Vantralia Pty Ltd v Redline Water Infrastructure Pty Ltd [2023] QSC 291

Pietro Girgenti Solicitor and Advisor for the applicant

• [1] Mr Peter Arthur is an adjudicator. On 5 June 2023 Mr Arthur made an adjudication decision pursuant to s 88 of the Building Industry Fairness (Security of Payment) Act 2017. The effect of the decision was that the applicant, Vantralia Pty Ltd, was required to pay the first respondent, Redline Water Infrastructure Pty Ltd, the sum of $241,359 for payment claims. The payment claims had been made under a contract dated 13 April 2022 pursuant to which Vantralia had retained Redline to perform earthworks for a subdivision at Cooroy.
• [2] Vantralia challenges Mr Arthur's decision.
• [3] Both parties accept that Vantralia may only challenge the adjudicator's decision if it demonstrates a jurisdictional error. Jurisdictional error will be found in the following situations:

(a) the decision does not meet the "basic and essential" statutory requirements - the existence of a construction contract, the service of a payment claim, the making of an adjudication application, the reference of the application to an eligible adjudicator, and the determination of the application;

(b) the adjudicator has not arrived at his or her conclusion by a process which considers the matters listed in s 88(2) of the Act; however, the valid exercise of an adjudicator's jurisdiction is not conditioned on the adjudicator reaching what is objectively the correct conclusion on all of the questions of fact or law required by the consideration of the matters set out in s 88(2);

(c) the adjudicator has arrived at his or her conclusion by a process which involved consideration of new reasons for withholding payment that were not included in the payment schedule;

(d) the adjudicator has failed to include written reasons for the decision in compliance with s 88(5)(b);

(e) the adjudicator has failed to accord to the parties the necessary level of procedural fairness;[1]

(f) the adjudicator has failed to make a good faith attempt to perform the function specified in s 88 of the Act.[2]

• [4] The parties agreed that there were four issues:

(a) Was Redline's final payment claim out of time because Vantralia had validly terminated the contract on 18 August 2022?

(b) Did the adjudicator fail to afford procedural fairness to Vantralia with respect to certificates of compaction and testing?

(c) Did the adjudicator take into account considerations he was required not to take into account, and fail to afford procedural fairness, on the issue of survey and the contention that practical completion could not be achieved by the extended date?

(d) Did the adjudicator inconsistently apply the onus of proof by finding that there is no requirement for Redline to show testing and proof of compaction?

Issue 1: Was Redline's final payment claim out of time because Vantralia had validly terminated the contract on 18 August 2022?

• [6] There was a peculiarity about the argument before the adjudicator and before me. Vantralia's submission was, and is, that Redline's final payment claim was out of time because the final payment claim was made on 28 February 2023 when that claim was required to be filed, at the latest, within 6 months of 18 August 2022 (i.e. by 18 February 2023).
• [7] The relevant time bar is in s 75(3)(c) of the Act.[3] That subsection requires that the claim be given within "6 months after the completion of all construction work to be carried out under the construction contract".[4] Thus, it can be seen that the six months begins to run from the time of the completion of all construction work to be carried out under the contract.
• [8] Rather than focus on that jurisdictional fact - when the work was completed or to be completed - the focus of the parties and the adjudicator was on the purported terminations of the contract by both parties. Vantralia had purported to terminate on 18 August 2022 and Redline had purported to terminate on 30 August 2022. And so, Redline's final payment claim was made on 28 February 2023 - which is 6 months and 10 days from Vantralia's purported termination, and just under 6 months from Redline's purported termination. Each party contended that the termination by the other party was invalid.
• [9] The focus on the date the contract was validly terminated was because Vantralia contended that, once the contract was terminated, Redline had neither the obligation nor the entitlement to carry out any construction work under the contract. That contention was no doubt inspired by the reasons of Bond J in SHA Premier Constructions Pty Ltd v Niclin Constructions Pty Ltd.[5] The concept, of course, is that the termination must, or is likely to, set the outer limit for any further work under the contract. That inquiry about when the contract was terminated is therefore a useful tool for determining when the work was complete.[6]
• [10] However, the jurisdictional fact under s 75(3)(c) is "". The wording is peculiar and involves two tenses. Bond J was right to ask, "" in .

(a) the period of work under the construction contract;

(b) 28 days after the end of the defects liability period;

(c) 6 months after the completion of all construction work to be completed under the contract (I will come back to this);

(d) 6 months after the complete supply of goods and services to be supplied under the construction contract.

• [12] The evident intention is to have the time begin to run when the work has concluded, the defects liability period has finished, and 6 months has passed after the complete supply of work, goods and services. Why, then, does clause 75(3) use the expression "work to be carried out"? There is no easy answer to that question. The prospective flavour to the expression seems designed to encompass work that may be carried out in the future. But the commencement of the six months can only sensibly be measured from the point when the work is complete. That is clear because of the use of the words "after the completion".
• [13] It is possible that the use of the language "work to be carried out" is designed to ensure that the six month time period does not start until the completion of all work, even work not yet complete at the time of the final claim or the final payment. Demobilisation work, for example, may not occur until after the final claim or payment.
• [14] Of course, in a particular case, and SHA Premier Construction is an example, the date when the contract was terminated may be cogent evidence or at least some evidence as to the last possible date when the construction work under the contract was complete. But caution is needed. Section 75(3)(c) should not be read as if the time limit was six months from the date when the contract was terminated.
• [15] In some cases, and this case is an example, the date when the contract was validly terminated may be contested territory. In such a case it is undesirable for the parties to focus entirely on whether and when the contract was validly terminated. To do so concentrates attention on the evidence which might, or might not, assist in determining the jurisdictional fact - namely whether the final claim was made within six months of the completion of all construction work to be carried out under the contract.

• [16] The evidence concerning completion of the works on this project is rather mixed. Mr Darren Mathews, Vantralia's development manager has given a statutory declaration that says this:
  1. I attended at the site near daily, to the best of my knowledge and belief, Redline did not conduct any construction works, and the site was locked up work [sic] from at least 12 July 2022. Attached hereto and marked DM 01 are true and correct copy of a photo taken by me on 12 July 2022 showing the site stood down."[9] [emphasis added]
• [17] In the next paragraph Mr Mathews says:
  1. On 21 and 25 July 2022, Redline issued Vantralia a Show Cause Notice under the Contract. Attached hereto and marked DM 02 and DM 03 are true and correct copies of those Show Cause Notices." [emphasis added]
• [18] The 21 July 2022 show cause notice claimed that on 30 June 2022 Redline had submitted payment claim number 6 for $122,083. Redline contended that a payment schedule did not issue within the required time. The time required was 15 days - that is, by 14 July 2022. None of that appears to be disputed. And so, by operation of s 77 of the Act, the sum of $122,083 was due and payable by Vantralia to Redline on 14 July 2022.[10]
• [19] The show cause notice contended that the failure to pay that sum was a substantial breach of the contract. That is consistent with clause 44.7 of the AS2124 contract terms that specified that the failure to make a substantial payment was a substantial breach of the contract.
• [20] Sometime around 22 or 25 July 2022[11] Vantralia part paid $89,682 of payment claim number 6 - leaving an outstanding balance of $32,401. It will be necessary to come back to this, but the failure to pay the whole $122,083 is a problem for Vantralia. The effect of s 77 was that the whole of that sum became due and owing on 14 July 2022. Vantralia's part payment on 25 July 2022 did not discharge that liability.

1. On 5 August 2022, I was forwarded an email appearing to be written by Max Shaw of Redline advising that plant and machinery would be removed from site to mitigate costs. Attached hereto and marked DM 07 is a true and correct copy of that email.
2. On 6 August 2022, I attended the Site and observed that all plant and machinery had been removed from the Site. Attached hereto and marked DM 08 is a true and correct copy of a photo taken by me on 6 August 2022 showing the Site free of any machinery. [emphasis added]

• [24] Those paragraphs are consistent with there at least being some Redline machinery on site up to 6 August 2022. There is some evidence that the work was suspended but that some demobilisation activity was carried out to secure or remove machinery. That view of the evidence is supported by Redline's final payment claim which claims for these two items:

(a) Suspension costs - 2 man crew cost recovery (only) 29/07/22 through 05/08/22 inclusive (6.5 days x 10 hrs/day = 65 hrs);

(b) Suspension costs - Equipment Only Cost Recovery (Only) 06/08/22 through 30/08/22 inclusive (19 days x 10 hrs/day = 190 hrs).

"Variation 3a & 3b ... Formal Notice of Suspension (copy attached) on 29/07/22. Formal Notice of Termination (copy attached) on 30/08/22 - Both Operators gainfully employed elsewhere from 06/08/22."

• [26] None of that evidence is explained. One difficulty, of course, is that the parties did not descend into the evidence on this issue and did not put arguments on the basis of evidence about the completion of the work because their focus was on whether and when the contract was validly terminated by either party. For example, neither party considered whether the concept of 'work under the contract', relatively widely defined by clause 2 of the contract, included demobilisation or crew recovery costs.
• [27] It is necessary to put aside the proper enquiry and to consider the issue of whether and when the contract was validly terminated.

30 June 2022 - Redline gives payment claim 6 for $122,082;

14 July 2022 - Vantralia fails to pay payment claim 6 for $122,082; the whole of that sum is due and payable under s 77 of the Act;

15 July 2022 - Redline gives payment claim 7 for $24,208;

21 July 2022 - Redline served Vantralia with a show cause notice under clause 44.7 of the contract for non-payment of payment claim 6;

22 July 2022 - Vantralia paid $89,681 to Redline in part payment of payment claim 6 - leaving a shortfall of $32,401;

27 July 2022 - the Superintendent, on behalf of Vantralia contends that progress claim 6 was valued by the Superintendent at $89,681 and so only that sum is payable (that, of course ignores the effect of s 77 of the Act);

29 July 2022 - Redline gave notice suspending the works under clause 44.9 of the contract by reason of Vantralia's failure to show reasonable cause because of the shortfall that remained due for payment claim 6;

29 July 2022 - Vantralia fails to pay payment claim 7 for $24,208; the whole of that sum is due and payable under s 77 of the Act;

30 July 2022 - Redline gave Vantralia a show cause notice under clause 44.7 of the contract for non-payment of payment claim 7;

4 August 2022 - Vantralia counter-attacked by serving a show cause notice of its own alleging that Redline was not devoting sufficient resources to enable practical completion to be reached on time, Redline's insurance had lapsed on 31 July, and that Redline had unlawfully suspended the works and had repudiated the contract;

5 August 2022 - the Superintendent, on behalf of Vantralia, issued progress certificate 8 which was a negative certificate in that it asserted that Redline owed Vantralia the sum of $75,369;

8 August 2022 - Vantralia, by its solicitors, asserted that Vantralia was now in credit with Redline to the extent of $75,369 and therefore any under-payment of payment claims 6 and 7 had been remedied. [No acknowledgment is made of the effect of s 77].

8 August 2022 - Redline gave a notice suspending the works by reason of Vantralia's failure to pay payment claim 7;

12 August 2022 - Redline responded to Vantralia's show cause of 4 August 2022 (the details of the response are at paragraph 47 of the adjudicator's reasons);

18 August 2022 - Vantralia purported to terminate the contract based on its show cause of 4 August 2022;

30 August 2022 - Redline purported to terminate based on the failures to remedy the notices - regarding non-payment of payment claims 6 and 7.

• [29] The issue agitated by the parties was whether Vantralia had a proper basis to terminate on 18 August 2022. The adjudicator found that Redline had shown reasonable cause why Vantralia should not terminate the contract. The adjudicator was entitled to come to that view based on the evidence.
• [30] Firstly, Vantralia claimed that Redline was in breach of clause 33.1 by failing to proceed with the works with due expedition and without delay. The basis of that claim is stated to be that: "It does not appear possible for Redline to complete the other 67.78% to 71.11% of the works under the Contract within the 25 days (or 18.94% of the total time) left for Redline to reach Practical Completion."[13] The balance of the work is calculated by Vantralia's solicitors based on the percentage amount of the contract price already claimed by Redline.
• [31] That is a crude mode of calculating the quantity of work remaining. And, by itself, the fact that 70% of the contract price remained to be claimed does not establish that Redline was proceeding with the work without due expedition and without delay. There may be any number of reasons why Redline had only claimed roughly 30% of the contract price. There is no expert or analysis or other evidence which demonstrates that Redline was proceeding less than diligently. Vantralia itself notes that extensions of time were being considered by the Superintendent. The other problem is that the work was suspended from 29 July 2022. That suspension was justified (see the discussion below). However, the suspension is not accommodated in any intelligible calculation of days of delay attributable to Redline's alleged lack of diligence.
• [32] In argument, Vantralia's counsel argued that the project was late even under Redline's own construction program. Even assuming Redline's program had some contractual significance, that is hardly cogent evidence of Redline's lack of diligence. The project may be delayed by the fault of the principal or the contractor, or both of them or by factors beyond the control of the contracting parties. To succeed, Vantralia are required to establish a lack of diligence on the part of Redline. Merely pointing to a delay as compared with Redline's program does not establish that.
• [33] Second, Vantralia alleged that Redline was in breach of the contract by wrongfully suspending the work. The problem with this claim is that Redline was entitled to suspend the work. When the work was suspended on 29 July 2022 the $32,401 balance of payment claim 6 remained unpaid. That was despite the show cause notice on 21 July 2022. Vantralia and their solicitors maintained that they were entitled to pay only the sum of $89,681 and that they were entitled to offset progress certificate 8 (which was negative $75,369). That is contrary to the clear words of of the Act. That section makes Vantralia "" the full sum claimed in the payment claim.

Issue 2: Did the adjudicator fail to afford procedural fairness to Vantralia with respect to certificates of compaction and testing?

• [40] This claim is difficult to understand. As the adjudicator pointed out, clause 42.1 of the contract required Redline to submit claims for payment supported by evidence of the amount due to the contractor and such information as the Superintendent shall reasonably require. However, Vantralia has advanced no evidence of any direction given by the Superintendent to Redline that required Redline to submit claims with any specific geotechnical testing or certification.
• [41] Vantralia relies on various other provisions of the contract. In particular, Vantralia relies on the following provisions and arguments.
• [42] First, clause 10.35 of the job specification specifies that:

The Schedule of Quantities for earthworks are net volumes, no compaction factor has been allowed for. The contractor is to assess this compaction factor and allow for the facts of this fraction on the volumes scheduled in the unit rates.

Moisture content of the fill should be within +/- 2% of optimum moisture content.

• [43] That is a contractual direction as to the basis for the contract schedule of quantities. Given that the adjudicator's role was to consider whether payment claims were properly made, the relevance of the provision eludes me.
• [44] Second, Vantralia contended for this:

[Vantralia] submitted at adjudication that [Redline] had not substantiated their earthworks with geotechnical testing or certification or themselves provided such testing or certification. Until such time as testing and proof of compaction was provided, the earthworks would be considered to be uncontrolled fill.

• [45] Again, it is difficult to know what the submission is. In the absence of a direction of the Superintendent under clause 42.1 payment claims are entitled to be made and paid without any particular certification. There is no evidence of a direction here. The other provisions may require Redline to meet certain technical standards. If Redline has failed to meet those technical standards, and Vantralia can prove that by evidence, then Vantralia may be entitled to bring proceedings against Redline for damages. But merely pointing to contractual provisions that have technical requirements does not invalidate payment claims or require a determination by the adjudicator.
• [46] Third, Vantralia points out that clause 10.15 of the job specification provided this:

The contractor will keep a record of levels of work being buried and this will be made available to the Superintendent as required; and ...

Where no allowance in the contract has been provided for the collection of as constructed information, the contractor is to provide access to the site and works for the Principal's surveyor and to advise when the completed works are able to be surveyed. If works are completed and the Principal's surveyor is not advised or provided access to the works, the contractor will be responsible for any additional costs associated with the collection of the as constructed information.

• [47] Again, it is difficult to know where that goes. No evidence establishes that the clause operates in the sense that, for example, Vantralia's surveyors were not given access and that there is some additional cost.
• [48] The point Vantralia seems to make is that the adjudicator did not examine clause 10.35 (quoted above). Vantralia argues that the evidence was clear that the contract was subject to terms of compliance for the work. No doubt that is true. But if Vantralia has a claim that the terms were breached then it is entitled to pursue Redline for damages. But none of that impeached the payment claim considered by the adjudicator.
• [49] Certainly, the Superintendent can require certain certification as a condition of payment. But that is not this case.
• [50] Fourth, Vantralia submits that clause 10.35 mandates that Redline assess the compaction factor and it follows that there must be an assessment of whether there has been compaction to assess the compaction factor. Vantralia seems to contend that clause 10.35 therefore requires Redline to certify its payments.
• [51] I am unable to see the contract in that way. The point of clause 10.35 is merely to require that Redline's schedule of quantities be prepared on the basis that they allow for a compaction factor. Presumably that is done because the schedule will not separately allow for recovery for compaction. In fact, the schedule of rates provides for rates for work that incorporate compaction. For example, item 6 comprises "Earthworks in all materials, including placement and compaction."[17] The sum specified is provisional. But that hardly qualifies as requiring payment claims to be accompanied by certification. Nor does it identify the type of certification.
• [52] Fifth, Vantralia points out the absence of compaction certificates. Plainly, nothing in the contract expressly or implicitly requires compaction certificates, let alone specifies who is to obtain them, and when, and what they are to certify.
• [53] Sixth, Vantralia then describes the adjudicator's decision on this certification issue as misapprehended and therefore a jurisdictional error, and as unreasonable or irrational. But the basis for those claims are not clear to me. Vantralia's claims about that seem to be entirely premised on the assumption that the contract requires compaction certification. It only requires certification if that was specified by the Superintendent. There is no evidence that was the case.

Issue 3: Did the adjudicator take into account considerations he was required not to take into account, and fail to afford procedural fairness, on the issue of survey and the contention that practical completion could not be achieved by the extended date?

• [55] Once again, it is difficult to discern the precise basis of this claim and the reasoning.
• [56] The basis for the complaint appears to be paragraph 41 of Vantralia's points of claim which asserts that the adjudicator failed to afford Vantralia procedural fairness in three respects:

(a) He considered the absence of a statutory declaration from Max Watterson, or the Superintendent in relation to the Superintendent recommending that [Vantralia] ought to carry out a survey of the site as providing an inference where no such inference ought to be drawn;

(b) He considered that the lack of a survey being carried out at the time as relevant to the conclusion he reached in paragraphs 39 and 40, when no such conclusion ought properly be made; and

(c) They applied inconsistent application of the onus of proof in the rapid adjudication process.

• [57] I am unable to make much sense of that. First, the three points do not appear to be instances where the adjudicator failed to afford procedural fairness to Vantralia. There are no specific instances alleged where Vantralia was no afforded an opportunity to know the case against it, and an opportunity to meet that case.
• [58] Second, in each case the challenge is to the adjudicator's reasoning process. The adjudicator's decision is not susceptible to a merits attack. The decision can only be challenged on the basis of a jurisdictional error.
• [59] Third, that is not the only problem. Vantralia does not explain the basis for its challenge. For example, in the first instance, it is not clear what the inference is (no inference is clear from that section of the adjudicator's decision[18]), or why Vantralia says that it was illegitimate for the adjudicator to draw such an inference.
• [60] Fourth, it seems perfectly logical for the adjudicator to note that there was no evidence from the Superintendent to the effect that, on the project the Superintendent had required geotechnical testing or certification.
• [61] Fifth, I cannot see any basis for the claim that the adjudicator considered irrelevant considerations or that he failed to afford procedural fairness on the issue of practical completion. There is certainly no evidence that Vantralia, or its solicitors, were shut out from putting on the evidence that they wished.

Issue 4: Did the adjudicator inconsistently apply the onus of proof by finding that there is no requirement for Redline to show testing and proof of compaction?

• [62] In its list of issues Vantralia articulated this complaint in this way:

The adjudicator inconsistently applied the onus of proof by finding that there is no requirement for Redline to show testing and proof of compaction when Redline had the onus to show us tests and proof of compaction. No expert supporting the proposition it was not required by [Redline] but expert being required beyond contract supervisor's certificate by Vantralia.

• [63] Paragraph 42 of Vantralia's points of claim has a contention very similar to the first sentence.
• [64] Again, it is difficult to understand the point being made. The complaint certainly does not appear to be a complaint of a jurisdictional error. But, putting aside that problem, the precise inconsistency is not identified. And, the inconsistency seems entirely based on Vantralia's view, discussed above, that the contract required Redline to produce compaction certificates and that, in the absence of those certificates, Redline's payment claim could be impeached. As explained, I do not accept that view of the contract.

• [65] It follows that, for the reasons stated, the application should be dismissed. I will hear the parties on costs.

[1] See White JA in Northbuild Construction Pty Ltd v Central Interior Linings Pty Ltd [2011] QCA 22; [2012] 1 Qd R 525 at [80].

[2] These 6 situations are summarised from the judgment of Bond J in Acciona Agua Australia Pty Ltd v Monadelphous Engineering Pty Ltd [2020] QSC 133 at [34]- [42].

[3] Both parties accepted that this was the relevant time bar.

[4] There is something of a peculiarity about the way the tenses are mixed up in this part of s 75(3)(c). That issue is discussed below.

[5] [2020] QSC 307 at [43].

[6] Depending on the contract, there may be work that is required to be performed by a party post- termination, for example, the secure a construction site or to provide a handover.

[7] I do not read the observations of Bond J in SHA Premier Constructions as suggesting that the jurisdictional fact is different.

[8] [2020] QSC 291.

[9] Very little is visible in the photograph.

[10] That is the effect of s 77 of the Act.

[11] Redline's chronology puts the date of this payment at 22 July 2022.

[12] The photos are not particularly helpful. The vision of the site is obscured by a fence. There looks to be no activity but there is a machine in the foreground.

[13] Trial bundle vol 1 tab 20 page 292.

[14] Trial bundle vol 1 tab 20 page 299.

[15] If Vantralia's complaint was that the policy of insurance did not comply with the policy, then it was necessary for that complaint to be articulated.

[16] See Carter, Contract Law in Australia 7th ed at [30-31].

[17] Trial bundle vol 1 tab 5 at page 72.

[18] See paragraphs 128 to 131 of the adjudicator's decision.