Builtcom Constructions Pty Ltd v VSD Investments Pty Ltd as trustee for The VSD Investments Trust (No 2) [2025] NSWCA 134

What the court decided

The parties' construction contract was for a 30-storey development in Burwood, NSW, combining residential and commercial uses [109]. Builtcom Constructions Pty Ltd (Builtcom) was the construction manager and VSD Investments Pty Ltd, as trustee for The VSD Investments Trust (VSD), the principal [2]. VSD terminated the contract for convenience on 25 October 2024 [112]. On 22 November 2024 Builtcom claimed $30,625,050.75 in a payment claim served under the Act [112]. The claim was a two-page letter with nine pages of tables and the statement that all subcontractors had been paid [3]. It included $3.65 million for a tower crane, Tower Crane 2, which the letter mentioned as equipment claimed under clause 28.2(c) and which otherwise appeared only as a line item in one of the tables [4]. VSD's payment schedule, served on 4 December 2024, was in a negative amount and complained that the claim lacked supporting documents [5].

Builtcom's adjudication application of 17 December 2024 came with 171 pages of submissions, a quantity surveyor's expert report and hundreds of pages of supporting documents [8]. VSD's adjudication response contested the substance of the claims [116]. It also submitted that the new material was not "duly made" and could not be considered [118]. For that submission VSD relied on John Holland Pty Ltd v Cardno MBK (NSW) Pty Ltd (Cardno) [119]. On Tower Crane 2, VSD alleged that a sale document was "doctored" and the amount "falsely claimed" [14].

On 3 February 2025 the adjudicator determined an amount of $8,467,232.13 in Builtcom's favour [120]. He valued many of Builtcom's claims at nil under what he called "the Cardno test" [28]. Tower Crane 2 was one of them [51]. As he applied that test, where a document was first advanced with the adjudication application, he asked whether VSD would probably have valued the claim or reasoned differently had the document been in the payment claim and, if so, ignored the document [32].

Peden J dismissed Builtcom's application for judicial review [126]. Her Honour held that an erroneous finding that a submission was not duly made was unreviewable [55], [151]. In the alternative, she treated the scope and ambit test as a heuristic for securing natural justice [30], [129]. She also indicated, provisionally, that she would likely have refused an order in the nature of mandamus [100], [101], [102]. In the Court of Appeal, the parties argued the case by reference to Tower Crane 2 as an exemplar, the adjudicator having dealt with other claims in the same way [19], [20], [21].

All three judges held that the adjudicator erred in law [43], [160], [183]. Leeming JA addressed that ground although it was a "non-dispositive ground", because only jurisdictional error could allow the appeal [36]. Both Leeming JA and Adamson JA rejected the primary judge's reading of the adjudicator's reasons as applying only a heuristic [31], [153]. Leeming JA agreed with Adamson JA that no test requires an adjudicator to disregard a document because the other party would have responded differently had it been in the payment claim [37]. His Honour found it difficult to discern any such rule in Cardno itself [38], [39]. A counterfactual test of that kind could be highly contestable, and unpredictable once a threshold of materiality was added [40]. An inflexible rule was also inconsistent with the adjudicator's power under section 21(4) to give the parties a further opportunity to make submissions [41]. Under section 17(3)(h), read with section 22(2)(c), a claimant may include relevant documentation in its application [42]. If Cardno is thought to require that approach, Leeming JA said, "that proposition is not the law" [43].

Adamson JA held that the adjudicator treated Cardno as a rule he was bound to apply [153], [157]. That gloss was inconsistent with the Act and an error of law [160]. Her Honour accepted that a respondent may schedule nil for an item on the ground that it is not adequately substantiated, leaving the claimant to substantiate it in the adjudication application [159]. She said that, to the extent the Act was asymmetrical, that was the result of a deliberate legislative policy choice, and it was not for judges or administrative decision-makers to devise rules to ameliorate a perceived unfairness [161].

Adamson JA also concluded that the primary judge erred in finding the adjudicator's opinion unreviewable [151]. Leeming JA accepted that a finding that a submission was not duly made could occasionally disclose jurisdictional error, and disagreed with the primary judge so far as her reasons treated that as impossible [86]. His examples were extreme ones, such as disregarding submissions printed on blue paper, and the present case was "far removed" from them [87].

On the decisive question, Leeming JA held that the error was not jurisdictional [98]. Establishing legal error is not enough to set aside a determination [47]. A determination decides nothing finally and does not stand in the way of a court deciding the contractual dispute [49], [50]. Whether a submission is duly made is generally for the adjudicator, and an error in deciding it is unlikely to be jurisdictional [61]. His Honour found none of Builtcom's six reasons for treating the error as jurisdictional persuasive, including its reliance on the Act's beneficial purpose and on Kirk v Industrial Court of New South Wales [57], [59], [62], [63], [66].

He also rejected Builtcom's attempt to attack the adjudicator's opinion on the principles in R v Connell; Ex parte Hetton Bellbird Collieries Ltd [67], [70], [81]. His Honour described that argument, put as one of "subjective jurisdictional fact", as a distraction [81]. There is no legal distinction between the adjudicator deciding that a submission is duly made and forming the opinion that it is [71]. His Honour said that section 22 imposes an obligation on the adjudicator, not a power conditioned on a fact or an opinion [73]. Accepting the argument would erase the line between jurisdictional errors of law and errors of law made within jurisdiction [81].

The adjudicator had not overlooked the crane claim: he decided VSD's anterior submission that Builtcom's supporting submissions were not duly made, as section 22(2) required him to do [84]. Builtcom did not contend that the adjudicator acted otherwise than in good faith or that his decision was legally unreasonable [78], [89]. His decision to treat the claims as outside the scope of the payment claim was one for him to make [94]. Leeming JA added that it was "scarcely unreasonable" to treat questions of doctored documents, a crane sold to another party and quantum as outside that scope [94]. Whether a "general rule" exists, the subject of ground 3, was a false issue, because the only question was jurisdictional error [95]. An adjudicator's error in deciding whether a submission is duly made will generally not, without more, invalidate the determination [96].

Leeming JA held that ground 4, which challenged the primary judge's provisional view on relief, did not arise because there was no jurisdictional error [99]. VSD had filed no notice of contention [103]. His Honour therefore preferred not to express a view on the discretionary refusal of relief, which would necessarily be informed by section 32A [104]. The appeal was dismissed with costs, Builtcom's limited success on ground 2 being no reason to depart from the usual rule [105]. Free JA agreed with Leeming JA, whose reasons therefore state the majority's conclusions [183].

Adamson JA, dissenting, held that the error was jurisdictional [173]. In her Honour's view, the adjudicator had to consider the adjudication application, including material substantiating the claims, and by refusing to adjudicate the claims on the Cardno basis he misapprehended his statutory mandate in section 22 [172]. In Shade Systems Pty Ltd v Probuild Constructions (Aust) Pty Ltd (No 2), by contrast, the adjudicator's errors in construing the contract had been within his authority [168]. Her Honour distinguished that case because here the error limited the ambit of the adjudication [172]. Treating the error as non-jurisdictional would, she said, quoting Kirk, risk creating "islands of power immune from supervision and restraint" [173].

Had it been necessary, she would also have held that the primary judge's provisional view on relief disclosed a House v The King error [180]. Her Honour would have allowed the appeal, set aside the affected parts of the determination under section 32A, confirmed the balance and remitted the claims to the adjudicator [181], [182].

Leeming JA reserved the question whether a contractual requirement such as clause 25.1, which called for supporting documents with each progress claim, is void under the Act [2], [24]. Adamson JA expressed the view that a contract is void under section 34 to the extent that it purports to add to the requirements in section 13 for a valid payment claim, but noted that Builtcom's grounds did not raise the point [177].

Why it matters

The decision concerns the New South Wales Act. Under that Act, all three judges rejected the "Cardno test" as the adjudicator applied it: there is no rule that a claimant's substantiating material is to be disregarded merely because it would have altered the payment schedule. The majority reached that conclusion on a ground that could not change the outcome [36], [105].

The majority's reasoning gives that conclusion limited practical force. On that reasoning, an adjudicator who wrongly treats such material as not duly made will generally make an error within jurisdiction, and the determination stands [96]. Leeming JA said that the adjudicator must still decide the scope and ambit of the payment claim, and that substantial new issues which could not have been anticipated before the application may indicate that the claimant is seeking adjudication of something outside it [45]. In practice, on the majority's reasoning, a claimant that leaves the substantiation of its claim to the adjudication application bears the risk that the adjudicator excludes it as outside the payment claim, with little prospect of review [94], [96].

The majority left open how section 32A bears on the discretionary refusal of relief, and whether a contractual requirement to substantiate progress claims is void [23], [24], [104]. Readers in Victoria should check the corresponding provisions of the Victorian legislation before relying on the decision.

Numbers in square brackets are paragraph numbers of the judgment. This note summarises a decided case for education and is not legal advice. See how the notes are written.