(2) on his valuation of all the elements required to be considered in arriving at the adjudicated amount (including both positive elements - claims asserted by Club - and negative elements - offsetting amounts claimed by Trysams) there was a balance owing to Club.
55 To this the adjudicator added his view that, to the extent that the contractual regime for certification might stand in the way of his determination, he was not bound by that regime. He reached that view not because of the operation of s34 but because of the analogy drawn by him with the reasoning of Hammerschlag J in the earlier case involving these parties: Trysams Pty Ltd v Club Constructions (NSW) Pty Ltd [2007] NSWSC 941 at [93].
56 Whether the referee was right or wrong in his application of the reasoning of Hammerschlag J is not to the point. Ms Culkoff did not submit that this aspect of the adjudicator's reasoning displayed any error, let alone "Brodyn" error; and a submission that a mere misunderstanding, or misapplication, of the relevant legal principle, without more, could have entitled the Court to intervene could not be accepted.
57 Thus, whilst I accept that the referee obtained support for his conclusion from his view as to the operation of s34, I do not think that his failure to give the parties an opportunity to be heard on the point has the consequence that his determination must be declared to be void.
58 It follows that there was no substantial denial of natural justice, because the point was not material to the adjudicator's decision. In any event, I think, the second and third strands of Ms Culkoff's submissions should not be accepted. I turn to them.
59 As to the second strand: I do not think that the decision of the Court of Appeal in the John Holland case on which Ms Culkoff relied ([2007] NSWCA 140) has the effect for which she contended.
60 That was a case where practical completion had been achieved, and the defects liability period was in force. The contract provided that the respondent might in its discretion release up to 50% of the security provided by the appellant. It declined to release any, claiming that it was entitled to hold the security against claims that it had foreshadowed for alleged defective works and the like.
61 It was against that background - fundamentally different to the facts in this case - that the Court of Appeal considered the question, whether the security provisions of the contract were void by the operation of s34.
62 The Court dismissed the proposition that the security provisions were some "clog" on the adjudication process, or that they had the effect of "undoing" the determination. Giles JA said at [62] that the contractor's (appellant's) statutory right to receive an adjudicated amount, and the principal's (respondent's) contractual right to be paid any amount shown as owing on a final certificate, were separate and distinct. His Honour said at [63] that the use of the security to recoup any amount finally
certified to be owing by the contractor to the principal would not have any effect contrary to the operation of the Act:
[62] It is not correct that retention of security "undoes" an adjudicator's determination, or that a superintendent who in performing his contractual function comes to a determination negates a statutory right to retain an adjudicated amount. The adjudicator's determination remains, and brings payment of the adjudicated amount, but that is interim and subject to a different position being established in relation to payment for the relevant work or related goods and services, contractually or in proceedings. If in civil proceedings it is decided that the contractor was entitled to $10 or $30, rather than the $20 determined by the adjudicator, that does not undo the adjudicator's determination. It has done its work in ensuring "prompt interim progress payment on account, pending final determination of all disputes" (per Ipp JA in Brewarrina Shire Council v Beckhaus Civil Pty Ltd at [219], above). So also if, in the manner earlier described, the contractual mechanisms result in a contractual obligation on the principal to pay the contractor or the contractor to pay the principal. The contractor's right under the Act is to receive the adjudicated amount, but subject to final determination, and if the final determination involves the superintendent determining that the contractor was entitled to $10 or $30, rather than the $20 determined by the adjudicator, the superintendent is not negating the contractor's statutory right.
[63] Section 34 of the Act requires that the contractual provision exclude, modify or restrict, or have the effect of excluding, modifying or restricting, "the operation of this Act". The Act operated to require that the RTA pay the adjudicated amounts to John Holland, and it did so. (In relation to the Detonator Dump monies, it may be taken that it has done so or will do so if the challenge to the adjudicator's determination has failed or fails). There is no effect contrary to that operation of the Act if, in the final determination of the position between the parties, one party has to pay money to the other because the final arbiter takes a different view from that of the adjudicator. Section 32 of the Act preserves the final determination, by the contractual mechanism or by proceedings. Nor is there an effect contrary to that operation of the Act if security provided under the contract is retained, the contract on its proper construction and operation so permitting, to satisfy John Holland's obligation to pay money to the RTA if that is the outcome of the final determination.
63 What his Honour said must be understood in the light of the particular facts, including that at the relevant time there had been no final determination (either pursuant to the contract or otherwise) of the amount (if any) owing by the appellant to the respondent. Indeed, at the relevant time, the defects liability period had not expired, so that no such final determination could be made.
64 In the present case, the claim was in effect Club's final payment claim. There is no doubt that the adjudicator was empowered to deal with it (both because of the definition of "progress payment" in s4 and because, by the operation of s13(3), it was open to Club to include in its payment claim a claim for the retention fund).
65 I do not think that the adjudicator's conclusion, that the contractual provisions on which Trysams relied were void by operation of s34, is necessarily (or at all) inconsistent with the reasoning of the Court of Appeal in John Holland. On the contrary: if the contractual provisions had the effect of denying Club's entitlement to the retention fund, simply because no final certificate or special certificate had been issued, it might well be correct to say that those provisions restricted, or had the effect of restricting, the operation of the Act in relation to a final payment claim that included a claim for the retention sum. Clearly, the legislature intended that adjudicators should have power to determine such claims. Equally clearly, adjudicators deciding such claims are not to be bound by the decision (or absence of decision) of a superintendent to issue (or not to issue) a final or special certificate. In this respect, I refer not only to the decision of Hammerschlag J in Trysams but also to my decision in Abacus v Davenport [2003] NSWSC 1027 at [34] to [40]. (I note that Hammerschlag J in Trysams at [93] referred to and relied upon my decision.)
66 The legislature gave adjudicators power to deal with claims to retention funds. It must be taken to have understood the function that retention funds play, and the very common contractual situation in which the release of those funds is dependant upon a process of certification. The legislature could not have intended that adjudicators, in deciding claims for retention funds, would be bound by such certification provisions.
67 For these reasons, I do not think the decision in John Holland has a great deal to say about the operation of s34 in the circumstances of this case; i.e., on Club's case (accepted by the referee), at a point in time when, subject to questions of defective or incomplete work, Club had substantially performed its obligations under the contract. (As to the significance of defective or incomplete work: the amount allowed by the referee was approximately 2.2% of the adjusted contract sum. This suggests that, in the referee's view Club had indeed substantially performed its obligations under the contract.)
68 I have not overlooked that the second strand of Ms Culkoff's submissions relied also on the decision of the Court of Appeal in Brewarrina Shire Council. However, that case was not concerned with a payment claim or adjudication under the Act. Further, the amendments introduced to the Act by Act No.133 of 2002 (see [40] above) commenced on 3 March 2003. They were not inforce at the time of the events with which that case was concerned.
69 In my view, if the adjudicator in this case had afforded Trysams an opportunity to make submissions on the s34 point, and Trysams had made the submissions foreshadowed by Ms Culkoff, those submissions should not have persuaded the adjudicator to change his mind. Indeed, I think, if he did rely upon them and change his mind, he would have fallen into error: although not error of a reviewable kind.
70 Since the submissions that Trysams says it would have made are not submissions that should have been accepted, I find it difficult to see how Trysams lost anything by being denied the opportunity to put them.
71 The third strand of Ms Culkoff's submissions (set out at [47] above) appears to overstate the effect of the adjudicator's determination. In essence, Ms Culkoff submitted that, because the adjudicator had decided that the relevant contractual provisions were void, it was no longer open to Trysams to rely upon them. That cannot be correct. The adjudicator's determination does not fix, in any final and authoritative way, rights under the contract. It is still open to Trysams to take proceedings (curial or arbitral) to establish what it says are its entitlements against Club. As s32 of the Act recognises, nothing in the adjudicator's determination affects any right that might be agitated in any such proceedings. Nor does the adjudicator's determination mean that Trysams cannot in any such proceedings rely on the relevant contractual provisions to assert that Club had no entitlement to be paid, and should on some restitutionary or other basis repay, the retention fund.
72 The adjudicator's decision that the relevant contractual decisions are rendered void by the operation of s34 cannot bind a court or arbitral tribunal. Whilst it is correct to say that "void" in s34 means "void for all purposes" (see Hammerschlag J in Trysams at [16] and the cases there cited; and see also my article, "Prohibition on Contracting Out of the Building and Construction Industry Security of Payment Act (NSW)" (2006) 22 BCL 246 at 255 to 256), an adjudicator's decision, unlike a final decision of a court or arbitral tribunal, does not finally decide the question as between the parties. No estoppel can arise from the determination which would preclude Trysams from rearguing the point before a court or arbitrator.
73 It is correct to say that the effect of the adjudicator's decision is to deprive Trysams of the practical protection afforded by the retention fund. That, however, is a necessary consequence of s13(3) of the Act, and the power given to adjudicators to decide disputes as to payment claims, including a dispute as to a retention fund.
74 It follows that in my view the attack based on denial of natural justice, because there was not given any opportunity to put submissions on the operation of s34, must fail.
Second and third issues
Alleged failure to consider the relevant contractual provisions.
75 In essence, the second and third submissions are alternative ways of asserting that the determination is void because the adjudicator failed to consider Trysams' case based on the relevant contractual provisions. It is said that thereby he either: