Icon Co (NSW) Pty Ltd v Australia Avenue Developments Pty Ltd [2018] NSWCA 339

What the court decided

Icon Co (NSW) Pty Ltd was the head contractor under a contract with Australia Avenue Developments Pty Ltd for the construction of the Opal Tower at Sydney Olympic Park [1]. On 30 July 2018 Icon served a payment claim under the Act for $3,331,744 excluding GST, with a reference date of 25 July 2018 [2]. Australia Avenue's payment schedule of 13 August 2018 proposed to pay $1,161,143.50, leaving a little over $2.5 million in dispute [3]. On 14 September 2018 the adjudicator determined an amount of $2,638,287.58 in Icon's favour [4].

Australia Avenue then sought an order quashing the determination, and on 19 October 2018 Parker J granted that relief [5]. The ground upheld concerned five items, called backcharges, which Parker J described as earlier deductions by the superintendent from the contract price [20], [21]. Australia Avenue argued that the adjudicator's allowances for those items fell outside the payment claim, so that she had exceeded her jurisdiction [20], [21]. Parker J held that the payment claim did not include any claim to reverse the backcharges, and that the adjudicator was wrong to say they were referred to in the payment schedule rather than only in the progress certificate [22]. He also held that the error was jurisdictional [20].

Basten JA said the term backcharges was obscure and might not have been used consistently by the parties [23]. Before the adjudicator, Australia Avenue had submitted that the backcharges were part of neither the payment claim nor the payment schedule, and that she had no jurisdiction to consider them [27]. The adjudicator rejected that submission, finding that the deductions formed part of the payment schedule through a progress payment certificate attached to it [27]. In Basten JA's view, to the extent there was an issue whether the payment claim included the backcharges, the adjudicator had expressly addressed and resolved it [28].

On the law, Basten JA noted that, as understood since Brodyn Pty Ltd t/as Time Cost and Quality v Davenport and affirmed by the High Court in Probuild Constructions (Aust) Pty Ltd v Shade Systems Pty Ltd, judicial review of a determination was available only for jurisdictional error [12]. He observed that section 22(2) directs the adjudicator to consider only specified matters, which include the payment claim and the terms of the construction contract [16]. In his view the Act implicitly gave the adjudicator power to form an opinion on the meaning of the contract, and the determination could not be set aside because an error of law in construing it appeared on the face of the record; the same was true of the scope of the payment claim [16].

Basten JA said the primary judge had correctly referred to Downer Construction (Australia) Pty Ltd v Energy Australia, where Giles JA treated the parameters of a payment claim as a matter for the adjudicator [17]. Giles JA had said that "a reasonable but erroneous decision by the adjudicator does not invalidate the determination" [17]. Basten JA considered that approach directly applicable [18]. It followed that it was not for the primary judge to examine the payment claim to decide whether the adjudicator's approach was wrong, and even a wrong approach would not be jurisdictional error [19].

Basten JA described the case as, in substance, a dispute about how the payment claim and payment schedule were to be understood [26]. In argument, senior counsel for Australia Avenue said the progress certificate, although "not the schedule", was "part of the schedule as an attachment", and Basten JA noted that it referred expressly to the backcharges, so that on any view they were before the adjudicator [29]. Australia Avenue's point of substance on the appeal was that, if a claimant could recast its claim as a reconciliation, a respondent might, because of section 20(2B), be denied the chance to make submissions about earlier claims revived in the adjudication application [9], [30]. Basten JA said the complaint had "an implicit air of procedural unfairness" but was not put in those terms [31]. Australia Avenue's own document had squarely raised the issue, and it had made the same complaint to the adjudicator, who was required by section 22(2) to address it and did so [31].

Basten JA said this was not a case where the adjudicator had awarded more than the amount claimed; the dispute was about how the payment claim was properly construed in light of the contract [32]. An error in construing the contract or understanding the payment claim was not jurisdictional error and could not be a basis for quashing the determination [32]. In any event, Basten JA said it was "tolerably clear that there was no error" [33]. Australia Avenue accepted that the payment claim identified the construction work as section 13(2)(a) required, and the dispute was about valuing that work, which was the adjudicator's task [33].

The Court allowed the appeal and set aside the order quashing the determination and the costs order made below [34]. It dismissed Australia Avenue's proceedings with costs and ordered that the money held in court be paid to Icon rather than to Australia Avenue [34]. Australia Avenue was ordered to pay Icon's costs of the appeal [34]. Meagher and Leeming JJA each agreed with Basten JA [35], [36].

Why it matters

Under the Act as it then stood, the Court of Appeal treated a dispute over whether amounts fell within a payment claim, which the adjudicator had addressed and resolved, as a question for the adjudicator. An error on that question was not jurisdictional error and did not allow the determination to be quashed. It was not a case where the adjudicator had awarded more than the amount claimed.

The decision applied the Act and the authorities as they then stood. Readers should check the current Act and later authority before relying on it.

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.