Case note: ABC Glass & Aluminium Pty Ltd v Nik Nominees Pty Ltd and Anor [2019] QSC 171

ABC Glass was the respondent to an adjudication application in which an adjudicator decided it was liable to pay the claimant, Nik Nominees, a progress payment in the amount of $334,023.23.[1] ABC Glass applied to the Supreme Court for a declaration that the decision was void, together with an injunction restraining Nik Nominees from enforcing it, on the basis that there were two jurisdictional errors: (a) breach of natural justice by making a decision on the applicant’s submission there was no construction contract within the meaning of s 3(2)(c) of the Act based on a view of the law for which neither party contended and in respect of which the adjudicator provided no opportunity to the parties to make submissions concerning his view of the law; and (b) failing to discharge his function under the Act by considering material which was not permitted by s 26(2) of the Act, providing a determination without foundation, failing to intellectually engage with the issues, and not deciding his jurisdiction properly under s 25(3) of the Act.

Was the adjudicator wrong in finding there was a construction contract?

An adjudicator must observe the principles of natural justice but only a substantial denial of natural justice may invalidate an adjudicator’s decision.[2] John Holland is authority for the proposition that a substantial breach of the requirements of natural justice will exist where the adjudicator determines a major issue on a ground for which neither party contended, without providing an opportunity to the parties to put submissions on a matter that was significant to the way in which the matter was actually decided.[3]

In determining whether a construction contract is an excluded contract for the purpose of the security of payment regime (under s (3)(2)(c) of the SCA, which is equivalent to 61(2)(c) of the BIF Act), an adjudicator is “not required to consider whether each progress payment sought by the [claimant] [is] linked to the value of the goods supplied at the date in respect of which the claim for the progress payment was made, but whether the consideration for the contract was calculated by reference to the value of the goods supplied”.[4] However, in this case the adjudicator’s decision on jurisdiction did not on its face depend on his views which neither party contended for.[5] In the circumstances, there was no denial of natural justice.[6]

Did the adjudicator consider material he was not permitted to?

To the extent that the security of payment regime prescribes what an adjudicator may and must not consider in deciding an adjudication application,[7] those rules apply “to the consideration of the subject matter of the adjudication itself and not jurisdiction”.[8]

Did the adjudicator provide a determination without foundation?

There is nothing in sections 13 (amount of progress payment) or 14 (valuation of construction work and related goods and services) of the SCA which impose an obligation on an adjudicator in determining a claim for a final payment to analyse each of the interim payments against s 13(b) of the SCA.[9] The equivalent of these sections are sections 71 and 72 of the BIF Act.

Did the adjudicator fail to intellectually engage with the issues?

An adjudicator is required to engage in an “active process of intellectual engagement” in considering the matters referred to in s 26(2) of the SCA.[10]

Footnotes

[1] ABC Glass & Aluminium Pty Ltd v Nik Nominees Pty Ltd and Anor [2019] QSC 171 (“ABC Glass”), [1].

[2] ABC Glass, [16].

[3] ABC Glass, [18].

[4] ABC Glass, [22].

[5] ABC Glass, [24].

[6] ABC Glass, [24].

[7] See SCA s 26(2); See also BIF Act s 88(2)-(3).

[8] ABC Glass, [28] citing Watkins Contracting Pty Ltd v Hyatt Ground Engineering Pty Ltd [2018] QSC 65, [76].

[9] ABC Glass, [32].

[10] See the authorities cited in ABC Glass, [33].