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Acciona Agua Australia Pty Ltd v Monadelphous Engineering Pty Ltd

Unreported Citation: [2020] QSC 133

In this significant case, Bond J comprehensively described the Supreme Court’s power to review adjudication decisions under the Building Industry Fairness (Security of Payment) Act 2017 and the circumstances in which an adjudicator might commit a jurisdictional error. As applied here, his Honour found that a jurisdictional error had been committed.

Bond J

27 May 2020

Monadelphous was contracted to upgrade the Kawana Sewage Treatment Plant in late 2016. [1]. In March 2017, it subcontracted Acciona to carry out engineering-related work and to supply mechanical equipment and materials. [3]. The relationship between the parties soured and Acciona began lodging adjudication applications, first under the Building and Construction Industry Payments Act 2004 (BCIPA) and then under the Building Industry Fairness (Security of Payment) Act 2017 (Payment Act), which replaced the BCIPA. [4]–[5]. The first five adjudication decisions were made in Acciona’s favour. [4]–[5]. This case relates to the sixth adjudication decision, in which the adjudicator found that while Acciona was entitled to payment of $462,853.17 and €308,675.19, those amounts could be set off against a sum of $4,424,904.14 owing to Monadelphous, with the ultimate result that he reduced Acciona’s entitlement to $nil. [6].

Acciona sought judicial review of this decision on two grounds. First, that the adjudicator had, in breach of s 88(5) Payment Act, failed to give proper reasons for his decision and that amounted to jurisdictional error. [8]. Second, on the ground that the adjudicator had exceeded his jurisdiction by finding that Monadelphous had “the right to recover the claim which it set off”, because he failed to properly construe the contract in breach of s 88(2), and because he had considered reasons given by Monadelphous which he was prohibited from taking into account. [9].

In assessing these grounds, Bond J started by identifying that the ultimate task of an adjudicator under s 88(1) Payment Act is to decide the amount of a progress payment to be paid. [13]. However, in doing that, the adjudicator can only take certain matters, prescribed by s 88(2), into account, and is expressly excluded from considering other matters set out in s 88. [14].

Turning then to the judicial review of decisions made under the Payment Act, Bond J observed that the power to review an adjudicator’s decision lay in the Supreme Court’s inherent supervisory jurisdiction, rather than being found in the Judicial Review Act 1991 or the Payment Act itself. [22]–[23], [26]–[31]. In the context of decisions under the Payment Act, Bond J identified six aspects of the valid exercise of an adjudicator’s jurisdiction, the breach of which might constitute a jurisdictional error. [34]–[42]. Essentially, the exercise of the adjudicator’s jurisdiction “is conditioned on the decision having complied with … ‘basic and essential’ statutory requirements” contained in ss 64, 68, 70, 75, 79, 80, 81, 88 and 150 of the Payment Act. [34].

Monadelphous’ payment schedule identified a deduction of $5,326,565, which it called the “assessed amount for Acciona’s contribution”. [47]. In an attachment to the payment schedule, it said this amount was for “CP Costs, as defined in or described in the Collaboration Deed”. [54]. Acciona contended that it could not be liable for CP Costs under the Collaboration Deed as they were not raised in accordance with the contractual procedure. [57].

In its adjudication response, Monadelphous argued that Acciona had breached the Collaboration Deed including an implied obligation of co-operation. [58]. Two points followed. First, Acciona could therefore not rely on the lack of approval given by the Steering Committee, which could not convene without its attendance; and alternatively, Monadelphous was entitled to damages for Acciona’s breaches. [58]. Significantly, neither of these points was asserted in the payment schedule. [60]. Accordingly, Bond J found that they were “new” reasons not included in the payment schedule. [62]. Further, the adjudicator used them – although it is not clear which specific reason was relied upon – to identify the set off amount and justify his decision. [65]. Accordingly, his Honour found that a jurisdictional error had been made out.

Turning to the remaining grounds, Bond J agreed that the adjudicator’s reasons were deficient because he did not specify which of the two alternative arguments he accepted. [72]. Accordingly, his Honour was not satisfied that the adjudicator had intellectually engaged with the issues and submissions before him. [72]. Accordingly, that ground of jurisdictional error had also been established. [73]. On the final ground, Bond J noted that there was a “logical incongruity” in the adjudicator’s approach to the contract. [77]. However, his Honour did not go so far as to say that this meant the adjudicator “was not seeking to apply the contract”. [77].

Finally, Bond J addressed the question of what order should be made. Acciona sought a declaration that the “Adjudicated Amount in the Adjudicator’s decision is AU$462,853.17 and €308,675.19”. [78]. Monadelphous submitted that no such relief was authorised under the Payment Act. [79]. Bond J disagreed, finding that such a power was necessary for the exercise of the power in s 101(4) Payment Act, which allows the Court to “allow the part of the decision not affected by the error to remain binding on the parties to the proceeding”. [81]–[82], [84].

As applied here, the adjudicator had decided on the merits of Acciona’s claims, but had identified that they should be set off in an amount asserted by Monadelphous. [88]. As the jurisdictional error only went to the adjudicator’s consideration of the set off issue, his positive findings on Acciona’s claims ought to remain in place. [90]. Accordingly, his Honour made the orders sought by Acciona. [92].

M Paterson