November 17, 2023

The New South Wales Court of Appeal (NSWCA) in Ceerose Pty Ltd v A-Civil Aust Pty Ltd [2023] NSWCA 215 examined the scope of an adjudicator’s duty to consider matters relevant to an adjudication determination.

Ceerose Pty Ltd (Ceerose) engaged A-Civil Aust Pty Ltd (A-Civil) as a subcontractor on two developments. A-Civil issued payment claims under the Building and Construction Industry Security of Payment Act 1999 (NSW) (the Act) in respect of each development. Ceerose disputed certain items claimed and set out its reasons for non-payment in a payment schedule. A-Civil applied for adjudication and the adjudicator determined that A-Civil was entitled to be paid amounts in respect of both developments.

Ceerose brought proceedings in the Supreme Court seeking to set aside the two determinations on the basis that the adjudicator had failed to consider essential matters in making the determinations and that the determinations were affected by jurisdictional error. Darke J found that parts of both determinations suffered from jurisdictional error, and held that the affected parts be set aside. Ceerose appealed to the NSWCA arguing that other parts of the determinations should also be set aside, and A-Civil cross-appealed on the basis that one of Darke J’s findings of jurisdictional error were incorrect.

The key issues considered by the NSWCA included the scope of an adjudicator’s duty to consider matters under the Act and the circumstances which may give rise to a valid challenge of a determination. The court held as follows:

  • In making a determination, the Act requires that an adjudicator consider all aspects of a payment claim and payment schedule, together with all submissions, to the extent they have been ‘duly made’, that is, made in accordance with the Act and the construction contract.
  • A failure of an adjudicator to refer to a submission in their reasons does not necessarily infer that they had failed to ‘consider’ it, because of factors including:
    1.  reasons are not necessarily a comprehensive statement of all the aspects of a decision maker’s thinking and a selection process is inevitable;
    2.  the object of the Act is to allow for quick progress payments on projects, as evidenced by the strict timeframes for an adjudication determination, which means that all reasons involved in reaching a decision do not need to be explained;
    3.  the volume of material often supplied to an adjudicator means it is inevitable that an adjudicator will spend more time on certain aspects of a claim than others, and this may be reflected in the reasons; and
    4.  there is a multitude of possible explanations as to why a particular submission or contention may not be referred to in an adjudicator’s reasons, only one of which is that the material was not considered.

The above circumstances make it difficult for an applicant seeking to challenge a determination made under the Act to establish that an adjudicator breached the duty to consider relevant matters. However, the court noted that in circumstances where an adjudicator fails to refer to a clearly articulated submission on a centrally important matter in the dispute, which is based on uncontested facts, then this may suggest that the adjudicator has not properly considered a relevant matter. This was not the case here, and the court dismissed this ground of appeal.

Further, the court held that, contrary to the finding of the primary judge, adjudicators are not required to investigate the ‘true merits of a claim’ and go beyond what the parties have presented for determination. Rather, adjudicators are to only decide the dispute as between the parties, based on the limited matters the Act requires them to consider. Accordingly, the court allowed the cross-appeal.

The above highlights the importance of ensuring that all relevant reasons for non-payment are raised in a payment schedule when challenging aspects of a payment claim, and subsequently in any submission made in response to an adjudication application.

The full decision can be found here.

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