the circumstances.
• [10] The adjudication decision considered these and many other arguments that were agitated in connection with eight major issues in dispute.
• [11] I should mention in that regard that the legal costs to the parties of preparing such voluminous and extensive submissions in the adjudication of a claim for less than $80,000 seems disproportionate. The costs of such an exercise, when the issues are already being litigated in the District Court, seem hard to justify on a cost-benefit analysis. The same applies to the volume of material and the costs of litigating a proceeding in the Supreme Court over a payment claim of less than $80,000.
• [12] The adjudicator was able to deal briefly with Niclin's assertion of a set-off of $476,000 for liquidated damages in relation to the Stafford project. He addressed the claim and Robotic's submission that because the Statement of Claim formed an essential part of the reasons given in the Payment Schedule, its omission meant that "no reasons have actually been given in the payment schedule", and that a deduction should not be allowed.
• [13] The adjudicator previewed alternative arguments on the liquidated damages issue, but was not required to address them because of his decision on the submission I have summarised. The adjudicator agreed with Robotic. He concluded "that the statement of claim forms part of the reasons given in the payment schedule and as they were not provided with the payment schedule, I find that variation IV*71- Robofab - LD's (Stafford) has not been substantiated".

• [14] Niclin submitted that the decision was affected by jurisdictional error and is thereby void because the adjudicator failed to take into account the argument that Niclin advanced before him about its entitlement to set off liquidated damages. The adjudicator's alleged failure to consider Niclin's submission was contended to be a failure "to consider" a matter that s 88(2)(d) of the Act required him to consider. Section 88(2)(d) requires an adjudicator to consider the Payment Schedule, together with "all submissions, including relevant documents, that have been properly made by the respondent in support of the schedule".
• [15] An associated argument by Niclin is that in failing to take its submission into account, there was a denial of procedural fairness.
• [16] At the hearing on 21 September 2023 I suggested that Niclin's complaint appeared to be about the adequacy of the adjudicator's reasons. This is because the adjudicator did consider the liquidated damages set-off issue and the consequences of not attaching the Statement of Claim to the Payment Schedule. As a result, the parties provided supplementary written submissions on the adequacy of the reasons.

Did the adjudicator consider Niclin's submissions on the liquidated damages issue?

• [17] Niclin submits that the adjudicator seems to have simply accepted Robotic's submission that because the Statement of Claim was not attached, the set-off issue was not properly raised by the Payment Schedule and, having done so, proceeded to reject the set-off claim without further discussion or analysis.
• [18] The valid exercise of an adjudicator's jurisdiction is conditioned on the adjudicator having considered the matters set out in s 88(2) of the Act.[2] The valid exercise of an adjudicator's decision is not conditioned on the adjudicator reaching what is objectively the correct conclusion on the questions of fact or law that are required by the consideration of the matters set out in s 88(2). Expressed differently, "there are many errors of fact and law which might be made by an adjudicator which would not be regarded as going to jurisdiction".[3]
• [19] In this matter, the adjudicator considered the issue of whether matters contained in the District Court Statement of Claim were raised by the Payment Schedule in circumstances in which the Statement of Claim was not attached to it. Having considered that issue, the adjudicator reached a conclusion.
• [20] Therefore, I am not persuaded that the adjudicator failed to consider Niclin's submissions about the set-off issue.

• [21] Niclin's contention that there was a denial of procedural fairness essentially rests on the argument that I have just addressed, namely its argument that there was a failure to take into account a mandatory consideration under s 88(2)(d), namely Niclin's submissions.
• [22] Because the procedural fairness argument is framed in that way it is unnecessary to discuss all aspects of the obligation to give procedural fairness, for example, where an adjudicator decides a dispute on the basis for which neither party has contended.[4]
• [23] There is an important distinction between procedural fairness and the question of whether an adjudicator has considered a matter that a provision like s 88(2) requires the adjudicator to consider. The distinction was identified by Payne JA (with whom Ward ACJ and Basten AJA agreed) in Ceerose Pty Ltd v A-Civil Aust Pty Ltd:[5]

"Because procedural fairness is concerned with the conduct of the adjudicator towards the parties, once it is established what fairness requires in a particular case, the question of compliance will be readily determined by the objective facts, being primarily the communications, or lack of them, between the adjudicator and the parties. By contrast, the question whether the adjudicator has considered a matter for the purposes of s 22(2) will involve an inquiry into the private processes of decision-making, and even the mental processes of the adjudicator. While those processes may be revealed by the reasons required to be given under s 22(3), those reasons will not necessarily demonstrate a negative proposition, namely a failure to consider a particular matter required to be considered simply because it is not referred to in the reasons."

• [24] In this matter neither the process by which the decision was made nor the reasons reveal a denial of procedural fairness. The consequence of the Statement of Claim not being attached to the Payment Schedule was the subject of submissions by both parties. Niclin was given an opportunity to make submissions on the point and the adjudicator preferred the submissions made by Robotic.

• [25] Section 88(5)(b) requires an adjudicator to give written reasons for a decision, unless the parties both ask the adjudicator to not include the reasons in the decision. A failure to comply with s 88(5) would amount to jurisdictional error.[6] For example, a complete failure to give reasons constitutes jurisdictional error.[7]
• [26] Purported reasons may be so deficient that they do not constitute "reasons" within the meaning of s 88(5)(b). The adequacy of reasons is a different matter. The inadequacy of reasons does not of itself amount to jurisdictional error.[8] As Brereton J observed in City of Ryde v AMFM Constructions Pty Ltd:[9]

"The significance of the reasons, or their inadequacy, is that in the context of the surrounding material they may reveal jurisdictional error, or that the adjudicator has not performed the task of determining an adjudicated amount by reference to the specified relevant factors in accordance with ... the Act."

• [27] There have been many formulations in different contexts, including adjudications under legislation similar to the Act, about when deficient reasons may justify a conclusion of jurisdictional error.[10]
• [28] In general terms, there is a dividing line between a deficiency of reasons that demonstrates that the adjudicator has not performed the decision-making task in compliance with the Act and a deficiency in reasons that does not. On which side of the dividing line certain reasons fall depends on the context. The adequacy of reasons is assessed in the context of an Act under which adjudicators provide their determinations in a "somewhat pressure cooker environment".[11]
• [29] Within that statutory context there are a wide variety of disputes, including complex questions of fact that may require an adjudicator to briefly explain why one party's evidence was preferred over another. Depending upon the circumstances, it may be sufficient if the reasons indicate why the adjudicator arrived at the decision. In other cases the reasons may in all the circumstances reveal a failure to consider submissions. They may reveal "no intellectual justification" for the decision that was made.[12] That said, "intellectual justification" is a gloss on the duty "to consider" and courts, including the High Court, have warned about the use of that label.[13]
• [30] A question may arise as to what specific inference is to be drawn from the absence of reference to a particular submission or contention in the adjudicator's reasons. Payne JA in Ceerose[14] recently explained:

"There are a range of possible explanations, only one of which is that the material was not considered. Another is that the claim was readily seen to be well-founded and the submissions to the contrary as lacking in substance. However, the latter would be a good reason to omit reference to the issue in the reasons. If the submission had been misunderstood, the facts mistaken or the law wrongly identified, that might explain absence from the reasons of something expected to be addressed, but not lack of consideration. Of course, the duty to consider a submission is separate from the absence of any duty to deal with it correctly, whether in law or in fact. The point is rather that an unreviewable error may explain why the reasons do not advert to a particular matter."

• [31] The fact that an adjudicator does not refer in reasons to all of the submissions made on an issue does not necessarily mean that he or she did not consider them.[15]
• [32] In Avopiling (NSW) Pty Ltd v Menard Bachy Pty Ltd,[16] Sackar J stated:

"Provided it is apparent that the adjudicator has considered pertinent issues in good faith, very considerable latitude in my view should be afforded to an adjudicator as to the manner and form of the determination. To become too pedantic about the way in which the adjudicator has drafted a determination is to introduce an element of artificiality such as might well defeat the object and purpose of the Act and the aim of the process entirely."

• [33] Having regard to the nature of the issue that the adjudicator had to decide, I am not satisfied that he failed to give reasons for his decision, or that his reasons are so inadequate that they reveal jurisdictional error, or that the adjudicator has not performed his statutory task.
• [34] The reasons on the point at issue were adequate to inform the parties that the adjudicator accepted the submission of Robotic about the consequences of not attaching the Statement of Claim to the Payment Schedule. That conclusion involved a rejection of Niclin's contention to the contrary. The reasons are sufficient to disclose the adjudicator's view that it was not sufficient to substantiate Niclin's liquidated damages claim for the purpose of the Payment Schedule that Robotic knew about the Statement of Claim. The adjudicator's reasons may be in error in that regard, in the light of authorities about what must be included in a Payment Schedule and the possibility of incorporating another document by reference. However, that relates to the correctness or otherwise of a decision made in the exercise of the adjudicator's jurisdiction.
• [35] Niclin submits that the issue that the adjudicator addressed was not a particularly complicated one and its submissions could have been disposed of in a few additional sentences.
• [36] The liquidated damages set-off issue was one of many that the adjudicator had to decide and give reasons about. The fact that the issue was not a particularly complicated one explains why it was permissible for the adjudicator's reasons on the point to be brief. The fact that the reasons could have been expressed more fully is not determinative of the issue. The issue is whether the reasons are so deficient as to demonstrate jurisdictional error, including jurisdictional error on the basis that the adjudicator did not consider submissions that s 88(2)(d) required him to consider, or otherwise did not discharge his statutory task. The brevity of the reasons for accepting Robotic's contention about the consequences of the Statement of Claim not being attached and rejecting Niclin's submissions to the contrary, calls into question their adequacy. However, the absence of elaboration as to why Robotic's submissions were preferred does not lead me to conclude that the submissions of the parties were not considered. Moreover, in all the circumstances, including the fact that the issue was not a complicated one, the reasons were sufficient to indicate to the parties a rejection of Niclin's argument that its liquidated damages claim might be substantiated by an extraneous document of which Robotic was aware.

• [37] In conclusion, the reasons were not so deficient as to demonstrate jurisdictional error.

• [38] Subject to any submissions as to costs, I propose to order:
  1. The application is dismissed.
  2. The applicant pay the first respondent's costs of and incidental to the proceeding to be assessed, if not agreed.

[1] R J Neller Building Pty Ltd v Ainsworth [2009] 1 Qd R 390 at [39] in respect of the statutory predecessor to the Building Industry Fairness (Security of Payment) Act 2017 (Qld) (the "BIF Act").

[2] Acciona Agua Australia Pty Ltd v Monadelphous Engineering Pty Ltd [2020] QSC 133; (2020) 4 Qd R 410 ("Acciona").

[4] John Holland Pty Ltd v TAC Pacific Pty Ltd [2009] QSC 205; [2010] 1 Qd R 302 ("John Holland").

[5] [2023] NSWCA 215 at [51] ("Ceerose").

[7] Annie Street JV Pty Ltd v MCC Pty Ltd [2016] QSC 268 at [23].

[8] City of Ryde v AMFM Constructions Pty Ltd [2011] NSWSC 1469 at [9] followed in Annie Street JV Pty Ltd v MCC Pty Ltd [2016] QSC 268 at [29].

[16] [2012] NSWSC 1466 at [38].