Slade v Kongstruction Pty Ltd [2026] NSWSC 606 | Case summary | Zoe

NSWNSWSC

Slade v Kongstruction Pty Ltd

[2026] NSWSC 606

Supreme Court of NSW|2026-06-01|Before: Parker J

View on NSW Caselaw

At a glance

Source facts

Court

Supreme Court of NSW

Decision date

2026-06-01

Before

Parker J

Catchwords

JUDICIAL REVIEW — Building and Construction Industry (Security of Payment) Act 1999 — Adjudicator's rejection of documents in adjudication response as not duly made under s 22(2)(d) — Documents post-dating payment schedule — Whether erroneous rejection of duly made submissions constitutes jurisdictional error — Held not jurisdictional JUDICIAL REVIEW — Natural justice — Adjudicator's decision to exclude documents on ground not raised by either party — Whether denial of procedural fairness — Held denial of procedural fairness — Whether material — Severance under s 32A

Source

Original judgment source is linked above.

Catchwords

JUDICIAL REVIEW — Building and Construction Industry (Security of Payment) Act 1999 — Adjudicator's rejection of documents in adjudication response as not duly made under s 22(2)(d) — Documents post-dating payment schedule — Whether erroneous rejection of duly made submissions constitutes jurisdictional error — Held not jurisdictional JUDICIAL REVIEW — Natural justice — Adjudicator's decision to exclude documents on ground not raised by either party — Whether denial of procedural fairness — Held denial of procedural fairness — Whether material — Severance under s 32A

Judgment

Source: NSW Caselaw (www.caselaw.nsw.gov.au). Converted to plain text by ZoeLaw. Not the official version.

Medium Neutral Citation: Slade v Kongstruction Pty Ltd [2026] NSWSC 606

Hearing dates: 4, 28 May 2026

Date of orders: 28 May 2026

Decision date: 01 June 2026

Jurisdiction: Equity - Technology and Construction List

Before: Parker J

Decision: See [146]

Catchwords: JUDICIAL REVIEW — Building and Construction Industry (Security of Payment) Act 1999 — Adjudicator's rejection of documents in adjudication response as not duly made under s 22(2)(d) — Documents post-dating payment schedule — Whether erroneous rejection of duly made submissions constitutes jurisdictional error — Held not jurisdictional
JUDICIAL REVIEW — Natural justice — Adjudicator's decision to exclude documents on ground not raised by either party — Whether denial of procedural fairness — Held denial of procedural fairness — Whether material — Severance under s 32A

Legislation Cited: Building and Construction Industry Security of Payment Act 1999, ss 8, 10, 13(1C), 14(3), 20(2), 20(2B), 21(4), 22(2)(d), 32A

Cases Cited: AM Darlinghurst Investment Pty Ltd v Growthbuilt Pty Ltd [2024] NSWSC 825
Builtcom Construction Pty Ltd v VSD Investments Pty Ltd [2025] NSWSC 250
Builtcom Construction Pty Ltd v VSD Investments Pty Ltd (No 2) [2025] NSWCA 134 Ceerose Pty Ltd v A-Civil Aust Pty Ltd (2023) 112 NSWLR 225 Ceerose Pty Ltd v A-Civil Aust Pty Ltd (No 2) [2023] NSWSC 401 Demex Pty Ltd v McNab Buildings Services Pty Ltd (2023) 113 NSWLR 382 Goodwin Street Developments Pty Ltd v DSD Builders Pty Ltd (2018) 98 NSWLR 172 Martinus Rail Pty Ltd v Qube RE Services (No 2) Pty Ltd (No 2) [2024] NSWSC 1223 Martinus Rail Pty Ltd v Qube RE Services (No 2) Pty Ltd (No 3) [2024] NSWSC 1483 Miller v LMG Building Pty Ltd [2023] NSWSC 995 MZAPC v Minister for Immigration and Border Protection (2021) 273 CLR 506

The contract in question was dated 14 August 2023. It was a Housing Industry Association (“HIA”) New South Wales Residential Building Contract for New Dwellings, April 2021 edition. The works were to be carried out at an address in Oliver Road, Roseville. The contract price was $718,500.
The Builder began work in October 2023. The contract provided for practical completion within 34 weeks. The Owners agreed to extend the period by 23 working days, but completion was not achieved within the extended period. The Builder made further claims for extensions of time, but these were not accepted by the Owners. The works were still incomplete at the end of December 2024.
According to the Owners, they were told in January last year that the works would be completed by 11 February. When this date was missed, the parties fell into formal dispute.
On 19 February the Owners issued a breach notice requiring the Builder to remedy certain alleged breaches within 10 business days or face termination of the contract. The notice alleged two breaches: that the Builder had failed to reach practical completion by the date specified in the contract, and that the work was defective, as specified in a list of defects.
On 25 February, the Builder responded to the notice. The Builder blamed the Owners for the delay, complaining about their failure to agree to the EOT requests and to make payments under the contract which the Builder claimed to be outstanding. For good measure, the Builder suspended work, on the ground of failure to make the allegedly outstanding payments.
On 5 March the Owners replied, rejecting the explanations offered by the Builder and disputing the Builder’s entitlement to suspend works. Two days later, on 7 March, the Owners issued a formal notice of termination. On the following day the Builder responded to the notice of termination, denying that it was valid. On 14 March the Owners, through solicitors, replied, maintaining that the contract had been terminated and stating that they were in the process of engaging replacement contractors to complete the work.
The Builder continued to maintain that the Owners were not entitled to terminate, but did not return to the site. The Owners proceeded, as they had foreshadowed, to retain other contractors to complete the works. The landscaping work was undertaken by a contractor named “Everyscape”. The other building work was undertaken by a contractor named “FIRACU”.
The payment claim by the Builder which resulted in the subject adjudication was issued nine months later, on Christmas Day last year. The Owners’ payment schedule was served on 12 January this year. The scheduled amount was nil; the Owners contended that in fact the Builder was liable to them for several hundred thousand dollars.
The Builder pressed on with an adjudication application on 29 January. In the application the Builder maintained the full claim of $290,000. There was an adjudication response by the Owners on 5 February.
The Adjudicator’s determination was issued on 25 February. The precise amount awarded was $195,389, together with adjudicator’s fees and expenses of $22,000.

The Owners’ payment schedule asserted that there was no entitlement to the progress payments claimed. The Builder was, as a matter of construction of cl 17, only entitled to a progress payment for work done on a stage once that stage had been completed. On the Builder’s own admission, none of the relevant stages had been completed.
The schedule also asserted that, as well as being incomplete, the works undertaken by the Builder were defective. For this purpose, the Owners relied upon a report from a registered building inspector, Mr Ibrahim Durdu, a copy of which was attached.
Mr Durdu had conducted an inspection of the works during last year’s dispute between the parties. In his report, he identified 31 items of defective work. For each item, the report contained an explanation for why Mr Durdu considered the work to be defective, illustrated with photographs. The report was however limited to identifying defects, and did not contain any costings to rectify them.
The schedule went on to assert (at [14]) that after Mr Durdu had completed his report six additional defects had been identified in the Builder’s work. A brief description was provided for each of those alleged defects.
Next, in connection with “the issue of incomplete and defective building works”, the schedule referred to the Owners’ notice of termination of 7 March last year and the provisions of cl 30 of the contract. The schedule asserted that the Owners had incurred the sum of $597,120 in completing the building works (including rectification of the defective works earlier identified), noting that this figure greatly exceeded the amount claimed by the Builder. The schedule added that the Owners expected to incur further costs of about $25,000, noting that the building works had “still not yet reached practical completion”.
The costs incurred were said to be “detailed” in a spreadsheet annexed to the schedule (Annexure C). The spreadsheet appears to have been, or to have been derived from, a record kept by the Owners of payments made by them. It contained particulars of 50 payments with columns for: the date, the amount, and an “original description” which generally identified the payee and often the invoice number. A further column headed “details” contained (generally but not always) a slightly fuller identification of the payee and other payment details.
Another column allocated the payments to categories of expenditure. FIRACU had its own category. There were other categories such as “landscape”, “roof” and so on. At the beginning of the spreadsheet was a list of figures for each category. A subtotal of “owner payments” total was $597,120. The grand total was $607,000 which included two payment categories of payment which were noted as having been “excluded from total costs”.
The Builder’s adjudication application was accompanied by a statement from Mr Heyu Su. Mr Su described himself as “the” (presumably sole) director of the Builder and the holder of its building licence.
Mr Su began by describing the state of completion of the works as at February last year when the dispute with the Owners came to a head. He gave a list of works which he said had been completed and identified a further list of tasks which were outstanding, giving an approximate cost for each task. The total was $58,870.
Mr Su also responded to Mr Durdu’s report. He stated that many of the items identified by Mr Durdu as defects were simply works which the Builder had not completed before the work was suspended and the contract was terminated. But to the extent that he accepted that the report contained allegations of defective work, strictly so called, he provided a rebuttal. In some cases he accepted that there were defects in the work and gave an estimate of material and labour costs to rectify that defect. He added, however, that had the contract not been terminated, the work would have been undertaken using subcontractors as part of the contractual defect rectification process and there would have been no labour cost.
Finally, Mr Su responded to the allegation in the payment schedule at [14] of additional defects not identified in Mr Durdu’s report:

The adjudication application was also accompanied by written submissions in support of the Builder’s claim and responding to the Owners’ contentions in the payment schedule. For present purposes, four areas of the submissions are relevant.
Concerning the Builder’s entitlement to progress payments, the submissions argued:
even if, given the wording of cl 17 of the contract, the Builder had no contractual right to progress payments, the Builder still had an independent statutory right to a progress payment under s 8 of the Act for the value of the work done up to termination;
by s 10 of the Act, given that the contract made no express provision with respect to valuation of the works for that purpose, it was to be undertaken “having regard to” the “contract price” for the work in question;
the proper way of assessing the value of the works by reference to the contract price was to follow what was said to have been the approach taken in the payment claim, namely “to take the value which particular stages are given in the contract … and apply to that the percentage of completion of that state to produce a total figure, then deduct any amounts already paid”;
the percentages used for this purpose in the payment claim had not been challenged in the payment schedule, and, as a result, it was now too late to dispute them (referring to s 20(2B) of the Act, set out later in this judgment).
Concerning the defects alleged in the payment schedule, the submissions argued:
under the Act, the Owners had no statutory right of set-off for alleged defects;
any basis for such a set-off therefore needed to be found in the terms of the contract;
but cl 17.6 of the contract excluded any contractual set-off except in the case of the “final progress claim”;
the Builder’s payment claim was not the “final progress claim” for this purpose, because that term was a reference to a claim upon practical completion under cl 21, and the works had never reached practical completion.
In answer to the Owners’ claim concerning incomplete works, the submissions argued:
again, there was no statutory right of set-off and the Owners needed to establish a right of set-off under the contract;
the Owners had no claim under the contract for incomplete works at all, unless they had validly terminated the contract;
but the Owners’ purported termination of the contract had been unjustified, and therefore invalid;
in any event, even if the Owners had an entitlement to claim a set-off if their termination had been invalid, any such entitlement could only arise under cl 30;
on the proper interpretation of the contract, the cl 30 right to payment for completion works done by a replacement contractor was not a right of set-off for the purpose of cl 17.6;
even if it was, the Owners had not satisfied the terms of cl 30, because, among other things, they had failed to serve the requisite notice upon completion of the works.
As to quantum, the submissions argued:
Mr Durdu’s investigation report did not distinguish between incomplete and defective work, and did not contain any costings of such works;
nor, according to Mr Su’s statement, had proper particulars been provided of the further items of allegedly defective works identified in the payment schedule at [14], nor had any costings for those works been provided;
the $597,120 figure in Annexure C to the payment schedule was inflated, unsubstantiated and lacked transparency, appearing to include upgrades, variations and works outside the original contract scope;
to the extent that the payments in Annexure C did involve repairs to defects in, or completion of, the Builder’s contract works, the spreadsheet did not distinguish between defect rectification and completion works, making it impossible to identify separately the costs of the completion works, or to allocate those works to the relevant stages identified in the contract;
none of these details had been provided in the payment schedule, and again it was too late to do so.
The Owners’ adjudication response took the form of an email attaching four documents, followed by a supplementary email attaching a fifth document. There was no accompanying submission of the type provided by the Builder in support of its adjudication application.
The five documents were as follows:
Investigation report of Mr Durdu dated 10 March last year. This had already been provided with the payment schedule.
Scott schedule from Mr Durdu dated 5 February this year: the schedule had 31 rows, corresponding to the 31 items of defective work identified in his investigation report. It contained estimates for 28 items, totalling $67,575. The other items were marked “TBC”.
Statement of Michael Edwards dated 5 February this year. Mr Edwards was a director of FIRACU. His statement contained a description of the scope of the works undertaken by his firm. Mr Edwards also described the state of the works when FIRACU was retained (in March 2025). He was extremely critical of the state of the site, describing it as an “utter disgrace”. He estimated that less than 30% of the work for the relevant stages had been done.
Statement of Sam Every dated 4 February this year. Mr Every was a director of the landscaping contractor, Everyscape. His statement likewise contained a description of the scope of the work undertaken by his firm. The statement also contained “further background” describing the state of the works at the time Everyscape was retained (May last year). Mr Every estimated that “less than 10%” of the landscaping works had been completed by the Builder.
Statement of the Owners dated 5 February this year: the statement set out in narrative form the disputes between the Owner and the Builder, including relevant correspondence. Among the annexures to the statement (which were very voluminous) was a bundle of copy invoices (Annexure Z) which were said to be all of the supporting invoices for the payments made “to complete the building works at our Roseville property” following the termination of the contract with the Builder. The Owners went on to give a brief description of the work done by the replacement contractors, which was said to have involved completing the “scope of works” under the contract with the Builder.
The initial email stated that the four accompanying documents were ones which the Owners would be “seeking to rely upon in response to the adjudication application” and which were “for the avoidance of doubt, intended to form part of the [Owners’] response” to the application. The email continued by describing the four documents in the following terms:

Counsel submitted that the facts of Miller were similar to those in the present case.
The owner refused to pay the builder’s payment claim on several grounds, including that the works were defective. The schedule also alleged that the owner had previously overpaid the builder for work done, and was entitled to a credit against the claim on that account also.
In support of the allegation of defective work, the schedule was accompanied by an expert report from a company named Quest which identified the alleged defects, and provided a description and a photograph, but which did not contain any costings to repair the alleged defects.
In the builder’s adjudication application, it was submitted that no response was required to the defect allegations because no costings had been provided.
The owner’s adjudication response was then accompanied by a supplementary report from Quest setting out costing details for the alleged defects. It was also accompanied by a statutory declaration from the superintendent, Mr Grice, which explained the circumstances in which the alleged overpayments had been made.
The adjudicator refused to consider the supplementary report from Quest or Mr Grice’s statutory declaration because “none of the above mentioned documents were in existence at the time of the payment schedule, or even at the time of the adjudication application”, and reliance on them “amounts to new reasons that cannot be included in the adjudication response” under s 20(2B) of the Act. The adjudicator continued that the only reports that could be considered in the adjudication were “those attached to the payment claim and payment schedule, or that were in existence prior to the payment schedule and can reasonably be relied upon as being in support of the reports in the payment claim and payment schedule”.
Consequently, the adjudicator concluded that, by claiming an offset based on costings which did not exist at the time of the payment schedule, the owner was “giving a new reason for non-payment” which could not be considered in the adjudication.
Ball J, after stating the conclusion at [22], which I have already quoted, explained his reasoning further in [23]-[26]:

Counsel submitted that the present case was nothing like the examples his Honour gave at [87]. The present case, in counsel’s submission, was precisely analogous to Builtcom. As in that case, the adjudicator had simply made a mistake in deciding what submissions fell for consideration in the adjudication.
Counsel also submitted that it was wrong to say that the Adjudicator had failed to consider the Owners’ contentions in the payment schedule. The Adjudicator had dealt with the substance of those submissions despite not having regard to “further evidentiary documents” provided in support of them. Counsel developed the following points.
Counsel pointed out the limitations which recent Court of Appeal authority, especially Goodwin Street Developments Pty Ltd v DSD Builders Pty Ltd (2018) 98 NSWLR 172, has placed on the obligation to “consider” submissions. The idea that the obligation requires “intellectual engagement” or a requirement to “grapple with” the submission by subjecting it to “proper, genuine and realistic consideration”, has been rejected.
Counsel pointed out that the Owners’ adjudication response did not address Mr Su’s statement. Nor did it address the submission that it was now too late to provide costings information because of the effect of s 20(2B). Nevertheless, the Adjudicator did deal with the defects identified in Mr Durdu’s investigation report. He considered Mr Su’s estimates. In doing so, counsel submitted, the Adjudicator had applied his own experience, as he was entitled to do, and this involved no error.
So far as the incomplete works were concerned, again, the Owners did not respond to the criticisms levelled at the set-off claim for $597,120, except in their statement. This might have dealt with the question about the scope of the works undertaken by the replacement contractors, but it did not address the point about the lack of a breakdown of the $597,120 figure between incomplete and defective works.
Counsel also pointed out that there was no response to the argument that the requirements of cl 30 had not been satisfied. The Adjudicator, in counsel’s submission, had accepted this point at AD [273]-[274].
In these circumstances, counsel submitted, the decision in Miller was distinguishable: in that case, the contentions of the owner had, because of the approach taken by the adjudicator, not been considered at all. In the present case they had been. In any event, the decision could not stand against the later statement of principle by the Court of Appeal in Builtcom at [85]. Finally, if the decision could not be distinguished and had not been overruled, it was out of step with prior authority and should not be followed.
Denial of natural justice: Counsel for the Owners relied, under this ground, on the statement of principle by Ball J in AM Darlinghurst Investment Pty Ltd v Growthbuilt Pty Ltd [2024] NSWSC 825 at [25]:

It is convenient to begin by identifying the legal issues in the adjudication proceedings which are relevant for present purposes. Three such issues can be identified.
The first was the Builder’s entitlement to a progress payment for the incomplete stages of the works. As already noted, the Adjudicator considered that the Builder had a statutory entitlement to such a progress payment under s 13(1C) of the Act. The entitlement was to be calculated by “having regard” to the contractual price for each of the stages in question.
For this purpose, the Adjudicator used the “percentage completion” method which he described. But it seems that this may have involved a misconception.
In the payment claim a completion percentage was given for each stage, but the actual figure claimed was the full contractual price for the stage, less the credits allowed. It seems from the description of the credits that they represented costs which would be incurred to carry the work to completion (see also AD [171], quoted at [49] above). The completion percentage does not seem to have played any part in the calculation.
That does not appear to have been understood by the Builder’s legal representatives when they prepared the adjudication application. The description of the method which appeared in the application (quoted at [34(3)] above) stated that the proper approach was to apply the completion percentage to the contractual value of the stage, although it then referred to deducting the “amounts already paid” (presumably a reference to the credits, but, it seems, an incorrect description of them). Similarly, when the Adjudicator came to deal with the matter, he adopted the percentage completion method of calculation (in his description of the method, he did introduce a qualification, presumably to explain the credits, but his calculation appears to have taken no notice of them).
In passing, it should be noted that the adoption of the percentage completion method might have been contestable. It was not, as a matter of language, mandated by the statutory requirement to “have regard” to the contract price. Other methods of valuation were left open.
The contract price represented the completion of a defined stage of the works. Just because the Builder had undertaken 70% of the work (however measured) did not mean that the Owners had received 70% of the value of the completed stage. An incomplete stage might have been of no practical value to them at all. A more logical approach might have been to start with the contract price for the stage and then subtract the cost of the works required to bring that stage to completion. Ironically, this may be what the Builder was trying to do in the initial payment claim.
But neither of these points affects the validity of the approach followed by the Adjudicator. The percentage completion method, as it was put forward in the adjudication application, was not challenged in the adjudication response.
The second issue was the allowance in favour of the Owners for defect****s in the Builder’s completed works. As the Adjudicator found, this was not a matter of set-off, which would have required the Owners to demonstrate that there was contractual debt owing for the defects. Rather, it was a requirement of the Act. Section 10(1)(b)(iv) expressly required that in valuing a payment claim, regard was to be had to the estimated cost of rectifying any defect. Any such rectification costs therefore had to be allowed for as part of the assessment of the Builder’s progress payment entitlement.
The third issue was the Owners’ claim for payments made to replacement contractors to repair the defects and complet****e the work****s. This was a claim to set-off a debt (under cl 17.6). A claim for damages was not available in the adjudication.
As already noted, the Adjudicator considered that no such claim was available with respect to repairs to defective work. The claim was limited to a claim to set off payments for completion work. That claim depended upon cl 30 of the contract.
Clause 30 required the service of a notice specifying the payments made by the Owners to the replacement contractors. No such notice had been served before the Builder’s payment claim was lodged. Evidently, the Adjudicator assumed that the payment schedule could itself constitute the Owners’ notice for the purpose of cl 30.
As the Builder’s submissions in support of the adjudication application pointed out, any right to a set-off under cl 30 depended on the contract first having been terminated by the Owners. The Adjudicator’s findings in this regard were not definitive.
The Adjudicator found that the purported termination by the Owners in their notice of 7 March last year was invalid. On the other hand, from 25 February onwards the Builder had wrongfully suspended work.
The Adjudicator identified as one possibility that the contract had been “mutually terminated by the parties based on their actions”. This seems to be the language of abandonment. But it is difficult to see how that could be. Abandonment would require some sort of implicit mutual agreement between the parties discharging all outstanding obligations under the contract. By bringing the payment claim, the Builder showed that for its part it had not agreed to release its entitlement to be paid. Similarly, there is no indication that the Owners have abandoned their right to sue the Builder for incomplete or defective work.
The other alternative offered by the Adjudicator was the contract having been repudiated by “both parties”. But mutual repudiation does not itself bring the contract to an end. The contract will only be terminated when one or the other party accepts the other’s repudiation. It is true that on the Adjudicator’s findings the Owners repudiated the contract on 7 March with their invalid notice. But that repudiation was not accepted: the Builder denied the validity of the notice, but at the same time itself wrongfully continued to suspend the works. Whether that gave rise to some form of repudiation which could have been accepted by the Owners’ solicitor’s letter of 14 March was not considered. And if that letter were a further repudiation then it still was not accepted by the Builder.
In these circumstances, the Adjudicator’s findings do not yield a clear answer as to whether cl 30 was available to the Owners. This is of course no criticism, as questions of repudiation and acceptance were not raised by the parties in their submissions. In the view I take, it is not necessary to reach any conclusion on those questions. I will assume for the sake of argument that the clause was available.
Failure to consider duly made submissions: Section 22(2) of the Act relevantly provides:

The effect of ss 14(2) and (3) is that a payment schedule must “indicate”:
the scheduled amount;
if the scheduled amount is less than the claim amount, “why” it is less; and
if it is less “because the respondent is withholding payment for any reason”, the “reasons” for doing so.
As a matter of language, s 14(3) seems to contemplate that “withholding payment” means something more than simply refusing to pay the amount claimed. So understood, the term might apply to an “affirmative defence” such as a set-off, but not a “negative defence” of denying or not admitting that the claimant has established the entitlement claimed.
If the Act does recognise a difference between a negative defence and an affirmative defence, that could have consequences for the permissible scope of submissions made in the course of an adjudication response. Apart from the requirement in s 20(2) that such submissions be “relevant to the response” the only provision which is expressly picked up by the requirement that they be “duly made” is the requirement in s 20(2B). That requirement applies only where the respondent is “withholding payment”. It would not therefore apply to further submissions in support of a negative defence.
On the other hand, s 22(2)(d) requires that the respondent’s submissions be made “in support of the payment schedule”. Even in the case of a negative defence, the payment schedule must at least state “why” payment has not been scheduled. The rules of natural justice might prevent a new point being raised in support of a negative defence in any event.
Neither party’s submissions addressed these questions. As in the adjudication, the parties proceeded before me on the assumption that s 20(2B) prevented the Owners from raising fresh “reasons” in their adjudication response which had not been advanced in their payment schedule, irrespective of the issue to which the submissions were directed. I will follow the same approach.
As already noted, there was no dispute that in rejecting the statements of Mr Edwards and Mr Every, and Mr Durdu’s Scott Schedule, as inadmissible, merely because they post-dated the payment schedule, the Adjudicator adopted an erroneous construction of s 22(2)(d). But in my opinion, this is not necessarily an error in the application of the provision. If in fact the statements amounted to submissions which were not “duly made” because of s 20(2B), then the decision to reject them, although made on the basis of an incorrect construction, was not erroneous.
To this extent, I agree with counsel for the Builder. It is necessary to consider what part, if any, the rejection of the documents played in the Adjudicator’s reasoning. The focus is not on AD [262] itself, but rather on subsequent paragraphs in the adjudication where the Adjudicator referred to an absence of evidence from the Owners. The question is whether those parts of the reasoning were affected by error.
I will deal first with the allowance in favour of the Owners for defective work. Here the position is clear.
At AD [281] the Adjudicator stated that no response had been made to Mr Su and no competing figures had been put forward on behalf of the Owners. That was in fact incorrect because Mr Durdu had done so in his payment schedule (and it had been supplemented, as pointed out in the covering email from the Owners, in the statement from Mr Edwards). The defects had been raised as an issue in the payment schedule and the supplementary material merely provided figures for the costs of rectifying those defects. The Adjudicator’s failure to refer to that material merely because of the date on which it had been prepared fell squarely within the decision of Ball J in Miller. It was therefore an error in the application of s 22(2)(d).
So far as the Builder’s progress payments for incomplete work is concerned, the position is more complex. In the first place, I am not satisfied that the Adjudicator’s reasoning on the close-up stage was affected by his decision to exclude the Owners’ statements from consideration. The Adjudicator’s reasoning did not refer, and apparently did not rely, on Mr Su’s 90% estimate. Certainly, the Adjudicator does not appear to have reasoned on the basis that that estimate was uncontested. And there is no need to consider the practical completion stage, because the Builder’s claim was rejected in whole.
But the Adjudicator’s reasoning on the fixing and landscaping stages were, on the face of it, affected. At AD [179] and AD [186] the Adjudicator stated that there had been no response to the percentage completion estimates put forward by Mr Su. In fact responses had been provided in the statements of Mr Edwards and Mr Every, but the Adjudicator’s incorrect decision to exclude those statements meant that he did not have regard to those responses. In my view, however, had he done so, the Adjudicator would (as foreshadowed in the Builder’s submissions in support of the adjudication application) have rejected the relevant submissions as impermissible under s 22(2)(d).
For the reasons I have given, it might not have been necessary for the Owners’ payment schedule to make a specific challenge to the percentage completions advanced in the payment claim. On the face of it, those percentages were not part of the way in which the claim was quantified. But in the schedule the Owners confined themselves to an argument that no payment claim was available for works which were incomplete. They did not advance any fallback argument for paying a lesser amount if, contrary to that submission, the Adjudicator were to find that a claim for partially completed work was available. Accordingly, any attempt to do so in the adjudication response was impermissible.
So far as the set-off claimed for costs of completion works is concerned, the relevant passage was at AD [273]. Again, on the application of the reasoning of Ball J in Miller, the failure to include the invoices in the payment schedule did not automatically make them inadmissible as attachments to the adjudication response.
But this does not mean that the decision to exclude the documents was erroneous. On the Adjudicator’s interpretation of cl 30 (which has not been, and could not have been, challenged in these proceedings), there was a contractual requirement to include all of the invoices with the payment schedule. Whatever effect the schedule might have had under the Act, it therefore had no contractual effect. The Adjudicator was entitled to treat the invoices as inadmissible on that account.
There was also a finding by the Adjudicator (again, not challenged and not challengeable in these proceedings) that practical completion had not been reached at the time the payment schedule was issued. It followed that there was no entitlement to a set-off under cl 30 for that reason alone. The incorrect reasoning concerning the interpretation of s 22(2)(d) therefore did not play any part in the Adjudicator’s findings, and there was no relevant error for present purposes.
The Owners have therefore established the existence of an error under s 22(2)(d) in the Adjudicator’s reasoning on the defects allowance issue (only). I turn to address whether the error was a jurisdictional one.
I have referred to two formulations of principle from the Court of Appeal on this question. One is in Ceerose at [69], the other is in Builtcom at [85]. What they have in common is that they both declare that an adjudicator’s duty under s 22(d) is not a duty to consider all submissions which are, objectively, “duly made”. Rather, it is only a duty to consider those submissions which the Adjudicator, acting in good faith, decides to have been “duly made”.
In my view, the present case is, as counsel for the Builder submitted, indistinguishable from Builtcom. Both involved an error of interpretation by the Adjudicator which resulted in submissions being excluded from consideration. I think the Court is bound to apply the approach stated in strong terms in Builtcom at [85]. If there is any tension between that formulation of the principle and what was said in Ceerose, it is a matter for the Court of Appeal.
Denial of n****atural justice: As already noted, counsel for the Owners characterised the denial of natural justice in two separate ways. One was the decision to reject the statements of Mr Edwards and Mr Every, Mr Durdu’s Scott schedule, and the Annexure Z invoices, as inadmissible, on the ground that they post-dated the payment schedule. The other was the consequential failure to consider all the evidence and submissions put forward in the adjudication response.
I do not think the failure to consider all the Owners’ evidence and submissions, taken on its own, can amount to a denial of procedural fairness in the present context. It is true that usually it is a requirement of natural justice that the decision-maker consider all of the admissible evidence put forward by the parties. But s 22(2)(d) covers this ground and the obligation under that provision has been read so as to oblige adjudicators only to consider such evidence as they determine, acting in good faith, to be admissible. The degree of natural justice to be afforded has thereby been reduced as a result of implications in the Act: see Demex at [30]-[31].
But the other formulation of the Owners’ argument cannot be so readily dealt with. The complaint is that the Adjudicator decided to exclude the documents on a ground which had not been the subject of prior argument. That is a different type of procedural failing entirely.
I do not accept the submission from counsel for the Builder that the Adjudicator’s decision to exclude the Owners’ material was in some way foreseeable. It is true that the Builder’s submissions in support of the adjudication application referred to s 20(2B) and claimed that the effect of that provision would be to limit the permissible range of submissions which might be made in the adjudication response. But that claim in no way advocated, or even suggested, the interpretation of s 20(2B) later adopted by the Adjudicator.
It would have been possible for the Adjudicator, before proceeding to decide the admissibility of the Owners’ material on the ground which he had in mind, to seek submissions from the parties on the question under s 21(4) of the Act. As discussed in Demex, at [19], this would not automatically have given him an extension of time to finish the adjudication; the parties would have had to agree to that. The existence of the power therefore had “limited force” in qualifying the “imperatives against requiring strict standards of procedural fairness”. Nevertheless it was “consistent with” a duty to afford such fairness to the parties.
In my view, in the circumstances of the case, the Adjudicator’s decision to exclude the Owners’ material on the ground that it post-dated the payment schedule involved a denial of procedural fairness. I think there are five considerations of particular significance.
The point had not been raised by the Builder. It evidently occurred to the Adjudicator while he was writing his determination. It must have been obvious to him that if he was to act on it to exclude the Owners’ material he would be doing so without hearing from either party on its validity.
The import of the Owners’ material was clear from the covering email. It must have been clear to the Adjudicator that if he acted on the point to exclude that material, he would be leaving the Builder’s evidence and submissions on the relevant issues unanswered.
The point had been squarely refuted by the then recent decision of Ball J in Miller. It is not clear that the Adjudicator undertook any research on it. If he did so, he did not refer to any authority in support of it.
The point was a short and simple one. It need not have taken long to invite the parties’ submissions on it. Doing so would not have prevented the Adjudicator from going on with the rest of the adjudication while waiting for those submissions. It thus seems unlikely that inviting submissions would have imposed an unreasonable burden on the Adjudicator, even if the parties had refused to grant an extension of time.
In any event, there was no imperative to deal with the Owners’ material on admissibility grounds. No objection had been taken. There was nothing to stop the Adjudicator from simply going through the material in the ordinary way and deciding, on a submission-by-submission basis, whether it fell within the payment schedule, and to the extent that it did, considering it. That would have been the usual process. There is no reason to treat it as having been unduly burdensome.
Finally, I come to materiality. For reasons I have given, there was no material effect on the quantification on the progress claim or the set off for payments. But I do think that the decision to reject the documents was material to the defect allowance issue.
The fact that the Adjudicator was entitled to apply his own experience in considering Mr Su’s defective works costings cannot be decisive. He made specific reference to those costings not being contested when the Owners had in fact provided documents which did that very thing. It is notable in this regard that the Adjudicator’s reasons for rejecting the progress claim for the practical completion stage relied heavily on facts introduced by the Owners in their statement (it is one of the curiosities in this matter that the Adjudicator did not reject that statement even though it too post-dated the payment schedule). Where relevant evidence is excluded in breach of natural justice, it is not necessary to prove that that evidence, if admitted, would inevitably have led to a different result. A reasonable possibility is enough: MZAPC v Minister for Immigration and Border Protection (2021) 273 CLR 506 at 524 [39]. In my view that is the case here.
The finding of breach of natural justice, however, only applies to one of the three issues which I have identified. The Court should in this situation try to avoid setting aside the whole of the adjudication if severance of the decision on the offending issue is possible under s 32A.
It seems to me, as at present advised, that such severance could be achieved by deducting from the amount of the adjudication the difference between the amount allowed by the Adjudicator ($28,770) and the costings presented by the Owners in their adjudication response ($107,486). The rest of the adjudication cannot have been affected by any denial of natural justice and should stand.
On 14 May I issued to the parties a draft of my reasons for judgment to this point. I invited them to identify any errors or omissions, and to confer on the orders required to give effect to my conclusions and deal with costs. A further hearing took place today on those issues.
The main area of dispute between counsel was how much of the determination should be severed and left standing despite my finding that the determination involved a failure to afford natural justice to the Owners. Counsel for the Owners referred me to the decision of Darke J in Ceerose Pty Ltd v A-Civil Aust Pty Ltd (No 2) [2023] NSWSC 401 at [39]-[40]. His Honour said:

Counsel submitted that, as a matter of principle, this was the same approach as I had foreshadowed at [125] above. It involved calculating the value of the defective works allowance for which the Owners contended in their adjudication response and deducting from that figure the $28,770 conceded by the Builder and adopted by the Adjudicator (see [56] above). The difference between these two figures represented the “ambit of the dispute” which the Adjudicator had been called upon to determine.
Counsel submitted, however, that the proper figure for the Owners’ defective works allowance was higher than the $107,486 stated (tentatively) in [125]. It included four components:
$67,575, for Mr Durdu’s original Scott Schedule estimates (see [40(4)] above);
$9,206, for items in Mr Durdu’s schedule where Mr Edwards gave an estimate which exceeded Mr Durdu’s (see [40(4)] above);
$30,250, for items in Mr Durdu’s schedule where Mr Edwards gave an estimate and none had been given by Mr Durdu (see [40(4)] above); and
$56,368, for additional defective works identified by Mr Edwards not in Mr Durdu’s schedule (see [40(3)] above: this was less than the $90,000 figure given in [40(3)] because of double counting between that figure and the components in [40(4)]).
The figure in [125] was calculated by adding up components (1) to (3). In counsel’s submission, component (4) was no different in principle. It represented part of the Owners’ case in the adjudication schedule, which the Adjudicator had wrongly failed to consider.
On counsel’s calculations, the total value of the Owners’ defective works allowance was $153,854. Subtracting $28,770 gave an “ambit of the dispute” of $125,084. Deducting that figure from the amount awarded by the Adjudicator yielded a figure of $70,305.
Counsel for the Builder did not agree. Counsel did not criticise the approach taken by Darke J in Ceerose (No 2). But counsel submitted that the case was distinguishable. His Honour was concerned with a claim by a builder. In the present case the Court is dealing with an allowance being contended for by an owner.
Counsel repeated his submission from the main hearing (see [71(2)] above) that the Adjudicator made his own assessment of the alleged defects and accepted Mr Su’s estimates. This was hardly consistent with accepting the significantly higher figures put forward by Mr Durdu. Nor was there any reason to expect that the Adjudicator would have accepted figures from Mr Edwards which were even higher than Mr Durdu’s. It followed, in counsel’s submission, that only component (3), where Mr Durdu had not offered an estimate, could possibly be relevant.
I do not accept the premise of counsel’s argument. The Adjudicator’s reasoning at AD [278]-[281], quoted at [56] above, shows that Mr Su’s estimates were accepted because, so the Adjudicator considered, no contrary submission had been made on behalf of the Owners. The Adjudicator may have had regard to Mr Durdu’s original defect report. But, quite deliberately, he had no regard to Mr Durdu’s cost estimates.
Nor do I accept that the value of the Owners’ defective works allowance should be limited in the manner suggested by counsel. I see no reason at all to ignore the figures in Mr Durdu’s Scott Schedule. Mr Edwards’ higher estimates for some of the items in Mr Durdu’s schedule (category 2) and additional estimates (category (4)) also had to be taken into account in determining the Owners’ best case. If the Adjudicator determined they were admissible, they were in play and had to be considered.
It is immaterial that, had the Adjudicator considered these estimates, he might not have accepted them at their highest (or even at all). Once jurisdictional error has been demonstrated, the Court should only allow the adjudication to stand if it can be satisfied that the residual part of the adjudication would have been the subject of an award in any event. The onus lies on the party defending the adjudication. Counsel for the Builder has not satisfied me that any of Mr Durdu’s or Mr Edwards’ estimates fell outside the “ambit of the dispute” before the Adjudicator.
Counsel for the Owners accepted that the residual adjudicated amount would carry interest. Counsel presented a figure for interest which was not disputed by counsel for the Builder.
It was common ground that a reduction in the adjudicated amount, even if confined to category (3), was sufficiently material to invalidate the Adjudicator’s decision to award all of the adjudication fees and costs in favour of the Builder. It was also accepted that as a consequence the Court could not substitute its own assessment, but instead would fall back on the statutory starting point of a 50/50 split under s 29(3) of the Act: Ceerose (No 2) at [47]; Martinus Rail Pty Ltd v Qube RE Services (No 2) Pty Ltd (No 2) [2024] NSWSC 1223 at [317]. The Builder in fact paid all of the adjudication fees, so there will need to be an adjustment to reflect that.

Counsel for the Owners submitted that they had enjoyed substantial success in the proceedings. They had not managed to have the Adjudicator’s determination set aside in its entirety but had achieved a large reduction which well justified their coming to Court. Counsel submitted that the Builder should be required to pay the whole of their costs of the proceedings. Alternatively, there should be a modest percentage discount on the costs order in their favour.
Counsel for the Builder pointed out that the Owners had advanced various different grounds of challenge to the determination, only one of which had been successful. It was true that the Owners had in the end received a reduction of 60% or thereabouts in the adjudicated amount (when the fees for the adjudication were included). But in counsel’s submission the Court should adopt a “broad-brush” approach and order the Builder to pay 50% of the Owners’ costs.
Two components of the Adjudicator’s determination were challenged by the Owners in these proceedings. One was his decision on the allowance claimed by the Owners on account of the allegedly defective works. The other was the adjudicator’s decision on the set-off claimed by the Owners for allegedly incomplete works. I will refer to these challenges as the “defective works claim” and the “incomplete works claim”.
Both of the Owners’ claims stemmed from the Adjudicator’s decision to treat as inadmissible the material submitted in support of the Owners’ adjudication response. This decision involved a denial of natural justice. But, while it was material to the Adjudicator’s determination of the defective works’ claim, it was not material to his determination of the incomplete works claim.
The Owners have achieved a reduction of 64% in the award by the Adjudicator. But I do not think the 64% figure (or some approximation of it) is a particularly useful guide for the purposes of applying the rule that costs follow the event. The only “event” upon which the Owners failed was the incomplete works claim. Some of the arguments in support of the challenge to the Adjudicator’s admissibility decision failed, but that is immaterial. Those unsuccessful arguments were only alternative ways of formulating a contention which was ultimately successful. They were not “clearly dominant or separable”.
It follows that, as a matter of principle, the Owners should only be deprived of their costs, and obliged to pay the Builder’s costs, to the extent that those costs were solely referable to the incomplete works claim (cf Martinus Rail Pty Ltd v Qube RE Services (No 2) Pty Ltd (No 3) [2024] NSWSC 1483 at [174]). But neither party invited me to make a costs order in this form. Instead they both proposed that I make a costs order in the Owners’ favour but apply a percentage discount to it. Given the relatively small amount at stake there is no reason to demur.
On the face of it, the inclusion of the incomplete work claim would have had minimal, if any, effect on the parties’ costs of preparing the case for hearing. The only effect would have been the increased cost of preparing and presenting the submissions specifically addressing that claim (assuming costs were charged on a time costing basis rather than per day or half day engaged). In my view, that increase is likely to have been marginal in the scheme of things. In my opinion, justice will be done if the Builder is ordered to pay 75% of the Owners’ costs.

Slade v Kongstruction Pty Ltd

At a glance

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JUDGMENT

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Application to set aside Adjudicator’s determination

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01 June 2026

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Cases Cited (15)