Shell Refining (Australia) Pty Limited v A J Mayr Engineering Pty Limited

Shell Refining (Australia) Pty Limited v A J Mayr Engineering Pty Limited - [2006] NSWSC 94 - NSWSC 2006 case summary — Zoe

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55005/06 SHELL REFINING (AUSTRALIA) PTY LIMITED V A J MAYR ENGINEERING PTY LIMITED JUDGMENT 1 These are proceedings to have declared null and void an adjudicator's determination made under the Building and Construction Industry Security of Payment Act 1999 (NSW) (the Act). The plaintiff, Shell Refining (Australia) Pty Limited, and the defendant, A J Mayr Engineering Pty Limited, are parties to a construction contract (the Contract) pursuant to which the defendant agreed to fabricate and pre-assemble modules for use in the plaintiff's refineries in Clyde, New South Wales and Geelong, Victoria. The plaintiff appointed Aker Kvaerner Australia (AKA) to administer the Contract. 2 The defendant served on the plaintiff a payment claim, dated 30 November 2005, under the Act in the amount of $11,137,998.30 which included items E5.1 to E5.7, identified as claims for "Reimbursement of Costs, Losses and Damages", totalling $6,286,182 (inclusive of GST) (previously $5,714,711 prior to adjustments). That claim also included an amount for costs incurred by the defendant in transporting the modules to Geelong in Victoria, in particular, those costs of the journey from the border to Geelong. 3 Under cover of a letter dated 21 December 2005 the plaintiff served on the defendant a payment schedule under the Act. On 12 January 2006 an adjudication application was made by the defendant. On 13 January 2006 Philip Davenport (the adjudicator) accepted an appointment offered by the nominating authority to serve as adjudicator. On 19 January 2006, the plaintiff lodged its adjudication response pursuant to s 20 of the Act. 4 On 26 January 2006 the adjudicator made his determination (the Determination), determining the adjudicated amount to be $11,085,693 as due and payable by the plaintiff to the defendant. That amount included the amounts claimed for items E5.1 to E5.7 and the transportation costs to Victoria. 5 The plaintiff commenced these proceedings by Summons filed on 3 February 2006 seeking a declaration that the Determination is null and void. The defendant filed an adjudication certificate and in separate proceedings sought the entry of judgment in its favour in the amount determined by the adjudicator. That application will await the outcome of these proceedings. These proceedings were heard by me on 15 February 2006 when Mr M Christie, of counsel, appeared for the plaintiff and Mr M Rudge SC, leading Mr F Hicks, of counsel, appeared for the defendant. The adjudication material 6 The defendant's submission accompanying the adjudication application annexed a large volume of documents including a document entitled "Claim for Reimbursement of Costs, Losses and Damages" dated 8 August 2005 (the 8 August Claim). 7 The 8 August Claim included section 7.3, entitled "Substantiation of Costs, Losses and Damages Due to Delays and/or Disruptions". This section of the Claim referred to the various delays that the defendant claimed had occurred including: delays due to incomplete work by others; out of sequence working; inadequate and untimely access to areas and workforces; delays in the provision of necessary information and/or drawings; inadequate and inconsistent drawings; untimely and disruptive variations; acceleration of sections of the work and programming changes. After stating that the defendant had thereby incurred costs and suffered losses the Claim continued: There is no precise way to compute the costs and losses incurred for both labour and equipment due to disruption to the original program. In AJ Mayr's claim, the quantification has been derived from specific events, specific circumstances, the consequences of those events and circumstances and a degree of subjective judgment. 8 The 8 August Claim also included the following: 8 QUANTIFICATION OF COSTS, LOSSES AND DAMAGES

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In conclusion, A J Mayr requires to be placed in the financial position with this contract in which it would have been had the project not experienced disruptions and now seeks compensation for such costs, losses and damages incurred. 9 The 8 August Claim was adjusted on 29 September 2005 and 7 December 2005. Each of those adjustments applied the same methodology to that outlined in the 8 August Claim. In support of its claim before the adjudicator the defendant included all of the records progressively submitted to the plaintiff in the weekly progress reports. Those reports recorded "work achieved, the spent manhours, and the earned manhours". The defendant's submission included an explanation in respect of the use of the labour rate of $55 per hour referred to in section 8.2 in relation to labour efficiency. In that regard the submission claimed: Shell/AKA is readily able to verify the labour rate of $55.00 per hour used in the calculation of costs by dividing the total amount including in its tender for labour, by the total labour hours included in its tender. The rate is simply an average gang labour rate. Shell/AKA is also able to verify the component of the claim for incremental labour from the calculation provided and correspondence referenced in the claim. A further explanation of the various incremental labour cost claims is attached. 10 One of the documents submitted to the adjudicator by the plaintiff was the AKA letter to the defendant dated 21 December 2005 in which the following appeared: E5.1 to E5.7 Claim for Reimbursement of Costs, Losses & Damages To date we have received several unsubstantiated global claims associated with delays. Our request to have the basis of claims substantiated … has been ignored to date. Until we received (sic) adequate substantiation of the claim we are unable to assess the claims and consider whether we are able to make a determination of claims "outside the contract". On the information provided to date we are unable to assess the basis or quantification of these claims and have, as such, valued the claim as "0" in the Determination set out in ATTACHMENT 1. We point out that during the course of the CONTRACT the COMPANY has paid the CONTRACTOR's claims associated with the following prolongation costs: · Additional Management Fee costs totalling $3,531,409 above the original sum of $2,304,407 included in the Management Fee for site management, administration and site supervision. This represents a 153% increase in Management Fee payments associated with management, administration and site supervision personnel whereas the increase schedule duration of 4 months over the original 8 months schedule represents a 50% increase. · Standby costs associated with waiting time for delivery of materials, particularly pipe and fittings. · Facility Costs associated with lease and hire of temporary buildings and facilities. The making and receiving payment for such claims seems to us to be inconsistent with your global claim. Hence, we are seeking clarification on the basis of these claims totalling $5,714,711. The Determination 11 The Determination includes the following: The submissions and accompanying documents submitted by the parties fill two boxes. I have considered all the material. The fact that I do not specifically refer to any submission or document must not be taken as any indication that I have not considered it. The reason why I have not specifically referred to any submission or document is that I have not considered it of sufficient relevance to warrant specific comment.

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15 In Coordinated Constructions Co Pty Limited v J M Hargreaves (NSW) Pty Limited (2005) 21 BCL 390 Hodgson JA said: 51 That passage [referring to the first instance decision] could be read as asserting that, if a respondent to a payment claim does not raise any relevant grounds for denying or reducing the progress claim made by the claimant, then the adjudicator automatically determines the progress claim of the amount claimed by the claimant. My tentative view is that such an assertion would be incorrect. 52 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. Section 22(2) says that the adjudicator is to consider only the provisions of the Act and the contract, the payment claim and the claimant's submissions duly made, the payment schedule and the respondent's submissions duly made, and the results of any inspection; but that does not mean that the consideration of the provisions of the Act and the contract and the merits of the payment claimed is limited to issues actually raised by submissions duly made: see Minister for Commerce v Contrax Plumbing (NSW) Pty Ltd [2005] NSWCA 142 at [33]-[36]. 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. 53 Indeed, my tentative view is that, if an adjudicator determined the progress payment at the amount claimed simply because he or she rejected the relevance of the respondent's material, this could be such a failure to address the tasks set by the Act as to render the determination void.

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16 In Pacific General Securities v Soliman & Sons Pty Ltd [2006] NSWSC 13, Brereton J said: 82. I therefore respectfully agreed 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 a 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. 17 A determination under the Act may be the subject of judicial review in limited circumstances, including where it is proved that an adjudicator has failed to comply with the basic and essential requirements prescribed in the Act: Brodyn at 441, [53]. Applying the abovementioned principles to the present case, it was necessary for the adjudicator to assess the merits of the defendant's claims and determine the value of the defendant's claims in items E5.1 to E5.7 to comply with the basic and essential requirements of the Act. The plaintiff claims that the adjudicator's Failure to Address the Merits and the allowance of the Transport Claim were failures to comply with the basic and essential requirements prescribed by the Act. Failure to Address the Merits 18 The pivotal paragraph upon which the plaintiff relied in support of the claim that the adjudicator failed to address the merits of the claim is as follows: I am satisfied that the respondent did cause delay and disruption and the respondent thereby breached the Contract and caused the claimant to incur some damages of the nature claimed. Had the respondent addressed the claims and come up with a different assessment, then I might have been able to determine an entitlement different to that claimed. As it is, the respondent has not provided information which would enable me to assess the claimant's damages at a lesser amount than the amount claimed. Consequently, for a payment on account, I am satisfied that the claimed amount should be included in the calculation. 19 The plaintiff claims that from this paragraph it is clear that the adjudicator determined that: (a) the defendant incurred "some" damages of the nature claimed; and (b) the amount claimed by the defendant should be allowed because the plaintiff had not provided the adjudicator with a different assessment. It was submitted that the absence of any reference to the merits of the claim's value by the adjudicator reinforces this interpretation of the adjudicator's findings. It was submitted that the only reference to the merits of the claim in terms of value to be found in the Determination was the reference to the incursion of some damages of the nature claimed. 20 The defendant submitted that on a proper and reasonable reading of the Determination it can be seen that the adjudicator did consider the merits of the claim and that he valued the claim at the amount claimed by the defendant. It was submitted that the paragraph relied upon by the plaintiff should not be read as meaning that only some of the damages claimed were caused by the plaintiff but rather that there was some damages incurred by the defendant and they included those in E5.1 to E5.7. 21 In Brodyn Hodgson JA referred to what the adjudicator must do in fairly general terms, that is, that the adjudicator must "address the merits" of the claim. In Pacific General Securities Brereton J went further to suggest that "as a minimum" that would involve the adjudicator determining "whether the construction work identified in the payment claim had been carried out, and what is its value". The plaintiff submitted that amongst the matters relevant to addressing the merits of the claims and determining their value in this case are: (1) whether the claimant had established a nexus between delays and costs said to have been incurred; (2) if so whether all delay costs were necessarily and reasonably incurred; (3) whether the claim included inter-state construction work or related goods and services; (4) whether all the rates claimed were reasonable; (5) whether the adjudicator agreed with the "subjective judgment" of the defendant as to its methodology; and (6) whether the plaintiff had already paid the defendant amounts referable to delay damages. The defendant did not demur to this submission, however, it submitted that the adjudicator did consider these matters and did address the merits of the claims. I will now consider each of these matters in turn except the third item, which I will consider later in relation to the Transport Claim. 22 The pivotal paragraph upon which the plaintiff relied needs to be considered in the context of the whole of the relevant parts of the Determination dealing with the matters the subject of the challenge and in the context of the various matters that the plaintiff claims the adjudicator failed to address.

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Did the adjudicator fail to consider whether the plaintiff had established a nexus between delays and costs said to have been incurred? 23 The adjudicator referred to the claims made by the defendant at pages 5 and 6 of the adjudication application as "alleged causes of substantial delay". That reference is to paragraphs 2.8 to 2.10 of the application. They were: 2.8. During the progress of A J Mayr's scope of work and despite its best endeavours, A J Mayr was unable to complete work as required to meet the original project program end date of 6th July 2006, [See Volume 2 Section 5 tab no 2] due to substantial delays caused by AKA in the delivery of free issue of design information, construction materials, mechanical and electrical equipment. The cause of delays included: · Delayed delivery of design data; · Delayed delivery of structural drawings; · Delayed delivery of piping isometric drawings; · Delayed delivery of pipe fittings and valves; · Delayed delivery of pressure vessels; · Delayed delivery of pumps, motors and other mechanical equipment; and · Delayed delivery of electrical and instrumentation equipment; 2.9 A J Mayr's ability to maintain the delivery dates of the contract program was further impacted by the: · Ongoing changes to design data; · Ongoing changes to structural drawings; · Ongoing changes to piping isometric drawings; · Ongoing changes to pipe fittings and valves; · Ongoing changes to pressure vessels; · Ongoing changes to pumps, motors and other mechanical equipment; · Ongoing changes to electrical and instrumentation equipment; · Out of sequence work due to delays in delivery of free issue material; · Insufficient laydown area caused by the need for increased work-fronts established under AKA's directions; · Deficient design information; · Inconsistent and inadequate information and drawings; · Change orders in the field; · Change of sequence of work; and · Site instructions. 2.10 These assertions are not new. These causes of delay and disruption are all recorded and those records, whether made by A J Mayr or AKA have been progressively communicated to Shell through the minutes of weekly progress meetings, in weekly progress reports and correspondence. 24 The adjudicator stated that it was "apparent" to him that the defendant "incurred considerable delay and disruptions as a consequence of acts, defaults and omissions of" the plaintiff. It is clear then, that the adjudicator considered whether the delays had been caused by the plaintiff. Indeed he went further to state that insofar as any delays were the delays caused by AKA, they were the delays caused by the plaintiff. 25 The defendant relied upon the statement by the adjudicator on the first page of the Determination that he had considered all the submissions and accompanying documents submitted by the parties and the fact that he had not specifically referred to any submission or document in the Determination, should not be taken as any indication that he had not considered it. The adjudicator qualified this generality by his statement that the reason that he had not referred to any submission or document was that he had not considered it of "sufficient relevance to warrant specific comment". Such a qualification is not really helpful. It suggests that anything that is not mentioned might be relevant but not of "sufficient relevance" to be mentioned. 26 Adjudicators are under pressure to produce their determinations within tight timeframes and in large and/or complex cases that pressure can be intense. It also seems that the development of the case law in relation to the Act has not made the adjudicator's task easier. Indeed Gleeson CJ, in refusing a grant of special leave, recently observed that certain provisions of the Act that had to be construed by the New South Wales Court of Appeal "have occasioned some difficulty and some differences of opinion among judges": Coordinated Construction Co Pty Ltd v JM Hargreaves (NSW) Pty Ltd & Ors; Coordinated Construction Co Pty Ltd v Climatech (Canberra) Pty Ltd & Ors [2006] HCATrans 9 (3 February 2006). Adjudicators are also under the pressure of knowing that their determinations may well be scrutinised by numerous lawyers and judges. 27 It is perhaps understandable that some adjudicators whose determinations have been the subject of administrative law challenge may regard it as appropriate to utilise a catch-all statement, similar to the one used in the Determination, to fend off an allegation that they have failed to consider a relevant matter. Notwithstanding the somewhat pressure cooker environment in which adjudicators provide their determinations, it seems to me that it would be unhelpful for adjudicators to develop such a practice. It is assumed that adjudicators will comply with their statutory duties under s 22(2) of the Act, which sets out the matters to which they are to give consideration. A consideration of whether they have so complied is made from the content of their determinations rather than from a statement or claim by the adjudicator in the determination that he/she has so complied. I am not persuaded that the defendant is able to obtain any assistance or support for its submissions from this statement by the adjudicator on the first page of the Determination.

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28 The defendant submitted that the type of claim put forward by it in its application is not a novel one. It was submitted that it was an extremely common, simple way of putting forward a claim for loss and expense in circumstances where it is difficult to link each item to a particular breach. It was submitted that what the defendant did was to add up all the hours it had spent on the job; compare that total with the hours allowed in the tender; deduct the latter from the former to represent the unrecovered number of hours and multiply that figure by the contract rate to obtain the unrecovered cost. In this regard the defendant submitted that the Contract envisaged that in respect of such costs, what was required to be done was the making of an "estimate" (see clause 2.3(2)(e) of the General Conditions). It does not seem to me that such description can assist the defendant. That was an estimate to be provided in the Notice to the Company of a claim for an "eligible delay". What was claimed was not merely an estimate, but a figure that had been calculated pursuant to a specific methodology. In the claim made by the defendant the method used to calculate the amount or, perhaps put more accurately, to make a judgment of its worth, was clearly set out. 29 The adjudicator referred to the Currie & Brown report and noted the impeccable record keeping of the defendant. It seems to me that such observation is an indication that the adjudicator was of the view that the claims made by the defendant in respect of the hours that it did spend as a result of the delays incurred were properly documented and provided to the plaintiff. It also seems to me that the adjudicator considered that the delays were caused by the plaintiff and that he accepted that the way in which the defendant had valued its delay costs was a reasonable method of so doing, in the circumstances of the contractual relationship between the parties. The amount of $55 per hour as the multiplier was explained in the defendant's application and, although the adjudicator does not expressly refer to that figure, it is clear that he has considered the plaintiff's response in the payment schedule and AKA's assessment of the payment claim. Additionally the adjudicator referred to the 8 August Claim which contained the analysis and methodology of the defendant's claim and the subsequent adjustments to those figures. 30 The adjudicator went further and referred to the General Conditions of Contract and said: It appears to me that clause 2.6 gives the claimant a contractual right to delay damages caused by acts or omissions of the respondent. This is just what the subject claims are alleged to be for. Whether the claims can be categorised as a "global claim" as alleged by the [plaintiff] is irrelevant. They are a claims for alleged costs which fall within the definition of Delay Costs. 31 I am not satisfied that the adjudicator failed to consider whether the defendant had established a nexus between delays and costs said to have been incurred. Did the adjudicator fail to consider whether all delay costs were necessarily and reasonably incurred? 32 The plaintiff referred to clause 2.6 of the General Conditions of the Contract which provides that, subject to certain matters, the plaintiff was obliged to pay the defendant Delay Costs that it had "necessarily and reasonably incurred", and submitted that it was significant that the adjudicator had said in his Determination (at 19): Clause 2.6 of the General Conditions provides that subject to clauses 2.3(4) and 2.4(4)(a) (which are not relevant for present purposes) where the claimant [defendant] has necessarily and reasonably incurred Delay Costs the respondent [plaintiff] will pay the claimant such Delay Costs.

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Whether the adjudicator agreed with the "subjective judgment" of the defendant as to its methodology. 40 It was submitted that because the methodology for the calculation of the claims set out in the 8 August Claim referred to the necessity for a certain amount of "subjective judgment", it was incumbent upon the adjudicator, in addressing the merits of the defendant's claim, to determine whether he accepted, or agreed with, that "subjective judgment". 41 This aspect does not appear to me to be a matter that is separate from the consideration of whether the claims were reasonable. It is true that the adjudicator did not say that he accepted that there was an amount of subjective judgment in the methodology for the calculation of the claim nor did he say that he agreed with the subjective judgment. However for the reasons I have given in relation to the two previous complaints, I am satisfied that the adjudicator was well aware of the inclusion within the methodology of an element of subjective judgment and that he accepted that such was a reasonable and acceptable method by which to calculate the amounts claimed. Did the adjudicator fail to consider whether the plaintiff had already paid the defendant amounts referable to delay damages? 42 The plaintiff claimed that the adjudicator failed to consider the claim made in the AKA letter to the defendant dated 21 December 2005, which was in the materials submitted to the adjudicator. The plaintiff claimed, before the adjudicator, that the defendant had "already been paid substantial payments in relation to delay-related costs". The plaintiff's Payment Schedule annexed the AKA letter of 21 December 2005 extracted earlier in this judgment. The extract is set out below for ease of reference: E5 to E5.7 Claim for Reimbursement of Costs, Losses & Damages To date we have received several unsubstantiated global claims associated with delays. Our request to have the basis of claim substantiated … has been ignored to date. Until we received (sic) adequate substantiation of the claim we are unable to assess the claims and consider whether we are able to make a determination of claims "outside the contract". On the information provided to date we are unable to assess the basis or quantification of these claims and have, as such, valued the claim as "0" in the Determination set out in ATTACHMENT 1.

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We point out that during the course of the CONTRACT the COMPANY has paid the CONTRACTOR's claims associated with the following prolongation costs: · Additional Management Fee costs totalling $3,531,409 above the original sum of $2,304,407 included in the Management Fee for site management, administration and site supervision. This represents a 153% increase in Management Fee payments associated with management, administration and site supervision personnel whereas the increase in schedule duration of 4 months over the original 8 months schedule represents a 50% increase. · Standby costs associated with waiting time for delivery of materials, particularly pipe and fittings. · Facility Costs associated with lease and hire of temporary buildings and facilities. The making and receiving payment for such claims seems to us to be inconsistent with your global claim. Hence, we are seeking clarification on the basis of these claims totalling $5,714,711. 43 There is no doubt that AKA's letter of 21 December 2005 formed part of the materials before the adjudicator. However it is necessary to analyse what the plaintiff did by way of claims and submissions in respect of E5.1-E5.7. The document attached to the payment schedule as annexure 2 was entitled "Shell's Detailed Response to A J Mayr's Contract Payment Claim Statement (summary sheet)" (the Response). The Response included the following: 3. Aker Kvaerner's Determination dated 21 December 2005 3.1 On 8 December 2005, AJ Mayr submitted its November 2005 progress claim to Aker Kvaerner for determination. The November 2005 Progress claim was received on 9 December 2005. AJ Mayr's progress claim is identical to AJ Mayr's November 2005 payment claim, except that it does not purport to be a payment claim made under the Act. 3.2 On 21 December 2005, Aker Kvaerner issued its determination in respect of AJ Mayr's November 2005 progress claim. A copy of the determination is attached to this document at annexure 4. 3.3 Aker Kvaerner's overall assessment of the progress claim is that A J Mayr owes Shell $1,308,007 plus GST. This is $301,722 more than the amount that Shell says is owed by AJ Mayr in Shell's Payment Summary Sheet. The difference is attributable to the fact that in its determination, Aker Kvaerner has revalued a number of variation claims and as a consequence, has identified several overpayments which have been made to AJ Mayr. 44 It is clear that the plaintiff was alleging that the defendant owed it $1,308,007 plus GST. The section of the 21 December 2005 letter from AKA, extracted earlier, referred specifically to the additional management fee costs above the original sum of $2,304,407. The adjudicator dealt specifically with this part of the claim on page 3 of the Determination under the heading "Set-off". The adjudicator found that the plaintiff was not entitled to make the claimed set-off. In this regard he relied upon clause 15.3 of the General Conditions of Contract and accepted the defendant's submission as to the construction of that clause. 45 It is clear from this section of the Determination that the adjudicator did consider the content of the AKA letter of 21 December 2005 and stated as follows: What the respondent [plaintiff] is attempting to set off is not a debt or amount due. It is no more than a claim for an amount assessed by [AKA] who was appointed by the respondent "to administer, co-ordinate, manage, supervise and monitor the performance of the Contractor under the Contract" [Section 5, Special Condition 2 of the Contract]. The fact that AKA assesses that the claimant owes the respondent money does not mean that the claimant, in fact, owes the respondent the assessed amount. It does not mean that the assessed amount is a debt or money due from the claimant to the respondent. Until there is a final determination of the respective entitlements of the parties under the Contract, it cannot be said that there is a debt or money due from the claimant to the respondent or what is the amount of the debt or the money due. 46 This statement by the adjudicator was made in the context of the construction that he placed on clause 15.3 of the General Conditions of Contract. 47 The Response dealt with the defendant's claims E5.1-E5.7 in section 14. It alleged that the claim was in the nature of a "global delay and disruption" claim. There was then the complaint that the defendant had failed to provide "verifiable documentation" (see par 14.1-14.3). The plaintiff then referred to the 8 August Claim and reiterated parts of it to suggest that the defendant's claim was both global and unsubstantiated (see par 14.4-14.6). The plaintiff then made the following relevant submissions relating to the claims: 14.7 As matters presently stand, A J Mayr has not even attempted to explain the alleged relationship between any delay or disruption and the costs that are claimed (or provide supporting documentation in support of such costs). 14.8 It is therefore not possible to attribute any value to claims E5.1 to E5.7. In the absence of any meaningful effort by A J Mayr to substantiate these claims, Shell has no way of determining whether A J Mayr has incurred any of the alleged costs or whether the costs have been claimed by A J Mayr elsewhere. As with all of its claims, A J Mayr must clearly articulate the basis of the claim and substantiate the costs that it claims. If A J Mayr puts forward claims with appropriate verifiable supporting documentation, Shell will consider such documentation and respond accordingly. However, in the absence of any such attempt to provide this information, the only available conclusion is that these claims are wholly without merit and no amounts are payable. 48 The plaintiff then went on to suggest that the claims may be time barred and claimed, inconsistently with the decisions of the Court of Appeal, that the claims were not permitted under the Act (pars 14.9 - 14.11). 49 The adjudicator dealt with each of the submissions in this section of the Response. This section of the Response did not refer to the AKA letter of 21 December 2005. However, it is clear that the adjudicator considered the material in the AKA letter of 21 December 2005 in relation to section 3 of the Response in which the AKA letter was relied upon. I am not satisfied that the adjudicator failed in his obligations under the Act to consider the matters placed before him in this regard. The pivotal paragraph 50 I do not read the pivotal paragraph in the context of the Determination as a whole, to mean that the adjudicator did not value the defendant's claim and simply allowed it because there was no other assessment provided by the plaintiff. This matter is different to that with which Brereton J was dealing in Pacific General Securities v Soliman & Sons Pty Ltd. In that case the adjudicator said that "in the absence of any valid submission from the respondent which refutes the claim" the claimant was entitled to the payment of the sum claimed. Here the adjudicator, as I have interpreted what he has said, has considered the claim made by the plaintiff that the defendant's claim was unsubstantiated. In other words he considered whether the defendant's claim was substantiated, to be in a position to reject the plaintiff's claim that it was not substantiated. There was a great deal more to the adjudicator's assessment of the defendant's claim in this case than there appeared to be in determination under consideration in Pacific General Securities v Soliman & Sons Pty Ltd. 51 I am of the view that in the pivotal paragraph read in context, the words "some damages of the nature claimed" do not mean that the defendant had proved only some of its claims. I am satisfied that the adjudicator found that the delays caused some damages and that they included the claims made in E5.1 to E5.7. I am also satisfied that the adjudicator did address the merits of the defendant's claim and concluded that it was substantiated and that the methodology used to calculate the claim was reasonable. In so deciding, the adjudicator placed a value on the claim in the amount as claimed in the 8 August Claim and adjusted by the two later letters to which he referred in the Determination. Having done that, the adjudicator observed that the plaintiff had not provided information that would enable him to assess the claim at less than that amount. In my view, that observation does not mean that the adjudicator did not address the merits of the defendant's claim. I am satisfied that the adjudicator did address the merits of the defendant's claim and placed a value on it equivalent to the amount claimed as adjusted.

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Transport Claim 52 It is common ground that there were transport costs incurred and claimed for transporting the modules by road into Victoria to Geelong. It is also common ground that the adjudicator included such amounts in the Determination. The plaintiff initially submitted that the transport claims were excluded by s 7(4)(b) of the Act and that the inclusion in the Determination of the costs incurred for transporting the modules in Victoria was beyond the jurisdiction of the adjudicator. 53 Section 7(4) of the Act provides: (4) This Act does not apply to a construction contract to the extent to which it deals with: (a) construction work carried out outside New South Wales, and (b) related goods and services supplied in respect of construction work carried out outside New South Wales. 54 Mr Rudge SC, leading Mr F Hicks, of counsel, for the defendant, submitted that all construction work under the construction contract was carried out in New South Wales and the fact that there was transport interstate in respect of that construction work does not enliven s 7(4) of the Act. 55 During submissions I indicated that it was my view that the transporting of the modules to Victoria could be characterised as the provision of goods and services in relation to construction work that was carried out in New South Wales, thus not offending s 7(4) of the Act. In a supplementary submission the plaintiff acknowledged the force of that view but submitted that it does not dispose of the question as to whether the Act applies to related goods and services supplied outside New South Wales. It was submitted that s 7(4)(b) has as its starting point construction work carried out outside New South Wales and that goods and services in respect of that construction work are excluded. However it was submitted that the Act is silent as to the specific application of the Act to related goods and services supplied outside New South Wales in respect of construction work carried out in New South Wales. 56 It was submitted that the existence of s 7(4) is insufficient to rebut the presumption summarised in Halsbury's Laws of Australia (volume 24, Statutes), paragraph [385-315] as follows: Presumption not to give extra territorial effect . It is always assumed as a common law rule of construction that a legislature must clearly show the necessary intention for a statute to have extra territorial effect. However, this does not mean that the legislature has the necessary authority to enact a statute with such effect. 57 Section 12(1) of the Interpretation Act 1987 (NSW) relevantly provides: (1) In any act or instrument: … (b) a reference to a locality, jurisdiction or other matter or thing is a reference to such a locality, jurisdiction or other matter or thing in and of New South Wales. 58 The plaintiff submitted that in the present case the reference in the Act to related goods and services is a reference to a "matter or thing", and that by reason of s 12(1)(b) of the Interpretation Act such is a reference to related goods and services in and of New South Wales. In support of this submission the plaintiff also relied upon the following statement in D. Pearce & R. S. Geddes, Statutory Interpretation in Australia (5th edn., 2001) at 135: It can thus be seen that the presumption against legislation having extra territorial operation can be fairly readily rebutted if circumstances so demand. However, a court will probably need to be persuaded that the operation of the legislation would be rendered ineffective before the presumption will be set aside.

[61]

62 Section 11 of the DD Act provided: 11.(1) If: (a) a person is suffering, or has suffered, from a dust-related condition or a person who has died, was immediately before death, suffering from a death-related condition, and (b) it is alleged that the dust-related condition was attributable or partly attributable to a breach of duty owed to the person by another person, and (c) the person who is or was suffering from the dust-related condition or a person claiming through that person would, but for this Act, have been entitled to bring an action for the recovery of damages in respect of that dust-related condition or death, proceedings for damages in respect of that dust-related condition or death may be brought before the Tribunal and may not be brought or entertained before any other court or tribunal. 63 In considering Goliath's submission that the Court should read into the provisions of the DD Act a limiting territorial connection so that only a person in New South Wales would be entitled to recover damages in the Tribunal, in particular for a breach in New South Wales of a duty owed in this State, Kirby P said at 426: The ordinary principle of construction of statutes is that general words used in an Act are presumed to be used in a sense which will not cause the legislature enacting them to exceed its powers. As O'Connor J said in Jumbunna Coal Mine, No Liability v Victorian Coal Miners' Association (1908) 6 CLR 309 at 363: "… Most Statutes, if their general words were to be taken literally in their widest sense, would apply to the whole world, but they are always read as being prima facie restricted in their operation within territorial limits." 64 In dealing with a number of other arguments in respect of the reach of the Tribunal's jurisdiction, Kirby P said at 427-428: · First, the presumption of a territorial interpretation of the general language of State legislation provided by the common law, and by the provisions of the Interpretation Act 1987 cited, must not be taken too far. Some of the common law principles were stated in earlier times apt to the circumstances of colonial and recent colonial legislatures. Those principles will not, without modification, apply to the parliament of a State of Australia at this stage of the nation's development. Modern means of transport and other forms of communication make an excessively narrow approach to territorial connection inappropriate and likely to defeat the intended operation of at least some State statutes. It has often been said that it is inappropriate to treat the different jurisdictions of Australia as if they were foreign countries and to apply to them conflict of laws rules apt to separate nations: see McKain v R W Miller & Co (South Australia) Pty Ltd (1991) 174 CLR 1 at 36; · Secondly, the principle of territorial interpretation competes with the more general rule that courts should give an ample construction to the language used by the legislature in order to achieve the purpose of parliament disclosed by that language. The purposive construction of legislation has helped to avoid the excessively narrow construction of earlier times which had the undesirable effect of promoting excessive detail of statutory language. Thus, in the present case, a statute designed to deal with workers with dust-related injuries is addressed to the problem of a working population, some of whom will be itinerant. A purely territorial construction of the legislation would risk defeating coverage of claims by such itinerant workers which the language of the Act and convenience would argue should indeed be within the jurisdiction of the Tribunal; · Thirdly, the authority of this Court cautions against an unduly rigid application of a construction of statutes to require strict territorial connection: see, eg, O'Connor v Healey (1967) 69 SR (NSW) 111 at 114; 87 WN (Pt 2) (NSW) 111 at 113. As Jacobs JA there said: "… it is not every aspect of every sentence or clause of legislation which can be given the local New South Wales connotation." As in all tasks of statutory construction, the duty of the court is to seek faithfully to give meaning to the presumed purpose of parliament; 65 The situation in Goliath is distinguishable from the present case. A basis upon which the Court found that the Tribunal had jurisdiction to entertain the case was the fact that the DD Act transferred jurisdiction from the Supreme Court (and the District Court) to a specialist tribunal and "[b]y hypothesis, the jurisdiction must, in the first place, have been capable of being exercised by the Supreme Court": per Gleeson CJ at 418. Kirby P said, at 429, that s 11(1) of the DD Act should be "construed as it would be if the same jurisdiction had been conferred on the Supreme Court." 66 In Wentworth Securities Ltd v Jones [1980] AC 74 at 105, Lord Diplock said: I am not reluctant to adopt a purposive construction where to apply the literal meaning of the legislative language used would lead to results which would clearly defeat the purposes of the Act. But in doing so the task on which a court of justice is engaged remains one of construction; even when this involves reading into the Act words which are not expressly included in it. 67 His Lordship continued, stipulating three conditions necessary to justify this approach, at 105-106: First, it [must be] possible to determine from a consideration of the provisions of the Act read as a whole precisely what the mischief was that it was the purpose of the Act to remedy; secondly, it was apparent that the draftsman and Parliament had by inadvertence overlooked, and so omitted to deal with, an eventuality that required to be dealt with if the purpose of the Act was to be achieved; and thirdly, it was possible to state with certainty what were the additional words that would have been inserted by the draftsman and approved by Parliament had their attention been drawn to the omission … Unless this third condition is fulfilled any attempt by a court of justice to repair the omission in the Act cannot be justified as an exercise of its jurisdiction to determine what is the meaning of a written law which Parliament has passed. Such an attempt crosses the boundary between construction and legislation.

[70]

[88] The authorities which have expressed the process of construction in terms of "introducing" words to an Act or "adding" words have all, so far as I have been able to determine, been concerned to confine the sphere of operation of a statute more narrowly than the full scope of the dictionary definition of the words would suggest. I am unaware of any authority in which a court has "introduced" words to or "deleted" words from an Act, with the effect of expanding the sphere of operation that could be given to the words actually used. This was the actual issue in R v Young . There are many cases in which words have been read down . I know of no case in which words have been read up . 71 Applying the observations made by Kirby P in relation to s 10(3) of the DD Act in Goliath to the present case, it may be suggested that to urge the view that an express provision excluding certain construction work (and related goods and services) from the operation of the Act, (s 7(4) of the Act), gives rise to the positive inference that related goods and services, that are not expressly excluded are included, is to "fall into a trap". However, this case is distinguishable from Goliath and, in my view, does not present the trap of the type to which Kirby P referred. In this case the provisions under consideration deal with the "content" of the jurisdiction as opposed to where the jurisdiction may be exercised, as was the case in Goliath. It seems to me that on a reading of the Act as a whole and, in particular, the provisions of s 7(4) of the Act, the legislative intention is that progress claims and payment for the provision of goods and services in Victoria in respect of construction work carried out in New South Wales are not excluded from the Act. 72 A matter that may be of some relevance is the Building and Construction Industry Security of Payment Act 2002 (Vic) which has an identical provision to the Act in relation to its object (s 3(1)). It also includes the following section: 7(4) This Act does not apply to a construction contract to the extent to which it deals with - (a) construction work carried out outside Victoria; and

[74]

76 I will now consider whether the three prerequisites referred to by Lord Diplock in Wentworth Securities Ltd v Jones have been satisfied to enable a purposive construction of the Act. As to the first prerequisite; it is possible from a consideration of the provisions of the Act read as a whole to determine the mischief the Act was to remedy. The mischief to be remedied was the slow payment and/or non-payment of contractors who undertake to carry out construction work or to supply related goods and services under a construction contract. This can be gleaned from a consideration of the whole of the Act but in particular the following provisions: the Object of Act (s 3); the very tight timeframes within which to make claims and challenge those claims (s 13 & s 14); the serious consequences where no challenge (or payment schedule) is made (s 15); the very tight timeframe within which the adjudication process is to occur (ss 17 - 22); the consequences of not paying the adjudicated amount (s 24); and the preservation of the parties rights (s 32). 77 In respect of the second prerequisite; the eventuality that may be seen to have been overlooked is the provision outside New South Wales of related goods and services in respect of construction work carried out in New South Wales. The purpose is the intended prompt payment under the scheme of the Act of contractors who supply related goods and services in respect of construction work carried out in New South Wales. The eventuality needed to be dealt with to ensure the purpose of the Act was not defeated. 78 With regards to the third prerequisite; the additional words that Parliament would have approved had attention been drawn to the oversight are identifiable. Section 7(1) provides: Subject to this section, this Act applies to any construction contract, whether written or oral, or partly written and partly oral, and so applies even if the contract is expressed to be governed by the law of a jurisdiction other than New South Wales.

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