Reviewing a BIFA Adjudication Decision – #1 Complete Guide

Reviewing a BIFA adjudication decision is an option for a party who believes that there has been jurisdictional error, including a lack of procedural fairness in the adjudication decision.

The Supreme Court of Queensland has a supervisory jurisdiction to review an adjudicator’s decision under the Queensland Building Industry Fairness (Security of Payments) Act 2017 (Qld) (“BIFA”).

The only way that a BIFA adjudication decision can be reviewed is on grounds of jurisdictional error.

There are many ways that jurisdictional error can arise, and some common examples are where the adjudicator:

1. fails to do something they are required to do – such as consider a document required by legislation to be considered, or give a party an opportunity to express their position;
2. does something they are not allowed to do – such as consider a document they are prohibited by legislation from considering or deny a party an opportunity to express their position; or
3. proceeds as if they have jurisdiction, but in fact the jurisdictional “threshold” requirements have not been met.

It is impossible to identify all the potential jurisdictional errors, but this article sets out some of the issues which commonly arise.

This article on reviewing a BIFA adjudication decision is co-written by our building and constructions lawyers and Merissa Martinez of Counsel, building and construction barrister from Paloma Chambers in Townsville.

It is very important that you seek advice and assistance with prosecuting or defending reviewing a BIFA adjudication decision, contact our construction lawyers today.  We work closely with specialist counsel to obtain the best outcomes for our clients.

The Purpose of BIFA

The main purpose of BIFA is to help people who work in the building and construction industry to get paid.  Cash is the life blood of the industry, and therefore it must be kept flowing.

BIFA provides a procedure for sending invoices (payment claims) with strict time limits and content requirements; and responding to payment claims (payment schedules) within strict time limits and content requirements to enable the payee to better understand how much, and when, they will get paid.

BIFA also has a mechanism for the adjudication of disputed payment claims and the recovery of money claimed by the payee. This is a quick and cost-effective resolution to building and construction payment disputes.

Whilst it does not have a costs jurisdiction per se, the adjudicator will decide, as part of their decision, who pays the adjudicator’s fees.

The fast-track resolution means that not every mistake of fact or law will amount to jurisdictional error.  Put simply, there are certain errors which are within an adjudicator’s jurisdiction to make.

Errors which do not go to jurisdiction are “precisely the kind of departure from contractual and legal precision which the legislature has accepted as part of the ‘trade-off’ for speed and efficiency”: Laing O’Rourke Australia Construction Pty Ltd v Samsung C&T Corporation [2016] WASCA 130, per Martin CJ at [107].

BIFA does a lot of other things in relation to payment, but the scope of this article is limited to identifying the line between errors within jurisdiction to make, and errors which amount to jurisdictional error.

This line is sometimes difficult to discern.  Set out below are some examples of both jurisdictional errors and non-jurisdictional errors.

Jurisdiction to Adjudicate the Application

Section 84(2)(a)(i) of BIFA requires the adjudicator to decide whether they have jurisdiction to adjudicate the adjudication application.

Even if the respondent does not make any jurisdictional challenges about the applicant’s entitlement to make the payment claim and adjudication application, the adjudicator must nonetheless be satisfied that BIFA applies in order to proceed further.

An adjudicator has jurisdiction if:

1. there is a “construction contract” to which BIFA applies;
2. there is an entitlement to make a payment claim with a “reference date”;
3. a valid “payment claim” has been properly served on the payer at the right time;
4. an adjudication application has been made to the registrar in the approved form within the correct time period;
5. the application had been referred to, and accepted by, an eligible adjudicator within the correct time period; and
6. the adjudicator determines the claim strictly in accordance with their powers.

Each of these jurisdictional issues that can be used when reviewing a BIFA adjudication decision are expanded on briefly below.

Existence of a Construction Contract

A construction contract (whether written or oral, or partly written and partly oral) is defined as:

a contract, agreement or other arrangement under which 1 party undertakes to carry out construction work for, or to supply related goods and services to, another party.

The standard questions of formation of contract arise, but in this industry, there can sometimes be questions of whether the contract is an excluded contract or does not in fact cover “construction work” as that expression is defined.

Section 65 of BIFA defines construction work.  It is an extensive list which includes (but is not limited to) the following:

the construction, alteration, repair, restoration, maintenance, extension, demolition or dismantling of buildings or structures, whether permanent or not, forming, or to form, part of land;

the construction, alteration, repair, restoration, maintenance, extension, demolition or dismantling of any works forming, or to form, part of land, including walls, roadworks, powerlines, telecommunication apparatus, aircraft runways, docks and harbours, railways, inland waterways, pipelines, reservoirs, water mains, wells, sewers, industrial plant and installations for land drainage or coast protection;

the installation in any building, structure or works of fittings forming, or to form, part of land, including heating, lighting, air-conditioning, ventilation, power supply, drainage, sanitation, water supply, fire protection, security and communications systems.

Section 65(3) expressly excludes certain work:

However, “construction work” does not include any of the following work—

(a) the drilling for, or extraction of, oil or natural gas;

(b) the extraction, whether by underground or surface working, of minerals, including tunnelling or boring, or constructing underground works, for that purpose.

There are also relevant provisions in the Regulations.  As BIFA only applies to construction contracts, the statutory right to payment and adjudication are predicated upon the relevant works being caught by the statutory definition. So this is the first consideration when reviewing a BIFA adjudication decision.

Entitlement to Make a Payment Claim

In relation to the entitlement to make a payment claim, section 70 of BIFA says:

From each reference date under a construction contract, a person is entitled to a progress payment if the person has carried out construction work, or supplied related goods and services, under the contract.

Whether a reference date arises is a matter to be determined under the contract and within the legislative framework of BIFA.

Section 67 of BIFA gives us a definition of “reference date”.  It says:

(1) A “reference date” , for a construction contract, means—

(a) a date stated in, or worked out under, the contract as the date on which a claim for a progress payment may be made for construction work carried out, or related goods and services supplied, under the contract; or

(b) if the contract does not provide for the matter—

(i) the last day of the month in which the construction work was first carried out, or the related goods and services were first supplied, under the contract; and

(ii) the last day of each later month.

(2) However, if a construction contract is terminated and the contract does not provide for, or purports to prevent, a reference date surviving beyond termination, the final reference date for the contract is the date the contract is terminated.

Without a reference date, there is no statutory right to payment.  Therefore, careful analysis of the statutory regime, the contractual regime and the factual matrix is important to ascertain if a reference date has arisen.

If not, then this can be another reason for reviewing a BIFA adjudication decision.

Service of a Payment Claim

In relation to service, section 102 of BIFA says that a notice or other document under this chapter can be served pursuant to a term or terms in the construction contract; or pursuant to section 39 of the Acts Interpretation Act 1954 (QLD) which says:

If an Act requires or permits a document to be served on a person, the document may be served—

On an individual—by delivering it to the person personally; or by leaving it at, or by sending it by post, telex, facsimile or similar facility to, the address of the place of residence or business of the person last known to the person serving the document; or

On a body corporate—by leaving it at, or sending it by post, telex, facsimile or similar facility to, the head office, a registered office or a principal office of the body corporate.

There are also temporal requirements in relation to serving payment claims.

Section 75(2) of BIFA states that a payment claim must be given in the period worked out under the construction contract or 6 months after the construction work to was last carried out:

(2) Unless the payment claim relates to a final payment, the claim must be given before the end of whichever of the following periods is the longest—

(a) the period, if any, worked out under the construction contract;

(b) the period of 6 months after the construction work to which the claim relates was last carried out or the related goods and services to which the claim relates were last supplied.

If the payment claim is a final payment claim, then section 75(3) of BIFA states that the claim must be given before the end of whichever of the following periods is the longest:

(a) the period, if any, worked out under the relevant construction contract;

(b) 28 days after the end of the last defects liability period for the construction contract;

(c) 6 months after the completion of all construction work to be carried out under the construction contract;

(d) 6 months after the complete supply of related goods and services to be supplied under the construction contract.

For more on payment claims read our article on making BIFA payment claims.

It is important to ascertain as a matter of fact when the last construction work was carried out, or when the goods and services were last supplied – this will permit the clock to start ticking.  If not, then this may allow the review of a BIFA adjudication decision.

Adjudication Application made to Registrar in the Approved Form

The Registrar is the Queensland Building and construction Commission (“QBCC”).

The approved form for the QBCC adjudication application in Queensland is QBCC Form S79 Adjudication Application.

The application is made if it is delivered in person to a QBCC regional office or posting it to the QBCC.  There are strict time limits.

Section 79(2)(b) of BIFA says that an application must be made within:

For an application relating to a failure to give a payment schedule and pay the full amount stated in the payment claim—30 business days after the later of the following days:

* the day of the due date for the progress payment to which the claim relates;

* the last day the respondent could have given the payment schedule under section 76; or

For an application relating to a failure to pay the full amount stated in the payment schedule – 20 business days after the due date for the progress payment to which the claim relates; or

For an application relating to the amount stated in the payment schedule being less than the amount stated in the payment claim – 30 business days after the claimant receives the payment schedule.

So, a claimant has either 20 or 30 business days to make an application for adjudication depending on the particular circumstances of your dispute.  These are guillotine deadlines with which applicants must comply.

Adjudication Application Referred and Accepted by an Eligible Adjudicator

A list of adjudicators is kept by the QBCC – https://www.qbcc.qld.gov.au/about-us/adjudication-registry

The adjudicator must be a registered and licensed adjudicator.

For more on making adjudication applications read our article – How to Make an Adjudication Application.

Valid Determination by the Adjudicator

Section 88 of BIFA outlines how the adjudicator must decide the adjudication application.  Section 88 of BIFA includes directions in relation to:

1. What the adjudicator must decide;
2. What the adjudicator must consider;
3. What the adjudicator must not consider; and
4. The form and procedure of the adjudication decision.

The relevant provisions of BIFA for each of these are identified below.

What the Adjudicator must Decide

Section 88(1) of BIFA states:

(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.

This section operates in two ways: first, it identifies what must be determined, and a decision which does not fulfil the requirements is not a valid decision.

Second, it identifies the extent of the adjudicator’s jurisdiction, so that if the adjudicator steps outside of these limits, the decision will be ultra vires.

What the Adjudicator must Consider

Section 88(2) of BIFA states:

(2) In deciding an adjudication application, the adjudicator is to consider the following matters only—

(a) the provisions of this chapter and, to the extent they are relevant, the provisions of the Queensland Building and Construction Commission Act 1991 , part 4A ;

(b) the provisions of the relevant construction contract;

(c) the payment claim to which the application relates, together with all submissions, including relevant documents, that have been properly made by the claimant in support of the claim;

(d) the payment schedule, if any, to which the application relates, together with all submissions, including relevant documents, that have been properly made by the respondent in support of the schedule;

(e) the results of any inspection carried out by the adjudicator of any matter to which the claim relates.

Therefore if an adjudicator considers something outside of this in reaching their decision, this may be grounds for challenging the enforceability.

What the Adjudicator must not Consider

Section 88(3) of BIFA states:

(3) However, the adjudicator must not consider any of the following—

(a) an adjudication response, to which the adjudication application relates, that was not given to the adjudicator within the time required under section 83 ;

(b) a reason included in an adjudication response to the adjudication application, if the reason is prohibited from being included in the response under section 82.

Section 88(4) of BIFA states:

(4) Also, the adjudicator may disregard an adjudication application or adjudication response to the extent that the submissions or accompanying documents contravene any limitations relating to submissions or accompanying documents prescribed by regulation.

The importance of these decisions by an adjudicator about what they are entitled to consider and not entitled to consider are discussed in greater detail below.

The Form and Procedure of the Adjudication Decision

Section 88(5) of BIFA states:

(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.

Section 88(6) of BIFA states:

(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.

Section 88(6) of BIFA states:

(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.

Whilst the technical compliance with the decision being in writing and submitted appropriately is obvious, this section does raise issues about the adequacy of the reasons provided, as discussed further below.

Jurisdiction of the Supreme Court

An adjudicator’s decision under BIFA is an administrative decision over which the Supreme Court of Queensland has a supervisory jurisdiction to review a BIFA adjudication decision.

In Brodyn Pty Ltd t/as Time Cost and Quality v Davenport & Anor [2004] NSWCA 394, Hodgson JA with Mason P and Giles JA agreeing, looked at the line of authorities and said at [44]:

It was decided in Musico v. Davenport [2003] NSWSC 977 that relief in the nature of certiorari is available against an adjudicator’s determination, albeit not on the ground of non-jurisdictional error of law on the face of the record. This has been followed in a number of other first instance decisions, including Abacus Funds Management v. Davenport [2003] NSWSC 1027, Brodyn Pty. Limited v. Davenport [2003] NSWSC 1019, Multiplex Constructions Pty. Limited v. Luikens [2003] NSWSC 1140 and Transgrid v. Walter Construction Group [2004] NSWSC 21.

The Court has inherent jurisdiction to grant declaratory and injunctive relief in relation to adjudicators’ determinations under BIFA.

Adjudications which do not comply with the essential statutory requirements are void and the Court may, when non-compliance has been demonstrated, make declarations and/or grant injunctions to prevent a party acting on a void adjudication.

What is Jurisdictional Error?

The main reason for reviewing a BIFA adjudication decision is because of jurisdictional error.

The High Court of Australia in Kirk v Industrial Relations Commission [2010] HCA 1 confirmed that jurisdictional error may arise due to “the absence of a jurisdictional fact”.  The Court said at [72]:

The Court amplified what was said about an inferior court acting beyond jurisdiction by entertaining a matter outside the limits of the inferior court’s functions or powers by giving three examples:

(a) the absence of a jurisdictional fact;

(b) disregard of a matter that the relevant statute requires be taken to account as a condition of jurisdiction (or the converse case of taking account of a matter required to be ignored); and

(c) misconstruction of the relevant statute thereby misconceiving the nature of the function which the inferior court is performing or the extent of its powers in the circumstances of the particular case.

In Chase Oyster Bar v Hamo Industries [2010] NSWCA 190, McDougall J referred to Kirk v Industrial Court of New South Wales and said at [158]:

The majority pointed out at 573[71] that “[i]t is neither necessary, nor possible, to attempt to mark the metes and bounds of jurisdictional error”. However, by reference to the decision in Craig v South Australia [1995] HCA 58; (1995) 184 CLR 163, 177–178, the majority identified three categories of jurisdictional error (Kirk at 573–574[72]):

(1)        the mistaken denial or assertion of jurisdiction, or (in a case where jurisdiction does exist), misapprehension or disregard of the nature of or limits on functions and powers;

(2)        entertaining a matter or making a decision of a kind that lies, wholly or partly, outside the limits on functions and powers, as identified from the relevant statutory context;

(3)        proceeding in the absence of a jurisdictional fact; disregarding something that the relevant statute requires to be considered as a condition of jurisdiction or considering something required to be ignored; and misconstruction of the statute leading to misconception of functions. (Of this last example, it was said in Craig at 178 that “the line between jurisdictional error and mere error in the exercise of jurisdiction may be particularly difficult to discern.”)

In accordance with the purpose of BIFA, even if an adjudicator has made an obvious mistake (including error of law or fact), as long as the adjudicator had the power to make the mistake, the courts will not likely disturb the adjudicated decision.

In Brodyn Pty Ltd (t/as Time Cost & Quality) v Davenport (2004) 61 NSWLR 421; and Transgrid v Siemens Ltd (2004) 61 NSWLR 521, Hodgson JA with Mason P and Giles JA agreeing, said that judicial review will be allowed in the following circumstances:

1. The adjudicator failed to comply with the requirements of [BIFA] for valid determination;
2. The adjudicator denied natural justice to one (or both) of the parties; and/or
3. The adjudication was fraudulent (with complicity of the adjudicator).

Examples of jurisdictional error can arise across an indefinable gambit, including where the adjudication decision:

1. was given by fraud or in bad faith;
2. was made where there is a reasonable apprehension of bias
3. was made without complying with the statutorily imposed short time frames;
4. was one which the adjudicator had no power to make due to the lack of a jurisdictional fact;
5. was reached by the adjudicator determining a question which was not submitted for adjudication;
6. did not deal with the question submitted for adjudication; and/or
7. was reached by the adjudicator failing, neglecting, or refusing to take into account something which the Act required.

It is very important that you seek advice and assistance with prosecuting or defending reviewing a BIFA adjudication decision, contact our construction lawyers today.  We work closely with specialist counsel to obtain the best outcomes for our clients.

What do the Cases Say about Jurisdictional Error?

To assist the reader in understanding if jurisdictional error applies to their matter, and therefore capable of judicial review, several common examples of jurisdictional error are discussed below.

The Threshold Issues must be Met

The first thing to consider is whether all of the threshold issues have been adequately or correctly considered in the adjudication decision.  Set out above are some of the threshold issues, which can commonly include:

1. Was/is there a relevant construction contract to which the Act applies;
2. Was/is the builder licensed to do the works the subject of the Contract;
3. Was the payment claim properly made by the applicant, and within the requisite time;
4. Was a payment schedule properly made by the respondent, and within the requisite time;
5. Was the adjudication application properly made by the applicant, and within the requisite time; and
6. Was the adjudication response properly made by the respondent, and within the requisite time.

If these things have not been done correctly, then the adjudicator may not have grounds to make the adjudication application.

The adjudicator must fulfil their statutory function.

The Adjudicator Must Fulfil their Statutory Function

As above, section 88 of BIFA states what the statutory functions of the adjudicator are.  The statutory functions are the adjudicator are:

1. To decide the amount of the progress payment, if any, to be paid by the respondent to the claimant.
2. To decide the date on which any amount became or becomes payable.
3. To decide the rate of interest payable on any amount.
4. To consider the provisions of this chapter and, to the extent they are relevant, the provisions of the Queensland Building and Construction Commission Act 1991, part 4A.
5. To consider the provisions of the relevant construction contract.
6. To consider the payment claim to which the application relates, together with all submissions, including relevant documents, that have been properly made by the claimant.
7. To consider the payment schedule, if any, to which the application relates, together with all submissions, including relevant documents, that have been properly made by the respondent.
8. To consider the results of any inspection carried out by the adjudicator of any matter to which the claim relates.
9. To not consider an adjudication response that was not given to the adjudicator within the time required under section 83.
10. To not consider a reason included in an adjudication response to the adjudication application, if the reason is prohibited from being included in the response under section 82.
11. To disregard an adjudication application or adjudication response to the extent that the submissions or accompanying documents contravene any limitations relating to submissions or accompanying documents prescribed by regulation.
12. To provide the adjudication decision in writing.
13. To include the reasons for the adjudication decision.
14. To give the registrar a copy of the decision at the same time the adjudicator gives a copy of the decision to the claimant and the respondent.
15. To give the registrar notice of all fees and expenses paid, and to be paid, to the adjudicator for the decision at the same time the adjudicator gives a copy of the decision to the claimant and the respondent.

New Reasons in Adjudication Response

Section 88(3)(b) of the BIFA says:

(3) However, the adjudicator must not consider any of the following –

… (b) a reason included in an adjudication response to the adjudication application if the reason is prohibited from being included in the response under section 82.

Section 82(4) of the BIFA says:

However, the adjudication response must not include any reasons (new reasons) for withholding payment that were not included in the payment schedule when given to the claimant.

There are two types of decisions which can arise in relation to “new reasons”.  The first is where an adjudicator erroneously makes a decision to consider reasons which were in fact “new reasons”.  The second is where an adjudicator makes a decision that reasons are “new reasons” and refuses to consider them.  The former is reviewable, the latter is not.

In Acciona Agua Australia Pty Ltd v Monadelphous Engineering Pty Ltd [2020] QSC 133 (Acciona) the Court considered whether the respondent’s reasons were “new reasons” not raised in the payment schedule and whether the adjudicator, in improperly considering these reasons, fell into jurisdictional error.

His Honour Justice Bond concluded that the adjudicator’s acceptance of the “new reasons” in the adjudication response treated the distinction between a reason in the payment schedule and a “new reason” in an adjudication response “in such a way as would undermine the policy underlying the introduction of the new provisions in ss 82 and 88”, thereby denying the claimant the opportunity to engage with those submissions in its adjudication application.

There, the adjudicator’s decision was attended by jurisdictional error because he had improperly considered a “new reason” and accordingly, the adjudicator failed to comply with the condition in section 88(3)(b).

However, Acciona is fundamentally different (both conceptually and in the line of some of the authorities addressing it) from a decision by an adjudicator who has decided to exclude consideration under section 88(2)(d) of adjudication submissions on the basis they were not “properly made” or prohibited by operation of section 82(4) or section 88(3)(b).

In Acciona, Justice Bond referred to John Holland Pty Ltd v Roads & Traffic Authority of New South Wales [2007] NSWCA 19 at [54],[55] and [71]; Acciona per Justice Bond at [36(c) and (d)]:

“the settled law” that “a mere failure through error to consider … a submission [under s.26(2) in NSW or s.88(2) in Queensland], is not a matter which the legislature intended would invalidate the decision”.

[t]he rejection by the NSW Court of Appeal “as a false premise the proposition that the scope of the payment schedule and the identification of submissions “duly made” … were matters to be objectively determined by the Court”.

John Holland is also cited with approval in Annie Street JV Pty Ltd v MCC Pty Ltd & Sons [2016] QSC 268 per Flanagan J at [72].

In Civmec Electrical and Instrumental Pty Ltd v Southern Cross Electrical Engineering Limited [2019] QSC 300 at [31] – [38], her Honour Justice Mullins found that an adjudicator’s decision to treat parts of the adjudication response as not being properly made (even if in error) is a decision within jurisdiction and not reviewable.

In Wiggins Island Coal Export Terminal Pty Ltd v Monadelphous Engineering Pty Ltd & Ors [2016] QSC 96 at [12], [57] – [84], his Honour Justice Philip McMurdo rejected WICET’s complaints of both jurisdictional error and breach of natural justice when an adjudicator refused to consider a new delay report (the “Evans & Peck Report”) on the basis it contained new EOT periods and went beyond the reasons in the payment schedule.  Justice McMurdo concluded he was unable to find there was an error, but even if there was one, it was not an error which affected validity.

Neither of these decisions were included in Acciona, likely because of their lack of direct relevance to the line of authorities which was determinative of the dispute therein.

A further example is Thiess Pty Ltd v Civil Works Australia Pty Ltd [2010] QSC 187 where there was no jurisdictional error on the part of the adjudicator in failing to consider sections of a contract which were raised for the first time in the adjudication response but not the payment schedule.

The Court determined that s 26(2)(b) of the Act (s 88(2) of BIFA (Qld)) did not provide a positive obligation on the adjudicator to consider arguments relating to sections of the contract which were new and independent assertions made for the first time only in the adjudication response.

Denial of Natural Justice

Jurisdictional error will be established if the necessary level of procedural fairness has not been accorded to a party.

In John Holland Pty Ltd v TAC Pacific Pty Ltd [2009] QSC 205 at [66] (John Holland) referred to by White JA with approval in Northbuild Construction P/L v Central Interior Linings P/L & Ors [2011] QCA 22 at [92], the Court said:

Adjudicators are not required, and “cannot possibly, in the time available … give the type of care and attention to the dispute capable of being provided upon a full curial hearing”

Again, this is in line with the purpose of BIFA, being a quick resolution to payment claims in what is sometimes referred to as a “pressure cooker” environment.

However, in certain circumstances, such as where an adjudicator decides a point on a basis not argued by the parties, the error may amount to a denial of natural justice, thereby affecting the validity of the decision.

In order to be successful, the applicant must show both:

1. The denial of natural justice; and
2. That it was material or substantial.

For the second “materiality” limb, John Holland at [61] stated that the question is whether:

The matter about which the adjudicator did not provide an opportunity to be heard was a point upon which the adjudicator based his or her decision and was significant to the actual determination.

It is not that the adjudicator would have changed their mind, but that they could have changed their mind.  The Court said it is sufficient that there be “something to be put that might well persuade the adjudicator to change his or her mind.”: John Holland at [40]; Cragcorp Pty Ltd v Qld Civil Engineering Pty Ltd & Ors [2018] QSC 203 per Lyons SJA at [89].

So, if there has been a material or substantial denial of natural justice, together with materiality, then this may establish a jurisdictional error and allow for the Court to review a BIFA adjudication decision.

Failure to Determine the Amount of the Payment Claim

In relation to reviewing a BIFA adjudication decision, if an adjudicator fails to determine an adjudicated amount, then this may result in a jurisdictional error.

This is distinct from determining the amount which a party alleges is wrong.  The adjudicator must decide an amount which is due.

Section 88(1)(a) of the BIFA states:

(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“).

By failing to adjudicate an adjudicated amount, an adjudication decision can be void for jurisdictional error.

In Parrwood Pty Ltd v Trinity Constructions (Aust) Pty Ltd [2020] NSWCA 172 the adjudicator adjudicated the amount of the adjudication to be “no amount” (instead of say, $nil or $0.00).

The Court of Appeal said at [27]:

The mere fact that his reasons disclose error of law does not vitiate the determination. However, this error of law led to the adjudicator not doing the very thing he was required by s 22(1)(a) [88(1)(a) in BIFA] to do, namely, determine the amount of the progress payment to be paid by Parrwood to Trinity. That is as clear a case as one might find of misconception of function amounting to jurisdictional error.

So, there must be a determination, even if the determination is $nil or $0.00, in order to fulfil the statutory function.

Reasonable Apprehension of Bias

The test for the reasonable apprehension of bias was given in Johnson v Johnson [2000] HCA 48, where Gleeson CJ, Gaudron, McHugh, Gummow, and Hayne JJ of the High Court said:

Whether a fair-minded lay observer might reasonably apprehend that the judge might not bring an impartial and unprejudiced mind to the resolution of the question the Judge is required to decide.

In Reiby Street v Winterton [2005] NSWSC 545 the Court there was apprehended bias and that determination of the adjudicator was void because of a previous dispute between the adjudicator and the plaintiff.  Master Macready said at [56]-[58]:

56 In the circumstances of the present case, proceeding with the hearing was not a waiver such that Mr Hutchinson can not in the appeal, or the summons, raise the reasonable apprehension.

57 It necessarily follows that in the present circumstances the plaintiff has not waived his right to object by continuing to participate in the adjudication and not immediately commencing proceedings in this Court.

58 In these circumstances there is no waiver and no reason to refuse to set aside the determination on the ground of a breach of natural justice. I will make a declaration in terms of paragraph 1 of the Summons and I will hear the parties on any other orders.

In Allpro Building Services Pty Ltd v Micos Architectural Division Pty Ltd [2010] NSWSC 474 the Court decided an adjudicator’s determination was void due to the appearance of bias arising from the adjudicator being in a dispute with the plaintiff over fees from another adjudication.  Einstein J said at [16]:

There is absolutely no doubt from the materials to which I have referred that the adjudicator breached the rules of natural justice in terms of the tests already referred to. The views of a fair-minded bystander as to the adjudicator’s conduct would clearly give rise to the fact that that conduct exhibited a reasonable apprehension of bias.

So, whilst very rare, a reasonable apprehension of bias may also provide grounds for declaring an adjudication decision void.

Fraud

The Courts have found that fraud can be a sufficient reason to raise jurisdictional error.

Where the adjudicator is complicit in the fraud, the adjudication decision can be void.

Where the adjudicator is not complicit in the fraud, the adjudication can be voidable and can be set aside.

This is perhaps the rarest of the jurisdictional errors.

In Brodyn Pty Ltd (t/as Time Cost & Quality) v Davenport (2004) 61 NSWLR 421 Hodgson JA found, with Mason P and Giles JA agreeing:

If there is fraud of the claimant in which the adjudicator is also involved, the determination will be void because the adjudicator has not bona fide attempted to exercise the power. If the determination is induced by fraud of the claimant in which the adjudicator is not involved, then I am inclined to think that the determination is not void but voidable; and it is liable to be set aside by proceedings of the kind appropriate to judgments obtained by fraud.

In Hansen Yuncken Pty Ltd v. Ian James Ericson trading as Flea’s Concreting [2010] QSC 156, the subcontractor provided documents to the adjudicator which were falsified, and therefore fraudulent. These documents had not been provided at the same time to the contractor.  McMurdo J said at [14]:

In my conclusion … the reason is that there [is] a jurisdiction to defeat what would otherwise be the effect of an adjudicator’s decision procured by the fraud of the claimant, quite apart from the prerogative remedies. That jurisdiction was recognised by Hodgson JA in Brodyn …

In QC Communications NSW Pty Ltd v CivComm Pty Ltd [2016] NSWSC 1095, the adjudication determination in favour of the defendant was set aside for fraud.  Ball J followed the precedent discussed above at [31], [33] and [36]:

The general principle in respect of a determination obtained by fraud was stated by Hodgson JA in Brodyn Pty Ltd v Davenport [2004] NSWCA 394 at [60] in these terms:

If the determination is induced by fraud of the claimant in which the adjudicator is not involved, then I am inclined to think that the determination is not void but voidable; and it is liable to be set aside by proceedings of the kind appropriate to judgments obtained by fraud.

That view was accepted by the Queensland Supreme Court in Hansen Yuncken Pty Limited v Ericson [2011] QSC 327.

I am satisfied that the determination was induced by fraud in this case. That fraud consisted of CivComm relying on invoices in support of its claim that it, and that Mr Zakaria in particular, knew were false because they included claims for work that CivComm knew had not been performed

… In my opinion, the fraud was sufficiently significant and widespread that it had a substantial effect on the Adjudicator’s determination. As a result, the determination should be set aside.

If the claimant or respondent have submitted documents which are falsified, which would have a substantial effect of the adjudicator’s decision, then this may be jurisdictional error, allowing a party to apply for judicial review.

Quantum Meruit Claims

An adjudicator must confine the adjudication to the items prescribed at section 88 of the BIFA.

In Unifor Australia Pty Ltd v Katrd Pty Ltd atf Morshan Unit Trust t/as Beyond Completion Projects [2012] QSC 252, the adjudicator decided the amount of the claim by reference to irrelevant or unrelated considerations not prescribed by section 88.  Daubney J decided at [35]:

It follows that I conclude that the adjudicator fell into jurisdictional error by doing something which he lacked authority to do. The adjudicator did not have the power to make an assessment on a quantum merit; his power to assess the amount of the payment claim was prescribed by s 26 [now section 88] … The adjudicator’s decision, in this case was unlawful, and therefore void.

The adjudicator must adhere strictly to the prescribed process at section 88 of the BIFA.  This involves consideration of the contract, and as quantum meruit claims are extra-contractual assessments based on reasonableness, they are outside the legislative regime.

Awarding More Than the Payment Claim

An adjudicator does not have the jurisdiction to award an amount greater than what was claimed in the payment claim.

In Creative Building Services Pty Ltd v TIO Air Conditioning Pty Ltd [2016] ACTSC 367, the claimant claimed $41,710.67 for the payment claim. However, the adjudicator determined that the plaintiff was liable to pay an amount of $143,293.27.  Mossop AsJ said at [50]:

While it might be possible to characterise the existence of a payment claim for a claimed amount at least as great as the amount awarded as a jurisdictional fact necessary for the making of an award, I consider that it is more appropriate to characterise what occurred in the present case as a jurisdictional error. The jurisdictional error involved the adjudicator exceeding the jurisdiction which he was given as a consequence of TIO’s payment claim.

In Fulton Hogan Construction Pty Ltd v QH & M Birt Pty Ltd [2019] QSC 23, the Court decided the adjudicator was in error where the adjudicator had not valued work in accordance with the contract.

Adjudicator not Giving Reasons for the Decision

An adjudicator must give reasons for the decision.

Section 88(5) of the BIFA says:

(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.

In Sierra Property Qld Pty Ltd v National Construction Management Pty Ltd [2016] QSC 108, Jackson J held at [67]:

The failure to include reasons for the decision amounts to a jurisdictional error.

In Annie Street JV Pty Ltd v MCC Pty Ltd [2016] QSC 268, Flanagan J said, at [23]:

Given the mandatory language of s 26(3)(b) [now 88(5) of BIFA], absent the consent of both parties for the adjudicator not to include reasons in the decision, it may be accepted that a complete failure on the part of an adjudicator to give reasons constitutes jurisdictional error.

So, the adjudication decision must be accompanied by adequate written reasons.  This is not a low bar, and successful challenges on this basis are rare.

It is very important that you seek advice and assistance with prosecuting or defending reviewing a BIFA adjudication decision, contact our construction lawyers today.  We work closely with specialist counsel to obtain the best outcomes for our clients.

What are Non-Jurisdiction Errors in Adjudication Applications?

When thinking about reviewing a BIFA adjudication decision, non-jurisdictional errors are errors which are not jurisdictional in nature, and therefore do not allow for review of the adjudicator’s decision.  Non-jurisdictional errors can include:

1. Non-jurisdictional error of law;
2. Failure to interpret the contract correctly; and/or
3. Getting the facts of the case wrong.

We will explain these in more detail below.

Non-Jurisdictional Error of Law

An error of law on the face of the record does not automatically allow for the adjudication decision to be challenged, if it was a decision within the adjudicator’s jurisdiction to make.

In Shade Systems Pty Ltd v Probuild Constructions (Aust) Pty Ltd (No 2) [2016] NSWCA 379 the full court of the New South Wales Court of Appeal reviewed a decision from the Supreme Court alleging both a denial of procedural fairness and errors of law. The primary judge rejected the claim of procedural unfairness but stated that the Court could review non-jurisdictional errors of law. The appellant appealed to the Court of Appeal, asserting that there was no power to decide non-jurisdictional errors of law.

Allowing the appeal, the Court held that the NSW BIFA did not allow the review of the decision of an adjudicator for anything but jurisdictional error.  The Court held at [73]:

The independent consideration of the Security of Payment Act set out above supports the conclusion that review is not available for non-jurisdictional error of law on the face of the record.

This was followed in EQ Constructions Pty Ltd v A-Civil Aust Pty Ltd [2021] NSWSC 1604 at [58] where Williams J said:

… [t]he [Act] impliedly excluded certiorari for non‑jurisdictional error of law on the face of the record of an adjudication determination under that Act … The Full Court held that the adjudicator’s decision was wrong because he had misconstrued s 12, but that this was not a jurisdictional error.

A similar approach has been adopted in Queensland, for example in Civmec Electrical and Instrumental Pty Ltd v Southern Cross Electrical Engineering Limited [2019] QSC 300 Mullins J said at [66]:

… [t]he adjudicator’s decision to treat parts of the adjudication response as new reasons not covered by the payment schedule (even if in error) was a decision within jurisdiction and not reviewable.

Failure to Interpret the Contract Correctly

When reviewing a BIFA adjudication decision, an error in the identification or interpretation of a term of the contract will not automatically be jurisdictional error allowing a party to challenge the adjudicator’s decision, unless it pertains to a jurisdictional threshold issue such as the existence of a construction contract.

In John Holland Pty Ltd v TAC Pacific Pty Ltd & Ors [2009] QSC 205 Applegarth J said at [57]:

The statutory scheme may permit an adjudicator to make unreviewable errors of law in quickly deciding complex legal issues in adjudications of the present kind after considering the parties’ submissions.

In Northbuild Construction Sunshine Coast Pty Ltd v Beyfield Pty Ltd [2014] QSC 80 when discussing the misinterpretation of a term (or terms) of a construction contract by the adjudicator, Philip McMurdo J said at [34]:

Therefore I am not persuaded that his error was a jurisdictional error. But rather it was an error in the interpretation of the contract which was a task within his jurisdiction.

Northbuild (above) is supported by Caltex Refineries (Qld) Pty Ltd v Allstate Access (Aust) Pty Ltd [2014] QSC 223 where Philip McMurdo J held that misinterpretation of a term (or terms) of the construction contract is not jurisdictional error.  His Honour said at [36]:

 An adjudicator must identify the terms of the relevant contract and interpret them. Therefore, ordinarily an error in the interpretation of a contract is not a jurisdictional error for which an adjudicator’s decisions can be challenged.

This is in line with the overall principles of BIFA and other security for payment legislation in different Australian states and territories.

Getting the Facts or Law Wrong

Similarly, if the adjudication decision is decided in error but was an error within the jurisdiction of the adjudicator, it is not automatically reviewable.

Quasar Constructions v Demtech Pty Ltd [2004] NSWSC 116, Barrett J says at [13]:

The plaintiff says, and I agree, that an adjudicator has jurisdiction only to determine an amount that is, on the basis of the particular payment claim and payment schedule, a “progress payment” within the meaning of the Act; and that, in exercising that jurisdiction, the adjudicator may proceed only in accordance with the method the Act prescribes for determining the amount of a “progress payment” in the context of the particular payment claim and payment schedule. Jurisdictional error arises if an adjudicator is seen to have embarked on some course that is foreign or irrelevant to this statutory task. Jurisdictional error does not arise if, having embarked on the right course, an adjudicator comes to a wrong conclusion.

A similar conclusion was reached in WA, in WQUBE Port of Dampier -v- Philip Loots of Kahlia Nominees Ltd [2014] WASC 331 Chaney J said at [27]:

In my view, that regime supports the conclusion that the legislature intended to confer upon an adjudicator jurisdiction to determine questions of law authoritatively, and also the power to determine those questions wrongly without attracting prerogative relief.

Therefore, when reviewing a BIFA adjudication decision, errors of fact or the effect of law which do not go to jurisdiction are unlikely to be sound bases for challenging enforceability.

Multiple Building Contracts

In Trinco (NSW) Pty Ltd v Alpha A Group Pty Ltd [2018] NSWSC 239 McDougall J said at [60] to [61]:

Progress claim 3 related to work done under two contracts (the written subcontract made on 6 March 2017, and the fresh subcontract made on 8 June 2017). It must follow that the progress claim could not constitute a valid payment claim … It must follow, in turn that progress claim 3 could not be the foundation of a valid adjudication application.

In Matrix Projects (Qld) Pty Ltd v Luscombe [2013] QSC 4, Douglas J said at [20]:

Accordingly, the payment claim made cannot be described as one being made under a single construction contract whether the relationship be described more generally as an arrangement or not. Therefore, the variety of different types of contract for construction work relied upon in the payment claim is fatal to its validity.

In Acciona Infrastructure Australia Pty Ltd v Holcim (Australia) Pty Ltd [2020] NSWSC 1330 at [40] – [42], Hammerschlag J decided that the Adjudication Determination 2020061EA made by the second defendant was void and quashed on the basis that the relevant payment claim was subject to more than one (1) contract:

The Adjudicator had no jurisdiction because the Payment Claim was invalid and ineffective to engage the operation of the Act. By the parties’ express agreement in cl 2 of the Agreed Terms, each time a purchase order was issued, a separate contract came into existence between Acciona and Holcim on the terms set out in the GSA. Each such contract was governed by terms contained in the overarching GSA instrument, which terms became incorporated in every subsequent separate contract, but each time Acciona placed a purchase order, a separate contract for discrete work with a separate payment date came into existence

… Applying Trinco, the Payment Claim, which straddled numerous purchase orders (and therefore numerous contracts) with separate payment dates, did not constitute a valid payment claim

… It follows that the Determination is void and will be quashed.

In S.H.A. Premier Constructions Pty Ltd v Lanskey Constructions & Ors [2019] QSC 81, it was also submitted that the works were subject to different contracts. However, Boddice J found at [48] and [49] that they were not different contracts, but approved variations, and so the adjudication decisions were not invalid.

However, the Queensland Court of Appeal considered Acciona in Ausipile Pty Ltd v Bothar Boring and Tunnelling (Australia) Pty Ltd [2021] QCA 223 (Ausipile), noting (at [112]) that there was no contention in that case that the line of authority upon which it relied had been wrongly decided, and that it involved a payment claim which, on its face, identified more than one contract as the basis for the claim.  Justice Wilson (at [120]) followed the reasoning from NSW Court of Appeal’s decision in TFM Epping Land Pty Ltd v Decon Australia Pty Ltd [2020] NSWCA 93 (TFM), finding that a payment claim should not be treated as a nullity for failure to comply with s.75(1) of the Act, unless that failure is patent on its face.  Therefore, even if the claim truly fell under a different contract, the payment claim was complaint, because on its face, claimed for amounts due under the one contract ([121]).

Whilst Acciona was not expressly considered in the recent NSW Court of Appeal decision in BSA Advanced Property Solutions (Fire) Pty Ltd v Ventia Australia Pty Ltd [2022] NSWCA 82, the Court considered both Ausipile and TFM, in coming to its conclusion that even if a payment claim may relate to only one construction contract with one reference date, the validity of a payment claim is not conditioned on the existence of one construction contract: [36], [52].  The Court also found (at [40] and [52} that:

… the putative “one contract” rule is imprecise. The scope of commercial arrangements under which goods and services may be supplied is expansive … It is strongly arguable that there is no “one contract” rule and that s 13(1) permits a person to serve a payment claim in relation to an entitlement under more than one contract so long as the claim is referable to one reference date.

Therefore Acciona was effectively overruled.

What are the Consequences of Jurisdictional Error

The Court has options including:

1. declaring all or part of the adjudication decision void;
2. remitting it back to an adjudicator; and/or
3. seeking further recourse from the Courts.

We will explain these in more detail below.

Declaring all or part of an Adjudication Decision Void

If a Supreme Court judge is convinced that an adjudicator’s decision is unenforceable, the most common outcome is a declaration that the decision is void.  Any payments made in accordance with the decision must be returned.

In a review of an adjudication decision, the Queensland Supreme Court is now able to sever the portion of the decision affected by jurisdictional error.

This statutory change, introduced in s.101(4) of BIFA in 2017 overturned the common law, and stops the entire adjudication decision from being void if only one part of it is properly impugned, and that part may be severed.

The case law leading to that amendment is interesting.  In BM Alliance Coal Operations Pty Ltd v BGC Contracting Pty Ltd [2013] QCA 394 Holmes and Muir JJA and Ann Lyons J of the Queensland Court of Appeal overturned the earlier decision of Applegarth J in BM Alliance Coal Operations Pty Ltd v BGC Contracting Pty (No 2) [2013] QSC 67.

In the first case, Applegarth J decided that parts of the adjudication decision not affected by jurisdictional error should be allowed, and the parts of the adjudication affected by jurisdictional error should be denied.

In the appeal the original decision was set aside because the Court found at [71] that:

… [o]nce a court determines that a decision of the type in question is affected by jurisdictional error, the decision cannot give rise to legal consequences.

The Court then concluded at [77]:

His Honour … erred in finding in his 22 March 2013 reasons that the adjudication decision, which he held to be affected by jurisdictional error, retained effect until he exercised his discretion to grant a declaration or make an order quashing or setting aside the decision … For the above reasons, the primary judge’s orders of 22 March 2013 should be set aside.

These were the findings of Muir JA, with Holmes JA and Lyons J agreeing.

This appeal decision was followed in J Hutchinson Pty Ltd v Cada Formwork Pty Ltd & Ors [2014] QSC 63 at [81] where Lyons J said:

That conclusion is confirmed by the decision of the Court of Appeal in BM Alliance Coal Operations Pty Ltd v BGC Contracting Pty Ltd. In that case, the primary judge had found jurisdictional error, but refused relief. Muir JA (with whom the other members of the court agreed) referred to decisions of the High Court where it was held that a decision involving jurisdictional error is properly regarded, in law, as no decision at all. His Honour then held that declaratory relief was a “remedy dictated by the finding of jurisdictional error”. He also held that the primary judge erred in law in withholding such relief.

Following these decisions, s.101(4) was introduced, providing:

If, in any proceedings before a court in relation to any matter arising under a construction contract, the court finds that only a part of an adjudicator’s decision under this chapter is affected by jurisdictional error, the court may—

(a)  identify the part affected by the error; and

(b)  allow the part of the decision not affected by the error to remain binding on the parties to the proceeding.

Therefore, in Queensland, severance is legislatively permitted.  The position in other States and Territories will be determined by their own legislation.

So, once the adjudication is declared void and set aside, then what?

Remitting it Back to an Adjudicator

In some cases, when reviewing a BIFA adjudication decision, a Court can remit the decision back to the adjudicator for further determination.

This is discretionary, and a number of factors must be considered.  However, the essential considerations appear to be:

1. where the adjudicator lacked jurisdiction, the matter should not be remitted back to the adjudicator; and
2. where there is a jurisdictional error, the matter can be remitted back to the adjudicator.

It is not a common outcome.  Indeed, Heavy Plant Leasing Pty Ltd v McConnell Dowell Constructors (Aust) Pty Ltd [2013] QCA 386 identifies a number of problems with remitting back to the adjudicator.

Ultimately, considering all of the discretionary factors (or lack thereof), the Court of Appeal refused to exercise its discretion to remit, Muir JA said at [67], with Gotterson JA & Morrison JA agreeing:

In the absence of more comprehensive argument on this Court’s power to remit an adjudication to an adjudicator in the circumstances under consideration, I prefer to base my decision on discretionary grounds. In my view, the following matters tell against the remittal sought by the appellant. The provision of such a remedy would be contrary to the quick, cheap and simple processes envisaged by the Act. Moreover, as Macfarlan JA pointed out in Cardinal Project Services Pty Ltd v Hanave Pty Ltd, by the time the adjudicator decided the matter after remittal, circumstances may have changed significantly from the time when the adjudicator was considering his original determination. The payment schedule may be outdated. Other defects may have come to light. The removal of adjudicator’s decisions under the Act from the scope of Judicial Review is a further indication of a legislative desire that the Act’s mechanisms be quick, cheap and simple. Also any remittal order would necessarily require the adjudicator to make a decision outside the time permitted by s 25(3) unless the parties agreed to an extension of time.

The Adjudication Review Procedure

The procedure for reviewing an adjudication decision is to file an originating application in the Supreme Court of Queensland.

The originating application may require the following orders:

1. an undertaking as to damages;
2. payment of the adjudicated amount into Court;
3. the parties being restrained from enforcing the adjudication decision or adjudication certificate pending final determination;
4. the dates on which the parties have to file written submissions; and
5. a date for the hearing by a Supreme Court judge.

This would be supported by an affidavit in support of the application.

It is very important that you seek advice and assistance with prosecuting or defending reviewing a BIFA adjudication decision, contact our construction lawyers today.  We work closely with specialist counsel to obtain the best outcomes for our clients.