Federal Court of Australia

Dickson Developments Precinct 5 Pty Ltd v Core Building Group Pty Ltd [2024] FCA 86

ORDERS

THE COURT DECLARES THAT:

1.    The determination made on 3 November 2023 in respect of adjudication application 2023ACTAT065 (as amended on 7 November 2023) pursuant to the Building and Construction Industry (Security of Payment) Act 2009 (ACT) is void.

THE COURT ORDERS THAT:

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

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

REASONS FOR JUDGMENT

JACKMAN J

Introduction

1    This matter concerns the construction and application of the Building and Construction Industry (Security of Payment) Act 2009 (ACT) (the Act). The applicant, Dickson Developments Precinct 5 Pty Ltd (Dickson) seeks judicial review of an adjudication determination (Determination) by the second respondent, Mr Max Tonkin (Adjudicator). The Determination (as amended on 7 November 2023) requires Dickson to pay the amount of $5,530,114.95 to the first respondent, Core Building Group Pty Ltd (Core). I set out the jurisdictional basis for the Federal Court hearing and determining such a matter in Dickson Developments Precinct 1 Pty Ltd v Core Building Group Pty Ltd [2023] FCA 1473 at [2]. I will follow the course adopted by the parties in the present case by referring to that earlier judgment, dealing with the contract to design and construct the Kashmir Project, as the Kashmir Judgment. The applicant in that case is related to the applicant in the present case, and the terms of the contract in the two cases are relevantly substantially identical, except for the details set out in the schedules to the contracts.

Salient provisions of the Act

2    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).

3    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 …

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

(a)    a date stated in, or worked out under, the contract as the date when a cl aim 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; or

(b)    if the contract does not provide a date mentioned in paragraph (a)—

(i)    the last day of the calendar month in which the construction work was first carried out, or the related goods and services were first supplied, under the contract; and

(ii)    the last day of each subsequent named month.

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 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.

(4)    A payment claim may be given only before the later of —

(a)    the end of the period worked out under the construction contract; and

(b)    the end of the period of 12 months after the construction work to which the claim relates was last carried out or the related goods and services to which the claim relates were last supplied.

(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.

7    Section 16 then deals with the payment schedule, by which a respondent may reply to the claim. If the scheduled amount is less than the claimed amount, the schedule must indicate why the scheduled amount is less: s 16(3)(a). If an adjudication application is subsequently made, the respondent must not include in the adjudication response any reasons for withholding payment which were not already included in the payment schedule provided to the claimant: s 22(4).

8    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

9    On or about 6 September 2019, Core and Dickson entered into a written contract by which Core would design and construct a residential development in Dickson in the ACT, known as the Mulberry Project (the Contract). The original Date for Practical Completion was 3 November 2021, which was later extended to 9 November 2021.

10    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” is defined as meaning “a claim for payment by the Builder for all or part of the Contract Sum”. 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)    Practical Completion (see clause 17.5), within 10 Business Days after the Date of Practical 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.

11    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, “(c) Variations” and “(f) rectification of Defects and other remedial works”. “Variation” is defined relevantly as “any change to the Works including an omission of any part of the Works”. “Defects” is defined relevantly as any defect, shrinkage, deficiency, fault or omission in the Works.

12    Clause 17.5(a) provides that:

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

13    Clause 17.7 contemplates the issue of a “Progress Certificate” by the Superintendent, who must, inter alia, identify the Progress Claim to which the Progress Certificate relates and certify the amount for payment together with an explanation if that amount is less than was claimed.

14    Clause 17.13 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 28 of Schedule 1; that is, relevantly, within 52 weeks from the grant of the Certificate of Practical Completion.

15    The term “Practical 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 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 …

16    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 Builder has fulfilled all its obligations under this Agreement; and

(c)    the final Defects Liability Period has expired.

17    The term “Date for Practical 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 Practical Completion” is defined as meaning the date the Works reach Practical 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 Practical Completion of the Works or a Separable Part will be reached, such notice stating the date which the Builder anticipates achieving Practical 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 Practical 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 Practical Completion stating the date on which the Works or a Separable Part achieved Practical Completion, or provide written notice of various matters. The term “Certificate of Practical Completion” is defined in cl 1.1 as “the certificate issued by the Superintendent in accordance with clause 46.4”. The Builder must give notice if there is a dispute as to the Date of Practical Completion (cl 46.6), and cl 51 deals with the resolution of such a dispute by way of determination by an Independent Expert.

18    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, Practical Completion and Final Completion.

19    Clause 47 deals with occupation before Practical Completion and provides as follows:

47.1    Separable parts

Subject to the terms of this clause, the Developer may occupy any Separable Part or Separable Parts of the Works prior to Practical Completion of the Works.

47.2    Approvals

Prior to completion of any Separable Part the Builder must, to the extent that it is possible to do so having regard to the stage of completion of the Works Included in the Separate Part, obtain all necessary Approvals from Authorities for the Separable Part.

47.3    Occupation

(a)    Prior to the Developer being entitled to occupy any Separable Part, the parties must confer in order to identify and agree precisely the part of the Works to be treated as a Separable Part.

(b)    Where a part of the Works is to be a Separable Part, then for all purposes the provisions of this Agreement apply to that Separable Part as if it were the only work included in the Works but without derogating in any way from the applicability of this Agreement to any other part of the Works.

47.4    Builder’s consent

(a)    The Developer may not occupy a Separable Part before Practical Completion of the part of the Works without the prior written consent of the Builder and the issue of a Certificate of Practical Completion for the Separable Part by the Developer.

(b)    The Builder agrees to consider any request by the Developer to occupy a Separable Part reasonably and in good faith, having regard to its obligations under this Agreement to bring the Works to Practical Completion by the Date for Practical Completion.

47.5    Insurance and indemnity

The Developer must (before occupying a Separable Part) provide the Builder with evidence of the insurance for the Separable Part including building and public liability insurance and must indemnify the Builder for injury (including death) to any person and damage to any property arising out of the occupation of any Separable Part.

47.6    Conditions of occupation

Despite any other provision of this Agreement, the following terms apply to the occupation by the Developer of any Separable Part of the Works prior to Practical Completion of the Works:

(a)    the Builder must allow the Developer to use off Site facilities and services for the purpose of the occupation subject always to the Builder’s requirements for the completion of the Works;

(b)    unless instructed otherwise by the Developer, the Builder must do everything reasonably available to it to extend the warranty and maintenance periods for plant and equipment in any Separable Part occupied before Practical Completion of the works, to coincide with the warranty and maintenance periods for similar plant and equipment in the remainder of the Works; and

(c)    the Security provided by the Builder under this Agreement is not affected by the occupation by the Developer of a Separable Part.

20    The term “Separable Part” is defined in cl 1.1 as meaning:

any part of the Works capable of occupation and use prior to Practical Completion of the whole of the Works.

Salient Facts

21    Dickson’s project brief describing the scope of the Works, as attached at Schedule 5 of the Contract, included a number of documents relating to the “Estate Development Plan”, providing for Core to carry out off-site works to service the entire Soho precinct, which comprised multiple buildings including Mulberry, Kashmir, Calypso, Vermillion and existing heritage buildings which were to be retained (the EDP Works). The affidavit of Mr Staniland, the Construction Manager of Core, dated 13 December 2023, describes the EDP Works at [14] as including:

(a)    supply, install and maintain environmental controls;

(b)    disconnection and/or diversion of water mains;

(c)    disconnection and/or diversion of sewer infrastructure including ties;

(d)    disconnection and/or diversion of stormwater services;

(e)    installation of temporary sewer and stormwater diversions around Mulberry to allow basement works to progress;

(f)    supply and install stormwater services;

(g)    supply and install sewer services; and

(h)    supply and installation of a common trench for gas, communication and electrical services.

22    The construction program for the Mulberry Project dated 28 August 2019, which was submitted to the Superintendent on 12 September 2019, recorded that the EDP Works were planned to take place in one stage from 16 September 2019 to 15 February 2020 (prior to Practical Completion): Mr Staniland’s affidavit at [15]–[17].

23    Part of the EDP Works involved the installation of stormwater services on Northbourne Avenue. One of those stormwater services was 1350 mm in diameter and was to run across Northbourne Avenue, the other was 450 mm in diameter and was to service the Kashmir area: Mr Staniland’s affidavit at [18].

24    On 3 August 2021, Mr Maloney of Core sent a Notice of Delay to the Superintendent in relation to delays to stormwater services. The delays arose from a redesign of the stormwater services due to clashes with existing services, including water main, gas and telecommunications. The notice recorded that, until the redesign was completed, Core could not install those stormwater lines or carry out the associated works (i.e. road reinstatement, landscaping, footpath works, and reinstatement works) which would delay Transport Canberra and City Services’ (TCCS) acceptance and therefore Practical Completion. The notice stated that it was likely to take 12 weeks to complete the redesign and obtain necessary approvals, and as the date for Practical Completion was 14 weeks away, that would leave only two weeks to complete the works. On 10 August 2021, Mr Maloney from Core sent a claim for an extension of time (referred to as EOT 24) in relation to delays to Practical Completion due to the redesign.

25    On 12 August 2021, the Superintendent replied by email stating:

As discussed the EOT [Extension of Time] as noted is now not applicable due to the Deed Manager confirming that the works will not be required to be completed for Mulberry Practical Completion.

The attached drawing has been approved by the Deed Manager as works excluded from Mulberry achieving Practical Completion.

1.    1350 mm stormwater “Area A”

2.    450 mm stormwater on Northbourne Ave “Area B”

The drawing attached to that email marked up the two particular stormwater services.

26    On 14 February 2022, the Superintendent sent an email to Mr Anastasov and Mr Maloney of Core, in relation to Practical Completion of the Mulberry Project. That email repeated a comment from Mr Anastasov of Core to the following effect:

Meeting was held on 22nd September 2021 at approx. 2pm. At that meeting you confirmed [Practical Completion] would not be delayed due to offsite EDP works.

Under that statement, the Superintendent stated as follows:

The 1350’s and the 450 Stormwater ON Northbourne will not be an issue due to the works been [sic] a separate stage. The remainder was always part of your OA with TCCS. Design review document attached. Plus on the email you attached (RE: Mulberry Request for Extension of Time — Stormwater Redesign dated 12-08-21) all other aspects of the Off-site works other than item 1 & 2 were required to be completed as part of Mulberry PC.

27    Mr Staniland said at [28] of his affidavit that, after receiving that email on 12 August 2021, Core:

(a)    did not take any further action in relation to the EOT 24 claim;

(b)    did not progress installation of the 450 mm stormwater line as part of the Works necessary to achieve Practical Completion for the rest of the Works;

(c)    did not install the 1350 mm stormwater line across Northbourne Avenue (or divert the 300 mm water main that was necessary to install that stormwater line) as part of the Works necessary to achieve Practical Completion for the rest of the Works; and

(d)    elements of the common trenching were not progressed as a part of the Works necessary to achieve Practical Completion for the rest of the Works.

28    On 2 May 2022, the Superintendent issued a Certificate of Practical Completion for the Mulberry Project, confirming that the Mulberry Project had achieved Practical Completion on 2 May 2022 at 5pm. The letter includes the following under the heading “Practical Completion”:

Pursuant to cl 46.4 “Certificate of Practical Completion” I hereby certify to the Builder the Certificate of Practical Completion stating the date on which the Works or a Separable Part achieved Practical Completion.

This Practical Completion Certificate for the whole of the works has been issued in good faith noting that the Builder has Incomplete Works / Defects referred to in cl 46.3 and as per the list below. The Builder has agreed it will complete the majority of these works by 5:00pm 6th May 2022.

The list of Incomplete Works/Defects comprised some 43 items but did not refer to the EDP Works. Mr Staniland says in his affidavit at [34] that, as at 2 May 2022, the status of the EDP Works was that:

(a)    the 450 mm stormwater line from the Mulberry Project to the Kashmir Project which formed part of the Mulberry EDP Works had not been installed;

(b)    the 1350 mm stormwater line across Northbourne Avenue had not been installed; and

(c)    elements of the common trenching were incomplete.

29    On 28 March 2023, Core submitted Progress Claim No 34 (PC 34) to the Superintendent, which included a claim for $96,511.97 in respect of the EDP Works. PC 34 stated that the claim was made pursuant to the Act. The Superintendent did not issue a Progress Certificate under cl 17.7 in response to PC 34. However, more than six months later, on 11 October 2023, the solicitors for Dickson sent a letter to the solicitors for Core, referring to Dickson’s contention that Core owed Dickson money under the contract in the amount of $43,505.26, but stating that, notwithstanding that position, Dickson agreed to pay the sum of $106,162.84 (inclusive of GST) as stated in PC 34. That payment was said to be made without prejudice to Dickson’s rights to claim a refund of that sum, and other sums under and in connection with the Contract.

30    On 11 April 2023, Core issued an “EDP Completion Programme” to the Superintendent, setting out the detailed proposed sequence of completing the EDP Works under the Contract. Mr Staniland said in his affidavit at [42] that, since then, Core has carried out Works listed in the EDP Completion Program, which he summarises as:

(a)    installing the 450 mm stormwater line; and

(b)    diversion of a 300 mm water main including kerb and gutter removal and reinstatement.

31    On 31 July 2023, the Superintendent sent an email to Mr Staniland requesting that Core provide an updated Contracts Works insurance policy. On 3 August 2023, Core’s insurance broker provided a confirmation of Project Contract Works & Third Party Liability cover from 21 March 2020 to 2 February 2024, describing the insured project as being “Mulberry, Soho District & Associated Civil Works”.

32    On 2 May 2023, the Defects Liability Period under the Contract expired, that date being 52 weeks from the grant of the Certificate of Practical Completion: cl 39 and Item 28 of Schedule 1.

33    On 26 July 2023, Core submitted Progress Claim No 35 (PC 35) to Dickson and the Superintendent. PC 35 stated the following in the opening paragraph:

Please find enclosed Progress Claim # 35 for work undertaken up to 26 July 2023 inclusive. We note that Final Completion was achieved on 2 May 2023. We note that there are Separate Works continuing (Estate Development Plan Works) as is demonstrated by the fact they were neither identified as omitted or defective works to be rectified in the Certificate of Practical Completion Letter.

There then followed a summary of the claim. PC 35 was said to be made pursuant to the Act. Mr Staniland (at [48] of his affidavit) refers to PC 35 including claims for $535,216.81 for Variations, which related to the EDP Works. Senior Counsel for Core accepts that it was wrong to say that “Final Completion was achieved on 2 May 2023” (T31.15–19), and Senior Counsel for Dickson similarly contends that this assertion (in effect, that Core had entirely completed the Works under the contract as at 2 May 2023) was not true (T11.19–24).

34    On 4 August 2023, the Superintendent issued his assessment of PC 35 by way of a Payment Schedule for the purposes of the Act, which certified payment to Core “for the sum of $Nil for the Progress Claim”. The Superintendent’s letter said that PC 35 was not a valid claim under the Contract because Core had not complied with the conditions precedent for a valid progress claim under cl 17.1, PC 35 was not delivered as required by cl 17.3 as the Progress Claim Date was the 28th of each month whereas PC 35 was issued on 26 July 2023, and further PC 35 was said not to be a valid claim pursuant to the Act because:

3.1     The Progress Claim is not made in relation to a valid reference date; or

3.2    In the event there is a valid reference date, the Progress Claim relates to Works carried out after the reference date.

35    On 28 July 2023, Core commenced proceedings against Dickson in the Supreme Court of the ACT, and obtained an ex parte freezing order against Dickson on that day.

36    On 18 August 2023, the period of 10 business days from receipt of the payment schedule expired, this being the period within which an adjudication application had to be made in relation to Dickson’s payment schedule in respect of PC 35: s 19(3)(b) of the Act. No such adjudication application was made in relation to PC 35.

37    On 23 August 2023, Core submitted Progress Claim No 36 (PC 36) to Dickson and the Superintendent, stating in the opening paragraph:

Please find enclosed Progress Claim # 36 for work undertaken up to 28 July 2023 inclusive. We note that Final Completion was 2 May 2023. We note that there are Separate Works continuing (Estate Development Plan Works) as is demonstrated by the fact they were neither identified as omitted or defective works to be rectified in the Certificate or Practical Completion Letter.

The breakdown accompanying PC 36 was in the same terms as PC 35 in relation to the EDP Works, except that the amount for Variation No 69 increased from $43,876.80 to $54,846.00 (Mr Staniland’s affidavit at [53]). PC 36 was stated to be made pursuant to the Act. Mr Staniland (at [54] of his affidavit) identifies several respects in which the EDP Works remained incomplete as at 28 July 2023.

38    On 25 August 2023, Core filed an originating claim and statement of claim in the proceedings against Dickson in the Supreme Court of the ACT.

39    On 5 September 2023, the Superintendent issued his assessment of PC 36, by way of a payment schedule for the purposes of the Act. The Superintendent certified payment to Core “for the sum of $Nil for the Progress Claim”. That letter set out reasons as to why Dickson regarded PC 36 as not being valid, including that Core had not complied with the conditions precedent for a valid progress claim under cl 17.1, the progress claim was not delivered as required by cl 17.3 in that the Progress Claim Date was the 28th of each month whereas PC 36 was issued on 23 August 2023 and not on the Progress Claim Date, and also stated that PC 36 was not a valid claim pursuant to the Act because:

3.1    The Progress Claim is not made in relation to a valid reference date; or

3.2    In the event there is a valid reference date, the Progress Claim relates to Works carried out after the reference date.

40    Mr Staniland says the following at [56] of his affidavit:

In my time on the Mulberry Project, I have carried out the Works on the basis that the remaining EDP Works were a Separate Part and Core would continue to submit claims monthly on the 28th of each month. If I had believed that Core could not submit such claims, I would not have continued with the Work without reaching a negotiated solution with Dickson as otherwise we would have had no certainty as to when we would get paid.

41    On 8 September 2023, Core made an adjudication application in relation to PC 36 against Dickson.

42    On 9 October 2023, the Superintendent sent an email to Mr Staniland of Core setting out various aspects of the EDP Works and other Works which were said not to have been completed, despite the Superintendent’s instructions to do so. The email chain included an earlier email from the Superintendent to Mr Staniland on 11 September 2023, on the subject of “Final Completion”, in which the Superintendent recited Mr Staniland’s statement in an email dated 5 September 2023:

Given works are to take place post Final Completion, could you please provide a new Contract for any new works as per our variations outlined below …

The Superintendent’s response to that statement was as follows:

Final Completion has not been achieved to date and following Core Buildings finalisation of all Contract obligations Final Completion will be issued.

The email also set out Mr Staniland’s statement in his email of 5 September 2023 that:

This should be a simple construct only Contract and note the following exclusions …

The Superintendent’s response on 11 September 2023 to that statement was as follows:

The existing Contract will be utilised until Final Completion is achieved.

The email also recited Mr Staniland’s statement on 5 September 2023 as follows:

Additionally, can we start the 1350 mm line through the site this week while you prepare the Contract?

The Superintendent’s response on 11 September 2023 was as follows:

Please provide your programme for these works ASAP (Core Building has ignored instructions to commence the works). Core Building are instructed to proceed with the Works immediately.

43    Dickson made its adjudication response on 20 September 2023. One aspect of that adjudication response was to raise the jurisdictional question as to whether PC 36 was supported by a valid reference date. Dickson contended that on a proper interpretation of the Contract, the reference dates provided for Practical Completion and Final Completion were intended to be exhaustive reference dates following completion of the Works, such that reference dates no longer accrued on the 28th day of each month after the date of Practical Completion, and in any event, did not accrue after the end of the Defects Liability Period (at [40]).

44    The Determination was made on 3 November 2023, and a typographical error in the adjudicated amount was later corrected on 7 November 2023.

Grounds 1 and 2: Was PC 36 supported by an available reference date?

45    Ground 1 in the Amended Statement of Claim is that PC 36 was invalid as, contrary to the Determination, there was no reference date of 28 July 2023. Ground 2 is that PC 36 was invalid because of s 15(5) of the Act, in that the only available reference date was 2 May 2023, which had already been used for PC 35.

46    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 similar 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].

47    The Determination was in relation to the payment claim by way of PC 36, there having been no adjudication application by Core in relation to PC 35. The Adjudicator determined that a valid and available reference date arose on 28 July 2023, being a date “during the course of the Works”, and PC 36 was referable to that reference date: Determination at [23], [40], [44]–[46], and [51]. In the Kashmir Judgment at [32], I noted that on a literal construction of para (a) of Schedule 2, read in isolation, the monthly Progress Claims would 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 Practical Completion from occurring. However, in the context of Schedule 2 as a whole (noting that although Schedule 2 of the Kashmir Contract referred to “Completion” while Schedule 2 to the Mulberry Contract refers to “Practical Completion”, those terms are defined to have the same meaning in each contract), I expressed the view that para (a) of Schedule 2 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 Practical Completion of the Works has triggered the Practical Completion Progress Claim under para (b). In the present proceedings, neither party submitted that the harmonious construction which I preferred was wrong, and I remain of the view that it is the proper construction of Schedule 2. It follows that the monthly Progress Claims under Schedule 2(a) could not be submitted after 2 May 2022, being the Date of Practical Completion when the Certificate of Practical Completion was issued for the Works. I consider separately below, and reject, the arguments by Core that: (1) there was a Separable Part of the Works which qualifies that conclusion; or (2) Dickson is estopped from denying that Schedule 2(a) continued to operate after the Date of Practical Completion. The upshot is that the Adjudicator erred in finding that 28 July 2023 was a valid and available reference date for the purpose of seeking to support PC 36 as a monthly Progress Claim under Schedule 2(a). Dickson submits that even if a reference date other than 28 July 2023 was valid and available, it was sufficient to render the adjudicator’s determination void for jurisdictional error that the adjudicator addressed PC-36 on the basis of a reference date which was not available, relying on Brolton Group Pty Ltd v Hanson Construction Materials Pty Ltd [2020] NSWCA 63 at [46] and [48] (Gleeson JA, with whom Meagher and Payne JJA agreed). It is not necessary for me to decide that issue, as I am also satisfied, for the reasons which follow, that there was no available reference date at all which could support the claim in PC 36.

48    After the Date of Practical Completion of the Works, Schedule 2 refers to two available reference dates. Schedule 2(b) permits the Builder to submit a Progress Claim within 10 Business Days after the Date of Practical Completion of the Works, or as otherwise agreed between the parties. Schedule 2(c) then permits a Final Payment Claim (if any) to be made within 10 Business Days after the expiry of the last Defects Liability Period, which I have explained above expired 12 months after the issue of the Certificate of Practical Completion of the Works, namely on 2 May 2023.

49    Section 10(1) of the Act entitles a builder to a payment “On and from each reference date under a construction contract”. Section 15(4) then provides that a payment claim may be given only before the later of (a) the end of the period worked out under the construction contract; and (b) the end of the period of 12 months after the construction work to which the claim relates was last carried out or the related goods and services to which the claim relates were last supplied. Section 15(4) thus permitted Core to give Dickson a payment claim within 12 months of 2 May 2023, the date of 2 May 2023 being the expiry of the last Defects Liability Period and thus the last date on which “the construction work to which the claim relates” could have been carried out for the purposes of s 15(4)(b). Both PC 35 (issued on 26 July 2023) and PC 36 (issued on 23 August 2023) fell comfortably within that 12-month period commencing 2 May 2023.

50    Dickson submits that the reference date referred to in Schedule 2(c) was used when Core gave Dickson PC 35. Dickson refers to s 15(5), which provides that a claimant must not give more than one payment claim for each reference date under the construction contract, and submits that PC 36 was invalid because the reference date in Schedule 2(c) had already been used in giving PC 35.

51    Core submits that PC 36 was supported by a valid reference date on at least one of the following three bases. First, Core submits that the Mulberry Project had a Separable Part which continued after Practical Completion of the main works, such that Schedule 2(a) continued to provide reference dates on the 28th day of each month (and, in the event that it did not, the default date provided under s 10(3)(b) of the Act was available). Second, in the alternative to the Schedule 2(a) date, Core submits that the date of 2 May 2023 remained available for PC 36, despite PC 35. Third, Core submits that Dickson is estopped by way of conventional estoppel from contending that Schedule 2(a) ceased providing reference dates after Practical Completion. I will deal with each of those three arguments in turn.

52    As to the submission based on the existence of a “Separable Part” of the Works, Core accepts as a general proposition that Schedule 2(a) of the Contract applies only up to the Date of Practical Completion of the Works. However, Core relies on cl 47.3(b) of the Contract, which provides that where a part of the Works is to be a “Separable Part”, then “for all purposes the provisions of this Agreement apply to that Separable Part as if it were the only work included in the Works”. Core submits that, if cl 47.3(b) is engaged, the effect is that Schedule 2(a) continues to apply until the Date of Practical Completion of all of the Separable Parts (or alternatively, until the Date of Practical Completion of all the Works).

53    Core then submits that cl 47.3(b) was engaged under the Contract, as the Works under the Contract included not only the design and construction of the Mulberry apartments, but also the EDP Works, involving the relocation or installation of various services such as stormwater, water mains and sewerage. Core refers to its claim made on 10 August 2021 for an extension of time due to a redesign of stormwater services that were part of the EDP Works, and the response by the Superintendent on 12 August 2021 whereby he instructed Core that those parts of the EDP Works were not required to achieve Practical Completion. Core submits that the 12 August 2021 email created a Separable Part comprising the stormwater installation part of the EDP Works and a Separable Part comprising the balance of the Works. Alternatively, Core submits that the email of 12 August 2021 at least created a Separable Part comprising the balance of the Works. Core submits that the Superintendent confirmed that to be the case by an email of 14 February 2022 which stated that the relevant stormwater services “will not be an issue due to the works been [sic] a separate stage”. Alternatively, Core submits that the email of 12 August 2021 and the conduct of Core in carrying out the Works on that basis and not pursuing its extension of time claim gives rise to the inference of a variation to the Contract to create such Separable Parts (or Dickson is estopped from denying the creation of such Separable Parts). Core submits that the Certificate of Practical Completion of 2 May 2022 should be construed as having been issued in respect of the balance of the Works, and not the EDP Works nor the whole of the Works, in that the EDP Works were not complete at that stage and the list of incomplete or defective works on the certificate did not refer to the EDP Works. The consequence, Core submits, is that the Date for Practical Completion of all of the Separable Parts has not occurred (or alternatively the Date for Practical Completion of all the Works has not occurred), such that Schedule 2(a) continues to apply. Therefore, Core submits, 28 July 2023 was an available reference date to support PC 36.

54    Alternatively, Core submits that if Schedule 2(a) no longer provides reference dates after 2 May 2022, and the time for the Progress Claims in Schedule 2(b) and (c) has passed, then the Contract no longer provides reference dates for the separate works under the contract. In those circumstances, Core relies upon the default date contemplated by s 10(3)(b) of the Act, namely the last day of the calendar month in which construction work was first carried out under the Contract and the last day of each subsequent named month. On that basis, Core submits that, from at least 31 May 2023, and each subsequent calendar month, there were available reference dates to which PC 36 can attach.

55    There are several fundamental flaws in Core’s argument. First, the Certificate of Practical Completion must state “the date on which the Works or a Separable Part achieved Practical Completion”: cl 46.4(a). Similarly, cl 47.4(a) requires that Dickson may not occupy a Separable Part before Practical Completion of the Part of the Works without, relevantly, the issue of a Certificate of Practical Completion for the Separable Part by Dickson. In the present case, the Certificate of Practical Completion issued on 2 May 2022 was clearly for the whole of the Works. It expressly stated that it was for “the whole of the works” in the second paragraph under the heading “Practical Completion”, having already referred to the terms of cl 46.4 requiring the Certificate to state the date on which “the Works or a Separable Part achieved Practical Completion”. And as Core itself submits, the Certificate of Practical Completion did not make any separate reference to the EDP Works or any part of them in the list of incomplete or defective work. In those circumstances, the Certificate of Practical Completion cannot be construed as relating to a Separable Part of the Works.

56    Second, Dickson submits, and I accept, that in order for there to be a Separable Part of the Works, there are a number of preconditions which must be satisfied:

(a)    the works must be capable of occupation prior to Practical Completion as a separate part: see the definition of “Separable Part” in cl 1.1, and the terms of cl 47.1;

(b)    before the Developer has a right to occupy any Separable Part, the parties must confer to identify and agree precisely the part of the Works to be treated as a Separable Part: cl 47.3(a);

(c)    the Developer may not occupy a Separable Part before Practical Completion of that part of the Works without the prior written consent of the Builder and a Certificate of Practical Completion being issued for that Separable Part: cl 47.4(a) (and the grant of a Certificate of Practical Completion of a Separable Part is subject to the same requirements as the grant of a Certificate of Practical Completion for the whole of the Works: cll 46.1, 46.2(b), 46.3(a) and (b), 46.4, and 46.6);

(d)    the Developer must provide the Builder with evidence of insurance for the Separable Part and must indemnify the Builder arising out of its occupation of the Separable Part: cl 47.5.

As Dickson submits, these clauses make it plain that the existence of a Separable Part under the Contract is not a matter which is to be inferred or implied, or which can arise informally. Rather, there is a prescribed set of contractual preconditions which needed to be followed before part of the Works could become a Separable Part. In particular, the evidence in the present case does not reveal the kind of precise identification of and agreement on the part of the Works to be treated as a Separable Part required by cl 47.3(a). Further, the parties could not have contemplated that any aspect of the EDP Works which was not complete as at 2 May 2022 would be such a Separable Part, as those incomplete works could not have been used prior to the issue of the Certificate of Practical Completion on 2 May 2022, and could only have been used at a subsequent time. That is confirmed by Core’s claim for an extension of time, which on Core’s own case was antecedent to the creation of any Separable Part. Any argument as to the existence of a Separable Part could therefore only relate to the balance of the Works, but there was no identification and agreement as to what that would comprise. On the contrary, the Certificate of Practical Completion, as I have said above, was issued in respect of the whole of the Works.

57    Third, Dickson submits, and I accept, that the proper characterisation of the facts is that on 12 August 2021, the Superintendent waived the requirement as to the relevant part of the Works comprised in the EDP Works having to be completed in order to achieve Practical Completion. The use in correspondence on 14 February 2022 of the colloquial expression “separate stage” was a convenient description of the operation of that waiver, as too was the expression “Separate Works” (rather than “Separable Part”) as used by Core in PC 35 and PC 36.

58    Core submitted that it was put at a significant disadvantage by reason of Dickson adopting that position, in that Core would not be entitled to make Progress Claims under Schedule 2(a) in relation to the incomplete aspects of the EDP Works unless there were a Separable Part of the Works. However, there was a substantial advantage to Core in the arrangement recorded on 12 August 2021, in that the issue of the Certificate of Practical Completion on 2 May 2022, despite the EDP Works being incomplete, confirmed that Practical Completion had been achieved under the Contract. The period for Dickson’s liquidated damages claim was thereby limited to 175 days, that being the number of days between the extended Date for Practical Completion of 9 November 2021 and the actual Date of Practical Completion of 2 May 2022, rather than extending to the date when the EDP Works were all completed.

59    For the same reasons, I do not regard the email of 12 August 2021 and the conduct of Core in carrying out the Works on that basis and not pursuing its extension of time claim as giving rise to any inference of a variation to the Contract to create such Separable Parts. In addition, the communications between the parties do not evince any intention to enter into any varied or new contract. Even as late as 5 September 2023, Core was requesting a new contract relating to the incomplete Works, which the Superintendent refused on 11 September 2023, saying that the existing contract would be utilised until Final Completion was achieved. Further, in the absence of any express discussion between the parties of Separable Parts as such, I cannot see how Dickson could be estopped from denying the creation of such Separable Parts.

60    There was some debate before me as to the meaning of the word “capable” in the definition of “Separable Part”; that is, “any part of the Works capable of occupation and use prior to Practical Completion of the whole of the Works”. Core submitted that, because the EDP Works were off-site, they were inherently capable of use prior to Practical Completion of the Mulberry building itself. In my view, however, the use of the word “capable” in that definition is not a reference merely to what may be theoretically possible at the outset of the Contract by reason of the nature of the Works, but requires focus on what is actually feasible given the facts which have arisen as at the time when the parties are to confer in order to identify and agree precisely the part of the Works to be treated as a Separable Part. The fundamental purpose of cl 47, dealing with a Separable Part, is to enable the Developer to occupy (and thereby use) any Separable Part before Practical Completion of the Works as a whole. That purpose makes practical sense only in a context where it is actually feasible in the particular circumstances for such a Separable Part to be occupied and used, not merely where that may have been conceptually possible at the outset of the Contract.

61    Further, in my view there is no room for the operation of the default date contemplated by s 10(3)(b) of the Act. As I have said above, Schedule 2(a) did not provide reference dates after 2 May 2022, but Schedule 2(c) allowed for a claim for a Progress Claim to be made within 10 Business Days of 2 May 2023, and s 15(4) of the Act allowed for a further period of 12 months from 2 May 2023. The claims made in PC 35 and PC 36 fell within that period. There was no lacuna which called for the operation of the default date under s 10(3)(b) of the Act.

62    Turning then to Core’s second line of argument, that the date of 2 May 2023 remained available for PC 36, despite PC 35, Core submits that PC 35 was not a valid payment claim that used 2 May 2023 as the reference date, and thus 2 May 2023 remained available as the reference date for PC 36. Core points out that, in the covering letter that accompanied PC 35, it was stated that PC 35 was a progress claim for work undertaken up to 26 July 2023, whereas in the covering letter for PC 36, it was stated that PC 36 was a progress claim for work undertaken up to 28 July 2023. Core refers to the statements in PC 35 to Final Completion having been achieved on 2 May 2023, and that there were Separate Works continuing, and submits that it should be inferred that the claim was made on the basis that Schedule 2(a) still applied because of the ongoing Separate Works (the reference to 26 July 2023 being said to be an obvious mistake which should have been 28 July 2023). Core submits that there is nothing in the letter or accompanying documents to suggest that PC 35 was the Final Payment Claim contemplated by Schedule 2(c). Core further submits that Dickson’s payment schedule served in response to PC 35 indicated that Dickson did not understand PC 35 to be the Final Payment Claim, but rather understood that PC 35 was premised upon a Schedule 2(a) reference date because the point was taken that the payment claim was based on 26 July 2023 and not the 28th day of the month and was therefore invalid. Core submits that there was no entitlement under Schedule 2(a), nor under s 10(3)(b) of the Act, to have 26 July 2023 as a reference date, and therefore PC 35 was not a valid payment claim and could not have used up what Dickson submits was the last reference date under the contract, being 2 May 2023. Core submits that that left the last reference date available for PC 36.

63    The fundamental flaw in that line of argument is that the existence of a valid reference date for a payment claim is an objective matter, not one which depends on the subjective understanding, belief or intention of either of the parties. There is not even a requirement in s 15 of the Act that the payment claim must nominate the reference date to which it refers. The reference date is simply a date stated in, or worked out under, the contract as the date when a claim for a progress payment is to be made within the meaning of s 10(3)(a), unless the default provision in s 10(3)(b) applies (which it does not in the present case). The reference date is a date set by contractual force as a date for making a contractual claim to be paid the whole or part of the contracted amount: Southern Han at [70]. The existence of a reference date under a construction contract is a precondition to the making of a valid payment claim: Southern Han at [61]. In other words, the existence of a valid reference date is an objective fact to be found by the Court where necessary: Brolton Group Pty Ltd v Hanson Construction Materials Pty Ltd [2020] NSWCA 63 at [43] (Gleeson JA, with whom Meagher and Payne JJA agreed).

64    As a matter of objective legal entitlement, Core was entitled to submit a payment claim “on and from” (to use the language of s 10(1) of the Act) the expiry of the last Defects Liability Period under Schedule 2(c)). That claim had to be made within the 12-month period imposed by s 15(4). The fact that the claim was submitted on 26 July 2023, rather than 28 July 2023, was irrelevant. Similarly, the fact that PC 35 (and for that matter PC 36) was not described as a Final Payment Claim under cl 17.13 is irrelevant to a determination of the jurisdictional fact of the existence of the Schedule 2(c) reference date for the purposes of the Act.

65    It follows that PC 35 was validly supported by the reference date in Schedule 2(c), being 2 May 2023, and was made within the 12-month period imposed by s 15(4) of the Act. The reference date in Schedule 2(c) was therefore used by PC 35. The important consequence is that s 15(5) of the Act precluded Core from making the claim in PC 36, since the only available reference date under the construction contract for PC 36 had already been used by PC 35. The effect of s 15(5), being the counterpart to s 13(5) in the corresponding NSW legislation, is that a document purporting to be a payment claim that is in respect of the same reference date as a previous claim is not a payment claim under the Act and does not attract the recovery regime under the Act: Dualcorp Pty Ltd v Remo Constructions Pty Ltd [2009] NSWCA 69; (2009) 74 NSWLR 190 at [14] (Allsop P), cited with approval in Southern Han at [62].

66    As to the claim based on conventional estoppel, Core relies on the statement of principle of Brereton J in Moratic Pty Ltd v Gordon [2007] NSWSC 5 at [32]:

In common law conventional estoppel, it is necessary for a plaintiff to establish (1) that it has adopted an assumption as to the terms of its legal relationship with the defendant; (2) that the defendant has adopted the same assumption; (3) that both parties have conducted their relationship on the basis of that mutual assumption; (4) that each party knew or intended that the other act on that basis; and (5) that departure from the assumption will occasion detriment to the plaintiff …

See to the same effect Waterman v Gerling Australia Insurance Company Pty Ltd [2005] NSWSC 1066; (2005) 65 NSWLR 300 at [83] (Brereton J).

67    Core submits that Core and Dickson conducted themselves, at least up until the response filed in the adjudication concerning PC 36, on the basis that Schedule 2(a) continued to operate such that, despite Practical Completion, Core had a right to ongoing monthly progress payments for the separate works relating to the EDP Works, in that, according to Core’s submission:

(a)    PC 34 was served in relation to a reference date of 28 March 2023 and did not purport to be a Final Payment Claim. Core submits that, although Dickson did not issue a payment schedule in response, it has not contended that PC 34 was invalid by reason of it being submitted in relation to that reference date, and has instead expressly agreed to make payment pursuant to it;

(b)    PC 35 was served, albeit with the mistake in the date, on the basis that Schedule 2(a) continued to operate;

(c)    Dickson’s payment schedule in response to PC 35 took the point that the claim had to be made on the 28th day of the month (and did not deny that Schedule 2(a) continued to apply); and

(d)    PC 36 adopted the Schedule 2(a) date.

Core submits that, if Dickson were allowed to resile from that position and contend now that Schedule 2(a) no longer operates, Core would suffer the detriment of not having progressed the extension of time claim, or the completion of the incomplete aspects of the EDP Works, so as to be able to claim progress payments for them before the issue of a Certificate of Practical Completion (Mr Staniland’s affidavit at [28]), and of having foregone the opportunity to negotiate for such a right after the issue of that certificate (Mr Staniland’s affidavit at [56]). Accordingly, Core submits that Dickson should be estopped from denying that 28 July 2023 was a valid reference date in these proceedings.

68    In my view, no such conventional estoppel arose. While I accept that Core adopted the assumption that it was entitled to make progress claims pursuant to Schedule 2(a) even after the Certificate of Practical Completion had been issued, it has failed to establish that Dickson adopted the same assumption. As to PC 34, Dickson did not make any response to that claim for more than six months, and even then Dickson did not accept the legal validity of the claim but decided (for whatever reason) to pay the claim in any event, and in doing so reserved the right to claim repayment. As to PC 35, Dickson expressly stated that it was not a valid claim pursuant to the Act because it was not made in relation to a valid reference date (para 3.1 of the Superintendent’s letter of 4 August 2023). That letter did not engage in any detailed analysis as to why Dickson advanced that proposition, but the generality with which the proposition was expressed was wide enough to include the contention that Schedule 2(a) was not available after the issue of the Certificate of Practical Completion. The Superintendent’s letter of 4 August 2023 did refer to the Progress Claim Date being the 28th of each month, whereas PC 35 was issued on 26 July 2023 and not on the Progress Claim Date, but that proposition was only advanced in support of the different contention that PC 35 was not delivered as required by cl 17.3. The letter did not state or indicate that that was the basis on which the separate argument was made that PC 35 was not a valid claim at law pursuant to the Act because it was not made in relation to a valid reference date. Dickson’s reasoning on cl 17.3, including its reference to the 28th of each month, may well have been in the alternative to its position on whether there was a valid reference date. Hence, no relevant assumption can be inferred from Dickson’s response to PC 35. The same reasoning applies to the response on behalf of Dickson to PC 36, and in that context the conclusion is fortified by the fact that the adjudication response by Dickson expressly contended that the reference dates provided for Practical Completion and Final Completion were intended to be exhaustive reference dates following completion of the Works, and reference dates no longer accrued on the 28th day of each month after the date of Practical Completion or after the end of the Defects Liability Period (at [40]). There is no evidence that Core contended that such an argument would contravene s 22(4) of the Act, which prevents the respondent from including in the adjudication response any reasons for withholding payment which have not already been included in the payment schedule provided to the claimant. The lack of any such contention reinforces the conclusion as to the width of para 3.1 of the Superintendent’s letter of 5 September 2023, responding to PC 36, and saying (in the same way as had been done on 4 August 2023 in relation to PC 35) that PC 36 was not made in relation to a valid reference date.

Conclusion

69    It follows that Dickson has succeeded on Grounds 1 and 2. In my view, the appropriate form of relief is to declare the Determination to be void. I note that that was the form of relief granted at first instance, and effectively reinstated by the High Court, in Southern Han at 342 and 366. It is not necessary to consider the other grounds pursued by Dickson, particularly as those other grounds are directed only to parts of PC 36. Dickson is entitled to an order for costs of the proceedings against Core.

Associate:

Dated:    15 February 2024