Federal Court of Australia

Dickson Developments Precinct 1 Pty Ltd v Core Building Group Pty Ltd [2023] FCA 1473

ORDERS

THE COURT ORDERS THAT:

1.    The originating application be dismissed.

2.    The applicant pay the first respondent’s costs of the proceedings.

3.    In relation to the orders made on 3 November 2023:

(a)    the amount of money held by the Court as a result of the applicant’s payment into Court pursuant to paragraph 1 of those orders be released to the first respondent forthwith; and

(b)    the first respondent be released from its undertaking set out in paragraph 2 of those orders.

Note:    Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.

REASONS FOR JUDGMENT

JACKMAN J:

1    This matter concerns the construction and application of the Building and Construction Industry (Security of Payments) Act 2009 (ACT) (the Act). The applicant, Dickson Developments Precinct 1 Pty Ltd (Dickson) seeks judicial review of an adjudication determination by the second respondent, Mr Max Tonkin (Adjudicator). That determination (Determination) requires Dickson to pay $5,085,159.10 to the first respondent, Core Building Group Pty Ltd (Core).

2    The Federal Court has jurisdiction to hear and determine the matter by the combined operation of the following legislation:

(a)    s 9(3) of the Jurisdiction of Courts (Cross-Vesting) Act 1987 (Cth) provides relevantly that the Federal Court may exercise original and appellate jurisdiction conferred on that court by a provision of a law of Australian Capital Territory (ACT) relating to the cross-vesting of jurisdiction;

(b)    s 4(1) of the Jurisdiction of Courts (Cross-Vesting) Act 1993 (ACT) provides that the Federal Court has or may exercise original and appellate jurisdiction in respect of “ACT matters”, which relevantly are defined to include a matter in which the Supreme Court of the ACT has jurisdiction otherwise than by reason of a law of the Commonwealth or of another State; and

(c)    under the Supreme Court Act 1933 (ACT), the Supreme Court has all original and appellate jurisdiction that is necessary to administer justice in the ACT (s 20(1)), and the Supreme Court has power to grant any relief by way of prerogative order, which is defined to include an order the relief under which is in the nature of, or to the same effect as, relief by way of certiorari (s 34B(1)).

Accordingly, s 9(3) of the Jurisdiction of Courts (Cross-Vesting) Act 1987 (Cth) is a law made by the Parliament within ss 76(ii) and 77(i) of the Constitution, which picks up, as Commonwealth law, the jurisdiction of the ACT Supreme Court to hear and determine the dispute: Crosby v Kelly [2012] FCAFC 96; (2012) 203 FCR 451 at [34]-[35] (Robertson J, with whom Bennett and Perram JJ agreed). Although the originating application seeks to invoke s 39B of the Judiciary Act 1903 (Cth), Dickson disavows any reliance on that provision.

Salient provisions of the Act

3    Section 6 of the Act refers to the object of the Act being to ensure that a person is entitled to receive, and is able to recover, progress payments if the person (a) undertakes to carry out construction work under certain construction contracts; or (b) undertakes to supply related goods and services under certain construction contracts. In particular, it is said that the Act (a) grants an entitlement to a progress payment for construction work, whether or not a construction contract provides for progress payments; and (b) establishes a recovery procedure for construction work progress payments. The Act is not concerned with finally and conclusively determining the entitlements of parties to a construction contract; rather, it creates a distinct procedure for enforcing the statutory entitlement to a progress payment that is designed to operate quickly and with minimal delay to ensure the prompt resolution of payment disputes: Probuild Constructions (Aust) Pty Ltd v Shade Systems Pty Ltd [2018] HCA 4; (2018) 264 CLR 1 at [36]-[44] (Kiefel CJ, Bell, Keane, Nettle and Gordon JJ).

4    Section 10 of the Act provides relevantly as follows:

(1)    On and from each reference date under a construction contract, a person is entitled to a payment (a progress payment) if the person has undertaken, under the contract, to–

(a)    carry out construction work; or

(b)    supply related goods and services.

(2)    A progress payment may include–

(a)    the final payment for construction work carried out, or for related goods and services supplied, under a construction contract …

The term “reference date” for a construction contract is defined in s 10(3) to mean relevantly:

(a)    a date stated in, or worked out under, the contract as the date when a claim for a progress payment is to be made in relation to work carried out or undertaken to be carried out, or related goods and services supplied or undertaken to be supplied, under the contract …

5    Section 11 of the Act provides relevantly that the amount of a progress payment to which a person is entitled in relation to a construction contract is the amount worked out under the contract.

6    Section 15 of the Act provides relevantly as follows:

(1)    A person who is or who claims to be entitled to a progress payment under section 10(1) (the claimant) may give a claim (a payment claim) to the person who, under the construction contract concerned, is or may be liable to make the payment (the respondent).

(2)    A payment claim must–

(a)    identify the construction work or related goods and services to which the progress payment relates; and

(b)    state the amount of the progress payment that the claimant claims is payable (the claimed amount); and

(c)    state that it is made under this Act.

(3)    The claimed amount may include any amount–

(a)    that the respondent is liable to pay the claimant under section 29(3); or

(b)    that is held under the construction contract by the respondent and that the claimant claims is due for release.

…

(5)    A claimant must not give more than 1 payment claim for each reference date under the construction contract.

(6)    However, subsection (5) does not prevent the claimant from including in a payment claim an amount that has been the subject of a previous claim.

I note that s 29(3) imposes on the respondent a liability to pay the claimant the amount of loss or expense incurred in exercising the right to suspend carrying out construction work under s 29(2).

7    Division 4.2 of the Act deals with the adjudication of disputes. Section 20 deals with the eligibility of adjudicators and provides relevantly in subs (1):

A person is eligible to be an adjudicator for an adjudication application if the person–

(a)    is an individual; and

(b)    has the qualifications, expertise and experience to perform adjudications; and

(c)    has successfully completed a relevant training course.

8    Section 22 deals with adjudication responses and provides relevantly in subss (2) and (4):

The adjudication response–

(a)    must be in writing; and

(b)    must identify the adjudication application to which it relates; and

(c)    may contain submissions relevant to the response.

…

The respondent must not include in the adjudication response any reasons for withholding payment unless those reasons have already been included in the payment schedule provided to the claimant.

9    Section 23 deals with adjudication procedures and provides relevantly in subs (4) that, in a proceeding to decide an adjudication application, an adjudicator:

(a)    may ask for further written submissions from either party; and

(b)    if a further submission is lodged by a party – must allow the other party to comment on the submission …

10    Section 24 deals with the adjudicator’s decision. Section 24(1) provides that the adjudicator must decide, among other things, the amount of the progress payment, if any, to be paid by the respondent to the claimant. Section 24(2) provides as follows:

In deciding an adjudication application, the adjudicator must only consider the following:

(a)    this Act;

(b)    the construction contract to which the application relates;

(c)    the payment claim to which the application relates, together with any submission, including relevant documentation, properly made by the claimant in support of the claim;

(d)    the adjudication application;

(e)    the payment schedule, if any, to which the application relates, together with any submission, including relevant documentation, properly made by the respondent in support of the schedule;

(f)    the adjudication response, if any;

(g)    the result of any inspection by the adjudicator of any matter related to the claim.

11    Section 43(1) provides that, except as provided for in Pt 6, a court does not have jurisdiction to set aside or remit an adjudication decision on the ground of error of fact or law on the face of the decision. Dickson has not sought leave to appeal on any question of law arising out of the Determination pursuant to s 43(2) and (3).

Salient provisions of the Construction Contract

12    On or about 19 January 2021, Core and Dickson entered into a written contract by which Core would design and construct a residential development on Northbourne Avenue in Dickson in the ACT, known as Kashmir (the Contract). The original Date for Completion of the project was 31 August 2022, which was later extended to 11 November 2022.

13    Clause 17 deals with progress claims and payments. Clause 17.3 provides as follows:

On each Progress Claim Date the Builder must deliver to the Superintendent a Progress Claim for an amount equal to the value of the Works carried out in the period since the immediately preceding Progress Claim Date.

The term “Progress Claim Date” is defined as meaning a date in accordance with Schedule 2, which provides as follows:

For the purposes of clause 17 the Builder must submit a Progress [Claim] on the following dates:

(a)    during the course of the Works, the 28th day of each month;

(b)    Completion (see clause 17.5), within 10 Business Days after the Date of Completion of the Works or as otherwise agreed between the parties; and

(c)    Final Payment Claim (if any): in relation to Final Completion (see clause 17.14), within 10 Business Days after the expiry of the last Defects Liability Period,

or where any of those calendar days is not a Business Day, the next succeeding Business Day.

14    The term “Works” is defined as meaning the services and the work that the Builder is required to perform to comply with its obligations under the Agreement to design and construct the Project and includes, relevantly, “(f) rectification of Defects and other remedial works”. “Defects” is defined relevantly as any defect, shrinkage, deficiency, fault or omission in the Works.

15    Clause 17.5 provides relevantly that:

(a)    On, or within 10 Business Days after, the Date of Completion the Builder must deliver to the Superintendent the Completion Progress Claim.

16    Clause 17.14 deals with the Final Payment Claim, which is to be given by the Builder to the Superintendent within the period after the expiry of the last Defects Liability Period, being the period specified in Item 23 of Schedule 1; that is, for the initial period for rectification work, within 52 weeks from the grant of the Certificate of Completion.

17    The term “Completion” is given a lengthy definition, the relevant aspects of which are that it means the stage, in the carrying out and completion of the Works, when:

(a)    the Works are complete and free from Defects, except for Defects:

(i)    which are of a minor nature;

(ii)    which do not prevent the Works from being used for their intended purpose and use as disclosed in, or as reasonably able to be inferred from, this Agreement or the Contract Documents;

(iii)    which the Superintendent determines acting reasonably that the Builder has reasonable grounds for not promptly rectifying; and

(iv)    the existence or rectification of which will not prejudice the convenient use and occupation of the Works or a Separable Part …

18    There is also a term “Final Completion” which is defined as meaning the stage when:

(a)    the Works have been fully completed in accordance with the requirements of this Agreement and are fit for their intended purpose and use as disclosed in or as reasonably inferred from this Agreement or the Contract Documents;

(b)    the Works are free from all Defects;

(c)    the Builder has fulfilled all its obligations under this Agreement; and

(d)    the final Defects Liability Period has expired.

19    The term “Date for Completion” is defined as meaning the date specified in Item 3 of Schedule 1 as adjusted in accordance with the Agreement. As I have indicated above, that date was originally 31 August 2022, and was later extended to 11 November 2022. By contrast, the expression “Date of Completion” is defined as meaning the date the Works reach Completion as determined under cl 46. Clause 46 provides a detailed process which begins with notification by the Builder at least 21 calendar days prior to the date upon which the Builder anticipates that Completion of the Works or a Separable Part will be reached, such notice stating the date which the Builder anticipates achieving Completion (cl 46.1). It then provides for a Defects list to be provided by the Superintendent to the Builder within 5 Business Days of the joint inspection, being a list of Defects that require rectification by the Builder prior to the issue of the Certificate of Completion (cl 46.2(a)). Clause 46.4 contemplates that within 10 Business Days after the inspection referred to in cl 46.3, and subject to the Builder rectifying any Defects referred to in cl 46.2, the Superintendent will issue to the Builder a Certificate of Completion stating the date on which the Works or a Separable Part achieved Completion, or provide written notice of various matters. If there is a dispute as to the Date of Completion, then the Builder is to give a Dispute Notice in accordance with cl 51 (cl 46.6), and cl 51 then deals with the resolution of such a dispute by way of determination by an Independent Expert.

20    The Superintendent is a person nominated by Dickson whose role and function are set out in cl 8. Clause 8.2 provides that the Superintendent is authorised on behalf of Dickson to act as assessor in respect of a number of matters, relevantly including the approval of each Progress Claim for payment, Extensions of Time, Defects to be made good, Completion and Final Completion.

21    Clause 16 provides relevantly as follows:

16.1    Provision of Security

(a)    The Builder must provide Security in the form of Retention Money in accordance with clause 16.2 and in the amount specified in Item 12 [namely, 5% of the Contract Sum] which the Developer is entitled to retain as a security for the performance by the Builder of its duties and obligations under this Agreement.

(b)    If the Developer calls on the Security (including any Retention Money), then the Builder must within 10 Business Days provide the Developer with additional Security so that the total Security held by the Developer is equal to the Security Amount.

16.2     Retention Money

(a)    The Developer may retain from each Progress Payment an amount equal to the percentage specified in Item 13 [namely, 10% of each Progress Claim up to the Security Amount] of the otherwise gross amount of the payment until the Developer holds the Security Amount.

(b)    This Retention Money will be retained by the Developer as security for the performance by the Builder of its duties and obligations under this Agreement.

(c)    No interest is payable by the Developer on the Retention Money.

(d)    For the avoidance of doubt, any Retention Money deducted from Progress Payments under this Agreement (whether under clause 16.1 or under this clause 16.2 is not held on trust for or otherwise for the benefit of the Builder).

16.3     Replacement with Bank Guarantee

The Builder may, at any time, elect to replace the Retention Money with a Bank Guarantee to the value of the Security Amount. In that event, the Developer must release all Retention Money held by it in exchange for the Builder providing the Bank Guarantee.

16.4     Release

Subject to clause 16.5, the Developer will release:

(a)    50% of the Security held in accordance with clause 16.1 or clause 16.2 within 15 business days of the Date of Completion, subject to the completion of the works to rectify any Defects notified to the Builder prior to the Date of Completion;

(b)    the balance of the Security 52 weeks after the Date of Completion (Final Release Date), less an amount determined by the Developer acting prudently, being security for the rectification of any Defects which, at the Final Release Date have an expired Defects Liability Period (Remaining Security); and

(c)    the Remaining Security upon payment of the Final Payment.

22    The term “Retention Money” is defined as meaning “the amount of money withheld from each Progress Payment as security in accordance with either clause 16.1 or clause 16.2”. The term “Security” is defined as meaning “the Bank Guarantee or other alternative form of security agreed by the Developer and retained in accordance with clause 16”. The term Bank Guarantee is defined as meaning:

an irrevocable and unconditional undertaking from an authorised deposit taking institution listed by APRA (www.apra.gov.au), with no expiry date, and otherwise containing terms and conditions acceptable to the Developer, acting reasonably, to pay the amount specified in Item 11 upon demand from the Developer.

Item 11 in Schedule 1 refers to the Form of Security (and gives a reference to cl 16.1 rather than to cl 16.3) as: “Two unconditional Bank Guarantees or performance bonds each for an amount equal to half of the Security Amount”.

23    On 30 June 2022, Core provided security in the form of two unconditional undertakings from AAI Limited (trading as Vero Insurance), each in the sum of $930,000. On 6 July 2023, Dickson called on the unconditional undertakings provided by Vero Insurance, and received payment of $1,860,000.

24    Throughout the course of the Works under the Contract, Core provided payment claims in accordance with the Act. In about June 2023, a dispute arose between the parties as to when and whether Core had achieved Completion under that contract. Core claimed that it had achieved Completion on 30 June 2023, but Dickson contended that Core had failed to achieve Completion due to a number of issues, including Core’s failure to permit Dickson’s representative to inspect the Works and a significant number of outstanding Defects.

25    On 24 July 2023, Core served a payment claim on Dickson expressed to be pursuant to the Act for the sum of $7,140,328.87 for work undertaken up to 30 June 2023 (the July Payment Claim). On 4 August, Dickson issued a payment schedule to Core under s 16 of the Act in response to the July Payment Claim, which scheduled a nil amount for payment pursuant to that claim. Core did not apply for an adjudication under the Act of the July Payment Claim at any time.

26    On 18 August 2023, Core served a further claim for payment dated 17 August 2023 on Dickson, expressed to be pursuant to the Act, for the sum of $7,154,783.68 for work undertaken up to 28 July 2023 (the August Payment Claim). It included the amount of $930,000 described as Completion Security Release (an apparent reference to cl 16.4, which required Dickson, subject to certain matters, to release 50% of the security held within 15 Business Days of the Date of Completion). On 23 August 2023, Dickson issued a payment schedule to Core under s 16 of the Act, in response to the August Payment Claim, which scheduled a nil amount for payment in respect of that claim. In addition to disputing the validity of the claim, Dickson raised an offsetting claim for liquidated damages for delay.

27    Core referred the August Payment Claim for adjudication. The Adjudicator was appointed and made the Determination on 19 October 2023 after an agreed extension of time.

Was there a reference date for the August Payment Claim?

28    The existence of a reference date under a construction contract within the meaning of s 10(1) is a precondition to the making of a valid payment claim under s 15(1): Southern Han Breakfast Point Pty Ltd (in liq) v Lewence Construction Pty Ltd [2016] HCA 52; (2016) 260 CLR 340 at [61] (Kiefel, Bell, Gageler, Keane and Gordon JJ), a decision on the New South Wales (NSW) counterpart to the Act which was in substantially identical terms. The High Court said that it was not inappropriate to describe the existence of a reference date to support a payment claim as a “jurisdictional fact”, treating “jurisdictional fact” as a label for a criterion, satisfaction of which enlivens the power of a decision-maker: [47]. The High Court added that the terminology serves to emphasise that the existence or non-existence of a reference date is not within the jurisdiction of the adjudicator to determine: [47].

29    At the heart of the argument for Dickson is the contention that the monthly reference dates referred to in para (a) of Schedule 2 to the Contract ceased upon Completion. Dickson submits that upon Completion, the role of Core as builder shifted from active construction to merely Defect rectification, for which it was not entitled to charge. Accordingly, Dickson submitted, there was no need for monthly reference dates after Completion, as the only works which may need to be carried out after Completion were Defect rectification works.

30    The next step in Dickson’s argument is that in the Determination, the Adjudicator found that Completion had been achieved by 30 June 2023 (see for example [24] of the Determination), consistently with Core’s evidence and submissions to the effect that Completion had been achieved on 30 June 2023. Dickson submits that, having found that Completion was achieved on 30 June 2023, the Adjudicator should have determined that the monthly reference dates ceased thereafter and that no reference date arose on 28 July 2023 to support the August Payment Claim. Accordingly, Dickson submitted the August Payment Claim was not valid because it was not supported by a valid reference date, thus invalidating the Determination as a whole. Dickson also submitted that the Adjudicator’s finding that Completion was achieved on 30 June 2023 resulted in a further jurisdictional error, by reason of the fact that Core had served an earlier payment claim on 24 July 2023, which Dickson submitted could only be a Completion Progress Claim within para (b) of Schedule 2. Dickson submits that the August Payment Claim could not also be a Completion Progress Claim within para (b) as that would contravene s 15(5) of the Act. Further, Dickson submits that the Adjudicator’s conclusion that monthly reference dates continued after Completion was so irrational or illogical that no rational or logical adjudicator could have made that determination. I note at this point that Dickson did not advance any argument based on any form of estoppel or other preclusionary principle, whether arising out of the way in which Core had conducted itself during the adjudication process, or arising out of any findings made by the Adjudicator in the Determination: see T19.16-26; 33.33-46; 34.35-39; 35.34-36.2. In that regard, a determination does not of itself give rise to any issue estoppel for the purposes of civil proceedings arising under a construction contract: Probuild Constructions (Aust) Pty Ltd v Shade Systems Pty Ltd at [46].

31    Dickson did not take any point concerning the fact that the August Payment Claim was dated 17 August 2023, whereas para (a) requires monthly Progress Claims to be submitted on the 28th day of each month: see T24.32-35, 27.19-22, 69.38-47. Similarly, the July Payment Claim was dated 24 July 2023. Core submits, and I accept, that for the July Payment Claim, the relevant date was 28 June 2023, and that claim should have referred to the work undertaken since 28 May 2023 up to 28 June 2023 (whereas it referred to work undertaken up to 30 June 2023). The next relevant date was 28 July 2023 for work undertaken since 28 June 2023, up to 28 July 2023, which was the subject of the August Payment Claim. Core points out that there would have been a practical difficulty in submitting a claim for work up to the 28th day of the month on the 28th day of that month, given that a progress claim would have taken some time to prepare and complete, and for that reason nothing turns on the fact that the claims themselves were not submitted for several weeks after the reference date in question. Core points out that s 10(1) begins by stating that “On and from” each reference date under a construction contract, a person is entitled to a payment, and that the period in which a payment claim may be given under s 15(4) may be up to 12 months after the construction work to which the claim relates was last carried out. In any event, neither party submits that there is any significance in the fact that August Payment Claim was not submitted on the 28th day of the relevant month, being 28 July 2023.

32    In my view, the fundamental flaw in Dickson’s submissions is that there is nothing in the language used in Schedule 2 which indicates that the monthly Progress Claims under para (a) are to cease upon Completion. If one were to read para (a) literally on its own, the monthly Progress Claims are to continue during the course of the Works, and “Works” are defined expansively in a way which includes the rectification of Defects, including those of a minor nature or which do not prevent the Works from being used for their intended purpose, even though Defects of that kind would not have prevented Completion from occurring. However, in the context of Schedule 2 as a whole, in my view para (a) should be construed harmoniously with para (b) such that the monthly Progress Claims under para (a) can no longer be submitted after the Date of Completion of the Works has triggered the Completion Progress Claim under para (b). The question then arises whether the event referred to in para (b) had occurred by 28 July 2023.

33    Core submits correctly that para (b) refers to the “Date of Completion”, not “Completion”. The “Date of Completion” is defined as the date the Works reached Completion as determined under cl 46. Clause 46 lays down a procedure which begins 21 days before the Builder anticipates achieving Completion, and culminates in the Superintendent issuing a “Certificate of Completion” stating the date on which the Works achieved Completion. If there is a dispute as to the Date of Completion then that dispute is dealt with under cl 51, which provides for the appointment of an Independent Expert to make a final and binding determination. That may be contrasted with the term “Completion”, which refers as a factual matter to the physical stage in the carrying out and completion of the Works when various criteria have been satisfied. The fact that the operative concept in para (b) is the “Date of Completion” rather than “Completion” is reinforced by the express reference in para (b) of Schedule 2 to cl 17.5, which provides that within 10 Business Days after the “Date of Completion” the Builder must deliver to the Superintendent the Completion Progress Claim. The fact that the word “Completion” is used in para (b) in bold print is not of any significance, particularly when the use of that word is followed immediately by the reference to cl 17.5, which makes clear that the trigger event for the Completion Progress Claim is the Date of Completion. The concept of the Date of Completion turns on the Superintendent issuing the Certificate of Completion (or the determination of the Independent Expert if cl 51 is triggered by a dispute over the Date of Completion).

34    The fact that Core contended in the adjudication process, and the Adjudicator found, that the Works had achieved the physical state required by the definition of “Completion” on 30 June 2023 did not result in that date being the Date of Completion, as the Superintendent has not issued a Certificate of Completion (and no dispute concerning any such certificate has been referred under cl 51). Accordingly, there is still no Date of Completion, cl 17.5 has not come into operation, and para (b) of Schedule 2 has no work yet to do. Paragraph (a) of Schedule 2 was therefore still operative on 28 July 2023, and that date was a valid reference date to support the August Payment Claim. The existence of that precondition to the making of the August Payment Claim is a matter for this Court to determine, not a matter for the Adjudicator.

35    As to the argument that the July Payment Claim was a Completion Progress Claim within the meaning of cl 17.5 and para (b) of Schedule 2, consistently with what I have said above, the July Payment Claim cannot have been a Completion Progress Claim under para (b) because the Date of Completion had not then been reached, in the absence of a Certificate of Completion issued by the Superintendent. However, there is a further problem with the July Payment Claim, in that the operative reference date for that claim under para (a) of Schedule 2 was 28 June 2023, but it claimed amounts for work undertaken up to 30 June 2023. Neither under the Act nor under the Contract was Core entitled to a progress payment by reference to the date of 30 June 2023. Accordingly, the July Payment Claim may have been invalid, although it is not necessary for me to decide that question. In any event, the July Payment Claim was not the subject of the Adjudication.

36    There is a further difficulty in the submission by Dickson that the only Works that can exist after Completion are defect rectifications for which Core is not entitled to charge. While cl 35.3 provides in effect that Defects must be rectified by the Builder at its cost, the only Defects which cl 35.3 is concerned with are those Defects which the Superintendent gives the builder an instruction to rectify. In the definition of “Works”, para (f) refers to the rectification of Defects “and other remedial works”. Core submits, and I accept, that the parties to the Contract would have contemplated circumstances where there would be disputes about whether certain works were Defects or not, and whether the cost of doing further work was rectification of those Defects or additional work for which the Builder could charge. Accordingly, as Core submits, para (a) of Schedule 2 contemplates the Builder being able to claim, on an interim basis, for that work, despite an instruction from the Supervisor to rectify a Defect, as part of a progress claim, thereby making available to the Builder the means available under the Act to receive payment for that work in the face of a dispute by the Developer.

Extensions of Time and Liquidated Damages

37    A key issue between the parties in the adjudication was the Date for Completion, and whether Core was entitled to any extensions of time. If the Date for Completion was postponed because of claims by Core for extensions of time, then that would determine the extent to which Dickson was entitled to any liquidated damages, which Dickson would seek to offset against Core’s claim.

38    The Adjudicator addressed these matters at [48]-[75] of the Determination. The Adjudicator referred to the expert evidence of Mr Shachar, who was engaged by Core, and Ms Wenham, who was engaged by Dickson. The Adjudicator referred to Mr Shachar’s conclusion that Core was entitled to extensions of time of 193 working days, such that the Date of Completion should be extended to at least 1 September 2023, referring to the last Date of Completion in the table at para 38 of Mr Shachar’s report. That table summarised the claimed delays and their impact on Core’s entitlements to extensions of time and delay costs, and referred to the appropriate Date for Completion as being 30 June 2023, with the award of the Certificate of Completion being assumed to be about two months later, on 1 September 2023. Mr Shachar’s report also contained an “As Built Programme”, which shows the effect of the various delays as being that the Date for Completion would be 30 June 2023. Ms Wenham gave competing expert evidence, concluding that Core was delayed by 52.5 working days, and was entitled to extensions of time totalling 19 days, and provided a table summarising those assessments.

39    The Adjudicator then referred to a number of aspects of Ms Wenham’s opinion, and said at [56] that he found no assessment of “EOT 67 – Benchmark Unit/Standard” dated 23 May 2023 (EOT 67) either in the adjudication response or in Ms Wenham’s report, stating that EOT 67 indicated a fundamental difference between the parties. The Adjudicator then set out the salient passages in EOT 67, whereby Core claimed that it was being delayed by the Superintendent’s act of prevention relating to his assessment of the Benchmark Unit, and a disagreement about the Benchmark Standard: [57]. The Adjudicator then referred in detail to the Superintendent’s reasons for rejecting EOT 67, and expressed the view at [72] that the Superintendent had adopted a higher standard than was called for in the definition of Completion, and that that constituted an act of prevention on the part of Dickson. Although the Adjudicator referred at [74(d)] to the forecast duration of the entitlement for EOT 67 being 305 days, overlapping with the extensions claimed on grounds other than in EOT 67, that appears to be a reference to the fact that the Date for Completion was at that time stated as 1 November 2022, and Core was claiming that the revised forecast Date for Completion should be 1 September 2023. That appears from the dates given at the end of Core’s letter of 23 May 2023 to the Superintendent setting out EOT 67, and stating that:

1)    The approved Date for Completion is 1 November 2022.

2)    The current forecast Date for Completion is 31 May 2023.

3)    The revised forecast Date for Completion (following the Superintendent’s completion of “Stage 2 Works” et al, and receipt of COU Certification) is estimated as 1 September 2023.

4)    The forecast duration of the entitlement is 305 days (Revised Date – Forecast Date).

Core submits, and I accept, that the reference to the current forecast Date for Completion, being 31 May 2023, indicates that other delays apart from the one referred to in EOT 67 had already led to claims for extensions to the Date for Completion up to 31 May 2023, and only about three months’ incremental delay was being claimed for the impact of EOT 67 on the Date for Completion.

40    The Adjudicator then expressed his conclusion at [75] as follows:

Given my consideration of the Superintendent’s reasons for rejecting EOT 67, and considering the claimant’s EOT 67 submission, I am satisfied the claimant is entitled to the EOT 67 as claimed. On that basis, the Date for Completion should be adjusted to 1 September 2023, which is after the date of the payment claim [namely, 17 August 2023]. Accordingly, I am not satisfied the respondent is entitled to its claim for liquidated damages.

41    Dickson submits that there was no evidence upon which the Adjudicator could reach a finding that EOT 67 justified an extension of 305 days. Dickson submits that Mr Shachar had assessed all of the extension of time claims relating to Dickson’s approach to the defect rectification process, including EOT 67, as justifying no more than 10 days of extension and submits that Ms Wenham did not think that anything about Dickson’s approach to the defect rectification process justified any extension at all. In my view, those submissions proceed on a misreading of Mr Shachar’s report. Mr Shachar does not refer expressly to EOT 67, but was of the view that Core was entitled to extensions of time until 30 June 2023 (see para 36), and assumed that it would take a further two months until 1 September 2023 for the Certificate of Completion to be issued (see para 38). The figure of 10 days is given by Mr Shachar only in relation to the issues which delayed Core from achieving Completion in the last two weeks of the project. namely from 15 June 2023 to 30 June 2023 (see para 35). Mr Shachar’s overall view was that Core’s entitlement was for extensions of time through to the award of a Certificate of Completion on 1 September 2023. Accordingly, I reject Core’s submission that there was no evidence to support an overall extension of time of 305 days to 1 September 2023, and I also reject Core’s submission that the Adjudicator’s extension of 305 days was so illogical or irrational as to constitute jurisdictional error.

42    While the Adjudicator’s reasons on this issue are expressed in a way which is at times unclear, I note that such adjudications are not intended to be scrutinised in the same way as considered final determinations: Northbuild Construction Pty Ltd v Central Interior Linings Pty Ltd [2011] QCA 22; [2012] 1 Qd R 525 at [3] (McMurdo P), cited with approval in Demex Pty Ltd v McNab Building Services Pty Ltd [2023] NSWCA 261 at [22] (Kirk JA, with whom Mitchelmore and Adamson JJA agreed). As Kirk JA said in the latter case at [84]:

Given experienced parties, and the tight timeframes under the legislative scheme, there is no requirement that every step in a payment claim or adjudication application must be spelt out in express words.

Further, Kirk JA said at [24] that adjudicators may be expected to bring their experience and expertise to bear in making their determinations, that being the point of setting the eligibility requirements under the Act. The reasons given by an Adjudicator are to be considered leniently: Iskra v MMIR Pty Limited [2019] NSWCA 126 at [49] (Gleeson JA, with whom Bathurst CJ and Payne JA agreed).

Unsolicited Submissions

43    On 21 September 2023, the solicitors for Core sent to the Adjudicator some written submissions directed to the proposition that the submissions and evidence provided by Dickson in its adjudication response of 18 September 2023 went beyond the reasons for withholding payment expressed in the payment schedule, and thereby contravened the prohibition in s 22(4) of the Act. On 22 September 2023, the Adjudicator made a request pursuant to s 23(4) of the Act for Dickson to make further written submissions by a certain time on whether the parts of the adjudication response and supporting materials identified by Core should be disregarded in the adjudication process, and also invited Core to comment on Dickson’s further submissions by a specified time. I note that Dickson does not make any complaint about any denial of procedural fairness: T62.4-18.

44    Dickson submits that the effect of s 24(2) is that, in deciding an adjudication application, the adjudicator must only consider the matters set out specifically in that subsection, including “any submission, including relevant documentation, properly made by the claimant in support of the claim” as provided for in subpara (c). Dickson submits that the words “properly made” in that provision should be construed as a reference to submissions made at the time the payment claim is served, as referred to in s 19(3)(g). Dickson submits that a corresponding construction should be given to the reference in s 24(2)(e) to “any submission … properly made” by the respondent in support of the payment schedule, as referring to the submissions which may be included in the adjudication response under s 22(2)(c). Dickson submits that the Adjudicator wrongly considered Core’s unsolicited submissions and accepted them in a number of places in a manner indicating that those unsolicited submissions had an impact on the conclusions reached in the Determination, thus making the Adjudicator’s error in considering those submissions material.

45    As a matter of construction of the Act, I reject the submission that the words “properly made” in s 24(2)(c) and (e) refer narrowly and only to the submissions referred to in s 19(3)(g) and s 22(2)(c) respectively. The adverb “properly” is a relatively flexible and open-ended word, which does not convey that the legislative intention was to refer exclusively to the earlier provisions relating to the ability to make submissions within the specified timeframes for the adjudication application and adjudication response. If that had been the intention, then s 24(2)(c) and (e) would have referred expressly to those earlier provisions. That reasoning is reinforced by considering the practical operation of s 22(4), which prohibits the respondent from including in the adjudication response any reasons for withholding payment unless those reasons have already been included in the payment schedule provided to the claimant. On the construction advanced by Dickson, the respondent would have no ability to point out to the adjudicator that certain reasons included in the adjudication response for withholding payment might have contravened that provision. That would present a real risk that the breach of s 22(4) would not be picked up by the adjudicator, particularly in circumstances where the adjudicator is under a tight timeframe to reach a decision, and where it would plainly be of assistance to the adjudicator to have any such contravention of s 22(4) pointed out by the respondent. In my view, a respondent making a further submission to that effect (as Core did in the present case) would be acting entirely properly.

46    In any event, there is ample authority to the effect that whether a submission has been “duly made” (being the term used in s 22(2) in the NSW counterpart to the Act, the Building and Construction Industry Security of Payment Act 1999 (NSW) (the NSW Legislation)) is a matter for the Adjudicator, whose error in that respect would not invalidate the determination, and is not a matter for objective determination by the Court: Downer Construction (Australia) Pty Ltd v Energy Australia [2007] NSWCA 49; (2007) 69 NSWLR 72 at [86] (Giles JA, with whom Santow and Tobias JJA agreed), citing John Holland Pty Ltd v Roads & Traffic Authority of New South Wales [2007] NSWCA 19 at [57] (Hodgson JA, with whom Beazley JA agreed) and [71]-[72] (Basten JA). It is clear from the Determination that the Adjudicator regarded the unsolicited submissions as having been “properly made” because he asked Dickson to respond to them, and he took them into account at various points of the Determination. I note that Dickson submits that the expression “properly made” in the Act is the same in meaning and effect as the expression “duly made” in the NSW counterpart legislation: T61.1-8.

Release of Security

47    As I have indicated above, the August Payment Claim included a claim for $930,000 described as “Completion Security Release”. In the Determination, the Adjudicator referred to Dickson having acknowledged in the adjudication response that it had had recourse to two performance bonds in the sum of $930,000 each (at [22]), but the Adjudicator found that Dickson was not entitled to claim liquidated damages and that the Works had reached Completion by 30 June 2023 and accordingly Dickson was not entitled to have recourse to the performance bonds (at [24]). The Adjudicator accepted Core’s position that the cash value of the performance bonds held by Dickson was to be treated as retention money held by Dickson as Security, and thus allowed for return of $930,000, being 50% of the cash value of the performance bonds, leaving Dickson with the remaining 50% to be held as retention for Security (at [35]).

48    Dickson submits that Core was not able to claim for the return of those monies as they never had the character of monies held by Dickson under the Contract which was due for release, and thus were not capable of being claimed under s 15(3)(b) of the Act. Dickson submits that s 15(3)(b) is directed to retention monies which the claimant asserts are due for release, citing Ceerose Pty Ltd v A-Civil Aust Pty Ltd (No 2) [2023] NSWSC 345 at [39] (Richmond J). Dickson submits that a retention is not the same as a performance bond, in that a retention is comprised of amounts withheld from each progress payment due to the contractor until the amount retained reaches a certain cap as agreed between the parties, and is thus a portion of the contract sum payable for construction work which has been retained as security. A performance bond, by contrast, provides the principal with the right to call on a specified amount, and is not comprised of amounts included in the Contract Sum. In the present case, Dickson submits that the Security under the Contract is in addition to the defined Contract Sum, which is the amount that is being paid as consideration for completing the Works. Dickson submits that the performance bonds are therefore not payment for construction work; rather, they are provided by Core for all of Core’s liabilities and obligations under the Contract, including the obligation to pay liquidated damages and to claim an indemnity for damage caused by Core. Dickson submits that that interpretation is consistent with the reasoning of White J concerning the reinstatement of the security in Patterson Building Group Pty Ltd v Holroyd City Council [2013] NSWSC 1484 at [73]-[74]. Further, Dickson submits that the monies received from Dickson’s call upon the security bonds issued by Vero Insurance were never monies held by Dickson under the Contract, but were monies received by Dickson from Vero Insurance in satisfaction of Core’s obligations, and thus fell outside s 15(3)(b). Accordingly, Dickson submits that the Determination should be set aside to the extent of $930,000 plus GST (assuming no other grounds of review are successful).

49    Core submits that the relevant question (as to whether the money received by Dickson from the bonds provided under cl 16 of the Contract should be found to be an amount “held under the construction contract by the respondent and that the claimant claims is due for release” as contemplated by s 15(3)(b)) was a matter for the Adjudicator to determine. Core submits that it is not a question for this Court to determine, as this is not a merits review. Core submits that Dickson’s submissions wholly ignore that an error in the interpretation of the Act on the part of the Adjudicator (for which Dickson contends) does not prevent a determination from being valid, citing Downer Construction (Australia) Pty Ltd v Energy Australia at [87] (Giles JA, with whom Santow and Tobias JJA agreed).

50    It is now clear that the scheme established by the Act excludes the jurisdiction of the Court to make an order in the nature of certiorari to quash an adjudicator’s determination for non-jurisdictional error of law on the face of the record: Probuild Constructions (Aust) Pty Ltd v Shade Systems Pty Ltd at [35] (Kiefel CJ, Bell, Keane, Nettle and Gordon JJ), [55] (Gageler J), and [108] (Edelman J). In respect of the Act, that is also the effect of s 43(1), although there was no corresponding provision in the NSW counterpart legislation considered by the High Court in that case. I note that, although s 43(2) and (3) allow for leave to appeal on a question of law, that has not been pursued by Dickson in these proceedings. The issue therefore is whether the element of s 15(3)(b) that an amount is “held under the construction contract by the respondent” is a precondition to the jurisdiction of an adjudicator to determine that any such amount is payable.

51    As I have indicated above, in Southern Han Breakfast Point Pty Ltd (in liq) v Lewence Construction Pty Ltd at [47], the High Court referred to the term “jurisdictional fact” as a label for a criterion, satisfaction of which enlivens the power of a decision-maker, and stated that such usage was not inappropriate and served to emphasise that the existence or non-existence of the particular matter was not within the jurisdiction of the decision-maker to determine. However, the High Court said that that was the limit of its utility, and that the terminology of “jurisdictional fact” was no more than a label for the conclusion for which the appellant in that case contended, and that appending that label to the conclusion added nothing to the requisite antecedent statutory analysis.

52    The High Court then engaged with the statutory analysis required to resolve the competing constructions of the NSW counterpart to s 15(1) of the Act. In the course of that analysis, the High Court expressed the following views at [59]-[60], which I paraphrase as follows. The High Court said that within Pt 2 of the NSW Legislation (corresponding to Pt 3 of the Act) an important distinction is drawn between a progress payment to which a person is entitled and the amount of the progress payment to which that person is entitled. Section 8(1) (corresponding to s 10(1) of the Act) makes clear that a person who meets the description of a person who has undertaken to carry out construction work or supply related goods and services under a construction contract is immediately by force of that provision “entitled to a progress payment” on and from each reference date under the construction contract. By contrast, s 9 (corresponding to s 11 of the Act) makes clear that the amount of a progress payment to which the person is so entitled is not fixed by force of that section but is to be ascertained in the manner prescribed by that section, and quantifies the amount of the progress payment to which a person is entitled by force of s 8(1) (corresponding to s 10(1) of the Act).

53    I note at this point that there is a difference in the language between the Act and its NSW counterpart in that in s 11 of the Act, the amount of a progress payment to which a person is entitled in relation to a construction contract “is” the amount worked out under the contract, whereas in s 9 of the NSW counterpart the word “is” is replaced by “is to be”. The High Court treated the expression “is to be” in the NSW provision as being cast in the future tense, in contrast to the use of the present tense in s 8(1) of the NSW Legislation (corresponding to s 10(1) of the Act). Accordingly, it would appear that the contrast drawn by the High Court between the use of the present and future tense in the two provisions respectively in the NSW Legislation may not apply to ss 10(1) and 11 of the Act, although it might be observed that the opening words of both s 11 in the Act and s 9 in the NSW Legislation use the present tense in the expression “is entitled”. In my view, that difference in language does not affect the application of the High Court’s conclusion at [59], namely that s 9 of the NSW Legislation anticipates the procedure for recovery of a progress payment, to s 11 of the Act. Although s 11 of the Act is expressed in the present tense, it still anticipates the procedure for recovery set out in Pt 4 of the Act. Part 3 of the Act (like Pt 2 of its NSW counterpart) deals only with the right to progress payments, which is a step towards the exercise of the procedure for recovering progress payments laid down in Pt 4 of the Act (corresponding to Pt 3 in its NSW counterpart). In my view, the difference in language between the word “is” in s 11 of the Act and “is to be” in s 9 of its NSW counterpart is far too subtle to affect the application of the High Court’s ultimate conclusion that under the procedure for recovery of a progress payment, in the event of a dispute between a claimant and a respondent, the ascertainment of the amount, if any, of the progress payment to be recovered is committed to the jurisdiction of an adjudicator to determine under s 22 of the NSW Legislation (corresponding to s 24 of the Act).

54    The High Court then dealt with the description in s 13(1) of the NSW Legislation (corresponding to s 15(1) of the Act) of a person who is able to make a payment claim so as to trigger the procedure for recovery set out in Pt 3 (or Pt 4 of the Act). I note that the description of that person in s 15(1) of the Act is different from that in s 13(1) of its NSW counterpart, but the common language between the two is the reference to a person who “is or who claims to be entitled to a progress payment”. As to that language, the High Court said that that description recognises, consistently with s 9 (corresponding to s 11 of the Act), that the amount of the progress payment to which that person is entitled might ultimately be ascertained, according to the procedure set out in Pt 3 (or Pt 4 of the Act), to be less than the amount that the person claims to be due, and might even be ascertained according to that procedure to be nothing.

55    The High Court concluded from that analysis that the description in s 13(1) (corresponding to s 15(1) of the Act) of a person referred to in s 8(1) (or s 10(1) of the Act) is of a person whom s 8(1) makes entitled to a progress payment, and s 8(1) makes a person who has undertaken to carry out construction work or supply related goods and services under a construction contract entitled to a progress payment only on and from each reference date under the construction contract: [61]. In that way, the High Court said that the existence of a reference date under a construction contract within the meaning of s 8(1) is a precondition to the making of a valid payment claim under s 13(1): [61].

56    For present purposes, the importance of that reasoning is the distinction drawn between a progress payment to which a person is entitled, and the amount of the progress payment to which that person is entitled. As the High Court said at [59], in the event of a dispute between a claimant and a respondent, the ascertainment of the amount, if any, of the progress payment to be recovered is committed to the jurisdiction of an adjudicator to determine under s 22 of the NSW Legislation (corresponding to s 24 of the Act). That is, the ascertainment of the amount in question is not a precondition to the exercise of jurisdiction by the adjudicator, nor would it be appropriate to use the label “jurisdictional fact” to describe any of the elements of the exercise of ascertaining the amount. Section 15(3) is concerned with what may be included in the claimed amount. The first element, set out in para (a) of that provision, is any amount that the respondent is liable to pay the claimant under s 29(3), being a claim for loss or expense incurred in exercising the right to suspend carrying out construction work or supplying related goods and services. That is plainly a matter for the adjudicator to determine in the event of a dispute. The second element, set out in para (b) of the provision, is any amount that is held under the construction contract by the respondent and that the claimant claims is due for release. That too is a matter for the adjudicator to determine in the event of a dispute, because it concerns the amount to which the claimant is entitled. The issues raised by that paragraph may well include questions of law, but they are not jurisdictional questions to be determined by the Court. Accordingly, it was a matter for the adjudicator to determine the application of s 15(3)(b) in the circumstances of the present case. Accordingly, I reject Dickson’s submission that the elements of s 15(3)(b) are for this Court to determine as a precondition to the exercise of jurisdiction by the Adjudicator.

Conclusion

57    Accordingly, in my view, the originating application should be dismissed with costs. Further, the interlocutory regime imposed on 3 November 2023 should be terminated such that the money paid into Court by Dickson should be released forthwith to Core, and Core should be released from its undertaking not to take, or cause to take, any steps to enforce the Determination.

Associate:

Dated:    27 November 2023