Adjudication discussion evening (6 Sep, Sydney) - 2/3

Three Recent SoP Cases
• St Hilliers Property v ACT Projects and Wilson
[2017] ACTSC 177 (20 July 2017)
• Quasar (Constructions) Commercial v Trilla Group
[2017] NSWSC 860 (22 June 2017)
• Probuild Constructions (Aust) v DDI Group
[2017] NSWCA 151 (23 June 2017)
David Campbell-Williams
Resolution Institute Adjudicators Discussion Evening
6 September 2017

St Hilliers Property v ACT Projects and Wilson
[2017] ACTSC 177 (20 July 2017)
Void determination- Jurisdictional error and manifest error
Cost exposure for Adjudicator
• 9 July 2014 ACT Projects, contracted to perform structural works for St Hilliers on
a project in Gungahlin ACT
• Works completed before 29 April 2015
• Between 20 May 2015 and 20 April 2016 ACT Projects served 12 almost identical
payment claims each related to the same completed works
• 20 June 2016 ACT Projects lodged an adjudication application
• 27 June 2016 Adjudicator filed notice of acceptance
• 4 July 2016 St Hilliers lodged its adjudication response
• Submissions sought and extension agreed that the Determination had to be made
on or by 22 July 2016
• Date met but minor amendments made on 25 July, and published 26 July
determining that St Hilliers owed ACT Projects $222,260.53

[2017] ACTSC 177
Appeal under Administrative Decisions (Judicial review)
Act 1989 and an appeal from the determination on the
basis of error of law (as provided for in s43 ACT SoP Act)
s43(4) The Supreme Court must not grant leave under subsection (3) (b)
unless it considers that—
(a) having regard to all the circumstances, the determination of the question of
law concerned could substantially affect the rights of 1 or more parties to the
adjudication decision; and
(b) there is—
(i) a manifest error of law on the face of the adjudication decision; or
(ii) strong evidence that the adjudicator made an error of law and that the
determination of the question may add, or may be likely to add, substantially to
the certainty of the law.

[2017] ACTSC 177
Three bases:
• that the payment claim had been served too late
• that a ‘reference date’ was a necessary prerequisite
to its service, and was absent at the time of service,
and
• that the Adjudicator had, in effect, delegated the
preparation of his adjudication by having someone
else prepare it (or taken into account something other
than the ACT s24(2) items/ matters) (22(2) in NSW
Act)

The payment claim had been served too late
ACT Section 15(4) provides:
(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.
• (cf NSW s13(4))

Cl 16.9 The subcontractor agrees to execute a CVA containing confirmation of the
matters dealt with in Schedule G and a release in favour of St Hilliers as a
precondition of final payment to the Subcontractor. The Unpaid Substantial
Completion Retention Release amount identified in the CVA is payable on
Substantial Completion and the Unpaid Final Retention Release amount is payable
at the end of the Defects Liability Period or when all defects have been remedied to
St Hilliers’ satisfaction, whichever is the later. Any Payment Claim which the
Subcontractor may have which is not included in the CVA or notified in writing to St
Hilliers within 7 days of issue of the CVA or notified in writing to St Hilliers within 3
business days of the commencement of the events giving rise to the Claim
(whichever is the earlier) (other than any claim for the return of Security or Retention)
shall be absolutely barred and forever released and discharged. Nothing in this
clause shall restrict the Subcontractor from defending or bringing a cross claim
(provided the cross claim related to the subject matter of the claim against the
Subcontractor) or a claim for contribution with respect to, any claim, action, suit of
proceeding [sic] brought by the Head Contract Principal against the Subcontractor.

[42] I consider the adjudicator erred in finding in cl 16.9 a period within which
ACT Projects could serve its claim.
[43] I cannot see any way in which it shows “the end of the period worked
out under the construction contract.”
[44] First, the clause says ACT Projects agrees to sign an agreement.
Secondly, it provides what is to happen with the retention sum referred to in
that agreement. Thirdly, it bars certain payment claims. Fourthly, it preserves
to ACT Projects the right to defend or cross claim in any case brought
against it by the head contractor.
[45] Nowhere does it create any rights to serve payment claims. Nowhere
does it contain a mechanism to work out “the end of the period under the
construction contract”.

No reference date
Para 43 of St Hilliers submissions quoted at [62]
43 Accordingly, on the proper construction of this contract, a (new)
reference date can only ever accrue in a month where no construction work
was performed, in circumstances where a valid payment claim was not
submitted in the previous month (and construction work was done in that
earlier month). Where a valid payment claim was submitted in the previous
month, no new reference date can arise. This is because there is no work
under the Contract which can be claimed. For that reason, on a proper
construction of the Contract, the Payment Claim was submitted in relation to
the same reference date as all previous 12 payment claims. No new
reference date ever arose for those subsequent months, as with the last
one.

No reference date
[77] Clause 16.1, although permitting monthly claims, must be construed as having
limits to its operation, including time limits. For example it would be absurd to construe
it as having continuous operation, beyond the end of construction and payment of the
final payment.
[78] If, as I am satisfied it does, the clause has a time limit for its operation, that must
have been, at the latest, to the time for claiming a final payment.
[79] On its face the clause contemplates ongoing work occurring in the month
immediately before lodgement, unless a claim previously lodged had failed to comply
with relevant preconditions: see cl 16.4. Where there has been such a failure, another
claim could be lodged for the work in that claim, which in cl 16.4 is called a “lapsed
claim.”
[80] It was not suggested here the claim lodged on 20 May 2016 was such a claim.
[81] Thus in the context of this case, I accept Mr Miller’s submission that the words “to
that time” in cl 16.3(a) must mean to the date immediately before the lodgement of the
claim. As no work was done in the month before 20 May 2016, the claim was not
served on a reference date, and was invalid.

Impermissible Delegation
[117] I accept Mr Miller’s submission that the use of singular words in s 22,
such as “an adjudicator” (s 22(1), shows that the job of adjudicator is
personal to the person who agrees to adjudicate.
[118] I do not consider s 24(2) requires that an adjudicator work alone,
with no clerical or other assistance. Clearly, adjudicators must have some
assistance. In the end, whether the assistance amounts to a usurpation of
the task of adjudication must be a matter of degree.
[119] However, as much as Mr Wilson sought to say all the work was his, I
infer most was that of Mr Turner, and that he adopted Mr Turner’s work to a
substantial degree and put forward the final product as his own.

The Appeal under ACT BCI(SoP)Act s.43
s43(1) Except as provided for in this part, 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.
s43(4) The Supreme Court must not grant leave under subsection (3)(b)
unless it considers that—
(a) having regard to all the circumstances, the determination of the question of
law concerned could substantially affect the rights of 1 or more parties to the
adjudication decision; and
(b) there is—
(i) a manifest error of law on the face of the adjudication decision; or
(ii) strong evidence that the adjudicator made an error of law and that the
determination of the question may add, or may be likely to add, substantially
to the certainty of the law.

The Appeal under ACT BCI(SoP)Act s.43
[138] The appellant contended that two errors of law had been made,
and each warranted allowing the appeal. The first concerned an issue
of waiver. The second, which I have dealt with above, concerned
whether the payment claim had been served on a reference date.
[139] For the reasons set out above as to the reference date, the
appeal must succeed. I am satisfied that in finding the payment claim
was served on a reference date, the adjudicator made an error of law.
[140] However I shall also consider the plaintiff’s argument that [the
Adjudicator] made an error of law when finding St Hilliers had waived
its right to insist that ACT Projects comply with contractual time limits.

Exposure to costs
Because the Adjudicator became actively involved in the proceedings, he
became exposed to a costs order.
[220] Despite the general rule that no order for costs be made against an
adjudicator, here, because of his active involvement in defence of his
position, I consider he should share some of the costs liability: Fernando v
Medical Complaints Tribunal at [21]. As did the tribunal member there, the
second defendant had an indemnity under the Act: s 37(1). That is an
additional factor I take account of on this issue: Fernando at [22].

Quasar (Constructions) Commercial v Trilla Group
[2017] NSWSC 860 (22 June 2017)
Determination not void by reason of want of Natural Justice
Stay also refused
Trilla had obtained a Determination of $462,000 incl GST
Quasar claimed:
• a declaration that the adjudicator's determination is void, and
consequential relief restraining Trilla from enforcing it; or in the event
that the primary case failed-
• an order restraining Trilla from enforcing the determination until such
time as Quasar's claim can be heard and determined.

• Quasar submitted to the adjudicator that the date of practical
completion was delayed by some 192 days from the date for
practical completion, in circumstances where the date for
practical completion (Quasar said) had not been extended. At
the rate of $13,000 per day for liquidated damages, that led to
the claim of the order of $2.5 million
• Trilla submitted that time was at large, because of Quasar's acts
of prevention. Those asserted acts of prevention included, apart
from the matters to which I have referred, the asserted failure to
appoint a superintendent who would manage

Quasar responded by denying some of the matters of fact to which Trilla
had referred. However, the principal argument advanced by Quasar was
that the prevention principle had no application because the contract
specifically made provision for extension of time. It relied on the judgment of
Rolfe J in Turner Corporation Limited v Coordinated Industries Pty Limited .
His Honour there held, in substance, that usually at least, the prevention
principle would only apply where the contract did not itself provide for the
consequences of the acts that were said to be breaches and acts of
prevention.

• Quasar's submissions then turned to cl 34.3 of the contract which
provided that Trilla would be entitled to extensions of time if Trilla:
▫ would be delayed (or had been delayed) by a "qualifying cause of
delay" to which it had not contributed itself:
▫ had given written notice within three days of becoming aware of the
causal event;
▫ that "the delay claimed affects the critical path of the progress of the
WUC“ and
▫ had taken all reasonable steps to mitigate the effects of the delay.

Quasar's submissions canvassed cl 34.3 and its application asserting that
no claim for an EOT had been made by Trilla.
Quasar also disputed that it had any obligation to provide a construction
program (coherent or otherwise) to Trilla.
It reiterated its submission that the prevention principle had no relevance,
and said that whatever the superintendent did or did not do had nothing to
do with the case.

The adjudicator then turned his attention to the real dispute, which was the
impact of the prevention principle on Trilla's claimed entitlements to EOTs
in circumstances where the contract made express provisions for EOTs in
cl 34.3.
He noted the requirement that the delay claimed must affect the critical
path of the progress of the WUC. He then said that although there was no
requirement for Quasar to provide a construction program, where it had
not done so (or had not updated the program initially provided), Trilla could
not comply with the requirements of that sub-paragraph because it simply
could not know whether the delay had had any impact on the critical path
of its works.

[20] Accordingly, the adjudicator concluded, the prevention principle
was no answer to Trilla's answer to the claim for liquidated
damages. Since it was the claim for liquidated damages that was
the principal offset, that removed a substantial obstacle to Trilla's
success.
[21] Trilla had submitted to the adjudicator, in the alternative, that if it
were wrong as to the application of the prevention principle,
nonetheless he should conclude, in the alternative, that he was
unable to determine the quantum of any liquidated damages. The
adjudicator referred to that alternative submission, but expressed no
view as to whether or not he was satisfied that it had been made
good.

[22] In the end (on this aspect of the dispute) the adjudicator decided
that Quasar could not set off liquidated damages, because Trilla was
unable to request an EOT in accordance with the provisions of the
contract. That was so, he said, because Trilla could not assess if a
qualifying cause of delay would have any impact on the critical path,
because the critical path had not been defined in an updated
construction program.
[23] …[Quasar] submitted that by deciding the question in this
fashion, the Adjudicator had decided it on a basis for which neither
party contended. In those circumstances, he submitted, there was a
material or substantial denial of natural justice.

[24] In my view, there was no substantial or material denial of natural
justice. It was Quasar itself that put cl 34.3 into issue, as an answer
to Trilla's claim insofar as that claim relied on the prevention
principle. Trilla had no ability to respond to Quasar's submissions on
that point. It was up to the Adjudicator to wrestle with the issue as
best he could.
[25] The factual material that the adjudicator took into account,
including the absence of a current construction program and the
consequences of that, were in the evidence before him. Quasar was
in a position to answer those factual matters, and to the extent that it
wished to do so, it did.

[26] The legal issue that Quasar presented was whether cl 34.3
imposed an insuperable obstacle to Trilla's defence (an inaccurate
but sufficient term for present purposes) of Quasar's response to
the adjudication application based on its claimed entitlement to set
off liquidated damages. Neither party could anticipate in any real
detail the way in which that argument might work out. But it was an
argument that had been put before the adjudicator, and it was an
argument that he dealt with, as best he could in the very tight
timeframe allowed by the [Act]…

[28] In my view, the issue having been raised, it was incumbent upon the
adjudicator to deal with it as best he could on the material provided. That,
I think, is precisely what he did. He may have been right or wrong in his
interpretation of the contract. But if he were, that would be an error within
jurisdiction, and nothing more

Stay refused
[33] Although it may not be true as a statement of absolute application, it is
undoubtedly correct to note that most of the cases where a stay has been
granted are cases where the claimant before the adjudicator has been
insolvent, or is undergoing some form of administration in insolvency, and
no longer trading. In those cases, as the Court said in Facade Treatment
Engineering, the rationale for allowing the statutory shift of the risk of
insolvency to continue is no longer applicable.

Stay refused
42 …Even if it should be held that, apart from the cross-claim, Trilla
were entitled to the full amount of $861,000 claimed by it, the resulting
debt in favour of Quasar, assuming it proved its entire claim for
liquidated damages, would be of the order of $1.6 m. It does not seem
to me that there is any real prospect that Trilla could repay that if called
upon to do so.
43 However, to reason in that way is to ignore the policy of the Act, and
the relevant aspects of its operation in relation to solvent trading
companies, that have been referred to in the intermediate appellate
court decisions that I have summarised above. The mere fact that an
amount might not be repaid does not justify withholding it until the
entitlement to that amount can be determined on a final basis.

Probuild Constructions (Aust) v DDI Group
[2017] NSWCA 151 (23 June 2017)
Determination not void by reason of want of Natural Justice; Appeal
dismissed.
Beazley ACJ McColl JA Macfarlan JA
on appeal from Meagher JA [2016] NSWSC 462 (20 April 2016)
Primary Judgment McColl JA
Challenge to Determination of $475,716 in favour of DDI had been dismissed
by Meagher JA
Probuild contended that the determination was infected by a denial of
procedural fairness (natural justice) in that the adjudicator rejected its
liquidated damages claim on bases which neither party had notified to the
other or contended for, and which the adjudicator had not notified the parties.
Probuild also asserted that had the adjudicator intended to so act, he should
have invited the parties to make further submissions, as he was empowered
to do under s 21(4) of the SOP Act

Extract from para 185 of Determination (@ [51])
“…Based on the submissions it appears that 80% of the contract variations
(approximately $1.4m) were directed by [Probuild] and executed by [DDI] after 5 January
2015. As the bulk of the contract variations were approved by [Probuild] it is assumed
[DDI] performed the work as directed by [Probuild].
It appears totally inconsistent and unreasonable for [Probuild] to be directing [DDI] to
perform significant additional work under the Subcontract after the original Date for
Practical Completion and then making a claim for LDs against [DDI] for following
[Probuild’s] express directions.
[Probuild] also states:
‘DDI has not been granted nor is it entitled to any extension of time.’
Under the Subcontract [Probuild] has the ability to extend time for any reason. Based on
the significance of the volume of additional work being directed it is unreasonable of
[Probuild] not to [have] granted additional time.
Whilst there may have been [DDI] caused delays I am not satisfied [Probuild] is entitled
to a claim for the total 144 days.
In the absence of an alternative [Probuild] position I find in favour of [DDI].”

The Prevention Principle (@[114] to [129])
[114] In Spiers Earthworks Pty Ltd v Landtec Projects Corp Pty Ltd (No
2), McLure P (with whom Newnes JA agreed), by reference to Hudson’s
Building and Engineering Contracts, observed that “[t]he essence of the
prevention principle is that a party cannot insist on the performance of a
contractual obligation by the other party if it itself is the cause of the other
party’s non-performance”.
[115]…Ordering variations after the due date which must substantially delay
completion will, unless the contract provides otherwise, and in the absence of
an applicable extension of time clause, disable the proprietor from recovering
or retaining liquidated damages which might otherwise have accrued after the
giving of the order. In the context of delaying variations, whether ordered
before or after the due date for completion, the prevention principle “is
grounded upon considerations of fairness and reasonableness”.

The Prevention Principle
[117] The operation of the prevention principle can be modified or excluded by
contract. The manner in which this can be done, as relevant to the present
case, is by extension of time provisions such as cll 41.5 – 41.6. Those
clauses established a procedure by which, in the event of an actual or likely
delay caused as provided in cl 41.6(b)(i), DDI could advise Probuild of the
matters set out in cl 41.5, including whether it sought an extension of time to
the Date for Practical Completion.
[128] In my view, and contrary to Probuild’s submissions, Probuild was
obliged to exercise the reserve power to grant extensions conferred by cl 41.9
honestly and fairly having regard to the underlying rationale of the prevention
principle to which I have earlier referred or, if necessary, because there is an
implied duty of good faith in exercising the discretion cl 41.9 conferred.

Justice McColl’s conclusions
[130] …It is important in considering the content of the procedural fairness
requirement in the context of the SOP Act to bear in mind that a valid
payment claim may be made under the SOP Act “even though it may
ultimately be proved that no payment was due under the construction
contract”. This underscores the rough justice the adjudication procedure
entails. There is no, or little, time for fine arguments about legal principle.
Indeed, having regard to the fact that there is no requirement that
adjudicators have legal qualifications, and, again the constrained time period
for adjudications, it might be concluded the legislature intended such matters
are left to the courts to which the parties may in due course resort, after the
adjudication process is complete.

[131] When the operation of the prevention principle is understood as I
have explained it, it is apparent in my view that its application was
squarely an issue in the adjudication process. Its inferential application by
the adjudicator could not, or should not, have come as a surprise to
Probuild.

[137] …Probuild was clearly on notice of the following matters.
First, that the adjudicator was being asked to determine its liquidated
damages claim in the face of a strong claim by DDI that [Probuild’s] acts of
prevention had caused the performance of the Subcontract to be delayed past
the Date for Practical Completion.
Secondly, that it had abandoned the variation procedure in the Subcontract
such that it could not place reliance on assertions that DDI was not entitled to
extensions of time under those provisions by virtue of failing to comply with the
time periods they prescribed.
Thirdly… that there was a free standing, albeit discretionary, extension of time
provision which DDI had, or could arguably have been understood, to have
invoked.

[140] In concluding that Probuild was not entitled to liquidated damages for
the period of 144 days as sought in its Payment Schedule Table, it is
apparent that the adjudicator did, as the primary judge found, deal “with
Probuild’s argument as made”. In short, the adjudicator found Probuild had
not made good its liquidated damages claim because, as it had anticipated
might be found, Probuild should have granted DDI an extension of time.

Adjudication discussion evening (6 Sep, Sydney) - 2/3

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Adjudication discussion evening (6 Sep, Sydney) - 2/3