Summary

This is yet another decision from the Court showing how difficult it is to successfully challenge an adjudication determination.

Facts

The plaintiff, Woonona-Bulli Memorial Club Ltd (the Club) engaged the defendant, Warrane-Design Construct Fit-out Pty Ltd (the Builder) to perform a construction project involving the upgrade of the Club’s carpark through a cost-plus contract (the Head Contract).

Despite receiving advice from the Builder to complete site inspections, the Club were in a rush to complete the project and instructed the Builder to go ahead with the project. The Builder subsequently engaged a subcontractor, All Civil Solutions Group Pty Ltd (All Civil), who on the day that works commenced under the subcontract, found asbestos in the landscaping, causing delays and greater costs to be incurred.

The dispute arose from a progress claim being served on the Builder by All Civil under the subcontract. The progress claim included a variation in respect to the costs associated with the delay of the project. All Civil were successful in an adjudication application and the delay costs were determined payable by the Builder.

As a result, the Builder served a progress claim on the Club to cover the costs determined in favour of All Civil. The Builder contended that it was liable to pay the adjudicated amount to All Civil and, given the terms of the head contract, the Club was also obliged to pay this figure to the Builder as part of the Cost of the Works. The delay costs awarded to the subcontractor fell within the definition of the “Cost of the Works” described in Schedule 1 of the head contract, being “The cost of all work carried out by trade creditors engaged by the Builder … conclusively evidenced by an invoice … from the trade creditor.”

The Club issued a payment schedule disputing the costs associated with delays to the contract works and scheduling nil payment for such costs. The Club contended that no notification of the claim was given in accordance with the contract as well as any supporting evidence. Additionally, the Club suggested that the variation was not allowable as it resulted from the “default or negligence of the Builder”, as per their contract.

The Builder subsequently applied for adjudication and was awarded the delay costs in the same amount that were awarded to All Civil.

The Challenge made by the Club

The Club challenged the determination in the Supreme Court. The Club contended that the Adjudicator fell into jurisdictional error by, effectively, accepting the adjudication determination of the delay costs as between the Builder and All Civil as determining the value of the works. The Adjudicator was said to have:

1. failed to determine the value of the delay costs by reference to the terms of the head contract, in accordance with sections 10 and 22(2) of the SOP Act which govern how the works are to be valued and the matters which an adjudicator is to consider in making a determination; and,
2. mis-applied section 22(4) of the SOP Act which governs valuations in prior determinations and, in having regard to the subcontractor determination, took an irrelevant consideration into account

Supreme Court’s Decision

The Court upheld the determination. The Court found that the Adjudicator did not consider himself to be bound by the subcontractor determination but regarded it as evidence he could take into account, along with the parties’ submissions (including relevant documentation) made in the adjudication before him.

The Court found that:

1. The Adjudicator only considered the matters prescribed by section 22(2) of the Act and his determination is, thus, the product of a valid exercise of his jurisdiction.
2. If the Adjudicator mis-construed or mis-applied section 22(4) of the Act, then it was a non-jurisdictional error of law, which this Court does not have jurisdiction to quash.
3.  The validity of the determination does not depend on the Adjudicator reaching the correct conclusion on all questions of fact or law.
4. Ultimately, any error if proven wouldn’t have much mattered, as the Adjudicator ultimately decided the point by accepting the builder’s main argument, rather than his analysis of the Club’s submission in respect of section 22(2)(b) of the Act.