June 24, 2020

The recent decision of the Queensland Supreme Court in Acciona Agua Australia Pty Ltd v Monadelphous Engineering Pty Ltd [2020] QSC 133 considered what constitutes jurisdictional error for the purposes of claims made under the Building Industry Fairness (Security of Payment) Act 2017 (Qld) (the Act), and the effect of such a finding on an adjudicator’s decision.

Monadelphous sub-contracted Acciona to perform certain services associated with upgrading a sewage treatment plant. A dispute arose in relation to a progress payment submitted by Acciona, which was the subject of an adjudicator’s decision. The adjudicator determined that Acciona was entitled to $NIL as Monadelphous was able to set off an amount greater than the sum of Acciona’s payment claim.

Acciona issued proceedings in relation to the decision, claiming that it was void as it was based on a jurisdictional error. Specifically, Acciona submitted that:

  •   in breach of s 88(5) of the Act, the adjudicator failed to give proper reasons for his decision that Monadelphous was entitled to the set off amount, which amounted to jurisdictional error; and
  •   the adjudicator acted in excess of his jurisdiction by finding that Monadelphous had a right to recover the set off claim on the basis that, in breach of the Act, the adjudicator had incorrectly considered arguments from Monadelphous which it had raised in its adjudication response.

Section 82(4) of the Act requires that an adjudication response must not include reasons which were not previously included in the payment schedule. Relevantly, s 88(3) of the Act states that, when preparing a determination, an adjudicator must not consider a reason included in an adjudication response if it is prohibited under s 82.

In considering the issue Bond J held that:

  •   The legislative intention of s 88(3)(b) is to ensure that a respondent includes in its payment schedule all reasons for withholding payment on which it may wish to rely in any subsequent adjudication, thereby allowing the claimant to respond to those reasons in its adjudication application.
  •   Monadelphous included new reasons in its adjudication response which it was prohibited from including, and which the adjudicator should not have considered. As those reasons were central to the adjudicator’s finding that the adjudicated amount was $NIL, the adjudicator’s decision was attended by jurisdictional error and therefore void.
  •   The adjudicator’s reasons were deficient because he accepted Monadelphous’s submissions regarding its entitlement to the set off amount without providing any reasoning as to why, which amounted to jurisdictional error.
  •   Under the Act, where a court finds that part of an adjudicator’s decision is affected by jurisdictional error it may discard the offending part, allowing the remainder of the decision to be binding. The reasoning relied upon in determining Monadelphous’ entitlement to the set off could be severed from the remainder of the decision. Thus, the amount payable to Acciona remained binding on the parties.

This case is a useful reminder that when preparing a payment schedule under the Act, care should be taken to ensure all valid defences are identified so that they can be relied upon in any subsequent adjudication.

The full decision of Acciona Agua Australia Pty Ltd v Monadelphous Engineering Pty Ltd [2020] QSC 133 can be found here.

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