Procorp Civil Pty Limited v Napoli Excavations and Contracting Pty Limited & Ors

i. the Act provides that a respondent cannot include in the adjudication response, any reasons for withholding payment, unless those reasons have already been included in the payment schedule provided to the claimant. [ s 20 (2B)]

ii. the document put forward as "the payment schedule" as part of the adjudication application, had not contended that no payment claim had been made on 14 December 2005.

iii. there was no contention in the adjudication response to the effect that Procorp had never submitted a payment schedule to Napoli within the meaning of the Act. The adjudicator's reasons 17 The adjudicator commenced his reasons as follows: "It is common ground that the claimant's payment claim was dated and served on the respondent on the 14.12.05 and the respondent issued a payment schedule on the 16.12.05 and served the payment schedule upon the claimant the same day. Pursuant to s.17(3)(c) of the Act the claimant had 10 business days in which to lodge an adjudication application. s.4 of the Act defines "business day" as any day other than;

The claimant lodged their adjudication application with Adjudicate Today on the 09.01.06 complying with s.17(3)(c) of the Act." 18 He then proceeded to deal with what he described as "a number of submissions [made by Procorp] as to the validity of the claimant's payment claim". 19 Procorp strongly contends that the adjudicator was mistaken in his observation that it was 'common ground' that the payment claim was dated and served on 14 December 2005. However bearing in mind:

i. the fact that the payment schedule provided as such by Napoli in the adjudication application, said not a word about any contention that no payment claim had been received;

ii. the fact that the adjudication response submissions of Procorp went far outside the content of the claims made in the payment schedule;

iii. the fact that neither the payment schedule nor the adjudication response submissions, contended [as did Procorp before this Court], that the column headed scheduled amount" [in what had been put forward by Napoli to the adjudicator as the payment schedule] had never been intended by Procorp as otherwise than a response to a list of invoices provided by Napoli to Procorp on 14 December 2005, which had itself included a column entitled "scheduled amount" it is clear that the adjudicator in his reference to what was 'common ground', was doing no more than stating what, in the environment before him, appeared not to be an issue. In this he was correct, but even if incorrect, his approach neither offended the requirement that he act bona fide nor the requirement for natural justice to be afforded. 20 The adjudicator then proceeded to deal with the respective submissions advanced by Procorp as to the 'invalidity' of the payment claim. He dealt with each of these matters giving reasons in a fashion compliant with:

i. his having bona fide addressed the requirements of the Act in terms of construing the same;

ii. his having bona fide addressed the factual, as well as the legal issues before him. 21 The authorities earlier cited as well as the authorities considered below, make clear that even had the adjudicator been mistaken in these reasons or some of them, much more is required before the determination will be held invalid. The adjudicator's mode of dealing with the Payment Schedule 22 The adjudicator dealt with the payment schedule as follows:

" Fatally for the respondent , the respondent's payment schedule of the 16.12.05 does not provide any reasons (save with one (1) exception) for withholding payment to the claimant. The payment schedule as against each Invoice notes the amount claimed and beside it the respondent's scheduled amount and beside same a column headed "Notes". The "Notes" bearing comments such as; "Operators deducted, to provide dockets, hours charged incorrect, attachment billed not used, rained off deduct 1 day."

Yet the respondent fails in the response to substantiate why in the majority of cases the respondent has a lesser amount in the schedule amount from the claimant's claimed amount. It would have been a simple matter for the respondent to provided relevant material and particulars to substantiate same; e.g. where the respondent's notes "hours be or provided any documents to refute the claimants hours claimed or the amount claimed. The respondent has elected not to provide any material to support its submission that the claimant is not entitled to the amounts claimed.

The respondent's response asserts at par.4-6 and indicates in the payment schedule that the respondent seeks to make deductions for "Backcharges" totalling $83,777.95. Yet the respondent provides no relevant documents or material to support the assertion that there is agreement between the parties to do so or that the respondent has a present legal entitlement to do so. The claimant's adjudication application and submissions in support clearly dispute the respondent's right to deduct backcharges particularly in respect of two (2) amounts of $865.48 and $45,100.00 referable to a separate project at Wahroonga, which the claimant points out is not part of the Taronga Zoo Project, the contract under which this payment claim is submitted. However having examined the claimant's quote of the 15.08.05 and the respondent's purchase order (both documents being attachment 2 to the claimant's adjudication application) the respondent has failed to satisfy me the respondent has any present legal entitlement to withhold payments for the alleged backcharges or deduct any monies for the alleged backcharges. I disallow the backcharges in their entity as valid deductions.

The abovementioned exception in the respondent's payment schedule for withholding payment is in the column headed "Summary: Procorp" where the respondent asserts it has previously paid the claimant $81,809.93. In the response of the 16.01.06 the Respondent at par. 23 asserts: "On the 14.12.05 Napoli provided to Procorp a list of invoices from Napoli to Procorp in respect of the Taronga Zoo project. The list included invoices previously received and paid by Procorp to Napoli."

Having made the assertion it would be a simple matter for the respondent to provide proof of payment in respect to those invoices. The respondent has not done so….

I note the payment schedule contains two (2) patent errors: (a) Invoice No 9990 indicates the claimed amount to be $8,120.00 and the schedule amount to be $8,932.00. An examination of the claimant's Invoice confirms the claimed amount as $8,932.00.

(b) Claimant's Invoice No 1042 for $742.50 is not referred to in the payment Schedule at all. As the respondent has raised no objection to the amount claimed I find the claimant is entitled to this amount as claimed." [emphasis added] 23 Nothing in this approach is exceptional. Nothing in this approach suggests a failure to bona fide address the factual issues. The adjudicator's task 24 Returning to the authorities, [conveniently summarised by McDougall J in Energetech Australia Pty Ltd v Sides Engineering Pty Ltd [2005] NSWSC 801]: · In Minister for Commerce v Contrax Plumbing (NSW) Pty Ltd [2005] NSWCA 142, Hodgson JA dealt with the consequences of errors of law (and fact) at para [49]. He said that an error of law in the interpretation of the Act or the contract, or as to the validity and operative terms of the contract, would not prevent a determination from being valid for the purposes of the Act: "49 In my opinion, an error of fact or law, including an error in interpretation of the Act or of the contract, or as to what are the valid and operative terms of the contract, does not prevent a determination from being an adjudicator's determination within the meaning of the Act. Section 22(2) does require the adjudicator to consider the provisions of the Act and the provisions of the contract; but so long as the adjudicator does this, or at least bona fide addresses the requirements of s 22(2) as to what is to be considered, an error on these matters does not render the determination invalid." [Similar views were expressed by his Honour in Coordinated Constructions Pty Ltd v J M Hargreaves (NSW) Pty Ltd [2005] NSWCA 228 at paras [45] and [46].] · In Coordinated Constructions Co Pty Ltd v Climatech (Canberra) Pty Ltd & Ors [2005] NSWCA 229, Hodgson JA said at para [24] that the task of the adjudicator was in substance to determine the claimant's entitlement within the framework of the dispute that was propounded by the parties. He said: "24 However, I accept that what is referred to an adjudicator for determination is a claimant's payment claim, and what an adjudicator is to determine is the amount of the progress payment to be paid on the basis of that claim and on the basis of other considerations in s 22(2) of the Act. Accordingly, the task of the adjudicator is to make a determination within the parameters of the payment claim, although that is not to say that, if an adjudicator were to make an error which can later be seen as taking the determination outside those parameters, it necessarily invalidates the determination." · In Energetech Australia Pty Ltd v Sides Engineering Pty Ltd [2005] NSWSC 1143, Campbell J observed as follows:

"[90] To say that an adjudicator can make a valid determination under the Act even if the service of the payment claim to which the determination relates contravenes s 13(5), or the payment claim itself contravenes s 13(2), is not, however, to detract from the significance of either s 13(2) or s 13(5), for the purpose of an adjudicator making his or her decision. If a payment claim which lacked the attributes which s 13(2) says it "must" have were to be submitted to adjudication, or if, notwithstanding s 13(5), a claimant served more than one payment claim in respect of a particular reference date and that claim was submitted to adjudication, the breaches of s 13(2) and s 13(5) would provide a sound reason for the adjudicator to decline to order any payment pursuant to that payment claim. To say that such a payment claim can give rise to a valid determination means that, even if the adjudicator makes a mistake by giving effect to a payment claim which does not comply with s 13(2), or a payment claim which does not comply with s 13(5), the adjudicator will still have made a determination which gives rise to an obligation to make a payment, and can be registered as a judgment." 25 Finally in Brookhollow Pty Ltd v R & R Consultants Pty Ltd [2006] NSWSC 1, Palmer J treated with the general scheme of the Act in the following terms:

"[44] A payment claim under the Act is, in many respects, like a Statement of Claim in litigation. In pleading a Statement of Claim, the plaintiff sets out only the facts and circumstances required to establish entitlement to the relief sought; the Statement of Claim does not attempt to negative in advance all possible defences to the claim. It is for the defendant to decide which defences to raise; the plaintiff, in a reply, answers only those defences which the defendant has pleaded.

[45] In my opinion, a payment claim under the Act works the same way. If it purports reasonably on its face to state what s 13(2)(a) and (b) require it to state, it will have disclosed the critical elements of the claimant's claim. It is then for the respondent either to admit the claim or to decide what defences to raise. [46] An assertion that service of a payment claim is prohibited under s 13(4) or (5) is like a defence in bar. For example, in the case of an action at law or in equity founded upon an oral contract for an interest in land it is open to a defendant to elect whether to raise a defence in bar founded on the Statute of Frauds. Similarly, it would be open to a respondent served with a payment claim under the Act to elect whether to raise a defence in bar that service of the claim is prohibited by s 13(4) or (5). A respondent to a payment claim may have a reason for electing not to raise such a defence: the payment claim may raise for determination an issue which will inevitably have to be determined in subsequent payment claims and the respondent may wish the issue to be resolved sooner rather than later.

[47] However, if the respondent does elect to raise a defence in bar founded on s 13(4) or (5), adjudication of that defence will require examination of the relevant terms of the contract, possibly the facts relating to the work performed and the time of performance and possibly also the content of previous payment claims. That examination may well be contentious and may involve issues of fact and law upon which minds may legitimately differ.

[48] In my opinion, the scheme of the Act in general and of s 13 and s 14 in particular requires that a defence in bar to a payment claim founded on s 13(4) or (5), like any other defence said to defeat or reduce the claim, must be raised in a timeously served payment schedule. If it is not, then the defence may not be relied upon to set aside or restrain enforcement of the adjudication determination as a nullity, nor may it be relied upon as a defence to entry of judgment under s 15(4) of the Act.

[49] In my opinion, these conclusions are consistent with, and are inherent in, the reasoning in Brodyn and they are not contrary to the majority decision in Nepean . They are also in conformity with the general approach to the determination of invalidity of a payment claim under s 13(4) and (5) taken by McDougall J in Energetech Australia Pty Ltd v Sides Engineering Pty Ltd [2005] NSWSC 801 at 25, by Campbell J in Lifestyle Retirement Projects No 2 Pty Ltd v Parisi Homes Pty Ltd [2005] NSWSC 705 at 19, and by Campbell J in Energetech Australia Pty Ltd v Sides Engineering Pty Ltd [2005] NSWSC 1143 at 87-90." The hearing before the Court 26 Procorp accepted that in order for it to succeed it must prove either:

i. a failure to satisfy the essential pre-conditions to validity expressly set out in [53] of Brodyn v Davenport ; or

ii. a breach of the fundamental requirements of natural justice required by the Act, namely a failure by the adjudicator to receive or consider submissions which is due to a breach of the provisions in sections 17(1), (2), 20, 21(1) or 22(2)(d) of the Act. Evidence taken on the voire dire 27 During the hearing both parties sought to place the extensive affidavit evidence of a variety of matters before the Court. Ultimately only extremely limited affidavit evidence was permitted and on a particular basis. The evidence [both in affidavit form as well as came forward in the limited cross-examination] was admitted on the voire dire upon the basis that a decision as to whether or not the evidence would be admitted on the hearing would be given in the judgment. This course permitted very limited evidence on only one area, namely what precisely had occurred on 14 December 2005. Portions only of the affidavit of Ms Bechini of Procorp of 22 March 2006 and of the affidavit of Mr Guerrera of Napoli of 24 March 2006 were permitted. 28 The decision is that none of this evidence is allowed. To my mind the evidence is simply irrelevant in terms of the task of the Court at hand. Alternatively and if the evidence be relevant, the probative value of the evidence is outweighed by the danger that the evidence would cause or result in a waste of time within the meaning of s 135 of the Evidence Act 1995. 29 I reject the proposition that the adjudicator, following receipt of the adjudication response of Procorp, was obliged to invite further submissions first from Napoli and then further responsive submissions from Procorp. The adjudicator was entitled to proceed upon the basis that s20 (2B) was operative. That he did so is clear from his use of the words "fatally for the respondent". Indeed nothing in the adjudication response submissions of Procorp threw up the vital questions put to the Court, concerning precisely what had occurred on 14 December 2005. The incorrect computation of the total amount 30 The adjudicator included in the determination the following paragraph:

"…[T]he claimant at par.26 of their submissions accepts that since making the payment claim they have received payment of $122,139.35 for the works the subject of the invoices comprising the payment claim, I note the payment claim invoices are for $378,887.92, and the claimant "claims the outstanding amount of $256,748.57." 31 The position which obtains may clearly be characterised in terms of the adjudicator failing [as is apparent on the face of the determination] to have had regard to the matter which was indeed common ground, in terms of the net amount claimed by the claimant following receipt by Napoli of $122,139.35. One presumes that this was simply an oversight. 32 The adjudicator's determination clearly containing what must be characterised for the purposes of s 22 (5) as a clerical mistake and/or an error arising from an accidental slip or omission and/or a material miscalculation of figures, the adjudicator had power on his own initiative or on the application of either party, to correct the determination. 33 At the commencement of the hearing, the Court raised with the parties the question of whether the adjudicator still has the power on his own initiative or on the application of either party, to correct the determination. Indeed at one stage the parties were asked to address on whether a preliminary point should be ordered on the questions concerning whether a slip or mistake was able to be remedied even at this late point in time. It was made clear by both parties that they did not discern this issue as a matter of substance. [transcript 6, 7, 9, 10, 38, 39]. 34 Mr Corsaro SC, counsel for Procorp, did contend that as the adjudicator had been joined as a party to these proceedings, it was open to him, even after these proceedings had commenced, to have sought leave to correct the determination on the computation issue. 35 In my view the position which obtains is that the adjudicator is still possessed of the above-described power. Procedures/the way forward 36 It is important to follow with precision the precise events which occurred. They are as follows:

i. On 9 February 2006 an adjudication certificate was issued in the sum of $392,607.77 including the adjudicated amount plus interest and the unpaid share of the adjudicator's fees;

ii. On 9 February 2006 an affidavit was made by Mr Guerrera pursuant to s 25 of the Act which provides inter alia: "(1) An adjudication certificate may be filed as a judgment for a debtor in any court of competent jurisdiction and is enforceable accordingly.

(2) An adjudication certificate cannot be filed under this section unless it is accompanied by an affidavit by the claimant stating that the whole or any part of the adjudicated amount has not been paid at the time the certificate is filed.

(3) If the affidavit indicates that part of the adjudicated amount has been paid, the judgment is for the unpaid part of that amount only." iii. The affidavit included the following:

This Affidavit is made pursuant to section 25 of the Building and Construction Industry Security of Payment Act 1999 NSW to accompany the adjudication certificate for an adjudication amount of $392,607.77.

A total payment of $129,115.98 has been received from the Defendant and the Defendant had incurred costs of $61,237.43 which it can properly claim as back charges from the Plaintiff.

Accordingly, the amount outstanding, which is due and owing, as at the date of this affidavit is $202,254.36 ("the Judgment Debt"), which includes interest of $3,269.85.

On 9 February 2006 the Plaintiff obtained the Adjudication Certificate from Adjudicate Today by making a payment of $550.00. Now shown to me and marked annexure "G" is a copy of the tax invoice from Adjudicate Today.

I request that the Court issue an order that the Defendant pay the Plaintiff's costs of obtaining the Adjudication Certificate from Adjudicate Today in the sum $550.00.

iv. On 9 February 2006 a Certificate of Judgment issued from the District Court in which the Registrar certified as follows: 1. In this action the Plaintiff recovered Judgment against the Defendant on 10/02/2006, in the sum of $392,607.77 and his costs $0.00.

2. I am informed by the Judgment Creditor that the amount of $0.00 has been paid in respect of the Judgment.

3. Interest is payable per annum on so much of the judgment debt (including costs) as is from time to time unpaid - see attached schedule.

4. The Judgment Creditor has incurred costs of attempting to enforce the judgment, recoverable against the judgment debtor, in the amount of $0.00. 37 The proper analysis seems to me to be as follows:

i. The adjudicator's determination contained what has earlier in the judgment been described as a clerical mistake and/or an error arising from an accidental slip or omission and/or a material miscalculation of figures;

ii. That matter can be remedied by the adjudicator within the s22 (5) power;

iii. The District Court made another error. The certificate of judgment did not comply with the dictate of s 25 (3) of the Act. The judgment entered ought to have been for the unpaid part of the adjudicated amount;

iv. That matter can also be remedied by the District Court within the slip rule applying in that jurisdiction. 38 The appropriate course is to simply adjourn the proceedings for a short period and to then relist the proceedings following the parties having had an opportunity to review these reasons. 39 A real degree of assistance may be found in the recent decision of the Court of Appeal: Khoury v Hiar [2006] NSWCA 47 dealing with disconformity between the order of court and the relevant statutory regime. The Legal Profession Act 1987 enabled a party to obtain a judgment through an assessment of costs and the filing of an assessor's certificate. That Act relevantly provided that a legally assisted person should not be liable for the payment of the whole or any part of particular costs. The judgment taken to have been entered on the filing of the certificate was subject to the statutory prescript that the claimant [a legally assisted person] was not liable for the costs. 40 The holding was that the judgment and the non-liability stood together. The effect of the section was superimposed on the judgment which had no greater force then the order for costs which enabled the assessment of costs. Disconformity between a Court's order and liability to pay was accepted in the Act's approach, by which the liability of a legally assisted person to pay costs was not worked out when the court made its costs order, but was left for the superimposition of the section. [cf at 37-41; 45]. 41 There is particular relevance in the reference (at [50]) to the ability of the Court to turn to its armoury of relief and to control by injunction enforcement of the judgment so as to permit enforcement only to the extent of the entitlement. An injunction was ordered restraining the First Opponent from enforcing the judgment entered in the District Court save to the extent of his entitlement. 42 The purpose of these observations is to make clear that this Court, depending upon what occurs after the parties have had a proper opportunity to consider these reasons, has the jurisdiction to restrain Napoli from enforcing the judgment entered in the District Court save to the extent of the unpaid part of the adjudicated amount. 43 Submissions will be taken as to whether there is any need for a further interim interlocutory regime pending the next occasion when the matter is before the Court.

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