Richard Crookes Construction Pty Ltd v CES Projects

Supreme Court of NSW|2016-09-02|Before: McDougall J

S Robertson (Plaintiff) J Doyle (Solicitor) (First Defendant) Second Defendant (Submitting Appearance)

Solicitors: Colin Biggers & Paisley Pty Ltd (Plaintiff) Doyles Construction Lawyers (First Defendant) King Lawyers Australia (Second Defendant) File Number(s): 2016/233579

Judgment

HIS HONOUR: The plaintiff (the contractor) agreed with a developer to construct a residential apartment complex in Newcastle. It subcontracted what were in effect fit-out works to the first defendant (the subcontractor). There is no doubt that the subcontract was a construction contract for the purposes of the Building and Construction Industry Security of Payment Act 1999 (NSW) (the Security of Payment Act). These reasons deal with a dispute over an adjudicator's determination made under that Act.

Background to the dispute

The subcontract was made on 29 January 2016. Work commenced three weeks later, on 22 February 2016. The parties fell into dispute over a number of issues. On 24 May 2016, the contractor took over (or purported to take over) the subcontract works. There is a disagreement as to whether, in those circumstances, the contractor repudiated the subcontract.
On 7 June 2016, the subcontractor served on the contractor a document that was (or purported to be) a payment claim under the Security of Payment Act. The claimed amount, exclusive of GST (as most amounts in these reasons will be given: and when GST is included, I will say so) was, in round figures, $878,600.00. The subcontractor broke the claimed amount down into several components. The only items of present relevance are the claims for $794,600.00 for contract work (excluding variations), and $106,000.00 for variations.
The contractor provided a payment schedule on 22 June 2016. It stated that the scheduled amount was negative $235,900.00 (i.e., that this amount was owing to it by the subcontractor).
The dispute thereby constituted was referred to the second defendant (the Adjudicator) for adjudication. He produced a reasoned determination on 26 July 2016. After payment of the adjudication fees which exceeded $45,000.00 (all of which, he said, should be payable by the contractor), the determination was made available to the parties. The adjudicated amount (stated inclusive of GST) was, again in round figures, $573,100.00.
The contractor contends that the determination is void, essentially for three reasons. It commenced proceedings in this Court for relief in the nature of certiorari under s 69 of the Supreme Court Act 1970 (NSW); alternatively, a declaration as to invalidity; and an injunction restraining the subcontractor from enforcing the determination.
On 5 August 2016, after a contested interlocutory application, I granted injunctive relief for reasons that I then gave ([2016] NSWSC 1119). As the price of that relief, the contractor was required to pay into Court the adjudicated amount. It did so.

The real issues in dispute

The contractor submitted that the determination is void, for three independent reasons: 1. because the Adjudicator, in breach of his fundamental statutory obligation, had failed to carry out what was said to be an essential function, namely identifying what construction work, the subject of the payment claim, had been carried out and what was the value of that work, and giving reasons for his conclusion. 2. Alternatively, but for essentially the same factual reason, the determination lacked what was said to be the necessary quality of "reasonableness", as that concept is explained in administrative law cases (the contractor referred to Minister for Immigration and Citizenship v Li (2013) 249 CLR 332). 3. Again alternatively, there was no available reference date, authorising or enabling the making of the payment claim.
Mr Robertson of Counsel, who appeared for the contractor, acknowledged that the third reason was inconsistent with the decision of the Court of Appeal in Lewence Construction Pty Ltd v Southern Han Breakfast Point Pty Ltd [2015] NSWCA 288. He submitted formally that Lewence Construction was wrongly decided, whilst recognising that I was bound to follow it, as a decision of the Court of Appeal directly in point.
Mr Doyle, Solicitor, who appeared for the subcontractor, submitted that the Adjudicator had done what was necessary to fulfil his essential statutory functions, and thus submitted that the first and second grounds of challenge must fail. In the event that the challenge succeeded, Mr Doyle submitted that: 1. relief in the nature of certiorari being discretionary, the Court should withhold that relief for a number of reasons, including that the contractor lacked clean hands. 2. Alternatively, the Court should withhold that relief unless the contractor consented to an extension of time for the Adjudicator to deal with the matter, so that it could be remitted to the Adjudicator for further consideration. 3. In any event, relief should be withheld because the contractor had an adequate alternative remedy, namely commencing litigation to recover the adjudicated amount (it being common ground, of course, that the Adjudicator's determination, if valid, does not finally settle rights between the contractor and the subcontractor). 4. There was no error of law in the Adjudicator's reasons; a mistake of fact did not, Mr Doyle submitted, amount to an error of law.
Mr Doyle submitted, further, that if the Court were otherwise inclined to grant relief, it should do the following: 1. remit the matter to the Adjudicator for further consideration; or 2. order the Adjudicator to refund the amount of the fee that the subcontractor had paid. The subcontractor has not filed a cross-claim seeking that relief.
The Adjudicator, upon being served with the summons and commercial list statement, filed a submitting appearance (as is customary and entirely proper). There was nothing in the summons or the commercial list statement to indicate that any relief was sought against the Adjudicator other than the relief under s 69, or declaratory relief, to which I referred earlier. Nor was the Adjudicator (or for that matter, the authorised nominating authority) notified, by any cross-claim, of the last two claims that I have identified. Presumably, if the subcontractor's list response had been served on the Adjudicator and he had troubled to read it, he might have realised that those claims were being agitated, at least as between the contractor and the subcontractor. However, in my view, if those claims were to be made, having as they do a direct impact on the Adjudicator well beyond the quashing of the determination or the making of a declaration that it was void, he was entitled to be notified directly, and to be given an opportunity to appear and put his position. The same may be said of the authorised nominating authority.
Mr Robertson submitted that the Court should not deal with the claims identified at [11] above in the absence of a cross-summons and cross-claim list statement. He submitted, further as to the claim for an order remitting the matter to the Adjudicator for further consideration, that: 1. this could in theory be done, but not in such a way to enlarge the powers otherwise available to the Adjudicator under the Security of Payment Act; 2. on the proper construction of the relevant provisions of the Security of Payment Act, the Adjudicator would lack jurisdiction to deal with the remitted matter; and 3. in any event, the power of the Court to remit would arise only if it made an order under s 69 of the Supreme Court Act quashing the determination.
Mr Robertson observed, correctly as a matter of fact, that the first aspect of those contentions had been notified to the subcontractor's lawyers, who had disagreed, and said that there was no need for their client to proceed by way of cross-summons and cross-claim list statement.
As to the third reason, Mr Robertson submitted that his client need press only its claim for declaratory and injunctive relief, and that if it did so (and succeeded), no question of remittal of the proceedings could arise. Thus, as he put the contractor's case in final submissions, the primary relief sought was declaratory and injunctive.

Elements of a valid determination: addressing the merits of the claim

In Coordinated Construction Co Pty Ltd v JM Hargreaves (NSW) Pty Ltd (2005) 63 NSWLR 385, Hodgson JA stated at [52] that: The task of the adjudicator is to determine the amount of the progress payment to be paid by the respondent to the claimant; and in my opinion that requires determination, on the material available to the adjudicator and to the best of the adjudicator's ability, of the amount that is properly payable. … The adjudicator's duty is to come to a view as to what is properly payable, on what the adjudicator considers to be the true construction of the contract and the Act and the true merits of the claim. The adjudicator may very readily find in favour of the claimant on the merits of the claim if no relevant material is put by the respondent; but the absence of such material does not mean that the adjudicator can simply award the amount of the claim without any addressing of its merits.
Ipp JA agreed with Hodgson JA on the primary reasons that Hodgson JA had given for disposing of the appeal. However, Ipp JA expressly reserved comment on the other issues discussed by Hodgson JA, including what his Honour had said at [52].
The third member of the Court, Basten JA, did deal with the matter, and appeared to have a different view from that of Hodgson JA as to the issue to which the observations of Hodgson JA at [52] had been directed. Nonetheless, Basten JA did not disagree expressly with what Hodgson JA had said, at [52], as to the content of the Adjudicator's statutory duty.
Brereton J considered the content of an adjudicator's statutory duty in Pacific General Securities Ltd v Soliman and Sons Pty Ltd [2006] NSWSC 13 at [82]. Brereton J referred to, and expressed agreement with, what Hodgson JA had said in Hargreaves. Brereton J continued: I therefore respectfully agree with the view tentatively expressed by Hodgson JA in Hargreaves: the adjudicator's duty is to come to a view as to what is properly payable, on what the adjudicator considers to be the true construction of the contract and the Act and the true merits of the claim, and while the adjudicator may very readily find in favour of the claimant on the merits of the claim in the absence of a payment schedule or adjudication response, or if no relevant material is advanced by the respondent, the absence of such material does not entitle the adjudicator simply to award the amount of the claim without addressing its merits, which as a minimum will involve determining whether the construction work identified in the payment claim has been carried out, and what is its value.
Brereton J reinforced the point at [86]: … [T]he absence of relevant material from a respondent does not entitle the adjudicator simply to award the amount of the claim without addressing its merits, which as a minimum will involve determining whether the construction work identified in the payment claim has been carried out, and what is its value. Adoption of the other approach by an adjudicator - by allowing a claim in full just because a respondent's submissions are rejected, without determining whether the construction work the subject of the claim has been performed and without valuing it - would bespeak a misconception of what is required of an adjudicator. In traditional terms, it would be jurisdictional error resulting in invalidity.
In a later case, Plaza West Pty Ltd v Simon's Earthworks (NSW) Pty Ltd [2008] NSWCA 279, Hodgson JA said at [58] that an adjudicator who, having decided (for good reasons) that the respondent's submissions should be disregarded, thereafter simply adopted the amount specified by the claimant in its payment claim would fail to perform the statutory task of determining the amount of the progress payment (if any) to be paid.
In SSC Plenty Road Pty Ltd v Construction Engineering (Aust) Pty Ltd [2015] VSC 631, Vickery J said at [76] that adjudication of a payment claim requires at least a determination as to whether the construction work in question has been performed, and its value. Failure to do so, his Honour said, would be "a failure to comply with a basic and essential requirement of the [Victorian equivalent of the Security of Payment Act]". After a review of the authorities (including those to which I have referred), Vickery J said at [100] that the Adjudicator's task was to make the determinations, of what work had been done and its value, "by arriving at a rational assessment of value on the basis of the evidence".
Vickery J summarised what, in his view, was required of an Adjudicator as follows at [101]: [101] Drawing the threads together, the following may be said of an adjudicator's assessment of a payment claim under the Act in Victoria: (a) The adjudicator is required to determine and apply what the adjudicator considers to be the true construction of the Act in the light of the current case law. (b) The adjudicator is required to determine and apply what the adjudicator considers to be the true construction of the construction contract. (c) In addition to the matters to be determined and considered under ss 23(1) and (2), and excluded under s 23(2A) of the Act, an adjudication requires, as a minimum, the following critical findings to be made (the "critical findings"): (i) a determination as to whether the construction work the subject of the claim has been performed (or whether the relevant goods and services have been supplied); and (ii) the value of the work performed (or the value of the goods and services supplied). (d) Construction work carried out or related goods and services supplied are to be valued in accordance with the terms of the construction contract (if the contract contains such terms) pursuant to ss 11(1)(a) and 11(2)(a). (e) In the absence of any express provision in the construction contract providing a mechanism for an adjudicator to undertake the assessment of value, the valuation assessment is to be undertaken in accordance with s 11(1)(b) (for work) and s 11(2)(b) (for goods and services), having regard to the matters set out in those sub-sections, namely: (i) the contract price for the work or the goods and services; (ii) any other rates set out in the contract; (iii) if there is a claimable variation, any amount by which the contract price or other rate or price set out in the contract, is to be adjusted as a result of the variation; and (iv) if the work or goods are defective, the estimated cost of rectifying the defect. (f) If a construction contract contains a binding schedule of rates within the meaning of s 11(1)(b)(ii) (for work) and s 11(2)(b)(ii) (for goods and services), the adjudicator is required to have regard to the schedule in assessing value if s 11(1)(b) or s 11(2)(b) apply. Further, the adjudicator should state in the adjudication determination whether and how the schedule of rates was applied in the assessment of value, if it in fact was applied, or state why the schedule of rates was not applied. (g) However, without measures, evidence or submissions being provided to the adjudicator in a coherent fashion in respect of defined categories of work (or goods and services) the subject of a contractual schedule of rates, in most cases it would not be possible for an adjudicator to safely apply the schedule in assessing the value of the claim. In such circumstances the adjudicator may have regard to a schedule of rates, but would not be remiss in not applying it. (h) The adjudicator is obliged to make the critical findings on the whole of the evidence presented at the adjudication. (i) The adjudicator, having decided that the respondent's submissions and material should be disregarded, cannot simply adopt the amount claimed by the claimant (for example, in the payment claim or in the adjudication application). (j) The adjudicator must proceed to make the critical findings by: (i) fairly assessing and weighing the whole of the evidence which is relevant to each issue arising for determination at the adjudication; (ii) drawing any necessary inferences from the evidence, or from the absence of any controverting material provided by the respondent, including an inference that if there is no controverting material, no credible challenge can be made to the value of the claim advanced by the claimant. Such an inference may be considered in the context of the evidence as a whole; (iii) arriving at a rational conclusion founded upon the evidence; (iv) in so doing, is not called upon to act as an expert; and (v) is not entitled to impose an onus on either party to establish a sufficient basis for payment or a sufficient basis for withholding payment. (k) Pursuant to s 23(3) of the Act, the adjudicator must include in an adjudication determination both the reasons for the determination and the basis upon which any amount or date has been decided. In providing these reasons the adjudicator must summarise the central reasons for the making of the critical findings in the adjudication determination with as much completeness as the time permitted under the Act will allow.
In Suprima Bakeries Pty Ltd v Australian Weighing Equipment Pty Ltd [2016] NSWSC 998, I referred at [39] to the judgment of Vickery J in SSC Plenty. I said at [40] that there was sufficient similarity between the legislation considered by his Honour (the Building and Construction Industry Security of Payment Act 2002 (Vic)) and the Security of Payment Act "to make his Honour's observations directly applicable" to the Security of Payment Act.

The Adjudicator's reasons

The Adjudicator commenced by setting out (paras 1 to 4) the contractual background. He then identified the payment claim and its breakup (paras 5, 6), and the payment schedule and its breakup (paras 8, 9). He summarised the monetary differences between the parties at para 10. At para 11, he referred to a fundamental difference between the parties: namely, the contractor's claim that he lacked jurisdiction because there was no relevant reference date (the Lewence Construction point).
The Adjudicator identified the adjudication application and response at paras 12, 13. He then turned to, and dealt with, the jurisdictional issue (paras 14 to 29). Although the jurisdictional issue has no present relevance, it will be necessary to return to some of the paragraphs in question, to deal with submissions that Mr Doyle put.
The Adjudicator then returned to the monetary differences between the parties. He set out at para 30 the parties' breakup of the contract sum. At para 31, he set out a breakup of the payment claim which referred to the parties' allocation of elements of the contract sum as set out in the preceding paragraph of his reasons.
At para 32, the Adjudicator identified the factual material on which the subcontractor justified its claim. That material, he said, comprised: 1. a statutory declaration made by the subcontractor's contractual representative, Mr Harry Gavrilos, and the documents referred to in that declaration; and 2. a series of photographs that the Adjudicator identified in a table forming part of para 32.
In para 33, the Adjudicator dealt with that material. He said that he did "not find any of this material helpful in coming to a determination as [to] the value of the construction work the claimant had completed at the time of the claim. He added that the "multitude of photos referred to", whilst they did show "that a significant amount of construction work has been completed", were not of assistance "in establishing any evaluation".
Further, and as to the photographs identified in the table to para 32, the Adjudicator made "the same comments as made earlier … [t]hey do not assist me in coming to any value for the construction work referred to in that table".
The Adjudicator commented at para 33.2 on photographs relating to a claim exceeding $338,300.00 for the supply and installation of partition walls. He noted that those photographs were said to show "that 57% of all of these walls have been completed". However, he said, on examination "this material far from establishes that this substantial amount of work has been completed".
The Adjudicator concluded para 33 by saying: In summary, put simply, this material is far from convincing. All of it appears to have been generated by the claimant. I suggest it would have been better for an independent party to provide supporting evidence for these valuations. For example, a report by an independent quantity surveyor.
The claim for $338,300.00 for the supply and installation of partition walls is significant. That amount formed part of the amount claimed, $794,600.00, for contract works (excluding variations). Arithmetically, it constituted about 43% of the total of that part of the claim. The Adjudicator said, in substance, that the material relied upon to support the proposition that this work had been completed "far from establishes" that point.
At para 34, the Adjudicator referred to other material which, he said, was "more persuasive". The first part of that material consisted of the assessments made from time to time by the contractor of the amount of work completed. The Adjudicator noted that those assessed percentages had diminished over the month from 25 April to 25 May 2016, and that the same pattern, of diminishing assessments, month by month, of percentage of work completed, appeared from earlier assessments. The Adjudicator summarised that material in a schedule to his reasons. Clearly enough, he found that the contractor's assertions as to the percentage of work completed were unreliable, involving as they did the proposition that the percentage completed had dropped from month to month.
The Adjudicator then referred, at the end of para 34, to some invoices provided by the subcontractor: Finally, the claimant has also included its invoices for the supply of labour and materials during its involvement with the contract. The claimant has not totalled these amounts but an examination of them indicates that well over $500,000.00 (excl GST) has been incurred by the claimant in both labour and material costs.
Those invoices appeared to have been submitted by subcontractors to the subcontractor, for work done and materials provided by those sub- subcontractors.
The Adjudicator then turned, at paras 35 to 36, to material on which the contractor relied. It is clear that he found it unpersuasive.
The Adjudicator's reasons for coming to the view he did, as to the value of the construction work completed (excluding variations) were set out at para 38: 38. In summary, the claimant says that to 24/5/16 it had carried out $794,624.30 in value of construction work. In support of its assessment, it has provided the following material: 38.1 A number of drawings and other document tied to a multitude of photographs. 389.2 [sic] A series of invoices of invoices as to materials and labour. As for the respondent, apart from its written submissions, it has only provided the material considered at 36. I do not [sic] this material persuasive as neither do I find the material referred to at 38.1. I am then left with the material referred to at 38.2 wherein the claimant has provided a significant number of invoices, albeit some of which have been replicated, both for materials and labour. Notwithstanding, these invoices, from others, indicate the claimant has carried out a significant amount of labour and supplied a significant amount of materials for the construction work under consideration. Moreover, it represents some independent evidence, albeit imperfect, and most likely including costs relating to variations to the works but still in support of the claimant's position. I also note that the respondent has not considered this material whatsoever in its adjudication response. I am also mindful of the respondent's assessment of the current program by comparison with the third. In conclusion, I prefer the claimant's position and therefore determine it is entitled to this part of its claim, being $794,624.30.
That is the extent of the Adjudicator's reasoning on the quantity of work claimed and its value, in relation to the claim for work valued at $794,600.00.
It seems to be reasonably clear that the "drawings and other document tied to a multitude of photographs" referred to at para 38.1 were the drawings and photographs referred to, and found to be unhelpful, at para 33. That follows from the footnoted references. Mr Doyle did not submit otherwise.
The "invoices of invoices as to materials and labour" are those referred to at para 34. Again, this appears from the footnoted references. Again, Mr Doyle did not contend otherwise.
The Adjudicator then turned his attention to the claim for variations, in the further sum of $106,000.00. In the course of dealing with the variations claim, the Adjudicator referred to a statutory declaration by the contractor's project manager and said at para 42.1 that it was "inconsistent with the facts" and, in insignificant parts, "implausible".

The parties' submissions

Mr Robertson submitted that the Adjudicator's reasons did not come up to the minimum standard required. He relied on what Brereton J had said in Pacific General and Vickery J had said in SSC Plenty. Mr Robertson submitted that the Adjudicator had failed to give any reason for concluding, on the basis of sub-subcontractors invoices that "totalled … well over $500,000.00" but included invoices that had been "replicated", and others that "most likely" related "to variations to the works", that the claim for $794,600.00 was made out. Mr Robertson submitted that this failure of the Adjudicator to grapple with the essential statutory task of deciding what work had been completed and what was the value of that work was compounded, because in his view there was apparently nothing to establish that a significant component of the total, $338,300.00, had even been completed.
Mr Doyle submitted that in essence the Adjudicator was faced with two competing analyses. The subcontractor's material asserted that the work had been done, and that it was worth the amount claimed. The contractor's material asserted that the work had not been done, and that in fact the contractor was owed money. Mr Doyle submitted that the Adjudicator was faced with a choice between these two analyses. In circumstances where he had rejected the contractor's analysis, for the reasons given, Mr Doyle submitted that it was open to the Adjudicator to do as he did, and prefer the analysis of the subcontractor.
Mr Doyle submitted that it was open to the Adjudicator to form the view that he did of the merits of the contractor's payment schedule and adjudication response. (Mr Robertson did not submit otherwise.) In those circumstances, Mr Doyle submitted, the Adjudicator had done all that the Security of Payment Act required, because he had given adequate reasons for his rejection of the contractor's stance.
It is convenient to say, at this point, that I accept that the Adjudicator gave adequate reasons for rejecting the approach of the contractor. Whether or not those reasons were valid is not a matter with which I am concerned.

Decision

In my view, the Adjudicator's reasons demonstrate that he did not carry out the minimum content of the statutory task entrusted to him: as Brereton J said in Pacific General at [86], "determining whether the construction work identified in the payment claim has been carried out, and what is its value".
In so far as it claimed for contract work (i.e., for work other than variations), the payment claim was for $794,600.00. Of that sum, $338,300.00, or about 43%, related to the supply and installation of partition walls. The evidence relied upon to show that those walls had been supplied and installed failed to satisfy the Adjudicator that this was so.
I accept of course that the Adjudicator referred to invoices from sub-subcontractors which "totalled … well over $500,000.00". Leaving aside for the moment the deficiencies in that material as proof of the total claim, the Adjudicator did not identify whether, or to what extent, those invoices supported the claim for $338,300.00 for the supply and installation of partition walls.
Thus, having rejected as "far from" persuasive the material relied upon to support the proposition that those walls had been supplied and installed, the Adjudicator did not say why it was that such evidence as he did find persuasive - the sub-subcontractors' invoices - sufficiently supplemented this deficiency of proof. Nor is that proposition self-evident.
Returning to the totality of the claim for $794,600.00, the invoices at best could support no more than whatever their total was, of which we know only that it was "well over $500,000.00": not the full amount of this aspect of the payment claim. The Adjudicator did not explain how he moved from whatever the total of those invoices was to the conclusion that, somehow, the whole of this part of the payment claim had been made good.
Further, the Adjudicator did not deal with the consequence of his finding that the invoices in question included some that were "replicated" (by which, I take it, he meant duplicated claims). Nor did he demonstrate how many of those invoices, in number or in value, related to variations. The first point is significant because, without eliminating double counting, there is simply no demonstration of the extent to which the invoices support the relevant part of the claimed amount. The second point is relevant for the same reason, in particular bearing in mind that variations (for which a total of $106,000.00 was claimed) were dealt with separately in the Adjudicator's reasons.
Put briefly but not, I think, unfairly, the Adjudicator's reasons go no further than saying that, for the total of $900,600.00 claimed, there were supporting sub-subcontractors' invoices for some amount well exceeding $500,000.00.
In those circumstances, the conclusion that the invoices are sufficient proof for the bulk of the claim - $794,600.00 - is both counter-intuitive and entirely unsupported by any reasoned analysis.
I have noted Mr Doyle's submission that the Adjudicator was confronted with two competing (indeed, totally conflicting) analyses, and that, having rejected one (the contractor's), he was entitled to choose the other (the subcontractor's). I think that in substance, this is what the Adjudicator did. That is why, in my view, he did not carry out his essential statutory function.
Adapting what Hodgson JA said in Plaza West at [58] (see at [21] above), it appears that the Adjudicator, having decided that the contractor's submissions should be disregarded, simply adopted the subcontractor's valuation of its claim. In doing so, he failed to perform the task required: to determine the amount of the progress payment (if any) to be paid having regard to the matters set out in s 22(2) of the Security of Payment Act. Alternatively, adapting what Vickery J said in SSC Plenty at [100], the Adjudicator's reasons do not demonstrate any rational assessment of value. They do not disclose any process of reasoning based on the only factual material that the Adjudicator found (even with the flaws that he pointed out) to be persuasive, leading to the conclusion that this aspect of the payment claim had been proved.
The consequence is that, subject to the various arguments raised by Mr Doyle, the contractor has made good its claim to relief.

Remittal of application to Adjudicator

I should start by saying that in my view, this question does not arise. A grant of the declaratory and injunctive relief that the contractor seeks would have the consequence that there is no need to make an order in the nature of certiorari, calling up and quashing the Adjudicator's decision. If that is not done, no question arises as to whether there is power to make a remitting order, and, if there is, what would be its effect.
In circumstances where the subcontractor made an informed choice not to file a cross-summons and cross-claim list statement seeking an order remitting the matter to the Adjudicator, or indeed its claim that the adjudication fee be refunded, I do not think that I should make the orders sought by it even if I were persuaded that they are appropriate orders to make in the present circumstances. And I am fortified in that view because the question of remittal was not fully argued. As will be apparent from what follows, the question is a difficult one.
There are three decisions at least that support the proposition that, upon a determination being quashed, the adjudication application may be remitted to the Adjudicator for further consideration. Those decisions are: 1. the decision of Vickery J in Metacorp Australia Pty Ltd v Andeco Construction Group Pty Ltd (No. 2) (2010) 30 VR 141 at 195; 2. the subsequent decision of Vickery J in Maxstra Constructions Pty Ltd v Joseph Gilbert [2013] VSC 243; and 3. the decision of Emmett AJA in Probuild Constructions (Aust) Pty Ltd v Shade Systems Pty Ltd [2016] NSWSC 770.
In Metacorp (No. 2), Vickery J was concerned with the nature of the relief to be granted following his decision in Metacorp Australia Pty Ltd v Andeco Construction Group Pty Ltd (2010) 30 VR 141. In that case, his Honour held that an adjudicator had failed to afford natural justice to the plaintiff. In Metacorp (No. 2), Vickery J concluded that the determination was void.
At [18], Vickery J said that if certiorari were granted, "the matter is open to be remitted to the original tribunal to be determined in accordance with law, which is both available and appropriate in the present case".
It may be accepted, at the level of basic principle, that if the order of an inferior court or tribunal is called up into a superior court, and the decision quashed (which is the process involved in certiorari), the matter may be remitted to the inferior court tribunal or court to be decided according to law. However, whether that procedure is available, either at common law or on the making of an order in the nature of certiorari under s 69 of the Supreme Court Act, where the "inferior tribunal" in question is an adjudicator appointed under the Security of Payment Act, is in my view a problem that requires some consideration.
It is apparent from what Vickery J said in Metacorp (No. 2) at [19] that his Honour thought that the course of remitting the matter to the Adjudicator to be determined in accordance with law was appropriate because "Metacorp should be afforded a chance to put such appropriate submissions and facts before the adjudicator … as it may be advised", as to the point on which, Vickery J had held, it had been denied procedural fairness.
In Maxstra, Vickery J referred at [72] to what he had said in Metacorp (No. 2). He noted that remitting the matter to the original tribunal "is the usual form of relief when certiorari is granted". At [73], Vickery J said: Although some elements of timing found in the provisions of the Act would tend to suggest that the remedy of remitting a matter back to the original tribunal for determination would not be open as a matter of implication, in my opinion, no such implication can arise.
His Honour did not elaborate on this point.
At [74], Vickery J noted that it had been held that determinations of an adjudicator were amenable to certiorari (Grocon Constructors Pty Ltd v Planit Cocciardi Joint Venture (No. 2) (2009) 26 VR 172).
At [75], Vickery J concluded: It follows that an order remitting a matter back to the original tribunal for determination in accordance with the law, being a usual form of relief which may be granted on the quashing of the original decision on the grant of certiorari, would similarly remain available as an incident of the relief, untouched by any implication in the Act to the contrary.
In Probuild, Emmett AJA concluded that the determinations of adjudicators were reviewable in this Court for error of law on the face of the record. It is apparent that his Honour did not intend to restrict review to cases of jurisdictional error; the error of law that he found in the adjudicator's reasons went to the construction and application of the particular construction contract. In those circumstances, Emmett AJA held that relief in the nature of certiorari should be granted. As part of that relief, he ordered "that the matter of the adjudication be remitted to the Adjudicator for further consideration and determination according to law".
Emmett AJA gave no reasons for making the order remitting the matter to the adjudicator for further consideration and determination according to law. It would appear that his Honour regarded this as an ordinary incident of the grant of relief by way of (or in the nature of) certiorari.
It is, with respect, undoubtedly correct to say that in many cases where certiorari is granted (or where an order in the nature of certiorari is made), so that the decision of the inferior court or tribunal is quashed, the superior court will remit the matter to the inferior court or tribunal to be decided in accordance with law. That would normally be done where, for example, the error that supported the making of the order was non-jurisdictional.
The point is illustrated by the actual decisions of Vickery J in Maxstra and Emmett AJA in Probuild. In the former case, Vickery J proposed to remit the matter to the adjudicator so that the plaintiff could be given an opportunity to be heard on the point on which it had earlier been denied that opportunity. In Probuild, the error of law being non-jurisdictional, Emmett AJA concluded that the adjudicator should reconsider the matter but on the basis of the correct interpretation of the contract.
However, where relief is granted in this Court (or an equivalent superior court of record) on the basis that the inferior court or tribunal lacked jurisdiction to deal with the matter, the only necessary order is that the decision be quashed. There is no point in remitting the matter, because the outcome is necessarily determined by the quashing order.
Further, the circumstances in and means by which a superior court might return a matter to an inferior court or tribunal after granting relief by way of certiorari are not entirely simple. McPherson JA referred to this in R v T (1995) Qd R 192 at 194. His Honour said: Under the general law a court on setting aside a judgment or conviction on an application for certiorari or other prerogative writ … or prohibition would if necessary issue a writ of procedendo to return the proceeding to the inferior court or tribunal to be dealt with there.
McPherson JA referred to American authority and practice, commenting that in the United States, the function of the writ of procedendo was said to be "to "hand back" jurisdiction to the trial court… not to dictate what the judgment should be, but simply to enable jurisdiction to be resumed and judgment to be entered in the court below".
McPherson JA referred also to the judgment of Madden CJ in R v Wallace, ex parte O'Keefe [1918] VLR 285 at 306. The facts of that case are somewhat unusual. In brief, the Full Court decided (by majority) that certiorari should be granted against the Insolvency Court, and the order of that Court should be quashed. Their Honours did not say what should happen thereafter. However, Madden CJ referred to earlier authority, the judgment of Lord Tenterden CJ (with whom the other members of the Court agreed) in R v Neville (1831) 2 B & Ad 299. His Lordship there said that: I think we ought to make the rule absolute for a procedendo. It is undoubtedly a general rule that if a record be filed in this Court upon a certiorari it cannot be sent back or remanded, but the rule applies to cases where this Court has the power to execute the judgment of the inferior Court. Here we have not the power… so that, in the event that has happened, this court cannot enforce the execution of the judgment. In order to prevent a failure of justice, therefore, I think we ought to send the record back to [the inferior court], in order that that Court may cause it to be enforced, as they would have done if it had never been removed.
It is apparent, I think, that his Lordship considered that if, the decision of an inferior court having been quashed, it was necessary for the inferior court to reconsider the matter, that would require a separate writ, of procedendo, to get the record back to the inferior court. His Lordship does not appear to have considered that remittal was available simply on, and as part of, the making of an order quashing the decision.
In short, the proposition that, where an order has been made quashing the judgment of an inferior tribunal, it is customary to send the matter back to the inferior tribunal to be decided according to law, may collapse into one, or conflate, the separate processes originally effected by the writ of certiorari and the writ of procedendo. The function of the former writ was to get the record of the inferior tribunal into the superior court. If, that having been done (the court having been "certified", or informed, of what had happened in the inferior tribunal), the decision of the inferior tribunal was quashed, the latter writ could come into play. If the superior court could not make an appropriate order finally disposing of the matter, it was required to send the matter back to the inferior tribunal. And to do so, it called in aid the writ of procedendo.
Do the general powers of this Court under s 69 of the Supreme Court Act include a power to grant both forms of relief on the one hearing, without separate application being made by a proper process? Since that question was not explored in submissions, I do not propose to explore it in these reasons.
Whether the matter should be remitted to the Adjudicator depends on among other things, on the time limit in s 21(3) of the Security of Payment Act. On the proper construction of the statute, is that limit an essential preliminary to, or only a procedural condition of, the exercise of a statutory power or authority? See Project Blue Sky Inc v Australian Broadcasting Authority (1998) 194 CLR 355 at [92] (McHugh, Gummow, Kirby and Hayne JJ; and note also the view (although in dissent) of Brennan CJ at [37] to [39]).
Proper consideration of this question would require attention to a number of decisions on the Security of Payment Act. For example, in MPM Constructions v Trepcha Constructions [2004] NSWSC 103, I concluded that a determination made outside the ten business day time limit imposed by s 21(3) was, nonetheless, valid and enforceable. Basten JA appears to have come to a similar view in Cardinal Project Services Pty Ltd v Hanave Pty Ltd (2011) 81 NSWLR 716 at [59]. However, his Honour dissented in that case, and Tobias AJA, who agreed with Macfarlan JA in the disposition of the appeal, expressed a contrary view at [115], [116].
Neither Mr Robertson nor Mr Doyle addressed on these matters. Mr Doyle's submissions were limited to reliance on the brief reasons given by Vickery J in Metacorp (No. 2) and in Maxstra, and on the order made by Emmett AJA in Probuild. Mr Doyle did not consider the extent to which the making of an order as sought would be either consistent with, or indeed permitted by or effective for the purposes of, the Security of Payment Act.
Mr Robertson's submissions were more helpful. He accepted, at the level of principle, that if the Court were to make an order in the nature of certiorari, it could order that the matter be remitted to the Adjudicator. However, Mr Robertson submitted, no such order could be effective to give the Adjudicator a power which otherwise he did not have.
Although Mr Doyle contended that the Court should remit the matter to the Adjudicator, his client had made a considered decision not to cross-claim for such relief. Nor did Mr Doyle explain how such an order could be made where the only relief granted was declaratory and injunctive relief. As I have said, I take the view that an application to have the matter remitted to the Adjudicator should have been made by cross-claim, because it is a matter in which the Adjudicator has an interest over and above that indicated by his submitting appearance. (Of course, this is so a fortiori in respect of the claim, also made, for a refund of the adjudication fee.)
In circumstances where the issue is not squarely raised by an appropriate quasi-pleading, and where it was not fully or properly argued, I have come to the conclusion that I should not decide it.

"Remission would be futile"

Mr Doyle submitted that there was no point in interfering with the decision of the Adjudicator because remittal back to the Adjudicator would be unlikely to change the result. The obvious answer to that submission is that, for the reasons given, I do not propose to make any such order, given the subcontractor's failure to seek it by way of cross-claim.
In any event, it is by no means obvious that the result would be the same. The Adjudicator's view of the lack of probative value of much of the subcontractor's evidence, with the consequence that he was driven to rely on the sub-subcontractors' invoices as the evidentiary foundation for his conclusion, demonstrates that. In circumstances where the subcontractor's evidence on the point did not satisfy the Adjudicator that a very substantial component of the claim (supply and installation of partition walls, 43% of the total claim excluding variations) had even been completed, it is at least arguable that a reasoned analysis of the whole of the material could lead to a conclusion different to that expressed by the Adjudicator.

Clean hands

Mr Doyle relied on unfavourable observations made by the Adjudicator as to the contractor's evidence: 1. at para 26.2, the Adjudicator said that the contractor had been "unreasonable in its assessment of the [subcontractor's] first three payment claims" (which were not the ones with which his determination was concerned); 2. the Adjudicator's conclusion at para 27 "that the [contractor] has failed to act reasonably in relation to" its decision to take the work out of the hands of the subcontractor; 3. the Adjudicator's reference at para 34 to the contractor's progressive reductions in its assessment of the percentage of work completed; 4. the Adjudicator's comments at para 38 (see at [38] above); and 5. the Adjudicator's unfavourable views as to Mr Hall's statutory declaration (para 42.1; see at [42] above).
The question of "clean hands" is not relevant to the grant of declaratory relief. However, given that the contractor also seeks injunctive relief to restrain enforcement of the determination, the point may arise.
In my view, even if the matters to which Mr Doyle referred were capable of demonstrating unclean hands (and I am by no means persuaded that they do), there is no relevant connection between them and the grant of relief that the contractor seeks. The contractor's evidence and submissions had no impact on the Adjudicator's conclusion. On the contrary, he put them to one side, and effectively found them to be of no value, for the reasons that he gave (which include the five matters set out at [88] above).
The "clean hands" defence was considered at length by Young J in FAI Insurances Ltd v Pioneer Concrete Services Ltd (1987) 15 NSWLR 552. At 561, after a detailed and penetrating analysis of the authorities, Young J said, of the "clean hands" so called "rule": However, the more one examines the rule in its application in the cases, the more one can see that it is only if the right being sought to be vindicated by the plaintiff in a court of equity, is one which if protected, would mean the plaintiff was taking advantage of his own wrong, that the court will either debar him from relief…
His Honour's summary is one with which I entirely agree. In the present case, Mr Doyle made no attempt to link the alleged wrongdoing of the contractor to the relief that it seeks by way of injunction. In truth, I think, that alleged wrongdoing is, at its worst, no more than what Young J, in FAI Insurances at 556, described as "general naughtiness".

"Refusal to do justice"

Mr Doyle submitted that if the plaintiff were to obtain relief, it should be on the basis that the plaintiff consent to an extension of time, under s 21(3) of the Act, for the Adjudicator to complete his determination (presumably, in accordance with law and in conformity with these reasons).
There is a well-known principle of equity that one who seeks equity must do equity. Mr Doyle cited no authority for a general expansion of that principle, to require that one who seeks "justice" in any form must offer to do "justice". Nor did his submissions explain why the interest of justice required that a plaintiff, who had successfully challenged a purported determination on the ground that it did not accord with law, should be required to give the claimant and the Adjudicator another opportunity to consider the matter.
More importantly, perhaps, the authorities dealing with the refusal of administrative law relief on discretionary grounds suggest that the interests of justice are not at large, but must take into account the statutory scheme under which the particular legislative power has been exercised. As Gleeson CJ said in Minister for Immigration and Multicultural Affairs v Wang (2003) 215 CLR 518 at [16], "[t]he content of the interests of justice … is to be determined in the light of the provisions of" the statutory scheme there under consideration.
Mr Doyle's submissions did not explain why the interests of justice required prolongation of the adjudication process, when that process has been set up to ensure a swift, although rough and ready, system for the interim determination of rights to payment under a construction contract. Nor did he explain why the interests of justice entitled his client to another opportunity to access that statutory scheme when it had available to it, on a final basis, its rights (whatever they may be) at law.

Alternative remedy

Mr Doyle submitted that relief should be refused because the contractor had an alternative remedy, namely pursuit of its rights at law.
To my mind, that submission is based on a misconception of the basis on which equitable or administrative law relief may be refused in cases where a plaintiff has available to it alternative remedies at law. The classic, perhaps paradigm, example where prerogative relief would be refused on this basis is where there is an established appellate process.
More generally, the principle applies where there is "a more convenient and satisfactory remedy" available elsewhere (the quotation comes from R v Commonwealth Court of Conciliation and Arbitration; ex parte Ozone Theatres (Aust) Ltd (1949) 78 CLR 389 at 400). Moreover, the discretion to withhold relief, if otherwise a case for its grant is made out, is a judicial discretion, not one to be exercised at large on general considerations of "fairness" (Ozone Theatres, again at 400).
Finally, under this heading, it could be said that the subcontractor equally has a remedy alternative to remission and reconsideration: namely, as I suggested at [96] above, enforcement at law of whatever maybe its rights under the contract.

No error of law

Mr Doyle submitted "that an error of act [sic] or a want or [sic] analysis or logic is not an error of law". The essence of that proposition may be accepted, at least as one of general principle. It has no application to the present case.
The contractor does not seek relief on the basis that the Adjudicator's determination is infected by some error of law (to the extent that review is available on that basis). Its case is that the Adjudicator failed to carry out his essential statutory function, namely, deciding what construction work had been completed and what was its value. That is the case that I have found has been made good.

Further declaration sought by subcontractor

Mr Doyle's written submissions put that if relief in the nature of certiorari should be granted, there should be: … a declaration that the First Defendant is entitled to request the Second Defendant to further consider the matter of the determination and to determine the same according to law…
That declaration was not sought by way of cross-claim, and for that reason alone should not be considered, let alone made. I add only that Mr Doyle's submissions did not identify the nature of the right that his client sought to have declared, or how, on the facts of this case, it could arise.

Costs

The contractor asked for its costs of the summons. Mr Doyle submitted that even if the contractor succeeded in gaining the relief that it sought, it should have those costs only up until 5 August 2016 (the date of the interlocutory hearing). From then, he submitted, the contractor should pay his client's costs, and on the indemnity basis.
The contractor's claim for costs relies on its success, and thus on Uniform Civil Procedure Rules 2005 (NSW).
Mr Doyle submitted that the matter could and should have been dealt with, on a final basis, on 5 August 2016. He noted, correctly, that I had offered that opportunity to the parties, that his client was prepared to accept it, but that the contractor was not.
There is no doubt that the primary question could have been dealt with on a final basis on 5 August 2016. The only evidence required was the determination. The proposition that Mr Robertson sought to make good, based on the determination, was either correct or not. That proposition depended on no more than careful study of the determination.
It seems that the reason that the contractor would not consent to having the matter dealt with on a final basis was that it wished to put on further evidence. That evidence, it become clear, comprised a vast quantity of material relating to the determination. That material was entirely irrelevant.
Nonetheless, Mr Robertson submitted, given that my reasons on the interlocutory application had identified the problems faced by the subcontractor, it was inappropriate for the subcontractor to seek to reargue the position.
It is not correct to say (although in fairness Mr Robertson did not submit) that my interlocutory reasons determined all issues between the parties. Principally, it did not decide whether the matter could or should be remitted to the Adjudicator. I said at [29] of those reasons: I should note that Mr Doyle submitted that, were I to come to the conclusion that the determination was void, I should remit it to the adjudicator. There are two things to be said about that. The first is that this is an interlocutory hearing, not a final hearing. The second is that the decision on which Mr Doyle relied, that of Emmett AJA in Probuild Constructions (Aust) Pty Ltd v Shade Systems Pty Ltd [2016] NSWSC 770, whilst it does propose an order for remittal to the adjudicator for reconsideration, does not offer any reasons as to why that course is available.
I was able to take that course because the matter had been dealt with on an interlocutory basis. However, had it been dealt with on a final basis, I would have dealt with that question also.
The principal outcome of the deferral of the final hearing has been that the subcontractor put on numerous submissions as to matters of discretion, remittal to the Adjudicator, and other relief, which I have dealt with above. Whether the opportunity to do so could be regarded as a "benefit" for the subcontractor is a matter of some doubt, given the facile way in which the submissions were put and the reception that has been accorded to them.
Nonetheless, in my view, the matter could and should have been dealt with on a final basis. Having said that, the reality is that the "event" for the purposes of r 42.1 which might have been thought to be predictable, based on my interlocutory decision, has now occurred.
Balancing the considerations as best I can, and taking into account the fact that the adjournment of the final hearing gave the subcontractor an opportunity to put more detailed submissions on all aspects of its case, I do not think that the contractor should have all its costs. On the other hand, bearing in mind the quality of the subcontractor's opposition, I do not think that it would be just to make any order for costs in its favour.
In the result, I think, the contractor should have its costs up until and including 5 August 2016, and there should be no order as to costs thereafter.

Conclusion and orders

The contractor has made good its case for the relief that, ultimately, it pressed as its primary case. It should have costs, to the extent that I have identified.
As the price of obtaining interlocutory relief, the contractor paid into court the adjudicated amount. Since it has now vindicated its claim on a final basis, that amount should be paid out to it.
I make the following orders: 1. declare that the determination made by the second defendant on 26 July 2016, under the Building and Construction Industry Security of Payment Act 1999 (NSW) (Security of Payment Act) is void. 2. Order that the first defendant be restrained from, by itself, its servants or agents: 1. requesting the provision of an adjudication certificate pursuant to s 24(1) of the Security of Payment Act, in consequence of the said determination; 2. filing any such adjudication certificate as a judgment for a debt in a court pursuant to s 25 of the Security of Payment Act; and 3. serving on the plaintiff any notice purporting to be given pursuant to s 24(1)(b) of the Security of Payment Act. 1. Order that the money paid into Court by the plaintiff on 5 August 2016, together with any interest accrued thereon, be paid out to the plaintiff forthwith. 2. Order the defendant to pay the plaintiff's costs up until and including 5 August 2016. 3. Make no other order as to costs. 4. Direct that the exhibits be handed out. 5. Direct that these orders be entered forthwith.

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: 02 September 2016

Honour (the Building and Construction Industry Security of Payment Act 2002(Vic)

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