This update from HopgoodGanim's Construction, Infrastructure and Major Projects team includes information about the proceedings and decisions of two recent Supreme Court of Queensland cases.

Where a decision of an adjudicator made under the Building and Construction Industry Payments Act 2004 (Qld) (BCIPA) determines an issue in dispute on a ground for which neither party contended, and the adjudicator fails to notify of that intended determination or allow submissions, the decision may be declared void. The decision in John Holland Pty Ltd v TAC Pacific Pty Ltd & Ors, recently handed down by the Supreme Court, demonstrates this.

The parties

John Holland Pty Ltd and TAC Pacific Pty Ltd were parties to a construction contract. A dispute over a payment claim that TAC submitted went to adjudication under BCIPA.

The adjudication

A key issue, which the adjudicator needed to determine, was whether certain contractual conditions that John Holland relied upon were void by reason of section 99 of BCIPA, and whether TAC was entitled to be paid its claim, where it was alleged that TAC had not complied with certain contractual provisions governing claims for variations.

The adjudicator concluded that TAC was entitled to be paid the amount in the claim and relied on the decision in Plaza West Pty Ltd v Simon’s Earthworks (NSW) Pty Ltd. John Holland had relied on the authority of John Goss Projects Pty Ltd v Leighton Contractors in its submissions.

The adjudicator commented that he felt he was compelled to deal with Plaza West, as it was his view that the case effectively overturned the decision in Goss. At no stage, however, did TAC submit that Goss did not reflect the law.

John Holland’s argument, that TAC’s failure to meet conditions precluded TAC from payment of its claim, was rejected by the adjudicator, who relied on Plaza West in deciding that TAC was entitled to the full amount claimed together with GST, which totalled more than $1 million.

Off to Court: application to have the decision declared void

John Holland applied to the Supreme Court to have the adjudicator’s decision declared void. The Court considered the following issues:

1. Was there a denial of natural justice by the adjudicator? The complaint related to the adjudicator’s referral to Plaza West, which neither party referred to in their submissions, and the fact that the adjudicator did not notify the parties of his intention to rely on this decision or allow the opportunity to make further submissions.
2. Did the adjudicator fail to make a genuine attempt to understand and apply the contract?

Justice Applegarth decided the first of these grounds in favour of John Holland - that is, that there was a substantial denial of natural justice and the adjudicator’s decision was declared void.

In deciding whether natural justice had been denied, His Honour noted the following points:

• Although BCIPA allows an adjudicator to make unreviewable errors of law in the interests of expedience, BCIPA does not permit an adjudicator to make a determination on the basis of a view of the law for which neither party has contended.
• There will be a denial of natural justice where:
  (a) there is a significant or critical legal issue on which the decision is likely to turn;
  (b) the adjudicator intends to make his or her decision on a basis for which neither party contended; and
  (c) the adjudicator made the decision for the reason that a legal authority, upon which a party placed particular reliance, had been overturned, and was no longer the current law.
• This decision does not require adjudicators to expose their provisional views on legal issues or seek submissions from the parties on every authority upon which the adjudicator intends to rely.

Significance to the building and construction industry

The general intent of BCIPA is to allow an adjudicator to quickly decide complex legal issues. The adjudicator’s reasoning is protected from challenge under BCIPA.

However, in certain circumstances, an adjudicator’s reasoning will be subject to the scrutiny of the Courts, and this decision serves as a timely reminder to all building industry participants that where there has been a possible denial of natural justice, the decision may be able to be reviewed by the Court.

A recent Supreme Court of Queensland decision is a timely reminder to claimants of the technical requirements that must be satisfied to successfully serve a payment claim under the Building and Construction Industry Payments Act 2004 (Qld).

As many people in the building and construction industry would be aware, one of the requirements of a payment claim is that it must identify the construction work or related goods and services claimed.

In Baxbex Pty Ltd v Bickle [2009] QSC 194, Baxbex sent an alleged payment claim under BCIPA in the form of a letter which stated:

“in accordance with s 17 of [BCIPA] we advise:-

(a)  the construction work and/or goods and services to which our client’s progress claim relates is as particularised in the schedule hereto;

(b)  the amount of the progress claim that the Plaintiff claims to be payable is $148,819.10; and

(c)  the claim is made in accordance with [BCIPA].”

Attached to the letter was a schedule which referred to a number of invoices, but failed to attach copies of them. The schedule stated the invoice number, the date of the invoice and the balance owing. Presumably relying on the content in the invoices referred to, the schedule itself did not provide any information to identify the construction work or goods or services.

Bickle failed to provide a payment schedule and Baxbex applied for judgment of the full amount.

Payment claim

The Judge in this case found that the schedule was, on its face, not compliant with BCIPA, as it did not identify the construction work or any related goods or services. It merely invoked invoices by invoice number and amount.

Baxbex argued that because Bickle had received these invoices before, the claim sufficiently identified the work. The Judge:

(a)  said “the letter which was relied on as constituting the “payment claim” did not comply with s 17 of the BCIPA as neither the construction work nor related goods or services were identified within the payment claim itself"; and

(b)  drew a distinction between this case and another recent case where the invoices and supporting documentation were attached to the payment claim. He was of the opinion that “it would have been possible for the applicant to have sent copies of the invoices as part of, or annexed to, the schedule but this was not done.”

What about administration and supervisory costs?

The judge also considered the effect of including work which was arguably not ‘construction work’ or ‘related goods or services’ in the payment claim. The payment claim included amounts for administration and supervisory costs. The Judge thought that a claimant’s “entitlement to payment is dependant upon the proper construction of the contract and the legal entitlements of the parties under the contract”. He also thought that “whether or not administration and supervision can be considered ‘construction work’ or ‘supply related goods and services’ pursuant to the contract is properly a matter for adjudication”.

Essentially, if Bickle wanted to raise this point, it was a matter to be raised in the payment schedule, and not used later to try and defeat a judgment application.

Significance to the building and construction industry

Important points to be taken from this case for claimants include:

1. You must carefully check your payment claims to ensure they identify the construction work or related goods and services that are the subject of the claim.
2. Failing to satisfy this requirement will prevent you from successfully applying for judgment under BCIPA where no payment schedule has been received.
3. Referring to invoices and documents that identify the construction work or related goods and services is not enough. The claim itself must identify what you are claiming. This is the case even if the respondent already has these documents.

Important points to be taken from this case for respondents include:

1. If a claimant has not properly identified the work in the payment claim and you have failed to put in a payment schedule, there may still be grounds for you to oppose an application for judgment on this basis.
2. If you disagree that the work in a payment claim is not construction work or related goods or services, you should raise this in a payment schedule.

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