SUPREME COURT OF QUEENSLAND

CITATION: Unifor Australia Pty Ltd v Katrd Pty Ltd atf Morshan Unit

Trust t/as Beyond Completion Projects [2012] QSC 252

PARTIES: UNIFOR AUSTRALIA PTY LTD

(applicant)

v

KATRD PTY LTD ATF MORSHAN UNIT TRUST T/AS BEYOND COMPLETION PROJECTS (respondent)

FILE NO/S: 7518 of 2012

DIVISION: Trial Division

_{PROCEEDING: Application}

ORIGINATING COURT: Supreme Court of Queensland

DELIVERED ON: 6 September 2012

DELIVERED AT: Brisbane

HEARING DATE: 30 August 2012

JUDGE: Daubney J

ORDERS: 1. A declaration that the decision made on 20 August 2012 on an adjudication application brought by the respondent against the applicant under the Building and Construction Industry Payments Act _{2004 (“the decision”) is void.}

2. An order that the respondent be restrained from asking for an adjudication certificate pursuant to s 30 of the Building and Construction Industry Payments Act 2004 with respect to the said decision.

3. I will hear the parties as to costs.

CATCHWORDS: ADMINISTRATIVE LAW – JUDICIAL REVIEW – GROUNDS FOR REVIEW – JURISDICTIONAL MATTERS

– where the respondent succeeded in an adjudication claim

under the Building and Construction Industry Payments Act 2004 (Qld) – where the respondent provided the wrong supporting spreadsheet to the adjudicator – where neither side realised the incorrect spread sheet had been provided at the time of the adjudication - where the adjudicator acknowledged a difficulty in indentifying precisely what the terms of the contract were between the parties – where the applicant contends that an essential statutory pre-requisite for an adjudication decision was not satisfied – where the applicant contends the decision of the adjudicator was fatally infected by jurisdiction error – where the applicant contends that there was an error of law on the face of the record – whether the decision of the adjudicator was unlawful

Building and Construction Industry Payments Act 2004

_{(Qld), ss 13 , 14 , 17 , 26}

Brodyn Pty Ltd v Davenport [2004] NSWCA 394 ; (2004) 61

_{NSWLR 421 , followed}

John Holland Pty Ltd v TAC Pacific Pty Ltd (2010) 1 Qd R

_{302 ; [2009] QSC 205 , cited}

QCLNG Pipeline Pty Ltd v McConnell Dowell Constructors (Aust) Pty Ltd and Consolidated Contracting Company Australia Pty Ltd & Anor [2011] QSC 292 , cited

Queensland Bulk Water Supply Authority v McDonald

_{Keen Group P/L & Anor [2009] QSC 165 , cited}

_{Richard Kirk Architect Pty Ltd v ABC [2012] QSC 177 , cited}

T & M Buckley Pty Ltd v 57 Moss Road Pty Ltd [2010] QCA

_{381 , applied}

Transgrid v Siemens Ltd [2004] NSWCA 395 ; (2004) 61

NSWLR 521 , distinguished

COUNSEL: M Labone for the applicant

B Kidston for the respondent

SOLICITORS: & Legal for the applicant

Praeger Ellem Solicitors for the respondent

[1] The applicant (“Unifor”) has applied for a declaration that an adjudication decision made on 20 August 2012 under the Building and Construction Industry Payments Act 2004 (“BCIPA”) is unlawful, and for consequential orders to prevent the respondent (“Katrd”) from relying on that adjudication decision.

[2] Unifor contends that the adjudication decision is unlawful because:

(a) an essential statutory prerequisite for an adjudication decision was not satisfied; (b) the decision was fatally infected by jurisdictional error;

(c) there was an error of law on the face of the record. Background

[3] The following statement of background is taken from the adjudicator’s reasons (in which Katrd is “the Claimant” and Unifor is “the Respondent”):

“1. The Claimant is a contractor that specialises in the project/logistic management and installation of commercial building fit-out.

2. The Respondent is a company that specialises in the design and engineering of office furniture and is part of the Molteni group of companies with its head-quarters in North Italy.

3. On or around October 2011 the Respondent approached the Claimant to provide a statement of capability and competency so as to assess suitability in relation to two Brisbane based projects, one of which relates to this matter (viz: the installation of an office system at levels 11-15, 111 Eagle Street, Brisbane).

4. On 4 November 2011 the Claimant forwarded such statement to the Respondent. The statement outlined the Claimant’s experience and its various past and current projects. Importantly, the statement also referred to the ‘ exclusive partnering arrangement ’ that it had with Allied Pickford and that ‘ under this arrangement we are able to offer unlimited warehouse and container storage under the following structure:

(a) Free warehouse storage for three months for up to 1500 square metres, thereafter

$1.20 per square metre ;

...’

5. On 1 December 2011 the parties met. At that meeting the Respondent outlined the unique, full height glass panel office system it was proposing to import from its headquarters in Italy and invited the Claimant to submit a price for the installation of that system.

6. On 21 December 2011 the Claimant submitted its proposal to the

Respondent for both the transfer from dock to floor and installation of the glass panel system ($463,688.63, ex GST), and the transfer from dock to floor and installation of open workstation storage cabinets and office furniture ($82,946.00, ex GST) (Please note all references to amounts are ex GST, unless otherwise stated).

7. Shortly afterwards, the Respondent advised the Claimant that whereas the

Claimant’s price relating to the workstation component was as expected, its price relating to the glass panel system was twice the amount expected. Nonetheless the

parties agreed to conduct a telephone meeting on 11 January 2012 so as to further discuss the pricing of the glass panel system.

8. On the following day (viz: 12 January 2012) the Respondent forwarded to the Claimant a Letter of Intent to the Claimant confirming the engagement of the

Claimant for the installation of the glass partitioning offices and workstations at the project for the following prices:

o Glass panel system - $284,273.00

o Workstations & storage - $96,215.00

The Letter went on to state that ‘ an official purchase order will be issued following the receipt of your revised proposal and agreement of (the Respondent’s) terms and conditions ’ as set out in the Letter. One of the conditions set out in the Letter required that ‘ all variations must be approved and issued with a purchase order number ’.

9. On the same day (viz: 12 January 2012), the Claimant submitted its revised proposal for the project. The revised proposal stated that the price for the project was as set out in the Respondent’s Letter of Intent (viz: $284,273.00 for the glass panel system and $96,215.00 for the workstations). The Claimant’s revised proposal noted that the Sea Shipment schedule, the Lifts schedule and the Installation Schedule were ‘ TBC/TBA ’ and that ‘ this proposal is not to be constituted as a contract without acceptance of a purchase order ’. The Claimant’s document also included a number of conditions of which the following are particularly noteworthy:

‘ (a) This proposal has been based on the product loading from loading dock to floor works to be carried out outside business hours;

(b) Labour costs due to changes to the lift schedule will be classed as a variation and invoiced accordingly;

(c) This proposal has been based on the installation works to be carried out during business hours only (7am – 4pm, Monday – Friday. Saturdays, Sundays and Public Holidays will attract overtime rates of 1.5-2 times as applicable);

(d) Penetration into flooring to stabilise/secure glass frames and panels has not been allowed for. The methodology for fixing is yet to be determined and priced;

(e) All items are to be delivered, palletised, transferable by pallet jack or trolleys into and out of lift and across floors. A dedicated lift must be made available to as to avoid wait time ’.

10. On 3 February 2012, the Claimant submitted a separate proposal for the

‘ redelivery ’ of various sea containers to the Site docking to docking station. The proposal was in the form of an ‘ estimate ’ of $1,500.00 per container, on the basis of ‘ Fork on to vehicle at dispatch and Fork-off at docking station ’. Further, the

proposal stated that it was being made on the basis that ‘ out-of hours deliveries have been allowed for ’.

11. On 7 February 2012 the Respondent provided the Claimant with a

Purchase Order for ‘ receiving, unloading and delivering to the site 30 containers ’

at the price of $1,500.00 per container (viz: for the total price stated at

$45,000.00).

12. When the Claimant commenced work on site the building had not reached practical completion. The site was under the overall control of the head contractor (Leighton). In particular, the head contractor had specific requirements relating to inductions for all personnel coming on site and access to the goods lift was also subject to strict control and the competing demand of other trades. Once the head contractor achieved practical completion in relation to level 11-15 of the site (13 April 2012), the Claimant was requested to significantly increase its manpower.

13. The Claimant contends that the nature of the site conditions that it

encountered were such that the assumptions upon which it had priced the installation of the glass panel system were no longer valid. In addition (so the Claimant contends), the assumptions upon which it had submitted its ‘ redelivery ’ proposal were also no longer applicable. Further, the Claimant contends that its offer to provide the Respondent with 3 months free storage had been overtaken by the Respondent’s request for the Claimant to arrange alternative larger facilities which were not able to be provided at the original storage area.

14. On 4 July 2012 the Claimant served on the Respondent the following 3 tax

invoices:

(a) Variation in relation to Storage costs, for the sum of $12,602.00;

(b) Variation for Delivery works, for the sum of $27,602.00;

(c) Variations for Installation works, for the sum of $265,650.45.

Each of the 3 tax invoices were endorsed as a payment claim made under the Act.

15. On 16 July 2012 the Respondent served on the Claimant 3 separate payment schedules responding to each of the Claimant’s payment claims. Each of the 3 payment schedules had scheduled a $nil amount and included, by way of annexures, the reasons as to why the Respondent had rejected the Claimant’s claims.

16. On 27 July 2012 the Claimant lodged its Adjudication Application (AA) and on 3 August 2012 the Respondent lodged its Adjudication Response (AR).” The forms of the payment claims

[4] As appears from the above statement of background, Katrd served three tax invoices on Unifor. Each of those tax invoices was also expressed to be a payment claim under the BCIPA. The most significant of those was a claim for $265,650.45 for installation works.

This document (which was identified as tax invoice 560 dated 3 July 2012) was the focus of the argument before me. Under the heading “Variations for Installation Works”, tax invoice 560 stated:

_“

”

[5] That tax invoice referred to a submission which Katrd presented to Unifor on 20 June 2012 “with comprehensive documentary evidence”.

[6] In the hearing, the following emerged:

(a) Katrd’s internal record keeping included maintenance of a spreadsheet which was continually updated with further entries as tasks were completed and the details of running timesheets for workers were entered into the spreadsheet. The information on these spreadsheets was, in turn, imported into spreadsheet documents which gave overviews or summaries of Katrd’s costings on the job, and on the matters which Katrd considered should be claimed as variations; in particular, reference was made to a summary entitled “Installation Cost Variations”. As the spreadsheets were updated with further entries, these summary spreadsheets were also updated;

(b) on 20 June 2012, Katrd sent Unifor an email attaching a “Summary of Costed Variations” with copies of supporting spreadsheets;

(c) in fact, the incorrect document was attached to that email, and on 27 June 2012 Katrd provided Unifor with another version of the “Summary of Costed Variations” (this was Exhibit 1 before me). For convenience, I will refer to this document as the “June spreadsheet”;

(d) the June spreadsheet recorded “Costed Hours Worked” as $627,115. That coincides with the “Cost of Hours Worked” recorded on tax invoice 560;

(e) when the parties fell into dispute, and ultimately an adjudicator was sought to be appointed under the BCIPA , a number of documents were included with Katrd’s adjudication application, including copies of the tax invoices (being the payment claims) and a copy of the email of 20 June 2012. Unfortunately, and clearly by error, the version of the spreadsheet which was included in the adjudication application was not the June spreadsheet, but a later version of the spreadsheet (“the July spreadsheet”) which had been updated since the June spreadsheet was produced. Obviously, the amounts claimed for hours worked on the July spreadsheet were greater than the numbers on the June spreadsheet. Given that the spreadsheet was a “living document”, the numbers on the July spreadsheet were greater than those on, relevantly, tax invoice 560;

(f) Neither Katrd nor Unifor (both of which were self-represented in the adjudication) noticed that the July spreadsheet, and not the June spreadsheet, had been put before the adjudicator. As will appear later in this judgment, the adjudicator (completely understandably) referred to the July spreadsheet in the course of his reasons.

Tax Invoice 560 as a payment claim

[7] The first argument advanced for Unifor was that tax invoice 560 could not be understood without reference to the spreadsheet, and accordingly it was not a “payment claim” under the BCIPA. It followed, so it was argued, that the essential statutory prerequisite (i.e. the existence of a payment claim) had not been satisfied, and the adjudication was consequently void.

[8] Section 17(2)(a) of the BCIPA provides that a payment claim “must identify the construction work or related goods or services to which the progress payment relates”.

[9] A number of recent judgments confirm the proposition that s 17(2)(a) requires that the payment claim must purport in a reasonable way to identify the work the subject of the claim so that a respondent can understand the basis of the claim. [1] It is sufficient to refer

to the following passages in the judgment of Philippides J (with whom Fraser and White JJA agreed) in T & M Buckley Pty Ltd v 57 Moss Road Pty Ltd:

“[35] In Nepean Engineering Pty Ltd , Hodgson JA (with whom Ipp JA agreed) in considering the degree of identification required for a payment claim, had regard to the observations in Clarence Street Pty Ltd concerning the different functions of a payment claim and payment schedule and to his statements in Climatech Pty Ltd (at [25]) that what was required was sufficient identification ‘to enable the respondent to understand the basis of the claim’. His Honour noted Basten JA’s statements in Climatech Pty Ltd (at [42]) that to be valid a claim must be reasonably comprehensible to the other party, and expressed the degree of identification required in terms of whether in all the circumstances, the material in the payment claim was sufficient to convey to the recipient just what was the work for which payment was claimed (at [28]). What was required was that the payment claim purport in a reasonable way to identify the work the subject of the claim, and a payment claim was not a nullity for failure to identify the work unless the failure was patent on its face. The payment claim did not cease to satisfy the requirement concerning identification because it could be subsequently shown that the payment claim was not entirely successful in identifying all of the work.

[36] Santow JA (at [47]-[48]) expressed the view that, in respect of the minimum necessary to satisfy the identification requirement that the payment claim ‘purport in a reasonable way to identify the work’ there must be ‘sufficient specificity in the payment claim for its recipient actually to be able to identify a “payment claim” for the purpose of determining whether to pay, or to respond by way of a payment schedule indicating the extent of payment, if any.’ But having said that, his Honour stated his agreement with what Hodgson JA said in Climatech Pty Ltd that what was required was sufficient identification ‘to enable the respondent to understand the basis of the claim’ and disavowed the notion that there was a legal necessity to include any material directed merely to persuading a respondent to accept a payment claim (at [25]).”

[10] The issue, then, is whether the relevant construction work was sufficiently identified (in the sense understood from the authorities to which I have referred) in the payment claim contained in tax invoice 560. It was not in issue that, by the time Katrd delivered that tax invoice, Unifor had received the June spreadsheet. Whilst the tax invoice did not, in express terms, incorporate reference to the June spreadsheet, it did expressly refer to the “submission outlining the basis of our variation claim” and the “comprehensive documentary evidence”. On the particular facts of this case, Unifor must have understood

that as incorporating a reference to the June spreadsheet (the numbers on which, as noted, corresponded with those on the tax invoice).

[11] In those circumstances, I do not think it can be said that the basis of the claim made in the tax invoice was not reasonably comprehensible to Unifor. I consider that the tax invoice did sufficiently identify the work to which the claim related. I reach that conclusion on a finding that the tax invoice sufficiently incorporated, by reference, the June spreadsheet (that being the spreadsheet which the parties understood was that which was supposed to have been provided with the email of 20 June 2012) and which was provided to Unifor before tax invoice 560 was issued.

[12] I would therefore reject the argument that an essential statutory precondition for the adjudication decision was not met.

Adjudicator’s valuation of the installation work

[13] The adjudicator valued the amount recoverable by Katrd for the installation work in the sum of $265,650.45 (i.e. the amount claimed on tax invoice 560). Unifor contends that, in reaching that valuation, the adjudicator:

(a) erred by not having regard to certain submissions by Unifor, leading to a jurisdictional error;

(b) in any event, failed to value the work in accordance with s 14 of the BCIPA , thereby committing a jurisdictional error and/or an error of law on the face of the record which was so fundamental as to result in a jurisdictional error.

[14] To understand these arguments, it is necessary to set out a number of extracts from the adjudicator’s reasons.

[15] Under the heading “Contractual Arrangements”, the adjudicator found:

“17. There does not however appear to be any documentation that consolidates the 3 separate proposals into a single formal agreement or contract. Further, the Respondent does not appear to have issued any documentation formally accepting the Claimant’s revised offer relating to the installation work. Whereas the Respondent did issue its Letter of Intent on 12 January 2012, that document stated that ‘ an official purchase order ’ would be issued following receipt of the Claimant’s proposal accepting agreement of the prices and the terms and conditions set out in that Letter. Then, when the Claimant issued its revised proposal (also dated 12 January 2012), not only were the terms and conditions set out in that document different to those set out in the Respondent’s Letter of Intent, but the Claimant’s (revised) proposal expressly stated (in bold print) that ‘ this proposal is not to be construed as a contract without acceptance of a purchase order ’. Most important however, the Respondent did not subsequently issue an ‘ official purchase order ’ in relation to this work, and yet, nonetheless, the Claimant proceeded with carrying out installation of the Respondent’s glass panel system.”

...

22. The difficulty with the Claimant’s position is that there is no agreed document that sets out all of the assumptions upon which the Claimant contends its proposals had been based. Equally, the difficulty with the Respondent’s position is that its Letter of Intent does not constitute the contract upon which the Claimant had agreed to carry out its works and provide the services (viz: storage

of containers and delivery of materials). It is therefore necessary to consider from the evidence provided, whether, in the absence of a formal contract setting out the terms and conditions, the Claimant is entitled to the additional costs claimed.”

[16] The adjudicator returned to this topic later in his reasons:

“54. I have already dealt with the difficulty of indentifying [sic] the specific document which sets out the terms and conditions upon which the installation works were to be carried out (refer to paragraphs 17 to 22 above). The Respondent’s submission that the ‘ contract ’ relating to the installation work constitutes its Letter of Intent is misconceived because it was forwarded on the basis that the Claimant submits its ‘ revised proposal and agreement of the following ... terms and conditions ’. However (and as set out above), whereas the Claimant did immediately forward a revised proposal for the same amount set out in the Respondent’s Letter of Intent, the Claimant’s (revised) proposal had included an entirely different set of terms and conditions. Yet, even the Claimant’s (revised) proposal, with all the terms and conditions set out therein, was expressly stated that ‘ it is not to be construed as a contract without acceptance of a purchase order ’. No purchase order relating to the installation work appears to have ever been issued yet, nonetheless, the Claimant proceeded with this work. Therefore, whereas there was agreement on the price for which the work was to be carried out, there was no agreement on the terms and conditions because the Claimant’s revised proposal had set out a fresh set of terms and conditions (which were different from those set out in the Respondent’s Letter of Intent) but the Respondent did not appear to have accepted these terms and conditions because it did not issue a purchase order. No explanation has been provided by either party as to why the Respondent did not issue a purchase order, or why the Claimant proceeded to carry out is work without such a purchase order being issued. Whatever the reason, the fact remains that the Claimant carried out the installation work and the Respondent made various progress payments in respect of such work.”

[17] In fact, the adjudicator was mistaken in his finding that there had not been a “purchase order”. Indeed, the adjudication response put in by Unifor identified specifically that Unifor had issued a purchase order “for the receipt of containers and the delivery and installation” as well as the letter of intent to which the adjudicator did refer. The fact that a purchase order was issued by Unifor was never contested by Katrd.

[18] Unifor contended that this error of fact by the adjudicator demonstrated that he had not had regard to Unifor’s submissions, and therefore failed to comply with the requirements of s 26 of the BCIPA. I disagree. It is clear enough that he made an error of fact in his findings. But it is also clear enough that an error of fact alone does not give rise to a jurisdictional error. It is, however, important to note this error of fact, because it informed the way in which the adjudicator approached the valuation of the installation works claimed by Katrd.

[19] Under the heading “Variation for Installation Works”, the adjudicator’s reasons commenced with the following:

“44. This item represents the largest component of the Claimant’s claim and relates to the additional costs that the Claimant contends it incurred in the carrying out of the installation work. The amount claimed is $265,650.45. It would appear that this figure represents the Claimant’s total labour costs (stated to be $627,115.00) less the combined value of the Claimant’s revised proposal relating to the installation work ($380,489.00), although it is evident that there has been an arithmetical error (because the actual difference is $246,626.00 and not the claimed amount of $265,650.45). I have also been referred to the excel spreadsheet located behind Tab D of the AA, but the figures set out in that document do not correspond to the amount set out in the Payment Claim, with the value of the labour hours stated at $682,175.92 (compared to $627,115.00 in the Payment Claim) and the additional amount stated to be $301,686.92 (compared to $265,650.45 in the Payment Claim). No explanation has been provided by the Claimant regarding the discrepancy between the figures shown in the spreadsheet and the figures set out in the Payment Claim.”

[20] In hindsight, and with the benefit of the information now before me, the reason for the discrepancy is obvious – the adjudicator was looking at the July spreadsheet, not the June spreadsheet. As noted above, he had been provided with the July spreadsheet instead of the June spreadsheet by Katrd, and Unifor did not pick up on the fact that the adjudicator had been given the wrong document.

[21] In his reasons, the adjudicator then set out the terms of the tax invoice (which was the payment claim) and the arguments advanced in the payment schedule submitted by Unifor. The adjudicator specifically referred to the terms of the email of 17 April 2012 (referred to in tax invoice 560) which was sent by a representative of Unifor to Katrd. That email stated:

“Don’t be nervous, it’s a simple formula. We together predicted number of man hours for the project. Garrick is recording each day number of men and hours you are using. When one goes beyond the other, you will be paid accordingly.”

[22] The adjudicator then canvassed the arguments advanced by Unifor, including the submission that Katrd’s work sheets had grossly misstated the hours said to have been spent onsite.

[23] The adjudicator concluded his deliberations concerning the installation works as follows:

“56. I am satisfied that the Claimant’s concerns in regards to the above issues had been drawn to the Respondent’s attention during the carrying out of the works (refer to the emails sent by Mr Moran dated 17 February 2012, 6 March 2012, 8 March 2012, 26 March 2012, 16 April 2012 and 17 April 2012). I am also satisfied that the Claimant drew these concerns to the Respondent’s attention because it had priced its revised proposal on the basis of the information that the Respondent had provided at the telephone discussions held on 11 January 2012. It is important to emphasise that the purpose of the telephone conversation was to discuss the basis of the Claimant’s initial proposal. It was during this conversation that the Respondent advised that the assumption upon which the Claimant had priced its original proposal were incorrect (refer to paragraph 62 of Mr Moran’s statutory declaration). It was only after the Respondent had outlined the details of the glass panel system (refer to paragraph 65 of Mr Moran’s statutory declaration) and provided a copy of its costing sheet (refer to Tab I of AA) that the Claimant revised its proposal by submitting a significantly lower price. I consider that in circumstances where the information that the Respondent had provided did not materialise, the Claimant should be entitled to be paid for any of the additional costs it incurred. It is evident that soon after commencing its works the Claimant realised that the information it had been provided by the Respondent and the assumptions upon which it had priced its revised proposal were no longer applicable. That was why it had sent its various emails to the Respondent. Most importantly however, the Respondent accepted that the issues that the Claimant had encountered would result in additional costs and that was why the Respondent’s representative (Mr Gabriel) sent an email to the Claimant on 17 April 2012 stating that whatever additional hours above those ‘ predicted ’ would be ‘ paid accordingly ’ (refer to paragraph 52 above). That effectively deals with the Respondent’s argument that there had been an agreement that the Claimant would not be entitled to a variation unless approved and accompanied by a signed purchase order. Not only does this condition as set out in the Letter of Intent not apply (because the Claimant did not accept these conditions when it forwarded its revised proposal which had set out its own terms and conditions) but the Respondent had clearly (as evident by Mr Gabriel’s email of 17 April 2012) agreed to pay the Claimant for the costs of the additional hours spent on site carrying out the installation works.

57. Having decided that the Claimant is entitled to be paid for the additional costs involved in the carrying out of the installation works, the next task is to decide a value for such costs. I have already commented on the discrepancy relating to the figures set out in its Payment Claim, with the amount set out in the Payment Claim being less than that set out in the supporting documentation. Notwithstanding that the Claimant has not provided an explanation regarding this discrepancy and notwithstanding the Respondent’s submission that the Claimant’s claim is ‘ grossly mis-stated ’, I am nonetheless prepared to accept the amount set out in the Payment Claim represents a reasonable figure of the additional costs that the Claimant has incurred. I do so on the basis that the amount claimed in the Payment Claim is less than that set out in the supporting documentation and that this lesser figure may account for any errors/double counting (such as those identified by the Respondent in the extract of the worksheets as set out in Tab G of the AR). It seems to me that in circumstances where the Claimant has an entitlement to be paid for the additional costs but where the Respondent submits that the Claimant’s value of the additional costs should not be accepted because of an example of an apparent inconsistency in the number of hours claimed on a particular day (27 April 2012), it would be unjust to deny the Claimant of its statutory entitlement. Left with a choice of determining a figure which is less than that set out in the Claimant’s supporting documentation or denying the Claimant any amount because of an anomaly that the Respondent had identified in respect to one small part of the Claimant’s material, I prefer to arrive at an outcome that provides relief to the Claimant. I am sufficiently satisfied (from the information provided) that the lesser amount set out in the Claimant’s Payment Claim represents a fair and reasonable value of the additional costs that the Claimant had incurred in the carrying out of the installation work.”

[24] Counsel for Unifor contended that the adjudicator had, in valuing the installation work, fundamentally misconceived the applicable law. It was argued that the valuation of the installation work was required to be undertaken in accordance with s 14 of the BCIPA, and that there was no basis in law for the adjudicator to make a valuation decision as he did.

[25] Counsel for Katrd submitted that the adjudicator had, in fact, done what he was required to do under s 26 of BCIPA, and in particular had decided the “adjudicated amount”. It was further argued that the adjudicator’s reasons disclose that he considered the contractual regime in place between the parties with a view to identifying the construction contract, as required by ss 13 and 14 of the BCIPA, identified how the installation work was to be valued, and then undertook a valuation of that work.

[26] The BCIPA relevantly provides: “ 13 Amount of progress payment

The amount of a progress payment to which a person is entitled in relation to a construction contract is –

(a) the amount calculated under the contract; or

(b) if the contract does not provide for the matter, the amount calculated on the basis of the value of construction work carried out or undertaken to be carried out, or related goods and services supplied or undertaken to be supplied, by the person, under the contract.

14. Valuation of construction work and related goods and services

(1) Construction work carried out or undertaken to be carried out under a construction contract is to be valued –

(a) under the contract; or

(b) if the contract does not provide for the matter, having regard to – (i) the contract price for the work; and

(ii) any other rates or prices stated in the contract; and

(iii) any variation agreed to by the parties to the contract by which the contract price, or any other rate or price stated in the contract, is to be adjusted by a specific amount; and

(iv) if any of the work is defective, the estimated cost of rectifying the defect.

(2) Related goods and services supplied or undertaken to be supplied under a construction contract are to be valued –

(a) under the terms of the contract; or

(b) if the contract does not provide for the matter, having regard to – (i) the contract price for the goods and services; and

(ii) any other rates or prices stated in the contract; and

(iii) any variation agreed to by the parties to the contract by which the contract price, or any other rate or price stated in the contract, is to be adjusted by a specific amount; and

(iv) if any of the goods are defective, the estimated cost of rectifying the defect.

(3) For subsection (2)(b), for materials and components that are to form part of any building , structure or work arising from construction work, the only materials and components to be included in the valuation are those that have become or, on payment, will become the property of the party or other person for whom construction work is being carried out.

...

26 Adjudicator’s decision

(1) An adjudicator is to decide –

(a) the amount of the progress payment, if any, to be paid by the respondent to the claimant (the adjudicated amount ); and

(b) the date on which any amount became or becomes payable; and

(c) the rate of interest payable on any amount.

(2) In deciding an adjudication application, the adjudicator is to consider the following matters only –

(a) the provisions of this Act and, to the extent they are relevant, the provisions of the Queensland Building Services Authority Act 1991 , part 4A ;

(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 properly 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 properly 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.

(3) The adjudicator’s decision must – (a) be in writing; and

(b) include the reasons for the decision, unless the claimant and the respondent have both asked the adjudicator not to include the reasons in the decision.”

_{[27] In John Holland Pty Ltd v TAC Pacific Pty Ltd, [2] Applegarth J said:}

“[18] The Courts have recognised that an adjudication decision is void if:

1. it fails to comply with the basic requirements of the Act; or

2. it is not a bona fide attempt by the adjudicator to exercise the relevant power; or

3. there has been a substantial denial of natural justice to a party;

and only a declaration regarding its invalidity (and perhaps injunctive relief, if necessary) is needed to give it its quietus.

_{[19] Thus in Brodyn Pty Ltd v Davenport [3] Hodgson JA said:}

‘[I]t is plain in my opinion that for a document purporting to be an adjudicator's determination to have the strong legal effect provided by the Act, it must satisfy whatever are the conditions laid down by the Act as essential for there to be such a determination.

If it does not, the purported determination will not in truth be an adjudicator's determination within the meaning of the Act: it will be void and not merely voidable. A court of competent jurisdiction could in those circumstances grant relief by way of declaration or injunction...

...

What was intended to be essential was compliance with the basic requirement..., a bona fide attempt by the adjudicator to exercise the relevant power relating to the subject matter of the legislation and reasonably capable of reference to this power... and no substantial denial of the measure of natural justice that the Act requires to be given. If the basic requirements are not complied with, or if a purported determination is not such a bona fide attempt, or if there is a substantial denial of this measure of natural justice, then in my opinion a purported determination will be void and not merely voidable, because there will then not, in my opinion, be satisfaction of requirements that the legislature has indicated as essential to the existence of a determination.’

[20] The approach in Brodyn has been adopted in Queensland: Hitachi Limited v O'Donnell Griffin Pty Ltd; [4] Walton Constructions (Qld) Pty Ltd v Salce; [5] and J Hutchison Pty Ltd v Galform Pty Ltd. [6]

[21] I add that the statutory scheme also was helpfully described by P Lyons J recently in Queensland Bulk Water Supply Authority v McDonald Keen Group Pty Ltd & Anor. [7] His Honour surveyed authorities to the effect that a condition of validity of the exercise of an adjudicator’s power is that the adjudicator act in good faith. His Honour concluded:

‘It may be correct to say that a decision which displays an extreme degree of unreasonableness akin to that described in Associated Provincial Picture House Ltd v Wednesbury Corporation , [8] is not a decision for the purposes of s 26 of the Payments Act . Otherwise, I do not consider an adjudicator’s decision purporting to be made under the Payments Act will be invalid if it is not “reasonable”. The Payments Act seeks to provide a mechanism for obtaining a decision which will be quick, but in a sense, provisional. It does not seem to me, consistent with the general object and tenor of the Act, to impose a requirement of “reasonableness”.

I am therefore of the opinion that the test advanced on behalf of QBWSA is too widely formulated. If the broad test for good faith is to be adopted, then what is required is a genuine attempt to exercise the power in accordance with the provisions in the Payments Act . Specifically, in relation to a consideration of the construction contract, what is required is a genuine attempt to understand and apply that contract.’ [9]

In arguing this matter the parties agreed that his Honour’s reasons state the appropriate test to be adopted, and I respectfully adopt his Honour’s view.”

[28] Unifor’s argument was that the adjudicator failed to comply with the basic requirements of the BCIPA because he was required to decide a value for the installation work in accordance with s 14 of the Act, but the method he adopted was completely alien to that provided for under s 14. Moreover, it was argued that he misconceived both the law and his function of the Act in identifying that, being faced with a choice of determining a figure less than that set out in the supporting documentation or denying Katrd any amount because of the anomaly, the adjudicator preferred “to arrive at an outcome that provides relief” to Katrd.

[29] The requirements of the cognate provision to s 14 of the BCIPA under the New South Wales legislation were considered by the New South Wales Court of Appeal in Transgrid v Siemens Ltd. [10] The relevant contract under consideration in that case provided, inter alia, that an amount certified by the superintendent under the contract as due to the contractor at the time of a claim for payment “shall be the value of the work carried out by the Contractor in performance of the Contract to that time together with any monies due to the Contractor under any other provision of the Contract or for breach of Contract” less permitted deductions by the principal. One of the issues for determination was whether the adjudicator had committed a jurisdictional error in the approach the adjudicator took to valuing the claimed work. Hodgson JA, with whom Mason P and Giles JA agreed, said:

“31 In this case, there is no doubt that the purported determination answered the statutory words, at least unless vitiated by one of the other matters to which I have referred.

Plainly, there was a construction contract between Siemens and Transgrid to which the Act applied (s 7 and s 8). Siemens served the payment claim on Transgrid identifying the construction work to which the progress payment related and indicating the amount claimed (s 13). Transgrid provided a payment schedule identifying the payment claim and indicating the amount of the payment it was prepared to make. Siemens made an adjudication application in writing to an authorised nominating authority, identifying the payment claimed (s 17). The authorised nominating authority referred the adjudication application to an adjudicator, who accepted the adjudication application (s 19). The adjudicator determined the amount of the progress payment, the date on which it became due, and the rate of interest payable, and did so in writing and with reasons (s 22).

32. There was no suggestion of denial of natural justice or fraud.

33. What was alleged was ‘jurisdictional error’. The jurisdiction of the adjudicator is to determine the adjudication application referred to him or her (see ss 17(6), 19(2), 21(5) and 22) 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)). Section 22(2) requires the adjudicator to consider specified matters only. However, for reasons given earlier, in my opinion an adjudicator’s determination will not be rendered invalid by this provision so long as the adjudicator either does consider only the matters specified, or else bona fide addresses the requirements of s 22(2) as to what is to be considered.

34. In this case, there is no suggestion that the adjudicator did not consider the provisions of the Act and the provisions of the contract. However, the Master found that he made a jurisdictional error, because he did not determine the amount calculated in accordance with the terms of the contract, as required by s 9(a). In my opinion, even if ‘amount calculated in accordance with the terms of the contract’ were, on the true construction of s 9(a) and of the contract, the amount certified by the Superintendent, a decision to the contrary by the adjudicator would be a mere error of law, and not such as to render the determination invalid. To that extent, I disagree with the views expressed by McDougall J in Musico V Davenport . Similarly, if it be the case that, on the true construction of the contract, there could be no entitlement to a progress payment in respect of a variation not approved in writing by the Superintendent, the inclusion of such a progress payment would likewise be an error of law, and not a matter which would render the determination invalid.

35. Accordingly, it is not necessary to decide whether, on the true construction of s 9(a) and the contract, the amount ‘calculated in accordance with the terms of the contract’ is the amount certified (cl 42.2 of the contract) or the value of the work less deductions (cl 42.3 of the contract). However I would express the view that the latter follows from what I think is a preferable interpretation of s 9(a) and the contract, consistent with the use of the word ‘calculation’ and consistent with the provisions against contracting out (s 34); that is, on this matter, I prefer the view of McDougall J in Abacus v Davenport to that tentatively expressed by the Master in the present case.” (emphasis added)

[30] In the present case, the adjudicator’s approach to the valuation was clearly affected by his misapprehension that there had been no purchase order placed for the work. He found, however, that Katrd “should be entitled to be paid for any of the additional costs it had incurred”, and relied particularly for that finding on the email of 17 April 2012 – see paragraph 56 of his reasons. Having decided that Katrd had such an entitlement to be paid, the adjudicator then set about the task of deciding the value of those additional costs which Katrd was entitled to receive. This task was something he was required to do in order to make the decision prescribed by s 26(1)(a).

[31] The adjudicator did not, however, undertake that valuation in any way by reference to the provisions of s 14. He noted the discrepancy (on what is now known to be the incorrect material before him) between the figures on the payment claim (tax invoice 560) and the supporting documentation (the July spreadsheet), noted the contention by Unifor concerning “gross mis-statement”, and found that he was prepared to accept that the amount in the payment claim represented a “reasonable figure” of the additional costs incurred by Katrd. The adjudicator’s reason for reaching that conclusion was in no way referable to a contract between the parties or to any agreed variation for an adjustment by a specific amount, [11] but rather was on the basis that the lesser amount stated in the payment claim “may account for any errors/double counting”. The adjudicator further justified his acceptance of that figure on the basis that, having determined that Katrd had an “entitlement to be paid”, it would be “unjust to deny” Katrd’s entitlement because of an apparent inconsistency in the hours claimed. The adjudicator then said:

“Left with a choice of determining a figure which is less than that set out in the Claimant’s supporting documentation or denying the Claimant any amount because of an anomaly that the Respondent had identified in respect to one small part of the Claimant’s material, I prefer to arrive at an outcome that provides relief to the Claimant. I am sufficiently satisfied (from the information provided) that the lesser amount set out in the Claimant’s Payment Claim represents a fair and reasonable value of the additional costs that the Claimant had incurred in the carrying out of the installation work.”

[32] These two sentences in the reasons really confirm, in my view, the approach taken by the adjudicator. The adjudicator did not, with respect, have any regard to the provisions of the BCIPA in performing the valuation. His approach, rather, was akin to undertaking an assessment on a quantum merit, on the basis that this would avoid an unjust result.

[33] This is, therefore, not a case where the adjudicator had regard to, but incorrectly interpreted or applied, the relevant contractual or statutory provisions. Had he done that, then his error would have been either one of law or fact, but not of such a nature to give rise to a jurisdictional error. In the present case, the adjudicator, in undertaking the valuation exercise required of him, had no regard at all to s 14 or to the matters required under s 14. This case is, therefore, clearly distinguishable from Transgrid v Siemens Ltd.

[34] Under s 26(1) an adjudicator is required to decide, relevantly, the amount of the progress payment. Section 26(2) mandates the matters an adjudicator is to consider in deciding an adjudication application. Not surprisingly, those matters include the provisions of the BCIPA and the provisions of the relevant contract. Section 26 does not permit an adjudicator to venture beyond the prescribed considerations, and undertake a valuation for the purposes of deciding the amount of the progress payment on bases beyond those in s 26(2). That, however, is precisely what the adjudicator did here. He decided the amount of the progress claim not by a consideration of the matters prescribed under s 26(2) but by reference to extraneous considerations.

[35] It follows that I conclude that the adjudicator fell into jurisdictional error by doing something which he lacked authority to do. The adjudicator did not have the power to make an assessment on a quantum merit; his power to assess the amount of the payment claim was prescribed by s 26 and regulated by s 14. The adjudicator’s decision, in this case was unlawful, and therefore void.

Conclusion

[36] There will be the following orders:

1. A declaration that the decision made on 20 August 2012 on an adjudication application brought by the respondent against the applicant under the Building and Construction Industry Payments Act 2004 (“the decision”) is void.

2. An order that the respondent be restrained from asking for an adjudication certificate pursuant to s 30 of the Building and Construction Industry Payments Act 2004 with respect to the said decision.

[37] I will hear the parties as to costs.

[1] T & M Buckley Pty Ltd v 57 Moss Road Pty Ltd [2010] QCA 381 ; QCLNG Pipeline Pty Ltd v McConnell Dowell Constructions (Aust) Pty Ltd [2011] QSC 292 ; Richard Kirk Architect Pty Ltd v ABC [2012] QSC 177.

_{[2] [2009] QSC 205 ; (2010) 1 Qd R 302.}

_{[3] [2004] NSWCA 394 ; (2004) 61 NSWLR 421 at 441 [52] , 442 [55].}

_{[4] [2008] QSC 135.}

_{[5] [2008] QSC 235.}

_{[6] [2008] QSC 205.}

_{[7] [2009] QSC 165.}

_{[8] [1947] EWCA Civ 1 ; [1948] 1 KB 223.}

[9] Queensland Bulk Water Supply Authority v McDonald Keen Group Pty Ltd & Anor

supra at [32]-[33].

_{[10] [2004] NSWCA 395 ; (2004) 61 NSWLR 521.}

_{[11] See s 14(1)(a) and s 14(1)(b)(iii)}