Supreme Court New South Wales Medium Neutral Citation: CPB Contractors Pty Limited v Heyday5 Pty Limited [2020] NSWSC 1625 Hearing dates: 2 November 2020 Decision date: 16 November 2020 Jurisdiction: Equity - Technology and Construction List Before: Hammerschlag J Decision: Summons dismissed Catchwords: BUILDING AND CONSTRUCTION – Building and Construction Industry Security of Payment Act 1999 (NSW) ss 22(2), (3), (5) – An adjudication determination upheld a claim for a variation of a building contract consisting of a direction by a head contractor to a sub-contractor to provide spotters for mobile elevated work platforms – Challenge to the determination on the grounds that it discloses no evident or intelligible justification for upholding the claim and that the adjudicator denied the plaintiffs procedural fairness because he found them on bases not the subject of submission duly made – HELD – Challenges not made out – Importance of recognising that adjudicators' determinations are not judgments of a court, that the procedural behaviour of adjudicators and determinations should not be examined with an overcritical or pedantic eye but should be viewed with common sense and without undue legality and should not be scrutinised with a fine-tooth comb approach. Legislation Cited: Building and Construction Industry Security of Payment Act 1999 (NSW) Cases Cited: Cockram Construction Ltd v Fulton Hogan Construction Pty Ltd [2018] NSWCA 107 Colin Joss & Co Pty Ltd v Cube Furniture Pty Ltd [2015] NSWSC 735 Minister for Immigration and Ethnic Affairs v Wu Shan Liang (1996) 185 CLR 259 Perform (NSW) Pty Ltd v Mev-Aus Pty Ltd [2009] NSWCA 157 Re Minister for Immigration and Multicultural Affairs; Ex parte Lam (2003) 214 CLR 1 Category: Principal judgment Parties: CPB Contractors Pty Limited - First Plaintiff Dragados Australia Pty Ltd - Second Plaintiff Samsung C&T Corporation - Third Plaintiff Heyday5 Pty Limited - First Defendant David Francis - Second Defendant Resolution Institute - Third Defendant Representation: Counsel: M Christie SC with D Hume - Plaintiffs FP Hicks SC with A Cameron - First Defendant Solicitors: MinterEllison - Plaintiffs Kreisson - First Defendant File Number(s): 2020/260298 Judgment INTRODUCTION 1. HIS HONOUR: This is a challenge to an adjudication determination (the Determination) made by the second defendant (the Adjudicator) in favour of the first defendant (Heyday) against the plaintiffs (together CDSJV), for $13,153,289.098 (excluding GST) on 30 August 2020 under the provisions of the Building and Construction Industry Security of Payment Act 1999 (NSW) (the Act). 2. CDSJV is a joint venture which had the head contract for the WestConnex project, which includes the construction of roads, a tunnel, and other physical works. 3. On 9 July 2018 under a written works contract (the Contract), CDSJV retained Heyday (defined as the Contractor in the Contract) to do electrical installation works on the project. 4. The work to be done under the Contract required use of mobile elevated work platforms (MEWPs). 5. $7,120,922 of the total adjudicated amount was determined by the Adjudicator to be owing to Heyday for the provision of 'spotters'. Spotters are ground personnel whose function it is to observe and monitor the operation of MEWPs. The parties referred to this claim as the Spotters Claim. 6. CDSJV's challenge to the Determination is directed exclusively to the Spotters Claim but the parties are agreed that if the challenge succeeds, the entire Determination is void. 7. The grounds of CDSJV's challenge are that: 1. the Determination discloses no evident or intelligible justification for upholding the Spotters Claim. 2. the Adjudicator denied it procedural fairness because he found against it on bases not the subject of submissions duly made. 1. For the reasons which follow, neither ground has been made out and the challenge fails. THE CONTRACT AND CONTRACTUAL DEALINGS 1. Clause 25 of the Contract contained provision for Quality, Safety, and Health and the Environment. 2. Clause 25.3(1)(d) provided: 25.3 Work, Health and Safety Management System (1) The Contractor acknowledges that CDSJV: … (d) for the purpose of the Work under the Contract, the Contractor must either: (i) implement its own Corporate WHS Management System which complies with the Law and is otherwise in accordance with the NSW Government Work Health & Safety Management Systems and Auditing Guidelines (5th Edition) (September 2013); or (ii) if CDSJV gives its written consent for the Contractor to do so, comply with the requirements of CDSJV's work, health and safety management system; 1. Clause 25.4(5) required Heyday to maintain and progressively submit to CDSJV, but not less than 5 business days before commencing the work under the Contract or a discrete part thereof, copies of Job Safety Analyses (JSAs) or Safe Work Method Statements (SWMSs) for that work or the relevant part thereof. 2. Clause 33 provided for variations and gave CDSJV the right to direct Heyday to increase, decrease or omit any part of work under the Contract, change the character or quality of any material work (including a change in specified performance requirements or performance requirements), or supply additional material or perform additional work. 3. Apparently on 2 July 2018 (that is, prior to entry of the Contract), Heyday submitted to CDSJV an SWMS for working on an MEWP (SWMS3). It included requirements that a spotter be used when moving a MEWP across works areas and that the driver keep visual contact with the spotter at all times. 4. In December 2018, Heyday submitted to CDSJV an SWMS for operating and spotting (SWMS8). SWMS8, while referring to spotters, did not include a requirement for them to maintain visual contact. 5. On 25 January 2019, CDSJV wrote to Heyday (as well as to all other companies that had any type of MEWP on the project) (the Direction) informing them that, effective 8 February 2019, changes had been made to the managing of MEWPs. The Direction apparently had its origins in a work and safety report emanating from South Australia. Relevantly, the Direction included the following: While operating a MEWP, the following controls must be in place: Ground personnel are within sight and verbal communication distance who are familiar in the operation of the MEWP's ground controls to act on emergency situations. Of note, depending on the nature and scale of activities, ground personnel may work with multiple MEWP's at a time; 1. Shortly after receipt of the Direction, Heyday gave CDSJV written notice that the Direction constituted or involved a variation under cl 33(2) of the Contract. Relevantly, Heyday said: It has been Heyday's intent to manage MEWP's by use of ground personnel when in transition, and by use of exclusion zones when stationary. This is what was accepted by CDS-JV as part of Heyday's SWMS documentation. 1. On 22 February 2019, CDSJV responded disputing that any variation was involved. It took the position, amongst others, that the requirement for spotters, as articulated in the Direction, was nothing new and Heyday was already under an obligation to provide spotters. 2. The controversy did not at that time appear to be whether or not spotters who were employed had to have continual visual contact but rather whether spotters were needed when MEWPs were stationary. THE PAYMENT CLAIM, THE PAYMENT SCHEDULE AND THE DETERMINATION 1. On 21 May 2020, Heyday made a payment claim on CDSJV which it described as a Variation Claim Submission (the Payment Claim). The Payment Claim included the Spotters Claim which was referred to as Variation V024.4. The Payment Claim comprised 15 lever-arch folders. A significant portion of the documentation was written argument. This is a practice which is to be firmly discouraged. The Payment Claim was accompanied by an index and a USB device containing the documents as well as a photograph depicting the 15 lever-arch folders. 2. The Payment Claim makes only sparse references to the visual contact requirement for spotters. One reference is in para 451 where Heyday put that 'sight and visibility' were an enlargement and a requirement over and above any requirement established by the relevant Australian Standard or the tender documents. The same point was made in para 21 of a section entitled 'Paragraph by Paragraph Reply to Payment Schedule'. 3. CDSJV served a payment schedule on 4 June 2020 (the Payment Schedule). The Payment Schedule includes what is descried as a 'Schedule of Reasons'. The Payment Schedule exceeds 60 pages. CDSJV's responding submission on the Spotters Claim runs to 26 pages. 4. CDSJV's Schedule of Reasons included the following: The Contractor is not entitled to the amount claimed because, in accordance with clauses 14.1, 14.4, 25.3 and 25.4 of the Contract, it is the Contractor's obligation and responsibility to comply with: WHS Legislation; the Law; all Codes and Standards; and the NSW Government Work Health & Safety Management Systems and Auditing Guidelines (51h Edition) (September 2013). Clause 14.1 requires the Contractor, in carrying out the Work under the Contract, to comply with all applicable Laws; and NSW Government Policies. This includes the Work Health and Safety Act 2011 (NSW) (WHS Act). Further, clause 14.4 requires the Contractor, in performing the Works under the Contract, to comply with all requirements of all Codes and Standards. Under the Contract 'Codes and Standards' include guidance materials such as the Safety Alert and the Elevating Work Platform Association's Good Practice Guide Mobile Elevating Work Platforms. The Contractor is attempting to claim that its only obligation under the Contract was to comply with section 5.14 of AS2550. This is clearly incorrect. Further, pursuant to clauses 8.1(1) and 8.2(2) of the Contract, the Contractor provided a number of warranties, including warranties in respect of: non-reliance on information; undertaking its own assessment and examination in relation to matters relating to the Contract. CDSJV entered into the Contract relying upon the warranties, undertakings, acknowledgements and agreements from the Contractor. For the reasons above, the Contractor was required by the Contract, its own documentation, the WHS Act and the relevant Codes and Standards (including, but not limited to, those identified above) to eliminate risks to health and safety by using spotters in managing MEWPs and therefore it is not entitled to any payment for those costs as a variation to the Contract. 1. Thus, CDSJV's position was that Heyday was not entitled to the Spotters Claim because it already was Heyday's obligation and responsibility to provide spotters, amongst others, because of its own documentation. It will also be observed that CDSJV made no point of the requirement for spotters to have visual contact. 2. Heyday lodged an adjudication application and served it on CDSJV on 22 June 2020. The Adjudicator records that he received seven boxes containing 33 lever-arch folders. 3. The substantial body of material placed before the Adjudicator by Heyday included a witness statement by Mr Enrico Pecora, Heyday's commercial manager. In para 183 of the statement, Mr Pecora said that he could not find any reference in CDSJV's material other than its own Contractor Pack which identified the 'new requirement introduced by CDSJV in relation to management of MEWPs, namely ground personnel are within sight and verbal communication distance of MEWPs which was not in the WHS Act, relevant codes and standards at the time of entering into the Contract.' 4. On 29 June 2020, CDSJV delivered its adjudication response. 5. In it, CDSJV made the following statements: 20.2.1 In summary the Contractor claims that: … (b) CDSJV directed the Contractor to use spotters because it directed that ground personnel were to be within sight of MEWPs, which was a variation to the Contract; … 20.3.2 As set out in the Payment Schedule, CDSJV says that the Contractor has no entitled [sic] for V024 because: … (b) there was no variation (see paragraphs 20.5.1 to 20.5.60 below). In particular: … (ii) consistent with the Contractor's own documentation acknowledging the need for spotters, the Contractor's safety obligations imposed under relevant health and safety legislation and standards (which the Contractor was bound under the Contract to comply with) also required the use of spotters; … … 20.5.40 As set out in the Payment Schedule, the Contractor's own documentation, including the Plan and SWMS 3 and SWMS 8, required the use of spotters in managing MEWPS. Critically, the Contractor's own SWMS required the use of spotters in July and December 2018, before the alleged variation direction. 1. CDSJV's submissions before me record, apparently correctly, that the Adjudicator called for further submissions on no fewer than 13 occasions. Given the burden that was imposed on him, this was entirely understandable. 2. The Adjudicator issued the Determination on 30 August 2020. 3. The Determination is a very substantial document running to 386 pages. I have, in the interests of avoiding undue prolixity and because of the narrow focus of CDSJV's attack, refrained from extensively quoting from the Determination. 4. The Adjudicator determined that the Direction was a direction for a variation pursuant to cl 33 of the Contract. [1] 5. In paragraph 371 of the Determination, the Adjudicator said: "Spotter" is not a defined term. In the documents provided by the parties they are variously called "support personnel", "nominated support personnel" and "ground personnel". Their function can be carried out by any person with the appropriate training. The claimant accepted that there would need to be Ground Personnel (such as leading hands, foremen and supervisors) trained for Ground Personnel duties with each type of in the MEWP who would communicate with the operator by radio. 1. CDSJV focused its attack on paragraph 372 in which, including by way of footnote 159, the Adjudicator said: The respondent's submissions about the claimant's SWMS are not accepted as, firstly, because the claimant stated that it intended to have its employees and the role of "nominated support personnel" and "ground personnel". Secondly, contrary to the claimant's rights under Clause 25.3(1)(d)(i) of the Contract and in breach of its obligations the respondent conducted itself so that the claimant was forced to accept the changes introduced to SWMS by the 25 January 2019 amendments. The respondent's conduct is the failure to approve the claimant's SWMS and the 27 August 2019 threat159 to have the claimant removed from the Project unless it included the line of sight requirement for ground personnel. While the "visual contact" statement may have existed in the pre-contractual 2 July 2018 SWMS, contrary to the respondent's submission, there is no such requirement in the post-Contract 12 December 2018 iteration of the claimant's SWMS on which the respondent relies. Accordingly, there was nothing in the claimant's own documents at any relevant time. 159 The claimant's evidence about both the effect of the respondent's ability to manage the progress of construction of the 240 m sections in accordance with the timetable and the threat to remove the claimant from the Project unless it complied is unchallenged. DISPOSITION 1. Section 22(3) of the Act provides: 22 Adjudicator's determination … (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), and (c) be served by the adjudicator on the claimant and the respondent. 1. An adjudicator's determination is not a judgment of a court. Often, adjudicators are not lawyers. The Act imposes tight time limits on them and they are regularly, as in this case, called to dispose of complex issues, factual and legal, within those limits. As with arbitrators and their awards (and perhaps, even more so because adjudication determinations do not have the final effect of an arbitrator's award), the procedural behaviour of adjudicators and their adjudication determinations should not be scrutinised with an overcritical or pedantic eye but should be viewed with common sense and without undue legality. Adjudication determinations are to be read as a whole and should not be viewed through the prism of legal concepts or examined with a fine-tooth comb: see Minister for Immigration and Ethnic Affairs v Wu Shan Liang (1996) 185 CLR 259 at 291; Colin Joss & Co Pty Ltd v Cube Furniture Pty Ltd [2015] NSWSC 735 at [47]; Cockram Construction Ltd v Fulton Hogan Construction Pty Ltd [2018] NSWCA 107 at [17]. This is especially to be borne in mind with a determination such as the present one where a significant burden was placed on the Adjudicator. 2. It is not in dispute that the Adjudicator was obliged to afford the parties procedural fairness and that, to stand, the Determination must reveal an evident and intelligible justification. It is also not in dispute that, in determining an adjudication application, the Adjudicator was to consider only submissions duly made by the parties in support of the Payment Claim and the Payment Schedule respectively. [2] 3. At the outset, it is appropriate to observe that the field of contest between the parties about the Spotters Claim was in substance whether the Direction imposed on Heyday requirements with respect to spotters beyond that which the Contract already imposed on it. The Adjudicator's conclusion was that the Direction did so. 4. CDSJV directed its arguments, separately, to three parts of paragraph 372 of the Determination. 5. First, it argues that the following sentence is unintelligible: The respondent's submissions about the claimant's SWMS are not accepted as, firstly, because the claimant stated that it intended to have its employees and the role of "nominated support personnel" and "ground personnel". [emphasis added] 1. I reject this submission. It is lacking in merit. 2. Whilst read literally the sentence is unintelligible, what makes it unintelligible is no more than an obvious typographical error, in that the penultimate 'and' should read 'in'. No point was taken that a formal correction by the Adjudicator was necessary for the Court to read the sentence as it should obviously be read. [3] An application for correction would inevitably succeed. In any event, this error would not justify intervention of the Court. 3. Corrected, the idea behind the sentence may perhaps have been expressed differently but it intelligibly deals with Heyday's submission that the Direction constituted a variation under the Contract because it involved Heyday having to employ extra personnel. 4. CDSJV's next submission is directed to the following passage: Secondly, contrary to the claimant's rights under Clause 25.3(1)(d)(i) of the Contract and in breach of its obligations the respondent conducted itself so that the claimant was forced to accept the changes introduced to SWMS by the 25 January 2019 amendments. The respondent's conduct is the failure to approve the claimant's SWMS and the 27 August 2019 threat159 to have the claimant removed from the Project unless it included the line of sight requirement for ground personnel. 159 The claimant's evidence about both the effect of the respondent's ability to manage the progress of construction of the 240 m sections in accordance with the timetable and the threat to remove the claimant from the Project unless it complied is unchallenged. 1. CDSJV argues that the passage is unintelligible because the reference to 'the claimant's rights under Clause 25.3(1)(d)(i)' lacks sense in that that clause does not give Heyday any rights but imposes obligations upon it. It argues that the reference to 'breach' lacks sense because the existence or otherwise of a breach, whilst perhaps giving rise to a claim for damages, is irrelevant to whether the Direction constituted a variation or not. 2. It says it was denied procedural fairness because Heyday did not allege any breach of obligations as found by the Adjudicator as a basis for allowing the Spotters Claim. 3. I reject these submissions. 4. The passage could perhaps have been expressed differently, but it is not unintelligible. It reflects the Adjudicator's conclusion that Heyday did not have a pre-existing contractual obligation to do that which the Direction imposed on it. He infelicitously used the word 'rights' but it is plain that he was conveying the notion that, absent a variation, Heyday had a right not to be required to do more than the Contract required of it, that is, it had no such obligation. He infelicitously also used the word 'breach' but it is plain that he was conveying that CDSJV had no right, absent a variation, to impose on Heyday more than the Contract required of Heyday. 5. A fair and common sense reading of paragraph 372 does not convey a finding by the Adjudicator that the Spotters Claim was allowed because of a 'breach' by CDSJV. It is a finding that the Direction was a variation because it imposed a requirement on Heyday outside the terms of its existing obligations. There was no denial of procedural fairness involved here. The issue was plainly in play and dealt with by the Adjudicator. 6. CDSJV's final submission was directed to the final part of paragraph 372, which reads: While the "visual contact" statement may have existed in the pre-contractual 2 July 2018 SWMS, contrary to the respondent's submission, there is no such requirement in the post-Contract 12 December 2018 iteration of the claimant's SWMS on which the respondent relies. Accordingly, there was nothing in the claimant's own documents at any relevant time. 1. CDSJV argues that neither party made a submission that it mattered that the '"visual contact" statement' did not appear in SWMS8. It argues that it was denied procedural fairness by not having the opportunity to say that it did not matter that it did not so appear. 2. I reject this submission. It is artificial. 3. CDSJV's own contention to the Adjudicator was that the Direction was not a variation because the requirement for spotters was already in Heyday's own documentation. Heyday took issue with this contention. 4. The question for determination was whether the spotters requirement as articulated in the Direction was already in Heyday's own documentation. 5. Understandably, the Adjudicator took from the parties' written argument that it was part of Heyday's contention that in requiring visual contact (as opposed to spotters per se), CDSJV was imposing an additional requirement and that CDSJV's answer included that the visual contact requirement too was in Heyday's own documentation. The Adjudicator took it that CDSJV was arguing that the visual contact requirement was in SWMS8, which was part of Heyday's own documentation. 6. Whatever it argued before the Adjudicator, CDSJV does not now argue that SWMS8 contains a visual contact requirement, as plainly it does not. In that respect, the Adjudicator was clearly correct. 7. Nevertheless, CDSJV argues that it was denied procedural fairness because it was deprived of the opportunity of submitting that it did not matter that SWMS8 embodied no such requirement. 8. If CDSJV was not responding to Heyday's contention about visual contact by saying that it was contained in Heyday's own documentation, it lost nothing in the Adjudicator finding that it was not in such documentation. 9. If CDSJV was responding to Heyday's contention about visual contact by saying that it was contained in Heyday's own documentation, it is difficult to see how it lost a relevant opportunity given that it accepts that SWMS8 does not contain that requirement. 10. The most it could have said was that it agreed that SMWS8 did not help it (or that it was irrelevant) and point to other Heyday documentation which did help it. It had every opportunity to point to that other documentation and to make submissions as to what documentation was relevant or irrelevant: see Perform (NSW) Pty Ltd v Mev-Aus Pty Ltd [2009] NSWCA 157 (Perform). Identifying relevant documentation was CDSJV's own burden. 11. Given that the visual contact requirement is not in SWMS8 (as CDSJV concedes), the Adjudicator's finding in effect upheld the submission CDSJV says it was deprived of making, namely that that document did not matter. 12. The Adjudicator otherwise determined that there was nothing in Heyday's own documents at any relevant time. 13. The Adjudicator was in any event not under any obligation to tell CDSJV how he proposed to determine the question before him: see Perform at [61]-[66]. 14. I also consider that, in the context of the Determination as a whole, the resolution of the question concerning visual contact was, on its own, less than material: see Re Minister for Immigration and Multicultural Affairs; Ex parte Lam (2003) 214 CLR 1 at 13-14. 15. CDSJV suffered no practical injustice. CONCLUSION 1. The summons is dismissed. 2. Provisionally, I order that the plaintiffs are to pay the first defendant's costs. This order will solidify seven days after this judgment is handed down unless a party notifies my Associate and the opponent in writing that some other order is sought and provides a brief statement of the basis. In the event that notice is received, directions will be made to resolve any issue of costs. ********** Endnotes 1. Determination para 365. 2. See s 22(2) of the Act. 3. See s 22(5) of the Act. Amendments 17 November 2020 - spelling correction DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated. Decision last updated: 17 November 2020