The validity of an adjudication is conditional upon the adjudicator performing the statutory task of assessing the amount of construction work and its value. In the same case, judicial review in relation to the adjudicator’s alleged incorrect finding of an available reference date was pursued, but only formally in light of Lewence [2015] NSWCA 288.

Richard Crookes Construction Pty Ltd v CES Projects (Aust) Pty Ltd (No.2) [2016] NSWSC 1229

Assessment of construction work and its value

The plaintiff (the Contractor) alleged that an adjudication under the Building and Construction Industry Security of Payment Act 1999 (NSW) was invalid because the adjudicator had failed to perform the statutory function of assessing the amount of construction work and its value.

McDougall J considered the authorities in relation to the content of this statutory function, including the New South Wales decision in Pacific General Securities Ltd v Soliman & Sons Pty Ltd [2006] NSWSC 13 and the decision of Justice Vickery in SSC Plenty Road Pty Ltd v Construction Engineering (Aust) Pty Ltd [2015] VSC 631. He noted the observations of Vickery J in SSC Plenty Road at [101] were directly applicable to the process of adjudications in New South Wales.

His Honour found that the adjudicator’s reasons demonstrated that he did not carry out the minimum content of the statutory task entrusted to him, ie, “determining whether the construction work identified in the payment claim has been carried out, and what is its value” (at [47]).

While it was open for the adjudicator to reject the material relied upon by the Contractor, His Honour found that the adjudicator did not say why it was that the sub-contractor’s invoices sufficiently supplemented other deficiencies that the adjudicator had identified in the proof of the sub-contractor’s claim. His Honour found that the adjudicator’s reasons went no further than saying that, for the total amount of $900,600.00 claimed, there were supporting sub-contractor’s invoices for some amount well exceeding $500,000.00. The conclusion that the invoices were sufficient proof for the bulk of the claim was considered by His Honour to be “both counter-intuitive and entirely unsupported by any reasoned analysis” [54].

Judicial Review in relation to available reference dates

The Contractor also alleged that the determination was void because there was no reference date to support the sub-contractor’s payment claim and that the availability of a reference date was a precondition to validity. The Contractor conceded that this submission was inconsistent with the New South Wales Court of Appeal decision in Lewence Construction Pty Ltd v Southern Han Breakfast Point Pty Ltd [2015] NSWCA 288 which His Honour was bound to follow (at [9]).

In Lewence, the Court of Appeal found inter alia that the existence of a reference date to support a payment claim is not a jurisdictional fact; it is not an essential pre-condition for the making of a valid payment claim (Ward JA at [60], [93]; Emmett JA at [119]; Sackville AJA at [133]) and that the words “or who claims to be entitled to a progress payment“ in s 13(1) make clear that the existence of a dispute as to the entitlement of a person to a progress claim does not preclude the making of a valid payment claim (Ward JA at [61]).

Lewence is on appeal to the High Court of Australia. The hearing took place on 12 October 2016. The High Court has reserved its decision.

In contrast to Lewence, in Victoria an Adjudicator’s finding in relation to the availability of a reference date is reviewable: Saville v Hallmarc Construction Pty Ltd [2015] VSCA 318 at [54]-[99]. Saville did not address the Court of Appeal’s decision in Lewence.

The Supreme Court TEC List has recently deferred the hearing of cases where there is a challenge to the validity of adjudication under the Victorian Act on the basis that there is alleged to be no available reference date, pending the High Court’s decision.