Lendlease Building Pty Ltd v BCS Airport Systems Pty Ltd & Ors

Lendlease sub-contracted with BCS Airport Systems in relation to construction work at Gold Coast Airport. As an airport, it is considered a “Commonwealth Place” to which Commonwealth laws apply. The Commonwealth Places (Application of Laws) Act 1970 (Cth) has the effect of applying state laws to Commonwealth places. Gold Coast Airport straddles the border between Queensland and New South Wales, meaning different parts of the airport are subject to different state laws. It also meant that some of the construction work under the contract concerned structures which were wholly or partly in New South Wales. A payment claim for costs arising out of delays was issued by BCS under the contract and pursuant to the Building Industry Fairness (Security of Payment) Act 2017; that claim went to adjudication. The adjudication decision determined that BCS’s claim was valid. Lendlease sought a declaration that the adjudication decision was void on three alternative grounds: a) that the adjudicator lacked jurisdiction because the claim related to work which occurred in New South Wales; b) that the adjudicator had failed to consider Lendlease’s submissions and thereby failed to provide natural justice; and c) that the adjudicator had impermissibly exercised judicial power. Sullivan J rejected all of Lendlease’s arguments and upheld the validity of the adjudication decision.

Sullivan J

30 July 2024

Lendlease Building Pty Ltd (“Lendlease”) and BCS Airport Systems Pty Ltd (“BCS”) sub-contracted for the construction of baggage handling works at Gold Coast Airport on 3 July 2019 (for ease of reading, this will be referred to henceforth in terms of “contract”, “contracting”, “contracted”, etc. rather than “sub-contract”). [13]. Gold Coast Airport straddles the Queensland and New South Wales (“NSW”) border. [4]. Importantly, the Gold Coast Airport is a “Commonwealth Place” and is therefore regulated under the Commonwealth Places (Application of Laws) Act 1970 (Cth) (“CPAL Act”). [5]. Section 4 of the CPAL Act applies the laws of the relevant state notwithstanding that a place is a Commonwealth Place, except to the extent that such an application would: impose a tax, be beyond the power of the Commonwealth Parliament in relation to that Commonwealth Place, or have the effect of conferring judicial power. [187]. Therefore, subject to those caveats listed immediately above, the laws applicable to the Gold Coast Airport will be either the laws of Queensland or New South Wales depending on where one is standing. It was uncontentious in the proceeding that part of the construction works under the contract were to be performed in the New South Wales areas of the airport. [16].

The contract allowed for claims by BCS against reasonable costs incurred as a result of delays. [18]. BCS made a claim. [35]. The greater part of that claim was related to labour costs (the costs of paying individuals including a Project Manager, Mechanical Fitter, Electrician etc. for their time). Importantly, the costs incurred because of delays were related to an inability to access certain areas of the airport. [45]. These areas were variously:

(a)wholly in Queensland;

(b)partly in Queensland and partly in New South Wales; and

(c)wholly in New South Wales.

The claim proceeded to adjudication. [41]. Lendlease argued that s 61(4) Building Industry Fairness (Security of Payment) Act 2017 (“BIF Act”) precluded the adjudicator’s jurisdiction. [49]. Section 61(4) of the BIF Act provides that the Act’s sections related to progress payments:

“… [do] not apply to a construction contract to the extent it deals with construction work carried out outside Queensland or related goods and services supplied for construction work carried out outside Queensland.”

Lendlease also argued that adjudicators under the BIF Act exercise judicial power, and that the prohibition on states granting judicial power in relation to Commonwealth Places under s 4 of the CPAL Act meant that the adjudicator lacked jurisdiction. [58].

The adjudicator ultimately decided that they had jurisdiction under the BIF Act by way of the CPAL Act, and determined that BCS’s payment claim was valid. Lendlease applied to the Supreme Court for a declaration that the adjudication decision was void. [1]. The three key issues for determination were:

(a)the proper construction of section 61(4) BIF Act and its application to the facts before the Court;

(b)whether the adjudicator had failed to properly consider Lendlease’s submissions in accordance with natural justice requirements; and,

(c)whether the adjudicator was impermissibly exercising “judicial power” within the meaning of s 4 CPAL Act. [5]–[10].

The proper construction of s 61(4) of the BIF Act and its application to the matter

His Honour prefaced his conclusions on this point by noting, with reference to authority, that the purpose of the BIF Act is “to provide a quick and inexpensive interim procedure for builders to be paid for their work”. [103]. His Honour accepted that whether or not construction work was being carried out in Queensland was a jurisdictional fact, and that the BIF Act was excluded from application “to the extent” that construction work was occurring outside of Queensland. [107]–[111]. Whether or not construction work can be said to be carried out inside or outside of Queensland is by reference to the object or objects being constructed – that is, if the work is to build a structure within Queensland, then all preparatory work related to that structure will fall under the BIF Act, even if such preparatory work takes place outside of Queensland. [113]–[115]. The consequence of this conclusion is that the BIF Act cannot apply to a construction contract where the “result” of that contract is wholly outside of Queensland. [116]. The BIF Act will, however, apply to a construction contract where the resulting structure is partly within Queensland, because to construe s 61(4) otherwise would create complexity contrary to the purpose of the BIF Act. [119]–[120].

His Honour determined that it was not a requirement of the BIF Act for BCS to attempt in its payment claim to identify what work pertained to structures in Queensland, New South Wales, or both. [124]–[135]. The question then was whether Lendlease could establish that the labour costs arose out of delays accessing sites situated wholly in New South Wales, such costs being excluded based on his Honour’s conclusions as to the proper construction of s 61(4) of the BIF Act. His Honour concluded that Lendlease had failed to discharge its onus in proving that part of BCS’s claim was for construction work carried out on a structure situated wholly outside of Queensland. [157]–[185].

Procedural fairness and the consideration of Lendlease’s submissions

Lendlease’s argument was that there had been a denial of procedural fairness in part because there was a failure by the adjudicator to consider certain matters made in submissions. [216]. This failure was said to be evidenced by a lack of treatment within the adjudicator’s reasons which Lendlease argued reflected a lack of genuine consideration. [204].

Referring to several authorities but in particular to Ceerose Pty Ltd v A-Civil Aust Pty Ltd (2023) 112 NSWLR 225, itself referring to the High Court in Plaintiff M1/2021 v Minister for Home Affairs (2022) 96 ALJR 497, 509 [26], his Honour summarised four reasons why an adjudicator’s failure to identify a particular claim or response in their reasons will not of itself demonstrate a failure to consider that claim or response:

(a)an adjudicator’s reasons do not have to be comprehensive in every respect and a process of selection is necessary;

(b)the scope of reasons will reflect practical circumstances such as time constraints;

(c)material supplied to an adjudicator may run for hundreds of pages and it is inevitable that more time will be spent on some items within a claim than others and the reasons may reflect that; and,

(d)a claim or response may be lacking in substance and detailed reference to it omitted on that basis. [218]–[225].

Canvassing the reasons of the adjudicator, his Honour concluded that the process which the adjudicator appeared to have followed supported an inference that the adjudicator considered all submissions made by both Lendlease and BCS. [229]–[269].

Judicial Power and the CPAL Act

Lendlease’s final argument was that adjudicators under the BIF Act exercise judicial power. This was said to be derived from the adjudication certificate issued by an adjudicator at the close of proceedings, which can be filed as a judgment for debt. [275]. If an adjudicator’s powers could be properly characterised as judicial, then their exercise would be impermissible in relation to constructions at Gold Coast Airport as a result of s 4(5)(b) CPAL Act. [275]–[276].

His Honour ultimately determined that adjudicators under the BIF Act do not exercise judicial power. [313]–[329]. His Honour identified a distinction between the ability to make a binding determination on narrow issues determined by statute, and the ability to render a determination as final and authoritative. [323]. Referring to Birdon Pty Ltd v Houben Marine Pty Ltd (2011) 197 FCR 25, 61 [154], his Honour stated:

“The scheme bears all the hallmarks of an administrative arrangement for a speedy adjudication which will operate without prejudice to ultimate legal rights and, to the extent necessary, on an interim basis.”

Disposition

Lendlease’s application was dismissed, with the parties to be heard as to appropriate costs orders.

B Wilson of Counsel