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[2012] NSWSC 6
procedural. The court continued the existing interlocutory relief and stood the matter over so the second and third defendants could be heard if they wished. It reserved all further orders. The court stated...
Nebax sent invoices as part of progress claim 18 and pursued five adjudication applications. The adjudicator treated the contract’s 25 separable work portions as 25 separate contracts, even though neither party had argued that position and the parties had no chance to address it. McDougall J considered that this was a material denial of natural justice. The judge also considered that the Act generally allows only one adjudication application for one payment claim. However, because the second and third defendants might not have been heard, the judge did not make final orders at this hearing.
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RailCorp and Nebax entered into a construction contract on about 15 December 2009. The work was a platform resurfacing programme at about 25 railway stations. The court described the arrangement as one contract, made for a specified lump sum, and the tender material referred to it as “one single contract” comprising all separable parts ([1], [14]–[18]).
2 cited instruments linked from this judgment.
On 31 October 2011, Nebax emailed RailCorp what it called “Progress claim No 18”, for work relating to September 2011. The email attached five invoices, each with its own tax invoice identifier and subject matter. Each also referred to the same job details, contract number and progress claim number. RailCorp issued a payment schedule for each invoice, in some cases scheduling nil and in others scheduling less than the amount claimed ([2]–[3], [22]–[24]).
Nebax then made five adjudication applications, one for each invoice and corresponding payment schedule. RailCorp objected that there was one contract and one progress claim, and argued that the Act did not permit five adjudication applications for that claim. The adjudicator accepted that the contract contained 25 separable portions but concluded that those portions were separate contracts governed by a head contract. On that basis, he found that he had jurisdiction to determine the applications ([4]–[6], [50]).
RailCorp challenged the determinations. Its central argument was that the adjudicator had denied natural justice by deciding the jurisdictional objection on the basis of 25 contracts, a position neither party had taken and which the adjudicator had not put to them for submissions. RailCorp also argued, in the alternative, that s 17(1) did not allow multiple applications for one payment claim, and that multiple payment claims for one reference date would breach s 13(5) ([7]).
McDougall J heard the matter during the vacation. Although the parties had agreed to proceed finally, the judge was concerned that the second defendant, the authorised nominating authority, and the third defendant, the adjudicator, might not have had a proper opportunity to be heard. The adjudicator could have an interest in the result, including a possible effect on entitlement to fees ([11]–[13]). The judge therefore gave reasons expressing a present view, continued existing interlocutory relief and reserved final orders ([62]).
The principal ground was procedural fairness. The adjudicator’s reasons expressly addressed the fact that there were 25 separable portions and concluded that these were separate contracts, even though the overall contract documentation described a single contract. The judge found that neither party had advanced the “25 contracts” analysis in the payment claim, payment schedules, adjudication documents or court proceedings. Nebax’s counsel accepted that there was one contract, and the judge considered that the contract documents supported that conclusion ([50]–[53]).
The judge applied principles previously stated in the security-of-payment context. Natural justice must be understood in light of the Act’s compressed process and the limited time available to adjudicators. It is not an abstract entitlement to submissions on every conceivable issue. The relevant question is whether the unannounced basis was material, meaning that submissions might have had some prospect of changing the adjudicator’s mind ([54], incorporating Watpac at [141]–[147]).
The judge answered that question in RailCorp’s favour. Had the issue been raised, RailCorp could have directed the adjudicator to the acceptance letter, which described one contract for a fixed sum, and to the tender and contract provisions explaining why the work was divided into separable parts. Those parts were relevant to matters such as cancellation of work, delay costs and liquidated damages. The judge considered those submissions would have had force ([56]–[58]).
The court did not need to decide whether the adjudicator would ultimately have accepted RailCorp’s submissions. The judge noted that an adjudicator’s conclusion on his or her own jurisdiction could not bind the court. The material point was that RailCorp had lost the opportunity to make submissions capable of affecting the adjudicator’s reasoning ([47], [57]). The judge consequently concluded that the denial was material and stated that such a denial rendered the determination void ([58]–[59]).
The court also examined the statutory question about multiple adjudication applications. Sections 8, 13, 14 and 17 form a sequence: a right to a progress payment arises by reference to a reference date; a claimant serves a payment claim; the respondent may provide a payment schedule; and adjudication is available for a payment claim in specified circumstances. Section 13(5) provides that a claimant cannot serve more than one payment claim for each reference date under the contract, subject to an exception not relevant to the court’s discussion ([43]–[44]).
From that structure, the judge considered that s 17(1) authorised one adjudication application for one payment claim under a particular contract. Allowing separate adjudication applications for parts of one claim appeared inconsistent with the Act’s stated objective of providing an enforceable progress-payment right through a speedy and relatively inexpensive process ([45]–[46]). This was the judge’s considered reading of the provision. The dispositive conclusion in the ruling, however, was the material denial of natural justice.
The judgment described the existing legal framework as one in which an adjudicator’s determination could be void for a substantial denial of natural justice. In discussing Brodyn Pty Ltd v Davenport, the judge noted that the validity of a determination depended on “basic and essential requirements”, including the making of an adjudication application by the claimant to an authorised nominating authority ([42]). The judge also adopted the natural-justice principles set out in the earlier decision Watpac Constructions (NSW) Pty Ltd v Austin Corp Pty Ltd, including the requirements of materiality and practical fairness ([54]).
Against that background, Rail Corporation of NSW v Nebax Constructions applied those principles to an adjudicator who resolved a jurisdictional dispute through a new factual and contractual characterisation, without inviting the parties to address it. The judgment’s contribution on the facts before it was its conclusion that this was not a harmless departure: submissions about the contract documents might have affected the adjudicator’s reasoning ([55]–[59]).
The judgment also gave a preferred interpretation of s 17(1): one adjudication application for one payment claim under one contract. The judge connected that interpretation to s 13(5) and the structure and purpose of the Act ([43]–[46]). The judgment does not state that this construction was a new rule displacing earlier authority. It notes that Brodyn did not expressly decide the question and treats Dualcorp Pty Ltd v Remo Constructions Pty Ltd as consistent with concern about repetitious attempts to enforce the same claim ([42], [45]).
There is an important limit on describing the “after” state. This was an ex tempore ruling in which final orders were stood over. The court expressly described its view as its “present view” and reserved further orders so the second and third defendants could be heard ([61]–[62]). The judgment alone therefore establishes the reasoning and provisional outcome recorded on 3 January 2012; it does not provide a later procedural history or establish how subsequent courts treated the case.
At [30], the judge said the better view was that there had been “but one payment claim”, broken up or particularised by reference to different work portions and a variations claim. In plain English, separate invoices did not necessarily mean separate statutory payment claims. The character of the claim depended on the documents and circumstances as a whole.
At [32], the judge read the contract administrator’s directions as requiring the claim to be organised so that the work at each separable portion could be assessed. The directions did not appear to require multiple statutory payment claims. The judge also doubted that the contract administrator could unilaterally change an express contract term.
At [38], the judge agreed that s 20(2B) did not prevent a respondent from raising a jurisdictional ground in an adjudication response. The distinction was between a reason for withholding payment, which the subsection addresses, and a contention that the adjudicator lacks jurisdiction. The latter issue could arise only after the allegedly non-compliant applications were lodged ([34]–[39]).
At [46], the judge stated the preferred construction of s 17(1): there could be only one adjudication application for any one payment claim. In plain English, dividing one claim into multiple applications was not, on the judge’s reading, authorised by the statutory scheme.
At [53], the judge identified the procedural problem: the adjudicator decided the objection on a basis neither party had advanced, without giving either party notice or an opportunity to be heard. At [58], the judge concluded that the denial was material. The significance was not simply that the adjudicator had adopted a different analysis, but that the parties lost a meaningful opportunity to address a point that could affect the result.
Finally, at [61]–[62], the judge stated that RailCorp was, on the present view, entitled to relief, but did not make final orders. This procedural qualification matters when describing the result: the court continued interlocutory relief and reserved further orders.
The natural-justice reasoning is most directly relevant to a statutory adjudication where an adjudicator proposes to decide a jurisdictional or substantive question on an analytical basis not advanced by either party. The judgment indicates that the relevant questions include whether the parties had notice, whether they could make submissions, and whether those submissions might have affected the decision ([53]–[59]).
The reasoning is particularly tied to circumstances where the proposed basis depends on interpreting contract documents or characterising the parties’ arrangements. Here, the adjudicator inferred 25 separate contracts from separable portions in a document that the court read as constituting one contract. The court considered that the contractual material offered a substantial basis for submissions against the adjudicator’s approach ([14]–[21], [51]–[57]).
The statutory discussion is relevant to disputes about multiple invoices, payment claims and adjudication applications arising under one construction contract and reference date. The judgment cautions that separate invoices or work components do not themselves resolve whether there is more than one payment claim. The court’s assessment was that the documents here more likely represented one progress claim broken into components ([22], [30]–[32]).
The decision should not be read as resolving every case involving separable portions, multiple invoices, or directions from a contract administrator. The judge’s conclusions depended on the particular contract and claim documents. The alternative issue under s 13(5) was expressly left undecided ([61]).
The supplied judgment does not discuss any later treatment of Rail Corporation of NSW v Nebax Constructions. It was decided on 3 January 2012, and the text provided contains no subsequent judgments applying, distinguishing, approving or rejecting it. Accordingly, a later-treatment history cannot be established from this source alone.
The judgment itself identifies the authorities it used. It refers to Brodyn on basic and essential requirements and substantial denial of natural justice; Watpac on materiality in statutory adjudication; and Chase Oyster Bar v Hamo Industries on jurisdiction and the inability of an adjudicator’s own jurisdictional view to bind the court ([42], [47], [54], [59]). It also relies on Olympia Group in explaining why s 20(2B) did not preclude a jurisdictional objection ([37]–[38]).
For the multiple-application question, the judge drew on the statutory structure and referred to Dualcorp as supporting an approach against repeated claims seeking to enforce the same claim ([43]–[46]). Those are the authorities discussed by McDougall J in this judgment, not evidence of how later courts treated this decision.
The most immediate open question in the judgment was procedural: whether the second and third defendants would seek to be heard before final orders were made. The judge reserved those orders rather than finally disposing of the proceedings ([11]–[13], [62]).
The court also left the s 13(5) alternative argument undecided. RailCorp argued that if the invoices were separate payment claims under one contract, there was a breach of the prohibition on serving more than one payment claim for a reference date. The judge said it was unnecessary to reach that question after concluding that the natural-justice ground supported relief ([7], [61]).
The judgment expressed doubt that the contract administrator’s directions could vary the contract or override the Act, but did not decide the full extent of the administrator’s power to direct the form of claims in other circumstances ([32], [60]). Nor did it finally determine whether the directions could affect reference dates in relation to completed separable parts. The judge noted that the practical-completion argument had not been raised in the relevant claim or adjudication material and that the evidence did not establish a reference date for the relevant period ([29]).
Finally, the judgment’s s 17(1) interpretation was expressed as the “better view” and supported by the statutory scheme. The provided text does not set out any later appellate determination of that issue or the eventual final orders in this proceeding ([46], [61]–[62]).
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Judgment - EX TEMPORE 1HIS HONOUR: The plaintiff (RailCorp) and the first defendant (Nebax) are parties to a contract made on about 15 December 2009 (the contract). That contract is a construction contract for the purposes of the Building and Construction Industry Security of Payment Act 1999 (NSW) (the Act). Under the contract, Nebax was required to undertake platform resurfacing work at some 25 separately identified railway stations under the control of RailCorp.
A disputed progress claim 2On 31 October 2011, Nebax made what it described as "Progress claim No 18" by email addressed to the relevant officer of RailCorp. That email read, so far as it is relevant: "Please find attached invoices in relation to progress claim No 18 in the platform resurfacing programme 2009-10. The above claims are for the month of September 2011 ...". 3There were sent with the email some five invoices, four of which remain in issue, and various other required documents. RailCorp served a payment schedule in respect of each of those invoices. Presumably it took that course because each individual invoice stated that that it was "a payment claim made under the [Act]". In some cases, the payment schedule provided for a scheduled amount of nil. In other cases, the payment schedule indicated a scheduled amount of less than the amount of the claim.
Reference to adjudication 4The dispute or disputes thereby constituted were referred to adjudication. Nebax made not one but five adjudication applications: one in respect of each tax invoice and its appropriate payment schedule. The applications were made to the second defendant who referred them to the third defendant. The third defendant accepted nomination and proceeded with the adjudication in each case. 5In each case (although I am concerned only with four of the five individual claims, as it is convenient to refer to the individual tax invoices), RailCorp took the point that there were five separate adjudication applications referable to the one contract and the one payment claim. It referred to ss 13(5) and 17(1) of the Act. It said that the adjudicator lacked jurisdiction to deal with the applications, either because s 17(1) did not permit multiple applications for the one payment claim or because s 13(5) did not permit multiple payment claims under the one contract for the one reference date. 6The adjudicator dealt with that argument by finding, in substance, that there were in fact 25 separate contracts. He did so by referring to the provisions of the contract relating to "separable portions", and reasoned that each of the separable portions was to be treated as a separate contract governed by the one head contract. Thus, he concluded, he had jurisdiction to deal with the applications that were made.
Challenge to the determination 7RailCorp challenges that determination. It says, in essence: (1) in dealing with the matter in the way that he did, the adjudicator denied natural justice to the parties, and specifically to RailCorp, by proceeding on the basis that there were 25 separate contracts, in circumstances where neither party had contended this and where neither was given an opportunity to put submissions to the contrary. (2) Alternatively, it submitted, the adjudicator lacked jurisdiction because s 17(1) of the Act did not permit the making of separate adjudication applications for separate portions of the one payment claim. (3) In the further alternative, it submitted that if there were in truth five separate payment claims, but arising under one contract, then this was a clear breach of s 13(5), which was (RailCorp submitted) a jurisdictional requirement. 8Nebax appeared to accept that there was but one contract and that the adjudicator's reasoning on this point was erroneous. However, it submitted, in the circumstances of this case, the contract administrator had given a direction that separate claims be made for each separable portion of the works, and that this had the effect of creating a separate reference date for each portion. Alternatively, it submitted, it was not open to RailCorp to take the point in circumstances where the point had not been raised in its payment schedules (see s 20(2B) of the Act). 9In relation to denial of natural justice, Nebax submitted, in substance, that denial of natural justice was significant only if the outcome would have been (or might have been) different if in some way, or if submissions could have been put that would (or might) have led to a different result; and in this case, again because of the "direction" point to which I have referred, there would have been no different result. 10Finally, Nebax submitted, relief in the nature of certiorari should be refused because the point had not been raised in the payment schedule, in circumstances where the direction to which I have referred had been given (not once, but twice), and in circumstances where, thereby, it had been led to proceed in the way that it did.
A procedural diversion 11The matter came before me during the vacation. RailCorp and Nebax sensibly agreed that the matter should proceed to hearing on a final basis. Unfortunately, as it now appears, the second defendant has been served only (if at all) very recently, by email; and if that is to be regarded also as service on the third defendant (the adjudicator), there is absolutely no reason to think that the matter has come to the attention of the adjudicator. 12I have no doubt that when the second and third defendants are served, they will take the usual (and proper) course of filing appearances whereby they submit save as to costs. But my absence of doubt on the point cannot justify an exclusion of their right to be heard should they wish. The adjudicator, in particular, has a real (if theoretical) interest in the matter, because the effect of the making of an order in the nature of certiorari would be that he has not made any determination at all. That could mean, for example, that he has no entitlement to retain the fees that he has been paid for the work that has been done. Those fees are not insubstantial. 13In the circumstances, the parties accepted that I should express my view on the basis of the material that is now before me and on the arguments that have been put, but that I should refrain from making final orders until the second and third defendants have been given an appropriate opportunity to consider their positions. Although there are risks in taking that course (because, if the second or third defendants do wish to be heard, they may well claim that I have prejudged the matter), nonetheless, having regard to the amount at issue and to the work that the parties have done to get the matter ready for hearing today, and bearing in mind the dictates of s 56 of the Civil Procedure Act 2005 (NSW), I conclude that I should proceed in the manner just indicated.
Relevant provisions of the contract 14I start by going to relevant provisions of the contract. In form, the contract is constituted by RailCorp's letter of 15 December 2009 to Nebax, whereby RailCorp accepted Nebax's revised tender for the performance of the works for a specified lump sum. The letter specified, in a schedule to which reference was made in the body of the letter, that the contract documentation should include some 12 described documents. 15The letter referred to RailCorp's "RFT" (Request For Tender) number WS 7203, contract number CW 5090 and the "platform resurfacing program 2009/10"). It commenced as follows: Rail Corporation New South Wales (RailCorp) accepts your company's Proposal dated 15 th September 2009 for the Platform Resurfacing Program 2009-10, in accordance with Request for Proposal No WS7203 and in accordance with the documents listed in attached Schedule A, for the revised fixed cost of $10,495,623 exclusive of GST. This is not subject to rise and fall, exchange rate or customs duty variation. The Contract between RailCorp and Nebax Constructions Australia Pty Ltd shall be entirely constituted by this Letter of Acceptance and the documents listed in attached Schedule A. 16The contract documentation included the RFT (to adopt the language of the parties). In the introductory part of that RFT, RailCorp made clear that there was but "one single contract". I set out part of the "tender background": It is RailCorp's intention to award this package as one single contract (comprising all Separable Parts) on a "ALL or NONE" basis. Tenderers shall note the following possibilities and make provision for the following possibilities in their tender:
The payment claim and payment schedules 22It is necessary also to pay some attention to the form of the progress claim and the payment schedules. I have set out the terms of the email of 31 October 2011. The invoices sent with it followed a standard pattern. Each had the date 30 September 2011. Each had a unique tax invoice identifier. Each referred to the same job number, the same job details, the same contract number and the same progress claim number. They differed, of course, in their statement of the subject of the particular claim. Two related to specific railway stations, at Guildford and Yennora. One appears to be a claim for extras or variations over the whole of the project. Another relates to the provision of "deadman anchors" at one particular (although not identified in the invoice) station. 23The payment schedules responded to the claims individually. Again, they had a common format, but gave separate reasons, bearing in mind the nature of the claim to which they responded. Each misidentified the contract as "C 707". No one submitted that this misidentification of the contract is of any significance. 24In each case, where the scheduled amount was less than the claimed amount, reasons were given.
The "direction" relied on 25According to Nebax, the payment claim was submitted in the way that it was as a result of directions given by the contract administrator, who at the relevant time was Mr Ari Kalamotas. 26On 29 June 2010, Nebax submitted its progress claim 8. Mr Kalamotas responded the same day saying: "Please amend and submit individual progress claims ...". 27That course was apparently followed until progress claim 17 was lodged, on 26 August 2011. For reasons that are not clear, that appears not to have been broken up. Accordingly, on 8 September 2011, Mr Kalamotas responded by email: "Please provide separate invoices for the variations at each location. ... 28Nebax complied with that response.
Practical completion 29Nebax relied on the fact that practical completion had been granted for a number of stations, including two (Guildford and Yennora) that were the subject of progress claim 18. It is common ground that practical completion has been granted for, among others, those stations. There is no evidence to enable the court to conclude affirmatively when it was that this occurred. Such evidence as there is (and this applies only to the work at Guildford Station) would suggest that practical completion was granted on or shortly after 5 October 2011. I mention this because at one stage, Mr Smith of counsel, who appeared for Nebax, submitted that in relation to those two stations, there were separate reference dates by reference to the provisions of clause 12.13. Even if that argument were available, in circumstances where it had not been raised in the payment claim or adjudication application for the relevant stations, it must mean that, so far as the evidence goes, there is no basis for concluding that practical completion occurred for the period to which the payment claim related (the month ending 30 September 2011).
One only progress claim 18 30The payment schedules did not assert, as a reason for refusing payment, that it was not open to Nebax to make more than one payment claim for the one reference date. There are two things that can be said about this. The first is that, on the evidence that I have at present, the better view appears to be that there was but one payment claim, broken up into, or particularised by reference to, a number of separate separable portions of the works and an individual claim for variations. 31I have no doubt that, in an appropriate case, it is open to a claimant to submit one payment claim, for the purposes of the Act, that comprises several invoices, even though each invoice is separately said to be a payment claim for the purposes of the Act. Macready M (as his Honour then was) so held in Alan Conolly & Co v Commercial Indemnity [2005] NSWSC 339 at [23]. As his Honour's preceding analysis makes clear, that is a finding based on the facts of the particular case. I have no doubt that his Honour's finding was sound in law, and in an appropriate case, as I have indicated, I would accept that one payment claim, for the purposes of the Act, may be constituted by multiple invoices, and that this is so even where each invoice is said to be, individually, a payment claim in its own right. 32The second is that I do not see anything in the language of the "directions" relied upon, the relevant parts of which I have set out, to suggest that Rail Corp, through its agent the contract administrator, required separate payment claims to be made for each job. On the contrary, I think, what Rail Corp, or perhaps more accurately Mr Kalamotas, required, was that each payment claim be broken up in such a way as to facilitate an assessment of the work claimed for each separable portion or other element of the total of the claim. So understood, the directions do not seem to me to be in any way inconsistent with the language of the contract, which clearly requires that there should be one payment claim for each reference date: see clause 12.6. In any event, it must be open to doubt whether the power to give directions conferred on the contract administrator by clause 3.1 of the contract would enable him unilaterally to vary an express term of the contract.
Section 20(2B) 33It is convenient at this point to consider the arguments under s 20(2B) of the Act. That subsection reads as follows: (2B) The respondent cannot include in the adjud i cation response any reasons for withholding payment unless those reasons have already been included in the payment schedule provided to the claimant. 34It is common ground that the payment schedules in this case did not take the point that there were multiple claims in breach of s 13(5). However, several things may be said about that. The first is that the jurisdictional argument that was raised in the adjudication responses was not that argument. It was, rather, that s 17(1) of the Act did not permit multiple adjudication applications to be made for the one payment claim. Of necessity, that is a point that could not be taken until the allegedly offending multiple adjudication applications were lodged. 35The second point is that even if the point could have been taken earlier, parties cannot confer jurisdiction beyond that which the Act gives, although no doubt they may agree between themselves to accept, or abide by, a determination made in excess of or want of jurisdiction. 36More significantly, it appears to me, s 20(2B) talks of "reasons for withholding payment". That is not what is at issue here. The question that was raised for the adjudicator's consideration was whether he had any jurisdiction to hear the multiple applications that were lodged. 37In Olympia Group (NSW) Pty Ltd v Hansen Yuncken Pty Ltd [2011] NSWSC 165, Ball J said at [11], of a similar argument put to him for consideration, that s 20(2B) prevented the respondent: "from raising in its adjudication response a reason for not making a payment that was not raised in its payment schedule. It did not prevent it from raising grounds on which it was asserted that the adjudicator did not have jurisdiction to make a determination". 38I agree. The point could not have been taken in the payment schedule. Thus, the alternative submission referred to at [8] above and the submission referred to at [10] above must fail. 39In Chase Oyster Bar v Hamo Industries [2010] NSWCA 190, the Court of Appeal considered whether an adjudicator had power to determine an adjudication application not made in compliance with s 17(2)(a) of the Act. It held that he did not. No question was raised of s 20(2B). Nor could it be raised. The point did not arise until the non-compliant adjudication application was made. In this case, the point did not arise (if it arose at all) until the allegedly non-compliant applications were made. 40One then comes back to the arguments based on s 17(1), denial of natural justice and s 13(5).
Section 17(1) 41The adjudicator appears to have proceeded on the basis that s 17(1) was jurisdictional. That subsection reads as follows: 17 Adjudication applications (1) A claimant may apply for adjudication of a payment claim (an "adjudication application") if: (a) the respondent provides a payment schedule under Division 1 but: (i) the scheduled amount indicated in the payment schedule is less than the claimed amount indicated in the payment claim, or (ii) the respondent fails to pay the whole or any part of the scheduled amount to the claimant by the due date for payment of the amount, or (b) the respondent fails to provide a payment schedule to the claimant under Division 1 and fails to pay the whole or any part of the claimed amount by the due date for payment of the amount. 42In Brodyn Pty Ltd v Davenport (2004) 61 NSWLR 421, Hodgson JA (with whom Mason P and Giles JA agreed) held at [53] that the "basic and essential requirements" for validity of an adjudicator's determination included "the making of an adjudication application by the claimant to an authorised nominating authority". His Honour did not say in terms that s 17(1) authorised the making of only one adjudication application for one payment claim. 43Nonetheless, it seems to me, when one considers the structure of the Act as a whole, it is reasonably clear that there should be one only application for adjudication of any one payment claim. Section 8(1) gives the right to a progress payment. Section 13 of the Act gives to a person claiming an entitlement to a progress claim the right to serve a payment claim. Section 14 provides for a response, through a payment schedule. Section 17 provides for "adjudication of a payment claim" where, among other things, a payment schedule is provided under which the scheduled amount is less than the claimed amount. I set out those sections, so far as they are relevant: 8 Rights to progress payments (1) On and from each reference date under a construction contract, a person: (a) who has undertaken to carry out construction work under the contract, or (b) who has undertaken to supply related goods and services under the contract, is entitled to a progress payment. ... 13 Payment claims (1) A person referred to in section 8 (1) who is or who claims to be entitled to a progress payment (the "claimant") may serve a payment claim on the person who, under the construction contract concerned, is or may be liable to make the payment. (2) A payment claim: (a) must identify the construction work (or related goods and services) to which the progress payment relates, and (b) must indicate the amount of the progress payment that the claimant claims to be due (the "claimed amount"), and (c) must state that it is made under this Act. ... (5) A claimant cannot serve more than one payment claim in respect of each reference date under the construction contract. (6) However, subsection (5) does not prevent the claimant from including in a payment claim an amount that has been the subject of a previous claim. ... 14 Payment schedules (1) A person on whom a payment claim is served (the "respondent") may reply to the claim by providing a payment schedule to the claimant. (2) A payment schedule: (a) must identify the payment claim to which it relates, and (b) must indicate the amount of the payment (if any) that the respondent proposes to make (the "scheduled amount"). (3) If the scheduled amount is less than the claimed amount, the schedule must indicate why the scheduled amount is less and (if it is less because the respondent is withholding payment for any reason) the respondent's reasons for withholding payment. ... 17 Adjudication applications (1) A claimant may apply for adjudication of a payment claim (an "adjudication application") if: (a) the respondent provides a payment schedule under Division 1 but: (i) the scheduled amount indicated in the payment schedule is less than the claimed amount indicated in the payment claim, or (ii) the respondent fails to pay the whole or any part of the scheduled amount to the claimant by the due date for payment of the amount, or (b) the respondent fails to provide a payment schedule to the claimant under Division 1 and fails to pay the whole or any part of the claimed amount by the due date for payment of the amount. (2) An adjudication application to which subsection (1) (b) applies cannot be made unless: (a) the claimant has notified the respondent, within the period of 20 business days immediately following the due date for payment, of the claimant's intention to apply for adjudication of the payment claim, and (b) the respondent has been given an opportunity to provide a payment schedule to the claimant within 5 business days after receiving the claimant's notice. (3) An adjudication application: (a) must be in writing, and (b) must be made to an authorised nominating authority chosen by the claimant, and (c) in the case of an application under subsection (1) (a) (i)-must be made within 10 business days after the claimant receives the payment schedule, and (d) in the case of an application under subsection (1) (a) (ii)-must be made within 20 business days after the due date for payment, and (e) in the case of an application under subsection (1) (b)-must be made within 10 business days after the end of the 5-day period referred to in subsection (2) (b), and (f) must identify the payment claim and the payment schedule (if any) to which it relates, and (g) must be accompanied by such application fee (if any) as may be determined by the authorised nominating authority, and (h) may contain such submissions relevant to the application as the claimant chooses to include. (4) The amount of any such application fee must not exceed the amount (if any) determined by the Minister. (5) A copy of an adjudication application must be served on the respondent concerned. (6) It is the duty of the authorised nominating authority to which an adjudication application is made to refer the application to an adjudicator (being a person who is eligible to be an adjudicator as referred to in section 18) as soon as practicable. 44It seems to me that, because s 13(5) prevents (with a presently irrelevant exception for which subs (6) provides) the service of more than one payment claim per reference date per construction contract, and because the right to adjudication "of a payment claim" is clearly referable to a payment claim that complies with the various requirements of s 13, there can only be one adjudication application for any particular payment claim for any particular contract. 45The proposition that there may be multiple adjudication applications in respect of different parts of a payment claim seems to me to be completely inconsistent with the underlying objective of the Act, which is to provide an enforceable right to progress payments and a speedy and relatively cheap and efficient means for enforcement of those rights. It also seems to me to be inconsistent, if not directly then at least by implication, with the approach of the plurality (Macfarlan JA and Handley AJA) in Dualcorp Pty Ltd v Remo Constructions Pty Ltd (2009) 74 NSWLR 190, where their Honours expressed a clear view against the repetitious lodging of payment claims seeking to enforce the same claim. It may be noted that Allsop P concurred in the result, although for somewhat different reasons. 46Thus, it seems to me, the better view of s 17(1) is that there can only be one adjudication application for any one payment claim. To put it another way, it seems to me that s 17(1) does not authorise the lodging of multiple adjudication applications in respect of the one payment claim. 47On that basis, the adjudicator was required to do as he did, and to consider whether the objection to jurisdiction was good. It is clear that an adjudicator's decision that he does have jurisdiction cannot bind the court. See Chase at [97] to [101] (Basten JA, with whom on this point I agreed). 48It is necessary to draw attention to the fact that the primary position taken by Nebax is that it had lodged one only payment claim, consisting of five separate subclaims. Even if that were not its position, I would so conclude. As I have said, I read the directions to which it referred in submissions as relating to the form of the payment claim, and not as to some apparent creation of a right expressly forbidden by s 13(5) of the Act.
Natural justice 49In this case, the adjudicator clearly considered that the objection to jurisdiction was valid at the level of principle. That is to say, he seems to have considered that if there were in truth five adjudication applications relating to the one payment claim arising under the one contract, then there would be a jurisdictional issue. 50The adjudicator dealt with this at paras 27 to 40 of the reasons annexed to his determination. I set out paragraphs 27 to 38, which constitute the essence of his reasoning: 27. This application is one of five Adjudication Applications submitted by the Claimant to the Authorised Nominating Authority. Each application was submitted separately by the Claimant on 24 November 2011. 28. Applications 620 to and including 623 relate to the one contract, namely the platform resurfacing contract, in accordance with the Respondent's submissions. They all refer to being part of a progress claim numbered 18, as submitted by the Claimant to the Respondent on 31 October 2011. Application 624 is obviously not related to the previous 4 claims given its unique contract number. 29. Progress claim 18 is a reference number contained on each Payment Claim. The subsequent individual tax invoices associated with the individual Payment Claims contain a unique reference number which ultimately is associated to each individual Adjudication Application. The fact that each refers to being a part of progress claim 18 is more of a reference to the claims relation with the head contract. Each Payment Claim made under the Act is unique to a separable and specific contract, which I shall explain in due course. 30. The Act prevents a Claimant submitting more than one Payment Claim in any one reference period under the contract. 31. The Respondent contends that, to the extent progress claim 18 is one single Payment Claim, the Claimant is only entitled to submit one application to adjudication under section 17 of the Act in relation to that Payment Claim. 32. The Respondent concludes that noting in the Act entitles a claimant to subdivide any one Payment Claim and issue numerous Adjudication Applications to be determined at the same time. 33. Section 17 of the Act contemplates one adjudication application for each Payment Claim for each reference date under a contract. 34. The Construction Contract is made up of 25 separable portions with each portion relating to a different specified railway station. 35. It is clear that the parties wished to treat each station as a separable and independent portion of the contract, with individually assigned contract values for each station. The Construction Contract states that the tender price for each of the separable parts must be independent and separable. 36. It is apparent that the parties intention was to treat each of the 25 independent railway stations as completely separate components of an overall global contract for the resurfacing works. In fact the contract specifically identifies the 25 independent components. 37. I am satisfied that there were five different payment claims pertaining to 5 different contracts (governed by a head contract) giving rise to the five separate Adjudication Applications. 38. I am satisfied that the Construction Contract contemplated that in relation to invoicing, progress claims and subsequent payments, each of the 25 railway stations were to be treated in isolation and as a separate contract, to be governed by the terms of the head contract, namely Contract No. CW5090, Platform Resurfacing Program 2009/10. 51It will be seen that the adjudicator reasoned, based on the existence of separable parts of the works, that there were in fact 25 separate contracts: one for each separable part of the works. 52That is not an approach that either party had taken. It was not referred to at all in the payment claim, the payment schedules, the adjudication application or the adjudication response. Nor is it an approach adopted by Nebax in this court. Mr Smith, in my view entirely correctly, accepted that there was but one contract. If that concession had not been made, I would so hold: the language of the various parts of the contract documents to which I have referred makes it clear. 53In those circumstances, it seems to me, the adjudicator dealt with the objection as to jurisdiction on a basis for which neither party had contended. It is not disputed that he did not give either party notice of his intention to do so, or offer them an opportunity to be heard on the point. 54The obligation to provide natural justice, in relation to the Act, has been considered in a number of cases. I set out the relevant principles, as I understood them, in my decision Watpac Constructions NSW Pty Ltd v Austin Corp Pty Ltd [2010] NSWSC 168 at [141] to [147]. For convenience, and since I remain of the view set out in those paragraphs, I incorporate them into these reasons: [141] Hodgson JA discussed natural justice, in the scheme of the Act, in Brodyn at 441-442 [55]. His Honour said in that paragraph that an adjudication determination will be void if, among other things, "there is a substantial denial of the measure of natural justice that the Act requires to be given". [142] Any entitlement to natural justice must accommodate the scheme of the Act, including the extremely compressed timetable provided for the submission of payment schedules, adjudication applications, and adjudication responses; and the limited time (subject to the consent of the parties, which they may give or withhold at their will) for an adjudicator to determine an application. It must also accommodate the fact that, in many cases, claimants and respondents will prepare their documents themselves, and will not avail themselves of legal advice in doing so. [143] In Musico v Davenport [2003] NSWSC 977, I said at [107] that where an adjudicator is minded to decide a dispute on a basis for which neither party has contended, then natural justice requires the adjudicator to notify the parties of that intention, so that they could put submissions on it. [144] However, as I pointed out in John Goss at 716 [42], "the concept of materiality is inextricably linked to the measure of natural justice that the Act requires parties to be given in a particular case." That meant, I said, that the principles of natural justice "could not... require an adjudicator to give the parties an opportunity to put submissions on matters that were not germane to his or her decision". [145] I see no reason to depart from those views; and neither party submitted that I should. In particular, I think, my insistence on materiality is consistent with the reference by Hodgson JA in Brodyn to "substantial denial... of natural justice." [146] In this context, Gleeson CJ said in Re Minister for Immigration and Multicultural Affairs ; ex parte Lam (2003) 214 CLR 1 at 13 - 14 [37] that fairness is not abstract but practical. His Honour said that "[w]hether one talks in terms of procedural fairness or natural justice, the concern of the law is to avoid practical injustice". To like effect, Kirby J said in Minister for Immigration and Ethnic Affairs v Wu Shan Liang (1996) 185 CLR 259 at 291 that the court should not undertake the task of "combing through the words of the decision-maker with a fine appellate tooth-comb [sic], against the prospect that a verbal slip will be found warranting" the intervention of the court. [147] I accept, however, that the court should not be too ready to find that a denial of natural justice was immaterial; that it had no real or practical effect; or that (in the present context) there was nothing that could have been put on the point in question. But it remains the case, I think, that the denial of natural justice must be material, and that submissions that could have been put might have had some prospect of changing the adjudicator's mind on the point. 55Prima facie, therefore, the adjudicator did deprive the parties - in particular RailCorp - of natural justice. Was that material? Could submissions have been put that might have persuaded him to change his mind? In my view, each of those questions should be answered "yes". 56Had the matter been raised, it would have been open to RailCorp to take the adjudicator to the relevant portions of the contract to which I have referred already; in particular, the insistence, in the letter of 15 December 2009, that there was one contract for the specified lump sum; and the insistence and the acceptance, in the form of tender, that the contract was to be constituted by the tender documents as specified. It would also have been open to RailCorp to take the adjudicator in more detail to the provisions of Part B2 of the tender schedule, and to the relevant provisions of the contract, to show him the purposes for which the contract works under the one contract were it to be divided into separable portions. 57The adjudicator may or may not have accepted those submissions. If he did, he should not have concluded, for the reasons that he did, that he had jurisdiction. If he did not, then on the view I have taken, it would not matter because, as I have said, he could not determine his own jurisdiction conclusively. But the salient point is that as proceeding as he did, the adjudicator deprived RailCorp of the opportunity to put submissions, that in my view, would have had force and, indeed, should have persuaded him to a view different to the one that in fact he expressed. 58Thus, I conclude, there was a material denial of natural justice. 59It is clear that a material denial of natural justice renders the determination void. That proposition is supported by the authorities (including Brodyn and Chase ) and was not controverted. 60As I have said, Mr Smith submitted that it would have been open to his client to rely on the so-called direction, and on the submission of separate individual tax invoices each described as a payment claim, to argue that there would have been, or were, separate reference dates under the one contract. I do not think that this argument is sound. But the point is not whether or not it is sound. The point is, as I have indicated, whether the parties were given an opportunity to address the issue. Certainly, I am not persuaded that the argument is indubitably correct, so that the loss of the ability to put submissions had no practical consequence in terms of outcome. I say that for reasons that I think I have indicated, including of course that the proposition is inconsistent both with the language of the contract and with s 13(5) of the Act, and I have grave doubts that the power vested in the contract administrator to give directions could be intended to vary the contract, let alone to set at nought, a mandatory requirement of the Act.
Conclusion 61For those reasons, my present view is that RailCorp is entitled to the relief that it seeks. It is not necessary, having regard to what I have just said, to look at the separate s 13(5) argument, which would arise only if I had come to a different view on the matters that I have dealt with so far. 62Bearing in mind the procedural difficulties, the course that I propose to take, having given these reasons, is to continue the interlocutory relief already granted and to stand the matter over to a convenient date in the new term so that the second and third defendants can be heard (should they so wish) or so that, if they do not wish to be heard, appropriate orders can be made. Thus, apart from continuing the present interlocutory regime, I reserve all further orders.
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: 30 January 2012
Rail Corporation of NSW
Nebax Constructions
[2010] NSWCA 1990
(2004) 61 NSWLR 421
(2009) 74 NSWLR 190
(2003) 214 CLR 1
(1996) 185 CLR 259
The court continued the existing interlocutory relief and stood the matter over so the second and third defendants could be heard if they wished. It reserved all further orders. The court stated its present view that RailCorp was entitled to relief because of a material denial of natural justice, but did not make final orders at this hearing ([61]–[62]).