Cherrie Civil Engineering Pty Ltd v Jonishan Pty Ltd

1. [1]

   HER HONOUR: The plaintiff head contractor, Cherrie Civil Engineering Pty Ltd, seeks to quash an adjudication determination made under the Building and Construction Industry Security of Payment Act 1999 (NSW). The determination is said to be void for jurisdictional error, where the adjudicator is said to have failed to consider some 600 pages of material.

Facts

1. [2]

   In November 2023, the head contractor engaged the defendant subcontractor, Jonishan Pty Ltd, to undertake stormwater works on a residential development in Pennant Hills. The contract price was $2,134,059. Work began. A series of payment claims and variations followed. But by April 2024, the parties were discussing a reduced scope of works (or descoping) and the value of that descoping.

2. [3]

   In May 2024, the head contractor issued Variation No 18, “Scope Deduction”, valuing the variation for the descoping at $1,152,222.50. The subcontractor rejected this valuation assessment. On 3 June 2024, the head contractor issued Variation No 18 (Rev 2), valuing the variation for the descoping at $974,092.93 instead.

3. [4]

   The parties’ representatives met on-site on 4 June 2024. According to the head contractor, they agreed that the remaining stormwater works would be done by another subcontractor. On 5 June 2024, the head contractor emailed the subcontractor, “As discussed, and in the interest of both parties, [the head contractor] will remove the remaining stormwater lines from the scope. A marked-up plan showing the remaining contract scope to be removed will follow … shortly.”. The head contractor advised that a measurement of works completed would be undertaken and agreed between the parties, with the works then valued for final claim. The head contractor further advised that it would provide a mark-up and measurement of works completed for the subcontractor’s review.

4. [5]

   Within the hour, the head contractor provided marked up plans of works complete to date, noting “we consider all stormwater works in [the] subcontract to be incomplete and to be descoped”. The subcontractor’s review and comments were sought.

5. [6]

   On this application, I was taken to Sheet Layout Plans and told that these were the plans attached to the head contractor’s email. On the plans, various proposed stormwater pipes were clouded with a green line. This was said to indicate that the ‘clouded’ work had been descoped.

6. [7]

   As the adjudicator later noted, it was common ground that the subcontractor demobilised from the site on 7 June 2024. On 24 June 2024, the head contractor emailed the subcontractor following the departure of the last item of plant from the site. The head contractor advised that a final valuation of the descope of the remaining works would be provided shortly.

7. [8]

   On 27 June 2024, the head contractor provided Variation No 20 in respect of the second scope deduction for discussion. The cost impact of the second descoping was valued at $381,799.04. On 5 August 2024, the subcontractor rejected the valuation of both Variation No 18 and Variation No 20. The parties’ representatives met on 7 August 2024 and agreed Variation No 18. Variation No 20 was left on the basis that the subcontractor would “review and respond”. There matters lay.

8. [9]

   Nine months later, on 30 May 2025, the subcontractor made Payment Claim 9, seeking $553,668.81. An accompanying schedule in respect of variations noted:

9. [10]

   On 13 June 2025, the head contractor provided its payment schedule. In respect of the variations, the head contractor responded:

10. [11]

    On 27 June 2025, the subcontractor submitted an adjudication application. The subcontractor complained about the descoping but only disputed the valuation of the descope. The subcontractor disputed that any agreement had been reached on this subject, including at the meeting between the parties’ representatives on 7 August 2024. Notwithstanding this, the subcontractor accepted the assessment by the head contractor in Variation No 18 in its payment claim. But Variation No 20 remained in issue. The subcontractor then addressed the payment schedule:

11. [12]

    The head contractor put on an adjudication response. The supporting documentation was collated in 12 tabs, together with copies of various authorities. This material was provided electronically, by uploading a ZIP file in accordance with the adjudicator’s instructions. The ZIP file contained a clearly labelled folder for each tab, together with another folder entitled “Quality Documentation”. The “Quality Documentation” folder was not, however, referred to in the adjudication response.

12. [13]

    In its adjudication response, the head contractor noted that the parties were in dispute as to what was finalised and agreed at the meeting on 7 August 2024, but submitted that its version of events should be preferred. As to the value of the descoping, the head contractor noted that the descoping of the works was spread across Variation No 18 and Variation No 20, where Variation No 20 was a further extension of the descoping that was the subject of Variation No 18. The head contractor noted that the subcontractor contested the value of the descope applied under Variation No 20, “being a value derived from the same methodology used for Variation No 18 which was agreed on 7 August 2024 and is substantively not contested” by the subcontractor.

13. [14]

    The head contractor then responded specifically to the subcontractor’s submissions, including at [11.11]:

14. [15]

    The reference to “QA documentation” in [11.11] of the head contractor’s adjudication response was apparently to the ZIP folder entitled “Quality Documentation”. But I have to say that this was not obvious. Nor was “QA documentation” amongst the defined terms in the adjudication response.

15. [16]

    Within the “Quality Documentation” folder was eight documents. The first document listed was entitled “Jonishan Works Complete 05062024 a”. If the adjudicator had opened this document, he would have seen the marked-up plans provided by the head contractor on 5 June 2024: see [5]. It is not entirely clear what the adjudicator would have made of these plans. The plans were dated on varying dates from September to November 2023. It is not apparent that these plans had varied in some way more recently by the addition of ‘clouds’. The only ‘pointer’ in another direction was the file name. Further, without elaboration, it is unclear what the adjudicator would have made of the green clouds.

16. [17]

    The second to sixth documents, if opened, would have revealed numerous inspection reports of various items of work, together comprising some 600 pages. What the adjudicator was expected to divine from this material is not clear.

17. [18]

    The relevance of the seventh document, entitled "JS PC No.7 - showing 'To Complete' items d”, is also unclear. This was Payment Claim 7, submitted on 28 June 2024. In a schedule detailing the original subcontract works, a column entitled “To Complete” was highlighted and a note added, “these quantities are incorrect, but prove there was outstanding work not completed”.

18. [19]

    The last document listed was entitled "Scope Deduction - Markup Sent to JS 05.06.24 b”. If opened, the adjudicator would have seen the head contractor’s emails to the subcontractor on 5 June 2024: see [4]. It may not have been obvious to the adjudicator that the marked-up plans (comprising the first document in the “Quality Documentation” folder) were an attachment to this email. The fact that these two documents were separated by 600 pages of material probably did not help matters.

19. [20]

    The adjudicator noted that a key issue was the value of the contract sum. Taking into account the descoping, he awarded $217,621.17 including GST. The adjudicator traversed the history of Variation No 18 and Variation No 20. The adjudicator noted that the subcontractor accepted the head contractor’s valuation of Variation No 18. The adjudicator did not accept that the subcontractor had “accounted for [Variation No 20] in the reduced base scope”, but had effectively valued that scope deduction at zero.

20. [21]

    The adjudicator rejected the subcontractor’s submission that the head contractor was not entitled to issue Variation No 20 after the subcontractor had demobilised from the site. While the subcontractor said it had “completed the remaining works” by the time it demobilised, the subcontractor did not identify what those works were.

21. [22]

    The adjudicator then turned to the valuation of Variation No 20. He noted that the subcontractor submitted that it had never agreed to the valuation and “more importantly” that the head contractor had not provided any supporting documentation to justify the quantities of the deductions made. The adjudication determination continued:

22. [23]

    In the result, the adjudicator adopted the subcontractor’s valuation of Variation No 18 (which apparently took into account an error in the head contractor’s calculations), determined that the adjusted contract value was $980,313.52 and therefore that the value of the descope was $1,153,745.48.

Submissions

1. [24]

   The head contractor submitted that the adjudicator did not consider its submission or the Quality Documentation files and, incorrectly, stated that the head contractor had not provided any supporting material: Determination at [97]. The adjudicator went further and made an adverse Blatch v Archer finding: Blatch v Archer (1774) 1 Cowp 63 at 65; 98 ER 969 at 970; Vetter v Lake Macquarie City Council (2001) 202 CLR 439; [2001] HCA 12 at 454 [36] (Gleeson CJ, Gummow and Callinan JJ). This error was decisive as the value of Variation No 20 exceeded the adjudicated amount. The error was material to and not severable from the award: s 32A(2).

2. [25]

   The head contractor submitted that the Determination contained an explicit statement by the adjudicator, which showed that he had not considered the head contractor’s submission, as he erroneously thought that the head contractor had made no such submission and had failed to produce any drawings. The adjudicator was thereby “identifying a wrong issue” and “ignoring relevant material”: LPDT v Minister for Immigration, Citizenship, Migrant Services and Multicultural Affairs (2024) 280 CLR 321; [2024] HCA 12 at [3] (Gageler CJ, Gordon, Edelman, Steward, Gleeson and Jagot JJ); Trysams Pty Ltd v Club Constructions (NSW) Pty Ltd [2007] NSWSC 941 at [60]-[62] (Hammerschlag J). The head contractor submitted that the error was jurisdictional, as an adjudicator is required to consider the adjudication response, including "all submissions (including relevant documentation) that have been duly made by the respondent": s 22(2)(d); Ceerose Pty Ltd v A-Civil Aust Pty Ltd (2023) 112 NSWLR 225; [2023] NSWCA 215 at [64]-[69], [82] (Payne JA, Ward ACJ and Basten AJA agreeing). An adjudicator who acts otherwise has not performed his or her statutory function, such that the determination must be set aside.

3. [26]

   The subcontractor submitted that it was difficult to see how the adjudicator had not considered a “substantial clearly articulated argument relying upon established facts”: Ceerose at [41]; Martinus Rail Pty Ltd v Qube RE Services (No 2) Pty Ltd [2025] NSWCA 49 at [57] (Payne JA, Gleeson JA and Griffiths AJA agreeing). The head contractor’s adjudication response did not clearly refer to the documents which it is now said that the adjudicator ignored. An adjudicator can rely on the absence of supporting material: Ceerose at [83]-[84]. Even if the adjudicator did fail to consider the material, it was not clear how those documents were material to the determination and how the outcome would have been materially different: Woonona-Bulli RSL Memorial Club Ltd v Warrane-Design Construct Fit-Out Pty Ltd [2025] NSWSC 271 at [45] (Rees J).

4. [27]

   The subcontractor further submitted that the adjudicator may have not referred to the documents as he took the view that the documents did not assist the head contractor’s case and that does not give rise to jurisdictional error: Ceerose at [65]-[68]; Martinus Rail at [73]; Builtcom Constructions Pty Ltd v VSD Investments Pty Ltd as trustee for the VSD Investments Trust (No 2) [2025] NSWCA 134 at [85]-[87] (Leeming JA, Free JA agreeing). Trysams v Club Constructions was not analogous.

Principles

1. [28]

   Section 22(2) prescribes mandatory considerations that an adjudicator is obliged to take into account in making their decision, absent which the adjudicator will fail to exercise a statutory power, that is, there will be a jurisdictional error and their determination is void: Coordinated Construction Co Pty Ltd v JM Hargreaves (NSW) Pty Ltd (2005) 63 NSWLR 385; [2005] NSWCA 228 at [52] (Hodgson JA), [65] (Basten JA). Section 22(2) provides:

2. [29]

   Failure to take a matter into account must be “material” in order to constitute appealable jurisdictional error: Probuild Constructions (Aust) Pty Ltd v DDI Group Pty Ltd (2017) 95 NSWLR 82; [2017] NSWCA 151 at [99]-[101] (McColl JA, Beazley ACJ and Macfarlan JA agreeing); Anderson Street Banksmeadow Pty Ltd v JCM Contracting Pty Ltd [2014] NSWSC 102 at [47] (Ball J). As the High Court explained in Nathanson v Minister for Home Affairs (2022) 276 CLR 80; [2022] HCA 26 the question is “whether the decision that was in fact made could have been different” as a “matter of reasonable conjecture” if the particular consideration had been taken into account: at [32]-[33] (Kiefel, Keane and Gleeson JJ), [84] (Gordon J), citing MZAPC v Minister for Immigration and Border Protection (2021) 273 CLR 506; [2021] HCA 17.

3. [30]

   The scope of the obligation to “consider” in s 22 was extensively reviewed in Ceerose by Payne JA, who noted “the problem for a party challenging a determination is … to identify a basis on which it could be said that consideration did not occur. … [T]he failure to identify a particular claim or response in reasons will not of itself demonstrate that the adjudicator failed to consider it”: at [62]. His Honour pointed to a number of reasons for this, including the tight timeframes prescribed for the adjudication process under the Act. Further, at [65]:

4. [31]

   His Honour noted that there were a number of inferences that could be drawn from the absence of a reference to a particular submission in the reasons, of which only one was that the material was not considered: at [66]. Payne JA concluded at [69]:

5. [32]

   One of the rare cases in which an adjudicator fell into jurisdictional error by failing to consider a party’s submissions is TWT Property Group Pty Ltd v Cenric Group Pty Ltd [2020] NSWSC 72. There, the adjudicator overlooked the builder’s “clear submission” that the excavation carried out was in respect of sandstone and concluded that it was “common ground” that it did not: at [108]. Stevenson J found that the adjudicator could only have reached this conclusion by failing to consider the builder’s clear submission to the contrary: at [109]. At [112]-[114]:

6. [33]

   Ceerose was not one of those rare cases in which an adjudicator fell into jurisdictional error by failing to consider a party’s submissions. There, the respondent argued that cl 36.6 of the contract imposed a time limit on making a variation claim, but it was said that the adjudicator did not consider this submission. Payne JA disagreed as to the proper construction of the clause, and further at [180]:

7. [34]

   Nor was the case relied on by the head contractor, Trysams v Club Constructions, such a case. There, the respondent attached an expert report to its adjudication response. The adjudicator declined to consider the expert report as there was no indication that the claimant had been given the opportunity to evaluate the report at the time of the adjudication application. Hammerschlag J concluded that the adjudication determination was void for jurisdictional error as the report contained information of critical importance to the respondent in establishing its reasons for withholding payment: at [60]. The adjudicator was required by s 22(2)(d) to consider the material as it was part of submissions duly made: at [62]. In Trysams v Club Constructions, the adjudicator was aware that he had an expert report but considered that it was unfair to take it into account. Here, it is said that the adjudicator failed to appreciate that he had been provided with material at all.

Conclusion

1. [35]

   Applying these principles to the case at hand, I agree with the head contractor that this is not a case where a party challenging a determination is faced with the problem that the adjudicator has failed to identify a particular response in his reasons, this not necessarily being demonstrative of the fact that the adjudicator failed to consider it: Ceerose at [62]. Here, the adjudicator has squarely addressed the head contractor’s argument. But in so doing, the fact that the adjudicator made no mention of the “Quality Documentation” is said to demonstrate that he overlooked or failed to appreciate the significance of the material in support of that argument.

2. [36]

   That is one way of reading the adjudicator’s observations at [97] of the Determination. It is equally plausible that the adjudicator’s observations at [97]-[103] indicate that he had reviewed the “Quality Documentation” folder but observed that the material did not contain documents which he would expect to see in support of the head contractor’s Variation No 20. Or as the subcontractor put it, the adjudicator looked at the “Quality Documentation” folder but, “could not make head or tail of it”. What the adjudicator said in paragraph [97] was also strictly correct: the 600 pages of “Quality Documentation” did not include any drawings or photographs, or the scope given to the new subcontractor, unless the Sheet Layout Plans in the first document could be said to be “drawings”. I cannot know exactly why the adjudicator said what he did but, of the available explanations, only one is jurisdictional error.

3. [37]

   The head contractor submitted – in reply – that the value of the descope in Variation No 20 was based on the meterage of stormwater drains that was reduced from the scope of works. The calculation involved working out the meterage taken out of the job and multiplying that by the rates agreed for the different types of work in the subcontract. The inspection reports in the “Quality Documentation” folder would have evidenced the amount of works done and supported a conclusion that the methodology of applying the same rates as the subcontractor was reasonable.

4. [38]

   Looking at the “Quality Documentation” folder with the benefit of the explanation provided by the head contractor’s learned counsel – which the adjudicator did not have – I repeat that it was not obvious that the reference to “QA documentation” in the adjudication response was to the ZIP folder entitled “Quality Documentation”. A person is eligible to be an adjudicator in relation to a construction contract if they have relevant qualifications and experience in the field: reg 19, Building and Construction Industry Security of Payment Regulation 2020 (NSW). I will thus assume that the adjudicator worked that out.

5. [39]

   I repeat my earlier comments at [16]-[19] as to what the adjudicator might have made of the “Quality Documentation” material on review. The bulk of the material was documentation submitted by the subcontractor. These documents demonstrated the works that had been completed by the subcontractor. I am not sure how the adjudicator was supposed to work out precisely how much work the subcontractor had done, without going through multiple reports of varying degrees of completeness and legibility. The seventh document, Payment Claim 7 might have been treated as a summary of this material, setting out the work completed by the subcontractor, albeit the head contractor noted “these quantities are incorrect”.

6. [40]

   In sum, the second to seventh documents indicated how much of the work had been done by the subcontractor, while the first and eighth documents indicated that the head contractor had descoped whatever had not been done. But none of this material supported the head contractor’s valuation of the work that had not been done. And that was the material which the adjudicator wanted to see, particularly where the subcontractor was complaining about the absence of such documentation.

7. [41]

   Nor would the adjudicator have understood what he should have drawn from the “Quality Documentation” material in support of the valuation. Nowhere in the adjudication response was it explained how the rates should be multiplied by the meterage or compared with the “Quality Documentation” to produce the amount claimed in Variation No 20.

8. [42]

   Where the adjudicator was required to consider some 1,700 pages of documents in total, and 600 pages of “Quality Documentation” in particular, the adjudicator was not required to carefully read each page, without meaningful assistance from the party seeking to rely on that material as to what the adjudicator should draw from that material and why. The adjudication response, with its cursory, unclear reference to the documents included in the “QA documentation”, did not constitute a “clearly articulated” argument: Ceerose at [69]. Put another way, the head contractor’s submission relied on an assertion and it was not jurisdictional error for the adjudicator to fail to engage in a search for material to support that claim: Ceerose at [180].

9. [43]

   Nor can it be said that the adjudication determination could have been different, as a matter of reasonable conjecture, if the adjudicator had carefully examined each page of the “Quality Documentation”: Nathanson v Minister for Home Affairs at [32]-[33]. It is unclear how the documents supported the head contractor’s valuation of the descoping in Variation No 20 in any event.

Orders

1. [44]

   For these reasons, I make the following orders:

   1. (1)

      Dismiss the Summons with costs.