Queensland

The decision in Dart Holdings Pty Ltd v Total Concept Group Pty Ltd and Ors [2012] QSC 158 highlights the importance of ensuring that contractors are appropriately licensed under the Queensland Building Services Authority Act 1991 (Qld) (the QBSA). In that case, the Queensland Supreme Court was asked to declare a decision of an adjudicator void on the basis that the claimant did not hold the requisite licence required by section 42 of the QBSA. The contract entered into by the claimant and the respondent was primarily for performance of carpentry works and the claimant held a carpentry licence under the QBSA. There was however one item of the original contracted scope of works and a variation claim which the court found to require a glazing licence under the QBSA. The respondent did not hold a glazing licence. Justice McMurdo held that as a result of some of the works performed by the claimant not being within the scope of works permitted by the carpentry licence, the respondent had breached section 42(1) of the QBSA, with the effect that the respondent had “no contractual entitlement to be paid any consideration for any of the work the subject of the Contract” and was not entitled to submit a payment claim under the Building and Construction Industry Payment Act (BCIPA).

The respondent’s entitlement to payment now is within the limited confines of section 42(4) of the QBSA, which does not allow for profit or the supply of one’s own labour.

This case should serve as a reminder to builders who enter into contracts to carry out building work in Queensland to ensure they hold the requisite building licence and are compliant with the QBSA or else risk voiding their entitlement to payments both under the contract and under the BCIPA.

In Thiess Pty Ltd v Warren Brothers Earthmoving Pty Ltd and Ors [2012] QSC 373, Thiess, sought to have an adjudicator’s decision declared void or alternatively set aside on the basis of jurisdictional error arising by reason of the adjudicator failing to take into account material which he was required to take into account pursuant to section 26(2) of the Act, namely the payment schedule, the adjudication application and the adjudication response.

Notwithstanding that the adjudicator did refer to various aspects of the payment schedule and adjudication response, the court found that the adjudicator had failed to “consider” relevant submissions of Thiess in accepting an item as claimed by Warren Brothers in the payment claim when in fact, Warren Brothers had reduced the claim in its adjudication application as a result of the payment schedule. Of itself, this item was insufficient to justify a finding of jurisdiction error but did require the court to go on and consider the “extent of the failure and the nature, gravity and effect of the error”.

The court found that the adjudicator‘s rejection of Thiess’ submissions on the basis that Thiess was “generally unreliable and non-responsive to the real issues in dispute” and its material did “not provide a picture of constancy and reliability but portrays one consisting of a procedure prone to human error factors” was a failure by the adjudicator “to genuinely attempt to exercise his power in accordance with the BCIPA”, given it was Warren Brothers whose claim was subject to human error and it was Warren Brothers who had in fact not responded to some of the issues in dispute.

As “there is no mechanism available to sever any part of a decision that is infected by jurisdictional error”, the determination was declared void.

New South Wales

In Leighton v Arogen [2012] NSWSC 1323, Leighton entered into a lump sum contract with Arogen for the supply of horizontal drilling services. However, a further agreement was made whereby the lump sum contract was varied to a schedule of rates contract. Arogen submitted a payment claim for $6.2m primarily for variations and additional works pursuant to the schedule of rates contract. Leighton responded with a negative payment schedule on the basis that it disputed quantum and referred to a separate attachment which set out its calculations used to arrive at the amount in the payment schedule.

 The adjudicator accepted Arogen’s submission that the calculations were not included in the payment schedule and accordingly the Respondent was prevented by section 20(2B) of the Building and Construction Industry Security of Payment Act 1999 (NSW) from relying on these calculations. Arogen further sought to change the basis of one of its claims from that appearing in the payment claim (ie costs of suspension) to “excusable delay” for inclement weather as a result of the reasons raised by Leighton in its payment schedule. The adjudicator accepted the newly formulated claim, yet denied Leighton the right to raise any new reasons for rejecting the newly formulated claim in apparent reliance on section 20(2B) of the Act.

Justice McDougall in the Supreme Court quashed the adjudication determination. He held that the adjudicator had considered claims in an adjudication application which were framed on a significantly different basis from that put in the payment claim which was contrary to his obligation to only consider submissions “duly made” under section 22(2)(c) of the Act. His Honour further found that the adjudicator had denied Leighton natural justice by failing to take into account Leighton’s calculations as to the value of Arogen’s caims, irrespective of whether those calculations were actually attached to the payment schedule. The court reiterated that claims and schedules need to be “understood as the parties to the relevant construction contracts would have understood them” and in this case Leighton had identified the reason for withholding payment as “the variations had been valued at an excessive amount” therefore consideration of the calculations was not in any event a “new reason”.

The court was further critical of the adjudicator for failing to provide “any, let alone sufficient, reasons” for his adoption of Arogen’s valuations where quantum was expressly disputed by Leighton.

The case is a warning to claimants to ensure that their adjudication applications are consistent with their payment claims or they run the risk of the being unable to enforce the determinations and left to bear the adjudicator’s costs.