Pinnacle Construction Group Pty Ltd v Dimension Joinery & Interiors Pty Ltd

1. [1]

   Pinnacle Construction Group Pty Ltd seeks an order quashing a determination made on 5 February 2018 pursuant to s 22 of the Building and Construction Industry Security of Payment Act 1999 (NSW) that it pay Dimension Joinery & Interiors Pty Ltd an adjudicated amount of $111,470.80.

2. [2]

   On 17 January 2017 Pinnacle as head contractor and Dimension as subcontractor entered into a construction contract in relation to the installation of joinery at a residential unit development in Dee Why.

3. [3]

   Clause 4 of that contract provided, relevantly:

4. [4]

   On 12 December 2017 Dimension served on Pinnacle a payment claim pursuant to s 13(1) of the Act.

5. [5]

   The payment claim identified a reference date for the purposes of s 8(1) of the Act of 15 November 2017 and claimed an amount of $144,630.80.

6. [6]

   That sum was the balance of amounts claimed by Dimension in invoices of 20 February, 18 March, 18 April, 18 May and 25 May 2017 less payments made by Pinnacle to Dimension on various dates between 8 March 2017 and 10 November 2017.

7. [7]

   The payment claim annexed those earlier invoices, each of which was itself a payment claim for the purposes of the Act.

8. [8]

   Thereafter, on:

9. [9]

   Pinnacle challenges the determination on the bases that:

   1. (1)

      no reference date is available to support the payment claim;

   2. (2)

      the adjudicator denied Pinnacle procedural fairness by making unbidden and unheralded “pejorative findings” concerning Pinnacle’s conduct; and

   3. (3)

      those pejorative findings were not based on rational or reasonable reasoning or on logical connection between the evidence and the finding.

The reference date point

1. [10]

   Sections 13(5) and (6) of the Act provide:

2. [11]

   Pinnacle contends that the payment claim was invalid by reason of being in breach of s 13(5) in that:

3. [12]

   It is common ground that, in cl 4.1, the contract made provision for a reference date and that, accordingly, that reference date must be determined in accordance with “the terms of the contract as the date on which a claim for a progress payment may be made” (s 8(2)(a)).

4. [13]

   The reference date must be determined in accordance with the express terms of the contract: Southern Han Breakfast Point Pty Ltd (in liq) v Lewence Construction Pty Ltd [2016] HCA 52; (2016) 260 CLR 340 at [70].

5. [14]

   The matter that divided the parties was the proper construction of those express terms.

6. [15]

   The chapeau to cl 4.1 of the contract provides that Dimension must submit a progress claim to Pinnacle’s representative “once”. It was common ground that this expression should be read to mean “once in respect of each reference date”.

7. [16]

   Clause 4.1(vii) provides that “claims are to be submitted on the 15th of every month”.

8. [17]

   The question is whether, on the proper construction of the contract, the effect of that provision is that a new reference date arose on the 15th day of every month during the life of the contract, whether or not construction work had been carried out in any of those months.

9. [18]

   If not, and assuming that Dimension had carried out no construction work since it served its claim on 25 May 2017 (a matter which is controversial and to which I return below), the 12 December 2017 payment claim would be in respect of a reference date the subject of an earlier claim. It would therefore be a nullity, depriving the adjudicator of jurisdiction to make the determination: for example Dualcorp Pty Ltd v Remo Constructions Pty Ltd [2009] NSWCA 69; (2009) 74 NSWLR 190 at [8] to [15].

10. [19]

    As Allsop P said in Dualcorp at [8]:

11. [20]

    Generally speaking, reference dates continue to arise after work ceases, unless the contract otherwise provides: see Brodyn Pty Ltd t/as Time Cost and Quality v Davenport [2004] NSWCA 394; (2004) 61 NSWLR 421 at [63] (per Hodgson JA with whom Mason P and Giles JA agreed).

12. [21]

    The question is whether this contract otherwise provided.

13. [22]

    Mr Di Francesco who appeared for Pinnacle submits that provisions of cll 4.1(1) and 4.2 of the contract make clear that Dimension’s entitlement to submit a claim under cl 4.1(vii) was confined to the 15th day of a month in which it had performed construction.

14. [23]

    I see nothing in those clauses to compel that conclusion.

15. [24]

    Clause 4.1(i) provides that a claim must include Dimension’s “valuation of work executed and incorporated” in the works “to the date of the claim”. I see that provision as being relevantly neutral. It simply means that Dimension was required to include in the payment claim its “valuation” of the work it had done to date. The provision thus reflects the requirements of s 13(2)(b) that the claim “must indicate the amount of the progress payment that the claimant claims to be due”.

16. [25]

    As Mr Hume who appeared for Dimension points out, cl 4.1(i) does not require that Dimension include in the claim a valuation of the work “in the month” of the claim or “in the month preceding” the claim. It merely requires a valuation of the work done “to the date” of the claim. That valuation could be of work the subject of a previous claim; as s 13(6) of the Act permits.

17. [26]

    I do not see what light cl 4.2 casts on the issue. That clause is concerned with the question of when payment is to be made. It is not directed to the question of when a claim can be made.

18. [27]

    Mr Di Francesco drew attention to cases where a payment claim was served after work had ceased to be carried out and where the court has concluded that the payment was a nullity by reason of s 13(5) of the Act.

19. [28]

    Dualcorp is one such case; as is McDougall J’s decision in Trustees of Roman Catholic Church for Diocese of Lismore v TF Woollam & Son [2012] NSWSC 1559.

20. [29]

    But each case must be determined by reference to the proper construction of the contract in question. In each of Dualcorp and Woollam the contract provided for reference dates to arise while work was being performed and, separately, after work had ceased (see Dualcorp at [6]-[7] and Woollam at [32]). That may explain the conclusion in those cases that reference dates could not arise progressively after work was complete otherwise than as expressly provided by those contracts.

21. [30]

    There are no such provisions in the contract here and I see no reason to read down the plain words of cl 4.1(vii); save perhaps to limit Dimension’s entitlement to make a claim to the 15th day of the month during the life of the contract; not a limitation relevant in this case.

22. [31]

    Meagher JA (sitting as a trial judge) came to a similar view when construing the contract in question in Kyle Bay Removals Pty Ltd v Dynabuild Project Services Pty Ltd [2016] NSWSC 334 at [39].

23. [32]

    For those reasons, my conclusion is that, as asserted in the payment claim, a reference date arose on 15 November 2017 and therefore the payment claim does not offend the requirements of s 13(5) of the Act.

24. [33]

    In any event, it is common ground that Dimension did work on the site between 31 October 2017 and 3 November 2017.

25. [34]

    There is a dispute as to whether this work was additional contract work or merely defects rectification work for which Dimension would not be entitled to make a charge.

26. [35]

    However, as Mr Hume submits, even if the work should be characterised as defect rectification, and assuming contrary to my finding that Dimension can only make a claim on the 15th day of a month in which it has performed work, performance of defect rectification work would be sufficient to cause a further reference date to arise.

27. [36]

    Clause 9.1 of the contract entitles Pinnacle to deduct from monies otherwise due to Dimension damages or expenses it may incur by reason of defective work. Thus rectification of defective work would entitle Dimension to payment of funds withheld under cl 9.1 by reason of that defective work.

28. [37]

    The parties must have intended that Dimension be entitled to make a claim for that work and thus for a further reference date to arise in respect of that claim.

29. [38]

    Further the evidence establishes that some construction was performed after the date of Dimension’s 25 May 2017 invoice. A further reference date would thereby arise.

30. [39]

    For these reasons, the reference date point fails.

The failure to afford natural justice point

1. [40]

   A denial of procedural fairness will establish jurisdictional error entitling a party in the position of Pinnacle to have a determination set aside (for example Probuild Constructions (Aust) Pty Ltd v DDI Group Pty Ltd [2017] NSWCA 151; (2017) 95 NSWLR 82 at [99] (McColl JA with whom Beazley ACJ and Macfarlan JA agreed).

2. [41]

   McDougall J summarised the position in Watpac Constructions (NSW) Pty Ltd v Austin Corp Pty Ltd [2010] NSWSC 168 at [141] to [147] as follows:

3. [42]

   Pinnacle submits that the adjudicator made adverse findings about it without giving it an opportunity to be heard. It submits that those impugned findings went beyond those sought by Dimension in its adjudication application.

4. [43]

   Further, Pinnacle submits that the impugned findings were material in two senses. First, that Pinnacle could have made submissions or adduced evidence that might have caused the adjudicator to come a different view, and second, that it was reasonable to apprehend that the impugned findings affected the manner in which the adjudicator dealt with the matter.

5. [44]

   The impugned findings of the adjudicator related to Pinnacle’s claim that Dimension had failed to rectify defective works.

6. [45]

   The adjudicator stated:

7. [46]

   Mr Hume submits that in making the impugned findings, the adjudicator did no more than accept the contentions made by Dimension in its adjudication application. Accordingly, Mr Hume submits, there was no denial of procedural fairness as Pinnacle was on notice of Dimension’s contentions and had an opportunity to deal with them in in its adjudication response.

8. [47]

   I will deal with each of the three impugned findings in turn.

9. [48]

   The adjudicator described Pinnacle’s claim for defective works at par 43(b) of the determination as follows:

10. [49]

    “Tyrrells” is Tyrrells Property Inspections Pty Limited, a company Pinnacle engaged to inspect all of the units at the Dee Why complex. Tyrrells’ report covered the work of all trades. The report did not attribute a cost to the defects that they opined arose from the work carried out by Dimension.

11. [50]

    In its adjudication application, Dimension dealt with each of the four amounts referred to at [48] above.

12. [51]

    In relation to the $51,500 in the Tyrrells’ defects list, Pinnacle prepared a detailed schedule which set out, in relation to each of the 103 apartments in the complex, what it contended to be the “material cost” and “labour cost” associated with each of the defects identified by Tyrrells.

13. [52]

    In relation to those matters, Dimension, in its adjudication application said:

14. [53]

    In relation to the $25,000 - $40,000 claim for “post settlement joinery defects” Dimension said:

15. [54]

    As for the $10,000 claimed for “additional caulking” Pinnacle stated:

16. [55]

    Finally, in relation to $20,000 claimed for “additional cleaning and waste removal through the course of the works”, Dimension submitted:

17. [56]

    These are robust assertions. In the case of the figures claimed by Pinnacle for post settlement joinery defects ($25,000 - $40,000) and for additional cleaning ($20,000), Dimension’s contentions came close to an assertion that Pinnacle had made the figures up.

18. [57]

    I read the adjudicator’s finding that Pinnacle had “plucked numbers out of the air” as doing no more than accepting that submission (albeit in somewhat more colourful language).

19. [58]

    Mr Di Francesco submitted the adjudicator’s finding that Pinnacle “plucked numbers out of the air” in an “attempt to substantiate a position that it is not liable to make further payment” attributed an improper motive to Pinnacle and amounted to a finding that it had acted in bad faith, dishonestly or recklessly indifferent to the truth.

20. [59]

    I do not read the adjudicator’s finding that way.

21. [60]

    I read the adjudicator’s conclusion that Pinnacle had plucked numbers out of the air “in an attempt to substantiate a position that it is not liable to make further payment” as meaning no more than that Pinnacle had done so in an attempt to justify its position. I do not read into the adjudicator’s words the more sinister implication the subject of Mr Di Francesco’s submission.

22. [61]

    I see no procedural unfairness here.

23. [62]

    In its adjudication application Pinnacle submitted that, by an email sent on 6 November 2017, Ms Dianne Bechara, a director of Pinnacle, “notes that when [Pinnacle] gets a payment from another project it will finalise the payment schedule to show dates for final payments”. That statement suggested that Pinnacle would only indicate the time at which it would pay Dimension once it received payment “from another project”.

24. [63]

    Ms Bechara’s email was attached to the adjudicator’s application.

25. [64]

    Pinnacle did not respond to this contention.

26. [65]

    The adjudicator’s statement that Pinnacle “was content to hold on to payments for its own cash flow purposes” appears to me to be an acceptance that this was the correct characterisation of what Ms Bechara had said.

27. [66]

    In fact, what Ms Bechara said in her email was:

28. [67]

    Thus what Ms Bechara said was that, now that defect rectification work had been done by Dimension at the Dee Why project, Pinnacle was finalising a claim for the Dee Why project (not “another project”) and that payment was expected shortly.

29. [68]

    It appears, from the language used by the adjudicator, that he did not look with care at the 6 November 2017 email but rather accepted Dimension’s characterisation of it. That may well have been because Pinnacle did not, in its adjudication response, dispute that characterisation.

30. [69]

    That may be have been an error by the adjudicator. But I do not consider that by making that error, and accepting Dimension’s uncontradicted characterisation of Ms Bechara’s email, that a denial of procedural fairness arose.

31. [70]

    In its adjudication application, Dimension stated that, in her email 27 October 2017, Ms Bechara agreed “to pay $25,000.00 to get [Dimension] on site to complete the items starting on Tuesday 31/10/2017”.

32. [71]

    Again, Pinnacle did not dispute in its adjudication response that this was the effect of Ms Bechara’s 27 October 2017 email.

33. [72]

    The adjudicator’s conclusion appears to be an acceptance of Dimension’s characterisation of Ms Bechara’s email.

34. [73]

    Ms Bechara’s 27 October 2017 email read:

35. [74]

    Dimension’s statement in its adjudication application that Ms Bechara had agreed to make the payment “to get” Dimension back on site is an available conclusion to be drawn from this email. It is also consistent with an email that Mr Joe Bechara, another director of Pinnacle, sent Dimension on 29 November 2017 where he stated that Pinnacle had made payments to Dimension, including the payment of $25,000, “to push completion” of rectification works.

36. [75]

    I read the adjudicator’s words as doing no more than accepting Dimension’s submissions as to Pinnacle’s motivation in making the $25,000 payment.

37. [76]

    I see no procedural unfairness.

38. [77]

    Mr Joe Bechara attached to his 29 November 2017 email various “Buyer Defects Lists” and asserted that Pinnacle had “not received confirmation that the above defective items in the list relating to joinery have been closed out”. He asserted that “these issues are not new…and…are still outstanding and we are facing these issues with the new purchasers”.

39. [78]

    Mr Bechara also stated that “we retained monies from you and have met a number of times on site and in the office to discuss”.

40. [79]

    In its adjudication application, Dimension said that this email had been sent “without notice” and was “an attempt to recast its earlier communications” and to ignore Dimension’s confirmation that all was completed.

41. [80]

    Dimension also stated that:

42. [81]

    In its adjudication response Pinnacle maintained that defects remained outstanding and said that Mr Bechara’s email “was issued after payments were made to Dimension and only after Dimension failed to visit site and complete the works”.

43. [82]

    However, the adjudication response did not respond to Dimension’s contention that Pinnacle was endeavouring to “recast its earlier communications” nor Dimension’s contention that Mr Bechara had falsely stated that there had been meetings to endeavour to resolve the matter.

44. [83]

    It appears to me that by stating that Pinnacle had “suddenly expressed concern about the extent of the work to be completed”, the adjudicator was doing no more than accepting the submissions of Dimension that I have set out.

45. [84]

    Contrary to Mr Di Francesco’s submissions I do not accept that it is a fair reading that the adjudicator found Pinnacle’s complaints to be disingenuous or a recent invention, let alone that Pinnacle had acted in bad faith or dishonestly.

46. [85]

    Again, I find no want of procedural fairness here.

47. [86]

    For those reasons, I do not accept that the adjudicator has deprived Pinnacle of procedural fairness so as to establish jurisdictional error on his part.

Irrationality and unreasonableness

1. [87]

   Pinnacle’s submissions that the adjudicator’s findings were so irrational and unreasonable as to be beyond jurisdiction were in substance based upon its allegations that the adjudicator failed to afford natural justice to Pinnacle.

2. [88]

   Although the adjudicator at times expressed himself in general terms, my attention has not been taken to anything in his determination (beyond the matters complained of concerning procedural fairness) that would warrant a conclusion of irrational or illogical reasoning bespeaking jurisdictional error.

3. [89]

   As Mr Hume pointed, the High Court and the Court of Appeal have recently emphasised the breadth of the power given to adjudicators under the Act. It has been said that the time limits under the Act are “brutally fast”, that the Act provides a form of “rough justice” and that rights under the Act are to be determined informally, summarily and quickly: Probuild Constructions (Aust) Pty Ltd v Shade Systems Pty Ltd [2018] HCA 4; (2018) 351 ALR 225 at [40] and [44]; Probuild Constructions (Aust) Pty Ltd v DDI Group Pty Ltd at [130]. I have earlier expressed agreement with the observations of Sackar J in Avopiling (NSW) Pty Ltd v Menard Bachy Pty Ltd [2012] NSWSC 1466 at [38] that “very considerable latitude…should be afforded to an adjudicator as to the manner and form of the determination”: see Grid Projects NSW Pty Ltd v Proyalbi Organic Set Plaster Pty Ltd [2012] NSWSC 1571 at [90].

4. [90]

   I accept Mr Hume’s submission that it would require a most extraordinary case for a court to find an adjudicator’s decision to be unlawful because it is irrational or fails to disclose a logical connection between the findings made and the evidence.

5. [91]

   I see no justification for coming to that justification for coming to that conclusion in this case.

Conclusion

1. [92]

   Pinnacle’s challenge to the determination fails.

2. [93]

   The proceedings should be dismissed with costs.