Karam Group Pty Ltd as Trustee for Karam (No. 1) Family Trust v HCA Queensland Pty Ltd & Ors [2022] QSC 290

Andrew Orford  |  Laura Berry  |  Mikayla Colak

Key takeout

An adjudicator is required to both make a decision and communicate their decision, within the time prescribed in the Building Industry Fairness (Security of Payment) Act 2017 (Qld) (BIF Act) unless the adjudicator exercises the right to refuse to communicate the decision until the adjudicator’s fees and expenses are paid by giving notice to the parties within time. 

Where an adjudicator makes a decision in writing by the due date, but then fails to either deliver the decision to the parties and registrar, or give notice that they are refusing to deliver the decision until their fees and expenses are paid, by the due date, the adjudicator will have failed to comply with the key obligations of the BIF Act. This will render the decision void.

Facts

Karam Group Pty Ltd as Trustee for Karam (No. 1) Family Trust (Karam) entered into a construction contract with HCA Queensland Pty Ltd (builder) for the construction of a residential building. 

On 1 March 2022, the builder served a payment claim in the amount of ~$7 million.  On 15 March 2022, Karam issued a payment schedule for about $1.5 million.  The builder subsequently lodged an adjudication application in respect of the payment claim.  Under the BIF Act, the adjudicator was required to decide the application by 25 August 2022.  

The adjudicator decided the application and drafted written reasons by 25 August 2022.  On 26 August 2022, the adjudicator informed the parties that he refused to release his decision until his fees and expenses had been paid.  Payment was made that same day and the adjudicator released his decision to the parties.

The adjudicator’s decision was that the adjudicated amount was ~$1.8M.  Karam sought to overturn the decision in the Supreme Court.

The issues for determination were:

• whether the requirement that an ‘adjudicator must decide an adjudication application’ in s 85(1) of the BIF Act was satisfied by the written document complying with ss 88(1) and (5) being finalised before the expiry of the time period in circumstances where:
  • a copy of the adjudicator’s decision was not given to the registrar and the parties before the expiry of the time period; and
  • the adjudicator had not communicated that he would not release his decision until his fees and expenses were paid before the expiry of the time period; and
• if the court found that the adjudicator’s decision was void as a result of the timing issue above, whether the adjudicated amount paid pursuant to the purported adjudicator’s decision was required to be repaid.

The builder argued that the adjudicator’s decision was made within the prescribed time as the adjudicator had completed a written document that complied with the BIF Act before midnight on 25 August 2022.  The fact that the adjudicator’s refusal to communicate his decision was notified on 26 August 2022 did not affect the decision being made in time and valid. Karam argued that in the circumstances above, the adjudicator had effectively failed to make a decision within the prescribed time and therefore his decision was void.

Decision

Williams J found that the adjudicator had not decided the adjudication application within time and therefore the adjudicated decision was invalid and void. 

The proper construction of ss 85(1), 86 and 88 of the BIF Act was that the adjudicator decides the adjudication application by completing all aspects contained in s 88 prior to the expiry of the time period in s 85(1) (as extended by s 86), unless the adjudicator has validly exercised the right to refuse to communicate the adjudicator’s decision until the fees and expenses have been paid prior to the expiry of that time period. 

The court reiterated the integral role time limits play in achieving the purpose of the BIF Act, noting that communication of the adjudicator’s decision is essential to give rise to the obligation for payment of adjudicated amounts.

The builder was ordered to repay the amount determined as due and payable pursuant to the adjudicator’s decision that Karam had paid to builder.