EQ Constructions Pty Ltd v A-Civil Aust Pty Ltd [2021] NSWSC 1604 and

Iridium Developments Pty Ltd v A-Civil Aust Pty Ltd [2021] NSWSC 1601

Andrew Hales | Karen Hanigan | Alexander Mastrovangelis

Key takeouts

There were two similar claims determined consistently, but with different results, on the same day by the same Judge in the NSW Supreme Court concerning claims for jurisdictional error and an examination of what is a jurisdictional fact and when it applies.  Where an adjudicator’s determination is lawfully formed albeit erroneous or mistaken, it will not be determined as tainted by jurisdictional error.  

This is significant for parties seeking to serve payment claims under section 13(4)(b) of the Building and Construction Industry Security of Payment Act 1999 (NSW) (Act) as they need to serve claims within 12 months after the relevant and specified works the subject of the payment claim have been performed to avoid uncertainty of adjudication and potential court proceedings, and to avoid missing out on receiving the claimed amount for works completed.

Facts in EQC v A-Civil

EQ Constructions Pty Ltd (EQC) contracted with A-Civil Aust Pty Ltd (A-Civil) to carry out construction works. On 21 December 2020, A-Civil served a payment claim to EQC under section 13 of the Act. EQC’s response was that that no payment would be made. After three adjudication applications by A-Civil in relation to to the unpaid claim, the adjudicator determined that A-Civil receive $70,414 payable by EQC.

EQC sought judicial review on the basis that the adjudicator’s determination relating to section 13 was affected and tainted by jurisdictional error. Section 13 provides a mechanism to seek progress payments by way of payment claims for construction work (or related goods and services) that has been completed in the later of the period as agreed in the contract or 12 months after the work had been complete. EQC argued jurisdictional error on two grounds.  First, the adjudicator’s determination that the payment claim was served within the time stipulations of section 13(4)(b) constituted jurisdictional error.  Second, that there was no valid adjudication application for the adjudicator to determine, as time limits had elapsed and the Act did not permit further adjudication applications. This second issue was rejected as other provisions of the Act provide alternative mechanisms for where there has been a failure to pay the claimed amount

Decision in EQC v A-Civil

The court reviewed whether the adjudicator had erred in forming an opinion that the payment claim had been served within the 12 month time period stipulated in section 13(4)(b) and whether this was a ‘jurisdictional fact’ within the following categories:

• Category 1: whether the adjudicator had correctly or incorrectly determined if a payment claim had been served within the 12 month time stipulation.  If incorrectly served outside of the stipulated time, yet determined as within, then this would be considered a jurisdictional error.
• Category 2: where the threshold depends upon the adjudicator’s satisfaction, opinion and belief that the payment claim was served within the 12 month period and whether the opinion was lawfully formed.  If the opinion was lawful and the adjudicator was satisfied, then no jurisdictional error occurs.

The court held that the requirement in section 13(4)(b) was a jurisdictional fact and fell within the second category. The threshold is whether the adjudicator’s determination or opinion was lawfully formed upon the jurisdictional fact. This interpretation mirrors the object of the Act to provide a quick and efficient mechanism for progress payments and limit interruptions to business. Even if it was an erroneous finding, it will not be a jurisdictional error.

In this case the adjudicator misstated the question that she was required to address and, therefore, in answering the wrong question, was held to have made no finding, and had formed no opinion, about whether some of the construction work (or related goods and services) to which the payment claim relates was carried out (or supplied) during the 12 month period stipulated in s 13(4)(b) of the Act.  Therefore the determination was declared void due to jurisdictional error.

In separate proceedings, Iridium Developments Pty Ltd (Iridium) also contracted with A-Civil for civil works.  On 8 February 2021, A-Civil issued a progress claim for $3,702,858.  Iridium responded by denying any payment was due on grounds that section 13(4)(b) only provides for claims within 12 months of the date of last construction works being carried out.  Iridium claimed that A-Civil had reached practical completion on 29 May 2019, whereas the payment claim was dated 8 February 2021, which was far in excess of the 12 month stipulation under section 13. At adjudication it was determined that Iridium pay A-Civil $665,512.19 for the claim.

As in the EQC case, Iridium commenced proceedings claiming the adjudication determination was void and unenforceable on the basis of jurisdictional error, as the adjudicator had erred in determining that certain works had been undertaken within the period 12 months prior of service of the payment claim under section 13(4)(b).

Again, the Supreme Court said the adjudicator’s opinion was within the second category. Iridium acknowledged this distinction, however, contended that unlike in EQC where no opinion was formed, in this instance the opinion was erroneous, mistaken or flawed.

Decision in Iridium v A-Civil

The court held that it could not determine whether the finding or opinion was correct or erroneous.  In this case the opinion was lawfully formed and accordingly this cures any jurisdictional error.  The adjudicator’s determination was not void for jurisdictional error.