Civil Contractors (Aust) Pty Ltd v Galaxy Developments Pty Ltd & Ors; Jones v Galaxy Developments Pty Ltd & Ors

In this interesting appeal, the Court was asked to assess the effect of a construction adjudicator’s decision which was delivered out of time. There were three key aspects of the decision. First, whether or not the decision was void. Secondly, whether or not the adjudicator could further extend time where an extension of time had already been granted by the parties. Thirdly, whether or not the adjudicator was entitled to his fees after making a decision out of time. Ultimately, the Court found the decision was void and the adjudicator was not entitled to his fees.

Fraser and McMurdo JJA and Jackson J

2 February 2021

The appellant, CCA, was engaged by Galaxy to perform civil works associated with the building of a road in Coomera. [7]. After a dispute relating to a claim for a progress payment by CCA, it filed an adjudication application on 13 August 2019. [8]–[9]. The adjudicator requested three extensions of time, which were agreed to by the parties. [10]. Ultimately, the adjudication decision was due on 24 October 2019. [10]. However, the adjudicator’s decision was not provided to the parties until 29 October 2019. [12]. In the decision, the adjudicator held that CCA should recover $1.4 million from Galaxy. [2].

Galaxy sought review of the adjudicator’s decision before Dalton J. [2]. Her Honour found that the adjudication decision was void as it was made outside the statutory time limit, and that the adjudicator was not entitled to his fees for the adjudication decision. [2]–[3]. Both CCA and the adjudicator appealed. [2]–[3].

On appeal, there were three notable issues:

1. Whether an adjudication decision made outside the statutory time limits is void;
2. Whether s 86(2)(b) Building Industry Fairness (Security of Payment) Act 2017 could be used to extend time where the parties had invoked s 86(2)(a) to already agree an extension; and
3. Whether the adjudicator was entitled to his fees for the decision.

Effect of exceeding the time limit

On appeal, McMurdo JA, with whom Fraser JA agreed, first dealt with the question of whether or not the adjudicator’s decision was void as it was made outside the relevant time limits. [1], [6]. In his Honour’s view, ss 85, 86 and 94 of the Building Industry Fairness (Security of Payment) Act 2017 (“the Act”) “provide a coherent scheme by which time limits, on an adjudicator’s power to decide an application, are defined”. [28].

In this scheme, s 85(1) provides that an adjudicator must make a decision within a certain number of days of after the response date. [29]. This requirement is “expressly subject to s 86”. [30]. Section 86(2)(a) provides the application may be decided within a longer period where the parties have agreed that the adjudicator should have additional time to decide the application. [30]. Alternatively, under s 86(2)(b), the adjudicator may have an extension of time of five business days if the application “relates to a complex payment claim and, in the opinion of the adjudicator, the parties have failed to reach an agreement” to extend time. [31]. His Honour considered that, outside these two circumstances, the adjudicator may not decide an adjudication application beyond the prescribed time. [32].

Finally, a claimant may make a new application under s 94(2) where the adjudicator “does not decide the application within the period required under section 85”. [23]. In McMurdo JA’s view, this must be read as the time period required under s 85 subject to any extension under s 86. [33]. Further, any action taken under s 94(2) “does not displace the power of the original adjudicator”; rather, it takes effect when the original adjudicator’s power is spent. [36].

McMurdo JA held that, although this scheme does not expressly provide that decisions made outside the time limit will lack legal effect, the presence of a mechanism for the parties to agree to an extension of time was a “strong indication” that where there is no such agreement, the adjudicator would not have additional time to make the application. [38]. Ultimately, his Honour found that the Act requires that a decision be made within time, and that a decision made out of time would have no effect. [47].

Writing separately, Jackson J agreed with McMurdo JA on this point. [83]. His Honour did, however, helpfully note that the time limit imposed by ss 85 and 86 “constitutes a jurisdictional fact, the absence of which means a purported decision made later is subject to jurisdictional error and is void”. [85]. Further, if an adjudicator could make a decision out of time, that would lead to two perverse outcomes. [87]. First, an adjudicator could elect to make a fresh referral under s 94 after receiving the original adjudicator’s decision. [87]. Secondly, there would be no time limit which would apply to the deciding of the adjudication decision. [88]. Ultimately, his Honour agreed that the adjudicator’s decision was void and without effect. [91]–[92].

Effect of s 86

The next question dealt with by McMurdo JA was whether or not the adjudicator had the power to decide under s 86(2)(b) that the application related to a complex payment claim and so unilaterally grant himself a five-day extension in circumstances where the parties had already reached an agreement under s 86(2)(a). [48]. His Honour found that the two options contained in s 86(2) are alternatives and that “the circumstances which would engage (b) could not exist where (a) has been engaged”. [49]. This was because one of the conditions precedent to the adjudicator exercising the power under s 86(2)(b) is a failure by the parties to agree time. [49]. Where they have made such an agreement, this condition precedent cannot exist. [49].

Jackson J did not write separately on this point, but simply agreed with McMurdo JA. [82].

Was the adjudicator entitled to his fees?

Dalton J at first instance held that the adjudicator was not entitled to be paid his fees or expenses for or in relation to the adjudication. [63]. Her Honour grounded this conclusion in the dual findings that the adjudicator had not acted “in good faith” as he was aware of the time limit, and had made a misrepresentation by asserting to the parties that he had made a decision within time, despite that not being the case. [71]–[72].

McMurdo JA held that the findings of bad faith and misrepresentation ought not to have been made without providing the adjudicator an opportunity to be heard. [73]. In his Honour’s view, there was insufficient evidence to ground a finding that the adjudicator knew that the decision delivered out of time would be void, or that he had attempted to mislead the parties that he had made a decision within time. [74]. Further, such findings had not been sought. [74]–[75].

Nevertheless, McMurdo JA found that the adjudicator was not entitled to his fees as, at law, he failed to make a decision on the application. [76]. Although the adjudicator may have thought his decision to be effective, on the correct interpretation of s 95(6) of the Act, absent an agreement to extend time, the decision was void and so the adjudicator was not entitled to be paid any fees. [76].

Jackson J disagreed with McMurdo JA’s finding that no finding should be made about the alleged false representation without hearing from the adjudicator. [96]. This is because such a finding was raised in Galaxy’s written submissions to Dalton J. [96]–[97]. However, his Honour agreed that Galaxy did not seek a finding of an absence of good faith. [98]. Jackson J concluded that because the absence of good faith is a serious adverse finding, notice should have been given to the adjudicator before it was made. [99]. In any event, his Honour agreed with McMurdo JA’s conclusion that this case was covered by s 95(6) and so agreed that the adjudicator was not entitled to his fees. [100].

In the event, the appeals were dismissed. [80]–[81].

M Paterson