CONTRACTS – BUILDING, ENGINEERING AND RELATED CONTRACTS –
REMUNERATION – STATUTORY REGULATION OF ENTITLEMENT TO
AND RECOVERY OF
PROGRESS PAYMENTS – ADJUDICATION OF PAYMENT CLAIMS – where the
Source
Original judgment source is linked above.
Catchwords
CONTRACTS – BUILDING, ENGINEERING AND RELATED CONTRACTS –REMUNERATION – STATUTORY REGULATION OF ENTITLEMENT TOAND RECOVERY OFPROGRESS PAYMENTS – ADJUDICATION OF PAYMENT CLAIMS – where thefirst respondent made an adjudicationapplication under the Building IndustryFairness (Security of Payment) Act 2017 (Qld), in relation to a paymentclaim under a construction contract with the applicant, and the adjudicatordeclared an adjudicatedamount of $13,693.25 – where the applicantcontends the adjudicator lacked jurisdiction to make a decision because therewasno “reference date” for the payment claim – where theapplicant also argues the adjudicator denied the partiesprocedural fairness bydeciding a reference date which no party contended for, without giving theparties an opportunity to be heard– whether the decision should be setaside for jurisdictional error – if so, whether the application should beremitted
Total Lifestyle Windows Pty Ltd v Aniko Constructions Pty Ltd (No 2)
[2021] QSC 231, applied
Trysams Pty Ltd v Club Constructions (NSW) Pty
Ltd [2008] NSWSC 399, cited
Judgment (57 paragraphs)
[1]
CONTRACTS - BUILDING, ENGINEERING AND RELATED CONTRACTS - REMUNERATION - STATUTORY REGULATION OF ENTITLEMENT TO AND RECOVERY OF PROGRESS PAYMENTS - ADJUDICATION OF PAYMENT CLAIMS - where the first respondent made an adjudication application under the Building Industry Fairness (Security of Payment) Act 2017 (Qld), in relation to a payment claim under a construction contract with the applicant, and the adjudicator declared an adjudicated amount of $13,693.25 - where the applicant contends the adjudicator lacked jurisdiction to make a decision because there was no "reference date" for the payment claim - where the applicant also argues the adjudicator denied the parties procedural fairness by deciding a reference date which no party contended for, without giving the parties an opportunity to be heard - whether the decision should be set aside for jurisdictional error - if so, whether the application should be remitted to be considered according to law
Total Lifestyle Windows Pty Ltd v Aniko Constructions Pty Ltd (No 2)[2021] QSC 231, applied
[7]
Trysams Pty Ltd v Club Constructions (NSW) Pty Ltd[2008] NSWSC 399, cited
[8]
E Hall, self-represented, on behalf of herself and B Day trading as Hi-Cal Bricklaying
[9]
[1] The applicant, Procon, is a builder and developer. It was the head contractor for the construction of an "automotive service station and car wash" facility. The first respondent is a husband and wife partnership, providing bricklaying and blocklaying services under the name Hi-Cal Bricklaying.[1] On 3 May 2024, Procon entered into a sub-contract with Hi-Cal Bricklaying, for the construction of core filled block work infill walls in the car wash area.[2] The contract specified that it was for 145m2 of 150 series blockwork and 45m2 of 200 series blockwork. Hi-Cal Bricklaying commenced work on about 20 May 2024. A dispute subsequently arose between the parties - in relation to the price quoted for extra blockwork requested to be constructed (additional to that which had been specified in the contract) as well as in relation to a safety issue concerning the scaffolding. Procon contends that it lawfully terminated the contract on 11 June 2024, after Hi-Cal Bricklaying "abandoned" the works.[3] Hi-Cal Bricklaying disputes that, and says the contract was not terminated until 2 July 2024, when it accepted Procon's repudiation of the contract.[4]
[2] Procon has not paid Hi-Cal Bricklaying for the work it performed. Hi-Cal Bricklaying sent a payment claim (invoice 1150) on 28 June 2024,[5] for $17,386.11. It re-sent that payment claim on 30 July 2024.[6] On 14 August 2024, Hi-Cal Bricklaying sent an amended, replacement payment claim, for $19,931.63.[7] The amendments made were in relation to items Procon said were incorrect, and items Hi-Cal Bricklaying said it had missed in issuing the earlier invoice.
[3] Procon responded to each of the payment claims with a payment schedule saying that it would pay nothing, because it had to engage alternative contractors to complete the works said to have been abandoned.[8]
[8] A "reference date" is an important element of the adjudication procedure - it is a precondition to the making of a valid payment claim. It is defined, in s 67 of the BIF Act, as follows:
[11]
(1) A reference date, for a construction contract, means -
[12]
(a) a date stated in, or worked out under, the contract as the date on which a claim for a progress payment may be made for construction work carried out, or related goods and services supplied, under the contract; or
(b) if the contract does not provide for the matter -
(i) the last day of the month in which the construction work was first carried out, or the related goods and services were first supplied, under the contract; and
(ii) the last day of each later month.
[13]
(2) However, if a construction contract is terminated and the contract does not provide for, or purports to prevent, a reference date surviving beyond termination, the final reference date for the contract is the date the contract is terminated." [underlining added]
[14]
[9] The relevant contract between the parties in this case does not provide for, or purport to prevent, a reference date surviving beyond termination (see cl 15).
[10] A party's right to a progress payment is tied to a reference date, as provided for by s 70 of the Act:
[15]
From each reference date under a construction contract, a person is entitled to a progress payment if the person has carried out construction work, or supplied related goods and services, under the contract." [underlining added]
[16]
[11] By s 75(4), a claimant "can not make more than 1 payment claim for each reference date under the construction contract". But, by s 75(5), a payment claim "may include an amount that was included in a previous payment claim".
[12] Procon argues that the relevant "reference date" is 11 June 2024 - the date on which it terminated the contract.
[13] If Hi-Cal Bricklaying's argument about termination is accepted, the "reference date" would be 2 July 2024 - the date on which it accepted Procon's repudiation and terminated the contract.
[14] In the adjudication application, Hi-Cal Bricklaying specified 11 June 2024 as the reference date.[11] Ms Hall submits that was an inadvertent error made by her and her husband, without the required legal knowledge to understand what a reference date is or to appreciate the implications of getting it wrong.
[15] The adjudicator records the material that was provided to him in [5] of his decision. The only document he had from Procon was the payment schedule in relation to the payment claim sent on 14 August 2024 (invoice 1158). He records that he received no "adjudication response".[12]
[16] Section 82 of the BIF Act explains that an adjudication response is a response a respondent to an adjudication application may provide, which may include submissions, but cannot include any reasons for withholding payment that were not included in the payment schedule when it was given to the claimant. Procon says there was no need for it to provide an adjudication response because it maintained its reasons for denying the payment claim, as set out in the payment schedule, and because the "reference date" specified in the application accorded with its view as what the correct reference date was - namely, 11 June 2024.
[17] Without hearing from the parties, the adjudicator decided that 31 July 2024 was the reference date. His reasons were as follows:
[17]
"17. There is no dispute as to the existence of a reference date for submission of the Payment Claim.
[18]
18. In reference to section 67(1)(a) of the Act, a reference date means a 'date stated in, or worked out under, the contract...'.
19. The claim form states (incorrectly) that the reference date is 11 June 2024.
20. Invoices were issued in June and July and the last invoice date is 14 August 2024. This is the invoice referred to in this Adjudication.
21. The Contract consists of the Respondent's Subcontract Purchase Order, and the default provisions of the Act pursuant to Section 67(1)(b) apply if the Contract does not provide for the matter -
[19]
(i) the last day of the month in which the construction work was first carried out, or the related goods and services were first supplied, under the Contract; and
(ii) the last day of each later month.
[20]
22. Consequently, I find that the Reference Date is the end of the month of July, 31 July 2024.
23. The Payment Claim was submitted pursuant to a valid Reference Date."
[21]
[18] Both parties agree that 31 July 2024 is not the correct reference date.
[22]
Was there a reference date for the payment claim?
[23]
[19] There are two parts to Procon's argument that there was no reference date for the payment claim which is the subject of the adjudication application.
[20] The first part concerns the date of termination of the contract. As noted, Procon submits the contract was terminated when it gave notice of termination on 11 June 2024. Hi-Cal Bricklaying disputes this, on the basis that Procon did not have a valid basis on which to terminate when it sent that notice. It says the contract was terminated on 2 July 2024, when it accepted Procon's repudiation of the contract.
[21] I indicated to the parties in the course of the hearing that I was not persuaded, on the basis of the affidavit material, to accept Procon's argument. There is clearly a substantial factual dispute about the circumstances leading up to Procon's termination notice. That dispute is not one that I consider could properly be resolved in the context of the hearing of an application such as this - it would require the hearing of oral evidence, and cross-examination, and the determination of questions of credit. What Procon relied on, in terminating the contract, was:
[24]
(a) Hi-Cal Bricklaying quoting a price for the additional area of blockwork which was higher than the price previously quoted for the area of work the subject of the contract; and
(b) its characterisation of Hi-Cal Bricklaying having "abandoned" the project, because it removed tools and equipment from the site and did not return after 6 June 2024.
[25]
[22] In submissions on its behalf, counsel for Procon submitted that "by ceasing work, leaving the Site and refusing to return until the applicant agreed to higher rates", Hi-Cal Bricklaying breached clauses 2(a) and 3(a) of the contract. Clause 2(a) provides that "the Subcontractor must comply with all directions of Procon Developments and supply all items necessary for the proper performance of the subcontractor's obligations in relation to execution of the Works". Clause 3 deals with variations. Clause 3(a) provides that "Procon Developments may by written notice instruct the Subcontractor to carry out variations" and "the Subcontractor must comply with Procon Developments instruction within the time stated or, if no time is stated, within a reasonable time". Clause 3(b) is also important - it provides that the subcontractor is not entitled to payment for a variation unless it is instructed in writing by Procon (in accordance with clause 3(a)) and in determining a reasonable amount (for the variation) "regard will be given to any rates or prices specified in the Subcontract for the same or similar work".
[23] It is difficult to see why submitting a new quote for a substantial additional quantity of blockwork could be said to breach clause 2(a) or clause 3(a), because:
[26]
(a) clause 2(a) can only be construed by reference to the Scope of Work as defined in the contract itself (not by reference to additional work requested to be carried out); and
(b) clauses 3(a) and 3(b) must be read together - and it is apparent from clause 3(b) that the parties are not contractually bound to the rates or prices specified in the contract for additional work - all that clause 3(b) contemplates is that "regard will be given to" those rates.
[27]
[24] In so far as "abandonment of the job" is concerned, there is a factual dispute about a safety issue concerning the scaffolding which had been provided. Mr Day, of Hi-Cal Bricklaying first raised an issue about the scaffolding on 30 May 2024. It was outlined in more detail in a letter sent on 9 June 2024.[13] Procon responded by letter dated 10 June 2024, disputing that there was any safety issue in relation to the scaffolding, and stating that Hi-Cal Bricklaying had "abandoned the job".[14] There was another response from Hi-Cal Bricklaying on the same date,[15] which was followed by Procon's termination notice on 11 June 2024.
[25] In its submissions, in emphasising that it did not abandon the job, Hi-Cal Bricklaying emphasises s 84 of the Work Health and Safety Act 2011 (Qld), which provides that:
[28]
"A worker may cease, or refuse to carry out, work if the worker has a reasonable concern that to carry out the work would expose the worker to a serious risk to the worker's health or safety, emanating from an immediate or imminent exposure to a hazard."
[29]
[26] In circumstances where there is a substantial factual dispute, which I am not able to satisfactorily resolve in the context of an application of the present kind, I am not persuaded to find that Procon's termination of the contract on 11 June 2024 was valid. I therefore proceed on the basis that the contract was terminated when Hi-Cal Bricklaying accepted what it regarded as Procon's repudiation of the contract, on 2 July 2024. The submissions on behalf of Procon acknowledged 2 July 2024 as the alternative date of termination available, if its termination on 11 June 2024 was not accepted as having been valid.
[27] The next part of Procon's argument concerns the characterisation of the invoice which was re-sent on 30 July 2024. Hi-Cal Bricklaying submits that was not a new payment claim, it was simply resending the first payment claim, which is invoice 1150, dated 28 June 2024. Procon submits that re-sending the invoice, with a covering letter, should be regarded as a new payment claim.
[28] The correspondence between the parties about their dispute continued after 2 July 2024. On 30 July 2024, Hi-Cal Bricklaying wrote to Procon, again outlining their position. The last paragraph of the letter said:
[30]
"We refute your assertions against our ethical business manner and character and see little point in re-addressing these further with you. You will need to make payment on our claim (invoice 1150 re-attached for your convenience) by 4 August 2024, after which we will take further action and seek adjudication. If you have a fair offer to pay us for the work we have provided to this point, we suggest you make it prior to that date."[16]
[31]
[29] For its submission, Procon relied upon Fernandes Constructions v Tahmoor Coal[2007] NSWSC 381 at [27], in which McDougall J summarised the approach to determining whether a document is a valid payment claim. His Honour said that the test is objective, but in applying that test, the document should be considered as a whole and in context, which may also include the terms of any covering letter. But in the present case, the relevant payment claim (invoice 1150) is clearly, objectively, a payment claim on its face. There is no need to look to any other document to determine whether it is a payment claim, within the meaning of s 68 of the BIF Act. The fact that a copy of the invoice (payment claim) is "re-sent", or "re-attached", under cover of a letter, does not convert it to a new, separate, payment claim.
[30] What flows from these conclusions is that:
[32]
(a) having regard to s 67(2) of the BIF Act, the "reference date" is 2 July 2024;
(b) the payment claim sent on 28 June 2024 (invoice 1150) was sent prior to that reference date;
(c) the letter of 30 July 2024, re-attaching that invoice, did not constitute another, separate, payment claim;
(d) the payment claim sent on 14 August 2024 (invoice 1158) was a new payment claim. It replaced the earlier payment claim (invoice 1150) - which is permissible under s 75(5); and
(e) there was no breach of s 75(4) of the BIF Act - because there is only one payment claim for the reference date of 2 July 2024 (namely, invoice 1158 sent on 14 August 2024).
[33]
[31] Procon's argument, that there is no "reference date" for the purposes of the payment claim the subject of the adjudication application, depended upon a finding:
[34]
(a) firstly, that the reference date was 11 June 2024 - if this had been accepted, then the effect of s 75(4) would be that the payment claim sent on 14 August 2024 was not valid (because a claimant can not make more than one payment claim for each reference date, and there was already an earlier payment claim on 28 June 2024); and
(b) secondly, that there was a second payment claim issued on 30 July 2024 - if this had been accepted, then even on the basis of a reference date of 2 July 2024, the effect of s 75(4) would be that the payment claim sent on 14 August 2024 was not valid.
[35]
[32] As I have rejected Procon's argument on both accounts, it follows that there was a "reference date" for the payment claim the subject of the adjudication.
[33] The adjudicator's decision, that the reference date was 31 July 2024, is wrong. Both parties agree about that. But in this respect it is an error within jurisdiction, not a jurisdictional error. It could only be a jurisdictional error if there was no reference date available for the payment claim.
[36]
Did the adjudicator deny the parties procedural fairness?
[37]
[34] The short answer to this question is yes. The adjudicator recorded that there was no dispute about the reference date. On the face of the documents before him, that was correct, because Hi-Cal Bricklaying specified 11 June 2024 as the reference date, and Procon did not dispute that. Without giving the parties any opportunity to be heard, the adjudicator unilaterally decided that was incorrect, and went on to determine what he thought the reference date should be. In doing so, he had regard to s 67(1), but not s 67(2) of the BIF Act.
[35] The next question is, what is the consequence of that?
[36] As Applegarth J said in Ingeteam Australia Pty Ltd v Susan River Solar Pty Ltd[2024] QSC 30 at [76]:
[38]
"A denial of procedural fairness of the kind that I have found is a jurisdictional error, subject to the qualification that, depending upon the statutory context and the facts, an administrative decision will not be rendered invalid by an immaterial error."
[39]
[37] The materiality of a denial of procedural fairness is shown by the existence of a realistic possibility that the decision could have been different had procedural fairness been observed.[17]
[38] Whilst the finding about the "reference date" is not the decision - rather, it is a conclusion along the way to the decision as to jurisdiction under s 84(2)(a)(i) of the BIF Act - it is "germane to the decision", and it is realistically possible that submissions could have been made, if an opportunity had been given to do so, which might well have persuaded the adjudicator to change his mind.[18]
[39] I therefore find that, in the circumstances of this case, the denial of procedural fairness was material.
[40] A decision made in circumstances where there has been a material denial of procedural fairness is invalid. It must therefore be set aside.
[41] It is appropriate in the circumstances to remit the matter to the Adjudication Registrar, to enable a decision to be made on the application according to law. That is in circumstances where, objectively, I find there was jurisdiction to deal with the adjudication application (because there was a valid reference date, 2 July 2024, for the outstanding payment claim, issued on 14 August 2024), the only reason for the decision being set aside is an error made by the adjudicator as a result of a failure to observe the rules of procedural fairness, and the effect of setting aside the adjudicator's decision is that there has been no decision at all[19] - which means the application has not been dealt with.
[42] Procon submitted that whilst the Court might have power, where a decision is quashed on the basis of a denial of procedural fairness, to remit the application, that is problematic because of the strict time limits that apply under the BIF Act.
[43] I am satisfied that the Court does have power to remit the adjudication application to be considered, according to law, under the BIF Act.[20] That is the usual order, where a decision is set aside by the making of an order in the nature of certiorari (that is, an order setting aside a decision that has been made unlawfully - for failure to observe the rules of procedural fairness).
[40]
"(4) The claimant and respondent are jointly and severally liable to pay the adjudicator's fees and expenses.
[41]
(5) The claimant and respondent are each liable to contribute to the payment of the adjudicator's fees and expenses in equal proportions unless the adjudicator decides otherwise.
[42]
(8) Also, if a court finds that the adjudicator's decision is void and unenforceable, the adjudicator is still entitled to be paid any fees or expenses for adjudicating the application if the adjudicator acted in good faith in adjudicating the application."
[43]
[47] The adjudicator decided that Procon should pay 95% of his fee. If the decision is set aside, that aspect of the decision is no longer of effect. Yet the adjudicator is still entitled to be paid, and both parties are jointly and severally liable for the fees. At the time of delivering judgment, I will give the parties the opportunity to be heard, in relation to whether an order should be made that Procon reimburse Hi-Cal Bricklaying 50% of the adjudicator's fee.[23]
[48] The second matter is the costs of this application. I heard submissions from the parties at the time of hearing the application in relation to costs. Procon submitted that, if the decision is set aside, costs should follow the event. Ms Hall, on behalf of Hi-Cal Bricklaying, sought orders to reimburse for legal fees they paid to a solicitor who wrote the letter on 2 July 2024, and to another lawyer to assist them to understand the meaning of "reference dates", as well as other expenses incurred such as carparking and childcare fees. Ms Hall otherwise ably represented Hi-Cal Bricklaying in this proceeding. I consider that the appropriate order is that each party should bear their own costs of the application (noting, in any event, that the expenses sought to be recovered by Ms Hall are not recoverable as costs of this proceeding). Although the application has succeeded, Procon had to make an application to the Court in order to have the decision set aside. It chose to do that, rather than pay the modest adjudicated amount ($13,692.25). The basis on which the decision has been set aside is not the fault of either party - it is a fundamental error made by the adjudicator.
[49] For those reasons, I propose to make the following orders:
Declare that the adjudication decision of the second respondent, made on 22 October 2024, in respect of adjudication application number 2643815, is invalid.
The adjudication decision is set aside.
The adjudication application number 2643815, lodged on 13 September 2024 by Hi-Cal Bricklaying, is remitted to the Adjudication Registrar, to be referred to an adjudicator (not being the adjudicator who made the first decision) for a decision according to law, pursuant to s 79 of the BIF Act.
For the purposes of calculating the time in which steps are required to be taken in relation to the adjudication application, the date the application is made (for the purposes of the step required by s 79(4)) is taken to be the date of this order, and the date the application is received by the Registrar (for the purposes of s 79(5)) is the date the Registrar receives a copy of this order.
[44]
[1] For convenience, in these reasons I will refer to the first respondent as Hi-Cal Bricklaying.
[45]
[2] Exhibit CG-3 to the affidavit of Mr Groom, p 15 (references to exhibits "CG" are to the affidavit of Mr Groom which is document 10).
[46]
[6] Exhibit CG-21, pp 136-138 (letter of 30 July 2024, which "re-attached" invoice 1150).
[47]
[7] Exhibit CG-23, pp 146-153 (letter of 14 August 2024, enclosing new payment claim (invoice 1158) and "supporting statement".
[48]
[8] Exhibit CG-17, p 73 (payment schedule dated 5 July 2024, in relation to invoice 1150); and exhibit CG-24, pp 154-163 (letter from Procon dated 2 September 2024, enclosing the payment schedule (p 163)).
[49]
[9] Exhibit CG-25, pp 164-198. See s 78(2) of the BIF Act.
[17] See Ingeteam Australia Pty Ltd v Susan River Solar Pty Ltd[2024] QSC 30 at [76]- [80] and the authorities there referred to.
[52]
[18]Trysams Pty Ltd v Club Constructions (NSW) Pty Ltd[2008] NSWSC 399 at [45], cited in Caltex Refineries (Qld) Pty Ltd v Allstate Access (Australia) Pty Ltd[2014] QSC 223 at [40].
[21] An order of this kind may be made, having regard to s 101(3)(b) of the BIF Act, which permits the court to make "any other order it considers appropriate".
[5] The second respondent adjudicator decided that application on 22 October 2024,[10] finding that he did have jurisdiction and declaring an adjudicated amount of $13,692.25.
[6] Procon contends that the adjudicator had no jurisdiction because there was no "reference date" for the payment claim, and seeks a declaration that the adjudicator's decision is void for want of jurisdiction. Alternatively, Procon argues the decision was made in circumstances where the adjudicator failed to observe the principles of natural justice, by failing to give the parties an opportunity to be heard, and should be set aside on that basis also.
[7] In submissions filed in response to the application, Hi-Cal Bricklaying also made complaints about the adjudicator's decision, for denying part of its payment claim "due to a lack of a written variation order", as a result of which it was "short-changed" about $6,000. Hi-Cal Bricklaying says there was a written variation order, which formed part of the material before the adjudicator, and that the adjudicator also failed to observe the principles of natural justice by not asking for further submissions about the perceived lack of a written variation order, before reaching an adverse conclusion.
[44] The time provisions under the BIF Act can be accommodated by an order that the application be remitted to the Registrar, to be dealt with in accordance with s 79(4), as though the application were received on the date the Registrar is notified of the order.[21] All subsequent time frames would be calculated by reference to that date.
[45] Counsel for Procon submitted that, if the application were to be remitted, it ought to be to a different adjudicator, because there were email communications between the adjudicator and Ms Hall, following the making of the decision (about the amount Hi-Cal Bricklaying contends they were "short changed on"), and there could be said to be an apprehension of bias towards the claimant. I accept that it is appropriate in the circumstances for the application to be referred to a different adjudicator - although observe that the remitter is to the Registrar, not a particular adjudicator - and it is for the Registrar to refer the application to an adjudicator.[22]
[46] There are two remaining matters to deal with. The first is the adjudicator's fees. Hi-Cal Bricklaying has paid the fees; Procon has refused to reimburse its proportion of them. Section 95(4), (5) and (8) of the BIF Act provide as follows:
Each party is to bear their own costs of this proceeding.
[50] Subject to hearing from the parties, I will also make an order in relation to the adjudicator's fees and for payment of the moneys paid into court by the applicant.