The NSW Court of Appeal in the recent decision of Demex Pty Ltd v McNab Building Services Pty Ltd considered an appeal by the subcontractor Demex seeking to overturn a decision at first instance that an SOP Act adjudication decision in its favour of approx. $1.3m was void. The appeal succeeded and the Adjudicator's decision upheld.
The first instance decision held there was a denial of procedural fairness to the contractor by the Adjudicator’s failure to invite submissions on the calculation of the volume of material claimed in cubic metres in the subcontractor’s payment claim converted from the weight of the material in tonnes.
The key issue on appeal was whether the Adjudicator’s failure to invite submissions on the conversion factors applied was a material denial of procedural fairness and whether there was a real possibility of a different outcome had those submissions been invited.
The Court of Appeal noted the conversion factors applied (although not explained by the subcontractor at Adjudication) could be easily calculated on the information provided with the payment claim and was therefore implicit.
The Court of Appeal held the Adjudicator had correctly determined that the subcontractor had provided sufficient information and methodology as to calculation of the material volumes claimed and the contractor was not denied an opportunity to contest the issue. Further, the contractor had not offered an alternative conversion factors, or explained why the conversion factors applied were inappropriate.
The Court of Appeal also reasoned the Adjudicator went further than necessary by satisfying himself that that the conversation factors applied were reasonable by industry standards. Doing so meant there was no possibility of a different outcome and no material denial of procedural fairness.
As an aside, it was noted the contractor did not directly dispute the conversion factors applied in its payment schedule. Payment schedules should expressly include all reasons for withholding payment and identify all aspects of a claim calculation which are disputed. A failure to do so may invite the argument from a claimant that the issue is not validly raised in the Adjudciation Response.
