Lendlease Building Pty Ltd v BCS Airport Systems Pty Ltd & Ors [2024] QCS 164

Julie Whitehead  |  Laura Berry  |  Tara Vele

Key takeouts

• The proper construction of s 61(4) of the Building Industry Fairness (Security of Payment) Act 2017 (Qld) (BIF Act) is that it excludes construction work carried out on a building, structure or works situated wholly outside of Queensland.
• Where construction work straddles the border, an appropriate territorial nexus is maintained by way of the underlying building, structure or works being situated partly in Queensland. 
• In a cross border project, the BIF Act does not impose an additional requirement on a claimant to identify which work was carried out in QLD and which work was carried out in NSW. The only obligation on the claimant is to identify the construction work to which the progress claim relates so that the recipient can understand the work that has been undertaken and respond by way of a payment schedule.

Facts

Lendlease Building Pty Ltd (Lendlease) was the head contractor for construction work to be performed at the Gold Coast Airport. Lendlease entered into a subcontract with BCS Airport Systems Pty Ltd (BCS) to design and construct baggage handling systems. 

The border between Queensland (QLD) and New South Wales (NSW) runs through the airport and the area where BCS was to perform its construction work.  The land on which the airport is located is designated as a ‘Commonwealth Place’ and regulated under the Commonwealth Places (Application of Laws) Act 1970 (Cth) (CPAL Act).  A ‘Commonwealth Place’ is subject to Commonwealth legislative control and state laws cannot apply by way of their own force. However, the CPAL Act provides that a state’s laws operate in respect of a Commonwealth Place within that state, except to the extent that the state laws confer any judicial power.

BCS brought an adjudication application under the BIF Act, in which BCS sought payment for variations that were disputed by Lendlease.  One of the variations arose as a result of alleged access delays to structures that were situated wholly in QLD, partly in QLD and partly in NSW, and wholly in NSW.

Section 61(4) of the BIF Act provides that the security of payment regime does not apply to a construction contract to the extent it deals with construction work carried out outside of Queensland.  The key issue in the adjudication application and subsequent court proceedings was whether amounts sought as part of the variation claim related to construction work carried out outside of QLD.  Lendlease argued that the payment claim was invalid because some work was carried out in NSW and some work was carried out in QLD, and as it was impossible to distinguish which work was performed in each state, chapter 3 of the BIF Act did not apply.

Lendlease applied to the Supreme Court of Queensland, seeking a declaration that the adjudication decision, at least in part, be declared void. The questions before the court were:

1. What is the proper construction of s 61(4) of the BIF Act?
2. Does the BIF Act require a payment claim in a cross-border project to identify the location of the construction work?
3. Does a claim, with various components, where part of the work was undertaken in QLD and part of the work was undertaken in NSW fall outside the operation of the BIF Act by reason of s 61(4)?
4. Did the adjudicator fail to provide Lendlease with natural justice, by failing to consider Lendlease’s submissions on the operation of s 4 of the CPAL Act and s 61(4) of the BIF Act? If so, was the failure material?.
5. Was the adjudicator exercising ‘judicial power’ within the meaning of the CPAL Act?

Decision  

Lendlease’s application to set aside the adjudication decision was dismissed.

1. On the proper construction of s 61(4) of the BIF Act, Sullivan J accepted that the section provides a jurisdictional limit and gives rise to a jurisdictional fact. The purpose of s 61(4) is to identify what is excluded from the operation of Chapter 3 of the BIF Act , that is construction work carried out outside of Queensland.   The geographic focus of s 61(4) is the location of the building, structure or works to which an activity is applied to. His Honour concluded that s 61(4) ought to be construed as meaning that Chapter 3 does not apply to a construction contact to the extent it deals with construction work carried out ‘wholly’ outside QLD.  Where work ‘straddles the border’, the work is not carried out ‘wholly’ outside QLD. An appropriate territorial nexus with QLD is maintained by the underlying building or structure being situated partly in QLD. To conclude otherwise, would require a bolt-by-bolt analysis of work and materials to determine where the work took place, which would inevitably lead to further disputes. 
   
   
2. In a cross border project, the BIF Act does not require a payment claim to identify which work was carried out in QLD or in NSW.  The obligation on the claimant is to identity the construction work to which the progress claim relates so that the recipient can understand the work has been undertaken and respond to it by way of a payment schedule.  No further obligation is to be read into the BIF Act.
   
   
3. Lendlease had not discharged its onus to prove that a component of the variation claim was for construction work carried out on a structure situated wholly outside of Queensland.
   
   
4. Whether the adjudicator failed to consider Lendlease’s submissions, thereby denying Lendlease natural justice, Sullivan J concluded that the adjudicator met his obligation under s 84(2)(a)(i) of the BIF Act, which required him to decide whether he had jurisdiction to adjudicate the application. To the extent the adjudicator had an obligation under s 88(2) of the BIF Act, or an implied requirement under s 84(2)(a)(i), to consider submissions that were made on jurisdictional issues, His Honour concluded the adjudicator considered those submissions.  The absence in the determination of a discussion about the content of Lendlease’s jurisdictional argument based on s 61(4) of the BIF Act and s 4(5) of the CPAL Act was insufficient to establish an inference that there was a failure by the adjudicator to consider Lendlease’s submissions.
   
   
5. An adjudicator does not exercise judicial power under the BIF Act. The CPAL Act has the effect of applying the BIF Act to the contract between the parties in accordance with its terms. The process undertaken by an adjudicator under the BIF Act is administrative in nature.  Although an adjudicator delivers a binding determination, it does not automatically render the determination final and authoritative. Section 101 of the BIF Act makes it clear that an adjudication decision is not final and is subject to challenge in later court proceedings.