//
[2024] QSC 298
General information, not legal advice.
Supreme Court of Queensland
2024-12-06
Hindman J
Original judgment source is linked above.
CONTRACTS - BUILDING, ENGINEERING AND RELATED CONTRACTS - REMUNERATION - STATUTORY REGULATION OF ENTITLEMENT TO AND RECOVERY OF PROGRESS PAYMENTS -
PAYMENT CLAIMS - where the applicant, as the principal contractor engaged the respondent to design and construct a retail complex - where the applicant seeks to have an adjudication decision made in favour of the first respondent declared void - whether such a declaration ought to be made
ADMINISTRATIVE LAW - JUDICIAL REVIEW - GROUNDS OF REVIEW - JURISDICTIONAL MATTERS
$4,218,787.02 was made under the Building Industry Fairness (Security of Payment) Act 2017- where the applicant submits the decision is void for jurisdictional error on four grounds - where the applicant alleges the payment claim relied on by the first respondent in making the adjudication application was
invalid as it was not made in relation to an available reference date - whether this ground is made out
ADMINISTRATIVE LAW - JUDICIAL REVIEW - GROUNDS OF REVIEW - PROCEDURAL FAIRNESS -
where the applicant submits that a failure by the adjudicator to consider submissions and other evidence was a breach of natural justice - where the applicant contends there was a material denial of natural justice by the adjudicator determining the issues on grounds not contended for and in respect of which the applicant was not given the opportunity to address - whether the adjudicator failed to consider the submissions - whether the adjudicator failed to give the applicant an opportunity to address - whether any such failures were material
ADMINISTRATIVE LAW - JUDICIAL REVIEW - GROUNDS OF REVIEW - PROCEDURAL FAIRNESS -
where the applicant contends that there was a denial of procedural fairness by the manner in which the adjudicator determined the methodology and applicable percentage for the claims that were awarded under the decision - whether there was a denial of procedural fairness - whether any denial was material
Acciona Agua Australia Pty Ltd v Monadelphous Engineering Pty Ltd [2020] QSC 133; (2020) 4 QR 410
Alan Conolly and Co v Commercial Indemnity [2005] NSWSC 339
Alcan (NT) Alumina Pty Ltd v Commissioner of Territory Revenue (2009) 239 CLR 27; [2009] HCA 41
All Seasons Air Pty Ltd v Regal Consulting Services Pty Ltd
Annie Street JV Pty Ltd v MCC Pty Ltd [2016] QSC 268
BM Alliance Coal Operations Pty Ltd v BGC Contracting Pty Ltd [2015] 1 Qd R 228
BM Alliance Coal Operations Pty Ltd v BGC Contracting Pty Ltd [2012] QSC 346
Caltex Refineries (Qld) Pty Ltd v Allstate Access (Australia) Pty Ltd [2014] QSC 223
Ceerose Pty Ltd v A-Civil Aust Pty Ltd [2023] NSWCA 215 City of Ryde v AMFM Constructions Pty Ltd [2011] NSWSC 1469
Coordinated Construction Co Pty Ltd v Climatech (Canberra) Pty Ltd (2005) 21 BCL 364; [2005] NSWCA 229
GW Enterprises Pty Ltd v Xentex Industries Pty Ltd [2006] QSC 399
Iris Broadbeach Business Pty Ltd v Descon Group Australia Pty Ltd [2023] QSC 290
John Holland Pty Ltd v TAC Pacific Pty Ltd [2009] QSC 205; [2010] 1 Qd R 302
JR & LM Trackson Pty Ltd v NCP Contracting Pty Ltd
KDV Sport Pty Ltd v Muggeridge Constructions Pty Ltd
Kellett Street Partners Pty Ltd v Pacific Rim Trading Co Pty Ltd [2013] QSC 298
Ku-Ring-Gai Council v Ichor Constructions Pty Ltd [2014] NSWSC 1534
Modog Pty Ltd v ZS Constructions (Queenscliff) Pty Ltd
Musico v Davenport [2003] NSWSC 977
Niclin Constructions Pty Ltd v Robotic Steel Fabric Pty Ltd
Northbuild Construction Pty Ltd v Central Interior Linings Pty Ltd [2011] QCA 22; [2012] 1 Qd R 525
Northbuild Construction Pty Ltd v Central Interior Linings Pty Ltd [2010] QSC 95
Northbuild Constructions Sunshine Coast Pty Ltd v Beyfield Pty Ltd [2014] QSC 80
Probuild Constructions (Aust) Pty Ltd v Shade Systems Pty Ltd (2018) 264 CLR 1; [2018] HCA 4
Project Blue Sky Inc v Australian Broadcasting Authority
Rail Corporations (NSW) v Nebax Constructions [2012] NSWSC 6
Roseville Bridge Marina Pty Ltd v Bellingham Marine Australia Pty Ltd [2009] NSWSC 320
SHA Premier Constructions Pty Ltd v Niclin Constructions Pty Ltd [2020] QSC 307
Sought After Investments Pty Ltd v Unicus Homes Pty Ltd
Spankie v James Trowse Constructions Pty Ltd (No 2) [2010] QSC 166
T & M Buckley Pty Ltd v 57 Moss Road Pty Ltd [2010] QCA 381
Tailored Projects Pty Ltd v Jedfire Pty Ltd [2009] QSC 32 Thiess Pty Ltd v Warren Brothers Earthmoving Pty Ltd [2012] QSC 373
Total Lifestyle Windows Pty Ltd v Aniko Constructions Pty Ltd [2021] QSC 92
Transgrid v Walter Construction Group [2004] NSWSC 21 Trysams Pty Ltd v Club Instructions (NSW) Pty Ltd [2008] NSWSC 399
Walton Construction (Qld) Pty Ltd v Corrosion Control Technology Pty Ltd [2011] QSC 67; [2012] 2 Qd R 90
Watpac Construction (Qld) Pty Ltd v KLM Group Ltd [2013] QSC 236
Muscat Tanzer for the applicant HWL Ebsworth for the respondents
$4,218,787.02 in favour of the first respondent (Kenik) declared void in whole or part as a consequence of alleged jurisdictional error. Related relief is also sought.
$4,825,708.11 in respect of the adjudicated amount plus an amount for interest and adjudication costs.
(a) Ground 1: the payment claim relied on by Kenik in making the adjudication application was invalid as it was not made in relation to an available reference date, as the purported payment claim given on 8 September 2023 was preceded by claims given by Kenik earlier that day that were themselves statutory payment claims;
(b) Ground 2: the adjudicator committed jurisdictional error in deciding that loans or advances made by TPG to Kenik and a payment made directly by a related party of TPG to Kenik (a little over $2 million in total) were not to be included in the amount paid to date that, if included, would have significantly reduced the progress payment the adjudicator determined was payable to Kenik. The adjudicator:
(i) failed to consider TPG's submissions and evidence that the payments were between the parties and would be repaid by being offset against future progress payments under the contract; and
(ii) materially denied procedural fairness to TPG by determining the relevant issues on grounds not contended for and which TPG was not given an opportunity to address,
(c) Ground 3: the adjudicator determined the entitlement to payment for additional work arose pursuant to ss. 67(2) and 70 of the BIF Act on the basis that the work had been performed prior to termination. In doing so, the adjudicator disregarded a limitation on her jurisdiction by allowing the claim upon a basis other than the contract, which was a jurisdictional error;
(d) Ground 4: TPG was materially denied procedural fairness by the manner in which the adjudicator determined the methodology and applicable percentage for the claims that were awarded as preliminaries in variation claim 16.
(a) whether severance of the adjudicated amount should occur following any finding of jurisdictional error;
(b) in relation to claims for subcontractors' charges and a payment withholding request received by TPG, whether the amount of $803,267.16 ought be retained (in court or otherwise) from any amount payable by reason of the Decision, pursuant to ss. 97B and 126 of the BIF Act;
(c) whether there should be a stay preventing enforcement of the judgment debt obtained by Kenik, in whole or in part.
(a) as to Ground 1, objectively, Kenik sent and TPG received a single demand for payment constituted by the final document given on 8 September 2023, being the Payment Claim;
(b) as to Grounds 2 and 4, the adjudicator properly considered all necessary matters and accorded the necessary level of procedural fairness to TPG on the issues and was not required to request further submissions;
(c) as to Ground 3, the adjudicator found an entitlement to payment under the contract by reason of rights accrued prior to termination.
General principles about jurisdictional error in the context of the BIF Act
(a) the object of the BIF Act is to ensure cashflow to construction contractors in recognition of the fact that without cash flow, such contractors may not survive;
(b) the procedure of adjudication is subject to strict, fast timeframes;
(c) s. 101(a) of the BIF Act preserves the parties' ultimate rights that may be pursued by litigation in the ordinary course;
(d) the procedure of adjudication has been described as "pay now, argue later".2
1 Northbuild Construction Pty Ltd v Central Interior Linings Pty Ltd [2011] QCA 22; [2012] 1 Qd R 525, 550-556 [67]-
[80] per White JA (McMurdo P and Chesterman JA agreeing).
error in the context of the BIF Act, and has been regularly adopted by other judges of this court.4 I accept those principles as there articulated.
(a) TPG (through the superintendent) could direct Kenik to vary the works under the Contract;
(b) after receiving notice of a proposed variation to the works from TPG, Kenik was to provide notice of the costs consequences of the proposed variation works and the impact such works would have on the construction program;
(c) such variation claims made by Kenik were to be priced in accordance with clause
36.4 of the Contract.6
(a) 25 August 2023 (pursuant to clause 37.1 and item 33 of Annexure A of the Contract)7; or
(b) 29 August 2023 (the date the Contract was terminated).8
"1. This is a claim for the Contractor's costs arising from additional work arising from the Superintendent's variation direction (pursuant to clause 26.1) to for the Contractor to obtain an approved DA (Planning permit) for the project.
2. Pursuant to clause 36.4, the Contractor is entitled to
$244,336.05 plus GST for carrying out the additional work directed as a variation."
(a) were emailed between 12:49pm and 1:04pm on 8 September 2023;
(b) were each stated to be a variation claim by their respective subject lines and the content of the covering emails, as well as within their respective covering letters;
(c) were different to each other; that is, none of the claims were repetitious or reagitated the same claims;
9 Henderson, [28]-[49] and ex PJH-1, pp. 113-210.
10 Henderson, ex PJH-1, pp. 113, 120, 149, 157, 164, 169, 175, 185, 193, 200, 206.
(d) were expressed in each correspondence to be variation claims under clause 36 of the Contract11 (clause entitled 'Variations') or extension of time and delay damages claims under clause 34 of the Contract12 (clause entitled 'Time and progress');
(e) were not accompanied by a supporting statement as required by s. 75(7) of the BIF Act.
(a) it was emailed at 3:57pm on 8 September 2023, after each of the earlier eleven variation claims were delivered;
(b) it was expressed to be a payment claim in the subject line and body of the covering email, that stated:
"Attached is Kenik Pty Ltd's payment claim of today's date in respect of work at 222 Moggill Road, Taringa.
(c) it was stated in the Invoice, inter alia:16
(i) "Kenik Pty Ltd requests payment of the claimed amount of $9,689,767.44 (inc GST) from Taringa Property Group Pty Ltd (ACN 638 168 626) as trustee for the Taringa Property Group Unit Trust";
(ii) "Claimed in accordance with the Building Industry Fairness (Security of Payment) Act 2017 (Qld)",
13 Henderson, [50]-[51]; ex PJH-1, pp. 211-216.
(d) it expressed a reference date of 29 August 2023 (noting that the eleven variation claims did not state any reference date);
(e) it was expressed in the Invoice to be a payment claim by use of the words "PC- 31" and "Date of Payment Claim 31" (whereas the variation claims did not express themselves to be payment claims);
(f) it included a variation register and sought payment in respect of all unpaid variation claims including, amongst others, variations 15 to 25 that were issued earlier that same day;
(g) it was accompanied by a single signed supporting statement as required by
s. 75(7) of the BIF Act for payment claims (whereas the variation claims did not).17
(a) the relevant approach to statutory construction is set out by the High Court in cases such as _Project Blue Sky Inc v Australian Broadcasting Authority_24 and _Alcan (NT) Alumina Pty Ltd v Commissioner of Territory Revenue_25 requiring that consideration focus on the text of the provision, in context;
(b) the objectives of the BIF Act set out in s. 3 are important context;
(c) the requirements for the content of a payment claim are set out in s. 68 of the BIF Act:
(1) A payment claim, for a progress payment, is a written document that -
23 Tailored Projects Pty Ltd v Jedfire Pty Ltd [2009] QSC 32; [2009] 2 Qd R 171, [11]-[19]; Kellett Street Partners Pty Ltd v Pacific Rim Trading Co Pty Ltd [2013] QSC 298, [6]-[11]; All Seasons Air Pty Ltd v Regal Consulting Services Pty Ltd [2017] NSWCA 289.
25 [2009] HCA 41; (2009) 239 CLR 27, 46-47 [47], citations omitted.
(a) identifies the construction work or related goods and services to which the progress payment relates; and
(b) states the amount (the claimed amount) of the progress payment that the claimant claims is payable by the respondent; and
(c) requests payment of the claimed amount; and
(d) includes the other information prescribed by regulation.
(3) A written document bearing the word 'invoice' is taken to satisfy subsection (1)(c)."
(d) there are no regulations made prescribing additional information to be included in a payment claim;26
(e) s. 75 of the BIF Act provides that a person who claims to be entitled to a progress payment may make a payment claim, subject to certain restrictions that includes that only one payment claim can be made for each reference date;
(f) a payment claim is to be construed objectively, focused on the objective circumstances and not the subjective intentions or perceptions of one of the parties. The court must take its guidance from the statutory language, which is both simple and clear: T & M Buckley Pty Ltd v 57 Moss Road Pty Ltd [2010] QCA 381 (T & M Buckley), [30]-[38]; KDV Sport Pty Ltd v Muggeridge Constructions Pty Ltd [2019] QSC 178 (KDV Sport), [10]-[18] and authorities referred to therein. These authorities also show that the assessment need not be made only by reference to the terms of the claim itself, but also reference to the background knowledge of the parties (by analogy with the identification of construction work);
(g) the test is whether the claim purports in a reasonable way to identify the particular work in respect of which the claim is made: T & M Buckley; KDV Sport, [17], which test should be applied to all the requirements of s. 68(1). As was concluded by the Court in KDV Sport at [18]:
"The above approach accords with the overall purpose of the Act, which was said by Basten JA in _Coordinated Construction Co Pty Ltd v Climatech (Canberra) Pty Ltd_27 to be:
27 (2005) 21 BCL 364; [2005] NSWCA 229, [45].
'... to provide a speedy and effective means of ensuring that progress payments are made during the course of the administration of a construction contract, without undue formality or resort to the law'."
(h) importantly, the test for whether the payment claim complies with s. 68(1) does not direct the enquiry to whether or not, in hindsight, there has been a successful articulation of the work and the claim or the other criteria in s. 68(1). A document does not, for example, fail to be a payment claim within the meaning of the BIF Act merely because it can be seen after a full investigation of the facts and circumstances that it does not, for example, successfully identify all the construction work claimed;28
(i) there is no longer any requirement for a payment claim to be endorsed as having been made under the BIF Act,29 contrary to the requirements under earlier Acts. The requirement for a payment claim to carry on its face that endorsement was removed upon the enactment of the BIF Act in November 2017;
(j) it can be accepted that there is a degree of formality required in a document to satisfy the requirements of the payment claim;
(k) the fact that an invoice does not need to expressly request payment, but is deemed to satisfy s. 68(1)(c), confirms that no formulaic words are required; the document is to be construed objectively as to whether it makes request for payment of the claimed amount;
(l) s. 68(1)(c) does not limit the description or content of the document;
(m) as a matter of statutory construction, there is no strict requirement for certain words to be used in a document for it to be a payment claim satisfying the criteria in s. 68(1);
(n) further, the Court should be careful not to set the bar too high in assessing what is required by s. 68(1):30 an overly stringent, technical or strict approach to construing a payment claim and its compliance with s. 68(1) is not warranted;
(o) ss. 68(1)(a)-(c) do not require a payment claim to identify or state a due date for payment, given the first obligation is to either pay the amount claimed or deliver
28 KDV Sport, [17] and authorities cited there.
30 T & M Buckley, [30]-[38], cited with approval in KDV Sport, [13].
a payment schedule in response to the payment claim. Nor can such a requirement be implied by or imported from s. 68(1)(c), that simply provides that an invoice with a due date for payment is taken to satisfy the requirements of s. 75(1)(c) that the payment claim requests payment of the claimed amount.
(b) it was followed within a short period of time by other variations;
(c) importantly, it did not demand payment, did not demand payment by any particular date and did not have any stated due date or timeframe for payment;
(d) it was in a substantially different form to earlier payment claims that had been made under the Contract.
(a) TPG submits that the variation 15 claim was not accompanied by a supporting statement as provided in s. 75(7) is not relevant. Section 75(8) provides that the failure of the claimant to provide the payment claim with a supporting statement does not affect the validity of the payment claim and, further, is not a requirement for a payment claim found in s. 68(1). I find that the operation of
s. 75(8) is plain, however that does not mean that non-compliance with s. 75(7) is not relevant. Instead it is a factor that can be taken into account and that I do take into account in concluding that variation 15 was not a payment claim;
(b) TPG submits there was no provision in the Contract for Kenik to submit such a variation claim. TPG says clause 36 of the Contract did not provide for such a claim and the variation 15 claim was therefore not one that appeared to be made, or which was contemplated as being made, under clause 36.33 I find that clause 36 of the Contract was not exhaustive as to the issue of variations and so the apparently non-applicability of clause 36 to variation was of limited moment;
(c) TPG submits that accordingly, although the cover email and the document described it as a "variation claim" and "Variation 15", that is not determinative. Further, TPG submits that Kenik's subjective intention as to whether the variation 15 claim was intended to be a statutory payment claim is also irrelevant. I agree with both of those submissions;
(d) TPG submits that variation 15 was unlike previous variation approval documents that had passed between the parties.34 Previously Kenik had submitted for variations 1-14 a "Contract Variation - Approval" form to be signed by both parties (and which had occurred). Those variation claims were
all submitted in the one email communication with any supporting documents attached.35 I agree that is a relevant factor, but it is not determinative;
(e) TPG submits that variation 15 does not state (and there was nothing to indicate in the covering email) that it would be followed by, or otherwise claimed in a subsequent Invoice or progress claim that would be delivered by Kenik. I agree. TPG submits that on its face, variation 15 appears to be a standalone claim asserting that Kenik is entitled to payment of a specific amount for undertaking the additional construction work under the Contract. In the circumstances I have described above, I do not agree. Objectively, it was giving notice of a variation claim, not making a claim for payment per se.
36 Tailored Projects Pty Ltd v Jedfire Pty Ltd [2009] QSC 32; Alan Conolly and Co v Commercial Indemnity [2005] NSWSC 339, [23]; Modog Pty Ltd v ZS Constructions (Queenscliff) Pty Ltd [2019] NSWSC 1743, [78]-[79]; Rail Corporations of NSW v Nebax Constructions [2012] NSWSC 6; JR & LM Trackson Pty Ltd v NCP Contracting Pty Ltd [2019] QSC 201.
to constitute a single payment claim. Even though here there were multiple communications, not expressly cross-referenced, and the Invoice followed a number of hours after the flurry of variation claims, that is not determinative.
"...That question is to be resolved objectively taking into account all relevant matters, including the terms of the document, any covering letter and the surrounding circumstances known to both parties: Fernandes Construction Pty Ltd v Tahmoor Coal Pty Ltd (t/as Centennial Coal) [2007] NSWSC 381 (dealing with the question whether a single document was properly characterised as a payment claim); Leighton v Arogen [2012] NSWSC 1323.
37 Tailored Projects Pty Ltd v Jedfire Pty Ltd [2009] QSC 32, [18].
38 [2005] NSWSC 339, [14]-[23], especially [22].
39 Tailored Projects Pty Ltd v Jedfire Pty Ltd [2009] QSC 32, [19].
Fourth, the form in which the claim or claims are made is relevant to the question whether there is one or more claims, but it is not determinative: see Alan Conolly & Co v Commercial Indemnity Pty Limited [ 2005] NSWSC 339. Also relevant to the question whether there is one or more payment claims is the purpose of the prohibition in s 13(5) of the Act. It is evident that the purpose of that provision is to prevent a principal from being vexed by having to deal with more than one progress claim (including any associated adjudication application) during the period between reference dates. Consequently, it is relevant to ask whether that policy will be subverted if multiple 'claims' are characterised as a single payment claim for the purposes of the Act."
"Unicus, particularly in its letter dated 14 February 2019, appears to have used 'payment claim' and 'invoice' interchangeably. The effect of the letter, though, is to enclose four invoices. Those invoices were reissued as payment claims, presumably in relation to a reference date that had arisen recently. Although expressed in the plural ('claims'), the letter states that the due date for payment, despite what is said in the claims, is to be calculated from the date of the letter. Consequently, by its letter dated 14 February 2019, Unicus made a single demand for payment of the amounts stated in the enclosed invoices. The letter explained why four invoices or claims were included. The letter also it stated that Unicus awaited receipt of 'payment in full' or 'your payment schedule' (singular). Objectively, a recipient of that material must have understood that a single claim was being made for payment of the full amount of the four invoices, all of which were presented at the same time.
In my opinion, that characterisation is consistent with the purpose of s 13(5) of the SOP Act. Sought After Investments was not being vexed by multiple claims served at different times. From its point of view, there was no difference between receiving a single letter enclosing four invoices and a single document consolidating the four invoices or claims.
The fact that Sought After Investments chose to serve four documents each expressed to be a payment schedule in response to the claims does not alter the position. The objective character of the claims cannot be altered by Sought After Investments' response to them. Sought After Investments' response may provide some evidence of how a reasonable person would have understood the claims that were served on it. But in considering the weight to be attached to that evidence, it
40 Sought After Investments Pty Ltd v Unicus Homes Pty Ltd [2019] NSWSC 600, [26].
is necessary to bear in mind that Sought After Investments was plainly alert to the significance of there being four payment claims and it was in its interests to characterise the letter dated 14 February 2019 and its enclosures in that way. Given that, in my opinion little weight can be attached to its conduct."
"It is open to a claimant to submit one payment claim for the purposes of the SoP Act that comprises or refers to several invoices even though some or all of those invoices separately say they are a payment claim for the purposes of the Act: Rail Corporations of NSW v Nebax Constructions [2012] NSWSC 6, at [31]; Alan Conolly and Co v Commercial Indemnity [2005] NSWSC 339, at [23]."
(a) the adjudicator failed to consider submissions made by TPG based on uncontroverted evidence as to how the parties were to treat those payments (that is, the amounts were to be repaid by being offset against future progress payments under the Contract);
41 Modog Pty Ltd v ZS Constructions (Queenscliff) Pty Ltd [2019] NSWSC 1743, [75]-[79].
(b) there was a material denial of procedural fairness to TPG by the adjudicator determining the issues on grounds not contended for and in respect of which TPG was not given the opportunity to address.
(a) advance payments made by TPG to Kenik in February and March 2023 in the amount of $1,022,987.80 (asserted by TPG to be loans to assist Kenik's cashflow, made on account under clause 37.2 of the Contract) (TPG Advances);
(b) a payment in June 2022 of $1 million to Kenik by the Derek Lowe Superannuation Fund42 (asserted by TPG to be also made to assist Kenik's cashflow) (Lowe Payment).
(a) explained each payment was made by way of loans made on account pursuant to clause 37.2 of the Contract (that is, advance payments on progress payments under the Contract) to assist Kenik with cashflow, thereby having 'frontloaded' payments to Kenik to assist with purchasing goods for the project that Kenik was not actually entitled to be paid until installed;
43 Doyle, [11(b)], exs BJD-8 (paragraphs 34-39), BJD-9.
(b) those amounts were to be repaid by way of offset in future claims issued by Kenik throughout the course of the project.
(a) at [84]-[90], essentially repeating Mr Henderson's evidence that the TPG Advances were payments made to assist Kenik with its cashflow needs to finance the purchase of large quantities of goods that could not be claimed under the Contract until later, following installation, consistent with payments on account in clause 37.2. TPG also submitted that that loan would be repaid by way of offset in future invoices. TPG also relied on the Kenik Spreadsheet as confirming the parties' understanding that these were amounts owed by Kenik to TPG, to be treated as payments made on account by TPG to Kenik pursuant to clause 37.2 of the Contract;
(b) at [91]-[98], essentially repeating Mr Lowe's and Mr Henderson's evidence that, although the Lowe Superannuation Fund was not a party to the Contract, the Lowe Payment was a loan from TPG to Kenik and should be characterised as a payment by TPG to Kenik, again, to assist Kenik with cashflow on the understanding the loan would be repaid by way of offset. Again, the Kenik
44 Doyle, [11(b)], exs BJD-8 (paragraphs 40-41), BJD-9.
Spreadsheet was relied on as confirming this treatment of the Lowe Payment between Kenik and TPG.
(a) at [64]-[66] of the Decision the adjudicator summarised the issues in dispute, in particular that TPG had previously paid $19,347,791.16 plus GST to Kenik;
(b) at [94]-[96] the adjudicator referred to the Lowe and Henderson declarations in passing when considering a different issue (Kenik's allegations regarding estoppel by convention in respect of the direction of variations, recording Mr Henderson's evidence (1) of the TPG Advances made to Kenik outside of progress claims on the understanding that such loans were to be repaid and (2) that "Mr Lowe provided a $1,000,000 loan to the claimant which was to be treated as a payment by the respondent to the claimant.");
(c) at [405] onwards, by outlining the parties' respective submissions regarding the payments made to date. At [408] the adjudicator recorded TPG's submission that the amounts paid to Kenik to date included the TPG Advances and the Lowe Payment. Relevantly, at [414]-[415] the adjudicator summarised Mr Henderson's evidence that the TPG Advances were loans or advances made for cashflow reasons. The adjudicator did not refer to Mr Henderson's (or Mr Lowe's) evidence that these payments were to be offset against future progress payments to Kenik;
(d) at [416] the adjudicator records Mr Henderson's evidence of the Lowe Payment having been made to Kenik on behalf of TPG in respect of payment under the Contract and the Kenik Spreadsheet recording that loan. The adjudicator did not refer to Mr Lowe's evidence or the evidence that these payments were to be repaid by way of offset against future invoices.
(a) at [421] the adjudicator refused to include the Lowe Payment as part of the amount paid to date because it "does not involve both parties to this contract so was not made pursuant to the contract. As such it is excluded from the ambit of this adjudication and my jurisdiction";
(b) at [422]-[423] the adjudicator also rejected including the TPG Advances as part of the amount paid to date:
"422. The amounts paid as loans by the respondent to the claimant do have some merit, particularly as they fit with the claimant's narrative that certain works varied under the contract, such as the external works, were to be paid for outside of the progress payments at a later date which the claimant says was done to keep information from the respondent's funder. This point is also made by Mr Henderson in his declaration46 albeit for different reasons. Doc 22 also shows that the parties discussed loans as part of the payments under the contract, however, there is no information on the repayment terms of these loans and how they fit in with the contract payment mechanisms.
423. If I were to include these amounts in the total amount for the previous paid under the contract, it may also be reclaimed under the terms of the loan agreement, with the consequence that it could be recouped twice. Consequently, I have not included it in my assessment of the previous paid amount as it is a separate issue that should be dealt with outside of the contract under its own dispute mechanism."
payment claim. However, there was plainly a difference in the amounts 'paid to date' and Kenik had an opportunity to address that difference in its adjudication application. TPG was at liberty to explain in its adjudication response why the amounts paid to date differed, and it did so. There is no error in the approach of the adjudicator.
Relevant law - failure to consider required matters
49 See TPG's primary submissions, [88] and authorities cited there.
52 cf Where a respondent has not provided a payment schedule: see Ceerose, [77]-[86].
by the court.53 Assessment of these factors should also take into account the often voluminous submissions received by the adjudicator and the timelines under which they operate.
"...will involve an inquiry into the private processes of decision- making, and even the mental processes of the adjudicator. While those processes may be revealed by the reasons required to be given under s 22(3), those reasons will not necessarily demonstrate a negative proposition, namely a failure to consider a particular matter required to be considered simply because it is not referred to in the reasons."
"There is an important distinction between procedural fairness and the question of whether an adjudicator has considered a matter that a provision like s 88(2) requires the adjudicator to consider. The distinction was identified by the New South Wales Court of Appeal in Ceerose Pty Ltd v A-Civil Aust Pty Ltd:57
'Because procedural fairness is concerned with the conduct of the adjudicator towards the parties, once it is established what fairness requires in a particular case, the question of compliance
54 [2023] NSWCA 215, [51] per Payne JA, Ward ACJ and Basten AJA agreeing.
55 Acciona, [35], cited with approval in Niclin Constructions, [18].
56 [2023] QSC 218, [23].
57 [2023] NSWCA 215, [51].
will be readily determined by the objective facts, being primarily the communications, or lack of them, between the adjudicator and the parties. By contrast, the question whether the adjudicator has considered a matter for the purposes of s 22(2) will involve an inquiry into the private processes of decision-making, and even the mental processes of the adjudicator. While those processes may be revealed by the reasons required to be given under s 22(3), those reasons will not necessarily demonstrate a negative proposition, namely a failure to consider a particular matter required to be considered simply because it is not referred to in the reasons'."
"[26] Purported reasons may be so deficient that they do not constitute "reasons" within the meaning of s 88(5)(b). The adequacy of reasons is a different matter. The inadequacy of reasons does not of itself amount to jurisdictional error.58 As Brereton J observed in City of Ryde v AMFM Constructions Pty Ltd:
'The significance of the reasons, or their inadequacy, is that in the context of the surrounding material they may reveal jurisdictional error, or that the adjudicator has not performed the task of determining an adjudicated amount by reference to the specified relevant factors in accordance with ... the Act.'
60 John Holland Pty Ltd v TAC Pacific Pty Ltd [2009] QSC 205; [2010] 1 Qd R 302, [66].
may be sufficient if the reasons indicate why the adjudicator arrived at the decision . In other cases the reasons may in all the circumstances reveal a failure to consider submissions. They may reveal 'no intellectual justification' for the decision that was made.61 That said, 'intellectual justification' is a gloss on the duty 'to consider' and courts, including the High Court, have warned about the use of that label.62
'There are a range of possible explanations, only one of which is that the material was not considered. Another is that the claim was readily seen to be well-founded and the submissions to the contrary as lacking in substance. However, the latter would be a good reason to omit reference to the issue in the reasons. If the submission had been misunderstood, the facts mistaken or the law wrongly identified, that might explain absence from the reasons of something expected to be addressed, but not lack of consideration. Of course, the duty to consider a submission is separate from the absence of any duty to deal with it correctly, whether in law or in fact. The point is rather that an unreviewable error may explain why the reasons do not advert to a particular matter.'
Conclusion regarding alleged failure to consider required matters
Instead it is submitted by TPG that the adjudicator's reasons were required to identify and address TPG's submission about the TPG Advances, being a centrally important matter, particularly where that was clearly articulated and based on uncontested facts.66 TPG submits that the adjudicator did not do that here, thereby demonstrating a failure to consider TPG submissions.
(a) that the payments were made by TPG to Kenik (which was implicitly accepted by the adjudicator67);
(b) the loans were advance payments made outside of progress payments, to assist Kenik's cashflow and in purchasing goods that Kenik would later be entitled to payment for upon installation;
(c) the loans were paid on account pursuant to clause 37.2 of the Contract, to be repaid by being offset against future progress payments to Kenik under the Contract.
68 Although the adjudicator's consideration of the second element at [422] is somewhat oblique.
69 Niclin Constructions, [26], citing City of Ryde v AMFM Constructions Pty Ltd [2011] NSWSC 1469.
adjudicator's reasons do not reflect a genuine consideration of those submissions.70 TPG submits that the circumstances are analogous to those in _Thiess Pty Ltd v Warren Brothers Earthmoving Pty Ltd_71 where A Lyons J (as her Honour then was) found that, although the adjudicator may have read the respondent's submissions at some point in time, "when it came to the actual point of decision making he did not 'consider' them because he did not actively take them into his reasoning process and weigh them up along with the other evidence he was considering at that point in time."72 It was in these circumstances, that it was held that the decision was affected by jurisdictional error in that the adjudicator had failed to properly exercise his power in accordance with the Act.73
(a) the Adjudication Application and Adjudication Response comprised 1,929 files for the adjudicator to review, according to TPG's solicitors;76
(b) the Adjudicator reviewed the Henderson declaration and summarised it in her reasons;77
(c) the Adjudicator reviewed the reference documents such as the invoices and bank statements referred to her by TPG and prepared her own record of all payments she was able to identify;78
(d) the Adjudicator ultimately accepted TPG's submission that the previously paid amount was higher than that identified by Kenik in its Payment Claim (the
72 Thiess Pty Ltd v Warren Brothers Earthmoving Pty Ltd [2012] QSC 373, [56].
73 Thiess Pty Ltd v Warren Brothers Earthmoving Pty Ltd [2012] QSC 373, [60].
adjudicator finding that the previously paid amount was $16,293,403.52 excluding GST79 rather than $14,349,164.84 excluding GST, being the amount previously certified by TPG in payment certificate 26 signed by the Superintendent on 20 April 2023)80;
(e) the Adjudication Determination comprised 479 paragraphs over 83 pages of reasoning,
it cannot be said that the Adjudicator failed to consider submissions or evidence in any of the ways identified by Bond J in Acciona.
Relevant law - denial of natural justice by adjudicator
"The issue of natural justice relates to the condition upon which the adjudicator exercised his powers, as distinct from the result he reached and the insulation of that result from review for error of law. John Holland was not given an opportunity to make submissions to the adjudicator that the view he proposed to take about the law was wrong, and to thereby avoid legal error. The statutory scheme may permit an adjudicator to make unreviewable errors of law in quickly deciding complex legal issues in adjudications of the present kind after considering the parties' submissions. The statutory scheme does not permit an adjudicator to determine an adjudication on the basis of a view of the law for which neither party has contended. An adjudicator may be free, as it were, to make an unreviewable error of law based on the submissions of one of the parties. He should not be so free where the error is all his own work and might have been avoided by affording natural justice."
81 Musico v Davenport [2003] NSWSC 977; John Holland Pty Ltd v TAC Pacific Pty Ltd [2009] QSC 205; [2010] 1 Qd R 302, 313 [32]; Spankie v James Trowse Constructions Pty Ltd (No 2) [2010] QSC 166, [10]; Walton Construction (Qld) Pty Ltd v Corrosion Control Technology Pty Ltd [2011] QSC 67; [2012] 2 Qd R 90, 101 [60]; and Northbuild Constructions Sunshine Coast Pty Ltd v Beyfield Pty Ltd [2014] QSC 80, [35].
82 [2009] QSC 205; [2010] 1 Qd R 302, 321 [57]; cited with approval by McMurdo J (as he was then) in Caltex Refineries (Qld) Pty Ltd v Allstate Access (Australia) Pty Ltd [2014] QSC 223 (Caltex Refineries), [38]-[39].
mind".83 The question of jurisdictional error arising from a denial of procedural fairness thereby focusses on the procedure, rather than the result. The result is irrelevant unless it can be established that no submission could have been made that may have changed the decision, which will be a rarity.84
"To establish that there has been a lack of bona fides or a denial of natural justice is not an easy task. This was a complicated matter in which there was a substantial amount of material all of which needed to be considered and resolved within a limited period of time. The arbitrator did not accept much of what Northbuild said but I do not accept that in doing so he exhibited any lack of bona fides or failed to afford natural justice to Northbuild."
Conclusion regarding alleged denial of natural justice by adjudicator
(a) as identified above, that there was "no information on the repayment terms of those loans and how they fit in with the contract payment mechanisms";
(b) further, that those amounts "may also be reclaimed under the terms of the loan agreement, with the consequence that it could be recouped twice" and should be dealt with under the loans' "own dispute mechanism".
83 Trysams Pty Ltd v Club Instructions (NSW) Pty Ltd [2008] NSWSC 399, [45], cited with approval in
87 Northbuild Construction Pty Ltd v Central Interior Linings Pty Ltd [2010] QSC 95, [47].
(a) there was already evidence before her in Mr Henderson's declaration and TPG submissions as to how those loans were to be repaid under the contractual progress payment mechanisms;
(b) there was already submissions before her that the TPG Advances formed part of the broader arrangement between the parties.
89 By asking for further written submissions as empowered by s. 84(2)(b) of the BIF Act.
submissions as to why the Lowe Payment was to be included in the calculation of the amount due under the Contract, the adjudicator rejected those submissions. She was not required to give TPG a further opportunity to explain why the Lowe Payment should be taken into account.
Effect of the above findings in relation to Ground 2
"In this context, the decision referred to in s 101(4) is the adjudicator's decision referred to in s 88. It is the decision of the amount of the progress payment, if any, to be paid by a respondent to a claimant, the date upon which it becomes due and payable, and the rate of interest: s 88(1). Section 101(4) evidently contemplates that the decision as to the amount of a progress payment under a construction contract may have been comprised of decisions as to the merit of a number of component parts. It is obvious why that may be so: the determination of the amount of a progress claim under a construction contract often
90 Transgrid v Walter Construction Group [2004] NSWSC 21 at [68] per McDougall J.
91 Ku-Ring-Gai Council v Ichor Constructions Pty Ltd [2014] NSWSC 1534 at [45] per Stevenson J.
92 Acciona, [85], approved in Ceerose, [111].
involves making decisions about a multiplicity of claims, both positive and negative. And in working out what are the component parts in any particular case, it is notable that the adjudicator's decision includes the reasons for the decision: s 88(5)."
(a) s. 101(4) should be construed as conferring the power to make orders that are reasonably required or legally necessary to achieve the outcome of allowing the part of an adjudicator's decision not affected by jurisdictional error to remain binding on the parties to the proceeding, by reference to the touchtone of reasonableness;
(b) the remedial nature of the power suggests that a beneficial approach should be taken to the determination of what is reasonably required or legally necessary in order to allow a relevant part of an adjudicator's decision to remain binding;
(c) this impliedly carries with it the power to alter the "adjudicated amount" to accord with the part of the decision which the court decided to allow to remain binding.
ss. 67(2) and 70 of the BIF Act, rather than pursuant to an entitlement to be paid for those works under the Contract. In so doing it is alleged that the adjudicator disregarded a jurisdictional limitation by allowing the claim as one that arose pursuant to the BIF Act rather than the Contract, and thereby committed jurisdictional error. That is, what the parties are in dispute about is whether the adjudicator did in fact purport to rely upon a contractual entitlement to payment in respect of the variations or some entitlement outside of the Contract.
(a) the BIF Act does not create a right to remuneration for construction work: that right is created by the construction contract;93
93 Roseville Bridge Marina Pty Ltd v Bellingham Marine Australia Pty Ltd [2009] NSWSC 320, [43].
(b) it is not usually jurisdictional error for an adjudicator to misconstrue or misapply a relevant contractual provision;94
(c) it may be jurisdictional error for an adjudicator to misconstrue the contract to create an entitlement where one does not exist in the way described by Muir JA (with whom Holmes JA and Lyons J agreed)95 in _BM Alliance Coal Operations Pty Ltd v BGC Contracting Pty Ltd_96 (citations omitted):
"[29] Here the error was jurisdictional because the adjudicator disregarded a limitation on his functions and powers. He could not award an amount for the latent condition unless there was an entitlement to be paid for that under the contract. An entitlement to be paid could only arise by the mechanism set out in cl 26.3. The parties did not meet to negotiate and the matter was not referred to an independent expert for determination. These requirements were not steps in assessing an entitlement conferred under the contract. Compliance with cl 26.3 was a precondition to the adjudicator having jurisdiction to award a sum at all. Also, the extent of an adjudicator's jurisdiction on matters of law is, at best, limited. Bodies other than courts do not have power to authoritatively determine questions of law or make decisions other than in accordance with law, subject to contrary intent in the statute creating the body.
[30] As BGC could have no entitlement to payment in respect of the alleged latent condition until the requirements of cl 26.3 were fulfilled, the adjudicator committed a jurisdictional error in making the award by disregarding a limitation on his function and powers. The award effectively created a right, rather than assessing a right that existed under the contract. Contrary to the findings of the primary judge, the adjudicator's error was not one made "in the course of the decision-making process itself based on what the adjudicator considered to be the true construction of the contract and the true merits of the claim" and thus not a jurisdictional error even if the adjudicator's construction was wrong. If BMA's construction of cl 26.3 and cl 37 of the contract is accepted, the adjudicator necessarily assessed the progress payment other than by reference to the terms of the contract."
96 [2015] 1 Qd R 228, [29], [30].
(d) accordingly, a relevant contractual entitlement should be identified:97 a failure to do so may be jurisdictional error in the sense described by McMurdo J (as his Honour then was) in Northbuild Construction Sunshine Coast Pty Ltd v Beyfield Pty Ltd:98
"[29] To determine an application, an adjudicator must identify the relevant terms of the contract upon which the claim is made and then apply the facts, as he or she finds them to be, to those terms upon their proper interpretation. The identification of the terms and the interpretation of those terms are thereby questions which the adjudicator must answer in the exercise of his jurisdiction. It follows that an error in the identification of the terms or in their interpretation will not be a jurisdictional error: Coordinated Construction Co Pty Ltd v JM Hargreaves (NSW) Pty Ltd;99 Clyde Bergemann Senior Thermal Pty Ltd v Varley Power Services Pty Ltd;100 BM Alliance Coal Operations Pty Ltd v BGC Contracting Pty Ltd."101
(e) however, where it appears that an adjudicator is not meaning to apply the contract, as they interpret it, but is instead allowing the claim upon some other basis, the position is different, because the adjudicator is thereby misunderstanding the scope of the adjudicator's jurisdiction. An example is the allowance for termination costs in BM Alliance Coal Operations Pty Ltd v BGC Contracting Pty Ltd, which Applegarth J held was the result of a jurisdictional error, a conclusion which the parties accepted on the arguing of the appeal.
97 BM Alliance Coal Operations Pty Ltd v BGC Contracting Pty Ltd [2012] QSC 346, [55]-[56] per Applegarth J.
98 [2014] QSC 80; [2015] 1 Qd R 463, [29], [30].
99 [2005] NSWCA 228; (2005) 63 NSWLR 385, 399 [52] per Hodgson JA.
100 [2011] NSWSC 1039, [44] per McDougall J.
101 [2012] QSC 346, [8] per Applegarth J, whose reasons on this point were not criticised on appeal: BM Alliance Coal Operations Pty Ltd v BGC Contracting Pty Ltd [2015] 1 Qd R 228; see also Watpac Construction (Qld) Pty Ltd v KLM Group Ltd [2013] QSC 236, [21]-[24].
variation direction to be issued after the variation claim had been submitted.102 There was not, however, any provision in clause 36 of the Contract (variations) for such a variation claim to be submitted by Kenik. However, the basis for Kenik's contention was that the entitlement accrued upon the making of that variation claim, that the superintendent was estopped from refusing.
"147. I agree with the respondent that no new works can be provided after termination of a contract, but where the claimant is claiming for works already completed prior to the termination date, a right to payment for this arises under the Act.
148. I decide that the claimant is entitled to claim for valid variation works it performed prior to contract termination pursuant to sections 67(2) and 70 of the Act."
"From each reference date under a construction contract, a person is entitled to a progress payment if the person has carried out construction work, or supplied related goods and services, under the contract."
from BM Alliance Coal Operations Pty Ltd v BGC Contracting Pty Ltd. Here the adjudicator was meaning to apply the Contract.
Ground 4: denial of natural justice regarding preliminaries
108 'Preliminaries' is a term often used for indirect costs associated with carrying out works on a project, but which costs cannot be allocated to a specific element of the works, for example site overheads, utilities, site offices and site security.
for each element of the variation claim 16 (see [163]-[164] of TPG's outline of submissions in this proceeding). TPG valued (in Mr Thompson's report) each part of the variation claim, including by reference to whether preliminaries were included in the assessed amount. The assessed amount was nil.
(a) the total contract price (items 1 to 23, being both direct costs and indirect costs) identified in payment claim 31 was $13,629,853;110
(b) as part of that value, $1,399,572 was attributed to preliminaries in payment claim 31;
(c) as a percentage of the total contract price, the preliminaries constituted 10.27% of the total contract price.
110 See payment claim 31 invoice 'Contract Works' table appearing in Henderson, ex PJH-1, pp. 213-214.
substantiation for the percentage margin claimed for preliminaries in each variation 16 claim.
113 By asking for further written submissions as empowered by s. 84(2)(b).
Taringa Property Group Pty Ltd
Kenik Pty Ltd [2024] QSC 298
(2009) 239 CLR 27
(2018) 264 CLR 1
(1998) 194 CLR 355
(1996) 185 CLR 259
(2005) 63 NSWLR 385