Multipower v S & H Electrics
[2006] NSWSC 757
IN THE SUPREME COURT
OF NEW SOUTH WALES
COMMON LAW
DIVISION
McDOUGALL J
Monday 10 July 2006
Ex tempore (revised 17 July 2006)
12558/06 MULTIPOWER
CORPORATION PTY LTD v S & H ELECTRICS PTY
LTD
JUDGMENT
1 HIS HONOUR: The questions for
decision in these proceedings are:
(1) Whether an adjudication
application under the Building and Construction Industry Security of Payment
Act 1999 (the Act) was made outside the relevant time limit prescribed by s
17 of the Act.
(2) If so, whether an adjudicator’s determination
that concluded otherwise is void.
(3) Whether the adjudicator in finding
the relevant facts:
. asked the wrong question, or
. ignored relevant
material, or
. took into account irrelevant
material.
Background
2 The defendant (S & H) as
subcontractor and the plaintiff (Multipower) as head contractor, made a
subcontract in July or August 2004 whereby S & H undertook to carry out
electrical work for Multipower on two projects at Courallie Avenue, Homebush.
The parties accept that the subcontract was a construction contract to which the
Act applied. They agreed that the subcontract was terminated in January 2006;
the precise date, although disputed, is irrelevant.
3 On 10 February
2006, S & H served two tax invoices on Multipower. It is convenient to
refer to those together as the “payment claim” because the parties
agree that each was a payment claim for the purposes of the Act. The total
amount claimed was $83,028. Each tax invoice stated at its foot “(NETT 7
DAYS)”.
4 On 24 February 2006, Multipower served a payment schedule
on S & H. It conceded an overall liability of $22,884.50. No part of that
conceded amount was, or since has been, paid.
5 On 24 March 2006, S &
H made application to an authorised nominating authority for adjudication of the
dispute. An adjudicator was appointed. She made her determination in writing
on 10 April 2006. She concluded that S & H was entitled to the whole of the
amount claimed by it and that Multipower should pay the whole of the
adjudication fees and expenses totalling $6,875.
The
issue
6 Multipower claims that the determination was made without
jurisdiction in that, it says, the adjudication application was made out of
time. It follows, Multipower says, that the determination founded on that
adjudication application is void.
7 As I have said, Multipower attacked
the adjudicator’s relevant findings of fact by saying that they were
addressed to the wrong question, failed to take into account relevant material,
or took into account irrelevant material.
8 The issues were very
difficult to define. Written submissions ordered by Einstein J failed to
clarify them. I therefore ordered the parties to file points of claim and
defence, with statements of the issue arising, and then to file an agreed
statement of issues. This last step was not taken. The result is that the
issues were not finally clarified (I hesitate to say “defined”)
until the morning of the hearing.
The statutory
scheme
9 The relevant provisions of the Act include the
following:
“11 Due date for payment
(1) A progress
payment under a construction contract becomes due and payable:
(a) on
the date on which the payment becomes due and payable in accordance with the
terms of the contract, or
(b) if the contract makes no express provision
with respect to the matter, on the date occurring 10 business days after a
payment claim is made under Part 3 in relation to the
payment.
(2) Interest is payable on the unpaid amount of a progress
payment that has become due and payable at the rate:
(a) prescribed under
the Supreme Court Act 1970 in respect of unpaid judgments of the Supreme
Court, or
(b) specified under the construction contract,
whichever
is the greater.
(3) If a progress payment becomes due and payable, the
claimant is entitled to exercise a lien in respect of the unpaid amount over any
unfixed plant or materials supplied by the claimant for use in connection with
the carrying out of construction work for the respondent.
(4) Any lien or
charge over the unfixed plant or materials existing before the date on which the
progress payment becomes due and payable takes priority over a lien under
subsection (3).
(5) Subsection (3) does not confer on the claimant any
right against a third party who is the owner of the unfixed plant or
materials.
...
Division 1 – Payment claims and payment
schedules
13 Payment claims
(1) A person referred to in
section 8 (1) who is or who claims to be entitled to a progress payment (the
claimant) may serve a payment claim on the person who, under the
construction contract concerned, is or may be liable to make the
payment.
(2) A payment claim:
(a) must identify the construction
work (or related goods and services) to which the progress payment relates,
and
(b) must indicate the amount of the progress payment that the
claimant claims to be due (the "claimed amount"), and
(c) must state that
it is made under this Act.
....
(4) A payment claim may be served only
within:
(a) the period determined by or in accordance with the terms of
the construction contract, or
(b) 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),
whichever is the later.
(5) A claimant cannot serve
more than one payment claim in respect of each reference date under the
construction contract.
...
14 Payment
schedules
(1) A person on whom a payment claim is served (the
"respondent") may reply to the claim by providing a payment schedule to the
claimant.
...
(4) If:
(a) a claimant serves a payment claim
on a respondent, and
(b) the respondent does not provide a payment
schedule to the claimant:
(i) within the time required by the
relevant
construction contract, or
(ii) within 10 business days after
the payment claim is served,
whichever time expires earlier,
the
respondent becomes liable to pay the claimed amount to the claimant on the due
date for the progress payment to which the payment claim
relates.
...
16 Consequences of not paying claimant in
accordance with payment schedule
(1) This section applies if:
(a) a claimant serves a payment claim on a respondent,
and
(b) the respondent provides a payment schedule to the claimant:
(i) within the time required by the relevant construction contract,
or
(ii) within 10 business days after the payment claim is
served,
whichever time expires earlier, and
(c) the payment
schedule indicates a scheduled amount that the respondent proposes to pay to the
claimant, and
(d) the respondent fails to pay the whole or any part of
the scheduled amount to the claimant on or before the due date for the progress
payment to which the payment claim relates.
(2) In those circumstances,
the claimant:
(a) may:
(i) recover the unpaid portion of the
scheduled amount from the respondent, as a debt due to the claimant, in any
court of competent jurisdiction, or
(ii) make an adjudication
application under section 17 (1) (a) (ii) in relation to the payment claim,
and
(b) may serve notice on the respondent of the claimant's intention to
suspend carrying out construction work (or to suspend supplying related goods
and services) under the construction contract.
...
Division
2 Adjudication of disputes
17 Adjudication applications
(1) A claimant may apply for adjudication of a payment claim (an
adjudication application) if:
(a) the respondent provides a
payment schedule under Division 1 but:
(i) the scheduled amount indicated
in the
payment schedule is less than the claimed
amount
indicated in the payment claim, or
(ii) the respondent fails to pay the
whole or any part of the scheduled amount to the claimant by the due date for
payment of the amount, or
(b) the respondent fails to provide a payment
schedule to the claimant under Division 1 and fails to pay the whole or any part
of the claimed amount by the due date for payment of the
amount.
...
(3) An adjudication application:
(a) must be
in writing, and
(b) must be made to an authorised nominating authority
chosen by the claimant, and
(c) in the case of an application under
subsection (1) (a) (i)--must be made within 10 business days after the claimant
receives the payment schedule, and
(d) in the case of an application
under subsection (1) (a) (ii)--must be made within 20 business days after the
due date for payment, and
(e) in the case of an application under
subsection (1) (b)--must be made within 10 business days after the end of the
5-day period referred to in subsection (2) (b), and
(f) must identify the
payment claim and the payment schedule (if any) to which it relates,
and
(g) must be accompanied by such application fee (if any) as may be
determined by the authorised nominating authority, and
(h) may contain
such submissions relevant to the application as the claimant chooses to
include.
...
22 Adjudicator's determination
...
(2) In determining an adjudication application, the
adjudicator is to consider the following matters only:
(a) the provisions
of this Act,
(b) the provisions of the construction contract from which
the application arose,
(c) the payment claim to which the application
relates, together with all submissions (including relevant documentation) that
have been duly made by the claimant in support of the claim,
(d) the
payment schedule (if any) to which the application relates, together with all
submissions (including relevant documentation) that have been duly made by the
respondent in support of the schedule,
(e) the results of any inspection
carried out by the adjudicator of any matter to which the claim
relates.
...”
The ambit of the dispute before the
adjudicator
10 I have set out the dates of receipt of the payments
claim and the assertion of an entitlement to be paid within seven days. The
payment schedule asserted that the payment claim was received on 10 February
2006. It said nothing as to the due date for payment.
11 The
adjudication application stated that the due date for payment was 14 February
2006. The adjudication response was not in evidence. However, the
parties’ submissions to the adjudicator were.
12 Paragraphs 10 and
11 of the submissions for S & H dealt, at least inferentially, with the due
date for payment. Multipower replied to those paragraphs. It did not dispute
the relevant assertions as fact.
13 I set out paragraphs 10 and 11 of
S & H’s submissions, indicating in bold paragraphs 10 and 11 of
Multipower’s response:
“10. The Claimant believes it has met
all the requirements under the Act to put in a lawful claim and apply for
adjudication under the Act. In particular:
a. The Claimant served a
payment claim by way of a letter from Macquarie Lawyers to the respondent on 24
February 2006. Annexed hereto and marked ‘B’ is a copy of the
letter together with the facsimile
transmission.
Noted.
b. The Claimant received a Payment
Schedule on 24 February 2006. The schedule was dated 23 February 2006 and
served by way of facsimile on the Claimant’s legal representatives,
Macquarie Lawyers, on 24 February 2006. Annexed hereto and marked
‘C’ is a copy of the facsimile received from the Respondents
enclosing its Payment Schedule.
Agreed.
c. Section 17 of
the Act requires that if the Respondent provides a payment schedule stating an
amount to be paid, but fails to pay that amount by the due date, the Claimant
has to make an application for Adjudication within 20 business
days.
Noted.
d. Therefore, the adjudication application is
due on 24 March 2006.
Noted.
e. I now apply for
adjudication on 24 March 2006 and have lodged my application with Adjudicate
Today on this day.
Noted.
11. The Claimant respectfully
seeks the following rulings:
a. That the Respondent pay to the Claimant
the full amount of the consolidated payment claim, that is,
$83,028.00.
b. That the money became due and payable on 14 February
2006.
c. That interest should be awarded against the Respondent at the
Supreme Court rate for unpaid debt, of 9% per annum from 14 February
2006.
d. That the costs of the adjudication, being adjudicator fees and
the fees of the ANA be paid in full by the Respondent.
Noted but
denied that the rulings sought should be made.”
14 The clear
inference from Multipower’s response is that it did not dispute the
particular assertions in paras 10(c) and (d) and 11(b) of S & H’s
submissions. Multipower certainly did not raise the argument that it relied
upon in this Court.
15 S & H’s assertion in the adjudication
application of a due date of 14 February 2006 was on any view wrong, given that
even if the requirement for payment within seven days was a term of the
subcontract, it could only be seven days from receipt. A party to a contract
can hardly be expected to pay, within seven days or any other limited time, an
invoice that it does not receive. It follows that the adjudicator was bound to
satisfy herself of the due date. She sought to do so by considering what to her
were the relevant terms of the subcontract.
The
determination
16 Leaving aside formal parts, the adjudicator
commenced by looking at the “scope of works and the contract”. She
noted at page 4 of the determination that “there is no agreement between
the parties as to the contract made or the contract terms”. She set out
the documents that each party relied on as constituting, or evidencing, the
contract. At page 5 she concluded, “I am more persuaded that the
claimant’s submission and quotations represent a more reliable reflection
of the scope of works at each site and the price for the
work.”
17 The relevant quotations were in evidence before me.
Neither of them contains any provision for a due date for payment of any payment
claim.
18 The adjudicator then turned her attention to the payment claim.
She noted that the contract had been “cancelled” in January 2006 and
referred to the two tax invoices. She noted that each was received on 10
February 2006.
19 She then turned her attention to s 14(4) of the Act,
and considered certain dates in the following paragraph:
“The
Respondent provided a payment schedule dated 23 March 2006 which was served on
the Claimant’s lawyers on 24 March 2006, which is within the period
stipulated in the Act. Although, I note that on 24 March 2006 both the Claimant
and Macquarie Lawyers served the two payment claims on the Respondent for the
second time.”
20 It is clear that the reference to dates in
“March” is wrong in each case, and that the relevant dates were
dates in February 2006. The reference to resending the payment claim on 24
February 2006 (picking up the correction which I have just indicated should be
made) is to a letter from S & H’s lawyers in effect repeating the two
payment claims. It is not particularly clear why this course was taken, and it
appears to have generated some confusion: not in the adjudicator’s mind,
but in the submissions that were put before this Court.
21 The
adjudicator then noted the terms of the payment schedule. Having done that, she
turned her attention to s 11(1) of the Act. She said that “payment was
due on the date occurring ten business days after the payment claim was made,
which was 24 February 2006. Section 17(1)(a)(ii) provides that if the
Respondent fails to pay the whole or any part of the schedule amount to the
Claimant by the due date for payment, then the claimant may apply for
adjudication.”
22 It is apparent that the adjudicator decided,
although she did not expressly say so, that the subcontract made no express
provision for the time of payment (para (a) of s 11(1)). That would reflect her
finding on the previous page that S & H’s documents “represent a
more reliable reflection of the scope of work ... and the price”. In any
event, to the extent that she preferred those documents, the implicit conclusion
that there was no specification of an express time in the documents was
correct.
23 On this basis, the adjudicator’s conclusion that the
time for payment was governed by para (b) of s 11(1) was correct.
24 To
step aside from the determination for a moment: Multipower submitted in this
Court that the words, “which was 24 February 2006”, refer not to the
due date for payment but to the date when the payment claim was made. In other
words, it submitted that the adjudicator had taken into account not the payment
claim constituted by the two tax invoices dated 7 February 2006 and served three
days later, but the resent payment claims of 24 February 2006. I do not agree.
When one looks at the relevant passage of the determination in context, it is
quite clear that the adjudicator was saying that 24 February 2006 was the due
dates of payment, and not the date of the payment claim.
25 The
adjudicator then turned her attention to the reasons for non payment. There is
no need for me to look at those, because Multipower did not attack what she
there said. However, as is apparent from her conclusion that S & H was
entitled to receive the whole of the amount claimed, she found nothing in the
payment schedule, the adjudication response or the submissions in support of it
to indicate otherwise.
Contentions in this
Court
26 Multipower submitted that the due date for payment was (as
the adjudication application asserted) 14 February 2006. Thus, it submitted,
regardless of which paragraph of s 17(3) applies, the adjudication application
was made out of time.
27 S & H accepted that if 14 February 2006 were
the due date then the adjudication application had been brought out of time.
However, it submitted:
(1) The correct due date was, as the adjudicator
found, 24 February 2006.
(2) Accordingly, the adjudication application
was made within time.
(3) Alternatively, if the adjudicator were in
error, it was not an error of such a kind as would make the determination
void.
28 Multipower accepted that if the due date were 24 February 2006,
and if it had been open to the adjudicator so to find, then the adjudication
application had been brought within time.
29 In the course of
submissions, I raised with counsel for Multipower whether his client wished to
submit that the adjudicator had denied Multipower natural justice by deciding
what on its case was an issue not propounded by the parties, without first
giving them an opportunity to be heard.
30 The first response was that
this point was covered by paras 34 to 36 of Multipower’s points of claim.
Those paragraphs read as follows:
“(34) In the first alternative
the Adjudicator asked herself the
wrong question to make an
erroneous finding to reach a
mistaken conclusion bringing her
jurisdiction into question
as an error of
law.
Particulars
(a) The adjudication application
(b)
Adjudication submissions by S&H
(c) The payment schedule dated 23
February 2006
in response to the claim dated 7 February 2006 or
(d) The adjudication response which did not agree as to
the due
date for payment.
(35) In the second alternative the Adjudicator
ignored relevant
material make [sic] an erroneous finding to reach
a mistaken
conclusion bringing her jurisdiction into question as an
error
of law.
Particulars
(a) The adjudication
application
(b) Adjudication submissions by S&H
(c) The payment
schedule dated 23 February 2006
in response to the claim dated 7
February 2006 or
(d) The adjudication response which did not agree as
to
the due date for payment.
(36) In the third alternative the
Adjudicator relied on irrelevant
material to make an erroneous
finding to reach a mistaken
conclusion [sic] her jurisdiction into
question as an error of
law.
Particulars
(a) The
adjudication application
(b) Adjudication submissions by S&H
(c)
The payment schedule dated 23 February 2006
in response to the claim
dated 7 February 2006 or
(d) The adjudication response which did not agree
as to
the due date for payment.”
31 When I indicated
that I did not regard those paragraphs as raising the issue (as they do not),
he said, after considering the matter over the mid-morning adjournment,
that his client did not wish to pursue this issue further.
32 I have
said that I do not regard the relevant paragraph as raising the issue. To my
mind, that is apparent not only from the paragraphs themselves but also from the
statement of issues that was founded upon them.
Grounds of
review
33 The grounds upon which an adjudicator’s
determinations may be reviewed were dealt with by the Court of Appeal in
Brodyn
Pty Ltd v Davenport (2004) 61 NSWLR 421. In that case Hodgson JA,
with whom Mason P and Giles JA agreed, identified four grounds of review, from
pages 441 [52] to 443 [60]. I paraphrase what his Honour said, giving paragraph
citations:
(1) The first ground of review arises where an adjudicator
does not satisfy the conditions laid down by the Act essential for there to be a
valid determination ([52]).
(2) The second ground of review arises if the
adjudicator does not try in good faith to exercise the relevant power relating
to the subject matter of the legislation in a way that is reasonably capable of
reference to the power ([55]).
(3) The third ground of review arises
where an adjudicator denies a party such measure of natural justice as the
legislative scheme requires to be afforded ([57]).
(4) The fourth ground
of review arises if there is fraud in which the adjudicator is complicit
([60]).
34 I note that if there is fraud in which the adjudicator is not
complicit then the decision is reviewable, but, on the analysis of Hodgson JA,
is voidable rather than void (again, [60]).
35 It will be seen that the
first of these requirements relates to the “basic and essential”
preconditions of validity. Those were defined at 441 [53] as
follows:
“[53] What then are the conditions laid down for the
existence of an adjudicator’s determination? The basic and essential
requirements appear to include the following:
1. The existence of a
construction contract between the claimant and the respondent, to which the Act
applies (s 7 and s 8).
2. The service by the claimant on the respondent
of a payment claim (s 13).
3. The making of an adjudication application
by the claimant to an authorised nominating authority (s 17).
4. The
reference of the application to an eligible adjudicator, who accepts the
application (s 18 and s 19).
5. The determination by the adjudicator of
this application (s 19(2) and s 21(5)), by determining the amount of the
progress payment, the date on which it becomes or became due and the rate of
interest payable (s 22(1)) and the issue of a determination in writing (s
22(3)(a)).”
36 Hodgson JA referred at 441 [54] to what he called
“more detailed requirements”. Those included “s 17 as to the
time when an adjudication application can be made ...”. His Honour said
at 441 [55] that “[t]he legislature did not intend that exact compliance
with all the more detailed requirements was essential to the existence of a
determination”. This followed on from what his Honour had said at 441
[54], to the effect that approaching the question by reference to the old
classification of jurisdictional or non jurisdictional error of law “...
has tended to cast the net too widely; ...”.
37 In my view, it is
clear from His Honour’s analysis that even what might have been called
jurisdictional error of law in days gone by would not result in the avoidance of
a determination unless the subject matter of that error were a “basic and
essential requirement”.
38 Multipower relied on a number of other
decisions. They included the decision of Campbell J in Amflo Constructions
Pty Ltd v Jefferies [2003] NSWSC 856, and the decision of Einstein J in
Vince Schokman & Anor v Xception Construction Pty Limited & Anor
[2005] NSWSC 297.
39 Neither of those cases say anything that is
inconsistent with the decision in Brodyn (and if they did, it would
hardly help). In my view, the reliance on Schokman was misplaced.
Einstein J was considering whether, as a result of the time limit set out in the
Act and its operation in the facts of that case, the plaintiff had been denied
natural justice. He concluded that it had. It followed that the plaintiff was
entitled to succeed. That had nothing to do with the fundamental issue in this
case.
40 Multipower relied in particular on what His Honour said at para
[6] and then at paras [14] and [15]. In my view, the submissions that were
founded upon those paragraphs were dependent on a misreading both of what
Einstein J was seeking to do and what his Honour in fact did. Nothing in those
paragraphs, in my view, lends any support to the proposition that a failure to
comply with the relevant time limit arising out of s 17(3) vitiates a
determination on the ground of failure to comply with a basic and essential
precondition of validity.
No vitiating error
41 It follows
necessarily from what Hodgson JA said in Brodyn that, even if the
adjudication application had been made out of time, the adjudicator’s
implicit conclusion that it was made within time does not mean that the
determination is void. At most, and assuming error, there would have been an
error within the scope of the jurisdiction that is entrusted to adjudicators: a
mistake that the adjudicator would have been entitled to make.
42 Nor do
I think that the alternatives expounded in paras 34 and 36 of the points of
claim suggest otherwise. A reading of the determination shows that the
adjudicator considered the material that the parties put before her. She
preferred the material propounded by S & H. She accepted the conclusion to
which that material led. She was entitled to do so.
43 It is necessary
to bear in mind, in this context, that the matters relied upon by Multipower in
this Court as giving rise to the suggested error were not articulated in any way
in the documents provided to the adjudicator.
44 It is unnecessary to
consider the factual basis of Multipower’s attack, because any error of
fact, or any error in a conclusion (whether of fact or law) based thereon, does
not lead to the result for which Multipower contends. But, since the point was
argued, I think it appropriate to say that the approach taken by the adjudicator
was well open to her upon the facts.
45 Multipower’s submissions
relied on the payment claim as setting out the relevant terms (as to due date)
of the subcontract, by the parenthetical statement to which I have referred.
But this does not necessarily follow: especially where, as the adjudicator
found, the relevant contractual documents were silent on the point. Normally,
an invoice will show the existence of an underlying contract. But not
everything that is stated on the invoice will necessarily show, or be consistent
with, the terms of that contract. To say that the documents that constitute a
contract include invoices issued, or purportedly issued, pursuant to the
contract (which is the essence of Multipower’s submission to this Court)
is to reverse the proper order of inquiry.
Another matter
46 What I have said disposes of Multipower’s case. But there
is one other matter to which I wish to refer.
47 As I have indicated, the
amount in dispute (including the adjudication fee) was less than $100,000. It
lay within the jurisdiction of the District Court. Indeed, S & H has
obtained judgment in that Court through the mechanism of s 25 of the Act. The
dispute could and should have been raised and dealt with in that Court. It
could have been raised through an application to stay, and to set aside, the
judgment. It is clear that the judgment entered through s 25 may be set aside
if the underlying determination is void (see Brodyn at 443
[61]).
48 It is inappropriate that such a dispute over such an amount
should be brought in this Court. For my own part, I wish to make it quite clear
that such applications should be, and in the ordinary case will be,
discouraged.
Orders
49 I order that the injunction granted
on 21 June 2006 be dissolved. I order that the summons be dismissed. I will
hear the parties on costs.
(Counsel addressed on costs.)
50 HIS
HONOUR: The defendant asks for its costs. The plaintiff referred to the size of
the amount in issue, but otherwise did not oppose a costs order. I should add
that after I gave my reasons counsel for the plaintiff indicated why it was that
the proceedings had been brought in this Court and I accept that as explaining
what happened in the particular case. What I have said should not therefore be
taken as any reflection upon the particular act of the present parties in
bringing the litigation in this Court, but I stand by what I said as a general
warning.
51 It appears that, as the price for obtaining interlocutory
relief, the plaintiff brought into Court a sum of money to cover the
adjudication amount and the adjudicator’s fees. The parties agree that
the money was paid into Court to abide the outcome of the proceedings with the
intention that it be paid out to the successful party.
52 In the
circumstances of this case, I see no reason why costs should not follow the
event. Accepting for the moment that the proceedings had to be brought in this
Court, notwithstanding the size of the amount in issue, it follows that the
ordinary costs rule in this Court ought to apply.
53 The defendant asks
for payment out of the amount paid in. As I have indicated, the plaintiff
accepted that the amount was brought into Court to abide the outcome of the
proceedings and that it was the defendant that had succeeded.
54 I
therefore add the following to the orders that I have made.
55 I order
that the monies brought into Court in these proceedings by the plaintiff be paid
out to the defendant or as it directs.
56 I order the plaintiff to pay
the defendant’s costs of the proceedings.
COUNSEL:
T Bland (Plaintiff)
J P Donohoe
(Defendant)
SOLICITORS:
James Dimitrious (Plaintiff)
Macquarie
Lawyers (Defendant)