December 15, 2020
The NSW Supreme Court recently warned practitioners, contractors and principals alike, that the decisions of adjudicators under the Building and Construction Industry Security of Payment Act 1999 (NSW)(‘the Act’) must not be scrutinised with a fine-tooth comb, and instead must be taken more on their face value.
In a setting where the value of these decisions is commonly in the millions within the Security of Payment Regime, it leaves a curious question mark for how contractors and principals move forward.
The case in question is that of CPB Contractors Pty Limited v Heyday5 Pty Limited [2020] NSWSC 1625.
Background of Issue
CPB Contractors Pty Limited, Dragados Australia Pty Ltd and Samsung C&T Corporation (together as ‘CDSJV’) were the Head Contractor of the WestConnex Project, a project for the construction of a 33km motorway network in Sydney, NSW.
CDSJV retained Heyday5 Pty Ltd (‘Heyday’) under a written works contract to undertake electrical installation works on the project.
A dispute arose between the parties regarding the use of spotters during the utilisation of mobile elevated work platforms (‘the Spotters Claim’) as part of the works. The critical issue of the dispute turned on whether a direction issued by CDSJV following contract award which required the use of spotters was beyond the requirements imposed under the contract (which would therefore entitle Heyday to a variation for the cost associated with same).
Following the submission of a payment claim by Heyday claiming the Spotters Claim as a variation, and a payment schedule by CDSJV denying entitlement to same, the matter was referred to adjudication.
The adjudicator determined that the direction was a variation, and as such $7,120,922 was owing to Heyday by CDSJV.
The Challenge
CDSJV challenged the adjudicator’s decision on the grounds that:
- the Determination disclosed no evident or intelligible justification for upholding the Spotters Claim; and
- the adjudicator denied CDSJV procedural fairness because he found against it on bases not the subject of submissions duly made.
In particular, CDSJV highlighted three paragraphs in the adjudicator’s decision, two of which it considered to be ‘unintelligible’, and the third which it considered argued a point that was not raised by either party.
The Court’s Findings
The Court found that while the adjudicator may have used a poor choice of words, and made a typographical error, the two noted paragraphs were not unintelligible as so claimed by CDSJV. Further, the argument regarding the newly raised issue was artificial as CDSJV did not lose anything in being unable to respond to the issue raised.
In making its judgement, the court noted that adjudicators are often not lawyers, and are required to dispose of complex issues, both factual and legal in nature, within the tight time frames imposed by the Act. As such, the adjudicator’s procedural behaviour and adjudication determination should not be scrutinised with an overcritical or pedantic eye, but should be common sense and without undue legality.
The Court upheld the notion that an adjudicator’s determination must clearly state a justification behind its determination, and should only consider the submissions duly made by the Parties in support of the payment claim and payment schedule, however made clear that when reviewing the adjudicator’s determinations, these parties should not be overly critical or analytical. Instead, the determination should be “read as a whole and should not be viewed through the prism of legal concepts or examined with a fine-tooth comb”.
Consequences of the Court’s Findings
This approach by the Supreme Court is contrary to the previous actions of many (if not all) unsuccessful contractors and principals alike.
When the value of millions of dollars is on the line for a party, it is human condition that the decision be reviewed with great interest and scrutiny.
Further, it is curious that the court notes that the decisions of adjudicators should not be viewed through the prism of legal concepts, when the Act itself calls for the decisions of adjudicators to be strictly limited to the entitlements that the parties are afforded under the terms of construction contracts and the provisions of the Act.
This in itself is the Act calling for adjudicators to view the matter through the prism of contractual and legislative entitlement, which begs the question as to why the adjudicator’s decisions should not be viewed through the same lens.
Lamont Project & Construction Lawyers
Our Team have the knowledge and experience to assist both principals and contractors with any Security of Payment related issues. If you would like to discuss any matters raised in the above article as it relates to your specific circumstances, please contact Lamont Project & Construction Lawyers.
The contents of this article are for information purposes only. The article does not discuss every important topic or change in law, and it is not to be relied upon as legal advice. Specialist advice should be sought regarding your specific circumstances.