Demex Pty Ltd v Marine Civil Contractors Pty Ltd & Anor [2022] QSC 141

SUPREME COURT OF QUEENSLAND CITATION: Demex Pty Ltd v Marine Civil Contractors Pty Ltd & Anor [2022] QSC 141 PARTIES: DEMEX PTY LTD (ACN 635 279 640) (Applicant) v MARINE CIVIL CONTRACTORS PTY LTD (First Respondent) and SEAN O’SULLIVAN (Second Respondent) FILE NO: BS 6145 of 2022 DIVISION: Trial Division PROCEEDING: Application DELIVERED ON: 23 June 2022, ex tempore DELIVERED AT: Brisbane HEARING DATE: 23 June 2022 JUDGE: Bowskill CJ ORDER: 1. The application filed 10 June 2022 is dismissed; and 2. The costs of the application are the first respondent’s costs in the proceeding. CATCHWORDS: CONTRACTS – BUILDING, ENGINEERING AND RELATED CONTRACTS – REMUNERATION – STATUTORY REGULATION OF ENTITLEMENT TO AND RECOVERY OF PROGRESS PAYMENTS – ADJUDICATION OF PAYMENT CLAIMS – where a dispute arose between the applicant and the first respondent in relation to a claim for payment by the first respondent for the performance of demolition work under a subcontract – where an adjudication application was made by the first respondent and the second respondent was appointed as the adjudicator – where the applicant contends the adjudication determination is void for jurisdictional error because the payment claim relied upon included a claim for work alleged not to have been performed, the adjudicator gave insufficient reasons and the determination was not made within the statutory time period – where the applicant applies for an interlocutory injunction to restrain the first respondent from enforcing the adjudication determination until the applicant’s claim can be finally determined -- 1 of 6 -- 2 Building and Construction Industry Security of Payment Act 1999 (NSW) Clyde Bergemann Senior Thermal Pty Ltd v Varley Power Services Pty Ltd [2011] NSWSC 1039 Cranbrook School v JA Bradshaw Civil Contracting Pty Ltd [2013] NSWSC 430 Galaxy Developments Pty Ltd v Civil Contractors (Aust) Pty Ltd t/a CCA Winslow & Ors [2020] QSC 51 Mount Lewis Estate Pty Ltd v Metricon Homes Pty Ltd [2017] NSWSC 1121 MPM Constructions Pty Ltd v Trepcha Constructions Pty Ltd [2004] NSWSC 103 Probuild Constructions (Aust) Pty Ltd v Shade Systems Pty Ltd (2018) 264 CLR 1 Watkins Contracting Pty Ltd v Highett Ground Engineering Pty Ltd [2018] QSC 65 COUNSEL: J P Hastie for the Applicant S McNeil for the First Respondent SOLICITORS: Shand Taylor Lawyers for the Applicant Cronin Miller Litigation for the First Respondent [1] The applicant, Demex, and the first respondent, Marine Civil Contractors (MCC), are parties to a subcontract for the performance of demolition work by MCC on the Old Batemans Bay bridge in New South Wales. [2] A dispute arose between Demex and MCC in relation to a claim for payment by MCC for work under the subcontract. MCC made an adjudication application under the New South Wales legislation, the Building and Construction Industry Security of Payment Act 1999 (NSW). The second respondent was appointed the adjudicator. [3] The adjudicator determined the application and provided his decision to the intermediary through whom the application was coordinated, Adjudicate Today, on 20 May 2022 (see page 28 of the exhibits to Mr Sole’s affidavit, CFI 8). Adjudicate Today provided the decision to the parties on 23 May 2022 (see pages 31 to 32 of that affidavit). The adjudicator determined that an amount of $386,679.45 is the progress payment payable to the claimant. [4] By this proceeding, Demex contends the adjudication determination is void because, in making it, the adjudicator fell into jurisdictional error. There are three grounds relied upon, which I will come to shortly. [5] What is before the Court today for determination is Demex’s application for an interlocutory injunction restraining MCC from enforcing the adjudication -- 2 of 6 -- 3 determination until Demex’s claim can be finally determined. The relevant principles which apply are not in dispute, namely, that the Court must first consider whether the applicant has shown that it has a prima facie case, in the sense that there is a serious question to be tried, and, if so, whether the balance of convenience favours granting the relief sought. It is well established that the two inquiries are not independent of each other. So, for example, the strength or otherwise of the applicant’s case is a relevant factor in weighing the balance of convenience. [6] The arguments relied upon by the applicant to contend the adjudication determination is void for jurisdictional error are: (a) first, that the payment claim relied upon as the basis for the determination was invalid, because it included a claim for work not performed; (b) secondly, that the adjudicator gave insufficient reasons or, alternatively, denied the parties natural justice; and (c) thirdly, that the adjudication determination was not made within the statutory time period. [7] As to the first matter, the payment claim was issued on 24 February 2022. Included amongst the “works under the contract” for which payment was being claimed was an item described as “site works documentation”, with a value of $43,330, being 100% of the amount provided for. Demex submitted a payment schedule in response which approved only 50% of this amount, stating that “quality plan ITPs [which I interpolate means inspection and test plans] and as constructed drawings have not been provided” (see the exhibits to Mr Todd’s affidavit at pages 83, 84, 97 and 98). [8] That aspect of the factual dispute between the parties was identified in Demex’s submissions to the adjudicator at paragraph 2.49 where it said “it is not disputed by the Claimant that these documents must be provided as a precondition to Completion. What is in dispute is whether those documents have been provided by the Claimant”. The claimant, that is MCC, contended that they had. [9] That factual dispute was determined by the adjudicator who concluded, favourably to MCC, that MCC “did ultimately provide all documentation that was expected of it during the contract” (see paragraph 25(e) of the determination). [10] On this application, Demex argues that, on its contention that all the documents had not been provided, the payment claim would not be a valid payment claim, and therefore the adjudicator did not have jurisdiction to determine it. Demex relies, by parity of reasoning, on a decision of this Court in Watkins Contracting Pty Ltd v Highett Ground Engineering Pty Ltd [2018] QSC 65 at [102], in which Brown J accepted as correct the reasoning of Lyons J in another decision where it was held that a payment claim (under the earlier Queensland Act, the Building and Construction Industry Payments Act 2004 (Qld)), which included work done after the reference date, was not a valid payment claim. There was no conclusion as to a lack of jurisdiction in Watkins, however, and it is not apparent whether the fact of work having been done after the reference date was in dispute. [11] The respondent submits that what the applicant is trying to do by this application is to reagitate a contractual and factual dispute that was determined by the adjudicator, and that no jurisdictional error arises. Counsel for the respondent emphasises that the -- 3 of 6 -- 4 adjudicator was required to consider the proper construction of the contract – as to what documentation was required to be provided – and then to determine the factual dispute in terms of what was provided and whether that satisfied the contractual requirement. [12] In my view, the respondent’s submission should be accepted. The point of the security of payment regime is that it exists to resolve disputes of precisely the kind raised in this matter – where one party says it has undertaken work and seeks to be paid for it; and the other party disputes that – either because it says the work has not been done, or not done properly, or disputes the amount. [13] Section 13(1) of the New South Wales Act, which outlines what a payment claim is, contemplates that a person referred to in s 8 (that is, “a person who, under a construction contract, has undertaken to carry out construction work or to supply related goods and services is entitled to receive a progress payment”) “who is or who claims to be entitled to a progress payment may serve a payment claim on the person who, under the construction contract concerned, is, or may be, liable to make the payment” (emphasis added). The requirement for a payment claim is, under s 13(2), that it identify the construction work to which it relates, indicate the amount of the progress payment that is claimed to be due, and state that it is made under the Act. As the wording of s 13(1) and of s 13(2) emphasise, and demonstrate, it is a claim. That there might be a dispute about the claim that is made – whether because of the terms of the contract, or the facts as to what has been done under it – does not, in my view, lead readily to the conclusion that the payment claim is invalid. That potential is inherent in it being a claim, which may need to be adjudicated, as occurred here. I regard this argument as weak. [14] Likewise, I regard the second argument, that the adjudicator failed to provide sufficient reasons, as also weak. The reasons of the adjudicator set out at some length the submissions of both parties and then, in paragraph 25, set out the adjudicator’s reasons for finding, favourably to MCC, that all the documentation it was required to provide under the contract had been provided. In my view, the reasons adequately meet the description given by McDougall J in Clyde Bergemann Senior Thermal Pty Ltd v Varley Power Services Pty Ltd [2011] NSWSC 1039 at [66]-[67] in terms of what is required. I do not regard the contention that the adjudicator impermissibly reasoned, or failed to afford natural justice, on the basis that neither party had paid particular attention to the terms of the contract. That was an observation the adjudicator made, but a fair reading of the whole of paragraph 25 of the determination makes it plain, in my view, that the adjudicator concluded the contract had been complied with insofar as the documentation was concerned. I would not consider the applicant has shown a prima facie case of failure to give adequate reasons or a lack of procedural fairness. [15] The third ground is that, as a consequence of the determination not having been served until 23 May, it was outside the statutory time period and, therefore, void. Section 21(3) of the New South Wales Act provides that, subject to sub-ss (1) and (2), an adjudicator is to determine an adjudication application as expeditiously as possible and, in any case, relevantly here, within such further time as the claimant and the respondent may agree. -- 4 of 6 -- 5 [16] It is not controversial that the parties agreed that the date for the determination to be made was 20 May 2022. It is also not controversial that the adjudicator did determine the application on that date, albeit that occurred at the very last minute of that day (being emailed to Adjudicate Today shortly before midnight). The determination was not served on the parties, by Adjudicate Today, until 23 May 2022. [17] Insofar as the New South Wales provision is concerned, there is authority in three decisions of the New South Wales Supreme Court that the timing requirement in s 21(3) is not “jurisdictional” – that is, that a failure to make the determination in or by the time provided for, would not render the determination invalid. See MPM Constructions Pty Ltd v Trepcha Constructions Pty Ltd [2004] NSWSC 103; Cranbrook School v JA Bradshaw Civil Contracting Pty Ltd [2013] NSWSC 430 (both of which are decisions of McDougall J) and see also Mount Lewis Estate Pty Ltd v Metricon Homes Pty Ltd [2017] NSWSC 1121 (a decision of Hammerschlag J). [18] On the other hand, there is authority in Queensland which might suggest a different conclusion – the decision of Dalton J in Galaxy Developments Pty Ltd v Civil Contractors (Aust) Pty Ltd t/a CCA Winslow & Ors [2020] QSC 51 and, on appeal [2021] QCA 10. Although Dalton J described the equivalent Queensland provision, which her Honour was dealing with as “distinctly different” to the New South Wales provision, her Honour did also question the logic of the analysis undertaken in the New South Wales decisions of McDougall J. Her Honour emphasised the timing provided for a claimant to withdraw their application, which runs from the date by which the adjudicator is required to determine the application. On the other hand, I note that the obligation to pay an adjudicated claim does not run until after service of the determination (see s 21 of the New South Wales Act). It is apparent from these provisions that “determine” and “serve” are distinct concepts under the legislation. [19] Whilst it must be said the applicant has a difficult argument to overcome the New South Wales decisions, dealing with the New South Wales legislation, it must also be recognised that the Galaxy decision in Queensland may, upon further consideration of the issue, lead to a different outcome. [20] On balance, I do not consider the applicant has a prima facie case on either of the first two grounds of its argument, although it might on the third; but, in any event, I do not consider the arguments to be strong. [21] Turning then to the balance of convenience, in my view, that favours refusing the interlocutory relief which has been sought. In reaching that conclusion I place particular reliance upon: (a) the weakness of the applicant’s case, for the reasons I have outlined; (b) further, I accept the submission that the adjudicated sum should be seen, and accepted to be, vital cash flow for the respondent, noting the observations in the High Court’s decision in Probuild Constructions (Aust) Pty Ltd v Shade Systems Pty Ltd (2018) 264 CLR 1 at [40]; (c) whilst I note the offer by the applicant to pay the sum into court, that does not address the cash flow issue, nor does it cover amounts for interest or the adjudicator’s fees; and -- 5 of 6 -- 6 (d) there are arguments going both ways in terms of the value of the undertaking as to damages given by the applicant versus the ability of the respondent to repay the amount should that be called for. As one factor in the mix, I note in that respect, though, that the emphasis has been on challenging the part of the claim that amounted to effectively 50% of $43,000, in contrast to the overall adjudicated sum. [22] On balance, for the reasons that I have given, it has not been shown, in my view, that interlocutory relief should be granted preventing the respondent from recovering payment of the adjudicated amount, consistent with the statutory provision and the reasons and object of it. For those reasons, the application for interlocutory relief is dismissed. [23] The order of the Court is that the application is dismissed, and the second order is that the costs of the application are the first respondent’s costs in the proceeding. -- 6 of 6 --