Void SOPA determination – why the merits of a claim must be addressed
In the recent Supreme Court of New South Wales decision of Laing O’Rourke Australia Construction Pty Ltd v Monford Group Pty Ltd  NSWSC 491, the court considered an adjudicator’s statutory duty when making a determination under the Building and Construction Industry Security of Payment Act 1999 (NSW) (the Act).
Laing O’Rourke Australia Construction Pty Ltd (Laing O’Rourke) and Monford Group Pty Ltd (Monford) entered into a contract in relation to the development of a transport interchange facility (the Contract). Laing O’Rourke was the head contractor and Monford was the subcontractor. Monford served a payment claim under the Act on Laing O’Rourke for contract works and variations. Laing O’Rourke responded with a payment schedule which identified the amount of the payment as NIL. Monford referred the matter to adjudication under the Act.
In the adjudication, Laing O’Rourke disputed Monford’s claims on two preliminary bases: namely, that Monford had not complied with the variation regime under the Contract, and that it had failed to comply with the mandatory dispute resolution procedure in the Contract. The adjudicator rejected both points and determined Monford was entitled to a progress payment.
Laing O’Rourke appealed the adjudicator’s determination to the Supreme Court on the basis of jurisdictional error, specifically, the adjudicator’s failure to give due consideration to the merits of the claims made by Monford.
In finding that the adjudicator had failed to perform his statutory duty to consider the merits of each of the contested claims, Stevenson J held that:
the adjudicator determined each of the claims without any consideration of whether Monford had in fact carried out the work, or the value of any work carried out by Monford in relation to those claims; and
in some instances, the adjudicator failed to consider whether the work in question constituted a variation under the terms of the Contract.
Parties to a construction contract should be mindful that an adjudicator’s statutory duty to make a determination on the merits of the claim under the Act is absolute and should be properly exercised. A failure to do so can result in the adjudicator’s determination being set aside.
The Supreme Court’s decision can be viewed here.