Iridium Developments Pty Ltd v A-Civil Aust Pty Ltd

The first defendant, A-Civil Aust Pty Ltd (A-Civil), undertook certain early civil works for the plaintiff, Iridium Developments Pty Ltd (Iridium), in respect of a property development at 49-57 Gerrale Street, Cronulla, New South Wales.

On 8 February 2021, A-Civil issued progress claim 11 under the Building and Construction Industry Security of Payment Act 1999 (NSW) (the SOP Act) for $3,702,858. The claim attached a schedule entitled “Progress Claim Breakup” that was divided into Sections A and B for “Contract Works” and “Variation Works” respectively. The items in Section B included item “V18”, described as being for “Section 73 Works and Installation”, for which an amount of $240,000 was claimed.

On 16 February 2021, Iridium issued a payment schedule denying any payment in respect of payment claim 11.

The payment schedule stated that the reasons for denial of the whole of the payment claim were set out in an attached explanatory memorandum. The reasons included:

At the time relevant to these proceedings, s 13 relevantly provided:

On 2 March 2021, A-Civil lodged an adjudication application under s 17 of the SOP Act for an adjudication determination of the disputed payment claim.

Pursuant to s 17(6) of the SOP Act, the application was referred to the second defendant as adjudicator to determine the disputed claim.

Iridium filed and served an adjudication response pursuant to s 20 of the SOP Act on 9 March 2021. Iridium’s response acknowledged that the adjudicator had the capacity to determine whether he had jurisdiction to adjudicate the payment claim under the SOP Act. The response then set out matters relied on by Iridium in support of its contention that the adjudicator lacked jurisdiction, including the matter on which Iridium relies in these proceedings:

On 17 March 2021, the adjudicator determined that Iridium was liable to pay A-Civil the sum of $665,512.19 in respect of progress claim 11. [1]

The adjudicator’s reasons for determination acknowledged the jurisdictional challenges raised by Iridium, including that:

The adjudicator rejected that challenge, stating:

After addressing the other jurisdictional challenges raised by Iridium, the adjudicator then proceeded to value each of the variations included within the claim that were pressed by A-Civil. In relation to “V18 – Section 73 works and installation”, the adjudicator stated that Iridium had certified and paid $180,000 of the claim for $240,000 and had not provided any reason in the payment schedule for the difference of $60,000. The adjudicator referred to Iridium’s submission made in its adjudication response that the works were yet to be completed by A-Civil. However, referring to s 20 of the SOP Act, the adjudicator determined that he was unable to consider that submission as it had not been included in the payment schedule. The adjudicator referred to the statutory declaration made by an officer of A-Civil to the effect that the remaining s 73 sewer works had been completed and valued V18 as $60,000, being the contract value of $240,000 less the amount of $180,000 already certified and paid. [2]

These proceedings were commenced on 26 March 2021.

On that date, the Court made an interim order restraining A-Civil until 9 April 2021 from obtaining any adjudication certificate in respect of the adjudicator’s determination under s 24(1)(a) of the SOP Act and from filing any adjudication certificate as a judgment debt in any court of competent jurisdiction under s 25(1) of the SOP Act. The order was made upon Iridium giving the usual undertaking as to damages and on the condition that Iridium pay into court the sum of $700,481.46. That sum was paid into court. On 8 April 2021, the Court made an order continuing the interim order until further order.

In these proceedings, Iridium claims:

Iridium accepts that an adjudication determination cannot be set aside by the Court, except for jurisdictional error on the part of the adjudicator: Probuild Constructions (Aust) Pty Ltd v Shade Systems Pty Ltd (2018) 264 CLR 1; [2018] HCA 4 (Probuild) at [35]-[52] (Kiefel CJ, Bell, Keane, Nettle and Gordon JJ).

Iridium initially submitted that the adjudicator committed a jurisdictional error because, whilst the adjudicator had determined that de-stressing works and s 73 works had been carried out within 12 months prior to service of the payment claim, he had failed to determine whether the payment claim related to those works. That submission was withdrawn during the course of the hearing on 7 September 2021. Senior counsel for Iridium candidly accepted that paragraphs 54 and 55 of the adjudicator’s reasons for determination, read in the context of those reasons as a whole (and particularly paragraphs 41 to 55 of the reasons), is a determination that some of the s 73 works that were the subject of variation 18 included in the payment claim were conducted within the 12 month period referred to in s 13(4)(b) of the SOP Act. [3] A-Civil informed the Court that it no longer contends that the de-stressing works referred to in paragraph 42(a) of the adjudicator’s reasons were included in the payment claim.

Senior counsel for Iridium submitted that the adjudicator’s determination that some of the s 73 works included in the payment claim were carried out within the requisite 12 month period was wrong, and that it was a jurisdictional matter that the Court can and must determine for itself on an application to set aside or declare void an adjudicator’s determination under the SOP Act for jurisdictional error. It was submitted that the evidence before the adjudicator did not support his finding that some of the s 73 works that were the subject of variation 18 in the payment claim were performed within the 12 month period stipulated by s 13(4)(b) of the SOP Act.

This was the only alleged jurisdictional error relied on by Iridium in these proceedings. Iridium withdrew a submission that the adjudicator’s determination was void for denial of natural justice. [4]

Section 13(4)(b) of the SOP Act will be satisfied if some of the construction work to which the payment claim relates was carried out within the 12 month period stipulated in that section: Estate Property Holdings Pty Ltd v Barclay Mowlem Construction Ltd (2004) 61 NSWLR 515; [2004] NSWCA 393 at [17]-[21].

Iridium’s submissions raise the same threshold question that was considered and determined in EQ Constructions Pty Ltd v A-Civil Aust Pty Ltd [2021] NSWSC 1604 (EQC v A-Civil), namely whether s 13(4)(b) is a matter to be determined objectively by the Court on an application for judicial review of an adjudicator’s decision on the grounds of jurisdictional error.

In Icon Co (NSW) Pty Ltd v Australia Avenue Developments Pty Ltd [2018] NSWCA 339 (Icon), Basten JA said (at [13], Meagher and Leeming JJA agreeing) (citations omitted):

Iridium submitted that, as a matter of statutory construction, s 13(4)(b) of the SOP Act is a jurisdictional fact within the first category identified by his Honour. A-Civil submitted that s 13(4)(b) is within the second category.

Senior counsel for Iridium accepted that, if s 13(4)(b) falls into the second category, requiring an opinion or state of satisfaction on the part of the adjudicator rather than establishment of the objective fact to enliven the adjudicator’s jurisdiction, then these proceedings must be dismissed. Iridium does not contend that the adjudicator in this case did not form the requisite opinion: see [17]-[18] above. Nor does Iridium contend that the adjudicator’s opinion was not lawfully formed. Rather, Iridium simply contends that the opinion was erroneous.

In EQC v A-Civil, I held that s 13(4)(b) of the SOP Act is a jurisdictional fact within the second category referred to in Icon. My reasons explained at [32]-[69] of that judgment address the substance of the parties’ submissions in this case. For those same reasons, the adjudicator’s finding in this case that the payment claim included some construction work that had been carried out within the period of 12 months prior to service of the payment claim was sufficient to enliven his statutory jurisdiction to determine the adjudication application, even if that finding was erroneous. It is not for the Court to determine whether the finding was correct or erroneous.

That conclusion renders it unnecessary to address A-Civil’s submission that s 20(2B) of the SOP Act precludes Iridium from advancing its claim for relief on the grounds of the alleged jurisdictional error relating to s 13(4)(b). Had it been necessary to do so, I would have rejected that submission for two reasons. First, the payment schedule issued by Iridium did raise the issue of alleged non-compliance with s 13(4)(b): see [4] above. Second, s 20(2B) does not preclude a respondent from raising grounds, not included in its payment schedule, on which it is asserted that the adjudicator lacks jurisdiction: see Acciona Infrastructure Australia Pty Ltd v Holcim (Australia) Pty Ltd [2020] NSWSC 1330 at [38]-[39] and the authorities there referred to.

The proceedings must be dismissed for those reasons. There is no apparent reason why Iridium should not pay A-Civil’s costs of the proceedings and no party submitted that they would wish to be heard in relation to costs. Senior counsel for Iridium indicated that, if Iridium were unsuccessful, it would wish to be heard about whether the moneys paid into court pursuant to the interim orders made on 26 March 2021 should be paid out to A-Civil. Senior counsel foreshadowed a notice of motion for a stay of any order for payment of those moneys out of court in circumstances where Iridium apprehends that A-Civil is insolvent (which is disputed by A-Civil) and there are other proceedings on foot in the Technology and Construction List in which Iridium claims damages against A-Civil for alleged breaches of contract and in which the parties’ final entitlements under their contract will be determined. [5]

In those circumstances the appropriate course is to direct the parties to prepare short minutes of order giving effect to these reasons (including orders as to the moneys paid into court) and, in the absence of agreement about those orders, to serve written submissions in support of the orders for which they contend. The matter will be listed at 9.30am on 15 December 2021 for the making of orders, and any notice of motion of the kind referred to above should be filed and served together with any supporting evidence and made returnable at the same time.

My observations immediately above should not be read as encouraging or indicating any view about the likely prospects of the motion foreshadowed by Iridium. I note that any such motion will need to contend with the following observations of Kiefel CJ, Bell, Keane, Nettle and Gordon JJ in Probuild at [51] (citations omitted):

The directions and orders of the Court are as follows: