Supreme Court New South Wales Medium Neutral Citation: City of Ryde v AMFM Constructions Pty Ltd & Anor [2011] NSWSC 1469 Hearing dates: Friday, 4 November 2011 Decision date: 04 November 2011 Jurisdiction: Equity Division - Commercial List Before: Brereton J Decision: Summons dismissed with costs. Moneys paid into court to credit of proceedings to be paid out to the first defendant. Catchwords: ADMINISTRATIVE LAW - Adjudication under (NSW) Building and Construction Industry Security of Payment Act, 1999 -decision affected by jurisdictional error due to inadequate reasoning - failure to give reasons does not amount to jurisdictional error - inadequacy, illogicality, insufficiency or inconsistency of reasoning of an adjudicator does not go to jurisdiction - plaintiff must demonstrate that reasons, in context of surrounding material, illustrate failure by adjudicator to perform statutory function - need to bear in mind adjudicators operate under abridged timeframes and procedures - whether denial of procedural fairness where adjudicator did not notify plaintiff that he would decide matter on particular basis - adjudicator decided matter on basis adverted to by plaintiff - no denial of procedural fairness - whether adjudicator failed to take into account relevant consideration, namely provision of contract - failure to consider relevant provision of contract as required by s 22 of the Act would be jurisdictional error - adjudicator did take provision of contract into account. BUILDING AND CONSTRUCTION - Payment claims under Building and Construction Industry Security of Payment Act, s 13(5) - section prohibits service of more than one payment claim in respect of one reference date - not akin to plea in bar - section 13(5) goes to jurisdiction of adjudicator - pleas in bar do not deny jurisdiction - construction of contract to assess whether certificate of practical completion precluded service of additional payment claims - contract does not bar service of payment claims after issue of certificate of practical completion - payment claim valid under s 13. Legislation Cited: (NSW) Building and Construction Industry Security of Payment Act, 1999, s 13, s 17, s 22, s 24, s 25 (CTH) Migration Act, 1958 Cases Cited: Bauen Constructions v Westwood Interiors [2010] NSWSC 1359 Brookhollow Pty Ltd v R & R Consultants Pty Ltd [2006] NSWSC 1 Chase Oyster Bar v Hamo Industries [2010] NSWCA 190; 272 ALR 750 Dualcorp Pty Ltd v Remo Constructions Pty Ltd (2009) 74 NSWLR 190 Halkat Electrical Contractors Pty Ltd v Holmwood Holdings Pty Ltd [2007] NSWCA 32 Holmwood Holdings Pty Ltd v Halkat Electrical Contractors Pty Ltd & Anor [2005] NSWSC 1129 John Goss Projects v Leighton Contractors (2006) 66 NSWLR 707 Musico v Davenport [2003] NSWSC 977 Power Serve v Powerline's Cleaning Group [2011] NSWSC 1180 Re Minister for Immigration and Multicultural and Indigenous Affairs; Ex parte Palme (2003) 216 CLR 212 Tolfab v Tie [2005] NSWSC 326 Category: Principal judgment Parties: City of Ryde (plaintiff) AMFM Constructions Pty Ltd (first defendant) Philip Martin (second defendant) Representation: Counsel: Mr S Robertson (plaintiff) Mr F Corsaro SC (first defendant) Solicitors: Maddocks Lawyers (plaintiff) Colin Biggers & Paisley (first defendant) File Number(s): 2011/298009 Judgment (ex tempore) 1HIS HONOUR: On or about 23 September 2009, the plaintiff the Council of the City of Ryde ('the Council') as principal, and the first defendant AMFM Constructions Pty Ltd ('AMFM') as contractor, entered into a construction contract by which AMFM agreed to design and construct a building to be known as the Ryde Community & Sports Centre, in consideration of payment of an agreed contract price. A certificate of practical completion under the contract issued on 9 June 2011. The defects liability period has not yet expired. 2On or about 15 June 2011, AMFM served payment claim 23 pursuant to (NSW) Building and Construction Industry Security of Payment Act, 1999, s 13. On or about 18 July 2011, AMFM served a further payment claim (claim 24), the subject of these proceedings, purportedly pursuant to s 13 of the Act. On 29 July, the Council served a payment schedule in respect of progress claim 24, to the effect that it did not propose to make any payment in respect of that claim. On 11 August 2011, AMFM applied to have the disputed claim referred to adjudication under s 17 of the Act. On 16 August, the authorised nominating authority referred the adjudication application to the second defendant Philip Martin ('the adjudicator'), an adjudicator, who accepted it that day. An adjudication response was served on 18 August 2011. On 25 August 2011, the adjudicator issued an adjudication in the amount of $72,513.63 with interest, and determined that the adjudication fees be paid in full by the Council. 3By summons filed on 14 September 2011, the Council claims an order declaring the determination void; in the alternate an order in the nature of certiorari quashing it; and an injunction restraining AMFM from requesting provision of an adjudication certificate pursuant to s 24(1)(b) of the Act, filing an adjudication certificate (or purported adjudication certificate) as a judgment debt in any court pursuant to s 25 of the Act, or serving (or purporting to serve) a notice on the Council pursuant to s 24(1)(b) of the Act, in connection with the adjudicator's determination. When the summons returned before the court on 23 September 2011, upon the plaintiff giving the usual undertaking as to damages and paying into court the adjudicated sum, AMFM was restrained until further order from exercising any rights under s 24 of the Act. 4The Council relies on three matters as amounting to jurisdictional error infecting the adjudication determination and rendering it void. The first complaint is related to the adjudicator's determination of an issue as to whether AMFM had given timely notice under provisions of the construction contract in respect of a variation, the subject of the disputed payment claim. 5Clause 46.1 of the construction contract provides as follows: 46 TIME FOR NOTIFICATION OF CLAIMS 46.1 Contractor's Prescribed Notice The Principal shall not be liable upon any claim by the Contractor in respect of or arising out of a breach of the Contract unless within 28 days after the first day upon which the Contractor could reasonably have been aware of the breach, the Contractor has given to the Superintendent the prescribed notice. The Principal shall not be liable upon any other claim by the Contractor for any extra cost or expense in respect of or arising out of any direction or approval by the Superintendent unless within 52 days after the first day upon which the Contractor could reasonably have been aware of the entitlement to make the claim, the Contractor has given to the Superintendent the prescribed notice. The prescribed notice is a notice on writing which includes particulars of all of the following - (a) the breach, act, omission, direction, approval or circumstances on which the claim is or will be based; (b) the provision of the Contract or other basis for the claim or proposed claim; and (c) the quantum or likely quantum of the claim. This Clause 46.1 shall not have any application to - (i) any claim for payment to the Contractor of an amount or amounts forming part of the Contract Sum or any part thereof; (ii) any claim for payment for a variation directed by the Superintendent or to be made pursuant to Clause 12.3; (iii) any claim for an extension of time for Practical Completion; or (iv) the provisions of Clause 46.2. 6In its adjudication response, the Council made the following submissions: 4.15 In addition, each of the Claimant's claims in CV*12, CV*14,CV*31, CV*33 and CV*44 for variations are time barred under the Contract. 4.16 Clause 46.1 of the Contract requires the Claimant to provide the prescribed notice under the Contract to the Superintendent of any other claim (which is not a claim in respect of or arising out of a breach of the Contract) by the Contractor for any extra cost or expense in respect of or arising out of any direction or approval by the Superintendent within 42 days after the first day upon which the Contractor could reasonably have been aware of the entitlement to make the claim. Unless such notice is given within 52 days and either the Superintendent confirms that the direction is a variation or the Claimant gives the prescribed notice under clause 46.1, the Claimant cannot make any Claim in respect of such direction and the Respondent shall not be liable upon any claim by the Claimant that did not satisfy the pre-condition of providing a prescribed notice to the Respondent under clause 46.1. 4.17 The Claimant did not provide to the Respondent a prescribed notice under 46.1 in respect of any of the 6 variation claims the subject of the payment claim. 4.18 For a prescribed notice under the Contract to be valid, the notice has to be in writing and, in accordance with clause 46.1 of the Contract, has to include particulars of all of the following: (a) the breach, act, omission, direction, approval or circumstances on which the claim is or will be based;\ (b) the provision of the Contract or other basis for the claim or proposed claim; and (c) the quantum or likely quantum of the claim. 4.19 The Claimant has not given any notices in respect of these alleged claims that satisfy the requirements of prescribed notice under clause 46.1. 4.20 In particular, the notices provided by the Claimant as referred to by the Claimant in its adjudication application do not provide: (a) the provision under the Contract or other basis on which the claim is based; and (b) lack sufficient detail of the circumstances of the claim; and (c) do not refer or rely on any approvals by the Superintendent on which the claim is based. 4.21 In its adjudication application, the Claimant has failed to address how it says it has complied with the notice requirements of the Contract in respect of each of the 6 variation claims the subject of the Claimant's payment claim. This alone is a complete answer to each of the 6 variation claims and on that basis each of the 6 variation claims ought to be rejected and determined at $0. 4.22 In any event, even if the Claimant had demonstrated that it had complied with the notice requirements of the Contract in respect of each of the 6 variation claims, there is no variation in respect of any of the claims for the reasons set out below. 7As to these submissions, in his reasons for determination, the adjudicator said: The respondent submits that the claimant has not provided the required notice under the contract for the variations. The Act provides that the claimant is entitled to payment for construction work undertaken. The absence of a prescribed notice does not prevent payment for the work undertaken by the claimant. I determine that the claimant has carried out work under the construction work, including variations to the contract scope of work. 8In respect of this, the Council now submits, first, that the adjudicator's reasons were inadequate to explain or support his conclusion in respect of the "timely notices" point; alternatively, that they disclose a decision made on a basis which the adjudication respondent was not afforded an opportunity to address; and/or thirdly, that the adjudicator failed to perform his statutory function, in that he failed to consider clause 46.1. 9As to the first of these, the inadequacy, insufficiency, inconsistency or illogicality of reasons for a decision, even when the governing statute requires a decision-maker to give reasons in conjunction with and contemporaneously with the decision, does not of itself amount to jurisdictional error. The significance of the reasons, or their inadequacy, is that in the context of the surrounding material they may reveal jurisdictional error, or that the adjudicator has not performed the task of determining an adjudicated amount by reference to the specified relevant factors in accordance with s 22 of the Act. This distinction was adverted to in the context of the (CTH) Migration Act, 1958, by the High Court of Australia in Re Minister for Immigration and Multicultural and Indigenous Affairs; Ex parte Palme (2003) 216 CLR 212, in which Gleeson CJ, Gummow and Heydon JJ said (at 226): The visa cancellation decision may be reviewed in this Court for jurisdictional error. Such error may be found from what is disclosed by reasons provided under s 501G(1)(e). Failure to provide reasons may also be reviewed in this Court and compliance by the Minister with the statutory duty may be ordered. The reasons then provided may furnish grounds for prohibition under s 75(v) in respect of the visa cancellation decision. But what is not provided for is for a prosecutor, as in this case, to bypass that earlier step utilising mandamus, and to impeach the visa cancellation decision itself for want of discharge of the duty to provide reasons. There is, as was pointed out in argument, a critical distinction between failure to comply with s 501G(1)(e) [the obligation to give the reasons] and using that failure to conclude that the visa cancellation decision is flawed by jurisdictional error. 10McHugh J explained (at 227-228): The prosecutor contends that the Minister's failure to give reasons constitutes jurisdictional error with the result that the Minister has no jurisdiction or power to cancel the visa. Jurisdiction is the authority to decide. It is not easy to accept the notion that a decision is made without authority because subsequently the decision-maker fails to give reasons for the decision. Nevertheless, it is always possible that a statutory scheme has made the giving of reasons a condition precedent to the validity of a decision. If it has, a decision that does not give reasons will be made without authority... In this case, it is beyond argument that the Act did not intend failure to comply with s 501G should invalidate the decision to cancel a visa... ... The Minister's failure to give reasons did not leave the prosecutor without remedy. It was open to the prosecutor to seek a writ of mandamus to compel the Minister to provide reasons for the decision. If reasons were provided as the result of the issue of the mandamus, they might demonstrate an error of the kind that would attract prohibition under s 75(v) of the Constitution. But the prosecutor has not sought a writ of mandamus ... 11In Tolfab v Tie [2005] NSWSC 326, Macready AsJ held (at [5]) that failure to give adequate reasons did not amount to failure to comply with a basic and essential requirement of the Act, which would now be understood as equivalent to jurisdictional error. 12The way in which inadequacy of reasons may be used to reveal or illuminate jurisdictional error is apparent from the decisions of the Court of Appeal in Halkat Electrical Contractors Pty Ltd v Holmwood Holdings Pty Ltd [2007] NSWCA 32, and of McDougall J in Bauen Constructions v Westwood Interiors [2010] NSWSC 1359. What is important to appreciate is that it is not a question of a plaintiff in this Court pointing to the reasons and saying "well, it is not apparent how the adjudicator reached this particular decision"; rather the plaintiff must be able to show that the reasons, in the context of the surrounding material, demonstrate that there has been a failure on the part of the adjudicator to perform his or her statutory function. That was, for example, apparent in Halkat v Holmwood and in Bauen v Westwood, because the adjudication determination proceeded not by reference to the matters referred to in s 22 at all, but by the adjudicator, with an acknowledged inadequacy of evidence to determine the matter, proceeding to do so on an essentially capricious basis. 13In considering whether it can be shown from an adjudicator's reasons that he or she has not performed the statutory obligations required by s 22, it is also important to bear in mind that adjudicators operate under confined timeframes, and that their decisions are given not in a vacuum but in the context of the payment claim, payment schedule, adjudication application and adjudication response that have preceded them. It is worth observing that in this case the adjudication response alone amounted to some 17 pages, accompanied by a statutory declaration which had annexed to it approximately 220 pages. It is not realistic to expect an adjudicator operating under the time constraints imposed by the legislation to produce reasons that address, in a detailed way, every single point raised in that bulky material. 14Accordingly, even if the adjudicator's reasons do not sufficiently explain, or logically or consistently support, the conclusion regarding the timely notice point, that would not of itself establish jurisdictional error. 15As to affording of an opportunity to be heard, McDougall J in Musico v Davenport [2003] NSWSC 977 said: [101] Under this heading, Musico relied on the circumstance that, so they said, Mr Davenport reached a number of conclusions that had not been advanced by Grosvenor and of which Musico had not had notice. ... [106] As to two of those matters - namely, those referred to in paras 3(a) and 3(d), Grosvenor's position appears to be that, although the matters were not explicitly raised, nonetheless, because, in effect, Mr Davenport was required to consider the provisions of the contract, the provisions of the payment schedule and the provisions of the Act, it was open to him to reach the view that he did, notwithstanding that Grosvenor had not advanced or contended for those views in its adjudication application. [107] If that be Grosvenor's position it is, in my opinion, wrong. It may readily be accepted that the Act provides for a somewhat rough and ready way of assessing a builder's entitlement to progress claims. It may also be accepted that the procedure is intended not only to be swift, but also to be carried out with the minimum amount of formality and expense. Nonetheless, what an adjudicator is required to do is to decide the dispute between the parties. Under the scheme of the Act, that dispute is advanced by the parties through their adjudication application and adjudication response (which, no doubt, will usually incorporate the antecedent payment claim and payment schedule). If an adjudicator is minded to come to a particular determination on a particular ground for which neither party has contended then, in my opinion, the requirements of natural justice require the adjudicator to give the parties notice of that intention so that they may put submissions on it. In my opinion, this is a purpose intended to be served by s 21(4) of the Act (although the functions of s 21(4) may not be limited to this). [108] It follows, in my opinion, that where an adjudicator determines an adjudication application upon a basis that neither party has notified to the other or contended for, and that the adjudicator has not notified to the parties, there is a breach of the fundamental requirement of natural justice that a party to a dispute have "a reasonable opportunity of learning what is alleged against him and of putting forward his own case in answer to it". (See Lord Diplock in O'Reilly at 279.) [109] In my opinion, therefore, the complaints of denial of natural justice asserted in paras 3(a), (b), (c) and (d) of the summons are made out. 16Clause 40 of the construction contract provides as follows: 40 Variations 40.1 Variations to Work The Superintendent may direct the Contractor to - (a) increase, decrease or omit any part of the work under the Contract; (b) change the character or quality of any material or work; (c) change the levels, lines, positions or dimensions of any part of the work under the Contract; (d) execute additional work; and/or (e) demolish or remove material or work no longer required by the Principal. The Contractor shall not vary the work under the Contract except as directed by the Superintendent or approved in writing by the Superintendent or approved in writing by the Superintendent under Clause 40. The Contractor is bound only to execute a variation which is within the general scope of the Contract. The Contractor shall not be bound to execute a variation directed after Practical Completion unless the variation is in respect of rectification work referred to in Clause 37. 17The fundamental issue for the adjudicator was whether there had been variations within clause 40.1. In this case, the payment schedule did not, in my view, distinctly if at all, put into issue the question of authorisation or direction of the subject variations. On the face of the payment schedule, the dispute was essentially as to whether the alleged variations were within the contractual works so as not to involve a variation at all.The adjudicator adverted to this in paragraph 5.6 of his reasons: 5.6 Variations The Claimant has included a claim for variations to the contract work. The Respondent submits that the Claimant was obliged to complete the concept design and construct the work for the contract lump sum. The Respondent submits that claims CV12, 14, 31, 33 and 34 are for contract works. The construction contract provides for variations to the work at clause 40 of the contract. 18The plaintiff contends that implicit in the adjudicator's reasons for rejecting the timely notice submission - and in particular, the reference to the Act providing that the claimant is entitled to payment for construction work - is a view on the part of the adjudicator that the Act overrode clause 46.1, so that absence of a prescribed notice would not prevent a payment claim under the Act. Such a view, if held by the adjudicator, would have been incorrect [see John Goss Projects v Leighton Contractors (2006) 66 NSWLR 707 (at [80] and [82])]. The defendant submits that the reasons, properly construed, mean that the adjudicator has found that there has been a variation under clause 40.1 and that, by reason of clause 46.1(i) and (ii), the timely notice provision has no application in those circumstances. 19The adjudicator's reasoning in paragraph 5.6 in respect of the various variation claims reveals that the adjudicator did indeed find that there were variations to the contract. In those circumstances, where there are two bases on which the adjudicator's conclusion might be supported, one involving a legal error and a denial of procedural fairness and the other not suffering those defects and apparently consistent with the remainder of the adjudicator's reasons, there is every reason to adopt the latter rather than the former view of what the adjudicator did. 20Insofar as it is said that no argument was specifically raised that clause 46.1 did not apply where a variation was found to have been directed by the superintendent and that the adjudicator did not afford any opportunity to deal with it, that needs to be seen in the context that clause 46.1 was raised by the plaintiff/adjudication respondent in the adjudication response - as it had been in the payment schedule - and that at the heart of the debate before the adjudicator was whether or not there were variations. In those circumstances, and in the context of the abridged times and procedures that apply in the adjudication process, I do not think that the dictates of procedural fairness were such as to require the adjudicator specifically to advise the plaintiff "by the way, have you looked at the end part of clause 46.1, and do you want to say anything about that?" 21The third argument was that the adjudicator failed to take into account clause 46.1. In Holmwood Holdings Pty Ltd v Halkat Electrical Contractors Pty Ltd & Anor [2005] NSWSC 1129, I ventured that a failure by an adjudicator to consider a relevant provision of a construction contract was an error going to jurisdiction: [34] This raises for consideration the extent to which, if at all, a failure to consider a provision of the construction contract will invalidate an adjudication. [35] Section s 22(2) has a dual function: it prescribes matters to which the adjudicator is required to have regard, and it identifies those as the only matters to which the adjudicator is to have regard, on its face making the list exclusive... One of the prescribed matters is "the provisions of the construction contract from which the application arises". [36] At least in administrative tribunals (as distinct from inferior courts of law), failure to consider a matter, consideration of which is required, usually results in a decision being void. However Brodyn, although establishing that a purported adjudication will be void if the adjudicator fails to comply with the basic and essential requirements prescribed in the Act for there to be a valid determination, suggests that compliance with the requirements of s 22(2) - to consider the specified matters and those matters only - is not a precondition to the existence of authority to make a decision, and that non-compliance does not result in invalidity if an adjudicator either considers (only) the matters referred to in s 22(2), or bona fide addresses the requirements of s 22(2) as to what is to be considered [ Brodyn , [56]]. ... [38] Does Brodyn preclude, except in the absence of good faith, the application to failures to consider matters consideration of which is required by s 22(2), of the principle that failure to consider a matter which the statute requires to be considered is jurisdiction error in the broad sense and results in invalidity? ... [44] On no view is an adjudicator a court of law. Indeed, the Court of Appeal entertained some doubt as to whether an adjudicator was even a tribunal exercising governmental powers to which certiorari lay [ Brodyn , [46], [58]]. But as Basten JA has pointed out, relief by way of certiorari has been held to be available in relation to decisions of arbitrators... In Luikens , Palmer J said that, while an adjudicator was plainly not an "inferior court", it was unnecessary to decide whether an adjudicator was a "tribunal" - which was debatable - because the reach of the prerogative writs extends beyond courts and tribunals properly so called, to any person or body having legal authority to determine questions affecting common law or statutory rights or obligations of others, so long as in making such a determination that person or body is required expressly or by implication to act judicially - meaning to observe the basic rules of natural justice by affording a person who might be adversely affected a reasonable opportunity of presenting an informed case in opposition and arriving at the relevant decision uninfluenced by bias or self interest... It follows that an adjudicator not being a court, the broader scope of jurisdictional error appropriate to tribunals, rather than the narrower scope appropriate to inferior courts, would prima facie be applicable. [45] In that context, since Brodyn ties the availability of relief to invalidity, and since the result of jurisdictional error by a tribunal in failing to have regard to a relevant consideration is invalidity, it would follow that failure to have regard to a matter specified in s 22(2) would result in invalidity and would be a ground for judicial review. ... [51] Accordingly, I conclude that a failure by an adjudicator to have regard to a provision of the construction contract which is relevant to the adjudication under consideration is jurisdictional error, resulting in invalidity of the determination. ... [57] But here, the adjudicator made no reference to the terms of the contract at all. Because the adjudicator is obliged to include in the determination the reasons for it [s 22(3)(b)], it can be inferred from the absence of any reference to Pt D of the Schedule that he did not consider it, and further that he did not consider whether or not the contract made express provision with respect to the due date for payment of the progress payment. This is not a mere error in consideration of the provisions of the contract, but a failure to consider a relevant provision at all. ... [61] It follows that in my opinion the adjudicator failed to have regard to relevant provisions of the construction contract, and in particular cl 10, Part D of the Schedule, and cl 13(a). This was not a mere error of fact or law in determining whether or not particular provisions were provisions of the construction contract, or in the interpretation and/or application of those provisions, but a complete failure to have regard to them at all, in circumstances where those provisions were relevant to the adjudication under consideration. Although in the appeal from that decision the Court of Appeal explicitly did not endorse that passage [ Halkat v Holmwood (at [28])], I venture to think, may be reinforced by the more recent decision of the Court of Appeal in Chase Oyster Bar v Hamo Industries [2010] NSWCA 190; 272 ALR 750. I am of the view, therefore, that the failure on the part of an adjudicator to take into account at all a relevant condition of the construction contract, as required by s 22, is jurisdictional error. This view is reinforced by the observations of McDougall J in Power Serve v Powerline's Cleaning Group [2011] NSWSC 1180: [11] By s 22(2) of the Act, the adjudicator is to consider ("only") the five specified matters... The second... is "the provisions of the construction contract from which the application arose". ... [13] ... what is required by the obligation to "consider" something. In my view, what is required is that the adjudicator should turn his or her mind to the specified matters and grapple with them in a reasoned way. [14]... s 22(2) refers to matters that occur within the performance of the adjudicative function. To put it another way, it refers to matters that arise to be performed during the course of the decision-making process itself. ... [18]... adjudicators are to consider the five matters set out in s 22(2). In my view the jurisdiction that is given to adjudicators not only empowers but requires them to consider each of those matters. 22Accordingly, I would accept that if the adjudicator failed to take into account at all, as distinct from taking into account but erroneously, general condition 46.1, jurisdictional error would be established. 23In the passage from the adjudicator's reasons set out above, the adjudicator explicitly referred to the respondent's submission that the claimant had not provided "the required notice". The submission to which that refers is the submission set out in detail above, which specifically refers to and analyses clause 46.1 of the contract. In my view it is manifest that the adjudicator must have taken into account clause 46.1. Whether he did so correctly or incorrectly is not a matter within the purview of this court. 24Accordingly, the first complaint fails. 25I turn then to the second complaint, which covers the adjudicator's determination of an issue pertaining to the structural steel costs. As to that, the adjudicator said: 5.6.3 Additional structural steel costs The Claimant submits that a number of structural steel members shown on the original tender documents were not a standard size and production of these has ceased. The steel sections available were different from those specified and would incur additional costs. The Respondent submits that there has been no variation for the structural steel and a variation does not arise because the Claimant has not make a sufficient allowance for the structural steel in its lump sum tender. The Claimant advised the Respondent in April and May 2010 that the steel sizes shown at tender were not available. The Claimant has included correspondence from the steel supplier, OneSteel, confirming that supply of certain sections could not be met without supply of non standard steel rolls to manufacture the specified sections. The correspondence notes other sections that are available. The Respondent submits that the Claimant has not shown that the steel members were not available during the tender period or before the tender date. The Respondent refers to an email from the designer stating that he considered that the sizes could still be sourced but pre-ordering or longer lead times may be required. The documents provided with the submissions show that some of the structural steel sizes shown on the tender drawings were not available from the range of products available. At the time of tender the Claimant allowed for the structural steel shown on the tender drawings. The sizes nominated in the tender drawings were not a standard size at the time of manufacture. I accept the Respondent's submission that the scope of the structural steel work did not change but determine that the material required to manufacture the items shown in the scope of work did change. I determine that there has been a variation in the structural steel sections available to carry out the structural steel work. I determine that the Claimant is entitled to payment for the variation in the structural steel of $28,667.85 plus GST as claimed. 26The primary complaint is that the adjudicator gave insufficient reasons to explain or support the conclusion that there had "been a variation" notwithstanding his acceptance that the "scope of the structural steel work did not change". In my view, in the context of the debate which had taken place in the payment schedule, adjudication application and adjudication response, there is no substance to this argument. I have already set out the terms of general condition 40.1. In particular, it will be observed that clause 40.1 provides that variations may be by way of (a) variation by increasing, decreasing or omitting parts of the work, or (b) changing the character or quality of any material or work. The chief issue in respect of structural steel before the adjudicator was whether, as the Council contended, there had been no change to the scope of work so that all the work done was within the original contract, or whether (as AMFM contended) there had nonetheless been a change in the quality of the material required. The adjudicator evidently accepted that there had been no increase, decrease or omission of any part of the work under the contract, which is what was conveyed by his reference to "scope"; but that there had been a change in the quality of the requisite material, which is what he conveyed by his reference to the material having changed. 27In my view, it could not be said that the reasons in this respect were inadequate. In any event, even if they were, that would not be jurisdictional error. As the substance of the argument on this issue was as I have just outlined, I do not see how it can be said that the plaintiff was not afforded a reasonable opportunity to deal with that issue. The second complaint therefore fails. 28The third complaint is different in nature, and goes to the validity of the payment claim. 29Section 13 of the Act provides: Payment claims (1) A person referred to in section 8 (1) who is or who claims to be entitled to a progress payment (the claimant ) may serve a payment claim on the person who, under the construction contract concerned, is or may be liable to make the payment. (2) A payment claim: (a) must identify the construction work (or related goods and services) to which the progress payment relates, and (b) must indicate the amount of the progress payment that the claimant claims to be due (the claimed amount ), and (c) must state that it is made under this Act. (3) The claimed amount may include any amount: (a) that the respondent is liable to pay the claimant under section 27 (2A), or (b) that is held under the construction contract by the respondent and that the claimant claims is due for release. (4) A payment claim may be served only within: (a) the period determined by or in accordance with the terms of the construction contract, or (b) the period of 12 months after the construction work to which the claim relates was last carried out (or the related goods and services to which the claim relates were last supplied), whichever is the later. (5) A claimant cannot serve more than one payment claim in respect of each reference date under the construction contract. (6) However, subsection (5) does not prevent the claimant from including in a payment claim an amount that has been the subject of a previous claim. 30Clause 42 of the construction contract relevantly provides as follows: 42 Certificates and Payments 42.1 Payment Claims, Certificates, Calculations and Time for Payment At the times for payment claims stated in the Annexure and upon issue of a Certificate of Practical Completion and within the time prescribed by Clause 42.7, the Contractor shall deliver to the Superintendent claims for payment supported by evidence of the amount due to the Contractor and such information as the Superintendent may reasonably require. Claims for payment shall include the value of work carried out by the Contractor in the performance of the Contract to that time together with all amounts then due to the Contractor arising out of or in connection with the Contract or for any alleged breach thereof. Within 14 days after receipt of a claim for payment, the Superintendent shall issue to the Principal and to the Contractor a payment certificate stating the amount of the payment which, in the opinion of the Superintendent, is to be made by the Principal to the Contractor or by the Contractor to the Principal. The Superintendent shall set out in the certificate the calculations employed to arrive at the amount and, if the amount is more or less than the amount claimed by the Contractor, the reasons for the difference. The Superintendent shall allow in any payment certificate issued pursuant to this Clause 42.1 or any Final Certificate issued pursuant to Clause 42.8 or a Certificate issued pursuant to Clause 44.6, amounts paid under the Contract and amounts otherwise due from the Principal to the Contractor and/or due from the Contractor to the Principal arising out of or in connection with the Contract including but not limited to any amount due or to be credited under any provision of the Contract. If the Contractor fails to make a claim for payment under Caluse 42.1, the Superintendent may nevertheless issue a payment certificate. Subject to the provisions of the Contract, within 28 days after receipt by the Superintendent of a claim for payment or within 14 days of issue by the Superintendent of the Superintendent's payment certificate, whichever is the earlier, the Principal shall pay to the Contractor or the Contractor shall pay to the Principal, as the case may be, an amount not less than the amount shown in the Certificate as due to the Contractor or to the Principal as the case may be, or if no payment certificate has been issued, the amount properly due and payable and on determination (whether under Clause 47 or as otherwise agreed) of the amount so properly due and payable, the Principal or Contractor, as the case may be, shall be liable to pay the difference between the amount of such payment and the amount so properly due and payable. Payment of moneys shall not be evidence of the value of work or an admission of liability or evidence that work has been executed satisfactorily but shall be a payment on account only, except as provided by Clause 42.8. Notwithstanding Clause 42.4, the Principal shall be obliged to pay for any item of unfixed plant and materials where that item is - (i) to be imported into Australia, provided the Contractor has given the Principal a clean on board bill of lading or its equivalent, drawn or endorsed to the order of the Principal and, where appropriate, a custom's invoice for the item; or (ii) listed in the Annexure and which is not an item to be imported into Australia, provided the Contractor establishes to the satisfaction of the Superintendent that the Contractor has paid for the item, and the item is properly stored, labelled the property of the Principal and adequately protected. Upon payment to the Contractor of the amount which includes the value of the item, the item shall be the property of the Principal and free of any lien or charge. Except as provided in the Contract, the Principal shall not be obliged to pay for any item of unfixed plant and materials which is not incorporated in the Works. 42.2 Correction of Payment Certificates At any time and from time to time, the Superintendent may by a further certificate correct any error which has been discovered in any previous certificate, other than a Certificate of Practical Completion or Final Certificate. ... 42.5 Certificate of Practical Completion The Contractor shall give the Superintendent at least 14 days notice of the date upon which the Contractor anticipates that Practical Completion will be reached. When the Contractor is of the opinion that Practical Completion has been reached, the Contractor shall in writing request the Superintendent to issue a Certificate of Practical Completion. Within 14 days of the receipt of the request, the Superintendent shall give to the Contractor and to the Principal a Certificate of Practical Completion certifying the Date of Practical Completion or give the Contractor in writing the reasons for not issuing the Certificate. When the Superintendent is of the opinion that Practical Completion has been reached, the Superintendent may issue a Certificate of Practical Completion whether or not the Contractor has made a request for its issue. ... 42.7 Final Payment Claim Within 28 days after the expiration of the Defects Liability Period, or where there is more than one, the last to expire, the Contractor shall lodge with the Superintendent a final payment claim and endorse it 'Final Payment Claim'. The Contractor shall include in that claim all moneys which the Contractor considers to be due from the Principal under or arising out of the Contract or any alleged breach thereof. After the expiration of the period for lodging a Final Payment Claim, any claim which the Contractor could have made against the Principal and has not been made shall be barred. 42.8 Final Certificate Within 14 days after receipt of the Contractor's Final Payment Claim or, where the Contractor fails to lodge such claim, the expiration of the period specified in Clause 42.7 for the lodgement of the Final Payment Claim by the Contractor, the Superintendent shall issue to the Contractor and to the Principal a final payment certificate endorsed 'Final Certificate'. In the certificate the Superintendent shall certify the amount which in the Superintendent's opinion is finally due from the Principal to the Contractor or from the Contractor to the Principal under or arising out of the Contract or any alleged breach thereof. Unless either party, either before the Final Certificate has been issued or not later than 15 days after the issue thereof, serves a notice of dispute under Clause 47, the Final Certificate shall be evidence in any proceedings of whatsoever nature and whether under the Contract or otherwise between the parties arising out of the Contract, that the Works have been completed in accordance with the terms of the Contract and that any necessary effect has been given to all the terms of the Contract which require additions or deductions to be made to the Contract Sum, except in the case of - (a) fraud, dishonesty or fraudulent concealment relating to the Works or any part thereof or to any matter dealt with in the said Certificate; (b) any defect (including omission) in the Works or any part thereof which was not apparent at the end of the Defects Liability Period, or which would not have been disclosed upon reasonable inspection at the time of the issue of the Final Certificate; or (c) any accidental or erroneous inclusion or exclusion of any work, plant, materials or figures in any computation or any arithmetical error in any computation. Within 14 days after the issue of a Final Certificate which certifies a balance owing by the Principal to the Contractor, the Principal shall release to the Contractor any retention moneys or security then held by the Principal. 31Relevantly, the annexure provides, for the purposes of clause 42.1, that the time for payment claims is the "15 th day of each month, payment by end of each month". The annexure also provides that the defects liability period is a period of 12 months after the date of practical completion. The plaintiff's contention is that, properly construed, clause 42.1 and the annexure, read together, mean that payment claims can be made on the 15th day of each month until practical completion, then upon practical completion, and thereafter only within the time prescribed by clause 42.7, namely, 28 days after the expiration of the defects liability period. On that basis, it contends that payment claim 24 was made in respect of the same reference date as payment claim 23, and was therefore prohibited by s 13(5). 32In Brookhollow Pty Ltd v R & R Consultants Pty Ltd [2006] NSWSC 1 Palmer J said (at [44]-[49]): A payment claim under the Act is, in many respects, like a Statement of Claim in litigation. In pleading a Statement of Claim, the plaintiff sets out only the facts and circumstances required to establish entitlement to the relief sought; the Statement of Claim does not attempt to negative in advance all possible defences to the claim. It is for the defendant to decide which defences to raise; the plaintiff, in a reply, answers only those defences which the defendant has pleaded. In my opinion, a payment claim under the Act works the same way. If it purports reasonably on its face to state what s 13(2)(a) and (b) require it to state, it will have disclosed the critical elements of the claimant's claim. It is then for the respondent either to admit the claim or to decide what defences to raise. An assertion that service of a payment claim is prohibited under s 13(4) or (5) is like a defence in bar. For example, in the case of an action at law or in equity founded upon an oral contract for an interest in land it is open to a defendant to elect whether to raise a defence in bar founded on the Statute of Frauds. Similarly, it would be open to a respondent served with a payment claim under the Act to elect whether to raise a defence in bar that service of the claim is prohibited by s 13(4) or (5). A respondent to a payment claim may have a reason for electing not to raise such a defence: the payment claim may raise for determination an issue which will inevitably have to be determined in subsequent payment claims and the respondent may wish the issue to be resolved sooner rather than later. However, if the respondent does elect to raise a defence in bar founded on s 13(4) or (5), adjudication of that defence will require examination of the relevant terms of the contract, possibly the facts relating to the work performed and the time of performance and possibly also the content of previous payment claims. That examination may well be contentious and may involve issues of fact and law upon which minds may legitimately differ. In my opinion, the scheme of the Act in general and of s 13 and s 14 in particular requires that a defence in bar to a payment claim founded on s 13(4) or (5), like any other defence said to defeat or reduce the claim, must be raised in a timeously served payment schedule. If it is not, then the defence may not be relied upon to set aside or restrain enforcement of the adjudication determination as a nullity, nor may it be relied upon as a defence to entry of judgment under s 15(4) of the Act. In my opinion, these conclusions are consistent with, and are inherent in, the reasoning in Brodyn and they are not contrary to the majority decision in Nepean . They are also in conformity with the general approach to the determination of invalidity of a payment claim under s 13(4) and (5) taken by McDougall J in Energetech Australia Pty Ltd v Sides Engineering Pty Ltd [2005] NSWSC 801 at 25, by Campbell J in Lifestyle Retirement Projects No 2 Pty Ltd v Parisi Homes Pty Ltd [2005] NSWSC 705 at 19, and by Campbell J in Energetech Australia Pty Ltd v Sides Engineering Pty Ltd [2005] NSWSC 1143 at 87-90. 33More recently, in Dualcorp Pty Ltd v Remo Constructions Pty Ltd (2009) 74 NSWLR 190, Allsop P said (at [14]): Here, the work had been done; Dualcorp, the subcontractor, had left the site; it claimed payment by six invoices; six weeks later it repeated that claim by reference to the same invoices and, in my view, in respect of the same reference date. Dualcorp was prevented from serving the second payment claim. The terms of s 13(5) are a prohibition. The words "cannot serve more than one payment claim" are a sufficiently clear statutory indication that a document purporting to be a payment claim that is in respect of the same reference date as a previous claim is not a payment claim under the Building and Construction Industry Security of Payment Act and does not attract the statutory regime of the Act. 34The other judges in Dualcorp , Macfarlan JA and Handley AJA, did not need to and did not address that issue. 35Ordinarily, I would follow a first instance decision of a judge of this Division, but in circumstances where the President of the Court of Appeal has made a considered observation inconsistent with it, I consider that I am at liberty to reconsider the matter. Essentially, Palmer J's reasoning was that raising an argument under s 13(5), to the effect that service of the payment claim is prohibited, was like a plea in bar, in respect of which the adjudicator would have jurisdiction. I do not doubt that an adjudicator, like most tribunals, has jurisdiction to determine his or her own jurisdiction. But many tribunals have to decide at the outset whether their jurisdiction has been regularly invoked, and the fact that such a tribunal wrongly determines that its jurisdiction has been properly invoked does not mean that it thereafter has jurisdiction: it can still be prohibited from proceeding by a superior court. 36Moreover, in my view s 13(5) is not analogous to a plea in bar of the type described in Brookhollow v R & R Consultants . A plea by way of defence of the statute of frauds or of a release does not deny the jurisdiction of the court or tribunal hearing it. An objection to jurisdiction would have to be resolved by the tribunal or court but, if correct, does deny jurisdiction. In my view, s 13(5) has the effect that there is no valid payment claim to trigger the invocation of an adjudicator's jurisdiction, if it is the second claim in respect of the same reference date. 37Accordingly, I must resolve the question of construction as to whether, properly construed, clause 42.1 means that there is and can be no payment claim after practical completion until the expiry of the defects limitation period. 38I confess that at first I was quite strongly attracted to the argument that the reference to the certificate of practical completion in clause 42.1 was a powerful indicator that periodic monthly payment claims expired upon practical completion, and that after that there would be room only for a claim upon expiry of the defects limitation period. Ultimately, however, I have been persuaded that that view is not correct. 39It is first necessary to bear in mind that this is a pro forma contract, and that clause 42.1 is in a standard form. Essentially, it provides that a payment claim can be made (1) upon issue of a certificate of practical completion and (2) following expiry of the defects limitation period and, in addition, (3) at the times for payment claims stated in the annexure. When completing the annexure, different parties will insert different timeframes, but I think it would be giving too much significance to the reference to a certificate of practical completion at the beginning of clause 42.1, in the context of this type of contract, to treat it as some indication that periodic payment claims would come to an end when the certificate of practical completion issued. Merely expanding the clause by incorporating the definitions and schedule can give a misleading impression of the overall intent, if one overlooks how they are interrelated and assembled. 40There is, in clause 42.7, a clear indication that the final payment claim on the expiry of the defects limitation period was final, and that any claims not made by that time would thereafter be barred. There is no such provision in respect of practical completion. Clause 42.2, which I had originally supposed to give some support to the plaintiff's argument by its reference to a certificate of practical completion or a final certificate, in fact tells in the opposite direction, because a certificate of practical completion is not a payment certificate. What clause 42.1 contemplates is that upon issue of the certificate of practical completion a payment claim may be made, which would be followed by a further (interim) payment certificate. That certificate would be liable to correction under clause 42.2. 41There is nothing that explicitly says that monthly claims end upon issue of the certificate of practical completion. That is to be distinguished from clause 42.7, the necessary effect of which is that they do end upon the final certificate. There is no obvious or necessary requirement that monthly claims end upon practical completion. On the other hand, through the defects liability period the contractor may be required to carry out work to rectify omissions and defects in the works "howsoever caused and irrespective of responsibility for the defects or omission" (see general condition 37). Acceptance of the plaintiff's construction would entail that the contractor might have to wait 12 months to be paid for such works, even though the necessity for them was not the responsibility of the contractor. 42For those reasons, though not without doubt initially, I have come to the clear conclusion that, properly construed, clause 42.1 does not have the effect that a payment claim cannot be made after the issue of a certificate of practical completion until the expiry of the defects limitation period. It follows that the payment claim the subject of these proceedings, number 24, was not made in respect of the same reference date as payment claim 23, and therefore that it was a valid payment claim for the purposes of s 13. The third complaint therefore also fails. 43I order that the summons be dismissed with costs. 44I order that the amount paid into court to the credit of these proceedings, together with interest accrued thereon, be paid out to the first defendant. ********** 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: 14 December 2011