Your JavaScript is currently disabled. For the best experience viewing this website please enable JavaScript as described here.

Authorised Reports & Unreported Judgments

Exit Distraction Free Reading Mode

Please Note: You are about to print a copy of the onscreen version of this judgment. For court use, a full PDF copy of the judgment is required or preferred. Please return to the case for PDF printing options.

Word Highlighter:
0of0
Change Font and Font Size
Font:
Font Size:
CITE

Notable Unreported Decision

Iris Broadbeach Business Pty Ltd v Descon Group Australia Pty Ltd[2024] QSC 16Wilson J
Add to List

Iris Broadbeach Business Pty Ltd v Descon Group Australia Pty Ltd[2024] QSC 16

SUPREME COURT OF QUEENSLAND

CITATION:	Iris Broadbeach Business Pty Ltd v Descon Group Australia Pty Ltd & Anor [2024] QSC 16
PARTIES:	IRIS BROADBEACH BUSINESS PTY LTD AS TRUSTEE FOR THE IRIS BROADBEACH BUSINESS TRUST (ACN 651 719 603) (applicant) v DESCON GROUP AUSTRALIAN PTY LTD (ACN 625 771 075) (first respondent) TRACEY WOOD (ADJUDICATION REGISTRATION NO. J15008724) (second respondent)
FILE NO/S:	BS 1160 of 2023
DIVISION:	Trial Division
PROCEEDING:	Originating Application
ORIGINATING COURT:	Supreme Court at Brisbane
DELIVERED ON:	21 February 2024
DELIVERED AT:	Brisbane
HEARING DATE:	10 November 2023
JUDGE:	Wilson J
ORDER:	The parties are to provide a draft order in accordance with these reasons by 28 February 2024. The question of costs is adjourned.
CATCHWORDS:	STATUTES – ACTS OF PARLIAMENT – INTERPRETATION – OTHER MATTERS – where the applicant and the first respondent are parties to a construction contract – where the applicant applied to the second respondent for adjudication of a payment claim under the Building Industry Fairness (Security of Payment) Act 2017 (Qld) – where the applicant applied for orders that the second respondent’s adjudication decision be set aside or declared void and that the first respondent be permanently restrained from enforcing or seeking to enforce the adjudication decision – where the applicant argues that the adjudication decision is invalid or void, wholly or in part, for jurisdictional error for five reasons Building Industry Fairness (Security of Payment) Act 2017 (Qld) Acciona Agua Australia Pty Ltd v Monadelphous Engineering Pty Ltd (2020) 4 QR 410; [2020] QSC 133 Bezzina Developers Pty Ltd v Deemah Stone (Qld) Pty Ltd [2008] 2 Qd R 495; [2008] QCA 213 Chase Oyster Bar Pty Ltd v Hamo Industries Pty Ltd (2010) 78 NSWLR 393; [2010] NSWCA 190 John Goss Projects Pty Ltd v Leighton Contractors Pty Ltd (2006) 66 NSWLR 707; [2006] NSWSC 798 John Holland Pty Ltd v TAC Pacific Pty Ltd [2010] 1 Qd R 302; [2009] QSC 205 Multiplex Constructions Pty Ltd v Luikens [2003] NSWSC 1140 Musico v Davenport [2003] NSWSC 977 Northbuild Construction Pty Ltd v Central Interior Linings Pty Ltd [2012] 1 Qd R 525; [2011] QCA 22 Re Refugee Review Tribunal; Ex parte Aala (2000) 204 CLR 82; [2000] HCA 57
COUNSEL:	M D Ambrose KC with M R Reading for the applicant H Clift for the first respondent
SOLICITORS:	McCullough Robertson for the applicant Irish Bentley Lawyers for the first respondent

The application

[1]
On 6 September 2023, the second respondent (the adjudicator) delivered her reasons (the adjudication decision)^[1] in relation to an adjudication of payment claim 7 made by Descon Group Australia Pty Ltd (the first respondent) to Iris Broadbeach Business Pty Ltd as trustee for the Iris Broadbeach Business Trust (the applicant) pursuant to the Building Industry Fairness (Security of Payment) Act 2017 (Qld) (the Payment Act).
[2]
The applicant applies for orders that this adjudication decision be set aside, or declared void, and that the first respondent be permanently restrained from enforcing or seeking to enforce the adjudication decision.
[3]
The applicant sets out five bases as to why the adjudication decision is invalid and void, wholly or in part, for jurisdictional error:
1. first, in relation to the adjudicator’s treatment of retention monies (the retention monies issue);
2. second, the adjudicator awarded the first respondent the sum of $781,628.24 (GST exc.) notwithstanding that the sum to which this item related was not claimed by it (the award of unclaimed insurance amounts);
3. third, the adjudicator awarded an amount of $141,459.89 (GST exc.) to the first respondent notwithstanding that it did not claim for this sum within its adjudication application (the award of unclaimed structural engineer amounts);
4. fourth, in relation to the adjudicator’s valuation of the architect item (the architect item issue); and
5. fifth, the payment claim the subject of the adjudication decision was not a valid payment claim under the Payment Act because it did not request payment for the claimed amount in accordance with section 68 (1) (c) (the request for payment issue).
[4]
It is not in dispute by the parties that each of these grounds fall into jurisdictional error if they are made out.
[5]
Indeed, in relation to the second and third grounds, the parties agree that the adjudicator made a jurisdictional error and that the decision is void to that extent. Accordingly, the parties agree that $857,431.88 (GST exc.) be released to the applicant. At the hearing, at the urging of the parties, I signed a consent order to this effect. I will set out the basis for such an order in my reasons.
[6]
In relation to the remaining three grounds, the first respondent states that there is no jurisdictional error.

Background

[7]
On 3 August 2022, the applicant (as principal) engaged the first respondent (as head contractor) pursuant to the terms of a written contract entitled “Works Contract” (the contract). The first respondent was engaged to design and construct a development known as the Victoria and Albert Broadbeach project. Eastview Qld Pty Ltd (the superintendent) was appointed as the superintendent pursuant to the general conditions of the contract.
[8]
On 25 January 2023, the applicant gave notice to terminate the contract. The notice of termination was effective as of 9 February 2023.
[9]
On 28 February 2023, the first respondent served the applicant with its final payment claim, which is payment claim 7, the subject of these proceedings.
[10]
Payment claim 7 sought payment for almost $13.5 million (GST exc.). The superintendent responded with payment schedule 7, which certified some $3.6 million (GST exc.) payable.
[11]
The first respondent lodged an adjudication application on 28 April 2023 and the adjudicator accepted her appointment on 9 May 2023. The applicant then gave its adjudication response on 15 June 2023.
[12]
The adjudicator requested further submissions from the parties in relation to a number of issues. I note that the Payment Act also permits adjudicators to request additional time if required to complete the task required by the Payment Act. In this case the adjudicator requested additional time on:
1. 28 July 2023;
2. 25 August 2023;
3. 28 August 2023; and
4. 4 September 2023.
[13]
The adjudicator was granted each of these extensions by the parties and delivered her adjudication decision on 6 September 2023.

Principles

[14]
An adjudicator’s decision is not reviewable under the Judicial Review Act 1991 (Qld) and the Payment Act does not contain any provision for appeal from an adjudicator’s decision, or any other mechanism by which the adjudicator’s decision may be reviewed for error.
[15]
However, since Northbuild Construction Pty Ltd v Central Interior Linings Pty Ltd,^[2] it has been established that:
1. an adjudicator’s decision may be reviewed for jurisdictional error by the adjudicator in the performance of the adjudication function; and
2. an adjudication decision may be declared invalid and void for jurisdictional error.
[16]
The purpose and operation of the Payment Act must be borne in mind in any application for such relief, which include that:
1. the object of the Payment Act is to ensure cashflow to construction contractors in recognition of the fact that without cash flow, such contractors may not survive;
2. the procedure of adjudication is subject to strict, fast time frames;
3. section 101 (a) of the Payment Act preserves the parties’ ultimate rights which may be pursued by litigation in the ordinary course; and
4. the procedure of adjudication has been described as “pay now, argue later”.^[3]
[17]
There is a distinction between jurisdictional error and errors within jurisdiction; the latter of which are not reviewable. In that regard, in Ex parte Aala, Hayne J observed that:^[4]

“[163] In deciding whether writs of prohibition and certiorari (and analogous forms of relief) should be granted, a distinction is drawn between jurisdictional error and error within jurisdiction. This court has not accepted that this distinction should be discarded. As was noted in Craig v South Australia, that distinction may be difficult to draw. The difficulty of drawing a bright line between jurisdictional error and error in the exercise of jurisdiction should not be permitted, however, to obscure the difference that is illustrated by considering clear cases of each species of error. There is a jurisdictional error if the decision maker makes a decision outside the limits of the functions and powers conferred on him or her or does something which he or she lacks power to do. By contrast, incorrectly deciding something which the decision maker is authorised to decide is an error within jurisdiction. This is sometimes described as authority to go wrong, that is, to decide matters within jurisdiction incorrectly. The former kind of error concerns departures from limits upon the exercise of power. The latter does not.”

(Citations omitted).

[18]
The usual consequence of finding jurisdictional error will be that the decision is void and quashed; that is because a decision void for jurisdictional error is, in truth, no decision at all. Section 101 (4) of the Payment Act allows for severance of part of an adjudicator’s decision affected by jurisdictional error.

Ground 1 – The retention monies issue

[19]
Pursuant to the contract, the first respondent was required to provide security to the applicant in the form of two bank guarantees, totalling 5% of the contract sum (i.e. $19.634 million (GST exc.)).
[20]
The first respondent did not, prior to the effective date of termination of the contract (i.e. 9 February 2023), provide the applicant with security in accordance with the contract. However, the superintendent caused retention money to be withheld from the first respondent in each payment certificate. By the effective date of termination, the amount of retention withheld by the superintendent was $1,838,287.25 (GST exc.). All of this is uncontroversial between the parties.
[21]
The first respondent’s position before the adjudicator was that they were entitled to the return of monies that were withheld pursuant to clause 41 of the contract, which states:

“41. Termination for convenience

The Principal may terminate the Contract for any reason by giving the Contractor 10 business Days’ written notice, after which the Contract is ended, and the Principal, subject to the Contractor’s compliance with this clause, shall pay to the Contractor.

the amount due to the Contractor shown in any unpaid progress certificate;

the amount certificate by the Superintendent for WUC carried out to the date the Contract is ended, evidencing the amount not otherwise included in the progress certificate which would have been payable had the Contract not been ended and had the Contractor been entitled to and made a claim for payment on the date the Contract is ended;

the cost of materials reasonably ordered by the Contractor for WUC or work, which the Contractor cannot return, or which order cannot be cancelled, but only if the materials become the property of the Principal upon payment; and

the amount certified by the Superintendent on account of reasonable demobilisation costs.

Without limiting any other rights of the Principal, subject to clause 5, the Principal shall release security without 10 business Days of the date of termination under this clause.

…

The provisions of this subclause survive the termination or expiration of the Contract.”

[22]
The first respondent’s position, before the adjudicator, was that clause 41 of the contract required release of security (that is, the retention) within 10 business days of the date of termination and, as this time period had passed, the applicant was no longer entitled to the retention monies and they should be paid to the first respondent. Accordingly, the first respondent set out the following submissions to the adjudicator in its adjudication application:

“54. Pursuant to clause 68(2) of the Payment Act, the Contractor^[5] is entitled to include in a Payment Claim an amount that “is held under the construction contract by the respondent and that the claimant claims is due for release”.

The Principal currently holds an amount of $1,838,287.25. (The Contractor acknowledges that the current Payment Claim erroneously included an amount for retention for Payment Claim 6 that had not been certified).

Pursuant to clause 41 of the Contract, Principal was required to release security within 10 Business days of the date of termination, namely on or before 23 February 2023. The Principal has failed to release the amount of the retention held. Accordingly the Contractor is entitled to the return of moneys withheld by the Principal as retention. Those funds represent work already done but, pending provision of bank guarantees (the obligation in respect of which ended upon termination under clause 41) there was no obligation to pay. With termination, that basis to withhold payment lost validity.”

[23]
The applicant’s position before the adjudicator was that pursuant to clauses 41 and 5.7 (a) of the contract, the first respondent had no entitlement to their claim for retention monies and made the following written submissions to the adjudicator:

“No entitlement under clause 41

44.5 If Descon’s claim for retention is a claim for construction work or related goods and services which can be pursued in adjudication under the Payment Act, Descon must establish a contractual entitlement to retention and this requires establishing an entitlement under clause 41 of the General Conditions, as that is Descon’s sole entitlement upon termination under that clause.

44.6 At [38] of the Adjudication Application submissions, Descon submits that, as at the date of the Payment Claim on 28 February 2023, Iris had no right to retain retention, as the Contract was terminated from 9 February 2023.

44.7 The question is, therefore, whether Iris’s right to withhold retention survives termination of the Contract. It is clear that it does.

44.8 As set out in the Payment Schedule, Descon has no entitlement to the release of retention under clause 41 of the General Conditions because:

the provision for the release of security under clause 41 of the General Conditions is expressly provided to be ‘[w]ithout limiting any other rights of the Principal’, and also to be subject to clause 5 of the General Conditions;

pursuant to clause 5.7(a) of the General Conditions, Iris may continue to hold security or retention moneys ‘where the contract may otherwise require it to be released or after termination of the Contract for any reason, if there is any amount claimed by the party under or in connection with the Contract (whether liquidated or otherwise)’; and

Iris has claims against Descon under or in connection with the Contract entitling it to retain the retention (including those set out in Part E, below).

44.9 Accordingly, while clause 41 may ‘otherwise’ provide for the release of security, clause 41 is expressly subject to clause 5, and clause 5.7(a) provides that Iris may continue to hold retention moneys, ‘[d]espite any other provision of the Contract’.

44.10 For the purposes of clause 5.7(a) of the General Conditions, Iris has two substantial claims against Descon which are the subject of proceedings before the Supreme Court of Queensland. Contained at Annexure I to this Adjudication Response are Iris’s claims and statements of claim filed and served in those proceedings.”

[24]
The applicant’s submission before the adjudicator relied upon clause 5.7 (a) of the contract which states:

“5.7 Retention of Security

Despite any other provision of the Contract:

a party holding security or retention moneys may continue to hold security or retention monies (in an amount reasonably determined by that party to cover any amount claimed by that party) where the Contract may otherwise require it to be released or after termination of the Contract for any reason, if there is any amount claimed by the party under or in connection with the Contract (whether liquidated or otherwise)…”

[25]
The adjudicator concluded that the retention was to be released to the first respondent and therefore valued the retention item as “nil” and set out her reasons as follows:

“440. The Claimant has claimed for the full release of retention of $1,838,287.25 excluding GST on the basis that clause 41 of the Contract provides that security must be released by the Respondent within 10 business days after the day of termination of the Contract which is before the reference date for the Payment Claim.

In the Payment Schedule, the Respondent states that retention is held in full “as the principal requires to hold these funds to offset overclaiming in the past for primarily consultants and preliminaries”. No further reason is given. In Appendix D to the Payment Schedule, the Respondent states that retention cannot be claimed under the Payment Act as it is not an amount for construction work or related goods and services.

I do not agree with that position. Retention is an amount withheld from payment due to the Claimant for the carrying out of construction work. It is an amount that the Claimant is entitled to pursuant to the Contract. Accordingly, it is an amount that may be included in a payment claim.

The Respondent also submits in the payment Schedule that it is not due to be released pursuant to clause 41 of the Contract:

as it is subject to clause 5;

clause 5.7(a) provides that the Respondent may continue to hold retention where the contract may otherwise require it to be released or after termination of the contract for any reasons, if there is any amount claimed by the party under or in connection with the contract; and

the Respondent claims against the Claimant under or in connection with the Contract entitled it to retain the retention.

The Respondent has not referred me to any claim that it has made against the Claimant prior to termination of the Contract pursuant to clause 5.2 of the Contract or another provision. The Respondent has simply stated that it has a claim against the Claimant without identifying the basis for the claim, the contractual provision on which is relies to withhold the retention from the Payment Claim etc.

Clause 41 expressly provides that retention is to be released within 10 business days of the date of termination of the Contract.

Clause 5.2 provides the Respondent with the right to have recourse to security where an amount is due (there is no evidence or submissions that an amount was due at the relevant time) or in respect of any bona fide claim on the giving of 5 business days’ notice. The Respondent has not provided any evidence to show that it has provided such notice to the Claimant.

447. The Payment Schedule notes that the Respondent wants to withhold retention for alleged overpayments. However, as I have found above that the Respondent is not entitled to withhold amounts from the Payment Claim for such reasons and in the absence of any evidence from the Respondent that it has provided written notice to the Claimant of a bona fide claim to which clause 5.2 relates, I find that the Respondent is not entitled to withhold retention from the Payment Claim.”

[26]
In relation to the adjudicator’s treatment of retention monies, the applicant submits that the adjudicator committed jurisdictional error on two bases, as the adjudicator:
1. denied it procedural fairness by failing to seek submissions about the effect clause 5.2 of the contract; and / or
2. did not “consider” the applicant’s submissions as to why clause 5.7 (a) of the contract entitled it to withhold the retention, as mandated by section 88 (2) (d) of the Payment Act.
[27]
It is apparent from the adjudicator’s reasons that she relied upon clause 5.2 in coming to her decision which was a clause of the contract not relied upon by either party in their submissions to her.
[28]
The first respondent acknowledges that the adjudicator committed an error in respect of her dealing with clause 5.2. However, the first respondent submits that this is an error within jurisdiction as it is an error of law in interpreting the contract.
[29]
In this case neither party made, nor was invited by the adjudicator to make, submissions in relation to clause 5.2 of the contract.
[30]
The first respondent did not address clause 5 of the contract in the context of the retention of monies issue at all, despite it being expressly raised in the payment schedule. Rather, the first respondent’s submissions before the adjudicator focussed upon the wording of clause 41 of the contract.
[31]
The applicant’s response before the adjudicator was that clause 41 was subject to clause 5 of the contract. The applicant then specifically relied on clause 5.7 (a) of the contract. In my view, the applicant’s submission was clear when they set out the following in their submissions to the adjudicator:

“Accordingly, while clause 41 may ‘otherwise’ provide for the release of security, clause 41 is expressly subject to clause 5, and clause 5.7 (a) provides that Iris may continue to hold retention moneys ‘[d]espite any other provision of the Contract.”

[32]
It could not be said that the applicant was relying on the entirety of clause 5 to justify its position.
[33]
I note that each subsection of clause 5 does different work and is applicable to a variety of situations:

“5. Security

5.1 Provision

Security shall be provided in accordance with Item 14 or 15. All delivered security, other than cash or retention moneys, shall be held in accordance with the requirements of this Contract.

If security is provided by a financial institution the security shall be in the form of two unconditional undertakings given by a financial institution acceptable to the Principal's Financier.

If the Contract sum increases in accordance with the Contract by a total of 5% or more, and for each 5% increase thereafter, the Principal may direct the Contractor to provide additional security in accordance with Item 14 that is proportionate to the increase in the Contract sum.

The Contractor is not entitled to any payment under the Contract to the extent that it has not lied with this clause.

5.2 Recourse

The Principal may have recourse to security:

where an amount due to the Principal under the Contract remains unpaid after the time for payment;

in respect of any bona fide claim to payment (liquidated or otherwise), the Principal may have against the Contractor under the Contract,

on the giving of 5 days written notice to the Contractor.

The provisions of this subclause 5.2 survive the termination or expiration of the Contract.

5.3 Change of security

The Contractor may by written notice to the Principal request permission to substitute the form of security. The Principal may, in its absolute discretion, accept or reject the request. If permission is granted to the extent that another form of security is provided, the Principal shall promptly release and return the original security.

5.4 Reduction and release

Upon the issue of the certificate of practical completion, the Principal's entitlement to security (other than in Item 14(e)) shall be reduced by the percentage or amount in Item 14(f), and the reduction shall be released and returned within 14 days to the Contractor.

The Principal's entitlement to security in Item 14(e) shall cease 14 days after incorporation into the Works of the plant and materials for which that security was provided.

The Principal's entitlement otherwise to security shall cease 14 days after the later of:

the date of issue of the final certificate; or

the date upon which the Contractor has duly executed the completed copy of the Deed of Release - Final issued to the Contractor by the Superintendent and returned the same to the Superintendent and the Principal.

Upon the Principal's entitlement to security ceasing, the Principal shall release and return forthwith the security to the Contractor.

5.5 Trusts and Interest

Except where held by a government department or agency or a municipal, public or statutory authority, any portion of security (and interest earned thereon) which is cash or retention moneys, shall be held in trust for the party providing them until the Principal or the Contractor is entitled to receive them.

Interest earned on security not required to be held in trust shall belong to the party holding that security.

5.6 Performance Guarantee

Notwithstanding anything in this Contract:

the Contractor must lodge with the Principal prior to commencing work on the Site, and within 14 days of the date of the Contract, the deed of guarantee and indemnity (Performance Guarantee) annexed as Annexure Part F executed by the Contractor's ultimate holding company (as that term is defined in the Corporations Law) or if there is no ultimate holding company the n the directors of the Contractor;

the Principal must not be required to lodge a Deed of guarantee, Undertaking and Substitution; and

the Principal may refuse to make any payment otherwise due under the Contract until the Contractor has fully complied with its obligation under paragraph (a).

5.7 Retention of Security

Despite any other provision of the Contract:

a party holding security or retention moneys may continue to hold security or retention monies (in an amount reasonably determined by that party to cover any amount claimed by that party) where the Contract may otherwise require it to be released or after termination of the Contract for any reason, if there is any amount claimed by the party under or in connection with the Contract (whether liquidated or otherwise);

where the Contract is terminated by reason of the Contractor repudiating the Contract, being in breach of the Contract or having an event referred to in clause 39.11 (insolvency) occur in respect of it, the Principal may have immediate recourse to security or retention moneys after termination for any claim to money which the Principal may have against the Contractor whether for damages (including liquidated damages) or otherwise; and

where the Contract is terminated in circumstances other than those referred to in paragraph 5.7(b), the Principal may have recourse to security or retention moneys after termination where the Contract fails to pay any amount which becomes due to the Principal within the agreed period for payment or if no period is agreed, within 5 days.

5.8 Security Issuer

If the security is in the form of an undertaking from a financial institution or insurance company and such issuer:

becomes insolvent or is unable to pay its debts as and when they fall due; or

is an individual Person or a partnership including an individual Person, and if that Person:

commits an act of bankruptcy;

has a bankruptcy petition presented against him or her or presents his or her own petition;

is made bankrupt;

makes a proposal for a scheme of arrangement or a composition; or

has a deed of assignment or deed of arrangement made, accepts a composition, is required to present a debtor's petition, or has a sequestration order made, under Part X of the Bankruptcy Act 1966 (Cth); or

is a corporation, and in respect of such corporation:

notice is given of a meeting of creditors with a view to the corporation entering a deed of company arrangement;

the corporation enters a deed of company arrangement with creditors;

a controller or administrator is appointed;

an application is made to a court for the winding up of the corporation and not stayed within 14 days;

a winding up order is made in respect of the corporation;

the corporation resolves by special resolution that it be wound up voluntarily (other than for a member's voluntary winding-up);

a mortgagee of any property of the corporation takes possession of that property;

the shareholders or directors of the corporation attempt to pass or pass a resolution which bas as an object the winding up of that corporation; or

the corporation goes into voluntary administration, then the Contractor must within 14 days of a written request by the Principal provide new security in accordance with this clause.”

[34]
The first respondent submits that clause 5.7 is poorly drafted and notes a coherency in language between clause 5.2 and clause 5.7 of the contract. In oral submissions, counsel for the first respondent pointed to a coherency between the use of “recourse” in clause 5.2 and “retention” in clause 5.7 as both terms concern the use of security; recourse is using the security and retention is continuing to hold the security.
[35]
However, I note that each subparagraph of clause 5 contains distinct and differing obligations of each of the parties, each of which is clearly identified by headings in bold.
[36]
The distinction between clauses 5.2 and 5.7 is stark. Clause 5.2 is about recourse, whilst clause 5.7 is about retention; two completely different concepts.
[37]
Further, each clause imposes different obligations. Clause 5.2 requires the applicant to give 5 days’ written notice to the respondent which is not a requisite of clause 5.7.
[38]
In my view, the adjudicator did not commit an error of law in applying clause 5 in determining the retention of monies issue. Rather, the error was that the adjudicator decided the retention of monies issue on a particular ground that neither party contended for. Despite neither party relying upon clause 5.2 of the contract, the adjudicator:
1. formed the view that because the applicant had provided no evidence that it had notified the first respondent in accordance with clause 5.2 of the contract prior to termination of the contract (despite not having asked the parties for submissions as to whether or not that had occurred), the applicant’s right to hold the retention was somehow lost;
2. applied the test for the existence of the right to withhold as being conditional upon the giving of 5 days’ notice in writing, which is not a requirement of clause 5.7(a) of the contract; and
3. purported to determine the first respondent’s entitlement to the retention on the basis of arguments that were not put to her by either party, and about which she gave neither party an opportunity to make submissions.
[39]
The adjudicator proceeded on the basis that the applicant was advancing a right to withhold retention pursuant to clause 5.2 of the general conditions in circumstances where this was not the applicant’s case. On that erroneous basis, the adjudicator then purported to determine the applicant’s entitlement to withhold the retention on the basis of arguments that were not put to her by either party, and about which she gave neither party an opportunity to make submissions.
[40]
It is a denial of procedural fairness to determine the applicant’s rights on the basis of clause 5.2 when neither party made submissions in respect of that clause, and the applicant’s case was expressly premised upon clause 5.7 (a) of the general conditions, not clause 5.2.
[41]
This is not an error of construction. The adjudicator relied on a part of the contract to determine the issue about which neither party had adverted to. It is understandable why neither party referred to clause 5.2 in their submissions; it was simply not relevant in determining the dispute between them.
[42]
I accept the adjudicator decided the applicant’s rights on the basis of an entirely separate provision, to which the applicant did not expressly refer in its submissions, and about which the applicant did not have an opportunity to make submissions (or lead evidence).
[43]
The applicant has been denied procedural fairness.
[44]
It has long been established that a denial of procedural fairness will establish jurisdictional error entitling a party to have a determination set aside.
[45]
In Acciona Agua Australia Pty Ltd v Monadelphous Engineering Pty Ltd (Acciona),^[6] Bond J (as his Honour then was) provided a detailed consideration of the Payment Act and jurisdictional error under it, including a denial of procedural fairness:^[7]

“[41] … the valid exercise of an adjudicator’s jurisdiction is conditioned on the adjudicator having accorded to the parties what White JA described in Northbuild Construction Pty Ltd v Central Interior Linings Pty Ltd [2012] 1 Qd R 525 as “the necessary level of procedural fairness”. The juridical basis for this proposition is the same as the preceding propositions. The legislature must be taken to have contemplated that an adjudicator would have accorded the parties the necessary level of procedural fairness, such that failure to do so would be regarded as breach of a condition of the valid exercise of the jurisdiction…”

(Citations omitted).

[46]
In Musico v Davenport,^[8] McDougall J acknowledged the fast, rough and ready way of assessing a builder’s entitlement to progress claims. However, even in this context, if an adjudicator comes to a particular determination on a particular ground, for which neither party has contended, then the requirements of natural justice require the adjudicator to give the parties notice of that intention:^[9]

“[107] … It may readily be accepted that the Act provides for a somewhat rough and ready way of assessing a builder’s entitlement to progress claims. It may also be accepted that the procedure is intended not only to be swift, but also to be carried out with the minimum amount of formality and expense. Nonetheless, what an adjudicator is required to do is to decide the dispute between the parties. Under the scheme of the Act, that dispute is advanced by the parties through their adjudication application and adjudication response (which, no doubt, will usually incorporate the antecedent payment claim and payment schedule). If an adjudicator is minded to come to a particular determination on a particular ground for which neither party has contended then, in my opinion, the requirements of natural justice require the adjudicator to give the parties notice of that intention so that they may put submissions on it…”

[47]
The next question is whether this denial of procedural fairness was material to the adjudicator’s decision.
[48]
The principles of natural justice do not extend to requiring adjudicators to give the parties an opportunity to put submissions on matters that were not germane to their decision.^[10] The concept of materiality is inextricably linked to the measure of natural justice that the Payment Act requires parties to be given in any particular case.
[49]
As to materiality, Applegarth J in John Holland Pty Ltd v TAC Pacific Pty Ltd^[11] stated:

“[40] The adjective “substantial” has been used in the relevant authorities to capture the principle that the opportunity denied was material, namely that the matter about which the adjudicator did not provide an opportunity to be heard was a point upon which the adjudicator based his or her decision and was significant to the Payment Actual determination. In addition, the Court’s concern is with the practical effect of the alleged denial of natural justice. Reference to the High Court’s decisions in Stead v State Government Insurance Commission and Ex parte Aala supports the proposition that even if the Court is satisfied that there has been a denial of natural justice, relief may be denied if it can be shown that compliance with the requirements of natural justice could have made no difference to the outcome. It is probably sufficient in this regard for the applicant for relief to show that there were substantial submissions that, as a matter of reality and not mere speculation, might have persuaded the adjudicator to change his or her mind.”

(Citations omitted).

[50]
In relation to the issue of materiality, the first respondent submits that apart from the adjudicator’s reference to clause 5.2 there were other reasons for the adjudicator to find against the applicant.
[51]
The first respondent submits that paragraph 447 of the adjudicator’s reasons sets out another basis as to why the applicant was not entitled to withhold amounts, i.e. the payment schedule notes that the respondent wants to hold retention for alleged overpayments and the adjudicator has already found that the applicant is not entitled to withhold amounts from the payment claim.
[52]
For ease of reference, I will set out paragraph 447 of the adjudicator’s reasons again:

“447. The Payment Schedule notes that the Respondent wants to withhold retention for alleged overpayments. However, as I have found above that the Respondent is not entitled to withhold amounts from the Payment Claim for such reasons and in the absence of any evidence from the Respondent that it has provided written notice to the Claimant of a bona fide claim to which clause 5.2 relates, I find that the Respondent is not entitled to withhold retention from the Payment Claim.”

(Emphasis added).

[53]
The first respondent states that paragraph 447 thus provides a reference back to other parts of the adjudicator’s reasons where the adjudicator considered two bases for the applicant withholding payment to the first respondent:
1. performance security;^[12] and
2. deductions for amounts not paid and / or setoff.^[13]
[54]
In my view, paragraph 447 of the adjudicator’s reasons is not clear as to what the adjudicator is referring to when she states:

“However, as I have found above that the Respondent is not entitled to withhold amounts from the Payment Claim for such reasons…”

(Emphasis added).

[55]
It is not clear whether the reference to “above” in paragraph 447 is a reference to previous parts of the adjudication decision or a reference back to paragraphs 444 and 446 as a basis for finding that the applicant has not established an entitlement to hold the retention monies.
[56]
However, what is clear from the reasons is that the adjudicator relied on clause 5.2 of the contract in coming to her decision. I note that the adjudicator goes on to state in paragraph 447:

“… and in the absence of any evidence from the Respondent that it has provided written notice to the Claimant of a bona fide claim to which clause 5.2 relates, I find that the Respondent is not entitled to withhold retention from the Payment Claim.”

[57]
In my view, the reference to the “written notice” at paragraph 447 of the adjudication decision reveals the significance of clause 5.2 in the adjudicator’s reasoning and highlights the submissions that could have been made had the adjudicator invited submissions on the matter.
[58]
However, neither party made, nor was invited by the adjudicator to make, submissions to the adjudicator in respect of clause 5.2 of the contract.
[59]
In my view, the adjudicator decided the monies retention issue pursuant to clause 5.2 of the contract and did not give an opportunity for the applicant to make submissions in relation to this.
[60]
While it is accepted that the “concern of the law is to avoid practical injustice”,^[14] here there has been a material denial of natural justice which had a real or practical effect.
[61]
The only part of clause 5 that the applicant referred the adjudicator to in their submissions was clause 5.7 (a). Had the parties been given an opportunity to make submissions in respect of clause 5.2 of the contract, the adjudicator's attention would have been drawn to the fact clause 5.2 governed rights of recourse which was irrelevant to the consideration of the applicant’s entitlement to withhold.
[62]
In this case, I am satisfied that the applicant could have made substantial submissions that, as a matter of reality and not mere speculation, might have persuaded the adjudicator to change her mind.
[63]
Further, even if the applicant was not denied natural justice, in my view the adjudicator did not “consider” the applicant’s submissions as to why clause 5.7 (a) of the contract entitled it to withhold the retention, as mandated by section 88 (2) (d) of the Payment Act.
[64]
Section 88 (1) of the Payment Act sets out what the adjudicator is to decide:

“88 Adjudicator’s decision

(1) An adjudicator is to decide—

the amount of the progress payment, if any, to be paid by the respondent to the claimant (the adjudicated amount); and

the date on which any amount became or becomes payable; and

the rate of interest payable on any amount.”

[65]
Section 88 (2) of the Payment Act sets out what matters the adjudicator is to consider in deciding an adjudication application:

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

the provisions of this chapter and, to the extent they are relevant, the provisions of the Queensland Building and Construction Commission Act 1991, part 4A;

the provisions of the relevant construction contract;

the payment claim to which the application relates, together with all submissions, including relevant documents, that have been properly made by the claimant in support of the claim;

the payment schedule, if any, to which the application relates, together with all submissions, including relevant documents, that have been properly made by the respondent in support of the schedule;

the results of any inspection carried out by the adjudicator of any matter to which the claim relates.”

[66]
As Bond J (as he then was) explained in Acciona, the valid exercise of an adjudicator’s jurisdiction is conditioned on an adjudicator considering the matters set out in section 88 (2):^[15]

“[35] Second, the valid exercise of an adjudicator’s jurisdiction is conditioned on the adjudicator having arrived at his or her conclusion by a process which considers the matters set out in s 88(2) of the Payment Act. But as to this, the following important matters must be noted:

The valid exercise of an adjudicator’s jurisdiction is not conditioned on the adjudicator reaching what is objectively the correct conclusion on all of the questions of fact or law required by the consideration of the matters set out in s 88(2). Or, to put it another way, there are many errors of fact and law which might be made by an adjudicator which would not be regarded as going to jurisdiction.

On an application to set aside an adjudicator’s decision for jurisdictional error, the question is not whether the Court would have come to the same conclusion as the adjudicator. Rather, the question is whether the adjudicator arrived at his or her conclusion by a process which failed to consider the matters set out in s 88(2).

This point was succinctly made in Northbuild Construction Sunshine Coast Pty Ltd v Beyfield Pty Ltd [2015] 1 Qd R 463, 469–470 [29], where McMurdo J pointed out (footnotes in original):

“To determine an application, an adjudicator must identify the relevant terms of the contract upon which the claim is made and then apply the facts, as he or she finds them to be, to those terms upon their proper interpretation. The identification of the terms and the interpretation of those terms are thereby questions which the adjudicator must answer in the exercise of his jurisdiction. It follows that an error in the identification of the terms or in their interpretation will not be a jurisdictional error: Coordinated Construction Co Pty Ltd v JM Hargreaves (NSW) Pty Ltd; Clyde Bergemann Senior Thermal Pty Ltd v Varley Power Services Pty Ltd; BM Alliance Coal Operations Pty Ltd v BGC Contracting Pty Ltd.”

His Honour distinguished between that sort of error – which was not jurisdictional error – and that which was, in the following passage ([2015] 1 Qd R 463, 470 [30]):

“However, where it appears that an adjudicator is not meaning to apply the contract, as he or she interprets it, but is instead allowing the claim upon some other basis, the position is different, because the adjudicator is thereby misunderstanding the scope of the adjudicator’s jurisdiction.”

Adjudicators under the Payment Act do not have to get the answer right, but if it is demonstrated that they have not gone about their task by carrying out the Payment Active process of intellectual engagement with the issues and the submissions before them that the Payment Act requires, then they will have fallen into jurisdictional error because they will not have done the very thing s 88(2) of the Payment Act required them to do.”

(Citations omitted).

[67]
As to what is required in the process of intellectual engagement with the issues, the Full Court of the Federal Court in Jabari v Minister for Immigration, Citizenship, Migrant Services and Multicultural Affairs^[16] set out a number of principles which include:

“[55] …

A conclusion that the decision-maker 'has not engaged in an active intellectual process will not lightly be made and must be supported by clear evidence, bearing in mind that the judicial review applicants carry the onus of proof’.

What is required is the reality of consideration by the decision-maker, the Court on judicial review being required to assess, in a qualitative way, whether the decision-maker has as a matter of substance had regard to the relevant matter.

The onus lies on the appellant to establish on the balance of probabilities that a relevant matter was not considered, taking into account that the reasons must be read fairly and not in an unduly critical manner…”

(Citations omitted).

[68]
I acknowledge that adjudicators’ decisions are not analysed in a vacuum, as Applegarth J in John Holland Pty Ltd v TAC Pacific Pty Ltd^[17] recognised the circumstances in which they are made:

“[66] John Holland may have substantial reasons for disputing the conclusion that Schedule R did not govern entitlements to variations and the reasoning that led to it. However, in circumstances in which adjudicators are required to determine complex legal issues quickly, the detection of flaws in reasoning or poorly expressed reasons in an adjudication decision do not compel the conclusion that the adjudicator did not attempt to understand and apply the contract. Adjudicators provide their determinations in a “somewhat pressure cooker environment”. In some instances the adjudicator “cannot possibly, in the time available and in which the determination is to be brought down, give the type of care and attention to the dispute capable of being provided upon a full curial hearing”. The Court should be slow to conclude that adjudicators who work under the very tight deadlines imposed by the Payment Act, and who, in seeking to do their best, make a mistake, have not acted in good faith.”

(Citations omitted).

[69]
The first respondent submits that the adjudicator did consider the applicant’s submissions, which directed her to clause 5 and clause 5.7 (a); they say this much is clear from paragraph 443 of her decision and the reasoning which follows it.
[70]
Further, the first respondent submits that the assertion that the adjudicator has failed to consider clause 5.7 (a) of the contract ignores her express reference to that clause in paragraph 443 and her reasoning in paragraph 447, which considers the substance and operation of clause 5.7 (a) without expressly naming the clause. Accordingly, bearing in mind the context and proper approach to considering adjudicator’s reasons, the first respondent submits that the applicant has not discharged its onus.
[71]
In this case, the issue that the adjudicator had to deal with was simple.
[72]
The first respondent contended that by operation of clause 41 of the contract it was entitled to the return of the retention. On the other hand, the applicant contended that it was entitled to continue to withhold the retention by reason of operation of clause 5.7 of the contract, to which clause 41 was subject. That was the scope of the dispute in respect of retention that had been referred to adjudication.
[73]
Whilst the adjudicator does expressly refer to clause 5.7 (a) of the contract within the adjudication decision, this is done as part of reciting the applicant’s reasons for non-payment as set out in the payment schedule.
[74]
The applicant’s submissions with respect to its reliance on clause 5.7(a) and the claims were clearly articulated.
[75]
However, the adjudicator ignored the submissions made by the applicant in relation to clause 5.7(a), as evidenced by paragraph 444 of the adjudication decision:

“… The respondent has simply stated that it has a claim against the Claimant without identifying the basis for the claim, the contractual provision on which it relies to withhold the retention from the Payment Claim etc.”

[76]
Contrary to this statement by the adjudicator, the applicant in their submissions to the adjudicator did expressly identify:
1. the contractual provision on which it relied (clause 5.7 (a)); and
2. the basis for the two claims it made against the first respondent.
[77]
There is no indication in the reasons as to why the adjudicator rejected the relevance of clause 5.7 (a) of the contract, as relied upon by the applicant, and / or why the evidence as to the claims against the first respondent were ignored.
[78]
In my view, the adjudicator’s statement reveals that the adjudicator:
1. either did not consider the applicant’s submissions regarding clause 5.7 (a) of the contract; or
2. did not carry out a process of active intellectual engagement with the applicant’s submissions.
[79]
I accept the applicant’s submissions that the adjudicator’s statement as to the lack of identification of a contractual entitlement and the claims in respect of which the retention was withheld are only consistent with a failure, at a most basic level, to “consider” the applicant’s clearly articulated submission on a central issue worth roughly four-fifths of the total adjudicated amount.
[80]
I am satisfied that Ground 1 (the retention monies issue) has been made out on both bases relied upon by the applicant, i.e. that:
1. they have been denied procedural fairness; and
2. the adjudicator failed to consider their submission about the effect of clause 5.7 (a) of the contract.
[81]
Accordingly, the adjudicator has made a jurisdictional error which affects at least $1,838,297.25 (GST exc.) of the adjudicated amount.

Ground 2 – The award of unclaimed insurance amounts

[82]
The applicant asserts that the adjudicator erred by awarding the first respondent the value of insurance costs in the sum of $71,628.24 (GST exc.). The parties agree that this sum was not claimed by the first respondent and the adjudicator made a jurisdictional error in the way she dealt with it.
[83]
Within its adjudication response submissions, the applicant asserted that it was entitled to set off the sums of alternatively:
1. $1,885,048 (GST exc.) (being the total cost of the insurance);
2. $1,541,062.38 (GST exc.) (being the total value of refunds available); or
3. $648,490.04 (GST exc.) (being the total sum of refunds actually received by the first respondent) from payment claim 7.
[84]
The first respondent did not claim any amount in respect of insurances as part of payment claim 7, nor did it contend before the adjudicator that it should be awarded any positive sum for insurances.
[85]
Therefore, the first respondent did not address this topic within its adjudication submissions at all.
[86]
On 28 July 2023, the adjudicator invited the parties to provide further submissions in respect of matters raised in the applicant’s response submissions, including, relevantly, the topic of insurances.
[87]
The first respondent, in its further submissions:
1. conceded that the applicant “will be entitled to the benefit of any refund received from the insurance policy … limited to the pro-rated value that is refunded by the insurer” (this concession being consistent with the first respondent’s position in the prior adjudication decision); and
2. stated that “the amount of the anticipated insurance refund is $1,574,226.82 however an amount of $781,628.24 is yet to be refunded by the insurers”.
[88]
The first respondent did not, by these further submissions, contend that:
1. the applicant was not entitled to its claimed setoff; or
2. that an amount ought to be awarded in its favour in respect of insurances.
[89]
However, the adjudicator valued the total adjudicated amount for insurances in the positive amount of $781,628.24 (GST exc.), and thereby awarded the first respondent that amount. This was in circumstances where:
1. the first respondent claimed no amount for insurance in payment claim 7;
2. the applicant explained the basis for its setoff within its response submissions; and
3. the first respondent made relevant concessions within its further submissions.
[90]
The first respondent accepts that the adjudicator made a jurisdictional error as she erred by awarding the first respondent the value of insurance costs in the sum of $781, 628.24 (GST exc.) in circumstances where this sum was not claimed by the first respondent.

Ground 3 – The award of unclaimed structural engineer amounts

[91]
The applicant asserts that the adjudicator erred by awarding the first respondent an additional sum of $141,459.89 (GST exc.) in respect of the structural engineer consultant item within payment claim 7.
[92]
The amount actually claimed by the first respondent within payment claim 7 in respect of the structural engineer was $65,656.25 (GST exc.).
[93]
However, the adjudicator made the following errors in coming to an award of $141, 459.89 (GST exc.) when she:
1. copied the “claim to date” amounts from payment claim 7 into her column entitled “total in payment claim”, notwithstanding that these were not the amounts actually claimed by the first respondent within payment claim 7 in respect of the structural engineer; and
2. then copied the amounts within her column entitled “total in payment claim” to her column entitled “total adjudicated amount” notwithstanding that not all of these amounts were the subject of payment claim 7.
[94]
In doing so, the adjudicator awarded the first respondent $75,803.64 (GST exc.) more than it actually claimed in respect of the structural engineer within payment claim 7.
[95]
The first respondent accepts that in such circumstances the adjudicator made a jurisdictional error. The first respondent agrees that the adjudicator erred in her approach to the structural engineer item.
[96]
The adjudicator exceeded her jurisdiction to decide the first respondent’s adjudication application because she awarded the first respondent an amount that it did not claim payment for within payment claim 7.
[97]
Accordingly, the adjudicator made a jurisdictional error which affects $75,803.64 (GST exc.) of the adjudicated amount.

Ground 4 – The architect item issue

[98]
The fourth ground concerns the adjudicator’s valuation of the architect item which the adjudicator set out in her reasons:

“274. In the Payment Claim, the Claimant has claimed the total amount of $203,780 excluding GST for this item. The total amount previously approved for this work package by the Respondent was $160,000 excluding GST.

In the Payment Schedule, the Respondent has approved the total amount of $180,000 excluding GST for this item. The reasons for the difference are stated to be as follows:

based on DBI Reconciliation of paid to date;

DBI has confirmed amount claimed is $180,000;

the certified value reflects work completed to date;

the Claimant must establish what WUC it has actually achieved and why it is entitled to a progress payment in respect of that WUC;

the Claimant has claimed on a cost reimbursable basis, without attempting to establish the proportion of the design services that have been carried out having regard to the scope of the WUC and work;

the Claimant must establish the value of WUC carried out to the date the Contract was ended pursuant to clause 41(b);

the Claimant has not demonstrated that it has incurred the amounts that it has claimed for consultants in the Payment Claim;

the DBI invoices that the Claimant refers to in the Payment Claim show the value complete to be $183,780.

The parties agree that the Claimant has been previously paid $160,000 excluding GST in relation to this package.

The amount that I valued this work at in the First Adjudication is $200,000. Therefore, my valuation for this work in the Payment Claim cannot be less than that amount unless one of the parties satisfies me that the value of the work has changed since the previous decision pursuant to section 87(2) of the Payment Act. Neither party has made any submissions to show why I should value this package at something less than the amount that it was previously valued at in the First Adjudication or why that value has changed since my decision in relation to the First Adjudication.

After deducting payments made to date as agreed by both parties, the Claimant is claiming $43,780 excluding GST in the Payment Claim and the Respondent has agreed that an amount of $20,000 excluding GST is due in relation to the Payment Claim based on an approved value of $180,000 excluding GST.

I have already addressed elsewhere in these Reasons why I do not agree with the Respondent that it is permitted to withhold from the Payment Claim amounts that it alleges has not been paid by the Claimant to its consultants or subcontractors.

However, the Claimant has not provided any submissions that show why it is entitled to the amount of $203,780 excluding GST in relation to this package except to provide two invoices from the architect.

Accordingly, I value this package at $200,000 excluding GST being the same amount that it was valued at in the First Adjudication pursuant to section 87(2) of the Payment Act.”

[99]
As can be seen by these reasons, the adjudicator has previously valued this work at $200,000 (GST exc.). Accordingly, the valuation of this work, in this subsequent decision, was subject to section 87 (2) of the Payment Act, which provides that:

“87 Valuation of work etc. in later adjudication application

This section applies if, in deciding an adjudication application, an adjudicator has decided the value of—

any construction work carried out under a construction contract; or

any related goods and services supplied under a construction contract. Note— See section 72 for the valuation of construction work and related goods and services.

Any adjudicator must, in any later adjudication application that involves the working out of the value of the construction work or of the related goods and services, give the work, or the goods and services, the same value as that previously decided by the adjudicator unless the claimant or respondent satisfies the adjudicator concerned that the value of the work, or the goods and services, has changed since the previous decision...”

[100]
Pursuant to section 87 (2) of the Payment Act, the adjudicator must give the architect item the same value as she previously decided unless the applicant satisfied her that the value of the work has changed since the previous decision.
[101]
I note that the former equivalent of section 87 (2) of the Payment Act was section 27 (2) of the Building and Construction Industry Payments Act 2004 (Qld) (the old Act) which was considered in Bezzina Developers Pty Ltd v Deemah Stone (Qld) Pty Ltd (Bezzina) where Fraser JA stated:^[18]

“[57] Where s. 27(2) applies, it informs the manner in which the adjudicator is to perform the function imposed by s. 26(1) of deciding the amount of a progress payment. In performing that function, s. 26(2) requires the adjudicator to take into account only the matters described in paragraphs (a)-(e) of that subsection...”

[102]
If section 87 (2) of the Payment Act is engaged, then the adjudicator was required to perform the function of considering whether the value of the goods and services had changed since the prior adjudication decision by taking into account only the matters listed within section 88 (2) of the Payment Act.
[103]
Relevantly, section 88 (2) (d) of the Payment Act required the adjudicator to consider:

“(d) … all submissions, including relevant documents, that have been properly made by the respondent in support of the [payment] schedule…”

[104]
The applicant states that the adjudicator failed to do this as she failed to consider their submissions in relation to the architect item.
[105]
It is therefore necessary to consider the submissions made by the applicant that were before the adjudicator in relation to the architect item.
[106]
Within the prior adjudication decision, the adjudicator had valued the architect item at $200,000 (GST exc.). The adjudicator acknowledges this in her reasons.
[107]
The first respondent’s position before the adjudicator was that the architect item should be valued at $180,000 (GST exc.), and the first respondent made the following submissions:

“23.1 The following table summarises the position from the Payment Claim and the Payment Schedule:

Item	Total Claimed to Date	Amount Claimed	Total Approved to Date	Amount Scheduled
Architect	$203,780	$43,780	$180,000	$20,000

23.2 The Payment Schedule:

certified an additional $20,000 as being payable in relation to this item, for a total approved amount of $180,000 for this items; and

stated the following reason for withholding payment: ‘Based on DBI Reconciliation of Paid To Date’.

23.3 In addition, as stated at Annexure D of the Payment Schedule, for each of the consultant items, the Payment Schedule stated that:

it is necessary for Descon to establish what WUC it has actually achieved and why it is entitled to a progress payment in respect of that WUC (paragraph 10.4);

Descon has claimed on a cost-reimbursable basis, without attempting to establish the proportion of the design services that have been carried out having regard to the scope of the WUC and work (paragraph 10.7);

pursuant to clause 41(b) of the General Conditions, Descon must establish the value of WUC carried out to the date the Contract was ended (paragraph 10.9); and

Descon has not demonstrated that it has incurred the amounts that it has claimed for consultants in the Payment Claim (paragraph 10.10).

23.4 Further reasons for withholding payment were also set out by the covering letter of the Payment Schedule, contained at Annexure L of this Adjudication Response, which Descon has omitted to include.

23.5 These issues have not been addressed in the Adjudication Application. Paragraphs 22.8 to 22.11, above, explain why Descon’s submissions do not address the real issues.

23.6 The Adjudicator should find that Descon is not entitled to any additional payment and that Descon is entitle to payment of no more than $180,000.

23.7 The Adjudication Application does not substantiate Descon’s claim to payment of $203,780 because:

Descon relies on two invoices from DBI Design Pty Ltd (DBI) totalling $43,780, to claim a total amount to date of $203,780.

Descon has not established that it has performed the architectural WUC to the value of $203,780. Indeed, the two invoices from DBI support a different position. Invoice 10130 from DBI states a ‘value complete’ of $180,000, and invoice 10140 from DBI states a ‘value complete’ of $183,780. Accordingly, even taking Descon’s evidence at its highest, no amount more than $183,780 could be assessed for this item.

23.8 Further, as set out in the Third Goldman Declaration, Descon has made payment to DBI in the amount of $180,000. As set out above, the Superintendent’s assessment was based on a reconciliation of the amount paid to date to DBI.

23.9 Mr Isaac’s statutory declaration (sworn on 28 February 2023) that was included within the Payment Claim did not disclose that Descon has not paid DBI’s 30 January 2023 invoice, but this is what the Superintendent’s investigations have confirmed, as deposed to by Mr Goldman in the Third Goldman Declaration.

23.10 Pursuant to clause 38.2 of the General Conditions, Iris is entitled to withhold moneys until Descon provides evidence to the Superintendent’s satisfaction that Descon has paid DBI under invoice 10140. As set out in the Third Goldman Declaration, Mr Goldman was not satisfied that Descon had paid more than $180,000 to DBI.

23.11 Accordingly, the Adjudicator should find that no additional amount is payable to Descon in relation to this item.”

[108]
Therefore, an issue is whether these submissions made by the applicant were asking the adjudicator to revalue the work pursuant to s 87 of the Payment Act. The applicant’s counsel framed the issue in this way in his oral submissions before me:

“MR AMBROSE: - - - and do that. The issue is she has not even dealt with that point. So she said, “That is not a submission asking me to revalue the work.” If your Honour finds that it is in truth not a submission asking her to revalue the work, then this part - this ground will fall away.

HER HONOUR: So the question is, when she says, “Neither party has made any submissions to show why I should revalue this package”, you say there are, and that is at 23.7?

MR AMBROSE: Yes.

HER HONOUR: And then the question is, is that a submission to show why she should value the package as something less than the amount?

MR AMBROSE: Yes.

HER HONOUR: And what can be said against you is, that’s fairly vague and you haven’t put it in terms of actually what you’re - what the bottom line is.

MR AMBROSE: If it was a requirement, for example, that we were - we had to expressly draw her attention to 87.3, we haven’t done that. But she identified that that was the relevant provision.

HER HONOUR: Yes.

MR AMBROSE: But she doesn’t, for example, say, “I’ve seen the submission and 27.3. That doesn’t satisfy me that I need to exercise that discretion.” What she says is, “No submission has been made.”

HER HONOUR: So the question is - the question really is, is that a submission?

MR AMBROSE: Yes. Yeah.

HER HONOUR: And why do you say it is?

MR AMBROSE: We say it is because it identifies, in (b) - in (a) and (b), that the amount that had been claimed and the amount that had been previously provided are in excess of what the evidence establishes, which is the invoices which show that the earlier claim that was $200,000 should have been no more than 180,000, and the new claim seeking a further $3780 could mean that the total value must be less than the original $200,000. It could be no more than 183,780.”

[109]
Clearly the submissions made by the applicant to the adjudicator did not refer to s 87 (2) of the Payment Act. However, in my view, this is not fatal.
[110]
I note that the applicant’s submissions, before the adjudicator, referred to two invoices from the architect:
1. invoice 10130; and
2. invoice 10140.
[111]
Both of these invoices were provided to the adjudicator.
[112]
Invoice 10140 is the key invoice. It evidences that the total invoice from the architect to the first respondent was only $183,780 (GST exc.), not $200,000 (GST exc.) (being the total value to date assessed for the architect item by the prior adjudication decision).
[113]
Invoice 10140 is dated after the payment claim which was the subject of the prior adjudication decision. Accordingly, this invoice is important in two ways because it:
1. was a document that was not before the adjudicator for the prior adjudication decision; and
2. is also evidence that the value of the work had changed since the prior adjudication decision.
[114]
I am satisfied that the applicant’s submissions which were before the adjudicator and were accompanied by invoice 10140 plainly did demonstrate why the architect item should be valued at something less than the amount that it was previously valued at in the prior adjudication decision.
[115]
Clearly, the adjudicator failed to take these submissions and invoice 10140 into account as paragraph 277 of her decision is clear that neither party had made relevant submissions in relation to section 87 (2).
[116]
I note that the first respondent states that paragraph 277 of the adjudicator’s decision should not be read in isolation and paragraph 279 refers to the adjudicator not accepting that the applicant is permitted to withhold amounts it alleges have not been paid by the first respondent.
[117]
The first respondent states that the reference in paragraph 279 to “elsewhere in these Reasons” is a reference to “XIX. Reasons for withholding payment - Deduction for amounts not paid and/or Setoff” where the adjudicator sets out her reasons why the applicant is not entitled to the setoffs it claims.
[118]
Accordingly, the first respondent submits that once proper regard is had to that part of the reasons, the applicant’s complaint falls away.
[119]
The first respondent submits that whilst they did not make submissions in relation to the architect item, they did make submissions about the applicant’s ability to withhold funds about consultants:

“Further Comments on the Principal’s Payment Schedule

The Contractor makes the following observations in relation to the Payment Schedule and specifically the comments contained in the covering correspondence:

Consultants

The Principal at Part B of its “Reasons for withholding Payment” makes generic submissions as to the entitlement of the Contractor to claim being based on the completion of the WUC.

The invoices that accompanied the Payment Claim issued to the Principal make specifical reference to the nature of the work performed and the percentage basis of such works completion, for example, the works performed by the Geotechnical engineering consultant are detailed in each of the invoices included as part of the payment claim that established the basis of the WUC and work completed.

There is no specific response to each of the consultant invoices supplied by the Contractor denying that any of the services claimed were either not provided or a dispute raised as to the value of such services.

In the payment schedule the Principal has then made unsubstantiated deductions to consultant fees based on heresay and does not meet the requirements of section 69(c) of the Payment Act.”

[120]
However, these matters raised by the first respondent do not get around the fact that the adjudicator failed to engage with the applicant’s submissions in relation to the architect item in the context of section 87 (2) of the Payment Act. Her own decision makes this clear.
[121]
In relation to the matters raised by the applicant which addressed in substance the matters raised in section 87 (2), the adjudicator has not carried out the active process of intellectual engagement with the issues before them that the Payment Act requires. Accordingly, the adjudicator has fallen into jurisdictional error as she has not done the very thing that section 88 (2) of the Payment Act requires her to do.^[19]
[122]
As the adjudicator did not engage in a consideration of the application of section 87 (2) of the Payment Act, the material consequence of this error is that she valued the total adjudicated amount for this item at $200,000 (GST exc.) and failed, for the purposes of section 87 (2) of the Payment Act, to actively engage with evidence that the total value was not more than $183,780 (GST exc.).

Ground 5 – The request for payment issue

[123]
The applicant submits that payment claim 7 was not a written document within the meaning of section 68 (1) of the Payment Act and accordingly the adjudicator did not have jurisdiction under the Act in respect to the whole of payment claim 7.
[124]
For payment claim 7 to be a payment claim within the meaning of the Payment Act, it must be a written document which meets the requirements of section 68 (1) of the Act, which provides that:

“(1) A payment claim, for a progress payment, is a written document that—

identifies the construction work or related goods and services to which the progress payment relates; and

states the amount (the claimed amount) of the progress payment that the claimant claims is payable by the respondent; and

(c) requests payment of the claimed amount; and

includes the other information prescribed by regulation.”

(Emphasis added).

[125]
I note that the equivalent section in the old Act was section 17:^[20]

“17 Payment claims

A person mentioned in section 12 who is or who claims to be entitled to a progress payment (the “claimant”) may serve a payment claim on the person who, under the construction contract concerned, is or may be liable to make the payment (the “respondent”).

A payment claim—

must identify the construction work or related goods and services to which the progress payment relates; and

must state the amount of the progress payment that the claimant claims to be payable (the “claimed amount”); and (c) must state that it is made under this Act. (3) The claimed amount may include any amount— (a) that the respondent is liable to pay the claimant under section 33(3); or (b) that is held under the construction contract by the respondent and that the claimant claims is due for release. (4) A claimant can not serve more than 1 payment claim for each reference date under the construction contract, but may include in any payment claim an amount that has been the subject of a previous payment claim…”

[126]
A significant difference between the old Act and the Payment Act is that section 68 (1) of the Payment Act is no longer framed in mandatory terms. The legislature has removed the term “must” from section 68 in setting out what constitutes a payment claim.
[127]
The applicant submits that satisfaction of the prerequisites for a payment claim as set out in section 68 of the Payment Act are not arduous or inconvenient; the prerequisites are simple and are required to be satisfied in order to engage the legislative mechanism.
[128]
The applicant states that payment claim 7 is not a written document within the meaning of section 68 (1) of the Payment Act as it does not request payment of the claimed amount; therefore, the adjudicator did not have jurisdiction under the Payment Act in respect of this payment claim.
[129]
The applicant highlights that the payment claim, in this case, does not bear the word “invoice” and does not request payment of the claimed amount as required by section 68 (1) (c) of the Payment Act.
[130]
I note that payment claim 7 stated that the sum of $13,432,898.29 (GST exc.) was the “Total Progress Claim Value for the Month (GST exc.)”. This fulfilled the requirement of section 68 (1) (b) of the Payment Act, but not section 68 (1) (c).
[131]
As a matter of construction, sections 68 (1) (b) and (1) (c) are separate requirements. To be a payment claim within the meaning of section 68 (1) of the Payment Act, a payment claim must be a written document which, relevantly, both states the claimed amount and requests payment of the claimed amount. Both requirements have to be met.
[132]
If section 68 (1) was satisfied merely by a written document which stated the claimed amount, that would render subsection (c) with no work to do. A construction which gives each element of section 68 (1) of the Payment Act meaning and effect is to be preferred to one which does not.
[133]
The applicant emphasises that the valuable rights granted to builders by the Payment Act depend upon a builder’s strict observance of the Payment Act’s specifications as to time and other requirements.^[21]
[134]
In Chase Oyster Bar Pty Ltd v Hamo Industries Pty Ltd, McDougall J observed in the context of comparable New South Wales legislation that the legislation gives “very valuable, and commercially important, advantages to builders and subcontractors”.^[22] At each stage of the regime for enforcement of the statutory right to progress payments, the legislation:^[23]

“[209] … lays down clear specifications of time and other requirements to be observed. It is not difficult to understand that the availability of those rights should depend on strict observance of the statutory requirements that are involved in their creation.”

[135]
In Parkview Constructions Pty Ltd v Total Lifestyle Windows Pty Ltd T/as Total Concept Group, Hammerschlag J said:^[24]

“[50] The principles which govern the approach to, and consequences of, noncompliance with provisions of the Payment Act are now well trodden ground.

[51] Punctilious compliance with provisions of the Payment Act upon which the effectiveness of the decision making process under it depends is required.”

(Citation omitted).

[136]
In the context of requiring strict compliance with the Payment Act, the applicant referred to the old Act where it was a requirement that payment claims include a notation that the relevant payment claim was “made under” the old Act. A failure to comply with that requirement has been held to be fatal to the validity of a payment claim^[25] and such seemingly “minor” non-compliances with the old Act were not excused on the basis of the underlying purpose of the Payment Act. The applicant urges that a similar approach to section 68 (1) (c) of Payment Act should be applied.
[137]
The applicant submits that section 68 (1) (c) of the Payment Act would have been met if:
1. it included the term “invoice”;
2. there was a separate invoice that came with the payment claim stating “amount due”; and
3. it included bank details as to where payment could be made.
[138]
Whilst payment claim 7 does not expressly include a request for payment of the claimed amount, in my view, it is clear that it is a request for payment.
[139]
In my view, the following matters are indications that payment claim 7 objectively requests payment of the claimed amount:
1. the document is titled:

“VICTORIA & ALBERT BROADBEACH PROGRESS CLAIM.”

it includes the words:

“This Month's Claim Total Progress Claim Value for the Month (Excl. GST): $13,432,898.29

GST (10%): $1,343,289.83

Total Progress Claim Value for the Month (Incl. GST):

$14, 776.188.12.”

it also includes the words:

“This Progress Claim is submitted under the Building Industry Fairness (Security of Payment) Act 2017…”

[140]
However, most importantly, payment claim 7 was accompanied by a statutory declaration from the managing director of the first respondent. The purpose of this statutory declaration was to state that all the subcontractors were paid. Relevantly, this statutory declaration stated:

“I am making this statutory declaration in connection with the payment of Progress Claim No. 7 dated 28 February 2023 pursuant to the Contract.”

(Emphasis added).

[141]
In my view, the cumulative effect of these matters, in particular, the statement by the first respondent’s managing director, makes it very clear that payment claim 7 was a request for payment.
[142]
Accordingly, I am satisfied that section 68 (1) (c) was satisfied and that the adjudicator had jurisdiction in relation to this claim.

Conclusion

[143]
I am satisfied that the adjudicator has made jurisdictional errors in relation to:
1. Ground 1 – the retention of monies issue;
2. Ground 2 – the award of unclaimed insurance amounts;
3. Ground 3 – the award of unclaimed structural engineer amounts; and
4. Ground 4 – the architect item issue.
[144]
The applicant has not made out its fifth ground.
[145]
The parties at the hearing stated that they will provide a draft order in accordance with my reasons.
[146]
Accordingly, the parties are to provide a draft order by 28 February 2024.

[147]
I will give the parties an opportunity to consider these reasons before they are required to file and serve short written submissions on the question of costs. I encourage the parties to agree on an order for costs.
[148]
However, if this cannot occur, the parties should, within fourteen days, agree on a timetable for the exchange of written submissions and advise the court accordingly.
[149]
If it is appropriate, I will then deal with the question of costs on the papers, unless either party requests a hearing. In order to facilitate that process, I will adjourn the question of costs to a date to be fixed.

Footnotes

[1] Adjudication decision number 2285814.

[2] Northbuild Construction Pty Ltd v Central Interior Linings Pty Ltd [2012] 1 Qd R 525, [9], [25], [32] and [69]. See also Thiess Pty Ltd v Warren Brothers Earthmoving Pty Ltd [2013] 2 Qd R 75, [77].

[3] Multiplex Constructions Pty Ltd v Luikens [2003] NSWSC 1140 at [96].

[4] Re Refugee Review Tribunal; Ex parte Aala (2000) 204 CLR 82 at [163].

[5] The first respondent in these proceedings.

[6] (2020) 4 QR 410.

[7] Acciona Agua Australia Pty Ltd v Monadelphous Engineering Pty Ltd (2020) 4 QR 410 at [41].

[8] [2003] NSWSC 977.

[9] Musico v Davenport [2003] NSWSC 977 at [107].

[10] John Goss Projects Pty Ltd v Leighton Contractors Pty Ltd (2006) 66 NSWLR 707 at 716.

[11] [2010] 1 Qd R 302.

[12] Adjudication decision number 2285814 at [227]–[245].

[13] Adjudication decision number 2285814 at [246]–[273].

[14] Re Minister for Immigration & Multicultural Affairs; Ex parte Lam (2003) 214 CLR 1 at [37].

[15] Acciona Agua Australia Pty Ltd v Monadelphous Engineering Pty Ltd (2020) 4 QR 410 at [35].

[16] Jabari v Minister for Immigration, Citizenship, Migrant Services and Multicultural Affairs (2023) 298 FCR 431 at [55]. Although dealing with a migration decision, the principles are of a much wider application.

[17] [2010] 1 Qd R 302 at [66].

[18] [2008] 2 Qd R 495 at [57] (with whom McMurdo P and Keane JA agreed).

[19] Acciona Agua Australia Pty Ltd v Monadelphous Engineering Pty Ltd (2020) 4 QR 410 at [35(e)].

[20] Building and Construction Industry Payments Act 2004 (Qld) s 17.

[21] See Niclin Constructions Pty Ltd v SHA Premier Constructions Pty Ltd & Anor (2019) 2 QR 190 specifically Applegarth J's reasons at [12]; Chase Oyster Bar Pty Ltd v Hamo Industries Pty Ltd (2010) 78 NSWLR 393 per McDougall J at [209]. Whilst the objects of the Payment Act seek to “preserve the cash flow to a builder”, strict compliance with the requirements of the Payment Act is essential and a precondition to that entitlement arising.

[22] Chase Oyster Bar Pty Ltd v Hamo Industries Pty Ltd (2010) 78 NSWLR 393 at [209].

[23] Chase Oyster Bar Pty Ltd v Hamo Industries Pty Ltd (2010) 78 NSWLR 393 at [209].

[24] Parkview Constructions Pty Ltd v Total Lifestyle Windows Pty Ltd T/as Total Concept Group [2017] NSWSC 194 at [50]–[51].

[25] See JAG Projects Qld Pty Ltd v Total Cool Pty Ltd [2015] QSC 229.

Editorial Notes

Published Case Name:
Iris Broadbeach Business Pty Ltd v Descon Group Australia Pty Ltd & Anor
Shortened Case Name:
Iris Broadbeach Business Pty Ltd v Descon Group Australia Pty Ltd
MNC:
[2024] QSC 16
Court:
QSC
Judge(s):
Wilson J
Date:
21 Feb 2024
White Star Case:
Yes

Appeal Status

Please note, appeal data is presently unavailable for this judgment. This judgment may have been the subject of an appeal.

Cases Cited List of Cases Cited by this judgment

Case Name	Full Citation	Frequency
Acciona Agua Australia Pty Ltd v Monadelphous Engineering Pty Ltd	(2020) 4 QR 410; [2020] QSC 133	6 citations Jump To Cite 1 - [2020] QSC 133 Cite 2 - (2020) 4 QR 410 Cite 3 - (2020) 4 QR 410 Cite 4 - (2020) 4 QR 410 Cite 5 - (2020) 4 QR 410 Cite 6 - (2020) 4 QR 410
Bezzina Developers Pty Ltd v Deemah Stone (Qld) Pty Ltd	[2008] 2 Qd R 495; [2008] QCA 213	3 citations Jump To Cite 1 - [2008] QCA 213 Cite 2 - [2008] 2 Qd R 495 Cite 3 - [2008] 2 Qd R 495
Chase Oyster Bar Pty Ltd v Hamo Industries Pty Ltd	View on:JADE[2010] NSWCA 190	1 citation Jump To Cite 1 - [2010] NSWCA 190
Chase Oyster Bar Pty Ltd v Hamo Industries Pty Ltd	View on:NSWLR(2010) 78 NSWLR 393	4 citations Jump To Cite 1 - (2010) 78 NSWLR 393 Cite 2 - (2010) 78 NSWLR 393 Cite 3 - (2010) 78 NSWLR 393 Cite 4 - (2010) 78 NSWLR 393
Jabari v Minister for Immigration, Citizenship, Migrant Services and Multicultural Affairs	(2023) 298 FCR 431	1 citation Jump To Cite 1 - (2023) 298 FCR 431
JAG Projects Qld Pty Ltd v Total Cool Pty Ltd	[2015] QSC 229	1 citation Jump To Cite 1 - [2015] QSC 229
John Goss Projects Pty Ltd v Leighton Contractors	View on:NSWLR(2006) 66 NSWLR 707	2 citations Jump To Cite 1 - (2006) 66 NSWLR 707 Cite 2 - (2006) 66 NSWLR 707
John Goss Projects Pty Ltd v Leighton Contractors Pty Ltd	View on:JADE[2006] NSWSC 798	1 citation Jump To Cite 1 - [2006] NSWSC 798
John Holland Pty Ltd v TAC Pacific Pty Ltd	[2010] 1 Qd R 302; [2009] QSC 205	4 citations Jump To Cite 1 - [2009] QSC 205 Cite 2 - [2010] 1 Qd R 302 Cite 3 - [2010] 1 Qd R 302 Cite 4 - [2010] 1 Qd R 302
Minister for Immigration and Multicultural Affairs, Re; Ex parte Lam	View on:JADE(2003) 214 CLR 1	1 citation Jump To Cite 1 - (2003) 214 CLR 1
Multiplex Constructions Pty Ltd v Luikens	View on:JADE[2003] NSWSC 1140	2 citations Jump To Cite 1 - [2003] NSWSC 1140 Cite 2 - [2003] NSWSC 1140
Musico & Ors v Davenport & Ors	View on:JADE(2003) NSW SC 977	3 citations Jump To Cite 1 - (2003) NSW SC 977 Cite 2 - (2003) NSW SC 977 Cite 3 - (2003) NSW SC 977
Niclin Constructions Pty Ltd v SHA Premier Constructions Pty Ltd	(2019) 2 QR 190; [2019] QCA 177	1 citation Jump To Cite 1 - (2019) 2 QR 190
Northbuild Construction Pty Ltd v Central Interior Linings Pty Ltd	[2012] 1 Qd R 525; [2011] QCA 22	4 citations Jump To Cite 1 - [2011] QCA 22 Cite 2 - [2012] 1 Qd R 525 Cite 3 - [2012] 1 Qd R 525 Cite 4 - [2012] 1 Qd R 525
Northbuild Construction Sunshine Coast Pty Ltd v Beyfield Pty Ltd	[2015] 1 Qd R 463; [2014] QSC 80	2 citations Jump To Cite 1 - [2015] 1 Qd R 463 Cite 2 - [2015] 1 Qd R 463
Parkview Constructions Pty Limited v Total Lifestyle Windows Pty Ltd t/a Total Concept Group	View on:JADE[2017] NSWSC 194	1 citation Jump To Cite 1 - [2017] NSWSC 194
Re Refugee Review Tribunal; Ex parte Aala	View on:JADE(2000) 204 CLR 82	2 citations Jump To Cite 1 - (2000) 204 CLR 82 Cite 2 - (2000) 204 CLR 82
Re Refugee Review Tribunal; Ex parte Aala	View on:JADE[2000] HCA 57	1 citation Jump To Cite 1 - [2000] HCA 57
Thiess Pty Ltd v Warren Brothers Earthmoving Pty Ltd	[2013] 2 Qd R 75; [2012] QCA 276	1 citation Jump To Cite 1 - [2013] 2 Qd R 75

Cases Citing List of cases on Queensland Judgments citing this Judgment

Case Name	Full Citation	Frequency
Forme Two Pty Ltd v McNab Developments (Qld) Pty Ltd	[2025] QSC 96	2 citations
MWB Everton Park Pty Ltd v Devcon Building Co Pty Ltd	[2024] QCA 94	2 citations
Paladin Projects Pty Ltd v Visie Three Pty Ltd	[2024] QSC 230	1 citation
Starline Interiors Pty Ltd v Tomkins Commercial and Industrial Builders Pty Ltd	[2025] QDC 63	2 citations

Exit Distraction Free Reading Mode

Change Font and Font Size

Iris Broadbeach Business Pty Ltd v Descon Group Australia Pty Ltd[2024] QSC 16