Supreme Court
New South Wales
Case Title: Avopiling (NSW) Pty Ltd v Menard Bachy Pty Ltd
Medium Neutral Citation: [2012] NSWSC 1466
Hearing Date(s): 31 October 2012
Decision Date: 30 November 2012
Jurisdiction: Equity Division
Before: Sackar J
Decision: See paragraphs 109, 110, 111
Catchwords: Building and Construction Industry Security of Payment Act 1999 (NSW), adjudication determination, functions and duty of adjudicator, whether jurisdictional error, whether denial of natural justice, s 22(3), extent of requirement to provide reasons, procedural fairness, content of adjudication, whether erroneous consideration, misunderstanding and/or failure to address or consider matters, whether quash and/or void determination, no jurisdictional error exposed.
Legislation Cited: Building and Construction Industry Security of Payment Act 1999 (NSW)
Cases Cited: Beale v Government Insurance Office (NSW) [1997] 48 NSWLR 430
Bergemann v Power [2011] NSWSC 1039
Brodyn Pty Ltd (t/as Time Cost and Quality) v Davenport [2004] 61 NSWLR 421
Chase Oyster Bar Pty Ltd v Hamo Industries Pty Ltd [2010] 78 NSWLR 393
Coordinated Construction Co Pty Ltd v JM Hargreaves (NSW) Pty Ltd [2005] 63 NSWLR 385
Kirk v Industrial Court of New South Wales (2010) 239 CLR 531
Laing O'Rourke Australia Construction Pty Ltd v H&M Engineering & Construction Pty Ltd [2010] NSWSC 818
Leighton v Arogen [2012] NSWSC 1323
Mifsud v Campbell [1991] 21 NSWLR 725
Pacific General Securities Ltd v Soliman and Sons Pty Ltd [2006] NSWSC 13
Shell Refining (Australia) Pty Ltd v AJ Mayr
Engineering Pty Ltd [2006] NSWSC 94
Timwin Construction Pty Ltd v Facade InnovationsPty Ltd [2005] NSWSC 548
Watpac Construction (NSW) Pty Ltd v Austin Corp Pty Ltd [2010] NSWSC 168
Category: Principal judgment
Parties: Avopiling (NSW) Pty Ltd - plaintiff
Menard Bachy Pty Ltd - first defendant
Representation
- Counsel: Counsel:
N A Nicholls - plaintiff
I G Roberts SC - first & second defendant
- Solicitors: Solicitors:
Colin Biggers Paisley - plaintiff
HWL Ebsworths - defendant
File Number(s): 2012/294615
JUDGMENT
The Proceedings
1 By its amended summons the plaintiff, Avopiling (NSW) Pty Ltd (Avopiling) sought various declarations (paras 1 - 3) to the effect that there had been a number of breaches of ss13, 17 and 22 of the Building and Construction Industry Security of Payment Act 1999 (the Act). That relief is no longer pressed.
2 Avopiling however seeks an order quashing Adjudication Determination no. 2011-TASC-080 dated 11 September 2012. In the alternative it seeks that that Determination be declared void.
3 Avopiling also seeks an order restraining the first defendant, Menard Bachy Pty Ltd (Menard) from requesting the issuance of an adjudication certificate pursuant to the above Adjudication and/or that Menard be permanently restrained from taking any steps in relation to the recovery of any portion of the claim contained in the Determination.
4 Menard denies that there is any error in the Adjudication process sufficient to found any of the relief sought by Avopiling.
The Issues
5 Avopiling contends that the Adjudicator fell into error in his determination. In broad terms Avopiling submits that he failed to perform his statutory functions and denied it natural justice. Avopiling relies upon what it submits are manifestly inadequate reasons given by the Adjudicator in support of its contentions.
6 Menard on the other hand submits that the Adjudicator made no jurisdictional error, afforded both parties procedural fairness and acted in good faith and gave brief but adequate reasons for the Determination.
Background
7 On or about 15 January 2012 Menard entered into a contract with Avopiling under which Menard agreed to design, supply and construct jet grout columns for a jet grout plug in connection with works comprising part of the Port Waratah Coal Services Kooragang Island Project.
8 On 25 July Menard served a payment claim upon Avopiling dated 24 July said to be a claim "10" for an amount of $803,674.00.
9 On 27 July Menard served a revised payment claim "10A" dated 26 July purporting to withdraw the previous claim and making another payment claim in its place.
10 On 8 August Avopiling served a payment schedule to the second payment claim.
11 On 22 August 2012 Menard lodged with Australian Solutions Centre an adjudication application and served the application upon Avopiling on 23 August.
12 On 28 August the second defendant (the Adjudicator) gave notice accepting the adjudication application under s19(1) of the Act and was therefore appointed to determine it.
13 On 30 August Avopiling lodged an adjudication response pursuant to s20 of the Act.
14 On 13 September Australian Solution Centre issued to Menard and Avopiling an Adjudication Determination dated 11 September 2012.
15 The Adjudicator determined that the amount of the progress payments to be paid by Avopiling to Menard was $800,688.38. Further the Adjudicator determined that the amount became payable on 6 September and that the rate of interest payable on that amount was 6% above the cash rate last published by the RBA as at 11 September 2012.
Principles
16 The Act's objective is to streamline the procedure whereby any person who performs work under a construction contract and who makes a claim for a progress payment, for example, can have the claim assessed and adjudicated upon expeditiously and hopefully cost effectively.
17 There are detailed provisions in the Act setting out the procedures to be adopted in making such claims (ss13-16). Those procedures are well known and have been considered in other judgments of this Court: Brodyn Pty Ltd (t/as Time Cost and Quality) v Davenport [2004] 61 NSWLR 421.
18 If for example agreement cannot be reached on a claim the claimant may apply for an adjudication of that claim (s17). There are quite specific provisions providing for the content and timing of the adjudication application.
19 The claim must be referred to an eligible adjudicator who will then be appointed (ss18-19). The person against whom the claim is made can of course respond (s20).
20 The appointed adjudicator is directed to determine the adjudication application as expeditiously as possible, and in any case within 10 business days after the date the adjudicator notified the claimant and the respondent as to his or her acceptance of the application, or within such further time as the claimant and respondent may agree (s21(3)(a) and (b)). The adjudicator, within what is likely to be a very limited time frame, may request additional materials, hold a conference with the parties and have an inspection (s21(4)). I note that no extension of time here was agreed.
21 Section 22 is of course an important provision. It states:
Adjudicator's determination
(1) an adjudicator is to determine:
(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 such amount became or becomes payable, and
(c) the rate of interest payable on any such amount.
(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.
(3) The adjudicator's determination must: (a) be in writing, and
(b) include the reasons for the determination (unless the claimant and the respondent have both requested the adjudicator not to include those reasons in the determination).
(4) If, in determining an adjudication application, an adjudicator has, in accordance with section 10, determined:
(a) the value of any construction work carried out under a construction contract, or
(b) the value of any related goods and services supplied under a construction contract,
the adjudicator (or any other adjudicator) is, in any subsequent adjudication application that involves the determination of the value of that work or of those goods and services, to give the work (or the goods and services) the same value as that previously determined unless the claimant or respondent satisfies the adjudicator concerned that the value of the work (or the goods and services) has changed since the previous determination.
(5) If the adjudicator's determination contains: (a) a clerical mistake, or
(b) an error arising from an accidental slip or omission, or
(c) a material miscalculation of figures or a material mistake in the description of any person, thing or matter referred to in the determination, or
(d) a defect of form,
the adjudicator may, on the adjudicator's own initiative or on the application of the claimant or the respondent, correct the determination.
22 It can be readily appreciated from the above that the provisions of s22 require the adjudicator to focus on a number of quite specific matters. The scope of the materials available to the adjudicator is also specifically circumscribed. It is also a requirement that the adjudicator give reasons in writing, unless requested not to do so (s 22(3)(a)(b)). The obligation to give reasons is obviously statutory and not as an incident of judicial duty.
23 As Hodgson JA said of the functions to be performed by an adjudicator in Coordinated Construction Co Pty Ltd v J M Hargreaves (NSW) Pty Ltd [2005] 63 NSWLR 385:
[51] That passage [referring to the first instance decision] could be read as asserting that, if a respondent to a payment claim does not raise any relevant grounds for denying or reducing the progress claim made by the claimant, then the adjudicator automatically determines the progress claim of the amount claimed by the claimant. My tentative view is that such an assertion would be incorrect.
[52] The task of the adjudicator is to determine the amount of the progress payment to be paid by the respondent to the claimant; and in my opinion that requires determination, on the material available to the adjudicator and to the best of the adjudicator's ability, of the amount that is properly payable. Section 22(2) says that the adjudicator is to consider only the provisions of the Act and the contract, the payment claim and the claimant's submissions duly made, the payment schedule and the respondent's submissions duly made, and the results of any inspection; but that does not mean that the consideration of the provisions of the Act and the contract and the merits of the payment claimed is limited to issues actually raised by submissions duly made: see Minister for Commerce v Contrax Plumbing (NSW) Pty Ltd [2005] NSWCA 142 at [33]-[36]. The adjudicator's duty is to come to a view as to what is properly payable, on what the adjudicator considers to be the true construction of the contract and the Act and the true merits of the claim. The adjudicator may very readily find in favour of the claimant on the merits of the claim if no relevant material is put by the respondent; but the absence of such material does not mean that the adjudicator can simply award the amount of the claim without any addressing of its merits.
[53] Indeed, my tentative view is that, if an adjudicator determined the progress payment at the amount claimed simply because he or she rejected the relevance of the respondent's material, this could be such a failure to address the tasks set by the Act as to render the determination void.
24 In Pacific General Securities Ltd v Soliman & Sons Pty Ltd [2006] NSWSC 13, Brereton J said:
82. I therefore respectfully agree with the view tentatively expressed by Hodgson JA in Hargreaves : the adjudicator's duty is to come to a view as to what is properly payable, on what the adjudicator considers to be the true construction of the contract and the Act and the true merits of the claim, and while the adjudicator may very readily find in favour of the claimant on the merits of the claim in the absence of a payment schedule or adjudication response, or if no relevant material is advanced by the respondent, the absence of such material does not entitle the adjudicator simply to award the amount of the claim without addressing its merits, which as a minimum will involve determining whether the construction work identified in the payment claim has been carried out, and what is its value.
25 An adjudication determination pursuant to s22 of the Act is amenable to review by a court. Relief however will only lie if there has been a jurisdictional error.
26 It is important however to draw a distinction between a fact to be adjudicated upon in the ordinary course of an enquiry and an essential preliminary to the decision-making process. An error made in the former will be within jurisdiction whereas the latter will not.
27 In Chase Oyster Bar Pty Ltd v Hamo Industries Pty Ltd [2010] 78 NSWLR 393 the Court of Appeal considered what would and would not amount to jurisdictional error in the context of the Act. As a prelude the Court decided that adjudicators under the Act were amenable to judicial review. Basten JA at 417 [102] expressed the view that the decision of a Tribunal could not be arbitrary or capricious or irrational and must be an opinion open to a reasonable person correctly understanding the meaning of the law under which the authority is conferred. Basten JA also considered for example that a miscalculation of the period under s 17(2)(a) of the Act which was there under consideration or a misreading of it would both amount to jurisdictional error, (417, [103]).
28 McDougall J discussed the court's previous decision in Brodyn. His Honour said at 425 [149]:
The decision in Brodyn appears to assume that there is a distinction between a basic and essential requirement for the existence of an adjudicator's determination and a jurisdictional condition, or jurisdictional fact. However, the decision does not analyse the relevant requirements of the Act in terms of jurisdiction; the framework of analysis was restricted by the search for basic and essential conditions of validity.
29 In referring to Kirk v Industrial Court of New South Wales (2010) 239 CLR 531, McDougall J at [158] identified three categories of jurisdictional error: A mistaken denial or assertion of jurisdiction; entertaining a matter or making a decision of a kind that lies wholly or party outside the limits on functions and powers identified in the relevant statute, and proceedings in the absence of a jurisdictional fact, by for example, misconstruing a statute or disregarding something a statute requires be considered.
30 The Act discloses a legislative intention to require a particular measure of natural justice and a failure to afford that measure of natural justice will render the determination void. Brodyn at [57].
31 The extent of natural justice must accommodate the scheme of the Act including the compressed timetable in which the determination is to be undertaken: Watpac Construction (NSW) Pty Ltd v Austin Corp Pty Ltd [2010] NSWSC 168 at [142]. Any denial of natural justice would need to be material before a court would intervene.
32 There is of course an obligation upon the adjudicator to act in good faith and this requires him or her to put their mind to the facts and the legislative framework within which the adjudication is to take place. This also requires the adjudicator to display that he or she has made an effort to understand and deal with the issues in discharge of the relevant statutory functions. The Act requires that the adjudicator have regard to the various matters contained in s22(2) of the Act: Timwin Construction Pty Ltd v Façade Innovations Pty Ltd [2005] NSWSC 548 at [38] and [39]. The adjudicator is only entitled to consider those matters in the payment claim for example as explained by McDougall J in Leighton v Arogen [2012] NSWSC 1323 at [82] - [89].
33 As McDougall J also remarked in Laing O'Rourke Australia Construction Pty Ltd v H & M Engineering and Construction Pty Ltd [2010] NSWSC 818 at [34]:
[34] I do not think that it is necessary to say more than that, in the words of Lord Sumner in Roberts v Hopwood [1925] Ac 578 at 604 (cited by me in Timwin at [38]), for administrative bodies to act in good faith, they must put "their minds to the comprehension and their wills to the discharge of their duty": As I said at [39] and [40], that view of the content of the obligation of good faith was supported by the requirement to "consider" various matters set out in s22(2) of the Act. It follows that the obligation of good faith requires at least that adjudicators should turn their minds to, grapple with and form a view on all matters that they are required to "consider".
34 As I have already observed s 22(3) requires the adjudicator to give reasons for the determination. There is clearly no requirement for the reasons to be lengthy elaborate or detailed. The reasons should be sufficient to show that the adjudicator has engaged actively with the dispute and dealt with it in a way that is reasoned, not perverse, arbitrary or capricious: Bergemann v Power [2011] NSWSC 1039 at [67] per McDougall J.
35 The Act imposes (unless the parties agree to extend time) an extremely compressed timeframe for the determination to be made. The nature and extent to which an adjudicator is to deal with any issue will be a product to a large extent of how it is presented and explained by a party participating in the process. It should be acknowledged that, the adjudicator is afterall chosen because of his or her technical and specialised knowledge.
36 Within a very limited timeframe the adjudicator is entitled to consider not only the substance but the form of what is submitted. The adjudicator does not have time for second guessing and overly subtle submissions. In turn there is an obligation upon the parties to be concise, explicit and constructive. A party who is less than constructive or clear in the way materials are presented may not be in a position to complain about a terse or seemingly cryptic response from an adjudicator. As Samuels JA said in Mifsud v Campbell [1991] 21 NSWLR 725 at 728 and when speaking of judicial duty to provide reasons (although I consider similar notions apply here):
It is an incident of judicial duty for the judge to consider all the evidence in the case. It is plainly unnecessary for a judge to refer to all the evidence led in the proceedings or to indicate which of it is accepted or rejected. The extent of the duty to record the evidence given and the findings made depend, as the duty to give reasons does, upon the circumstances of the individual case.
37 No mechanical formula can be given in determining the precise form the reasons are to take. There is clearly no need to refer to all of the evidence, in the reasons. It has to be clear enough that the relevant evidence or point has been considered. Any issue which is critical should be adverted to, but again the extent to which it needs to be dealt with will be a matter of degree and depends to what extent the issue is canvassed by the parties themselves. It is not necessary for explicit findings to be made on each disputed question of fact provided it is clear by inference what is found. It is often said that subjecting every statement of reasons with a "fine tooth comb" will inevitably lead to the exposure of inadequacies often of no relevance. A statement of reasons should be looked at as a whole. Beale v Government Insurance Office (NSW) [1997] 48 NSWLR 430, per Meagher JA at 441 - 444. What I have said must be of course viewed in the context of the specific requirements of s 22.
38 The content of the adjudication is obviously the most relevant source as to whether the adjudicator has or has not performed the relevant statutory functions. It is to be recalled that the process may or may not be interactive and will be conducted generally, entirely in writing. Provided it is apparent that the adjudicator has considered pertinent issues in good faith, very considerable latitude in my view should be afforded to an adjudicator as to the manner and form of the determination. To become too pedantic about the way in which the adjudicator has drafted a determination is to introduce an element of artificiality such as might well defeat the object and purpose of the Act and the aim of the process entirely. On the other hand the mere fact an adjudicator blandly says he or she has read "all of the submissions and accompanying documents" or simply that he or she is "satisfied" without more in relation to a particular issue under consideration may not, subject to viewing the determination as a whole survive as adequate reasons. As I have said it will always be a matter of degree. Shell Refining (Australia) Pty Ltd v AJ Mayr Engineering Pty Ltd [2006] NSWSC 94 at [25] and [26] per Bergin J (as she then was), and McDougall J in Leighton at [94].
Discussion
39 I should observe at the outset that the materials including submissions and supporting materials supplied to the Adjudicator comprised something slightly in excess of a lever arch folder which included amongst other things a copy of the contract. Some of the issues before him however were complex factually.
Variation 8
40 Variation 8 concerned a claim for the costs of undertaking what were alleged to be repair works to jet grout columns in cell 7.
41 Menard claimed in its payment claim the costs of carrying out cell 7 repair works to jet grout columns which were said to have been damaged due to excavation works by the use of heavy duty machines. Avopiling responded in its payment schedule to the effect that the claimed amount related to rectification of defective works. It was asserted by Avopiling that under the GC36 of the sub-contract all costs were to be borne by Menard for any defective work.
42 In substance Menard disputed the work was necessitated by any defective work on their part but rather had been caused by others using inappropriately heavy excavation equipment. It was also asserted by Menard that the damage had occurred after they had left the site.
43 A statutory declaration was submitted by Menard in its supporting materials. It was sworn by a Mr Jonathan Hill who was employed as a construction manager by Menard. Mr Hill holds a science degree in civil engineering and had had twenty years experience working for foundation/ground improvement contractors.
44 Mr Hill acknowledged on behalf of Menard that having completed all jet grouting work to cell 7 and having carried out watertightness testing through its contractor, Douglas Partners, that cell 7 (amongst other cells 4, 5, and 6) failed the watertightness tests. He then explained that Menard proposed certain methodologies to rectify the problem.
45 The materials appear to support that the principal Bechtel accepted Menard's proposal which involved the provision of additional internal dewatering for cells 5, 6, and 7. It was it seems Bechtel that engaged its CSME contractor to proceed with excavation work and internal dewatering. These excavation works commenced in March.
46 On 29 May 2012 a leak was reported to Menard at cell 7. Menard asserted via Mr Hill's statutory declaration that this was the first notification of any significant leak between March and May. It seems on 28 May a mine dozer was used by Bechtel's CSME contractor. Mr Hill spoke to Mr Oraha of Avopiling about the leak. A view was formed by Menard personnel that use of the particular mine dozer used to cut down the jet grout was too large and that it had caused damage to the jet grout. Further the influx of water around 28 May was considered to be a stand alone event and was (importantly) unrelated to any failed water-tightness testing.
47 Finally Mr Hill indicated that had Menard been consulted about the use of the particular equipment he would not have agreed to its use because of the likelihood of damage to the slab.
48 As a result Menard told Avopiling of these matters on 2 July and also requested Bechtel to notify its insurer of the damage which it did.
49 In its claim for payment for the work, Menard clearly described the work as a variation, obviously contesting head-on that the work was rectification of any defect required to be undertaken by them at their expense. The amount of $61,131 was claimed in their claim schedule. A further document was supplied by Menard in respect of this claim. It gave in my view a considerable amount of detail as to how $61,131 was calculated. It identified with some precision the types of persons (not by name but status) employed to do the work, the number of hours spent, the rates applicable, and the specific tasks to be undertaken. There was also a list for materials needed for the task.
50 In addition a number of improvement notices (or NCR's) were also supplied, relevantly one dealing with cell 7. The notice for cell 7 was apparently completed by Mr Hill. He did not sign the form but his name was printed on it. The nature of the form proffered by Menard was capable of conveying to the Adjudicator that Mr Hill had indicated cell 7 should be given the status of "closed" meaning the matter was relevantly complete. The form was also consistent with his statutory declaration.
51 In its response to the claim Avopiling asserted Menard was entitled to nothing because the claim was for rectification work and under the terms of GC36 it was agreed the costs were to be borne by Menard. Avopiling also asserted that Menard neither pointed to any contractual provision to justify the basis for the claim and that it had not disclosed how the amount was calculated. As I have already observed Menard claimed the amount as a variation and provided a detailed document itemising the claim.
52 Avopiling also relied upon the very same NCR as an admission that there were defects in relation to cell 7 and it had not been closed off. In effect Avopiling suggested that Menard was claiming for work it was obliged to do at its own expense under the guise of a variation.
53 Avopiling did not, (so it appears) challenge the explanation given by Mr Hill, in particular that the damage to cell 7 was as a result of the use of heavy equipment which had occurred after Menard had left the site. It provided no statutory declaration giving its version of events. Likewise Avopiling did not (apart from a bare assertion) subject the detailed breakdown of the amount provided by Menard to any analysis. No comment was made by Avopiling, specifically in relation to the NCR which concerned cell 7, to the effect that it was not capable of suggesting the work was closed out. Avopiling merely asserted it was not closed out and relied upon the NCR's in support of that proposition.
54 The Adjudicator correctly identified Avopiling's reason for withholding the amount claimed. He stated quite clearly that Avopiling contended that the works were or should be seen as rectification of defective work and hence such costs should have been borne by Menard.
55 Avopiling submits that the issues joined for the purposes of the Determination were whether the work performed was outside the scope of work and therefore a change for which Menard was entitled to be paid, or alternatively was work required as part of Menard's proposed remediation measures. If it was a change then GC33 of the subcontract would apply according to Avopiling.
56 Avopiling submits that the Adjudicator wrongly remarked that Avopiling did not question the value of the claim or that the work was performed. Further Avopiling complains that the Adjudicator erroneously formed the view that there was no conclusive evidence provided to support the assertion that the work in question was in fact performed as a result of defective work. It is also submitted by proceeding in that way the Adjudicator erroneously addressed the question of onus. Further Avopiling submits that the Adjudicator entirely misunderstood the nature of some of the documents before him and the error led to a denial of procedural fairness.
57 Avopiling also suggests that the Adjudicator failed properly or at all to address certain provisions of the contract and other documents which had been submitted by Avopiling as part of the process. Further by what Avopiling submits is really an award of the amount claimed by default, the Adjudicator failed properly to consider the matters pursuant to section 22(2) of the Act.
58 It is clear that Menard pointed to the use by Avopiling (Bechtel) of large equipment as cause of the damage. As I have said Mr Hill's statutory declaration was not contested except by counter assertion. Menard identified the rates that it used to calculate the amounts, some of which were contract variation rates and some were not. It gave in my view considerable detail including a breakdown of rates etc and materials. It is hard to imagine what more could have been provided for that breakdown and Avopiling did not answer Menard's calculation in detail or in kind.
59 The Adjudicator clearly rejected Avopiling's argument that the costs were as a result of defective work and in particular was obviously satisfied that the NCR supported the assertion that the work in relation to cell 7 was closed out, as it plainly did. It is submitted by Menard (and I entirely agree) that this was sufficient for him to determine that the work was not as a result of defective work and to determine that Menard was entitled to the work claimed as a variation. There was ample material before him on the value of the claim which was detailed and credible.
60 The Adjudicator makes express reference to the NCR completed by Menard in relation to cell 7 and found expressly, as in my opinion he was entitled, that the item was "closed out".
61 He dealt with the claim clearly on the basis of the materials before him. He was also entitled to proceed on the basis that both sides had, made a choice as to manner in which they would deal with the claim, and the materials each relied upon.
62 The Adjudicator could not have been under any misapprehension that the NCR was a Menard document and that Mr Hill was a Menard employee. Although Avopiling submitted that he must have misunderstood the facts, there is nothing in the Determination to support that submission in my view.
63 It does not seem to me that what the Adjudicator did involved any error that would result in vitiating this aspect of his Determination. Although the reasons are brief he has demonstrated that he addressed the relevant issues, the basis for the claim and its value. I do not therefore regard this matter as providing a basis for the relief sought by Avopiling.
Backcharge 4
64 This item relates to the valuation of the amount to be allowed (if any) to Avopiling for the cost of additional water disposal. The item was included in the backcharges section of the payment claim. Menard submitted that the amount claimed by Avopiling was not reasonable and that Avopiling had not established that it had actually incurred the costs associated with the item.
65 In its payment schedule Avopiling provided what it contended was a calculation supporting a backcharge of some $80,155 said to be due to failed watertightness testing for cells 1 to 7. Further Avopiling invited the Adjudicator to note concessions made by Menard albeit suggesting that the concessions were not the subject of clear explanation of how amounts were calculated. Menard had conceded it was liable for at least $25,000.
66 Avopiling in its response chose to deal with all backcharges somewhat compendiously.
67 Avopiling submits that the Adjudicator fell into error because he failed properly to take into account the concession made by Menard that it was liable at least for a portion of a claim. In addition it was submitted the Adjudicator should have informed the parties if he was not going to pay regard to the concession so as to give Avopiling a further opportunity to address the issue. Avopiling further submits that the Adjudicator failed fundamentally to understand the factual basis for the backcharge.
68 The particular spreadsheet provided by Avopiling purports to explain this amount by reference to estimates only for work to be done for additional disposal of water due to failed watertightness testing. The estimates are supported by little in the way of explanation. The document is both opaque and scant on detail. The Adjudication Application made it clear that the concession of the $25,000 was itself an assessment of a reasonable amount taking into account its knowledge of the work. Menard pointed out that the spreadsheet submitted by Avopiling on the other hand did not really go beyond estimates in seeking to justify the basis for the costing or quantum. On that basis Menard made the point that it was by no means clear that Avopiling had in fact incurred any liability at all.
69 Avopiling however suggests that the Adjudicator did not reasonably consider Avopiling's submissions and in fact failed to value the claim at all.
70 It is clear from the Determination that the Adjudicator considered the submissions made by Avopiling and rejected them. He was entitled to do that. Notwithstanding the concession made in relation to the $25,000, he considered that such work as may be needed to be done was not as a result of defective work on the part of Menard. He also considered that the costs claimed by Avopiling were not a true and correct estimate of the alleged "defective" works. It seems to me that he was perfectly entitled to express that opinion on the facts presented to him especially the form in which they were presented.
71 As I have already said the Adjudicator reiterated, consistent with his findings in item 6(d) of the Determination, that he did not consider the work was as a result of defects, but he clearly did give due consideration to concessions made by Menard. Again I am not persuaded there is exposed any error sufficient to warrant intervention.
Backcharge 5
72 This item relates to a claim by Avopiling relating to the watertightness of re-test cell 1 and 4 and additional time to test cells 5, 6 and 7.
73 Avopiling described the claim as being for additional dewatering in the tunnel area which it asserted was necessary due to defective jet grouting works.
74 Avopiling claimed $100,000 as a backcharge for costs incurred by it rectifying the alleged defects. Menard denied responsibility for the claim. Menard also disputed the quantum of the backcharge.
75 Again Avopiling submits that the Adjudicator misunderstood the factual materials especially in the way in which Menard had put its case. Apart from a brief reference to a "significant submission" in the Determination Avopiling submitted that the Adjudicator did not demonstrate or display a proper understanding of the nature of the claim being advanced or the issues before him for resolution.
76 In its detailed Adjudication application Menard contended that as at 14 February 2012 Avopiling had made it clear that it was still negotiating with Bechtel about backcharges and that hence what was being described as backcharges were not costs that had in fact been incurred. Menard submitted a large number of documents in order to explain its position. It was contended by Menard that the claim appeared to be in relation to additional internal dewatering during bulk excavation. It was further contended that as bulk excavation had not advanced very far the amount must be partly prospective, and therefore a provision rather than a cost that had been incurred. Avopiling in its response dealt with the matter quite briefly simply asserting that Bechtel had made the claim for $100,000 and attaching a copy of Bechtel's letter of 2 August.
77. In the Determination the Adjudicator makes reference to a letter from Bechtel (R7) dated 2 August 2012. Consistent with the concerns expressed by Menard about actual as opposed to estimated costs, he said, having clearly considered the letter, that he was not satisfied (notwithstanding Avopiling's contention) that the amount claimed by Avopiling had in fact been backcharged. It is again tolerably clear the Ajudicator considered the terms of the letter and the submissions before him and arrived at a factual finding that no such amount had in fact been charged by Bechtel.
78 It seems to me again the Adjudicator was entitled to reject the arguments put by Avopiling on the materials it based those arguments upon. That is precisely what he did. I do not think that there is an indication that he incorrectly placed an onus on Avopiling, simply that he has not been convinced or persuaded that their position was correct. It is clear he gave consideration to the materials and the relevant letter which dealt with the item accordingly.
79 I do not consider a jurisdictional error has been exposed.
Backcharge 6
80 This item related to a claim by Avopiling for liquidated damages that were deducted from Menard's claim. The reason asserted by Avopiling as to why it was appropriate to deduct these monies is because of the failure by Menard to meet milestone 2 under its subcontract. This raised a factual dispute for the Adjudicator to determine. An amount of $125,000 was purportedly claimed by Avopiling for liquidated damages. It was contended by Avopiling that there had been an overrun of 25 days at $5,000 per day.
81 Further Avopiling again submitted that the works were not complete due to significant defects which had been claimed as backcharges. Further it submitted that Menard failed to comply with the requirements of cl 44 of contended that no notice of provisional acceptance or final acceptance had therefore issued. Fundamental to Avopiling's submissions was that Menard had failed to meet milestone 2.
82 In its application for adjudication Menard criticised the lack of details in the payment schedule provided by Avopiling as leading to an entitlement to withhold the $125,000. It submitted there was no clarity as to the start and finish of the 25 day period. Menard however submitted that it had completed all tunnel works by the revised milestone date. It also provided a most comprehensive schedule purporting to substantiate the fact that it had complied with the reviewed milestone date. The Adjudicator had to therefore consider the materials and make a finding on that issue which he specifically and correctly identified.
83 Again, albeit brief, the Adjudicator clearly indicated that he had read and considered the detailed submissions he had received on the issue. The Adjudicator in his Determination quotes from the Avopiling submissions as to the claimed basis for the backcharge and then briefly quotes from SC30 which deals with liquidated damages (in particular the operative part of that provision).
84 The claim by Avopiling clearly involved questions as to whether the works were complete, when they were completed and whether Menard was entitled to extensions of time and if so to what extent.
85 Having considered the submissions and in my view having correctly identified the issues (contractual and factual) that he had to grapple with he was clearly satisfied on the evidence that Menard had delivered by the specified or adjusted time frames. He was not therefore satisfied that Avopiling had substantiated there was a failure to meet the specified timeframes on Menard's part. He determined that Avopiling's claim for liquidated damages had simply not been made out on the facts. That was again open to him on the materials.
86 He considered matters which in my view were relevant and rejected Avopiling's position which he was entitled to do. I do not see that any jurisdictional error has been exposed.
Backcharge 7
87 This claim relates to additional testing for cells 1, 4, 5, 6, and 7. Avopiling claimed $58,409 for the additional testing. Menard allowed $11,832 for the item.
88 Avopiling contended that Menard had failed to provide any detailed support for its assessment of the value of the backcharge. It was contended by Menard on the other hand that Avopiling had provided relatively vague material without the support of any daily or contemporaneous records at the time the works had been carried out. Menard contended further that it was unable to assess the levels of management and/or supervision and/or labour input for the item.
89 The Adjudicator noted the argument put by Avopiling for withholding payment particularly its reference to GC36 and GC23 of the contract.
90 The Adjudicator also noted that although Avopiling had provided a spreadsheet in support of its costs in his view Avopiling had not provided any evidence to Menard despite its requests for "third party invoices" or a description of the activities performed and described as labour.
91 Avopiling submitted that the Adjudicator failed to pay proper regard to, for example, a document described as R4 which was provided in support of its position and not to have done so meant Avopiling was not afforded procedural fairness.
92 R4 comprises a statement of Mr Doug Ashcroft, the state manager of Avopiling. Attached are a number of documents including a spreadsheet and some invoices totalling something in excess of $4,000. Whilst the amount claimed was some $58,409 the supporting documentation appears only to support $54,751.50 with no explanation as to the difference. Mr Ashcroft provides no explanation either, beyond a reference to documents which he attaches.
93 In [41] of Avopiling's response there is a somewhat enigmatic reference to attachment R4 but again no explanation of it. As I have already mentioned the invoices only amount to around $4,000 and the spreadsheet which appears immediately after Mr Ashcroft's statement is far from clear. One of the major items on the spreadsheet is a reference to $22,680 said to be for labourers but again there is no explanation or supporting materials for what is a substantial proportion of the claimed $58,409. There is a reference to 280 hours but no detail of when such work took place and who was involved. The daily report sheets identify some activities undertaken by named persons said to be the operation manager, site engineer, OHS Manager and the "offsider", not labourers.
94 The Adjudicator made a particular and if I may so, pertinent comment about the lack of supporting materials for the labour charges. He was clearly not satisfied with the materials which otherwise Avopiling had submitted.
95 It seems to me again the Adjudicator was perfectly entitled to express that assessment of the factual material before him. He performed his task it seems to me within his jurisdiction favouring as he did Menard on the facts. He was entitled to come to that view and in doing so again I do not consider any error in jurisdiction has been exposed.
Backcharge 11
96 This item is claimed by Avopiling for $631,475.50 for what is described in the payment schedule simply as costs related to defective jet grouting works. There is an attachment which purports to indicate how the calculation of that amount is arrived at. That attachment however is scant in relation to detail. The largest single line item in Avopiling's payment schedule is for an item described as additional costs incurred from Bechtel said to be in the order of $534,198, but has no explanation, for example, of how the sum was to be broken up or how it was supported. The other items include a calculation of hourly rates for various categories of unnamed people with the number of hours they allegedly worked. Again no supporting details or materials are provided. The spreadsheet although it referred to "additional costs incurred by Bechtel" provided no supporting materials for that item.
97 It was submitted by Menard that Avopiling in its adjudication response did not respond to any of the matters of detail raised by Menard in its application, nor did it seek to support the claim with any evidence.
98 The Adjudicator referred to the submissions and indicated that he had reviewed the materials including what he described as the "unsubstantiated spreadsheet", which was a perfectly appropriate and pertinent description. He was not persuaded again that the spreadsheet which really amounted to no more than an assertion provided him with sufficient comfort on the facts to award such a large sum of money as was claimed. In my view he was perfectly entitled to form that view given the size of the amount claimed and the rather desultory approach adopted by Avopiling in terms of purporting to corroborate its claim. In my opinion the Determination in relation to this item does not again in my opinion expose any jurisdictional error.
Bank Guarantee
99 In its payment claim Menard claimed an amount of $2,454,000 together with an amount of $557,336 for variations representing all of the work carried out without deducting an amount for retention. That is plain from its claim 10A. Menard contended that this was the case because it had provided Avopiling with a bank guarantee to be held in lieu of the previously held retention. For that reason in the payment claim there was $0 against the line item for retention. Below that item there is a reference to the bank guarantee that was provided but the amount of the bank guarantee is not included in the column listing the amounts claimed. It simply is listed as the "security" and is identified as amounting to $122,700.
100 Avopiling's payment schedule identifies the amount it contended it held as retention monies as $295,020.45 (being 10% of the contract sum). It then identified a negative amount of $122,700 obviously relating to the bank guarantee which had the effect of providing a credit. The difference between the amount of the retention and the guarantee was $172,320.
101 Menard in its Adjudication Application contended it was entitled to the amount of $172,320. Menard further contended that as the bank guarantee had been provided there was no entitlement to retain the cash retention.
102 Avopiling contended before the Adjudicator that he had no jurisdiction under the Act to determine the return of the bank guarantee. However Avopiling did not take any issue that the guarantee had been provided in lieu of the retention. Importantly however on the other hand Menard had made no claim for a return of the bank guarantee. Avopiling did however assert that final acceptance of the work had not been achieved. It therefore submitted it was entitled to a right to the retention. Menard had of course in respect of other items contended its work was completed and for example had no rectification work to undertake, and that it had met all relevant milestones.
103 Avopiling's complaint, as I understand it in part, is that in determining he did have jurisdiction the Adjudicator relied upon s 13(3)(b) of the Act upon which Avopiling was not given a proper opportunity to make submissions. Menard did not rely upon that provision at all. In addition Avopiling submits that the Adjudicator was in error in calling s13(3) in aid as it refers to amounts held by way of retention and not to securities held for the proper performance of contractual obligations. Avopiling contends that bank guarantees and other performance guarantees are by their nature not amounts held under a construction contract. They may, it submits, give rise to independent contractual rights and obligations to third party financial institutions. Avopiling also submits that the Adjudicator's rulings otherwise are far from clear in explaining his reasoning process.
104 In determining this issue the Adjudicator referred back to an earlier part of his Determination, described as "section 4(c)". In that section he found he had jurisdiction to determine the release of the bank guarantee. This would not appear to be correct as a matter of law but it is not what Menard sought in any event. Avopiling made a submission on jurisdiction but failed to grapple with there being no claim for the return of the guarantee.
105 Avopiling appears to have contended that it was entitled to withhold the retention as well as the bank guarantee because the final acceptance of the work was still pending. Menard claimed back the $172,320 on the basis that the works were substantially complete "including the provision of all QA documentation". Menard also pointed out quite expressly that the bank guarantee was substituted in lieu and there was no basis to retain both.
106 The Adjudicator was confronted again with opposing factual positions. He was entitled to resolve that one way or the other. It is again in my view clear by inference at least that in finding Menard was entitled to the return of the $172,320 he was clearly finding the work was relevantly complete. That is entirely consistent with his other findings on defects, milestones and the like. He did not accept Menard was responsible for any timing issues. He rejected Avopilings asserted right to retain that sum.
107 Even if the Adjudicator was in error when he rejected Avopiling's contention about jurisdiction it was not material in the final result. In my view what he did does not expose jurisdictional error. For completeness Avopiling submitted that the Financial Summary exposes error on the part of the Adjudicator. It may be that the table attached to his reasons is difficult to reconcile. I do not consider even if that is correct that alone otherwise detracts from his reasoning process. In any event he clearly found the $173,320 should be returned and Menard does not seek any relief as to the bank guarantee.
108 Again I do not consider jurisdictional error warranting intervention has been exposed.
Conclusion
109 As a result of my reasons Avopiling is not entitled to any of the claimed relief.
110 I would invite the parties to prepare short minutes to reflect these reasons.
111 I would also reserve the question of costs and invite the parties to have the matter relisted for argument on that issue.
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