Supreme Court New South Wales Medium Neutral Citation: Diona Pty Ltd v Downer EDI Works Pty Ltd [2020] NSWSC 480 Hearing dates: 28 April 2020; written submissions 29 and 30 April 2020 Date of orders: 01 May 2020 Decision date: 01 May 2020 Jurisdiction: Equity - Technology and Construction List Before: Stevenson J Decision: Summons dismissed Catchwords: BUILDING AND CONSTRUCTION – adjudication determination under the Building and Construction Industry Security of Payment Act 1999 (NSW) – whether determination void – whether jurisdictional error – whether Adjudicator failed to consider the contract Legislation Cited: Building and Construction Industry Security of Payment Act 1999 (NSW) Cases Cited: Anderson Street Banksmeadow Pty Ltd v Helcon Contracting Australia Pty Ltd [2013] NSWSC 657 BM Alliance Coal Operations Pty Limited v BGC Contracting Pty Limited [2015] 1 Qd R 228; [2013] QCA 394 Cockram Construction Pty Ltd v Fulton Hogan Construction Pty Ltd [2018] NSWCA 107 Hanson Construction Materials Pty Ltd v Brolton Group Pty Ltd [2019] NSWSC 1641 John Holland Pty Ltd v Roads and Traffic Authority of New South Wales [2007] NSWCA 19 Lee v Minister for Immigration and Citizenship [2007] FCAFC 62 Minister for Immigration and Multicultural Affairs v Bhardwaj (2002) 209 CLR 296; [2002] HCA 11 Rhomberg Rail Australia Pty Ltd v Concrete Evidence Pty Ltd [2019] NSWSC 755 Trysoms Pty Ltd v Club Constructions (NSW) Pty Ltd [2007] NSWSC 1298 YTO Construction Pty Ltd v Innovative Civil Pty Ltd [2019] NSWCA 110 Category: Procedural and other rulings Parties: Diona Pty Ltd (Plaintiff) Downer EDI Works Pty Ltd (First Defendant) Philip Martin (Second Defendant) Representation: Counsel: B Le Plastrier (Plaintiff) S Robertson (First Defendant) Solicitors: Mills Oakley (Plaintiff) McCullough Robertson (First Defendant) File Number(s): 2020/122908 Judgment 1. By a Subcontract Agreement ("the Contract") dated 7 May 2019, the plaintiff, Diona Pty Ltd subcontracted to the first defendant, Downer EDI Works Pty Ltd, certain work in relation to safety upgrades on the Great Western Highway at Blackheath. 2. On 16 April 2020 the second defendant, an Adjudicator appointed under the Building and Construction Industry Security of Payment Act 1999 (NSW), determined that Diona should pay Downer $430,990.13. 3. Diona commenced these proceedings on 24 April 2020 seeking a declaration that the determination was void and an injunction restraining Downer from requesting an adjudication certificate or filing same as a judgment debt. 4. On 24 April 2020, Ball J as Duty Judge granted, ex parte, such an injunction up to 5.00pm on 28 April 2020. 5. The matter was listed for hearing before me on that day for argument as to whether the injunction should be continued until the final hearing. 6. In submissions served the previous evening Downer, through its counsel Mr Robertson, indicated that it did not propose to serve evidence and that it was in a position to proceed to a final hearing on 28 April 2020. 7. Through my associate, I informed the parties that I was available to conduct a final hearing on 28 April 2020, if that was agreed. However, Diona, through its counsel, Mr Le Plastrier, indicated that it was not in a position to proceed to a final hearing. 8. Accordingly, the matter proceeded for some time as an application by Diona for interlocutory relief. However, after Mr Robertson had concluded his submissions, and after a short adjournment, counsel reached an agreement whereby the matter could proceed on a final basis, taking into account the matters put orally on 28 April 2020, together with submissions put in writing over the next few days. 9. In the meantime, Downer undertook to take no steps to obtain an adjudication certificate until I gave judgment. The ambit of the dispute 1. Although the Adjudicator's determination was for $430,990.13, the amount in dispute between the parties is now only $30,000. 2. Part of Diona's claim against Downer was for liquidated damages. 3. One of Downer's arguments was that it was entitled to set off against that claim an amount of $30,000 on account of two extensions of time, totalling 15 days at a daily rate of $2,000. Downer contended it had this right under cl 28 of the Contract. The parties referred to these extensions of time at "EOT 18" and "EOT 21". 4. Diona's case was that Downer was not entitled to EOT 18 or EOT 21 because, by reason of provisions in cl 40 of the Contract, the claims had been made out of time, had been so determined by Diona's representative, and were "absolutely barred"; subject to Downer availing itself of the dispute resolution provisions in cl 41 of the Contract: which it did not do. 5. Thus, the effect of Diona's case was that the Adjudicator should have determined that Diona pay Downer $400,990.13, rather than $430,990.13. Diona's case 1. In its Technology and Construction List Statement, Diona put its case this way: "[Diona] contends that the Adjudication Determination is void on the basis that the [Adjudicator] failed to come to a view as to what amount is properly payable on the true merits of the payment claim insofar as: 1. The Adjudication Application and the Adjudication Response each identified EOT18 and EOT21 as claims for extensions of time that [Diona] had rejected; 2. The Adjudication Response identified that: 1. the determination of claims for extensions of time were final and could not be disturbed other than by way of a claim under the contract between the parties (the Contract); 2. the Contract contained a time bar on the making of a claim under the Contract. 1. The Adjudication Determination failed to give any reference to, or consideration of, whether each of EOT18 and EOT21 were time-barred under the Contract given that each had previously been rejected by [Diona] in reaching the conclusion that [Downer] was entitled to fifteen days for EOT18 and EOT21." 1. As finally developed orally, Mr Le Plastrier's put the matter a little differently. 2. Mr Le Plastrier's submission was that the Adjudicator had failed to address his statutory function so far as concerns the extension of time issue because he had not, as s 22(2)(b) of the Act required him to do, "considered" the "provisions of the construction contract". 3. The contractual provisions that the Adjudicator failed to consider were those in cl 40 of the contract which, Mr Le Plastier submitted, put an end to Downer's entitled to the extensions of time EOT 18 and EOT 21. 4. Mr Le Plastrier referred to Basten JA's observation in Cockram Construction Pty Ltd v Fulton Hogan Construction Pty Ltd [2018] NSWCA 107 at [10] and [11]: "[10] The particular complaint raised by the respondent was that the Adjudicator had disregarded the terms of the contract. The point was expressed in various ways, with varying rhetorical emphasis. [11] The claim had substance if it could be said that the Adjudicator failed to 'consider' the terms of the contract in so far as they were relevant to an issue in dispute and relied on by a party. That is because s 22(2)(b) requires the Adjudicator 'to consider' the provisions of the construction contract from which the application arose." 1. To consider that argument it is necessary to turn to Donia's Adjudication Response and the Adjudication Determination itself. That is because the question of whether the Adjudicator "considered" the provisions of the contract is a question of fact. The Adjudication Application, Response and Determination 1. In its Adjudication Application, Downer devoted a number of pages to its contentions concerning extension of time and, in particular, its asserted entitlement to EOT 18 and EOT 21. 2. In its Adjudication Response, Diona referred to the provisions in cl 40 of the contract and stated: "Determinations of claims for: … (B) Extension of time By Diona are final and cannot be disturbed except by raising a Claim under the Contract, see relevant clauses of the Subcontract". 1. In the section of the Adjudication Response dealing with Diona's claim for liquidated damages, and under a sub-heading "Diona's Entitlement under the Subcontract to set-off Liquidated Damages", Diona stated that "in respect of Diona's contractual entitlement under the subcontract to set-off Liquidated Damages" it "repeats and relies" on a number of earlier paragraphs, including the one I have set out in the previous paragraph. 2. On the question of extension of time, Diona simply said: "(iv) Downer has claimed Extensions of Time under the Subcontract in the amount of 45 days. (v) Diona has: (a) granted 20.9 days; (b) reject[ed] all other requests for extension of time." 1. Diona did not otherwise engage with Downer's contentions concerning EOT 18 and EOT 21. 2. In particular, Diona did not in its Adjudication Response develop the argument Mr Le Plastrier put to me that, on the proper construction of cl 40 of the Contract, and in the events that happened, Downer was no longer entitled to maintain an entitlement to EOT 18 or EOT 19 3. The Adjudicator dealt with the question of Diona's claim for liquidated damages and Downer's contention that it was entitled to set off the amounts allegedly due by reason of EOT 18 and EOT 21 (ie the $30,000) over some two pages of the Determination. 4. In the course of considering Diona's contentions concerning liquidated damages, the Adjudicator said at [5.7]: "[Downer] suggests that an adjudicator must consider the provisions in the construction contract but does not have to strictly apply the terms of the contract or resolve the dispute between the parties regarding liquidated damages. [Downer] refers to the judgment in Probuild Constructions (Aust) Pty Ltd v Shade Systems Pty Ltd (2018) CLR 1 (Probuild) to support this submission. The section of the judgment in Probuild referred to by [Downer] does not support this suggestion. The Act at section 22(2)(b) requires the adjudicator to consider the provisions of the construction contract when making the determination." (Emphasis added.) 1. That passage makes clear that the Adjudicator understood that he was required to consider the provisions of the Contract. 2. The Adjudicator then dealt with Diona's claim for liquidated damages and Downer's contention that it was entitled to EOT 18 and EOT 21. The Adjudicator dealt with Downer's EOT 18 and EOT 21 entitlements by reference only to cl 28 of the Contract (which, as I have said, set out the circumstances in which Downer could make a claim for an extension of time) but without any reference to cl 40 of the Contract, nor to Diona's contention, that I have set out at [22] and [24]. 3. The question is, should it thereby be inferred that, despite having acknowledged in terms that he was obliged to consider the provisions of the Contract, the Adjudicator did not do so. 4. I am not prepared to make this finding. 5. There are a number of possible reasons why the Adjudicator did not refer to cl 40 of the Contract in his consideration of the matter. 6. As Mr Robertson submitted, "the adjudicator may well have come to the view that in circumstances where [Diona] did not clearly articulate such argument, that that was a point that didn't need to be dealt with". 7. Or it may be that the Adjudicator misunderstood Diona's argument. As I have said, it was not put forward with great clarity in the Adjudication Response. And Mr Le Plastrier eschewed any misunderstanding by the Adjudicator of Diona's argument as a basis to contend for jurisdictional error. 8. The Adjudicator may have come to the wrong decision about Dower's entitlement to EOT 18 and EOT 21. But that, without more, is not a basis to set aside the set aside the determination. 9. I find that Diona has failed to establish a basis to quash the Adjudicator's determination. Discretion 1. Mr Robertson submitted that had I concluded that the Adjudicator did act beyond jurisdiction I should in any event have refused Diona relief as a matter of discretion. 2. That was because, Mr Robertson submitted, in that hypothetical circumstance: 1. the Adjudicator's foray beyond jurisdiction was only in respect of the $30,000 associated with EOT 18 and EOT 21 out of a total Determination of $430,990.13; and 2. Downer had in effect agreed to forgo the $30,000 as it had undertaken in its List Response that if the Court found such jurisdictional error it would not enforce the Determination if Diona promptly paid it the amount of the Determination less $30,000 (ie $430,990.13 less $30,000 = $400,990.13). 1. In view of my conclusion that the Adjudicator did not act beyond jurisdiction, it is not necessary for me deal with this contention. 2. However, I should record that Mr Le Plastrier submitted that this course would not have been open to me and that the circumstances in which the Court can refuse relief, notwithstanding a finding of judicial jurisdictional error, were limited to cases where: 1. the applicant had not exhausted other remedies; 2. there be an excessive delay by the applicant in prosecuting its case; or 3. the making of an order would be futile. 1. Mr Le Plastrier referred to the decision of the High Court in Minister for Immigration and Multicultural Affairs v Bhardwaj (2002) 209 CLR 597; [2002] HCA 11 at [51] (Gaudron and Gummow JJ; McHugh J agreeing), and the discussion of that case in Lee v Minister for Immigration and Citizenship [2007] FCAFC 62 at [45] (Besanko J, Moore J agreeing). 2. I also observe that there are decisions in this Court to the effect that, if an adjudication determination is infected by jurisdictional error it is void, not voidable and that the Court ought not exercise its discretion to, as it were, allow the determination to the extent that it is not infected by jurisdictional error: for example see John Holland Pty Ltd v Roads and Traffic Authority of New South Wales [2007] NSWCA 19 at [55] (Hodgson JA; Beazley JA agreeing) and Trysoms Pty Ltd v Club Constructions (NSW) Pty Ltd [2007] NSWSC 1298 at [16] (Hammerschlag J). 3. I referred to some of these authorities in Anderson Street Banksmeadow Pty Ltd v Helcon Contracting Australia Pty Ltd [2013] NSWSC 657. 4. There is also Queensland authority to the same effect: BM Alliance Coal Operations Pty Limited v BGC Contracting Pty Limited [2015] 1 Qd R 228; [2013] QCA 394 at [70]-[71] (Muir JA; Holmes JA and Ann Lyons J agreeing). 5. Some uncertainty appears to have arisen in this area by reason of the decision of the Court of Appeal in YTO Construction Pty Ltd v Innovative Civil Pty Ltd [2019] NSWCA 110. 6. Ball J referred to that decision recently in Rhomberg Rail Australia Pty Ltd v Concrete Evidence Pty Ltd [2019] NSWSC 755 at [25] as follows: "Prior to the decision of the Court of Appeal in YTO Construction Pty Ltd v Innovative Civil Pty Ltd [2019] NSWCA 110, it was generally accepted in New South Wales at least that the effect of a jurisdictional error was to render a determination void, on the basis that a determination is a single determination of a single payment claim: see Fulton Hogan Construction Pty Ltd v Cockram Construction Ltd [2018] NSWSC 264, and the cases cited there. However, it is accepted that any relief given by the Court in respect of jurisdictional error is discretionary and, in some cases, the Court has made it a condition of exercising that discretion that the plaintiff undertake to pay that portion of the claim that is unaffected by the error: see, for example, Emergency Services Superannuation Board v Davenport [2004] NSWSC 697. Nonetheless, without discussing the earlier authorities, the Court of Appeal appears to have reached the conclusion in YTO Construction that part of a determination affected by error can be severed from that part that is not." 1. Later in the Hanson Construction Materials Pty Ltd v Brolton Group Pty Ltd [2019] NSWSC 1641, Ball J said at [44] (albeit in obiter): "The parties provided the Court with extensive submissions on whether it had power to grant conditional relief in this case. It is not necessary to review the relevant authorities in detail. I accept Brolton's submission that the recent trend in the authorities in New South Wales is to the effect that the Court does have power in effect to sever that part of a determination that is within jurisdiction from that part which is not and to grant relief in relation to the latter on condition that the claimant pays the former: see YTO Construction Pty Ltd v Innovative Civil Pty Ltd [2019] NSWCA 110; Rhomberg Rail Australia Pty Ltd v Concrete Evidence Pty Ltd [2019] NSWSC 755; CC Builders (Aust) Pty Ltd v Milestone Civil Pty Ltd [2019] NSWSC 1251." 1. There, it appears, the matter has rested. 2. For the future, the question is moot as the matter has now been clarified by insertion into the Act of s 32A, which provides: 32A Finding of jurisdictional error in adjudicator's determination (1) If, in any proceedings before the Supreme Court relating to any matter arising under a construction contract, the Court makes a finding that a jurisdictional error has occurred in relation to an adjudicator's determination under this Part, the Court may make an order setting aside the whole or any part of the determination. (2) Without limiting subsection (1), the Supreme Court may identify the part of the adjudicator's determination affected by jurisdictional error and set aside that part only, while confirming the part of the determination that is not affected by jurisdictional error. (Emphasis added.) 1. It is common ground that this section has no retrospective effect and does not apply to the present case. Conclusion 1. The Summons should be dismissed. 2. The parties should bring in short minutes to give effect to these reasons. 3. I will determine argument as to costs on the papers. ********** 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: 01 May 2020