Taringa Property Group Pty Ltd v Kenik Pty Ltd [2024] QSC 298

Andrew Orford  |  Laura Berry  |  Max Rylance

Key takeouts

• Payment claims are to be construed objectively. Variation claims, or any other documents, sent on the same day have no impact on the effectiveness of a payment claim.
  
  
• Under the Building Industry Fairness (Security of Payment) Act 2017 (BIF Act), an adjudicator’s role is to decide on the amount payable to a claimant based on the payment claim and corresponding payment schedule relevant to the claim. It does not have a duty to request additional submissions.
  
  
• Adjudicators do not have to get the answer right. They must simply demonstrate that they have actively engaged with the issues and the submissions as required by s 88(2) of the BIF Act.

Facts

Taringa Property Group Pty Ltd (TPG) entered into a contract with Kenik Pty Ltd (Kenik) to design and construct a retail complex. The contract was terminated on 29 August 2023.

On 8 September 2023, Kenik sent eleven variation claims to TPG by email. Each followed a similar format and were delivered within fifteen minutes of each other.

Three hours later, Kenik sent a twelfth email, distinguished by the subject line ‘Payment Claim 31’, which included an invoice demanding payment of $9,689,767, along with a signed supporting statement.  It was in nearly identical form to the thirty previous payment claims issued by Kenik, which TPG had certified and paid an amount in response. The only material difference to the previous payment claims was the substitution of the word ‘Invoice’ for ‘Progress Claim’ at the top of the document.

In response, TPG delivered a payment schedule on 13 September 2023, certifying a nil amount and detailing its reasons for withholding payment.

On 26 October 2023, Kenik commenced an adjudication against TPG. The adjudicator found in favour of Kenik and decided that an amount of $4,825,708 was payable by TPG.

TPG applied to the court to have the adjudicator’s decision declared void for jurisdictional error. TPG submitted that:

• the payment claim was invalid on the basis that it was not made in relation to a valid reference date, due to the eleven variation claims issued by Kenik earlier on the same day;

• the adjudicator failed to account for over $2 million in loans and direct payments to the progress payment amount and did not adequately consider TPG’s submissions and other evidence;

• there was a denial of procedural fairness in the way the adjudicator determined the methodology and applicable percentage for the claims awarded; and

• the adjudicator exceeded her authority by awarding payment for works already completed prior to the termination date, a right reserved under the BIF Act, rather than pursuant to an entitlement to be paid for those works under the contract.

Decision

TPG’s application was dismissed. The court found that the adjudicator had not committed jurisdictional error.

Was the Payment Claim valid?

TPG argued that the eleven separate emails constituted individual payment claims under the BIF Act and that Kenik had therefore submitted more than one payment claim for the reference date.

The court rejected this argument finding there was a clear distinction between the variation claims and the Invoice, to the extent that TPG, or any reasonable party in their position, would have recognised only one payment claim. This was supported by the established pattern of conduct between TPG and Kenik, indicating that the Invoice was intended as a singular, consolidated demand for payment.

When the variation claims were viewed in isolation and without an express demand for payment or a stated timeframe, they could not objectively constitute a payment claim under the BIF Act. The absence of accompanying supporting statements was a pertinent factor in the court’s assessment.

Alternatively, the court acknowledged that the twelve documents could be construed as a collective payment claim.  

Was procedural fairness afforded to TPG?

The adjudicator decided that loans or advances made by TPG to Kenik and a payment made directly by a related party of TPG to Kenik (totalling ~$2 million) were not to be included in the amount paid to date.  

TPG asserted that the payments were loans made to assist Kenik’s cashflow and were to be repaid by being offset against future progress payments under the contract. TPG also claimed that there was a material denial of procedural fairness by the adjudicator determining the issues on grounds not contended for and in respect of which TPG was not given the opportunity to address.

The court disagreed and dismissed this ground.  The court found that the adjudicator properly considered all necessary matters and accorded adequate procedural fairness to TPG on the issues and was not required to request further submissions. Further, where the ultimate decision would not have been different had the adjudicator made the error, the jurisdictional error would not have been deemed to be material in any event.

Methodology and applicable percentages for claims awarded as preliminaries

TPG also alleged a breach of procedural fairness arising from the adjudicator’s methodology and the percentage applied to the awarded preliminary claims (based on a rationale neither party had proposed).

The court rejected this claim, saying that the adjudicator was not required to solicit additional submissions. The court found that the assessment made by the adjudicator was reasonable, consistent with the pricing mechanism for variations in the contract, and it was within the adjudicator’s jurisdiction to interpret and apply the contract. The court concluded that there was no denial of natural justice.

Entitlement to payment under the contract?

The adjudicator decided that although new works cannot be claimed after termination of a contract, a claimant retains the right under ss 67(2) and 70 of the BIF Act to seek payment for work completed before termination.

The court dismissed TPG’s argument that the adjudicator had determined Kenik’s entitlement to payment for variation claims based on the BIF Act, rather than under the contractual terms. Clarifying this point, the court indicated that TPG had misconstrued the adjudicator’s decision. In fact, the adjudicator had found that an estoppel by convention was in place, preventing TPG from strictly invoking the contract’s terms to deny liability for the claimed variations.