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  • Writer's pictureJohn Lowry

Payment Claims, Service of an Adjudication, Natural Justice

Key Take-aways: 1) You can only issue one payment claim per month (or agreed payment period) for each job (even if it spanned the BCIPA - BiF changeover).

2) An adjudicator can not undertake an adjudication before receiving a copy of the (full) adjudication application.

3) Adjudicators must consider respondents’ submissions about jurisdiction to decide the matter even if it did not serve a payment schedule (and cannot make a response about the claims). Note: Adjudicators should then give applicants the opportunity to reply to these submissions, since the adjudication response will be the first time they have seen them.

4) No 3 is about the concept of “natural justice”, i.e., the right to a fair hearing. Her honour drew an interesting distinction between being “denied a fair hearing” and “might have been denied” a fair hearing. Mind you, adjudicators should avoid the problem if possible. National Management Group Pty Ltd v Biriel Industries Pty Ltd [2019] QSC 219

In this fascinating case, Wilson J addressed three key facets of building adjudications: the validity of payment claims under the Building Industry Fairness (Security of Payment) Act2017; whether service of an adjudication application is a necessary prerequisite to their having jurisdiction; and whether an adjudicator is required by natural justice to take into account submissions on their jurisdiction from a party precluded from providing an adjudication response. Ultimately, her Honour declared one of the two subject adjudication decisions void. Note: Reading these judgements “the applicant” in the court case is usually “the respondent” to an adjudication.

Wilson J (the judge), 9 September 2019 The applicant was a principal contractor who engaged the first respondent to provide structural steel on two projects, known as the “Lucky Squire Project”and the “Harbour Town Project”. [5]–[6]. The first respondent initially issued payment claims on 17 December 2018 in respect of the Lucky Squire Project, and issued further payment claims, in respect of both projects, on 31 December 2018. [7]–[8]. On 6 February 2019, the first respondent lodged adjudication applications in relation to the latter payment claims. [13].The Queensland Building and Construction Commission wrote to the applicant on 7 February 2019, advising it that it had received adjudication applications in relation to each project. [17]. The following day, the applicant sent two bundles of documents, one relating to each application. [21]. The applicant contended that these bundles did not properly identify either application. [21]. It sent a letter about this to the adjudicator on 22 February 2019, although this did not reach the adjudicator until 1 March 2019. [31]. Ultimately, on 7 March 2019, the adjudicator made a decision in favour of the first respondent in relation to each application and expressly refused to take into account the applicant’s letter of 22 February 2019. [36]–[37].

In its judicial review application, the applicant raised the following notable contentions: 1.The adjudication decision on the Lucky Squire Project was not in relation to a valid payment claim, and the adjudicator did not have jurisdiction. 2.That the service of an adjudication application is a necessary prerequisite to an adjudicator having jurisdiction to determine a dispute. 3.That the adjudicator failed to accord the applicant natural justice by not taking into account its submissions on the adjudicator’s jurisdiction.

Payment Claim Validity The first respondent issued three payment claims in relation to the Lucky Squire Project, INV-0134 and INV-0137, each of which was issued on 17 December 2018, and another payment claim entitled INV-0137, dated 31 December 2018. [7]–[8]. However, the adjudication application was only made in relation to the latter INV-0137. [13]. The applicant submitted that the latter INV-0137 was not a valid payment claim because it purports to rely on the same reference date as the payment claim already made. [50]. The first respondent, conversely, submitted that the invoices issued on 17 December 2018 were issued under the Building and Construction Industry Payments Act 2004, which had been repealed and replaced by the Building Industry Fairness (Security of Payment) Act 2017(“the Act”), and so were invalid. [55]. Wilson J rejected the first respondent’s submissions on this point, finding that if “an invoice was issued at a date when the Act applied, then it is immaterial that the invoice includes a statement that it was issued under a repealed Act”. [61]. Accordingly, the latter INV-0137 “cannot be a valid payment claim”. [66]. As a valid payment claim “is a necessary prerequisite to an adjudication application”, the adjudicator lacked jurisdiction in relation to the payment claims arising from the Lucky Squire Project. [67]–[68]. Her Honour accordingly declared that adjudication decision void. [69].

Service Requirements Under s 79(3) of the Act, a “copy of an adjudication application must be given to the respondent”to that adjudication (in this case, the applicant). [70]. The question before Wilson J was whether, in light of “competing”authorities in Queensland and New South Wales, service in accordance with s 79(3) “is necessary to confer jurisdiction upon an adjudicator.”[71]. On the one hand, Hodgson JA provided a non-exhaustive list of “basic and essential requirements”for an adjudication decision to be valid in Brodyn Pty Ltd (t/a Time Cost & Quality) v Davenport (2004) 61 NSWLR 421 at [53], which did not include the service of the application. [72]–[75]. On the other, Ryan J recently concluded in Niclin Constructions Pty Ltd v SHA Premier Constructions Pty Ltd [2019] QSC 91 that service under the repealed Act was “required before an adjudication may be validly taken”. [79]. Wilson J agreed with this latter approach, finding that “in the absence of service, the respondent does not know precisely where it stands”. [83]. Accordingly, an adjudication application must be given to a respondent “before an adjudication may be validly undertaken.”[83].

Natural Justice The applicant submitted that the adjudicator failed to accord it natural justice by refusing to accept its submissions about jurisdiction. [181]. Notably, it was prohibited from giving an adjudication response by s 82(2) of the Act as it had not given a payment schedule to the first respondent. [186]–[187]. The adjudicator characterised the submissions on jurisdiction as an adjudication response and, because they were also out of time, expressly disregarded them. [190]–[192]. Wilson J agreed with the applicant’s submission that this constituted a breach of natural justice; although it was precluded from making an adjudication response, the adjudicator was required to consider its submissions on jurisdiction. [198]–[200]. Nevertheless her Honour considered that “not all breaches of natural justice will result in an adjudicator’s decision being voided”. [201]. In the instant case, the applicant failed to show that it's submissions “as a matter of reality and not speculation... might have persuaded the adjudicator to change his mind”. [206]. Accordingly, there was “no practical injustice or substantial breach of natural justice” sufficient to warrant the setting aside of the decision in relation to the Harbour Town Project. [208].

In the event, Wilson J declared the adjudication decision in relation to the Lucky Squire Project void, and the application was dismissed as it related to the Harbour Town Project. M Paterson

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