Two recent decisions in QLD Supreme Court in Iris Broadbeach Business Pty Ltd v Descon Group Australia Pty Ltd & Anor and NSW Court of Appeal in A-Civil Aust Pty Ltd v Ceerose Pty Ltd concern appeals of Adjudicator’s decisions (in NSW also an appeal from the primary judge) in respect of payment claims issued after termination of the respective contracts, whereby the Adjudicator in each instance had awarded payment of retention money to the claimant contractor.
Central to the background in each case was clause 5.2 (recourse to security) of the respective contracts with substantially similar wording.
The Adjudication decision the subject of the QLD case was decided by the Adjudicator relying on clause 5.2, which clause was not addressed by either party in Adjudication submissions.
By contrast, the Adjudication decision the subject of the NSW case was decided by the Adjudicator reaching a conclusion that clause 5 of the contract ceased to operate after termination and without considering respondent’s submissions on the operation of clauses 5.2 and 5.4 in the payment schedule.
The QLD Court held the Adjudicator fell into jurisdictional error on a range of issues, including by the failure to afford procedural fairness to the parties in respect of the decision to award payment of $1.8m of retention money to the claimant. The Court held the Adjudicator had failed to put the parties on notice of her intention to decide the retention claim by reference to clause 5.2 and failed to invite submissions from the parties on the issue, which was a material issue amounting to a denial of natural justice.
The respondent had argued in the payment schedule that it was entitled under clause 5.7(a) of the contract to retain the retention money, which submission the Court found the Adjudicator had failed to consider. Further finding, had the Adjudicator invited submissions on clause 5.2 and those submissions been made, the Adjudicator may have been persuaded to change her mind (John Holland Pty Ltd v TAC Pacific Pty Ltd).
The NSW Court held the Adjudicator fell into jurisdictional error by the failure to afford procedural fairness to the parties in respect of the decision to award payment of approx. $115K of retention money to the claimant. The Adjudicator decided the matter (by unexpressed conclusion) that clause 5 ceased to operate entirely after termination, a proposition neither party contended and without considering the respondent’s reliance on clause 5.2 in the payment schedule, which was a complete answer to the issue.
The Court held the Adjudicator reached the conclusion without putting parties on notice and without inviting submissions on the operation of clause 5 upon termination, which was a material issue amounting to a denial of natural justice. Further finding, had the Adjudicator invited submissions and those submissions been made, the Adjudicator’s decision could have been different.
Parties are encouraged to remind Adjudicators in Adjudication submissions of their obligation to consider all submissions properly made and the obligation to invite submissions on issues the Adjudicator considers are material where the parties have not yet made submissions on that issue.
