Security of payment determinations: follow the process

The recent decision of the New South Wales Supreme Court (NSWSC) in Icon Co (NSW) Pty Ltd v AMA Glass Facades Pty Ltd [2019] NSWSC 250 has considered a dispute in which successive adjudicators expressed inconsistent findings in three related security of payment determinations.

Icon Co (NSW) Pty Ltd (Icon), a head contractor, contracted with AMA Glass Facades Pty Ltd (AMA), a subcontractor, to install a facade and associated works on Sydney’s Opal Tower (the Project).

A dispute arose between the parties regarding AMA’s payment claim, which included sums for variation works that it asserted Icon had directed it to carry out, but that were not confirmed in writing as required by the contract (the First Legal Issue). Icon refused to pay, and asserted an entitlement to set off against AMA’s payment claim for liquidated damages for delay to the Project works (the Second Legal Issue) (the Two Legal Issues).

AMA submitted its payment claim to an adjudicator, Ms Durham, under the Building and Construction Industry Security of Payment Act 1999 (NSW) (the Act) for determination. Ms Durham made a determination (the First Durham Determination) in respect of variations 2 to 24, and held in favour of AMA on the Two Legal Issues.

Following the First Durham Determination, Icon submitted another payment claim to a different adjudicator, Mr Rivlin, in respect of different variations on the Project, variations 26 to 31. These variations were not in the First Durham Determination but the same Two Legal Issues applied to them.

Mr Rivlin’s determination (the Rivlin Determination) was inconsistent with the First Durham Determination and found against AMA regarding the Two Legal Issues.

AMA did not challenge the validity of the Rivlin Determination by application to a court. Instead, AMA submitted the same payment claim to the first adjudicator Ms Durham to determine variations 26 to 31, that is, the variations the subject of the Rivlin Determination.

The second determination of Ms Durham (the Second Durham Determination) was directly inconsistent with the Rivlin Determination, and held in AMA’s favour on the Two Legal Issues.

Icon appealed to the NSWSC seeking a declaration that the Second Durham Determination was void, or alternatively, an order that the Second Durham Determination be quashed.

AMA brought a cross-summons seeking a declaration that the Rivlin Determination was void, or alternatively, an order that the Rivlin Determination be quashed on the basis that an issue estoppel arose from the First Durham Determination which prevented re-agitation before Mr Rivlin.

Stevenson J found for Icon, and made an order quashing the Second Durham Determination, while the Rivlin Determination was allowed to stand. His Honour also dismissed AMA’s cross-summons. In making his finding, Stevenson J noted that:

•   adjudicators should not depart from the conclusions of a previous adjudication, as “it was not appropriate for an adjudicator to, in effect, dissent from earlier adjudicative expressions of opinion in relation to the same provisions of the same contract between the same parties in adjudications arising from the same project”</em>; and
•   a “repetitious re-agitation of payment claims” may be an “abuse of process”.

Because of AMA’s re-agitation of the second payment claim, the judge decided that to allow the Second Durham Determination to stand would be to subvert the intent of the Act, which is a scheme that is “coherent, expeditious and self-contained”.

Stevenson J also dismissed AMA’s cross-summons challenging the Rivlin Determination because it was outside the 3-month time limit for judicial review under the Uniform Civil Procedure Rules. Relevantly, in refusing to allow AMA’s application for an extension of time, Stevenson J noted that AMA’s decision to re-submit the claim had caused prejudice to Icon.

The full decision can be found here.