Castle Constructions Pty Ltd v Napoli Excavations and Civil Pty Ltd [2023] NSWSC 348

Andrew Hales  |  Anique Mawa   |   William Vu

Key takeout

• If an adjudicator fails to consider duly made submissions where they are statutorily bound to consider such submissions, and that failure is material, it will amount to a jurisdictional error and invalidate the adjudicator’s determination.
• A failure to refer to duly made submissions in an adjudicator’s determination gives rise to an inference that the adjudicator failed to consider such submissions.
• A failure to consider submissions is material where the adjudicator may well have come to a different conclusion if they had considered the submissions.

Facts

Castle Constructions Pty Ltd (contractor) sought a declaration that an adjudicator’s determination made under the Building and Construction Industry Security of Payment Act 1999 (NSW) (SOP Act) was void and of no effect.

The adjudication concerned a payment claim made by Napoli Excavations and Civil Pty Ltd (subcontractor) on 30 September 2022.  That was the fourth payment claim the subcontractor had made since work under the contract ceased in May 2022.  The third payment claim had been made on 31 August 2022 in exactly the same amount.  The contractor served a payment schedule in respect of the fourth payment claim with a scheduled amount of $nil.

In the adjudication application, the subcontractor submitted that the works were merely suspended and accordingly the contract was not terminated and allowed the subcontractor to submit the fourth payment claim.

In the adjudication response, the contractor submitted that the contract was terminated on 6 May 2022 and pursuant to section 13(1C) of the SOP Act the subcontractor was only entitled to make one payment claim after the date of termination and accordingly the fourth payment claim was invalid.  The contractor repeated that submission in the proceedings.

In the adjudicator’s determination, the adjudicator proceeded on the basis that it was common ground between the parties that the work under the contract was suspended.  The adjudicator did not reference or respond to the contractor’s submission that as the contract was terminated on 6 May 2022 it was not open to the subcontractor to serve the fourth payment claim.  The contractor alternatively submitted in the proceedings that the failure of the adjudicator to consider the contractor’s submission that the contract was terminated was a failure of the adjudicator to comply with section 22(2)(d) of the SOP Act, which requires an adjudicator to consider the payment schedule to which the adjudication application relates, together with all submissions duly made in support of the payment schedule.

Decision

The NSW Supreme Court held that the adjudicator’s determination was affected by jurisdictional error and declared the determination void and of no effect.

Darke J found that the contractor’s submission in its adjudication response as to the termination of the contract (and the resulting invalidity of the fourth payment claim) was duly made in support of its payment schedule, and section 22(2)(d) of the SOP Act required the adjudicator to consider that submission. 

His Honour inferred, principally from the failure of the adjudicator to make any reference to that submission and the adjudicator’s view that it was common ground between the parties that the contract works were suspended, that the adjudicator entirely overlooked the submission.  The fact the adjudicator held that view suggested to the court that it was unlikely that he considered the contractor’s submission about the termination of the contract.

The failure to consider the contractor’s submission was also considered material, as had the adjudicator considered the submission he may well have come to a different conclusion.  The adjudicator’s material failure to discharge his obligation to comply with section 22(2)(d) of the SOP Act amounted to a jurisdictional error.