Ingeteam Australia Pty Ltd v Susan River Solar Pty Ltd [2024] QSC 30

Michael Creedon  |  James Knell  |  Connor Wright

Key takeouts

Failing to afford a party procedural fairness has the potential to infect an adjudication determination under the Building Industry Fairness (Security of Payment) Act 2017 (Qld) (BIF Act) with jurisdictional error.  Jurisdictional error will occur where a decision-maker finds a fact that is a precondition to the conferral of jurisdiction exists when it does not exist, or finds that such a fact does not exist when it does. Where the ultimate decision could have been different had the decision-maker not made the error, the jurisdictional error will be deemed to be material.  

In this matter an adjudicator mistakenly denied the existence of jurisdiction on the basis that there was no enforceable construction contract that authorised the making of the payment claim. He found that he did not have jurisdiction because the contract was not enforceable due to a breach of licensing requirements. His erroneous licensing findings led directly to the conclusion that he did not have jurisdiction. Had he afforded both parties the opportunity to make submissions on the issues he might not have made these erroneous findings. This amounted to a material jurisdictional error.

Facts

Susan River Pty Ltd (Susan River), the owner of the Susan River Solar Farm (Solar Farm), engaged Ingeteam Australia Pty Ltd (Ingeteam) under an operating and maintenance contract (contract).  At the end of the contract term, Ingeteam brought an adjudication application under the BIF Act to recover $2.3 million in unpaid fees.

Susan River contended that Ingeteam carried out work under the contract without a licence in breach of section 42 of the Queensland Building and Construction Commission Act 1991 (Qld) (QBCC Act). However, in its initial adjudication submissions Susan River did not identify any specific instances where Ingeteam performed unlicensed building work. Rather, it referred to the fact that ‘building work’ as defined in the QBCC Act includes the repair of a building and under the contract, Ingeteam performed all scheduled and unscheduled maintenance of the Solar Farm. Susan River argued that this maintenance constituted ‘repair’ of a building.

Ingeteam acknowledged that it did not hold a licence under the QBCC Act and accepted that under the contract it could have potentially been required it to carry out building work. However, Ingeteam maintained that it was covered by the ‘head contractor exemption’ in section 8 of Schedule 1A of the QBCC Act. This exemption would have allowed Ingeteam to enter into a building contract, provided that it only used appropriately licensed subcontractors to carry out the building work and that the building work is not ‘residential construction work’ or ‘domestic building work’.

The adjudicator permitted the parties to deliver further submissions on the question of jurisdiction and in its reply submissions Susan River particularised, for the first time, four occasions where it alleged Ingeteam performed unlicensed building work. The adjudicator rejected the first three allegations but accepted the fourth allegation, which concerned a licensed electrician taping a small piece of plywood to the floor of a shed over a spot that required repair. The cost of this repair was $294. The adjudicator did not give Ingeteam a further opportunity to respond to Susan River’s reply submissions.

The adjudicator then found that Ingeteam intended to carry out unlicensed building work at the time of entering into the contract. This conclusion was reached despite Susan River not having made submissions to this effect. Ultimately, the adjudicator determined that the contract was not an enforceable construction contract under the BIF Act and he did not have jurisdiction to decide the payment claim.

Ingeteam appealed to the Supreme Court challenging the adjudicator’s decision on the basis that it was affected by jurisdictional errors.

Decision  

The three jurisdictional errors

1. Ingeteam contended that the adjudicator denied it procedural fairness by deciding that the floor repair was unlicensed building work without giving it an opportunity to make submissions on that point. The Court held that this was a breach of procedural fairness. Applegarth J found that the adjudicator denied Ingeteam procedural fairness by concluding that Ingeteam breached section 42 of the QBCC Act when entering into the contract, without giving it the opportunity to address this contention.
   
2. Ingeteam alleged that the adjudicator erred in finding that it carried out unlicensed building work because the repair fell under the ‘floating floor’ exemption. The Queensland Building and Construction Commission Regulation 2018 (Qld) lists numerous items that are not building work, including the laying of ‘carpets, floating floors or vinyl’. A ‘floating floor’ is defined to mean ‘a floor that covers a subfloor but is not fixed to the subfloor’. The Court held that the word ‘fixed’ ‘should be given a meaning that fits its context and the apparent purpose of the exemptions’. It would be an odd outcome if the exemption applied to taping a section of carpet or vinyl but not a piece of plywood. Accordingly, the floor repair was the laying of a floating floor. This exempted the floor repair from the definition of building work under the QBCC Act, meaning that Ingeteam did not require a licence to perform the floor repair. On this basis Applegarth J held that the adjudicator erred in finding that Ingeteam was carrying out building work and needed a licence to do so.
   
3. Ingeteam claimed that the adjudicator erred in concluding that at the time it entered into the contract Ingeteam intended not to comply with section 42 of the QBCC Act. The Court accepted this submission, having found that Ingeteam did not undertake unlicensed building work in carrying out the floor repair.

The floor repair was the sole basis upon which the adjudicator determined that Ingeteam intended to breach section 42 at the time the contract was formed. Applegarth J held that even if the adjudicator was correct, the adjudicator should not have made the finding because there was no evidence to support it and it had not been raised by Susan River in its submissions to the adjudicator.

Susan River argued that these three errors were not jurisdictional errors, and that even if they were, they were not material errors that would necessitate the court to set aside the adjudicator’s decision. A jurisdictional error is material if the ultimate decision made by the decision-maker ‘could have been different’ had the decision-maker not made the error.

The Court held that all three jurisdictional errors were material.

If the adjudicator had afforded Ingeteam procedural fairness by allowing it to make submissions about the floor repair and what might have been inferred, if anything, about its intention at the time of contract, there was a real possibility that the adjudicator would not have erred on both points.  Further, the adjudicator would have unlikely decided that he did not have jurisdiction to determine the payment claim based on Ingeteam’s alleged breaches of section 42 of the QBCC Act.

Susan River further argued that because the adjudicator also decided that he did not have jurisdiction for an additional reason, namely the absence of a reference date, the alleged jurisdictional errors were not material or were not even jurisdictional errors at all. The crux of this argument was that the adjudicator would have denied that he had jurisdiction anyway.

Applegarth J rejected this submission because there was a ‘substantial risk’ that the adjudicator’s decision that the contract was unenforceable could constitute an estoppel point, binding adjudicators in future proceedings. The practical effect of this would be that Ingeteam would be prevented from submitting another payment claim under a contract that had been deemed unenforceable. For these reasons, the Court held that the three jurisdictional errors were material and declared the adjudication determination void in part for jurisdictional error and that Susan River and Ingeteam were not bound by the adjudicator’s findings on licensing.