Key takeaway

The Courts continued to reiterate the “pay now, argue later” nature of the Building and Construction Industry Security of Payment Act (the SOP Act).

The Court of Appeal accepted the Adjudicator made a legal error in determining an adjudicator was prohibited from having regard to material not supplied with a payment claim on the basis that the material would have altered the payment schedule, however, held that the adjudicator’s legal error did not amount to a jurisdictional error and stated the determination of the parameters of the payment claim is a matter for the adjudicator, and a reasonable but erroneous decision by the adjudicator does not invalidate the determination.

Background

On 3 February 2025 an adjudication determination (Determination) was made where Builtcom (Builtcom) was awarded $8.5 million (including GST) (Determined Amount) which was payable by VSD Investments Pty Ltd as trustee for The VSD Investments Trust (VSD)(VSD).

Builtcom’s challenge

Builtcom commenced proceedings for jurisdictional error for the Adjudicator’s failure to consider 12 claims based on the Adjudicator’s application of the “Cardno test”. Namely, challenging the Adjudicator’s decision that certain new document were not “duly made” submissions as they were only advanced with the adjudication application and the presence of the same documents in the original payment claim would be enough to change the valuation or reasoning in the payment schedule.

VSD’s jurisdictional challenge

VSD commenced separate proceedings challenging the determination in so far as the Adjudicator failed to determine certain off claims raised in the payment schedule, for a number of overpayments previously made to Builtcom, payments made to Builtcom that were not paid downstream to subcontractors, and defects in the work that was performed by Buitlcom. The adjudicator determined these as ‘global claims’ and described them as a claim for general damages, for which it lacked jurisdiction, therefore valuing them at NIL.

With respect to VSD’s set-off claims, VSD submitted that the adjudicator failed to consider its submissions that were duly made about defect set off claims. The Court did not accept that the adjudicator failed to consider Builtcom’s contested submissions or fell into jurisdictional error.

Court of Appeal’s Decision

The questions arising on appeal was whether the primary judged erred in the answers to the following questions:

1. Whether the adjudicator’s opinion that Builtcom’s submissions were not ‘duly made’ was reviewable in the Court;
2. If so, whether that opinion was affected by an error of law;
3. If so, whether the error of law was jurisdictional; and
4. If so, what relief, if any, is appropriate.

The Cardno Test

The grounds of appeal in questions (1), (2) and (3) were addressed together as to whether the Court of Appeal had jurisdiction to review the adjudicator’s assessment of whether Builtcom’s submissions were ‘duly made’.

The Court of Appeal concluded against the findings of the primary judge and held that none of Builtcom’s submissions amounted to a conclusion the determination was affected by jurisdictional error.

The Court of Appeal determined that there is no rule that prohibits an adjudicator having regard to material not supplied with a payment claim merely on the basis that the material would have altered the payment schedule.

However, it was held that the adjudicator’s legal error did not amount to a jurisdictional error and noted two (2) points:

(1) The adjudicator’s obligation to determine the scope and nature of the payment claim. If matters put before the adjudicator give rise to substantial new issues which could not have been anticipated prior to the adjudication application, then that may indicate that the party is seeking to have something which is outside the scope of the payment claim adjudicated.

(2) Determination of the parameters of the payment claim is a matter for the adjudicator, and a reasonable but erroneous decision by the adjudicator does not invalidate the determination.

Jurisdictional Error

Builtcom identified numerous reasons as to why the adjudicator made a jurisdictional error and made submissions that:

(1) The adjudicator does not have the power to discern implied constraints in the Act;

(2) Because adjudicators need not be legally trained, the construction of the Act would not have be expected within their expertise.

The Court did not accept Builtcom’s submissions, that any error of law in applying the Act is one that is regarded as jurisdictional.

In addition to this, relying on principles stated in R v Connell; Ex parte Hetton Bellbird Collieries Ltd (1944) 69 CLR 407; [1944] HCA 42 (‘Bellbird Collieries’), Builtcom submitted that if the adjudicator forms an opinion that a submission is not duly made, but commits an error in the course of forming that opinion, the result may be to vitiate the adjudicator’s opinion that the submission is not duly made and, in turn, to vitiate the determination in whole or part.

The Court did not accept this submission, stating that if every conclusion by a decision-maker about a legal matter is treated as the formation of an opinion that is subject to Bellbird Collieries review, that would be a licence to treat every error of law in the formation of that opinion as a jurisdictional error.

Conclusion

For the above reasons, the Court of Appeal dismissed the appeal.