The Supreme Court of Queensland has just handed down its decision in the matter of Ostwald Bros Pty Ltd v Jaylon Pacific Pty Ltd & Ors [2016] QSC 240. In this case, Ostwald Bros Pty Ltd (Ostwald), represented by McInnes Wilson Lawyers, was successful in its application to have the decision of an Adjudicator declared void on the basis that the decision amounted to a substantial denial of natural justice to Ostwald.

WHAT IT MEANS FOR YOU 

This decision confirms that adjudicators must decide material issues based on the submissions of the parties to the adjudication application. If the adjudicator wants to ‘go outside’ the submissions then the parties should be given an opportunity to provide further submissions to the adjudicator on the issue. Failing to do this may amount to a denial of natural justice sufficient to have the decision set aside by the court. If you are a party to an adjudication decision and believe that you may have been denied natural justice then you should immediately seek legal advice.

BACKGROUND

Ostwald and Jaylon Pacific Pty Ltd (Jaylon) were parties to a subcontract for the supply and installation (by Jaylon) of a liner for an effluent pond cell at Condabri Central (Contract).

As a result of a payment dispute Jaylon lodged an adjudication application in the amount of $441,466.51 (inc GST). Ostwald denied it owed any money to Jaylon however the Adjudicator ultimately awarded Jaylon $424,901.40 (inc GST).

Oswald applied to the Court to have the Adjudicator’s decision set aside on a number of grounds. A major issue was the Adjudicator’s treatment of Ostwald’s claimed entitlement to set off liquidated damages (LDs).

On this point Jaylon submitted that it was entitled to extensions of time (EOTs) due to variations it carried out or alternatively that the ‘prevention principle’ applied i.e. time was ‘at large’ under the Contract. Jaylon argued that in either case Ostwald had no entitlement to LDs.

Oswald on the other hand argued that Jaylon had failed to prove that the claimed periods of delay were due to a ‘qualifying cause’ under the Contract or alternatively that it (Jaylon) had complied with the procedures under the Contract necessary to give rise to an entitlement to EOTs. Further the terms of the Contract left no room for the ‘prevention principle’ to apply.

DECISION 

On the issue of LDs the Court readily found that the Adjudicator had decided this material point (in Jaylon’s favour) on a basis that was not the subject of submissions by either Oswald or Jaylon i.e. the Adjudicator decided the issue on his own construction of two (2) clauses under the Contract that neither party had contended for. It was observed that the principal focus of the submissions by the parties was whether the ‘prevention principle’ operated however the Adjudicator found it unnecessary to decide this point.

The Court noted that where an adjudicator decides a material point on a basis for which neither party contended, there will be a substantial denial of natural justice (i.e. in effect a denial of the right of a party to be heard) unless it can be said that no submission could have been made to the adjudicator which might have produced a different result. The Court did not accept that this rider applied in this case.

The author acknowledges the assistance of Jason Dabelstein, Law Clerk in preparing this article.