The text of the scenarios for You are the Adjudicator! on Saturday in Melbourne, and the “volunteers” who will act as advocates, are as follows:

You are the Adjudicator!

The Society of Construction Law Australia’s National Conference 2015

Moderator: Robert Fenwick Elliott, Keating Chambers

 

Scenario 1 – The Insolvent Subcontractor (Victoria)

A claimant painting subcontractor Alan Pty Ltd gets into financial difficulty. He says it is because he was not paid in full for this new school project – the respondent main contractor, Brian Pty Ltd, says Alan was in trouble anyway. Alan ceases trading.

Alan makes a payment claim for $100k under the Building and Construction Industry Security of Payment Act 2002 (Vic)

Brian puts in a payment schedule saying that it is not paying because it has concerns about whether Alan applied a proper undercoat; he says he is arranging for a sample to be laboratory tested.

Alan commences an adjudication.

2 days after the adjudicator accepts the appointment, Alan goes into administration.

Alan’s adjudication submission says that it has done the work and that there is no evidence that it is defective. The Administrator says that liquidation of Alan looks inevitable, but asserts an accrued right to payment had arisen before the Administration started.

Brian’s submission is that he still asserts that Alan skimped on the undercoat, but the lab test results are not yet ready. Brian relies on Brodyn v Daseyn in support of its assertion that the Act has no application where a claimant is no longer a going concern, and further that the Act is unconstitutional where is effect would be deprive Brian of its statutory set-off for alleged defective work. The estimated cost of rectification is $80k.

The adjudicator calls a conference.

(Relevant authority includes Facade Treatment Engineering Ltd the Brookfield Multiplex Constructions Pty Ltd [2015] VSC 41).

Advocates

Alan Pty Ltd                           Laina Chan

Brian Pty Ltd                          Andrew Robertson

Scenario 2 – Equitable Set-Off (Queensland)

A head contractor, Chaffinch Pty Ltd, makes a payment claim under the Building and Construction Industry Payments Act 2004 (Q’land) for $100k for work done on Dove Pty Ltd’s new warehouse.

In its payment schedule, Dove does not deny that that work was done or the valuation of $100k for it, but says that Chaffinch was late completing another project for a new Dove supermarket, for which it owes Dove $90k by way of liquidated damages. Dove claims a set-off. Dove has not paid the balance of $10k, but says that it proposes to withhold that in case there are any defects in the warehouse work. Dove says that whilst there was no express agreement for retention in the warehouse contract, retention arrangements are normal, and to be implied. Dove pays nothing.

The written submissions add nothing material.

The adjudicator calls a conference.

(Relevant authority includes Downsouth Constructions v Jigsaw Corporate Childcare [2007] NSWSC 597 at [59] and Perform (NSW) Pty Ltd v Mev-Aus Pty Ltd [2009] NSWCA 157)

Advocates

Chaffinch                               Daniel Morris

Dove                                       John Sharkey

Scenario 3 – Fraud (Tasmania)

A concrete subcontractor Elk Pty Ltd has made a payment claim under the Building and Construction Industry Security of Payment Act 2009 (Tas) for $100k for a foundation slab for a new tannery. That figure includes a figure of $10k for placing reinforcement that was to be provided free issue by the head contractor Fawn Pty Ltd. The claim includes the whole of this $10k. The contract identifies the relevant tonnage for the whole of that free issue reinforcement.

Fawn failed to put in any payment schedule.

Elk commenced an adjudication. The adjudicator made a site visit, and found that about $2k worth of the free issue reinforcement had not been placed in the work, but was under a tarpaulin behind Elk’s site hut. During the site visit, Elk’s representative indicated that Elk intended to shift that reinforcement the following day, in order to use it on another job.

Fawn immediately wrote an unsolicited email to the adjudicator saying that Elk must have known that it had not placed that reinforcement. Fawn said that, with only 80% of the reinforcement placed, the slab will have to be redone; the whole adjudication process is a fraud. Fawn also said that Elk’s intention to use the reinforcement on another job amounted to theft.

Elk responded with an equally unsolicited email saying that the adjudicator has got no right to pay any regard to Fawn’s email since this complaint had not been raised in any payment schedule. And anyway, in Elk’s view, Fawn had over-specified the amount of reinforcement, and the amount of reinforcement which Elk had placed in the concrete was just right for the job in hand.

The adjudicator calls a conference.

(Relevant authority includes Sugar Australia v Southern Ocean Pty Ltd [2013] VSC 535).

Advocates

Elk                                           Julian Grant

Fawn                                       Josh Singer

Scenario 4 – Previous valuation (South Australia)

Gregory Contractors Pty Ltd is building a hotel for Henrietta Hoteliers Pty Ltd. The contract was drafted by Henrietta’s lawyers, and contains a fast track arbitration procedure whereby, inter alia, any disputes about the amounts due under the contract by way of progress payments are referred to arbitration by a named arbitrator, India Inglis, who is required to make her award within 3 weeks of referral.

A couple of months ago, Gregory submitted a payment claim dispute to adjudication and the duly appointed adjudicator, Julia James, found that Gregory was entitled to a statutory progress payment of $1 million. Julia’s reasons for that determination were that Gregory had been delayed by Henrietta, that Gregory was entitled to that amount by way of delay damages, and she dismissed both of Henrietta’s arguments (1) that the effective cause of the delay on the project was Gregory’s own fault, and (2) that Gregory had failed to give notices of claim which were conditions precedent to any entitlement.

Henrietta paid that amount straightaway, but immediately referred the dispute about delay damages to India under the fast track arbitration provisions. India has made an award finding that there was no contractual entitlement to that payment, and ordering its restitution under section 32(3)(b) of the Building and Construction Industry Security of Payment Act 2009 (SA)[1]. Gregory has not honoured that award.

Gregory has now submitted another payment claim claiming not only the same value as had been due by Julia, but also claiming another $¼ million for work done since that time.

Henrietta has not paid that claim, but put in a payment schedule repeating the original reasons for disputing the claim to the $1 million for delay damages, and relying on India’s arbitration award as overreaching Julia’s previous adjudication determination. The payment schedule did not challenge that $¼ million worth of work has been done since the last payment, but in the circumstances, Henrietta stood overpaid, and so the amount proposed by the payment schedule was nil.

In its adjudication submission, Gregory seeks to support its claim for the $1 million of delay damages by saying that Julia had made a relevant valuation, and that in this adjudication, the adjudicator is obliged to make that same valuation under section 22(4) of the Act[2]. Further, Gregory says that India’s arbitration award is a nullity, because the fast track arbitration procedure offends against the no contracting provisions at section 33 of the Act[3].

In its adjudication response, Henrietta relies on India’s arbitration award as having changed the value of the relevant work within the meaning of that section. Henrietta says that it cannot have been the intention of the legislation that an adjudication’s determination which has already been bowled over by subsequent civil proceedings can be revived by the simple expedient of making another adjudication application.

The adjudicator invites submissions.

(Relevant authority includes Gambaro v Rohrig [2015] QSC 170).

Advocates

Gregory Contractors              Karen Wenham

Henrietta Hoteliers                Donald Charrett

Bearing in mind the prohibitions on parties being represented by lawyers at conferences, the advocates will have to pretend not to be lawyers, but gifted amateurs for this purpose!

[1] 32—Effect of Part on civil proceedings

(1)         Subject to section 33, nothing in this Part affects any right that a party to a construction contract—

(a)         may have under the contract; or

(b)         may have under Part 2 in respect of the contract; or

(c)         may have apart from this Act in respect of anything done or omitted to be done under the contract.

(2)         Nothing done under or for the purposes of this Part affects any civil proceedings arising under a construction contract, whether under this Part or otherwise, except as provided by subsection (3).

(3)         In proceedings before a court or tribunal in relation to a matter arising under a construction contract, the court or tribunal—

(a)         must allow for an amount paid to a party to the contract under or for the purposes of this Part in any order or award it makes in those proceedings; and

(b)         may make such orders as it considers appropriate for the restitution of any amount so paid, and such other orders as it considers appropriate, having regard to its decision in those proceedings.

[2]         (4)         If, in determining an adjudication application, an adjudicator has, in accordance with section 10, determined—

(a)         the value of construction work carried out under a construction contract; or

(b)         the value of related goods and services supplied under a construction contract,

the adjudicator (or any other adjudicator) is, in any subsequent adjudication application that involves the determination of the value of that work or those goods and services, to give the work (or the goods and services) the same value as that previously determined unless the claimant or respondent satisfies the adjudicator concerned that the value of the work (or the goods and services) has changed since the previous determination.

[3]         (1)         The provisions of this Act have effect despite any provision to the contrary in any contract.

(2)         A provision of an agreement, whether in writing or not—

(a)         under which the operation of this Act is, or is purported to be, excluded, modified or restricted, or that has the effect of excluding, modifying or restricting the operation of this Act; or

(b)         that may reasonably be construed as an attempt to deter a person from taking action under this Act,

is void.