Acciona Infrastructure Australia Pty Ltd v Holcim (Australia) Pty Ltd

1. [1]

   HIS HONOUR: This is an attack on an adjudication determination made by the second defendant (the Adjudicator) on 23 July 2020 (the Determination) under the provisions of the Building and Construction Industry Security of Payment Act 1999 (NSW) (the Act), in favour of the first defendant (Holcim) against the plaintiff (Acciona) for $2,953,035.57 (including GST).

2. [2]

   Acciona is the design and construct (D&C) contractor for the Sydney Light Rail Project. Holcim produces and supplies ready mixed concrete.

3. [3]

   On 9 September 2016, they entered into a written Goods Supply Agreement (the GSA) for the supply and delivery of concrete.

4. [4]

   The substantiative works on the Sydney Light Rail were completed in July 2019. Acciona has continued to be engaged in the project, remedying defects, and has continued to buy concrete from Holcim but in limited quantities.

5. [5]

   The Determination adjudicated Holcim’s Payment Claim 36 dated 28 May 2020 (the Payment Claim) for $2,746,087.98 (excluding GST) for concrete allegedly supplied to Acciona but not paid for.

6. [6]

   References to sections are to sections of the Act. The Act has been recently amended but the amendments do not affect disposition of these proceedings.

7. [7]

   The Act provides for a claimant to make a payment claim for a progress payment on the person who, under a construction contract, is or may be liable to make the payment (s 13(1)). A claimant cannot serve more than one payment claim in respect of each reference date under the construction contract (s 13(5)). A reference date in relation to a construction contract is a date determined under the contract as the date on which a progress payment may be made, or if the contract makes no express provision, the last day of the named month on which the construction work was first carried out under the contract, and the last day of each subsequent named month (s 8).

8. [8]

   The respondent to a claim may reply by providing a payment schedule, which must indicate the amount of the payment (if any) that the respondent proposes to make (s 14). Where no payment schedule is served, the claimant may recover the unpaid portion of the claimed amount as a debt due in a court of competent jurisdiction, or make an adjudication application in relation to the claim. Where the payment schedule indicates a scheduled amount which the respondent proposes to pay and the respondent does not pay it, the claimant has the same option with respect to the unpaid portion of the scheduled amount (s 17). It is not uncommon for a respondent to indicate a nil amount.

9. [9]

   The adjudication process entails the making of an adjudication application by the claimant and the appointment by an authorised nominating authority of an adjudicator (s 19). The respondent may lodge an adjudication response (s 20). Under s 20(2B), the respondent cannot include in the adjudication response any reasons for withholding payment unless those reasons have already been included in the payment schedule provided to the claimant. The Act provides for adjudication procedures (s 21) and for the adjudicator to determine the amount of the progress payment (if any) to be paid by the respondent to the claimant (s 22) and the issue of an adjudication certificate (s 24). Section 21(3) requires an adjudicator to determine an adjudication application within 10 business days after notifying the parties of his or her acceptance of the application or within such further time as the parties may agree. Section 21(4) makes provision for an adjudicator to request further written submissions from the parties and to call a conference of the parties. Under s 22(2), in determining an adjudication application, the adjudicator is to consider a number of specified matters only. These include all submissions that have been duly made by the respondent in support of the payment schedule.

10. [10]

    Under s 10(1)(a), construction work carried out or undertaken to be carried out under a construction contract is to be valued in accordance with the terms of the contract. Under s 10(1)(b), if the contract makes no express provision with respect to the matter, having regard to the contract price for the work, any other rates or prices set out in the contract, any variation agreed to by the parties to the contract by which the contract price, or any other rate or price set out in the contract, is to be adjusted by a specific amount, and if any of the work is defective, the estimated cost of rectifying the defect.

11. [11]

    Acciona contends that the Determination is void on each of the following six grounds:

    1. (1)

       the Adjudicator had no jurisdiction because there was not a valid payment claim or valid adjudication application, in that the payment claim the subject of the determination impermissibly claimed for work done under two or more contracts.

    2. (2)

       the Adjudicator failed to consider Acciona’s contention that she lacked jurisdiction.

    3. (3)

       the Adjudicator failed to afford Acciona procedural fairness by finding a contractual basis for valuing progress payments upon which Holcim had not relied and which had not been the subject of submissions.

    4. (4)

       the Adjudicator misapprehended the nature of her task by relying on payment schedules which had previously passed between the parties rather than the Payment Schedule (the subject of adjudication application) and, in doing so, failed to afford Acciona procedural fairness by not giving it advance notice of her intention of so doing.

    5. (5)

       the Adjudicator failed to afford Acciona procedural fairness by rejecting a contention by Acciona that it was not in a position properly to assess Holcim’s claims because Holcim had not provided delivery dockets establishing that it had delivered what it was claiming it delivered, for reasons not advanced by Holcim, and by making credit findings against Acciona’s witness, Mr Li, on bases not put by Holcim and not the subject of submissions or advance notice.

    6. (6)

       the Adjudicator failed to discharge the statutory task of satisfying herself that Holcim had substantiated its claims.

The Goods Supply Agreement

1. [12]

   The GSA comprises an executed instrument of agreement, a series of numbered Agreed Terms, and a number of schedules and annexures. Acciona is defined as the D&C Contractor and Holcim as the Supplier.

2. [13]

   Agreement is defined in Clause 1.1 of the Agreed Terms to be the agreement between the D&C Contractor and the Supplier constituted by the Contract Documents. Contract Documents is defined to mean the documents described as such in Item 4 of Schedule A. Schedule A is an information table. Schedule A defined Contract Documents to include the Annexures, the Agreed Terms, and Site Procedures document provided to the Supplier. The Contract Documents, as defined, do not include Purchase Orders.

3. [14]

   The Instrument of agreement provides that the D&C Contractor must pay the Supplier the Contract Sum and any other sums which become payable under the Agreement, in accordance with the Agreement.

4. [15]

   Under Schedule A, the time for submission of a payment claim is the 25th day of the month. [1]

5. [16]

   The GSA (in the Agreed Terms section) includes the following terms:

Payment Claims and Payment Schedules 30 to 34

1. [17]

   Over the life of the GSA, Acciona issued some 12,500 purchase orders and Holcim directed 36 payment claims to Acciona.

2. [18]

   From July 2019, Acciona stopped paying Holcim’s payment claims.

3. [19]

   On 25 July 2019, Holcim made payment claim 30 for $683,808.04 (excluding GST). In Acciona’s payment schedule 30, $658,889.31 was certified as the value of the goods supplied but the value of the scheduled amount was nil on the basis of asserted set-offs of $2,184,773.76 said to arise because Holcim had wrongly charged plant opening fees and was not entitled to charge $2,004,773.76 for delay and cancellations, which had previously been paid by Acciona.

4. [20]

   On 27 August 2019, Holcim made payment claim 31 for $643,771.67 (excluding GST). In Acciona’s payment schedule 31, $611,256.33 was certified as the value of the goods supplied but the scheduled amount was nil on the basis of claimed set-offs (as in the case of payment schedule 30).

5. [21]

   On 25 September 2019, Holcim made payment claim 32 for $373,944.51 (excluding GST). In Acciona’s payment schedule 32, $324,329.51 was certified as the value of the goods supplied but the scheduled amount was nil on the basis of claimed set-offs of $1,646,375, being damages claimed for late deliveries.

6. [22]

   On 25 October 2019, Holcim made payment claim 33 for $268,375 (excluding GST). In Acciona’s payment schedule 33, $227,929 was certified as the value of the goods supplied but the scheduled amount was nil on the basis of claimed set-offs of $1,646,375 (as in the case of payment schedule 32).

7. [23]

   On 26 November 2019, Holcim made payment claim 34 for $142,487.37 (excluding GST). In Acciona’s payment schedule 34, $129,422.68 was certified as the value of the goods supplied but the scheduled amount was nil on the basis of claimed set-offs of $38,240,718.50. Acciona asserted that Holcim was not entitled to charge amounts totalling $2,078,417.06 for delay, which had previously been paid by Acciona, and had made late deliveries, for which Acciona claimed damages of $36,162,301.44.

Payment Claim 36

1. [24]

   On 28 May 2020, Holcim made the Payment Claim comprising:

   1. (1)

      $1,021,330.81 for newly claimed measured works, $323,830.81 which was for works from October 2019 to April 2020, and $697,500 was for plant opening charges from 26 March 2016 to 16 February 2020 which had not previously been charged by Holcim.

   2. (2)

      $1,718,246.80 for works in payment claims 30 to 34.

2. [25]

   On 12 June 2020, Acciona served Payment Schedule 36 (the Payment Schedule). It valued the new measured works at $252,428.66, but the scheduled amount was stated to be nil because of the claimed set-offs of $38,240,718.50. The Payment Schedule stated, “Without admission and for the purposes of this payment schedule only, the D&C Contractor does not press this Set-Off in this payment schedule.”

3. [26]

   The Payment Schedule also stated:

4. [27]

   On 26 June 2020, Holcim lodged its adjudication application for the Payment Claim (the Adjudication Application). The Adjudication Application included copies of payment claims and payment schedules 30 to 34.

5. [28]

   On 3 July 2020, Acciona lodged its adjudication response (the Adjudication Response).

6. [29]

   In it, Acciona raised two matters, described as “jurisdictional issues”, which had not previously been raised in the Payment Schedule. It contended that the Payment Claim was invalid and that the Adjudicator did not have jurisdiction to determine the Adjudication Application because the Payment Claim was for multiple purchase orders, which constituted separate contracts between the parties rather than one single contract, and the Adjudication Application was for more than one payment claim.

7. [30]

   By the Determination, the Adjudicator determined that Acciona was required to pay Holcim $2,953,035.57 (including GST) from 10 July 2020, that interest was payable, and that Acciona was liable to pay 100% of the adjudication fees.

8. [31]

   I now turn to the grounds of attack.

9. [32]

   Ground 1 is that the Adjudicator had no jurisdiction because there was not a valid payment claim or valid adjudication application, in that the Payment Claim impermissibly claimed for work done under two or more contracts.

10. [33]

    I uphold Ground 1.

11. [34]

    In paragraphs 12 to 14 of the Determination, the Adjudicator said (footnotes omitted):

12. [35]

    In Rail Corporation of NSW v Nebax Constructions [2012] NSWSC 6 at [44]-[46] (Nebax), McDougall J held that s 13(5) prevents the service of more than one payment claim per reference date per construction contract, so that there can only be one adjudication application for any particular payment claim for any particular contract. His Honour observed that s 17(1) does not authorise the lodging of multiple adjudication applications in respect of the one claim. In Matrix Projects (Qld) Pty Ltd v Luscombe [2013] QSC 4 at [17] (Matrix), Douglas J agreed with McDougall J’s reasoning and conclusion.

13. [36]

    In Trinco (NSW) Pty Ltd v Alpha A Group Pty Ltd [2018] NSWSC 239 at [55]-[61] (Trinco), McDougall J applied this reasoning to hold that a single progress claim cannot validly claim for work done under more than one contract. In Matrix at [20], Douglas J articulated this as, “…the variety of different types of contract for construction work relied upon in the payment claim is fatal to its validity.”: see too SHA Premier Constructions Pty Ltd v Lanskey Constructions [2019] QSC 81 at [16]-[17], [21].

14. [37]

    It was not suggested that any of Nebax, Matrix, or Trinco were wrongly decided.

15. [38]

    In Olympia Group (NSW) Pty Ltd v Hansen Yuncken Pty Ltd [2011] NSWSC 165 at [11], Ball J held that s 20(2B) did not prevent the respondent from raising grounds, not put in its payment schedule, on which it was asserted that the adjudicator did not have jurisdiction to make a determination. In Nebax at [34]-[39], McDougall J agreed: see too National Management Group Pty Ltd v Biriel Industries Pty Ltd [2019] QSC 219 at [200].

16. [39]

    In John Holland Pty Limited v Roads & Traffic Authority of New South Wales & Ors [2007] NSWCA 19 at [47]-[50], Giles JA considered that a decision by an adjudicator should not ignore something which he or she is aware of and is also relevant to real issues arising under s 20(2B) simply because the matter was not raised in submissions duly raised by the respondent.

17. [40]

    The Adjudicator had no jurisdiction because the Payment Claim was invalid and ineffective to engage the operation of the Act. By the parties’ express agreement in cl 2 of the Agreed Terms, each time a purchase order was issued, a separate contract came into existence between Acciona and Holcim on the terms set out in the GSA. Each such contract was governed by terms contained in the overarching GSA instrument, which terms became incorporate in every subsequent separate contract, but each time Acciona placed a purchase order, a separate contract for discrete work with a separate payment date came into existence.

18. [41]

    Applying Trinco, the Payment Claim, which straddled numerous purchase orders (and therefore numerous contracts) with separate payment dates, did not constitute a valid payment claim.

19. [42]

    It follows that the Determination is void and will be quashed.

20. [43]

    Ground 2 is that the Adjudicator failed to consider Acciona’s contention that she lacked jurisdiction.

21. [44]

    The substance of Ground 2 is that, irrespective of whether there was jurisdiction, the failure of the Adjudicator to consider the no jurisdiction contention vitiated the Determination. Accordingly, Acciona argued, the Determination would still be void even if the Court found that there was jurisdiction.

22. [45]

    The Ground does not arise given my finding of lack of jurisdiction.

23. [46]

    However, I consider that the Adjudicator was bound to consider the no jurisdiction submission and to satisfy herself that there was jurisdiction. Had she done so, there was at least a realistic possibility that she would have found no jurisdiction: see Hossain v Minister for Immigration and Border Protection (2018) 264 CLR 123; Minister for Immigration and Border Protection v SZMTA (2019) 264 CLR 421 at [46], [50].

24. [47]

    The difficulty with Ground 2 is that if the Court had found jurisdiction, Acciona’s contention is that the Determination was nevertheless void because the Adjudicator did not consider a contention which, if she had considered it and decided it correctly, would have resulted in a finding of jurisdiction. Acciona’s submission amounts to one that it was deprived of the opportunity that the Adjudicator might have made an error by finding no jurisdiction.

25. [48]

    I am by no means certain that if I had otherwise found jurisdiction I would have considered it appropriate nevertheless to grant relief on this ground.

26. [49]

    Ground 3 is that the Adjudicator failed to afford Acciona procedural fairness by finding a contractual basis for valuing progress payments upon which Holcim had not relied and which had not been the subject of submissions.

27. [50]

    Although it is not strictly necessary to consider this Ground, I will do so on the hypothesis that the Adjudicator had jurisdiction.

28. [51]

    I would uphold it.

29. [52]

    In paragraphs 38 to 44 of the Determination, the Adjudicator said:

30. [53]

    An adjudicator must afford the contestants natural justice, which includes affording them procedural fairness. It is a denial of natural justice 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: Musico v Davenport [2003] NSWSC 977; IWD No 2 Pty Ltd v Level Orange Pty Ltd [2012] NSWSC 1394 at [34]-[35]; Probuild Constructions (Aust) Pty Ltd v DDI Group Pty Ltd (2017) 95 NSWLR 82 at [54]; Brolton Group Pty Ltd v Hanson Construction Materials Pty Ltd [2020] NSWCA 63 at [53].

31. [54]

    The Adjudicator requested the parties to agree to an extension of time for determining the Adjudication Application and they agreed. The Adjudicator did not request further written submissions or call a conference.

32. [55]

    The Adjudicator was plainly conscious both of the necessity to assess the progress payment in accordance with s 9 and Holcim’s failure to identify the precise basis on which it was contending the progress payment was to be assessed. She observed that Holcim relied on s 9(a) but referred to cl 3.1(b) of the Agreed Terms, which did not deal with calculation of the amount of progress payments “at all”.

33. [56]

    She recorded Acciona’s submissions but expressed a view that, even if they were correct, Holcim was nevertheless entitled to an amount determined in accordance with s 9(a) or (b).

34. [57]

    The Adjudicator found the solution for Holcim by way of an implication to which she considered cl 23.3(a) of the GSA gave rise, which was not the subject of any submission by either Holcim or Acciona, and she did not give Acciona an opportunity of dealing with it.

35. [58]

    This was a denial of natural justice.

36. [59]

    In passing, I consider that the Adjudicator fell into error in finding that cl 23.3(a) helped. It is not a provision to which s 9(a) applies because it does not provide a method of calculation for a payment claim and, if it does, it is not an express provision with respect to that matter (hence the necessity for an implication) with the consequence that s 9(b), rather than s 9(a), was in play. The further consequence, is that she was obliged to proceed in accordance with s 10(1)(b), which she did not do.

37. [60]

    Ground 4 is that the Adjudicator misapprehended the nature of her task by relying on payment schedules which had previously passed between the parties rather than the Payment Schedule (the subject of adjudication application) and, in doing so, failed to afford Acciona procedural fairness by not giving it advance notice of her intention of so doing.

38. [61]

    I would not uphold Ground 4.

39. [62]

    Whilst the Adjudicator did pay attention to payment claims 30 to 34, I do not consider it to be a fair reading of the determination that she did not pay attention to the Payment Schedule or that she approached the matter without regard to the Payment Schedule. The previous payment schedules were before her.

40. [63]

    In its Adjudication Application, Holcim recounted the process which the parties had adopted in relation to earlier payment schedules and relied upon its earlier position in maintaining its entitlement for amounts which Acciona had declined to certify.

41. [64]

    It seems to me that the Adjudicator’s approach was, in effect, to treat the parties’ previous dealings and certifications as admissions for the purpose of making her Determination. I think this approach was erroneous for at least the reason that in many instances in the earlier payment schedules amounts were accepted by Acciona under the caption, “On account only, no substantiation provided.” This was no admission.

42. [65]

    However, I am not satisfied that insufficient advance notice of the possibility of her proceeding as she did was given. Her error was not jurisdictional.

43. [66]

    Ground 5 is that the Adjudicator failed to afford Acciona procedural fairness by rejecting a contention by Acciona that it was not in a position properly to assess Holcim’s claims because Holcim had not provided delivery dockets establishing that it had delivered what it was claiming it delivered, for reasons not advanced by Holcim, and by making credit findings against Acciona’s witness, Mr Li, on bases not put by Holcim and not the subject of submissions or notice in advance.

44. [67]

    I would uphold Ground 5.

45. [68]

    In its Adjudication Response, Acciona contended that Holcim failed to substantiate the Payment Claim, that it had failed to provide evidence to Acciona in support of its claim, and it disregarded cl 23.2 of the GSA. Acciona relied on a witness statement of Mr Firmin Li dated 3 July 2020.

46. [69]

    In paragraphs 33 to 37 of the Determination, the Adjudicator said:

47. [70]

    Acciona argued that Holcim advanced none of the 13 reasons given by the Adjudicator in paragraph 36 of the Determination for reaching the conclusion that the absence of delivery dockets did not prevent Acciona from verifying or rejecting any particular line item claim. Holcim did not argue that it advanced any of them.

48. [71]

    Acciona’s final submissions, however, focused on the adverse credit findings with respect to Mr Li in paragraphs 35 and 36(f), (h) and (m) of the Determination.

49. [72]

    In paragraph 35, the Adjudicator concluded that Mr Li could not have been employed full-time by Acciona because he was enrolled in two degree courses between 2015 and 2019. Counsel for Holcim correctly did not seek to support this non sequitur.

50. [73]

    In paragraphs 36(f) and (g), the Adjudicator referred to various statements by Mr Li as being contradictory and to his having exaggerated the effort involved in assessing payment claims 30 to 34.

51. [74]

    In my opinion, natural justice dictated the Adjudicator give Acciona advance notice that she was considering these significant adverse findings (which had not been the subject of any contention by Holcim) and affording it an opportunity of dealing them.

52. [75]

    Ground 6 is that the Adjudicator failed to discharge the statutory task of satisfying herself that Holcim had substantiated its claims.

53. [76]

    I would uphold Ground 6.

54. [77]

    Acciona relied, in particular, on paragraph 44 of the Determination, where the Adjudicator said:

55. [78]

    Acciona argued that it was incumbent on Holcim to satisfy the Adjudicator that it had carried out the work it was claiming for, and that the work should be so. It argued that the Adjudicator could not avoid the task of forming that satisfaction merely because Acciona was not positively disputing the facts, not least in circumstances where Acciona had told the Adjudicator that it was not in a position to do so having regard to the absence of information provided by Holcim.

56. [79]

    In Laing O’Rourke Australia Construction Pty Ltd v Monford Group Pty Ltd [2018] NSWSC 491 at [2], Stevenson J made the point that:

57. [80]

    In Pacific General Securities Ltd v Soliman & Sons [2006] NSWSC 13 at [82], Brereton J said that:

58. [81]

    Applying these statements of principle, Acciona’s submissions have force. Absence of dispute of a fact does not establish it. Holcim still bore the onus of establishing its claim, including those elements of it where Acciona adduced no material to dispute it, and the Adjudicator had a duty to satisfy herself that the claimed work had been done and of its value, a task which, by virtue of her approach, she did not carry out.

59. [82]

    I make the following orders:

    1. (1)

       Declare that Adjudication Determination 2020061EA made by the second defendant on 23 July 2020 is void.

    2. (2)

       Order that the said Adjudication Determination be quashed.

    3. (3)

       Order that the money paid into Court by the plaintiff and any interest be paid out to it or, on direction, to its solicitors.

    4. (4)

       Provisionally order that the first defendant is to pay the plaintiff’s costs. This order will solidify 7 business days after delivery of this judgment unless a party notifies my Associate in writing that some other order is sought, briefly stating the grounds, in which event the order will be vacated and arrangements will be made to determine costs.