Ceerose Pty Ltd v A-Civil Aust Pty Ltd (No 2)

1. [1]

   In these proceedings the plaintiff (Ceerose) challenges the validity of an adjudication determination made by the second defendant (Adjudicator) under the Building and Construction Industry Security of Payment Act 1999 (NSW) (the Act) on 27 September 2022 (the Determination) on the basis that the Adjudicator denied Ceerose procedural fairness in respect of his conclusion that Ceerose was obliged to pay the first defendant (A-Civil) an amount of $115,577.79 in respect of retention monies.

2. [2]

   The issues in the proceedings are first, whether there was a denial of procedural fairness by reason of the Adjudicator reaching that conclusion on a basis not advanced by either party; second, whether any such denial of procedural fairness was “material” in the relevant sense; and third, if both of those questions are answered in the affirmative, whether Ceerose is liable to contribute to the payment of 50% of the Adjudicator’s fees and expenses. It is not in dispute that if the first and second questions are answered in the affirmative, an order should be made under s 32A of the Act in respect of the Determination relating to the claim for the retention of monies.

Background

1. [3]

   Ceerose and A-Civil entered into a subcontract for certain works at 163 - 173 McEvoy Street, Alexandria on 2 March 2022 (the Contract). Ceerose is the main contractor and A-Civil is the subcontractor. A-Civil had entered into a head contract with the principal, Alexa Development Pty Ltd. The Contract required A-Civil to perform excavation work for a subcontract sum of $2,840,210. It incorporated the General Conditions contained in the “Subcontract conditions for design and construct” (AS4903-2000). Relevant clauses in the General Conditions are set out below.

2. [4]

   Clause 5 provides:

3. [5]

   Clause 1 defines “security” to include cash or retention monies and “claim” to mean “any Claim, action, demand or damages … including but not limited to at law, in tort (including negligence), under statute, in equity including quantum merit [sic] or restitution based on unjust enrichment, for rectification, frustration or for any other legal or equitable remedy”.

4. [6]

   In relation to cl 5.1, Item 19 is the relevant provision which provides that the security will take the form of retention monies in the amount of 10% reducing to a limit of 5% of the adjusted subcontract sum prior to practical completion of the head contract.

5. [7]

   The retention monies are amounts payable to A-Civil for construction work but are held back by Ceerose as security until the certificate of practical completion under the head contract occurs when 50% of the retention sum is required to be returned to A-Civil within 28 days and the balance is returnable to A-Civil 28 days after the final certificate is issued under the head contract.

6. [8]

   Clause 39 deals with the consequences of default, and provides relevantly:

7. [9]

   On 1 July 2022, Ceerose terminated the Contract and A-Civil left the site.

8. [10]

   On 29 July 2022, A-Civil issued its 8th and final payment claim which sought $790,947.74 (excluding GST) which included a claim for the release of the retention monies of $115,577.79 (excluding GST).

9. [11]

   On 12 August 2022, Ceerose provided a payment schedule to A-Civil which claimed that the amount owing under the payment claim by Ceerose was nil. In relation to the retention monies, the payment schedule put two alternative (and independent) grounds for why the retention money was not payable to A‑Civil. The first was that A-Civil had not satisfied the preconditions to making a claim for the retention monies set out in cl 5.4. After setting out cl 5.4 of the contract, the payment schedule states:

10. [12]

    The second, and independent basis, was that Ceerose had exercised its right under cl 5.2 to have recourse to the retention monies to satisfy, in part, its claim for amounts owing by A-Civil for breach. In relation to this argument, the payment schedule, after setting out cl 5.2, states:

11. [13]

    On 26 August 2022, A-Civil made an application for adjudication of its payment claim under s 17 of the Act. In the adjudication application A-Civil responded to Ceerose’s contention that the precondition to the entitlement to claim the retention money under cl 5.4 was not satisfied as follows:

12. [14]

    In relation to Ceerose’s contention that it had exercised its right to have recourse to the retention monies under cl 5.2, A-Civil responded in the adjudication application as follows:

13. [15]

    On 6 September 2022, Ceerose provided its adjudication response to the Adjudicator under s 20 of the Act. In the adjudication response at [19], Ceerose summarised the issues in dispute as follows:

14. [16]

    In relation to the retention issue, Ceerose’s adjudication response included the following:

15. [17]

    Ceerose’s adjudication response at [161] reiterates that A-Civil has no right to release of the retention monies under cl 5.4 and at [162] reiterates that Ceerose’s right to have recourse to the retention monies under cl 5.2 has been exercised.

16. [18]

    On 27 September 2022, the Adjudicator made a determination that the adjudicated amount was $167,970.87, that the date on which the amount became payable was 16 August 2022 and that the Adjudicator’s fees were to be apportioned between the parties equally. The adjudicated amount included the claim for retention of $115,577.79. It is necessary to set out in a little detail the reasoning process of the Adjudicator.

17. [19]

    Under the heading “Background and Preliminary issues” the Adjudicator set out some background regarding the termination of the Contract, the respective positions of the parties and (at [9] to [10]) his views as to the rights of the parties under the Contract and the Act:

18. [20]

    Later at [44] the Adjudicator set out the four disputed amounts which he summarised in the following table:

19. [21]

    The Determination then deals with each of the four items successively. It is necessary to refer only to what was said about the last two items, being the claim for retention and deductions.

20. [22]

    The reasons for allowing the claim for the retention monies in full are as follows:

21. [23]

    I note that no reference is made in this reasoning (or elsewhere in the Determination) to the fact that Ceerose had purported to exercise its right under cl 5.2 to have recourse to the retention monies.

22. [24]

    Starting at [114], the Determination then deals with the deductions claimed by Ceerose in the payment schedule and concludes that only one item was made out, being a deduction of $6,000 in respect of a fine received from the Council in respect of failure to maintain adequate environmental controls.

23. [25]

    In relation to the deductions claimed by Ceerose, the largest item is $2,694,506 for the cost to complete the works under the Contract. The Adjudicator concluded that A-Civil could not be “back charged” for the cost to complete because Ceerose had not deducted the value of subcontract works remaining to calculate the “extra over cost of completing the works” and “had not incurred the cost to complete which is based on a quotation and estimates”. There is no link expressed between this conclusion and the conclusion regarding the claim for the retention monies. In particular, the Adjudicator does not say that the reason for disallowing the claim for the retention monies is that Ceerose has not made out its claim for the cost to complete the works under the Contract.

24. [26]

    At [154] of the Determination, the Adjudicator set out a summary of his determination of the adjudicated amount which was as follows:

25. [27]

    At [163] of the Determination, the Adjudicator dealt with fees and expenses, stating:

26. [28]

    On 28 September 2022, the Adjudicator issued an invoice for his fees and expenses which was for the amount of $37,582.45 (incl GST). A-Civil subsequently paid the full amount of the invoice and claimed from Ceerose its proportion of $18,791.22, which it has not paid.

27. [29]

    On 11 October 2022, an adjudication certificate was issued in the amount of $189,095.53. Judgment was entered in the District Court in the sum of $189,297.53. On 12 October 2022, a garnishee order was made in the District Court.

28. [30]

    On 14 October 2022, Ceerose commenced these proceedings before the Duty Judge. Upon Ceerose giving the usual undertaking as to damages and an undertaking to the Court to pay the judgment sum into Court, Stevenson J made orders restraining the bank from acting on the garnishee order and restraining A-Civil from enforcing the judgment, such restraints to expire at 5:00pm on 21 October 2022.

29. [31]

    On 17 October 2022, Ceerose paid the amount of judgment sum into Court (which included the amount of $18,791.22 in respect of Ceerose’s share of the Adjudicator’s fees and expenses).

30. [32]

    On 2 November 2022, Rees J made an order that the amount paid into Court was to be paid out to A-Civil: see Ceerose Pty Ltd v A-Civil Aust Pty Ltd [2022] NSWSC 1487 (Ceerose (No 1)).

What did the Adjudicator decide on the retention monies claim?

1. [33]

   Central to this dispute is the identification of the basis for the Adjudicator’s decision that A-Civil was entitled to the return of the retention monies. The relevant part of the Determination is [112] set out at [22] above which must be read having regard to the Adjudicator’s reasons as a whole and not “minutely and finely with an eye keenly attuned for the perception of error”: Futurepower Developments Pty Ltd v TJ & RF Fordham Pty Ltd [2017] NSWSC 232 at [11]‑[12]. In my view it is clear that the first sentence of [112] of the Determination is not the basis of the decision regarding the retention monies claim. This follows from the word “notwithstanding” at the beginning of the second sentence. Rather, the Adjudicator decided that A-Civil was entitled to the retention monies because the Contract had been terminated. This follows from the word “therefore” in the second sentence read in light of what the Adjudicator had said earlier at [10] that “if the Subcontract is terminated, pursuant to sub-clause 39.4(b), payment shall be per the Subcontract”.

The alleged denial of procedural fairness

1. [34]

   When Ceerose commenced these proceedings, it alleged that the denial of procedural fairness comprised the Adjudicator’s conclusion in [112] that cl 5.4 of the Contract was an invalid “pay when paid” provision, as that was not a conclusion sought by either party in the adjudication and the Adjudicator gave no advance notice that he was considering reaching that conclusion. At the commencement of the hearing I gave leave to Ceerose to file an Amended Technology and Construction List Statement in which it now contends that:

2. [35]

   As noted in Ceerose No. 1 at [22], at the time Rees J considered the matter, Ceerose’s allegation was that the Adjudicator failed to afford it procedural fairness in respect of his conclusion that cl 5.4 of the Contract was an invalid “pay when paid” provision. For the reasons her Honour explained in the judgment at [36]–[41], the focus of Ceerose’s procedural fairness attack was on the first sentence of [112] of the Determination and her Honour considered that Ceerose’s prospects of success on that contention were “modest”. No doubt recognising the strength of her Honour’s preliminary view, Ceerose focused in the final hearing before me on the second sentence of [112]. I note that this is quite different from the approach taken by Ceerose when the matter was before Rees J on an interlocutory basis in Ceerose (No 1), and her Honour did not address the question whether there had been a denial of procedural fairness if [112] of the Determination is approached in the manner referred to at [33] above.

Statutory scheme

1. [36]

   In order to deal with the issues which arise, it is necessary to set out briefly the scheme of the Act. Sections 8 and 9 confer a statutory entitlement to progress payments on a person who under a construction contract has undertaken to carry out construction work or to supply related goods and services, in the following terms:

2. [37]

   While s 9(a) states that the amount of the progress payment is to be calculated in accordance with the terms of the contract, this is subject to s 12 which makes a “pay when paid” provision ineffective. Section 12 provides:

3. [38]

   Section 13 authorises a person who is or claims to be entitled to a progress payment (referred to as the “claimant”) to serve a payment claim on the person who, under the construction contract, is or may be liable to make the payment. The expression “payment claim” is defined to mean a claim referred to in s 13. Sections 13(2) and (3) deal with what a payment claim must contain, in the following terms:

4. [39]

   Section 13(3)(b) is directed to retention monies which the claimant asserts are due for release. It may be noted that the Act contemplates in s 12A that construction contracts often contain provisions for the head contractor to retain money out of money payable to a subcontractor as security for the performance of the obligations of the subcontractor under the contract: s 12A(5). (There is a regime established in Division 2 of the Building and Construction Industry Security Payment Regulation 2020 (NSW) to regulate such arrangements, but it was not in dispute that it has no application to the Contract.)

5. [40]

   Section 13(4) provides that a payment claim may be served only within the period determined by or in accordance with the terms of the construction contract, or 12 months after the construction work to which the claim was last carried out (or the related goods and services to which the claim relates were last supplied), whichever is the later.

6. [41]

   Under s 13(5) and (6) a claimant may only serve one payment claim in any given month, but this does not prevent a claimant from including in a payment claim an amount that is the subject of a previous payment claim.

7. [42]

   Under s 14, a person on whom a payment claim is served (referred to as the “respondent”) may reply to the claim by providing a payment schedule to the claimant. The expression “payment schedule” is defined to mean a schedule referred to in s 14. The requirements for a payment schedule are set out in s 14(2) and (3) which provide:

8. [43]

   If a claimant serves a payment claim on the respondent, but the respondent does not provide a payment schedule to the claimant within the time period specified in s 14(4)(b), the respondent becomes liable to pay the claimant the claimed amount on the due date for the progress payment to which the payment claim relates: s 14(4).

9. [44]

   If the respondent provides a payment schedule disputing the payment claim or, alternatively, fails to provide a payment schedule and fails to pay the amount due in respect of the payment claim under s 14(4), the claimant may apply for adjudication of the claim under s 17. This involves making a written adjudication application in accordance with s 17(2) and s 17(3).

10. [45]

    Sections 19, 20 and 21 deal with the appointment of an adjudicator, the provision by the respondent of an adjudication response and the procedure for determination of the adjudication application. While the adjudicator is required to determine the adjudication application within the tight time limits stated in s 21(3), s 21(4) confers a discretion on the adjudicator to, among other things, request further submissions from the parties and can obtain an extension of the time limit for determination of the adjudication application under s 21(3) if both parties agree. The discretion under s 21(4) to call for further submissions serves the purpose of requiring an adjudicator minded to make a determination on a ground for which neither party has contended to give the parties notice of that intention so that they may put submissions on it: Probuild Constructions (Aust) Pty Ltd v DDI Group Pty Ltd (2017) 95 NSWLR 82; [2017] NSWCA 151 at [108] (DDI).

11. [46]

    Under s 22(1), the adjudicator is required to determine the amount of the progress payment to be paid by the respondent to the claimant (referred to as the “adjudicated amount”), the date on which such amount became or becomes payable and the rate of interest payable on that amount. The mandatory considerations which the adjudicator is required to take into account are set out in s 22(2) which provides:

12. [47]

    The adjudicator’s determination must be in writing, include the reasons for the determination (unless the parties do not require reasons) and be served by the adjudicator on the claimant and the respondent: s 22(3).

13. [48]

    By virtue of s 23, the adjudicated amount is payable on the relevant date referred to in s 23(1). If the respondent fails to pay the whole or any part of the adjudicated amount in accordance with s 23, the claimant may request the authorised nominating authority to whom the adjudication application was made (here the third defendant) to provide an adjudication certificate under s 24, which it may then file in a court of competent jurisdiction giving rise to a judgment debt under s 25.

14. [49]

    Section 29, which deals with the payment of the adjudicator’s fees and expenses, provides relevantly:

15. [50]

    Where part of the adjudicator’s determination is affected by jurisdictional error, s 32A gives the court power to sever the affected part, in the following terms:

16. [51]

    Section 34 prevents the parties to a construction contract from contracting out of the scheme in the Act. It provides:

17. [52]

    The rights, duties and remedies arising under a construction contract are preserved by s 32 (and, in particular, in proceedings in a court or tribunal relating to a matter arising under the construction contract, allowance is to be given in any award for an amount paid under the Act). Hence it can be said that the Act provides a statutory entitlement for interim payments with the final determination of the party’s entitlements being determined by proceedings brought in a court or tribunal to enforce the contract: Probuild Constructions (Aust) Pty Ltd v Shade Systems Pty Ltd (2018) 264 CLR 1; [2018] HCA 4 at [38]-[39] (Probuild).

Procedural fairness

1. [53]

   It is not in dispute that the adjudication determination will only be subject to judicial review if it is affected by jurisdictional error: Probuild at [2], [29].

2. [54]

   It is well-established that an adjudicator is obliged to afford procedural fairness, and a denial of procedural fairness which is material will give rise to jurisdictional error: see e.g. DDI at [99]; Pinnacle Construction Group Pty Ltd v Dimension Joinery & Interiors Pty Ltd [2018] NSWSC 894 at [40]-[41]; Quickway Constructions Pty Ltd v Hick [2017] NSWSC 830 at [29]-[32].

3. [55]

   It is also well established that there is a denial of procedural fairness if an adjudicator decides the case on a basis different from that advocated by the parties, without notifying them of his or her intention to do so and permitting them to be heard: e.g. Acciona Infrastructure Australia Pty Ltd v Holcim (Australia) Pty Ltd [2020] NSWSC 1330 at [53] and cases there cited; Equa Building Services Pty Ltd v A&H Floors 2 Doors Australia Pty Ltd [2022] NSWSC 152 at [49]-[55]; Holmwood Holdings Pty Ltd v Halkat Electrical Contractors Pty Ltd [2005] NSWSC 1129; (2006) 22 BCL 285 at [135].

4. [56]

   The content of the requirement of procedural fairness is determined by reference to the scheme to the Act, including that (a) the time frames imposed on the parties and the adjudicator are designed to create a “pay now, argue later” system, and (b) the Act allows for the speedy but interim resolution of disputes concerning progress payments to preserve cash flow of subcontractors without prejudice to the common law rights of the parties which can be determined in the normal manner: DDI at [102]-[103].

5. [57]

   While the payment claim, payment schedule, adjudication application and adjudication response are not pleadings, they do serve to define the scope of the issues in dispute which the adjudicator is to determine: Brolton Group Pty Ltd v Hanson Construction Materials Pty Ltd [2020] NSWCA 63 at [55]; DDI at [110].

6. [58]

   In light of the matters referred to in [56] above, there will not be a denial of procedural fairness of the type referred to at [55] above where the parties could reasonably have anticipated that the adjudicator would rely upon the issue or principle concerned in the course of making his or her decision: JKC Australia LNG Pty Ltd v Inpex Operations Australia Pty Ltd (2018) 41 NTLR 149; [2018] NTCA 6 at [39]–[41]; Rhomberg Rail Australia Pty Ltd v Concrete Evidence Pty Ltd [2019] NSWSC 755 at [17]. Put another way, there will be no denial of procedural fairness of this kind if the relevant issue was “on the table”: DDI at [131], [144].

7. [59]

   Consistently with general principle, a denial of procedural fairness by an adjudicator gives rise to jurisdictional error only if it is “material”: McNab Building Services Pty Ltd v Demex Pty Ltd (No 2) [2022] NSWSC 1496 at [7]; Acciona Infrastructure Australia Pty Ltd v Chess Engineering Pty Ltd [2020] NSWSC 1423 at [41]. “Materiality” in this context refers to a realistic possibility, as distinct from a probability, that the decision could have been different as a matter of reasonable conjecture but for the denial of procedural fairness: see Nathanson v Minister for Home Affairs [2022] HCA 26; 96 ALJR 737 at [1]; MZAPC v Minister for Immigration and Border Protection [2021] HCA 17; 95 ALJR 441 at [31]-[41], [50]-[53], [60]; Minister for Immigration and Border Protection v SZMTA (2019) 264 CLR 421; [2019] HCA 3 at [45]-[50], [68]-[69].

8. [60]

   In Nathanson, Kiefel CJ, Keane and Gleeson JJ said (footnotes omitted):

9. [61]

   The concept of materiality reflects the fact that the concern of the law in the context of procedural fairness is to avoid practical injustice, and hence the focus is on whether there were submissions that could properly have been put that, as a matter of reality and not mere speculation, might have affected the determination: Trysams Pty Ltd v Club Constructions (NSW) Pty Ltd [2008] NSWSC 399 at [52]; Brolton at [66]–[67].

10. [62]

    Ceerose submitted that each sentence of [112] of the Determination, either separately or in combination, involved a denial of procedural fairness. In relation to the first sentence, neither party had contended that cl 5.4 of the Contract was void for contracting out of the Act, or on any other basis and the Adjudicator gave no notice to the parties that he might find that cl 5.4 was void.

11. [63]

    As to the second sentence of [112], Ceerose submitted that neither party contended that there was an entitlement to release of retention monies on termination of the contract. In particular, A-Civil contended that it was entitled to return of the retention monies because Ceerose had wrongfully terminated the contract.

12. [64]

    As to whether the denial of procedural fairness was material, Ceerose submitted that had it been notified of the potential for a finding in terms of the first sentence of [112], it could have contended and the Adjudicator might realistically have accepted, that cl 5.4 was not void under s 34 of the Act or an ineffective pay when paid provision within the meaning of s 12 of the Act; there was a plausible contention that the last sentence of cl 5.4 was severable even if the first two paragraphs of cl 5.4 were otherwise void or ineffective under s 12; even if cl 5.4 was (in whole or in part) void, it did not affect the validity of the operation of the balance of cl 5 which remained a scheme governing the rights in relation to the provision and recourse to security; there was no occasion to discern some implied duty to release retention upon termination given the terms of cl 5 read as a whole.

13. [65]

    Ceerose submitted as to the second sentence of [112] that had Ceerose been notified of the basis for release was a per se entitlement to release upon termination Ceerose could have contended and the Adjudicator might realistically have accepted that there was no occasion to discern an implied duty to release upon termination in the face of the provision made in cl 5; in particular, there was no duty to release upon termination in the event that Ceerose had a pre-existing bona fide claim to recourse and had in fact exercised it.

14. [66]

    A-Civil submitted that there was no lack of procedural fairness. First, the first sentence of [112] was a clear reference to s 34 of the Act given the reference to “void for contracting out of the Act”. In contrast, s 12 merely makes a provision ineffective where it satisfies the requirements of that section. Second, the Adjudicator did not decide that A-Civil was entitled to the retention monies on the basis that cl 5.4 was void under s 34. This was apparent from the word “notwithstanding” at the beginning of the second sentence which indicated that the conclusion regarding cl 5.4 in the first sentence was merely “an aside”. Third, on a fair reading of the Determination read as a whole, the Adjudicator concluded that because he had rejected Ceerose’s claim that it was entitled to deductions in excess of the retention sum, he had determined that Ceerose had no entitlement to retain the retention sum. Fourth, Ceerose should have reasonably anticipated that the Adjudicator would take into account s 34 in considering Ceerose’s claim that cl 5.4 applied. Paragraph 57 of the adjudication application puts squarely “on the table” that Ceerose claimed to be entitled to the retention monies in the context of a termination. Fifth, any denial of natural justice was immaterial because had the Adjudicator called for submissions, there was a simple and conclusive response which was that the provisions of cl 5 were ineffective due to either or both of s 12 and s 34 of the Act.

15. [67]

    In determining what issues were “on the table” in the adjudication, it is necessary to have regard to the terms of the payment claim, payment schedule, the adjudication application and the adjudication response: Brolton at [57]. It is clear from the adjudication application that A-Civil claimed to be entitled to the retention monies because Ceerose had wrongfully terminated the Contract: see adjudication application at [57] and [58]. This statement of the basis for its claim needs to be read in the context of what A-Civil knew was Ceerose’s position, which was stated clearly in the payment schedule as being that there was no right to the retention monies for two alternative and independent reasons: first, because cl 5.4 applied to restrict release of the retention monies until the certificates referred to in that clause had been issued, and second, that it had exercised its right to have recourse to the retention monies under cl 5.2. A-Civil did not respond to these contentions by a contention that neither cl 5.2 nor cl 5.4 applied because there had been a termination of the Contract. Rather, A-Civil responded by contending that these provisions did not apply because Ceerose’s termination was wrongful (i.e. not permitted by the contract).

16. [68]

    This was not the basis upon which the Adjudicator determined the claim in respect of the retention monies. As stated at [33] above, I accept A-Civil’s submission that the reason for the Adjudicator’s conclusion is to be found in the second sentence of [112]. The issue raised by this sentence is whether cl 5 ceases to apply following termination of the Contract for whatever reason, so that from that time there is nothing to prevent A-Civil from claiming the retention monies. In my view, it cannot be said that Ceerose should have reasonably anticipated that this issue was raised by the payment claim or the adjudication application. Ceerose was not given prior notice that this was an issue that it had to deal with, and it was entitled to be given such notice and an opportunity to make submissions on it.

17. [69]

    In my view, the denial of that opportunity was material in the relevant sense. As submitted by Ceerose, it could have put to the Adjudicator that cl 5.2 was a complete answer to the issue raised by the second sentence of [112]. First, there was no express term in the Contract that the right to have recourse to the retention monies under cl 5.2 ceases on termination of the contract and there is no basis for an implication of a term to that effect. Consequently, cl 5.2 (and the remainder of cl 5) survived termination of the Contract: Perkins (WA) Pty Ltd v Weston (No 2) [2022] WASCA 111 at [34]; Galileo Miranda Nominees Pty Ltd v Duffy Kennedy Pty Ltd [2019] NSWSC 1157 at [263]–[268]. Second, cl 5.2 permits Ceerose to have recourse to security “in respect of any Claim to payment (liquid or otherwise) that it may have against A-Civil under the subcontract or otherwise.” The word “Claim” is defined broadly and does not require that the relevant amount claimed be due or deemed payable. Ceerose had exercised the right conferred by cl 5.2 in its payment schedule (of which it had given written notice as required by cl 5.2). Third, there is a respectable argument that s 34 does not apply to cl 5.2 on the basis that it does not, and does not purport to, exclude modify or restrict the operation of the Act because the determination of the amount due in respect of a payment claim under s 8 and s 9 of the Act would require consideration of the provisions of the contract which entitle Ceerose to make deductions and set offs against monies due to A-Civil for claims which Ceerose has against A-Civil, including cl 5.2: Watpac Constructions (NSW) Pty Ltd v Austin Corp Pty Ltd [2010] NSWSC 168 at [169]‑[173]. Fourth, the Adjudicator did not record in [1] to [10], or [108] and [110] of the Determination that Ceerose had exercised its right to have recourse to the retention monies under cl 5.2. In circumstances where Ceerose had exercised its right to have recourse to the retention monies, the submission now being contemplated is one which the Adjudicator had not previously addressed in the Determination and it cannot, therefore, be assumed that he would reject it.

18. [70]

    For these reasons, in my opinion, there is a realistic possibility that the Adjudicator’s decision on the retention monies claim could have been different but for the denial of procedural fairness.

Adjudicator’s fees and expenses

1. [71]

   The parties were in agreement that if the Court concluded that the Determination was affected by jurisdictional error in relation to the retention monies, an order should be made under s 32A to set aside only part of the Determination. The parties wish to be heard on the precise form of orders to achieve that result.

2. [72]

   However, there is an issue as to whether Ceerose is liable for a proportion of the Adjudicator’s fees and expenses where an order is made under s 32A to set aside part of the Determination which affects the overall amount payable by Ceerose to A-Civil.

3. [73]

   Ceerose submitted that under s 29(4) of the Act, the Adjudicator’s entitlement to be paid his fees and expenses is excluded if he “fails to make a decision on the application … within the time allowed by s 21(3)”. It submitted that if an order is made under s 32A to set part of the Determination aside by reason of jurisdictional error, s 29(4) will apply to preclude Ceerose from having any liability for the fees and expenses, because:

4. [74]

   In addition, Ceerose submits that there should be no confirmation under s 32A(2) of the part of the Determination addressing the Adjudicator’s fees. The Adjudicator decided that fees should be borne 50/50: see Determination [163]. If the claim for retention had been rejected, the amount payable to A-Civil would have been $40,835.30 out of a claimed amount of $780.934.81. That would have been close to total failure of the claim. There is a realistic possibility – and, in fact, a probability – that the Adjudicator would not have decided to split the fees 50/50 in the event that he had not reached the conclusion he did on retention. At the least, A-Civil has not established to the contrary. The Court can more confidently reach a conclusion in Ceerose’s favour on this point in circumstances where the Adjudicator gave no reasons at all for the conclusion at [163].

5. [75]

   A-Civil submits that if Ceerose succeeded in establish jurisdictional error as to the part of the Determination concerning the retention monies, Ceerose’s attack on the Adjudicator’s decision to apportion fees and expenses equally should be rejected for essentially three reasons. First, if successful, Ceerose’s challenge is confined to the jurisdictional error of procedural fairness. There is nothing to suggest that the decision with respect to fees and expenses is infected with the same (or any) error. For this reason, the Court ought to set aside only so much of the determination as relates to the retention sum, leaving the fees and expenses part of the determination unaffected.

6. [76]

   Second, the adjudicator is not required to give reasons for his decision under s 29(3) regarding liability for fees and expenses. If the Court forms the view that [163] of the Determination is part of the determination which should be set aside, this still leaves the statutory default position, under s 29(2) and s 29(3), of contribution by the parties in equal proportions. This is a statutory right. A-Civil seeks its statutory entitlement and asks for an order that Ceerose pay it $18,791.22, or to avoid circularity, to deduct this sum from the amount to be remitted.

7. [77]

   Third, prerogative relief with respect to jurisdictional error is discretionary. The Court has the power to condition certiorari relief on Ceerose bearing half of the fees and expenses because the decision with respect to fees and expenses is unaffected by any jurisdictional error (Rhomberg at [25]; Acciona Infrastructure Australia Pty Ltd v Chess Engineering Pty Ltd [2020] NSWSC 1423 at [207]‑[219] per Henry J; Acciona Infrastructure Australia Pty Ltd v Chess Engineering Pty Ltd (No 2) [2020] NSWSC 1788 at [58]-[64] per Henry J). Section 32A is a remedial provision. It is does not seek to eradicate or limit the Court’s discretion to condition the grant of certiorari relief.

8. [78]

   It is true, as Ceerose submitted, that a decision affected by jurisdictional error is treated for the purposes of the law pursuant to which it was made as “no decision at all” and therefore a nullity: e.g. Minister for Immigration & Multicultural Affairs v Bhardwaj (2002) 209 CLR 597; [2002] HCA 11 at [51]. However, it remains a decision in fact which may yet have some status in the law: see Hossain v Minister for Immigration and Border Protection (2018) 264 CLR 123; [2018] HCA 34 at [24]; Seymour Whyte Constructions Pty Ltd v Ostwald Bros Pty Ltd (2019) 99 NSWLR 317; [2019] NSWCA 11 at [28]–[29], [175]–[176].

9. [79]

   Further, it has also been recognised that a decision involving jurisdictional error will be “no decision at all” unless the statutory provisions under which it is made require a contrary conclusion. In Jadwan Pty Ltd v Secretary, Department of Health and Aged Care (2003) 145 FCR 1; [2003] FCAFC 288 at [42], Gray and Downes JJ said:

10. [80]

    Hence, it is necessary to look at the scheme of the Act to see if the legislative intention can be discerned that an adjudication determination is to be treated as having any, and if so what, effect for the purposes of the Act even though it is affected by jurisdictional error: Jadwan at [43].

11. [81]

    In my view, s 32A does indicate the extent to which a determination affected by jurisdictional error is to have legal effect for the purposes of the Act. Under s 32A(1), the Court may set aside the whole or any part of the determination. The inference from this is that the part of the determination which is not set aside is to be regarded as always having statutory force. To read s 32A(1) as giving to the part of the determination which survives statutory force only from the time of the order quashing the remainder would involve reading into s 32A(1) words which are not there.

12. [82]

    Section 32A(2), which is expressed not to limit the operation of s 32A(1), goes on to give the Court power to identify the part of the determination affected by jurisdictional error and set aside that part only, while confirming the part not affected by jurisdictional error. The ordinary meaning of “confirm” is “to make certain or sure; corroborate; verify” (Macquarie Dictionary). To “confirm” something normally indicates that what is confirmed is already in existence: Abigroup Contractors Pty Ltd v ABB Service Pty Ltd [2004] NSWCA 181; (2005) 21 BCL 12 at [56]. That again suggests that the part which is confirmed is to be treated as legally effective from the time the determination was originally made.

13. [83]

    This construction is consistent with the purpose of s 32A which is to allow the part of a determination which is not affected by jurisdictional error to be severed under s 32A, so that it is only the part which is affected by jurisdictional error which is set aside as invalid. This is confirmed by the Second Reading Speech on the introduction of the Building and Construction Industry Security of Payment Amendment Bill 2018 (NSW), in which the Minister said:

14. [84]

    I note also that the cases referred to at [77] above recognised that the Court could in its discretion when granting certiorari relief before the enactment of s 32A, sever the part of a determination affected by jurisdictional error and thereby overcome the problem identified in the Second Reading Speech. In light of this, it is not a surprising outcome that s 32A, properly construed, operates to merely sever the part of the determination affected by judicial error and leave the remainder which was not affected by jurisdictional error as legally effective from the time the determination was made. Any doubts expressed in those cases about the correctness of this approach have been overcome by s 32A.

15. [85]

    Accordingly, in my opinion, the exercise of the power under s 32A to quash the part of the Determination that relates to the retention monies will not affect the obligation of the parties to pay the Adjudicator’s fees and expenses as to 50% each. I do not consider that [163] of the Determination is affected by jurisdictional error but if I am wrong in that view, so that [163] of the Determination should be quashed, the position of the parties would be the same due to the obligation created by s 29(3) on the parties to pay the Adjudicator’s fees and expenses equally. Importantly, the Court does not have power in judicial review proceedings to alter the parties’ liability to contribute to payment of the Adjudicator’s fees and expenses equally under s 29(3) in the absence of a different decision by the Adjudicator.

Conclusion

1. [86]

   For the above reasons, in my opinion, the Determination was affected by jurisdictional error in relation to the treatment of the retention monies claim and should be set aside, in part, to that extent. I will not make an order setting aside [163] of the Determination.

2. [87]

   I will hear the parties on the form of the order to be made under s 32A and on costs. I will stand the matter over for directions to set a timetable for the making of submissions on costs and to allow the parties to agree the form of the order under s 32A or, if agreement cannot be reached, short submissions as to the form of the order for which each contends.