Karam Group Pty Ltd as Trustee for Karam (No. 1) Family Trust v HCA Queensland Pty Ltd & Ors

This case was about the proper construction of s 85(1), s 86 and s 88 Building Industry Fairness (Security of Payment) Act 2017 which relate to the time for deciding an adjudication application and set out the requirements for, and matters to be taken into account in, an adjudicator’s decision. The issue in dispute was whether the adjudicator had decided the adjudication application within time. His Honour held that the adjudicator failed to do so and thus the adjudication decision was void.

Williams J

16 December 2022

The applicant had entered a construction contract with the first respondent for the construction of a residential building. The first respondent served a payment claim in the amount of $7,838,688.92 and thereafter the applicant issued a payment schedule in the amount $1,554,407.04. Subsequently the first respondent lodged an adjudication application. The applicant challenged the validity of the adjudicator’s decision which was purportedly made under the Building Industry Fairness (Security of Payment) Act 2017.

The primary basis of the challenge was that the decision had not been made within the prescribed time and was void for jurisdictional error [8]. Briefly ([4]-[5]):

1. Pursuant to s 86 of the Act, and following various extensions, the final date for the adjudicator to decide the application was 25 August 2022;
2. On that date, the adjudicator finalised the decision. However, it was not provided to the parties until 26 August 2022. That was because on 26 August 2022 the adjudicator communicated his unwillingness to “release” the decision to the parties until his fees and outlays were paid. That then occurred on the same day. Subsequently at 4:07 pm on 26 August 2022 the parties received the decision via email.
3. On 30 August 2022 the decision was amended under the “slip rule” in s 89 of the Act and the amended decision was provided to the parties.

The statutory scheme

Section 85 of the Act states as follows:

“85 Time for deciding adjudication application

(1) Subject to section 86, an adjudicator must decide an adjudication application no later than—

(a) for a standard payment claim—10 business days after the response date; or

(b) for a complex payment claim—15 business days after the response date.

Section 86 provides a mechanism for extending time for deciding an adjudication application.

Section 88 of the BIF Act states, in part:

“88 Adjudicator’s decision

(1) An adjudicator is to decide—

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

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

(c) the rate of interest payable on any amount.

…

(5) The adjudicator’s decision must—

(a) be in writing; and

(b) include the reasons for the decision, unless the claimant and the respondent have both asked the adjudicator not to include the reasons in the decision.

(6) The adjudicator must give the registrar—

(a) a copy of the decision; and

(b) notice of all fees and expenses paid, and to be paid, to the adjudicator for the decision.

Maximum penalty—40 penalty units.

(7) The adjudicator must give the registrar the information mentioned in subsection (6) at the same time the adjudicator gives a copy of the decision to the claimant and the respondent.”

Construction of the statutory scheme and application to the dispute

In construing the statute, his Honour noted the following matters:

1. The concept that the adjudicator’s task of “deciding” the adjudication application is the completion of all aspects contained in s 88 within the time prescribed in s 85(1) (as extended by s 86) is in keeping with the Act’s purpose; [48]
2. The desirability of compliance with the prescribed time limits is underpinned by the Act creating offences in instances of non-compliance with key obligations. [49]The desirability of compliance with the prescribed time limits is underpinned by the Act creating offences in instances of non-compliance with key obligations. [49].

He held that the proper construction of s 85(1), s 86 and s 88 is that the adjudicator decides the adjudication application by attending to all aspects specified in s 88 within the time period in s 85(1) (as extended pursuant to s 86), save for where the adjudicator has elected to refuse to communicate their decision where outstanding fees and expenses remain unpaid. [78]. As a result, an adjudicator will not be taken to have decided an application within time where he/she has finalised a written document complying with ss 88(1) and 88(5) before the expiry of the time period (in the current matter midnight on 25 August 2022), but has neglected to give a copy of the adjudicator’s decision to the registrar (s 88(6)) and the parties (s 88(7)) before the expiry of the time period and has not exercised the right to refuse to communicate the decision until payment of their  fees and expenses by giving notice before the expiry of the time period (s 95(7)(d)). [79].

Since the adjudicator did not provide a copy of the decision prior to midnight on 25 August 2022 or for that matter exercise the right under s 95(7)(d), the adjudication decision was void (see Civil Contractors (Aust) Pty Ltd v Galaxy Developments Pty Ltd (2021) 7 QR 34; [2021] QCA 10.  [80], [81].

Did any obligation to repay the money paid pursuant to the void adjudication decision arise?

Amounts of money paid pursuant to an adjudicator’s decision are subject to “practical compulsion”: see John Holland Pty Ltd v Chidambara [2017] WASC 179. Citing BM Alliance Coal Operations Pty Ltd v BGC Contracting Pty Ltd [2015] 1 Qd R 228; [2013] QCA 394, where the court held that when an adjudication decision is void, since no entitlement to payment of the adjudication amount arose, a principal has a right to recover the sum [83], [95], the applicant argued that it was in order that the amount paid pursuant to the purported adjudicator’s decision be repaid. The first respondent disagreed.

His Honour was compelled to follow the decision as it was binding authority. [96]. Noting the similarity between the payment of money pursuant to an adjudicator’s decision subsequently found to be invalid and the payment of money pursuant to a court order later overturned, [115] his Honour held that the first respondent was obliged to repay the money which had been paid by the applicant, with interest. [117], [122].

Disposition

Pursuant to s 10 Civil Proceedings Act 2011 the court ordered that the adjudication decision was void and set aside and it was further ordered that the first respondent pay to the applicant the sum of $1,821,891.26 that being the amount determined as due and payable pursuant to the decision, plus interest in the amount of $35,213.09.

A Jarro