Loading...
Queensland Judgments

beta

Authorised Reports & Unreported Judgments
Exit Distraction Free Reading Mode
  •   Notable Unreported Decision

QCLNG Pipeline Pty Ltd v McConnell Dowell Constructors (Aust) Pty Ltd

 

[2011] QSC 292

 

SUPREME COURT OF QUEENSLAND

 

CITATION:

QCLNG Pipeline Pty Ltd v McConnell Dowell Constructors (Aust) Pty Ltd and Consolidated Contracting Company Australia Pty Ltd & Anor [2011] QSC 292

PARTIES:

QCLNG PIPELINE PTY LTD

ACN 140 760 612
(applicant)
v
McCONNELL DOWELL CONSTRUCTORS (AUST) PTY LTD
ACN 002 929 017
CONSOLIDATED CONTRACTING COMPANY AUSTRALIA PTY LTD

ACN 140 609 052
(first respondent)
PHILIP DAVENPORT
(second respondent)

FILE NO:

SC No 6814 of 2011

DIVISION:

Trial Division

PROCEEDING:

Application

DELIVERED ON:

5 October 2011

DELIVERED AT:

Brisbane 

HEARING DATES:

31 August 2011; 1 September 2011

JUDGE:

Peter Lyons J

ORDERS:

The Court declares that the adjudication decision of the second respondent delivered on 3 August 2011 is void.

The Court orders that:

  1. The Registrar of the Supreme Court:
  1. shall return to the applicant the bank guarantee filed by the applicant on 9 August 2011 so that it can be presented and surrendered to the Australia and New Zealand Banking Group Ltd for release;
  2. shall provide written notice to Australia and New Zealand Banking Group Ltd, at Level 10, 20 Martin Place, Sydney NSW 2000 Australia, that the said bank guarantee is released; and
  3. shall provide a copy of the said notice to the solicitors for the applicant.
  1. The first respondent pay the applicant's costs of and incidental to the application, to be assessed on the standard basis.

CATCHWORDS:

CONTRACTS – BUILDING, ENGINEERING AND RELATED CONTRACTS – REMUNERATION – STATUTORY REGULATION OF ENTITLEMENT TO AND RECOVERY OF PROGRESS PAYMENTS – ADJUDICATION OF PAYMENT CLAIMS – where applicant engaged first respondent to design and construct a gas pipeline in Central Queensland – where vegetation clearing and pipeline construction along a right of way (ROW works) was suspended pending statutory approvals – where, pursuant to contractual provisions, first respondent issued variation proposal claiming payment for costs occasioned by suspension – where applicant then issued suspension notice confirming first respondent was to immediately cease ROW works – where first respondent issued second variation proposal, and then an interim consolidated claim – where first respondent then issued payment claim – where applicant responded with payment schedule – where first respondent applied for adjudication under Building and Construction Industry Payments Act 2004 (Qld) – where second respondent determined first respondent was entitled to payment from applicant under the Act – where applicant seeks to have decision of second respondent set aside, or declared void – whether payment claim classified as a claim relating to “construction work” or to “related goods and services” – whether payment claim made by first respondent is invalid by reason of non-compliance with the Act

ADMINISTRATIVE LAW – JUDICIAL REVIEW – GROUNDS OF REVIEW – FAILURE TO OBSERVE STATUTORY PROCEDURE – where applicant made submissions regarding compliance of first respondent with contract – whether decision of second respondent is of no effect due to failure to carry out his duty to consider matters, including submissions, under s 26(2) of the Act

ADMINISTRATIVE LAW – JUDICIAL REVIEW – GROUNDS OF REVIEW – PROCEDURAL FAIRNESS – HEARING – NATURE OF HEARING – OPPORTUNITY TO PRESENT CASE – where second respondent made findings which applicant had no opportunity to address – whether decision of second respondent is of no effect due to denial of natural justice – where second respondent not provided with copy of second variation proposal – whether material to decision of second respondent

ADMINISTRATIVE LAW – JUDICIAL REVIEW – GROUNDS OF REVIEW – UNREASONABLENESS – whether decision of second respondent void on ground of unreasonableness

Building and Construction Industry Payments Act 2004 (Qld), s 10, s 11, s 17(2)(a), s 26(2)

Brodyn Pty Ltd v Davenport (2004) 61 NSWLR 421, considered

Halkat Electrical Contractors Pty Ltd v Holmwood Holdings Pty Ltd [2007] NSWCA 32, considered

Laing O’Rourke Australia Construction Pty Ltd v H&M Engineering and Construction Pty Ltd [2010] NSWSC 818, cited

Neumann Contractors P/L v Peet Beachton Syndicate Limited [2009] QSC 376, cited

Northbuild Construction Pty Ltd v Central Interior Linings Pty Ltd [2011] QCA 22, considered

Project Blue Sky Inc v Australian Broadcasting Authority (1998) 194 CLR 355, cited

Protectavale Pty Ltd v K2K Pty Ltd [2008] FCA 1248, considered

T & M Buckley P/L v 57 Moss Road P/L [2010] QCA 381, applied

Trysams Pty Ltd v Club Constructions (NSW) Pty Ltd [2007] NSWSC 941, considered

COUNSEL:

P O’Shea SC, with T Sullivan SC and M Drysdale for the applicant

J Bond SC, with J Gleeson SC and N Pane for the first respondent

No appearance for the second respondent

SOLICITORS:

Corrs Chambers Westgarth for the applicant

Norton Rose Australia for the first respondent

No appearance for the second respondent

  1. PETER LYONS J:  On 3 August 2011, the second respondent determined, under the Building and Construction Industry Payments Act 2004 (Qld) (BCIP Act), that the first respondent (MCJV) was entitled to a payment from the applicant (QCLNG) which included the sum of $73,089,718 (disputed amount).
  1. QCLNG now seeks to have the adjudication decision set aside, or declared void. It alleges that MCJV’s payment claim was invalid in the sense that it did not sufficiently comply with the requirements of s 17(2) of the BCIP Act, to invoke the provisions of that Act which would result in an effective adjudication decision.  It also alleges that the adjudication decision is of no effect, there being a denial of natural justice, or a failure by the second respondent sufficiently to carry out his duties under the BCIP Act, when purporting to perform the functions of an adjudicator under the Act.

General background

  1. By a contract dated 23 August 2010, QCLNG engaged MCJV to design and construct a gas pipeline in central Queensland.  The contract sum exceeded $735 million.
  1. Part of the work involved vegetation clearing and pipeline construction along a right of way (the vegetation clearing is referred to as the ROW Works).  The contract provided for the issue of a “Full Notice to Proceed”, as a trigger for the commencement of much of the work.  A condition of the contract provided for the obtaining of certain authorisations required by legislation, or necessary for the commencement of works.  The Full Notice to Proceed could not issue unless this condition was satisfied or waived.
  1. It would appear that the Full Notice to Proceed issued on 18 February 2011, QCLNG waiving the condition just mentioned on the same day; with the ROW Works to commence on 23 February 2011. However, it then emerged that there was still some difficulty about environmental authorisations. MCJV alleges that this prevented the commencement of works, notwithstanding that MCJV had mobilised a crew, and arranged for the provision of machinery, to carry out the works.
  1. On 21 March 2011, MCJV issued a document to QCLNG (VP48), intended to take effect as a variation proposal under the contract, under cover of a letter of the same date.  The letter referred to earlier letters from MCJV, of 8 March 2011 (L0663) and 18 March 2011 (L0693), asserting that the ROW Works could not commence, because approvals had not been obtained “from the relevant Environmental Authorities”.  VP48, in effect, claimed the sum of $365,698.88 as costs incurred by reason of the mobilisation of a crew to commence the ROW Works, when the work could not be commenced.  Attached to VP48 were spreadsheets, giving details of the staff and machinery, together with hours and rates, relied upon to establish the quantum claimed.
  1. On the same day, QCLNG issued a document intended to take effect as a suspension notice under cl 55.1 of the contract.  The suspension notice referred to instructions on 17, 18 and 19 March 2011 that MCJV not undertake the ROW Works.  The suspension notice then confirmed that MCJV was required immediately to cease the ROW Works, but otherwise required it to proceed with work under the contract.  The suspension notice also suggested that MCJV may have been in breach of the contract in relation to obtaining environmental authorisations.
  1. Under cover of a letter dated 28 March 2011 (L0736), MCJV issued a further variation proposal (VP53).  VP53 was based on the suspension notice.  The covering letter also claimed an extension of time (under cl 28.1 of the contract).  Unlike what had happened with VP48, no calculations were attached to VP53, that document stating that the cost calculations were “[t]o be advised”.  The covering letter requested an extension of time to submit the estimate associated with VP53, in accordance with cl 32.4(a).
  1. By letter dated 5 April 2001 (L0768), MCJV provided “detailed supporting records that are currently available” relating to the effect of the suspension of works, and made a further request for an extension of time to submit the estimate of loss associated with VP53.  By a letter dated 18 April 2011 (L0795), MCJV provided additional supporting information relating to VP53.  Yet further supporting information was provided under a cover of a letter of 27 April 2011 (L0811).  This letter also sought an extension of the time for compliance with cl 32.4(a).
  1. MCJV sent a letter dated 30 May 2011 (L0886) to QCLNG, enclosing an Interim Consolidated Claim (ICC).  The ICC consolidated the claims made in VP48 and VP53, sought the extension of contractual dates, and claimed compensation in respect of labour, plant and equipment which had been stood down, and in respect of a number of other matters.  The ICC made claims not only for relief provided for in the contract, but also for damages for its breach.
  1. It would appear that QCLNG sought further particulars of the matters raised in the ICC. By a letter dated 10 June 2011 (L0921), MCJV provided some response to this request.  A further letter of the same date from MCJV (L0923) advised that documents were available for inspection, and that certain costs claimed were actual costs incurred by it.  By a letter dated 16 June 2011 (L0936) (in response to a letter from QCLNG of the same date), MCJV confirmed that documents in support of the ICC had been provided to QCLNG, including some 23 lever arch files.
  1. Under cover of a letter dated 20 June 2011 (L0953), MCJV sent to QCLNG a document intended to be a payment claim under the BCIP Act for May 2011 (payment claim).  Enclosed with the letter was a spreadsheet of six pages providing information relating to the calculation of the amounts claimed.  A section on page 6 entitled “Unapproved Variations” provided calculations of the disputed amount.  The payment claim referred to and incorporated L0886, L0921, L0923 and L0936.  A note at the bottom of page 6 identified the document as a payment claim under the BCIP Act.  A similar statement was made in the covering letter.
  1. QCLNG responded by a document dated 4 July 2011 (payment schedule).  By a document dated 15 July 2011, MCJV applied for adjudication under the BCIP Act of the payment claim (adjudication application).  QCLNG provided a document in response (adjudication response).[1]
  1. The dispute was referred to the second respondent, who provided his decision on 1 August 2011 (adjudication decision).  That decision is the subject of present proceedings.
  1. Before turning to the contentions of the parties, it is convenient to note some provisions of the contract, and some provisions of the BCIP Act.

Contractual provisions

  1. Clause 1.4 of the contract included definitions. One was as follows:

“Variation means any addition, deletion or change in the Works or the timing and sequence of the Works or other matters as described in clauses 15 (Verification of the Company Provided Information), 21.10 (the Company Provided Items) and 32.2(a)(i) to 32.2(a)(v) (Right of the Company to issue a Variation Order) (inclusive)”.

  1. Clause 32 of the contract dealt with variations. It included the following:

“32.1Variations Generally

  1. The Company has the right to instruct a Variation and the Contractor has the right to request a Variation.
  1. Prior to instructing or authorising any Variation, the Company may require the Contractor to submit estimates as described in clause 32.4(a).
  1. The Contract Price, the Milestone Dates, the Completion Date and/or the Execution Plan shall be subject to adjustment for a Variation only as a result of a Variation Order. Such adjustment shall be calculated in accordance with the principles set out in clause 32.5(c).
  1. The Contractor shall not be entitled to receive a Variation to cover any instruction, decision or act of the Company which may be made or given in order to ensure that the Contractor complies with any of its obligations under the Contract.

32.2Right of the Company to issue a Variation Order

  1. The Company has the right to issue a Variation Order to the Contractor at any time prior to the Date of Taking Over to do any of the following:
  1. make any revision to the Works which may include additions, omissions, substitutions and changes in quality, form, character, kind, position, dimension, level or line and changes in any method of construction;
  1. revise elements of the Works already completed in accordance with the Contract;
  1. omit any portion of the Works or engage a third party to carry out such omitted Works. For the avoidance of doubt, the Contractor shall not be entitled to any loss of profit, opportunity or any other similar type of loss or Consequential Loss as a result of such portion of the Works being omitted;
  1. after commencement of the Works, accelerate the Works or any part thereof within limits of practicality for Contractor in order to recover all or part of any delay in respect of which Contractor would otherwise have been entitled to an extension of time in accordance with Clause 28 (Extensions of Time, Acceleration and Recovery); and
  1. any other matter where the Contract provides for a Variation;
  1. at it's sole direction, request Contractor to provide additional plant, equipment and services from Third Parties as a Variation which shall be reimbursed at actual third party invoiced cost after deduction of all discounts, plus the percentage stated in Attachment 5 to Exhibit B (Compensation) to cover all handling, overheads and profit. Such miscellaneous prices shall not be applicable to any items for which Rates and Prices (other than those in Attachment 5 to Exhibit B (Compensation) are provided for in Exhibit B (Compensation); and
  1. any other matter where the Contract provides for a Variation.
  1. No Variation shall in any way vitiate or invalidate the Contract.
  1. When required by the Company on receipt of any Variation Order, the Contractor shall proceed immediately as instructed even though the amount of any adjustment to the Contract Price, the Milestone Dates, the Completion Date and/or the Execution Plan may not have been determined.

32.3The Contractor's Request for a Variation

  1. If the Contractor considers that an occurrence has taken place which constitutes a Variation, the Contractor, before proceeding with any work affected by such occurrence, shall request in writing that the Company issue a Variation. Any such request must be made within forty eight (48) hours of the beginning of the occurrence and shall be in accordance with Paragraph 3.2 (Contractor Requested Variation) of Exhibit E (Administrative Procedures).
  1. Any such request shall be in the form of a Variation Proposal and shall include details of the occurrence including any relevant dates and the clause or clauses of this Contract under which the Contractor considers itself to be entitled to a Variation.
  1. If the Contractor fails to submit requests for Variation in accordance with clause 32.3(a) and fails to provide supporting estimates in accordance with clause 32.4(a), the Contractor shall waive all claims which it might otherwise have had to claim a Variation and any rights concerning adjustment to the Contract Price, the Milestone Dates and the Completion Date.
  1. The Company shall within a reasonable time of having received a request for a Variation and the supporting estimates give notice to the Contractor stating that:
  1. the proposed Variation or part thereof is accepted in principle in which case the Company will issue such Variation; and/or
  1. what is requested or part thereof is already included in the obligations undertaken by the Contractor under the terms of this Contract and that the request is accordingly rejected; and/or
  1. the request or part thereof is rejected for other stated reasons.

Should the Contractor wish to pursue any request for a Variation, or part thereof, which has been rejected by the Company, it shall proceed in accordance with the provisions of clause 32.6.

32.4The Contractor's Estimates

  1. Within seven (7) Days of:
  1. the Contractor having been requested by the Company in accordance with clause 32.2(a); or
  1. the Contractor having requested a Variation in accordance with clause 32.3(a),

or such longer time as the Company shall agree where reasonable for any specific Variation, the Contractor shall submit to the Company fully detailed estimates prepared on a basis as directed by the Company and in accordance with paragraph 3.2 of Exhibit E (Administrative Procedures).

  1. The estimates referred to in clause 32.4(a) shall include:
  1. a description of the Works to be varied under the Variation;
  1. a detailed execution plan for the execution of the Variation showing the resources to be employed;
  1. the effect on the Contract Price (if any);
  1. the effect on the Execution Plan (if any); including details of the modifications to the Milestone Dates and/or the Completion Date,

together with such supporting documents in such detail as the Company may reasonably require for the purpose of verifying the Contractor's written estimates.”

  1. Some other contractual provisions may be noted briefly. Clause 28 provided for extensions of time, but expressly stated that an adjustment to the Completion Date did not, of itself, entitle MCJV to an increase in the contract price. Clause 55 made provision for QCLNG to give a notice suspending the works.
  1. Exhibit E to the contract identified administrative procedures. Clause 3.2 of Exhibit E required MCJV, within 48 hours of an occurrence which it considered entitled it to a variation, to give notice of its intention to raise a Variation Proposal.  Attachment A1 to Exhibit E was the standard form to be used for a Variation Proposal.  It included an entry for the total cost of the Variation; and provided for the attachment of a cost calculation sheet.

Statutory provisions

  1. The object of the BCIP Act, and the means of achieving that object, are set out in section 7 and section 8 respectively, as follow:

7Object of Act

The object of this Act is to ensure that a person is entitled to receive, and is able to recover, progress payments if the person—

  1. undertakes to carry out construction work under a construction contract; or
  1. undertakes to supply related goods and services under a construction contract.

8How object is to be achieved

The object is to be achieved by—

  1. granting an entitlement to progress payments whether or not the relevant contract makes provision for progress payments; and
  2. establishing a procedure that involves—
  1. the making of a payment claim by the person claiming payment; and
  1. the provision of a payment schedule by the person by whom the payment is payable; and
  1. the referral of a disputed claim, or a claim that is not paid, to an adjudicator for decision; and
  1. the payment of the progress payment decided by the adjudicator.”
  1. Section 10 of the BCIP Act contains a definition of “construction work”.  The relevant part of the definition is as follows:

“10Meaning of construction work

(1)Construction work means any of the following work—

  1. the construction, alteration, repair, restoration, maintenance, extension, demolition or dismantling of buildings or structures, whether permanent or not, forming, or to form, part of land;
  1. the construction, alteration, repair, restoration, maintenance, extension, demolition or dismantling of any works forming, or to form, part of land, including walls, roadworks, powerlines, telecommunication apparatus, aircraft runways, docks and harbours, railways, inland waterways, pipelines, reservoirs, water mains, wells, sewers, industrial plant and installations for land drainage or coast protection;
  1. the installation in any building, structure or works of fittings forming, or to form, part of land, including heating, lighting, airconditioning, ventilation, power supply, drainage, sanitation, water supply, fire protection, security and communications systems;
  1. the external or internal cleaning of buildings, structures and works, so far as it is carried out in the course of their construction, alteration, repair, restoration, maintenance or extension;
  1. any operation that forms an integral part of, or is preparatory to or is for completing, work of the kind referred to in paragraph (a), (b) or (c), including—
  1. site clearance, earthmoving, excavation, tunnelling and boring; and
  1. the laying of foundations; and
  1. the erection, maintenance or dismantling of scaffolding; and
  1. the prefabrication of components to form part of any building, structure or works, whether carried out on-site or off-site; and
  1. site restoration, landscaping and the provision of roadways and other access works;

…”

  1. Section 11 defines the expression “related goods and services”. Relevantly, it provides:

“11Meaning of related goods and services

(1)Related goods and services, in relation to construction work, means any of the following—

  1. goods of the following kind—
  1. materials and components to form part of any building, structure or work arising from construction work;
  1. plant or materials (whether supplied by sale, hire or otherwise) for use in connection with the carrying out of construction work;
  1. services of the following kind—
  1. the provision of labour to carry out construction work;
  1. architectural, design, surveying or quantity surveying services relating to construction work;
  1. building, engineering, interior or exterior decoration or landscape advisory services relating to construction work;
  1. soil testing services relating to construction work;
  1. goods and services, in relation to construction work, of a kind prescribed under a regulation for this subsection.

…”

  1. A statutory right to the progress payment is established by s 12, as follows:

“12Rights to progress payments

From each reference date under a construction contract, a person is entitled to a progress payment if the person has undertaken to carry out construction work, or supply related goods and services, under the contract.”

  1. Section 17(1) provides that a person entitled to a progress payment may serve a payment claim on the person liable to make the progress payment. Section 17(2) then provides:

“17Payment claims

(2)A payment claim—

  1. must identify the construction work or related goods and services to which the progress payment relates; and
  1. must state the amount of the progress payment that the claimant claims to be payable (the claimed amount); and
  1. must state that it is made under this Act.”
  1. The Act then makes provision for the delivery of a payment schedule (in s 18) and an application for adjudication (in s 21).  Section 24 provides for the making of an adjudication response by the respondent to the payment claim.
  1. Adjudication procedures are dealt with in s 25.  Subsections (1) and (2) are not relevant to the present case.  Section 25 then continues:

“25Adjudication procedures

(3)Subject to subsections (1) and (2), an adjudicator must decide an adjudication application as quickly as possible and, in any case—

  1. within 10 business days after the earlier of—
  1. the date on which the adjudicator receives the adjudication response; or
  1. the date on which the adjudicator should have received the adjudication response; or
  1. within the further time the claimant and the respondent may agree, whether before or after the end of the 10 business days.

(4)For a proceeding conducted to decide an adjudication application, an adjudicator—

  1. may ask for further written submissions from either party and must give the other party an opportunity to comment on the submissions; and
  1. may set deadlines for further submissions and comments by the parties; and
  1. may call a conference of the parties; and
  1. may carry out an inspection of any matter to which the claim relates.

…”

  1. An adjudicator’s decision-making power is regulated by s 26, in the following terms:

“26Adjudicator’s decision

(1)An adjudicator is to decide—

  1. the amount of the progress payment, if any, to be paid by the respondent to the claimant (the adjudicated amount); and
  1. the date on which any amount became or becomes payable; and
  1. the rate of interest payable on any amount.

(2)In deciding an adjudication application, the adjudicator is to consider the following matters only—

  1. the provisions of this Act and, to the extent they are relevant, the provisions of the Queensland Building Services Authority Act 1991, part 4A;
  1. the provisions of the construction contract from which the application arose;
  1. the payment claim to which the application relates, together with all submissions, including relevant documentation, that have been properly made by the claimant in support of the claim;
  1. the payment schedule, if any, to which the application relates, together with all submissions, including relevant documentation, that have been properly made by the respondent in support of the schedule;
  1. the results of any inspection carried out by the adjudicator of any matter to which the claim relates.

(3)The adjudicator’s decision must—

  1. be in writing; and
  1. include the reasons for the decision, unless the claimant and the respondent have both asked the adjudicator not to include the reasons in the decision.”

The adjudication decision

  1. In correspondence shortly after the adjudication response, there was debate about the provision of further submissions to the second respondent. The position ultimately reached on behalf of MCJV was that it would provide further submissions if requested by the second respondent. None were requested.
  1. Both parties were prepared to grant the second respondent more time to determine the claim. On 26 July 2011, the Adjudication Co-ordinator advised that “at the moment” the second respondent did not know whether an extension of time would be required. In the event, the adjudication decision was delivered within the time specified in the BCIP Act.
  1. Jurisdictional issues were raised in the material before the second respondent. Although he recognised that he could not make a decision binding on the parties in respect of those issues, he considered it necessary to satisfy himself that he had jurisdiction. He did so.
  1. Section 6 of the adjudication decision dealt with the question whether cl 55 of the contract determined the amount claimable by MCJV.  The adjudicator decided that it did not, that being the subject of provisions of cl 32.
  1. Section 7 dealt with the cause of the interruption to the work. The adjudicator determined that the reason that MCJV could not proceed with the work was that QCLNG had not obtained a necessary approval or approvals under the Environment Protection and Biodiversity Conservation Act 1999 (Cth).  That finding is not in issue in these proceedings.  In section 8 of the adjudication decision, the adjudicator determined that cl 10.2 of the contract, relating to non-compliance by MCJV with environmental and other legislation, was not relevant.
  1. Clause 11 of the contract deals with extensions of time. In sections 9 and 10 of the adjudication decision, the second respondent determined that this clause did not affect the outcome of the adjudication proceedings.
  1. The adjudication decision, in section 11, dealt with cl 32.3(a) of the contract.  This part of the determination is contentious, and will require further consideration.
  1. Section 12 of the adjudication decision dealt with cl 32.4, including time limits provided in the clause.  Again, this part of the decision is contentious, and will require later consideration.
  1. The adjudication decision dealt with cl 32.3(c) in section 13.  The clause provides that in certain circumstances, MCJV is taken to have waived claims to a variation.  The adjudicator determined that MCJV had not waived its claim.
  1. The balance of the decision deals with issues of quantum, the due date for payment, and interest. It is not necessary to refer to these matters further. The adjudicator determined that the sum of $86,832,133 million (exclusive of GST, but including the disputed amount) was payable, and was due for payment on 11 July 2011. The decision makes provision for the payment of interest.

Contentions of the parties

  1. QCLNG submitted that the payment claim did not satisfy the requirements of s 17(2)(a) of the BCIP Act, the satisfaction of those requirements being a precondition to the procedures and the creation of rights for which the Act subsequently makes provision.  In that sense, it was submitted that the disputed claim was invalid.  Reliance was placed on a passage from Protectavale Pty Ltd v K2K Pty Ltd (Protectavale)[2] stating that a payment claim “…must be sufficiently detailed to enable the principal to understand the basis of the claim.”  The passage continues, “[i]f a reasonable principal is unable to ascertain with sufficient certainty the work to which the claim relates, he will not be able to provide a meaningful payment schedule.”  It was submitted that the payment claim did not provide that level of certainty, as it did not enable QCLNG to understand the work to which the claim relates, or to ascribe a value to it.  Reliance was also placed on what was suggested to be a similar approach taken in Neumann Contractors P/L v Peet Beachton Syndicate Limited (Neumann Contractors).[3]
  1. It was contended on behalf of QCLNG that, in the adjudication proceedings, it had argued that MCJV was not entitled to the benefit of cl 32 because it had failed to submit a request for a variation within the time specified in cl 32.3(a); and that, in dealing with its argument, the second respondent made findings of which QCLNG had no notice, and which it had no opportunity to address; and that it would have done so, had it been given that opportunity.  One of those findings was that the variation was a continuing occurrence.  It was submitted that these findings were of sufficient significance to have the consequence that the adjudication decision should be set aside by reason of a substantial denial of natural justice, a form of jurisdictional error.[4]
  1. The submissions made on behalf of QCLNG referred to earlier decisions relating to the obligations of an adjudicator in exercising his power to determine an adjudication application under the BCIP Act.  Some of those authorities refer to an obligation to act in good faith, or not to act in bad faith.[5]  However, it was submitted that the proper approach is to consider whether there has been jurisdictional error because of a failure to perform the function required of the adjudicator by the BCIP Act, which includes the duty to “consider” only the matters set out in s 26(2) of that Act.  The submission relied on James Trowse Constructions Pty Ltd v ASAP Plasterers Pty Ltd[6] and Northbuild Construction Pty Ltd v Central Interior Linings Pty Ltd (Northbuild).[7]  In determining whether an adjudicator has carried out his or her obligation to “consider” a matter, reference was made to the discussion of authorities in Laing O’Rourke Australia Construction Pty Ltd v H&M Engineering and Construction Pty Ltd (Laing O’Rourke)[8] where McDougall J concluded that the obligation found in the NSW equivalent to s 26(2) should be read “…as requiring an active process of intellectual engagement.”
  1. It was submitted that a finding recorded in the adjudication decision that cl 32.3(a) did not apply to MCJV’s variation request meant that there was no variation request of the kind for which the contract provides, so that MCJV had no contractual entitlement under cl 32 for the payment it claimed in respect of the variation.  This was said to demonstrate a failure to make a genuine attempt to understand and apply the contract, and to consider the submissions made by the parties.  Alternatively, it was submitted that the adjudicator’s finding that cl 32.3(a) did not apply to VP53 had the consequence that the adjudicator found for MCJV on a contractual basis which had not been raised in the adjudication proceedings, and accordingly there had been a substantial denial of natural justice.
  1. It was also submitted that the manner in which the adjudication decision dealt with the provisions of cl 32.4 of the contract (specifying the time within which detailed estimates were to be provided) demonstrated that the adjudicator had paid no regard to QCLNG’s adjudication response on this issue.
  1. It was further submitted that the adjudicator’s treatment of the effect of cl 55 demonstrated that the adjudicator had failed to consider QCLNG’s submissions in respect to this clause.
  1. In addition, it was submitted that the second respondent’s decision was so unreasonable that no reasonable person in his position could have made it.
  1. For MCJV it was submitted that the payment claim complied with s 17(2)(a) of the BCIP Act.  Reliance was placed on the approach taken in T & M Buckley P/L v 57 Moss Road P/L (T & M Buckley).[9]
  1. With respect to the adjudicator’s findings relating to cl 32.3 of the contract, it was submitted that there was no substantial denial of natural justice, the findings being based on material before the adjudicator, and QCLNG having had sufficient opportunity to deal with the issues.  In this context, reliance was placed on Habib v Director-General of Security,[10] and on Lidono Pty Ltd v Commissioner of Taxation.[11]  It was also submitted that there was no substantial denial of natural justice, because the findings relied upon in QCLNG’s submissions did not relate to a critical issue or factor in the adjudication decision in respect of cl 32.3(a).
  1. MCJV also submitted that it had expressly raised the proposition that the occurrence relevant to the identification of the variation was a continuing occurrence; and accordingly QCLNG had had the opportunity to make submissions in relation to the adjudicator’s finding that the variation was a continuing occurrence.
  1. It was submitted that, when the adjudication decision is properly understood, the adjudicator found that the time bar in cl 32.3(a) did not apply; and that his statement that cl 32.3(a) was not relevant should be understood in that sense.  It was also submitted that the second respondent had considered and rejected each of QCLNG’s submissions relating to this clause.  Accordingly, it was submitted that QCLNG’s contention that the adjudicator had failed to make a genuine attempt to decide the claim in accordance with the BCIP Act, should be rejected.  Moreover, it was submitted that this analysis demonstrated that QCLNG was wrong in contending that the adjudicator held that MCJV was entitled to succeed on a basis other than cl 32.3(a).
  1. MCJV also took issue with QCLNG’s contention that the adjudicator had failed to consider its submissions about the time limit found in cl 32.4 of the contract, for the provision of estimates of the effect of a variation, including the effect on the contract price.  MCJV’s submissions referred to correspondence subsequent to VP53 in which MCJV had provided supporting information for the claim.  It also referred to its letters requesting an extension of time for complying with cl 32.4, and the absence of a refusal by QCLNG of those requests.  It was in those circumstances, so it was submitted, that the adjudicator found that QCLNG had failed to identify non-compliance with cl 32.4; and the finding did not mean that the adjudicator had failed to consider the submissions made by QCLNG on this clause.  In any event, it was submitted, relying on John Holland Pty Limited v Roads & Traffic Authority of New South Wales & Ors (John Holland v RTA)[12] that a failure to consider a single submission does not have the consequence that the decision is invalid.  It was also submitted that the claim would fail only if there was a failure to comply with time bars both in cl 32.3(a) and cl 32.4(a), with the consequence that the failure to consider this matter would not be a material omission.
  1. It was also submitted that the second respondent had considered QCLNG’s contentions in respect of cl 55, and had rejected them; so that he had not failed to perform the function which he was required to perform by the BCIP Act.
  1. It was further submitted that it had not been demonstrated that the second respondent’s decision was so unreasonable that no reasonable person in his position could have made it.
  1. At a relatively late stage in the hearing, it became apparent that the parties had not provided the second respondent with VP53, although he had been provided with the covering letter, L0795. That resulted in the parties providing further written submissions, after the hearing. These submissions are summarised later in these reasons.

Payment claim and the requirements of s 17(2)(a) of the BCIP Act

  1. In my view, the claim for the disputed amount is to be classified, for the purposes of the contract, as a claim for an adjustment to the contract price. The adjustment was occasioned by the need to hold staff and machinery ready to perform work under the contract for a period when they could not be deployed to do that work.
  1. It is debatable whether a claim of this nature is a claim which relates to “construction work”, or a claim which relates to “related goods and services”, for the purposes of s 17(2)(a).  There has been no suggestion that the contract is not a construction contract, as that expression is used in the BCIP Act.  The contract may be better characterised, by reference to the definition of the expression “construction contract”, as a contract under which one party undertakes to carry out construction work for another party; rather than a contract to supply related goods and services.  That analysis would suggest that s 17(2)(a) required the payment claim to identify the construction work to which the claimed progress payment relates, being the ROW Works, notwithstanding that, in respect of the disputed claim, no work was able to be carried out.  The alternative view is that the contract included an obligation (either express or implied) to supply related goods and services; and that the payment claim is for a progress payment relating to the supply of such goods and services.
  1. Neither party contended that it was necessary to determine the proper characterisation of the contract or the claim, in order to determine whether the payment claim satisfied the requirements of s 17(2)(a).  However, it may be easier to satisfy the requirements of s 17(2)(a) in the present case, if it is said that the disputed claim is for a payment which relates to construction work, than if it is for a payment which relates to the provision of related goods and services.
  1. In Protectavale,[13] Finkelstein J referred to authorities which, in relation to the requirements of s 17(2)(a) of the BCIP Act and corresponding provisions in other States, note the emphasis in the legislation on speed and informality.  Citing Hawkins Construction (Aust) Pty Ltd v Mac’s Industrial Pipework Pty Ltd [2002] NSWCA 136 at [20], his Honour stated that the requirements of the section should not be approached “…in an unduly technical manner”.  His Honour continued:

“Nonetheless a payment claim must be sufficiently detailed to enable the principal to understand the basis of the claim.  If a reasonable principal is unable to ascertain with sufficient certainty the work to which the claim relates, he will not be able to provide a meaningful payment schedule.  That is to say, a payment claim must put the principal in a position where he is able to decide whether to accept or reject the claim and, if the principal opts for the latter, to respond appropriately in a payment schedule …”

  1. His Honour’s approach was adopted by White J (as her Honour then was) in Neumann Contractors.[14]
  1. The requirements of s 17(2)(a) of the BCIP Act have been considered recently in T & M Buckley.[15]  The leading judgment was given by Philippides J, with whom Fraser and White JJA agreed.  Philippides J referred to submissions made in reliance on Protectavale and Neumann Contractors.[16]  Her Honour, however, endorsed the approach taken in Nepean Engineering Pty Ltd v Total Process Services Pty Ltd (in liq)[17] and Coordinated Construction Co Pty Ltd v Climatech (Canberra) Pty Ltd.[18]  The approach taken in these cases may be identified from the following passages of her Honour’s judgment:

“[35]  In Nepean Engineering Pty Ltd, Hodgson JA (with whom Ipp JA agreed) in considering the degree of identification required for a payment claim, had regard to the observations in Clarence Street Pty Ltd concerning the different functions of a payment claim and payment schedule and to his statements in Climatech Pty Ltd (at [25]) that what was required was sufficient identification ‘to enable the respondent to understand the basis of the claim’. His Honour noted Basten JA’s statements in Climatech Pty Ltd (at [42]) that to be valid a claim must be reasonably comprehensible to the other party, and expressed the degree of identification required in terms of whether in all the circumstances, the material in the payment claim was sufficient to convey to the recipient just what was the work for which payment was claimed (at [28]). What was required was that the payment claim purport in a reasonable way to identify the work the subject of the claim, and a payment claim was not a nullity for failure to identify the work unless the failure was patent on its face. The payment claim did not cease to satisfy the requirement concerning identification because it could be subsequently shown that the payment claim was not entirely successful in identifying all of the work.

[36]  Santow JA (at [47]-[48]) expressed the view that, in respect of the minimum necessary to satisfy the identification requirement that the payment claim ‘purport in a reasonable way to identify the work’ there must be ‘sufficient specificity in the payment claim for its recipient actually to be able to identify a ‘payment claim’ for the purpose of determining whether to pay, or to respond by way of a payment schedule indicating the extent of payment, if any.’ But having said that, his Honour stated his agreement with what Hodgson JA said in Climatech Pty Ltd that what was required was sufficient identification ‘to enable the respondent to understand the basis of the claim’ and disavowed the notion that there was a legal necessity to include any material directed merely to persuading a respondent to accept a payment claim (at [25]).”

  1. What is required, therefore, is that a payment claim purport, in a reasonable way, to identify the work the subject of the claim, so that a respondent can understand the basis of the claim. The decision in T & M Buckley provides a useful illustration of the application of this approach in a case with some similarity to the present case.  In that case, there was a claim for suspension costs.  The payment claim sought an amount for such costs, with a calculation identifying the total for the relevant month, less an amount equivalent to 10 per cent, described as retention.  An attachment specified a daily rate, for the period of the suspension; as well as an additional value, described as a “variable preliminary value”, per day.  At first instance, it had been held that the payment claim did not comply with the Act because it had failed to specify how the “variable preliminary value” was calculated.  This was overturned on appeal.  Her Honour said, referring to the decision of the judge at first instance:

“[38]… The issue for determination was not whether the payment claim explained in every respect the means by which a particular claim item had been calculated, but whether the relevant construction work or related goods and services was sufficiently identified as explained above. That is, whether the payment claim reasonably identified the construction work to which it related such that the basis of the claim was reasonably comprehensible to the applicant.”

  1. As has been mentioned, the payment claim consisted of a six page spreadsheet. It included the claim for the disputed amount, under the heading “Unapproved Variations”. The relevant entry under that heading was “Suspension of the vegetation clearing activities and pipeline construction work along the ROW” with the total amount claimed being identified. There was also a reference to VP53, as well as L0921, L0923 and L0936.
  1. VP53 again referred to the suspension of the vegetation clearing activities and pipeline construction along the right of way. It referred to the instruction to suspend work of 21 March 2011. It noted that the suspension was continuing, and stated that it was anticipated that for every calendar day when the suspension operated, the direct costs and indirect costs (identified as including “Project Management, Supervision, camp accommodation and mess facilities, etc”) would amount to AUD $1 million per day.  The covering letter also contained the following:

“From the 18 March to the date of this letter, the following activities as a minimum have been directly and continue to be affected by this Suspension of the Works:

  • Mobilisation of Main Spread Construction workforce for Stringing, Bending, Welding, NDT, Field Jointing Crews (programme activities ID B01FL00040; B01FL00045);
  • Mobilisation of Minor Spread Construction workforce for ROW, Stringing, Bending, Welding, NDT and Field Joint Coating Crews (programme activities ID B01FL00080; B01FL00085 and B01FL00090);
  • Right of Way clearing and preparation on the Gas Collection Header (programme activity ID B01H700040) and all subsequent successor activities;
  • Construction of and Operation of Camp No. 02 at KP-05 of Export Pipeline (programme activity ID A01FL00030, A01FL00035 and A00H100005);
  • Construction of the laydown area at the Receipt Station (KP-0 of the Export Pipeline);
  • Construction and Operation of the Laydown Area and Camp No. 04 at KP-278 of the Export Pipeline (programme activity ID A01FL00070, A01FL00075 and A00H100020); and
  • Pot-holing and locating of services along the ROW.”
  1. Another document incorporated into the payment claim was the ICC. There were a number of appendices to the ICC. The appendices set out in detail (and on a daily basis for each category) the cost of staff, labour, vehicles, and plant and equipment, together with costs associated with subcontractors and office costs and head office support costs. Staff were generally identified by name and position. An identification number was assigned to vehicles and plant. The dates and hours claimed, and the rate applied, appeared in the appendices. Substantial details of the amounts claimed in relation to subcontracts and ancillaries were also set out.
  1. However the amount claimed was derived by calculating the total of these costs under the headings previously mentioned, allocated to the project; and deducting amounts for activities and works which were able to be carried out notwithstanding the suspension. The total deducted was $9,250,401.71. The tables for the deductions refer to vehicles and plant by an identification number, in most cases. For labour, the deduction is calculated by identifying the labour category, the location, the week for which a deduction is allowed, and the number of days in the week and hours per day used in the calculation. However, persons are not named. Some of the labour categories correspond to the position descriptions used in the calculation of total costs, but others do not.
  1. It should be added that the amount claimed in the ICC was for a suspension extending until 12 June 2011, whereas the payment claim was for the period up to 31 May 2011. However, the manner in which information was provided in the ICC appears to make it possible by calculation to exclude amounts relating to periods outside the period covered by the payment claim.
  1. As mentioned, L0921, L0923 and L0936 were all referred to in a note to the payment claim, and identified additional information made available by MCJV to QCLNG in respect of the ICC.
  1. If the payment claimed is characterised as a payment relating to construction work, then it seems to me that the construction work to which the claim to payment relates is clearly identified, namely, the ROW Works which had been suspended.
  1. If the payment claimed is characterised as a payment relating to the supply of related goods and services, different considerations might arise. It was submitted on behalf of QCLNG that the primary difficulty was the inability to identify staff, plant and equipment for which deductions were allowed; and in particular to relate the deductions to the calculated total. The difficulty is not borne out with regard to much of the plant.
  1. However, in my view, that submission adopts too stringent an approach to the requirements of s 17(2)(a) of the BCIP Act.  The extensive material provided by MCJV, in my view, was plainly sufficient to enable QCLNG “to understand the basis of the claim”.  It seems to me that the material would have conveyed to QCLNG “just what was (the extent of related goods and services) for which payment was claimed”.  It was all of the costs of labour and staff, and plant and equipment, and costs incurred in respect of subcontractors as well as head office and other costs for the project; less costs related to resources able to be used productively.  While there may have been some difficulty in specifically correlating staff in respect of whom a deduction was allowed with the staff identified in the calculation of the total costs relating to the project, that, in my view, does not mean that there has been a failure to satisfy the requirements of s 17(2)(a).  I also note that, at a practical level, the extent of information provided seems to me to be far greater than that considered sufficient in T & M Buckley.
  1. I am therefore satisfied that the payment claim met the requirements of s 17(2)(a) of the BCIP Act.

Second Respondent’s treatment of cl 32.3(a) of the contract

  1. The second respondent dealt with this clause in 19 paragraphs of his decision.[19]  By reference to the definition of the term “Variation” (set out earlier in these reasons), the second respondent concluded that the relevant variation for the purposes of the disputed claim was the change in the timing and sequence of the ROW Works, occasioned by the fact that QCLNG did not have the necessary statutory approvals.[20]  That conclusion was influential in his consideration of the arguments relating to cl 32.3(a).
  1. Having identified the variation, the second respondent noted that QCLNG’s arguments that MCJV failed to comply with clauses 32.3(a) and 32.4, and cl 23.3(c) were “necessarily premised on the existence of a Variation.”[21]
  1. The second respondent then referred to a submission made on behalf of MCJV, which he described as a submission that cl 32.3(a) did not apply to the variation on which the disputed claim was based.  He expressed agreement with that submission, and explained his reasons for doing so.  Shortly afterwards, he wrote, “[t]he first requirement of clause 33.2(a) (sic) has not been breached”; and later that, “[c]onsequently, I cannot see how clause 32.3(a) has any relevance.”[22]
  1. MCJV submitted that the latter statement refers only to the time limitation found in cl 32.3(a) of the contract.  While that submission has some attraction, ultimately I do not accept it.
  1. A little earlier, the second respondent accepted a submission made on behalf of MCJV, mentioned earlier, relating to the applicability of cl 32.3(a) of the contract to VP53.  Specific reference was made to the relevant paragraph of the adjudication application.  MCJV’s submission was, in terms, a submission that the time limitation in cl 32.3(a) did not apply to the subject matter of VP53.  Notwithstanding the terms in which the submission is recorded in the adjudication decision, it seems to me that the better view is that the second respondent at this point was accepting a submission relating only to the time limitation in cl 32.3(a).
  1. However, after adopting the reasoning relied upon by MCJV in support of its submission, the second respondent returned to the variation, again identifying it. He stated that QCLNG had no power to approve the carrying out of the works; and no alternative but to approve of the change in the timing and sequence of the works which he considered to constitute the variation. It is at that point that he stated that he could not see how cl 32.3(a) had any relevance.  The statement seems to me to be directed to the lack of utility in requiring MCJV to request QCLNG to “issue a Variation”, when the variation had already occurred.
  1. However, MCJV submitted that the second respondent nevertheless considered the submissions made on behalf of QCLNG as to whether MCJV had satisfied the requirements of cl 32.3(a), and rejected those submissions.  In my view, that submission is correct.  The second respondent had earlier expressly found that what he identified as the “first requirement” of that clause had “not been breached”.[23]  He subsequently dealt with what he identified as the “second requirement” of that clause, over a number of paragraphs,[24] concluding that QCLNG had not satisfied him that MCJV was “in breach” of cl 32.3(a).
  1. The statement as to the relevance of cl 32.3(a) does not, in my view, demonstrate that the second respondent has not appreciated that MCJV’s claim was brought under cl 32 of the contract.  The statement appears to be a comment about the lack of utility of the procedure identified in cl 32.3(a).  A comment of this kind is somewhat akin to the earlier comment that the requirement in cl 32.3(a) that the Contractor request the Company to “issue a Variation”, “does not make sense”.[25]
  1. In my view, the statement as to the relevance of cl 32.3(a) does not demonstrate that the second respondent has failed to consider material referred to in s 26(2) of the BCIP Act.  I am also of the view that the second respondent did not decide the adjudication application on a basis outside cl 32.3 of the contract; so that there has been no consequent breach of the requirements of natural justice.

Other allegations of breach of natural justice requirements and cl 32.3

  1. In its submissions, QCLNG identified statements in the adjudication decision[26] to the effect that QCLNG could not say that it did not approve of the variation; or that it had no alternative but to approve of it.  The first statement follows the identification of the variation, and appears to identify an effect attributed by the second respondent to the variation, but unrelated to any relevant conclusion in the adjudication decision.  The second occurs immediately before the statement that the second respondent could not see how cl 32.3(a) had any relevance.  Apart from supporting that observation, it has no other relevance to the adjudication decision.  It seems to me therefore that the conclusion expressed in these statements is not material, and that it was unnecessary for the second respondent to give QCLNG the opportunity to make submissions about it.
  1. QCLNG identified references in the adjudication decision relating to the second requirement of cl 32.3(a), where the second respondent has referred to the variation as, in effect, a continuing occurrence.  It submitted that the second respondent failed to give it the opportunity to make submissions about that proposition, an opportunity which it would have taken up.
  1. MCJV submitted that QCLNG had the opportunity to make submissions about the operation of cl 32.3(a) in the context of a variation constituted by a continuing occurrence; and accordingly the requirements of natural justice have been satisfied.
  1. In its adjudication application, MCJV identified a number of occurrences, each of which was said to constitute “a change in the timing and sequence of the Works”; and no doubt, a variation.[27]  One occurrence identified was the suspension of works, in respect of which a cross-reference was made to section C.5 of the ICC.  The suspension was referred to in that section as a continuing state of affairs.[28]  Elsewhere in the ICC the suspension was referred to as if it were an ongoing event.[29]  It seems to me that QCLNG had the opportunity to deal with this question.  Indeed, it appears to have done so.[30]  QCLNG has not suggested that its submissions about the character of a continuing occurrence as a variation relevant to the requirements in cl 32.3(a) would differ depending upon whether the variation was identified as the suspension of works, or simply a continuing delay in the commencement of works because statutory approvals had not been obtained.
  1. In my view, QCLNG had the opportunity, in the adjudication response, to make submissions about the operation of cl 32.3(a) in relation to a variation constituted by a continuing occurrence.  Accordingly, it has not been denied natural justice in this context.
  1. Before returning to cl 32.4, it is convenient to refer to the submissions made by QCLNG with reference to cl 55.

Clause 55

  1. QCLNG’s adjudication response submitted that cl 55 provided the exclusive contractual right for MCJV to make a claim for costs incurred by reason of a suspension under cl 55.1; and accordingly MCJV had no right to make a claim for such costs under cl 32.[31]  Clause 55 placed limitations on the entitlement of MCJV to recover costs under that clause, by reference to the cause of the suspension; and by reference to the costs which might be recovered.  It also identified circumstances which would disentitle MCJV from recovering any costs associated with the suspension.
  1. A number of consequential submissions were then made on behalf of QCLNG. One was that as MCJV had expressly brought its claim under cl 32 and not cl 55, its claim could not succeed.  It also submitted that under cl 55, the claim would not succeed because the suspension was required by reason of a breach by MCJV of its obligations under the contract.
  1. QCLNG submitted that the second respondent had not made “a genuine attempt to exercise his power” in accordance with the BCIP Act.  It was submitted that he had ignored submissions made by QCLNG, had ignored the language of cl 55, and had materially misstated the submissions made by QCLNG.
  1. In dealing with cl 55, the adjudication decision commenced with a brief summary, intended to reflect the general thrust of the submissions made by QCLNG.  After making some observations about cl 55, the second respondent stated that he could “see no reason why the claimant must pursue a claim under clause 55 and cannot pursue a claim under clause 32”.[32]  The second respondent noted that QCLNG argued that MCJV had no entitlement under cl 55, but that the claim should have been made under that clause, a view with which he did not agree.  He also stated that he was not satisfied that MCJV was to blame for the fact that the ROW Works could not commence, and concluded that cl 55 was irrelevant.[33]  He also expressed the view that the costs the subject of the claim resulted, not from the suspension, but from the fact that there had been a change to the timing and sequencing of the works, resulting from the absence of necessary statutory approvals.[34]  He expressed the view that, by issuing the suspension notice, which may give rise to an “additional entitlement”, QCLNG could not extinguish a right which MCJV independently had to make a claim under cl 32.[35]
  1. It will be apparent from this summary of the reasons of the second respondent, that the second respondent considered and rejected the submission that cl 55 prevented MCJV from pursuing a claim under cl 32.  Once the second respondent reached that conclusion, it became unnecessary for him to consider the consequential submissions advanced by QCLNG.
  1. It is nevertheless appropriate to consider some specific submissions made in the present proceedings on behalf of QCLNG. One submission focuses on the statement in the adjudication decision that “[c]lause 55 does not say how the claimant is to claim costs or how the costs are to be valued.”[36]  It was submitted that the latter part of the statement could not have been made, if the second respondent genuinely had considered cl 55.2 and the submissions made by QCLNG.
  1. QCLNG’s submission characterises cl 55.2 as if it makes provision for how costs are to be valued.  In fact, the clause identifies how the amount payable to the Contractor is to be determined, if the Contractor has a right to an additional payment consequent on a suspension of the contractual works.  On QCLNG’s submission, cl 55.2 requires the identification of the costs of works actually incurred, consequent on the suspension; and the identification of the notional costs which would have occurred, but for the suspension.  The amount payable to the Contractor under cl 55.2 is then the difference between these two costs.  It may therefore be correct to say that cl 55.2 identifies a mechanism for determining the value of a claim made consequent upon a suspension under cl 55.  It is not inevitably incorrect to say that cl 55 does not itself say how the relevant items of costs, for the purpose of determining the amount payable to the Contractor under the clause, are to be valued or determined.  Moreover, in the preceding paragraph of the adjudication decision,[37] the second respondent noted QCLNG’s contention that VP48 and VP53 were “subject to different assessment methodologies”; and that QCLNG contended that VP53 “should be valued under clause 55”.[38]  The second respondent did not, in terms, reject QCLNG’s submission that there were different assessment methodologies for a claim made under cl 55.  In the context of the statements made in the adjudication decision, I do not accept the statement that cl 55 does not state “how the costs are to be valued” demonstrates that the second respondent did not consider the contract, and in particular cl 55.  Indeed, the second respondent’s discussion of this clause, in my view, indicates the contrary.
  1. QCLNG contends that the second respondent’s failure to consider its submissions is demonstrated by his failure to refer to the starting position identified in cl 55.2, namely, that “[a]ny cost incurred by the Contractor by reason of a suspension shall be born by the Contractor”.  The second respondent, however, expressly found that the cause of the loss in respect of which MCJV made a claim was not the suspension, but the absence of “necessary statutory approvals”.[39]  The opening words of cl 55.2 refer, on the other hand, to costs incurred by reason of a suspension.  It is by no means apparent that the second respondent was not alive to the effect of the opening words of cl 55.2.
  1. In any event, these matters do not, in my view, demonstrate a failure by the second respondent to comply with the requirement found in s 26 of the BCIP Act, that he consider the contract and submissions made to him.  Once he had determined that cl 55 did not prevent MCJV from making a claim under cl 32 independently of any right under cl 55 (as it had done), it was unnecessary for him to consider the effect of cl 55 on a MCJV’s claim.
  1. QCLNG has submitted that the second respondent materially misstated the effect of its submissions about cl 55, and that that demonstrates that he failed to obtain an understanding of its submissions, thus failing to comply with s 26(2) of the BCIP Act.  Although the second respondent stated the effect of two submissions of QCLNG in a single sentence, that does not demonstrate a failure to understand the effect of QCLNG’s submissions.  In any event, it seems to me that an erroneous understanding of a submission by an adjudicator does not invalidate the adjudicator’s decision.  The duty is to consider the submissions, not to understand them correctly.
  1. In my view, QCLNG has not demonstrated that the second respondent failed to comply with the requirement found in s 26 of the BCIP Act, that he consider both the contract, and the submissions made by QCLNG in relation to cl 55.

Second Respondent’s consideration of cl 32.4

  1. QCLNG’s payment schedule included the following:

“6Contractor has failed to comply with clauses 32.3(a) and 32.4(a) of the Contract in respect of Variation Proposal 53;

7By clause 32.3(c), Contractor has waived all claims it might have otherwise had to claim a Variation and any rights concerning adjustment to the Contract Price, the Milestone Dates and the Completion Date”.

  1. In its adjudication claim, MCJV denied that it failed to comply with cl 32.4(a) of the contract.  The adjudication claim also included the following:

“11.38MCJV relies on the notices of delay served on 8 March 2011 (L0663) and 28 March 2011 (L0736) and the Contractor's Estimates served pursuant to clause 32.4 of the Contract on 18 April 2011 and 27 April 2011.  MCJV also relies upon the information provided in the Interim Consolidated Claim.

11.39MCJV contends that it has substantially complied with clauses 32.3(a) and 32.4(a) of the Contract and that it has not waived its rights to make this claim.”

  1. QCLNG’s Adjudication Response included the following:

“5.24.21In relation to the requirement in 32.4(a), the Claimant also did not deliver the Claimant's estimates within the seven day period required by that clause.

5.24.22At most, at paragraph 11.38 the Claimant says, inter alia, that it relies on ‘the Contractor's estimates served pursuant to clause 32.4 of the Contract on 18 April 2011 and 27 April 2011’, whilst also relying upon the information provided in the Interim Consolidated Claim which was delivered on 30 May 2011.

5.24.23The Respondent was served on 18 April 2011 and 27 April 2011 with some documents.  They do not appear to be the Claimant's estimates as required by clause 32.4(a) of the Contract (see documents L0795 and L0811, the second of the letters attached approximately 194 pages of material).  Even if those documents answered the description of the Claimant's estimates, they were not served within the seven day period required under clause 32.4(a) for either VP48 or VP53.  VP48 was issued on 21 March 2011.  VP53 was issued on 28 March 2011.  The ICC document itself is dated 30 May 2011 and also could not have satisfied the seven day requirement in clause 32.4(a).

5.24.28In paragraph 11.39 of the Adjudication Application, the Claimant contends that it has ‘substantially complied’ with clauses 32.3(a) and 32.4(a) of the Contract.  The Claimant cites no authority in support of the proposition that you can ‘substantially comply’ with the time limit.  The reason for this is that there is no doctrine of 'substantial compliance' with time limits.  The authorities cited above support the proposition that where time limits apply, a failure to comply with such time limit disentitles a party from being able to promote the claim or entitlement (whatever the nature of the claim or entitlement may ultimately be).

5.24.29In conclusion, by reason of clause 32.3(c) the Claimant has waived its right to variations based on the occurrences identified in VP48 and VP53.” (footnotes omitted)

  1. The adjudication decision dealt with cl 32.4 as follows:

12.Clause 32.4

86]  At p 6 of the payment schedule the respondent contends that the claimant breached clause 32.4 of the contract.  That clause requires the claimant to provide detailed estimates within a prescribed time.  The respondent provided no particulars of the alleged breach.  The claimant says that the claimant has substantially complied with clause 32.4.  At p 87 of the adjudication response the respondent says that there is no doctrine of 'substantial compliance' with time limits.  However, the respondent has not provided details of the alleged non compliance.  The claimant provided detailed estimates.  The respondent has not satisfied me that there was a particular date by which the detailed estimates had to be provided.  The respondent has not satisfied me that the claimant did fail to comply with clause 32.4.”

  1. QCLNG submitted that it is apparent from a reading of this part of the adjudication decision, that the second respondent did not consider cl 32.4 of the contract, nor QCLNG’s submissions about it.
  1. MCJV submitted that the second respondent correctly identified a deficiency in the payment schedule, namely the failure by QCLNG to identify the basis for the assertion that MCJV had not complied with cl 32.4.  It then referred to its letter which accompanied VP53, noting that it requested an extension of time to comply with cl 32.4.  It also referred to its letters of 5 April 2011, 18 April 2011 and 27 April 2011 (respectively L0768, L0795 and L0811), all of which provided supporting information and records in relation to the claim which was the subject of VP53, and two of which sought an extension of time to comply with cl 32.4.  Two of these letters were attached to the adjudication application, and one to the adjudication response.  MCJV also drew attention to the fact that at no time had QCLNG indicated it was not prepared to grant the extension of time.
  1. No doubt, paragraph [86] of the adjudication decision must be read in the context of the decision as a whole. Earlier, the second respondent had recorded the dates on which VP48 and VP53 had issued.[40]  The adjudication decision makes clear that the second respondent had considered paragraph [5.24.20] on p 86 of the adjudication response, as well as material from p 84 and p 87 of the adjudication response.[41]  Paragraphs 5.24.21, 5.24.22 and 5.24.23, all appear on p 86 of the adjudication response.
  1. These paragraphs in the adjudication response follow a paragraph where cl 32.4 and cl 3.2 of Exhibit E (which provides that a Variation Proposal is the method by which the Contractor is to request a Variation under cl 32.3) are set out.[42]  These are followed by a series of submissions, including those at paragraphs 5.24.21-5.24.23, leading to the conclusion at paragraph 5.24.29 that MCJV has, under the contract, waived its right to variations based on the occurrence as identified in VP48 and VP53.  It is clear that the second respondent has considered paragraph 5.24.28 of the adjudication response (dealing with substantial compliance with a time limit).
  1. Further, the conclusion expressed in paragraph [86] of the adjudication decision addresses the ultimate proposition to which paragraphs 5.24.21-5.24.23 of the adjudication response are directed. The matters mentioned thus far point to the likelihood that the second respondent considered paragraphs 5.24.21-5.24.23 of the adjudication response.
  1. The statement principally relied upon by QCLNG appears in the latter part of paragraph [86] of the adjudication decision, to the effect that QCLNG had not provided details of its allegation that MCJV had not complied with cl 32.4.  A somewhat similar statement towards the beginning of paragraph [86] of the adjudication decision is explicable as referring only to the payment schedule.  That, however, is an unlikely explanation for the statement later in paragraph [86].
  1. Immediately before the later statement, the second respondent made reference to the adjudication response. The statement speaks of the case presented by QCLNG to the second respondent, not whether there was a request for, or the grant of, an extension of time.
  1. The adjudication decision does not identify requests for an extension of time in the reasoning which leads to the finding. There is some likelihood that the second respondent would have mentioned these requests, if he were taking them into account.
  1. Had the second respondent given consideration to requests for an extension of time in the context of cl 32.4, it is likely he would have appreciated that the requests, by themselves, were not sufficient to achieve an extension of time.  No act which might be said to constitute agreement to the extension for the purposes of cl 32.4(a) has been identified.
  1. While there is some possibility that the second respondent’s conclusion that he was not satisfied that MCJV had failed to comply with cl 32.4 is explicable by reference to the requests for an extension of time, that does not seem to me to provide the likely explanation for it. I am satisfied that the conclusion was not based on a consideration of the requests by MCJV for an extension of time for compliance with cl 32.4(a).
  1. The statement in the latter part of paragraph [86] to the effect that QCLNG had not provided details of its allegation that MCJV had not complied with cl 32.4, so far as is apparent from the adjudication decision, formed the basis of the second respondent’s finding in favour of MCJV in relation to cl 32.4.  Although the statement follows a reference to parts of the adjudication response located close to paragraphs 5.24.21-5.24.23, it is difficult to see how the second respondent could have made this statement if he had carried out the “active process of intellectual engagement” referred to in Laing v O’Rourke in relation to these paragraphs.  I therefore find that the second respondent did not consider paragraphs 5.24.21-5.24.23 of the adjudication response.  It is necessary to consider the effect of this finding.
  1. As has been mentioned, the submissions made on behalf of QCLNG referred to the decision of McDougall J in Laing O’Rourke to the effect that the New South Wales equivalent of s 26(2) of the BCIP Act required an active process of intellectual engagement in relation to the various matters there mentioned.[43]  The requirements of this section have been the subject of consideration by appeal courts on several occasions.
  1. In John Holland v RTA,[44] the Court concluded that certain submissions made to an adjudicator were not “duly made”, and accordingly there was no obligation on the adjudicator to consider them under s 22(2) of the New South Wales Act, being the provision equivalent to s 26(2)(d).  However, the Court went on to consider the failure by the adjudicator to take into account duly made submissions.  Hodgson JA (with whom Beazley JA agreed)[45] said:

“54     In my opinion, there may be a sense in which s.22(2) is breached if there is any relevant provision of the Act or provision of the contract which is not considered by the adjudicator, or indeed if there is any one of what may be numerous submissions duly made to the adjudicator which is not considered.  However, in my opinion a mere failure through error to consider such a provision of the Act or of the contract, or such a submission, is not a matter which the legislature intended would invalidate the decision.

55     The relevant requirement of s.22(2) is that the adjudicator consider the provisions of the Act, the provisions of the contract and submissions duly made.  If an adjudicator does consider the provisions of the Act and the contract which he or she believes to be relevant, and considers those of the submissions that he or she believes to have been duly made, I do not think an accidental or erroneous omission to consider a particular provision of the Act or a particular provision of the contract, or a particular submission, could either wholly invalidate a determination, or invalidate it as regards any part affected by the omission.  One could express this by saying that such an accidental or erroneous omission does not amount to a failure to comply with s.22(2), so long as the specified classes of considerations are addressed; or alternatively, if one takes the view that s.22(2) does require consideration of each and every relevant provision of the Act and the contract and each and every submission duly made, the intention of the legislature cannot have been that this kind of mistake should invalidate the determination.  In a case where there were 1,000 submissions duly made, an accidental failure to consider one of them could not reasonably be considered as invalidating a whole determination; and there is no basis for partial invalidation of a determination, that is, invalidation only of that part affected by the omitted submission.”

  1. Two days later, a differently constituted Court delivered judgment in Halkat Electrical Contractors Pty Ltd v Holmwood Holdings Pty Ltd (Halkat).[46]  The judgment of the Court was delivered by Giles JA, with whom the other members of the Court agreed.  His Honour said:

“26With respect to the trial judge, I consider that the fundamental vice in the adjudicator's determination can be shortly explained without embarking on an exegesis of the reference in Brodyn Pty Ltd v Davenport to a bona fide attempt to exercise the statutory power. Section 22 of the Act required that the adjudicator determine an adjudicated amount (s 22(1)) by considering particular matters (s 22(2)). The adjudicator had to make a determination, and he did not make a determination if he arrived at an adjudicated amount by a process wholly unrelated to a consideration of those matters. But that is what the adjudicator did. He stated expressly in his reasons that he did not have evidence on which he could independently arrive at the value of the completed work, and that he adopted the appellant's valuation in preference to that of the respondent because of the respondent's unmeritorious challenges to the validity of the payment claim.

27On the face of the determination, the adjudicator simply did not perform the task required by the Act, and his purported determination was not given greater respectability by the reference to his inclination ‘to believe the claimant rather than the respondent’: the unmeritorious challenges were not a basis for belief or disbelief, and in any event it was not correct to speak of believing a corporate body. The adjudicator did not comply with an essential precondition to the existence of a valid determination.”

  1. There is a sense in which it can be said that the decision in Halkat resulted from the fact that the adjudicator had not given consideration to matters raised by a party.  However, it seems to me that the decision turned upon the fact that the adjudicator’s process of reasoning lay outside the scope of what was intended by the statute.  I therefore do not consider the decision reached in Halkat to be of assistance in the present case.  However in Halkat, the judge at first instance had concluded, from the absence of reference to contractual provisions relating to the date of payment, and other matters, that there had been “a failure to consider a relevant provision at all”, with the result that the adjudication decision was invalid.[47]  Giles JA stated that he should not be taken as having approved by silence all that the judge at first instance had said; but also said that a failure to pay regard to relevant provisions of a contract at all may more readily be classed as a non-compliance with a basic and essential requirement of the Act than could a failure to pay regard to a particular provision or provisions of the contract.[48]
  1. These and other cases were considered in Northbuild.[49]  There, White JA endorsed the approach taken by the New South Wales Court of Appeal in Halkat, which requires focus on whether the adjudicator has performed the function demanded by the BCIP Act.  However in Northbuild it was not necessary to decide whether the failure to consider a particular submission meant that an adjudication decision was rendered invalid by reason of non-compliance with s 26(2).
  1. At the hearing in the present case, reference was also made to Trysams Pty Ltd v Club Constructions (NSW) Pty Ltd (Trysams).[50]  There, Hammerschlag J summarised principles to be derived from authorities dealing with provisions equivalent to those in the BCIP Act.  One related to the requirement to consider the matters identified in the New South Wales equivalent of s 26(2).  His Honour summarised this principle as follows:[51]

“If an adjudicator does consider the provisions of the Act and the contract which he or she believes to be relevant, and considers those of the submissions that he or she believes to have been made, an accidental or erroneous omission to consider a particular provision of the Act or a particular provision of the contract, or a particular submission is not sufficient to invalidate the determination.  This is either because an accidental or erroneous omission does not amount to a failure to comply with s 22(2) so long as the specified classes of consideration are addressed or because the intention of the legislature cannot have been to invalidate the determination for this kind of mistake.” (footnote omitted)

  1. These authorities appear to establish that the obligation to consider certain matters is derived from s 26(2).  Otherwise, it might have been thought that the obligation to consider matters is derived from a combination of the provisions of the BCIP Act relating to the making, and content, of an adjudication application (s 21); the appointment of an adjudicator (s 23); the provision for giving an adjudication response to the adjudicator (s 24(1)); the provision relating to an inspection (s 25(4)(d)); and the requirement to decide an adjudication application (quickly) (s 25(3)).  In that context, it might have been thought that s 26(2) limited the matters to be considered in deciding the adjudication application, rather than as providing a source of the obligation to consider matters.
  1. The requirement to consider matters found in s 26(2) extends to the payment claim, the payment schedule, and, in each case, “all submissions, including relevant documentation, that have been properly made” in support of the payment claim or payment schedule.  The language of the section makes it difficult to conclude that a failure to consider a particular submission is not a breach of the section.
  1. However, a question then arises as to whether a particular breach would invalidate an adjudication decision.
  1. In Trysams, after his summary of principles, Hammerschlag J noted that their application involves a consideration of “matters of fact and degree which exercise may not be a simple one”.[52]  His Honour then said:

“33It is accordingly necessary to consider the nature, gravity and effect of the errors, if any, made by the adjudicator, and to assess, in the context of the purpose and operation of this particular statute, whether the adjudicator breached a basic and essential requirement of the Act by not considering submissions duly made or by failing to make a bona fide attempt to exercise his powers under the Act, or whether the plaintiff was denied natural justice to a degree sufficient to void the adjudication.

34The required exercise is to determine whether what occurred worked ‘practical injustice’ on the plaintiff sufficient to vitiate the adjudication: Re Minister for Immigration and Multicultural Affairs; ; (sic) Ex Parte Lam (2003) 214 CLR 1 at 13-14 per Gleeson CJ.”

  1. In Brodyn Pty Ltd v Davenport,[53] Hodgson JA (with whom the other members of the Court agreed) held that for a document purporting to be an adjudicator’s determination to have the strong legal effect for which the New South Wales equivalent of the BCIP Act provided, it must satisfy conditions laid down by the Act as essential for such a determination.  His Honour then identified some “basic and essential requirements” (recognising that his list might not be exhaustive); and noted that there were more detailed requirements, including those found in the equivalent of s 26(2).  His Honour then said that the legislature did not intend that exact compliance with all the more detailed requirements was essential to the existence of a valid adjudication decision,[54] applying Project Blue Sky Inc v Australian Broadcasting Authority.[55]  Project Blue Sky endorsed the approach taken in Tasker v Fullwood[56] which explicitly referred to the extent of the failure to observe a statutory requirement as being relevant in determining the validity of an act purportedly taken under the statute.  In my view, this approach is consistent with the acceptance in oral submissions by Senior Counsel for MCJV that questions of fact and degree are involved.
  1. MCJV has submitted that a failure to consider the requirement found in cl 32.4(a) to provide estimates within a specified period would not be a material omission, because the effect of cl 32.3(c) is that MCJV would lose its claim only if there were non-compliance with both cl 32.3(a) and cl 32.4(a).  That submission depends upon the correct construction of cl 32.3(c), a matter for the second respondent to determine, in the context of an adjudication application.  The second respondent has not done this.  Accordingly, there being a real prospect that an adjudicator could construe cl 32.3(c) differently, it seems to me that the failure to deal with this question is potentially a material omission, notwithstanding the language of cl 32.3(c).
  1. The submissions made in paragraphs 5.24.21-5.24.23 of the adjudication response are plainly of considerable significance. Depending upon the construction of cl 32.3(c), they might amount to a complete defence to what is a very substantial claim.  Notwithstanding the limited time specified in the BCIP Act for an adjudicator to determine an adjudication application,[57] it seems to me that the failure to consider submissions which are of such significance constitutes a failure by the second respondent to comply with an essential requirement of the BCIP Act for a valid decision.  On that basis, I consider that the adjudication decision fails to comply with one of the “basic and essential requirements” of the BCIP Act, and for that reason is not a valid adjudication decision.

Unreasonableness

  1. QCLNG has relied upon each of the matters in respect of which it submitted the second respondent failed to meet the requirements of s 26(2) of the BCIP Act, as, in the alternative, demonstrating that the decision of the second respondent was so unreasonable that no reasonable person in his position could have made it.  There were three such matters, the first being the failure to consider the adjudication application and other documents relied upon by MCJV, which based its claim on cl 32.3; the second being the failure to consider the submissions made by QCLNG in relation to non-compliance with the time limit found in cl 32.4; and the third being the failure to consider cl 55.
  1. I have accepted QCLNG’s submission that there was a failure by the second respondent to consider the submissions found in paragraphs 5.24.21-5.24.23 of the adjudication response. Had I concluded that the second respondent had considered these provisions, I would have been satisfied that two of his conclusions were irrational, in the sense contended for by QCLNG. Those conclusions are that QCLNG had not provided details of the alleged non-compliance with cl 32.4; and (on the basis of those matters considered by the second respondent) that QCLNG did not establish that MCJV failed to comply with those requirements.  On that basis, I would have been prepared to set aside the adjudication decision.
  1. In respect of the other two matters relied on by QCLNG, it did not attempt to analyse any particular piece of reasoning of the second respondent, with a view to demonstrating that it was illogical; nor did it attack any particular conclusion as being so unreasonable that no reasonable person in the position of the second respondent could have reached it. I have earlier referred briefly to the reasoning of the second respondent in respect of these two matters. I am not satisfied that his conclusions were unreasonable in the sense for which QCLNG contends.

Second respondent was not provided with VP53

  1. At a relatively late stage in the hearing, it became apparent that the parties had not provided the second respondent with VP53, although he had been provided with the covering letter, L0795. That resulted in the parties providing further written submissions, after the hearing.
  1. QCLNG submitted that the fact that VP53 was not available to the second respondent provided an explanation for three matters found in the adjudication decision. One related to the characterisation of the variation, and the second respondent’s statements to the effect that QCLNG had no alternative but to approve it.[58]  The second was the second respondent’s rejection of the suspension notice as the occurrence which constituted the variation.[59]  The third was the second respondent’s statement that QCLNG had not satisfied him there was a particular date by which detailed estimates had to be provided, pursuant to cl 32.4.[60]  It was submitted that knowledge that the second respondent did not have a copy of VP53 explained why he came to conclusions involving propositions not advanced by either party; and supported the submission that, in not accepting that MCJV had failed to provide detailed estimates in the time required by cl 32.4, the second respondent had failed to give proper consideration to the matters which he was required to consider by the BCIP Act.  It was also submitted that his failure to note the absence of VP53, and to request a copy of it, demonstrated a failure by him to perform the function required by s 26(2) of the BCIP Act.
  1. MCJV submitted that the absence of a copy of VP53 from the documents provided to the second respondent was of no significance. It pointed out that the absence of the document was not noticed at the time by QCLNG. It submitted that the scheme of the legislation is that the parties would provide the adjudicator with necessary information; and the parties cannot now complain if a particular document was not provided by them to a second respondent. It also submitted that the documents provided to the second respondent sufficiently communicated the content of VP53, and it is likely that the second respondent well understood the content of VP53 (to the extent it was material). The submissions also pointed out that QCLNG did not identify any particular part of the content of VP53 said to be of importance, but unknown to the second respondent.
  1. VP53 included a statement said to be the “DESCRIPTION/REASON FOR PROPOSAL”. That identified the suspension notice of 21 March 2011; and then referred to the resulting suspension, asserting it to be due to QCLNG’s breach of its obligations. Other parts of VP53 identified the cause of delay and disruption as being the suspension, the effects of which were said to continue while the suspension was in place.
  1. VP53 was sent to QCLNG under cover of L0736, a copy of which was provided to the second respondent. The content of this letter referred to the suspension notice, and identified the suspension as the variation relied upon by MCJV, a position which was confirmed by the reference at the beginning of the letter. Further, the material content of VP53 was set out in a number of places in documents provided to the second respondent: the ICC;[61] the adjudication application;[62] and the adjudication response.[63]
  1. Moreover, the second respondent had been provided with a copy of VP48. He was therefore able to identify the form, and the likely content, of VP53. The ICC[64] and the adjudication application[65] quoted from VP48 in a way which would have enabled the second respondent to understand, from the parts of VP53 which appeared in the material provided to him, how VP53 identified the occurrence said to constitute the variation, namely, as the suspension resulting from QCLNG’s suspension notice.
  1. References to VP53 in the adjudication decision make it plain the second respondent appreciated that the stated basis for the variation proposal was the suspension of the works.[66]  The second respondent’s identification of the occurrence which constitutes the variation is not, in my view, a consequence of the fact that the second respondent did not have a copy of VP53; rather it results from his analysis of the definition of “Variation”, and of the events on which VP53 and the payment claim were based.
  1. It should be noted that MCJV had, in the adjudication application, made it plain that it identified the variation by reference to a number of events, one of which was the suspension of the works.[67]  A broadly similar approach was taken in the ICC.[68]  Although QCLNG responded in detail to the matters set out in the adjudication application, and challenged the identification of the variation made by MCJV, it did not suggest that MCJV was confined to the variation identified in VP53.[69]  In the circumstances, it is not surprising that the second respondent formed his own view as to the occurrence which constituted the variation; and did so without limiting himself to VP53.
  1. I am therefore not satisfied that the absence of VP53 played any material role in the conclusions referred to by QCLNG. Nor am I satisfied that the absence of this document supports QCLNG’s submissions to the effect that the second respondent failed to give proper consideration to matters which he was required to consider by the BCIP Act.
  1. Nor am I satisfied that the second respondent failed to notice the absence of VP53. QCLNG’s submission requires the drawing of an inference to that effect, from the fact that the second respondent neither mentioned that he did not have a copy of VP53 in the adjudication decision, nor did he ask the parties for a copy. Given the information available to the second respondent as to the content of VP53, that is not an inference I am prepared to draw.
  1. Further, the duty which the second respondent was required to perform under s 26(2) was to consider the payment claim, the payment schedule, and all submissions, including relevant documentation, provided by the parties in support of those documents.  It is not necessarily a breach of that duty to fail to consider a document not provided to him.  It may perhaps be a breach of that duty to fail to appreciate, from documents provided to an adjudicator, that a document has not been provided, without which the payment claim cannot sensibly be determined; but that is not so in the present case.
  1. Accordingly, the fact that the second respondent did not have a copy of VP53 is of no significance in the present proceedings.

Conclusion

  1. I am satisfied that there has been a failure by the second respondent to consider a submission made on behalf of QCLNG, and that that failure invalidates his decision. No submissions have been made about the consequences of such a finding, bearing in mind that not all of the amount awarded by the second respondent is in issue. In these circumstances, I shall invite the parties to make submissions about the form of order to be made.

Footnotes

[1] The copy of the adjudication response provided in the trial bundle is undated; however, the date of the adjudication response is noted in the decision of the adjudicator as 22 July 2011.

[2] [2008] FCA 1248 at [12].

[3] [2009] QSC 376.

[4] For the proposition that an adjudication decision might be set aside by reason of a substantial denial of natural justice, reliance was placed on John Holland Pty Ltd v TAC Pacific Pty Ltd [2010] 1 Qd R 302 at [18]; James Trowse Constructions Pty Ltd v ASAP Plasterers Pty Ltd & Ors [2011] QSC 145 at [45] and [50]; see also John Holland at [40]-[41]; and Walton Construction (Qld) Pty Ltd v Corrosion Control Technology Pty Ltd [2011] QSC 67 at [58]-[60].

[5] See, for example, Queensland Bulk Water Supply Authority v McDonald Keen Group Pty Ltd (in liq) [2009] QSC 165 at [32]-[33]; and on appeal [2010] 2 Qd R 322 at [40]-[51]; James Trowse Constructions Pty Ltd v ASAP Plasterers Pty Ltd [2011] QSC 145 at [16]-[36].

[6] [2011] QSC 145.

[7] [2011] QCA 22 at [96].

[8] [2010] NSWSC 818 at [34]-[39].

[9] [2010] QCA 381 at [34]-[38].

[10] (2009) 255 ALR 209 at [64].

[11] (2002) 191 ALR 328 at [18]-[20].

[12] [2007] NSWCA 19 at [54]-[55].

[13] [2008] FCA 1248 at [11]-[12].

[14] [2009] QSC 376 at [28]-[29].

[15] [2010] QCA 381.

[16] Ibid at [12].

[17] (2005) 64 NSWLR 462.

[18] [2005] NSWCA 229.

[19] Adjudication decision at [67]-[85].

[20] Ibid at [70]-[72], [82] and [85]; see also [4], [43] and [27].

[21] Ibid at [73].

[22] The reasoning is found at [74]-[76] of the adjudication decision.

[23]Ibid at [75].

[24] Ibid at [77]-[85].

[25] Ibid at [68]-[69].

[26] Ibid at [72] and [76].

[27] See in particular [9.5] and [9.8] of the adjudication application.

[28] See in particular [129] and [130] of the ICC.

[29] See ibid at [125] (p), (v)(ii), and (z).

[30] See [4.8]-[4.8.8] and [5.24]-[5.24.29] of the adjudication response.

[31] Ibid at [5.25.1].

[32] Adjudication decision at [40].

[33] Ibid at [42]-[43].

[34] Ibid at [43]-[44].

[35] Ibid at [44].

[36] Ibid at [40].

[37] Ibid at [39].

[38] Ibid.

[39] Ibid at [43], particularly the first two sentences.

[40] Ibid at [30] and [31].

[41] Ibid at [83], [84] and [86].

[42] At [5.24.4] of the adjudication response.

[43] See Laing O’Rourke at [39].

[44] [2007] NSWCA 19.

[45] Ibid at [1].

[46] [2007] NSWCA 32.

[47] Ibid at [19].

[48] Ibid at [28]-[29].

[49] [2011] QCA 22.

[50] [2007] NSWSC 941.

[51] At [30].

[52] At [31].

[53] (2004) 61 NSWLR 421 at [52].

[54] Ibid at [55].

[55] (1998) 194 CLR 355 at 390-391.

[56] [1978] 1 NSWLR 20 at 24-25.

[57] As to which see the observation of White JA in Northbuild at [96].

[58] See adjudication decision at the last sentence of [72], and [76].

[59] Ibid at [83] and [85].

[60] Ibid at [86].

[61] At [8].

[62] At [3.13].

[63] see [5.24.18]; also [5.24.19].

[64] At [7].

[65] At [3.12].

[66] See, for example, [4]; and the first sentence of [31].

[67] See [9.5], [9.7]-[9.8], and [9.10].

[68] See in particular [140]-[141].

[69] See in particular [5.12.6] of the adjudication response.

Close

Editorial Notes

  • Published Case Name:

    QCLNG Pipeline Pty Ltd v McConnell Dowell Constructors (Aust) Pty Ltd and Consolidated Contracting Company Australia Pty Ltd & Anor

  • Shortened Case Name:

    QCLNG Pipeline Pty Ltd v McConnell Dowell Constructors (Aust) Pty Ltd

  • MNC:

    [2011] QSC 292

  • Court:

    QSC

  • Judge(s):

    P Lyons J

  • Date:

    05 Oct 2011

  • White Star Case:

    Yes

Litigation History

No Litigation History

Appeal Status

No Status