Karam Group Pty Ltd ATF The Karam (No. 1) Family Trust v HCA Queensland & Ors  [2023] QSC 245

Andrew Orford  |  Gemma Osborne | Aidan Kleynhans

Key takeout

Dualcorp issue estoppel, which prevents the re-agitation of issues that have already been determined, is applicable to matters under the Building Industry Fairness (Security of Payment) Act 2017 (Qld) (BIF Act).

Dualcorp issue estoppel operates alongside the requirement for an adjudicator to determine whether an application is frivolous or vexatious under the BIF Act.

Facts

In July 2020 Karam Group Pty Ltd (Karam) entered into a contract with HCA Queensland Pty Ltd (HCA) for the design and construction of a residential apartment building in Coorparoo (contract).

HCA lodged four adjudication applications in relation to the contract between April 2022 and May 2023:

1. The first adjudication decision was set aside as invalid as it was not made in accordance with the timing requirements under the BIF Act (First Adjudication Decision).
2. The second application resulted in a determination that Karam was entitled to liquidated damages (Second Adjudication Decision).
3. The third application also resulted in a determination that Karam was entitled to liquidated damages (Third Adjudication Decision).
4. HCA then lodged a fourth adjudication application, which is the subject of this court decision. As part of its application HCA claimed that Karam was not entitled to claim liquidated damages on the basis of the ‘prevention principle’ (ie that Karam should be prohibited from insisting on strict performance of the contract where Karam had prevented HCA from performing.)

Dualcorp issue estoppel

Karam argued that its entitlement to liquidated damages (including the application of the prevention principle) had already been determined in the Second Adjudication Decision and Third Adjudication Decision. It submitted that it was an abuse of process for HCA to argue the matter again and sought an injunction restraining HCA from pursuing a claim that Karam was not entitled to liquidated damages.

Karam relied on a line of authority stemming from Dualcorp Pty Ltd v Remo Construction Pty Ltd (2009) NSWLR 190, which established that the BIF Act (and corresponding legislation in other jurisdictions) manifests an intention to prevent re-agitation of issues that have already been determined. This principle is sometimes referred to as ‘Dualcorp issue estoppel’.

The court in Wiggins Island Coal Export Terminal Pty Ltd v Monadelphous Engineering Pty Ltd [2016] QSC 96 (Wiggins) accepted that Dualcorp issue estoppel applies to construction adjudications in Queensland.

HCA submitted that since Wiggins had been decided, Queensland authorities have shown caution in the application of Dualcorp issue estoppel. It pointed to section 84(2)(a)(ii) of the BIF Act, which requires an adjudicator to determine whether an application is frivolous or vexatious. HCA noted that this provision was not present at the time Wiggins was decided, and that no similar provision exists in some of the equivalent legislation in other jurisdictions. It suggested that this provision (and not Dualcorp issue estoppel) provided the statutory process by which any re-agitation of claims should be addressed.

HCA further argued that even if Dualcorp issue estoppel was applicable in Queensland, it was not relevant in this case, since neither the Second Adjudication Decision nor the Third Adjudication Decision had expressly made a determination on the application of the prevention principle.

Decision

Dualcorp issue estoppel is applicable in Queensland and it applied to HCA’s arguments in relation to the prevention principle.

The court invited the parties to make submissions on whether an injunction or a declaration would be a more suitable remedy.    

The court found that it is generally well accepted as being applicable in Queensland. This is even though there have been some inconsistent decisions among interstate courts concerning the application of Dualcorp issue estoppel. Section 84(2)(a)(ii) of the BIF Act was not intended to supplant Dualcorp issue estoppel and that the two mechanisms were distinct in the way they operated.

The court recognised that the effect of section 84(2)(a)(ii) of the BIF Act was to make the adjudicator’s jurisdiction to make a determination conditional upon first deciding whether the application is frivolous or vexatious. This was contrasted this with Dualcorp issue estoppel, which is narrower in scope and can generally only be determined once arguments have been heard. There may be cases where an adjudication application may not on its face appear frivolous or vexatious but that a particular contention which forms part of that application may be an abuse of process. In such a case Dualcorp issue estoppel applies.

The court also found that while the Second Adjudication Decision had not expressly addressed the prevention principle, both parties had made submissions in relation to the prevention principle, and the award of liquidated damages in favour of Karam would have necessarily required a rejection of the application of the prevention principle.  

The court concluded that the issue regarding the applicability of the prevention principle had already been determined and Dualcorp issue estoppel prevented HCA from re-agitating that claim.