John Holland Queensland Pty Ltd v SecureFence Pty Ltd [2024] QSC 290

Julie Whitehead  |  Ren Shike  |  Siobhan Beckett

Key takeout

• Section 88(2) of the Building Industry Fairness (Security of Payment) Act 2017 (BIF Act) limits the matters which an adjudicator must consider in deciding an adjudication application.

• An adjudicator must make their decision by reference to the provisions of the construction contract itself, rather than any non-contractual documents. Even if a party is entitled to payment under a non-contractual document which applies to the parties’ relationship based on estoppel, this cannot be the basis for payment under the BIF Act. This is because source of the entitlement is not the construction contract but a separate document.
  
  
• An adjudication will be affected by jurisdictional error if an adjudicator finds that a party is entitled to payment based on a non-contractual document unless the estoppel is framed so as to estop the party from denying that the construction contract had been varied or amended to incorporate the non-contractual document.

Facts

The Department of Transport and Main Roads (DTMR) engaged a joint venture of John Holland Queensland Pty Ltd & Seymour Whyte Constructions Pty Ltd (head contractor) to carry out upgrades to the Maroochydore Road Interchange on the Bruce Highway (head contract). The head contractor subcontracted SecureFence Pty Ltd (subcontractor) to supply and install fencing for the project (subcontract).

In February 2024, the subcontractor issued a payment claim under the BIF Act to the head contractor, claiming an entitlement of $298,227 (plus GST). The subcontractor asserted that the subcontract was varied to incorporate Annexure E under which the subcontractor incurred additional costs in purchasing certain materials. The head contractor issued a payment schedule which indicated that the amount due under the payment claim was nil. The subcontractor applied for adjudication of the payment claim.

In June 2024, the adjudicator determined that the Head Contractor was liable to pay the Subcontractor $187,270.00 (plus GST).

The head contractor then sought judicial review of the adjudication decision on the basis it was affected by jurisdictional error on two grounds:

1. the adjudicator erred in considering submissions that went beyond the express terms of the contract, to one which was based on an estoppel, arising from the parties’ conduct in relation to a document (titled Annexure E) that did not form part of the subcontract (first ground); and
   
   
2. in making findings with respect to the existence of the estoppel, the adjudicator:
   • did not have regard to the submissions of the head contractor as required by s 88(2) of the BIF Act; nor
   • provide any, or adequate, reasons for his decision as required by s 88(5)(b) of the BIF Act (second ground).

Decision

The court held that the adjudication decision was affected by jurisdictional error and void. This was because:

• in relation to the first ground, the adjudicator based his decision on a finding that the head contractor was estopped from denying the existence of the subcontractor’s entitlement to claim for the increased cost of materials under Annexure E, rather than finding that the subcontract was varied to include Annexure E; and
  
  
• in relation to the second ground, given that the adjudicator did not find that the original subcontract was amended to include Annexure E, the adjudicator did not perform the task required by s 88(2)(b) of the BIF Act, which is to consider ‘the provisions of the relevant construction contract’. Rather, the adjudicator based the subcontractor’s right to a progress payment on some ‘other arrangement’.

Cooper J ordered the repayment of the amount paid by the head contractor pursuant to the adjudication decision, plus interest at the rate used for default judgments. The subcontractor was ordered to pay to the head contractor a total of $241,957.39.