Olympia Group (NSW) Pty Ltd v Hansen Yuncken Pty Ltd & Anor [2011] NSWSC 165 (16 March 2011)

Last Updated: 20 June 2011

Supreme Court New South Wales

Case Title:	Olympia Group (NSW) Pty Ltd v Hansen Yuncken Pty Ltd & Anor
Medium Neutral Citation:	[2011] NSWSC 165
Hearing Date(s):	10 March 2011
Decision Date:	16 March 2011
Jurisdiction:
Before:	Ball J
Decision:	Amended summons dismissed with costs
Catchwords:	BUILDING AND CONSTRUCTION CONTRACTS - Building and Construction Industry Security of Payment Act 1999 (NSW) - whether a decision by an adjudicator who does not have jurisdiction was a determination under s 22 - whether entitled to submit new claim under s 17 - whether adjudicator had jurisdiction to determine claim - whether construction work carried out outside NSW
Legislation Cited:	Building & Construction Industry Payments Act 2004 (Qld) Building & Construction Industry Security of Payment Act 1999 (NSW) Jervis Bay Territory Acceptance Act 1915 (Cth)
Cases Cited:	Brodyn Pty Limited v Davenport [2004] NSWCA 394; (2004) 61 NSWLR 421 Cardinal Project Services Pty Limited v Hanave Pty Limited [2010] NSWSC 1367 Chase Oyster Bar Pty Ltd v Hamo Industries Pty Ltd [2010] NSWCA 190; (2010) 272 ALR 750 Downer Construction (Australia) Pty Ltd v Energy Australia [2007] NSWCA 49; (2007) 69 NSWLR 72 Emergency Services Superannuation Board v Sundercombe [2004] NSWSC 405; John Holland Pty Limited v Made Contracting Pty Limited [2008] NSWSC 374 John Holland Pty Ltd v Schneider Electric Buildings Australia Pty Ltd [2010] QSC 159 Kirk v Industrial Relations Commission (NSW) [2010] HCA 1; 239 CLR 531 Multiplex Constructions Pty Limited v Luikens [2003] NSWSC 1140
Texts Cited:
Category:	Principal judgment
Parties:	Olympia Group (NSW) Pty Ltd (Plaintiff) Hansen Yuncken Pty Ltd (First Defendant) Ian Hillman (Second Defendant)
Representation
- Counsel:	Counsel: Mr F C Corsaro SC (Plaintiff) Mr B C A Bradley (Plaintiff) Mr M Christie SC (First Defendant) Mr B D Kaplan (First Defendant) No Appearance (Second Defendant)
- Solicitors:	Solicitors: Knight Lawyers (Plaintiff) Crawford Legal (First Defendant) No Appearance (Second Defendant)
File number(s):	2011/72539
Publication Restriction:

Judgment

Background

1. On 9 October 2009, the plaintiff, Olympia, and the first defendant, Hansen Yuncken, entered into a subcontract by which Olympia agreed for a lump sum of $7,034,550 (excluding GST) to refurbish the Geelong building in connection with the redevelopment of HMAS Creswell. HMAS Creswell is a shore establishment of the Royal Australian Navy located on the southwest shores of Jervis Bay. By s 4 of the Jervis Bay Territory Acceptance Act 1915 (Cth), the area occupied by HMAS Creswell is a territory of the Commonwealth known as the Jervis Bay Territory. By s 4A of that Act, the laws of the Territory are the laws of the Australian Capital Territory.
   
2. The contract between Olympia and Hansen Yuncken is expressed to be governed by the laws of the ACT.
   
3. On 28 January 2011, Olympia issued a payment claim in the sum of $946,214.48 (inclusive of GST) under s 13 of the Building & Construction Industry Security of Payment Act 1999 (the SOP Act ) in respect of work performed under the contract.
   
4. On 2 February 2011, Hansen Yuncken issued a payment schedule in the sum of $305,537.17 under s 14 of the SOP Act.
   
5. On 15 February 2011, Olympia made an adjudication application pursuant to s 17 of the SOP Act to the Australian Solutions Centre ( ASC ), an authorised nominating authority, for adjudication of its payment claim.
   
6. On 17 February 2011, Hansen Yuncken wrote to ASC drawing its attention to the fact HMAS Creswell was situated in the Jervis Bay Territory and to s 7(4) of the SOP Act. The text of s 7(4) is set out below. In substance, the section says that the Act does not apply to a construction contract to the extent that the contract deals with construction work carried out outside New South Wales or related goods and services supplied in respect of construction work of that type. The letter concluded:
   

Respectfully, we request the nominated adjudicator to consider, prior to acceptance of the nomination, whether he or she has the jurisdiction to determine the Adjudication Application in consideration of the above matters.

7. On 17 February 2011, Knight Lawyers, who acted for Olympia, responded to Hansen Yuncken's letter. In that response, they asserted:
   
   • The jurisdictional issue was not raised by Hansen Yuncken's payment schedule;
   • Jurisdiction was determined by the location of the construction work rather than the governing law of the construction contract;
   • "[T]he construction work and related goods and services which are the subject of the Payment Claim, has [sic] been carried out in Jervis Bay (location of site), Sydney (supply of most materials) and in between those two places (transportation of materials to site)" and, in those circumstances, the adjudicator had jurisdiction.

The letter went on to say:

To the extent which it may be relevant, the Respondent has not yet submitted its Adjudication Response and the matters contained in its facsimile will not be "duly made" for the purposes of section 22(2)(d) of the [SOP Act]. The Claimant submits that the submission should not be considered unless and until it is a submission "duly made" within the meaning of that section.

8. The second defendant was nominated as the adjudicator and, on 21 February 2011, ASC sent the parties a copy of his notice of acceptance under s 19 of SOP Act. Although the adjudicator did not file a submitting appearance in these proceedings, it is clear from evidence before the court that he chose not to participate in them; and the hearing proceeded on the basis that he had effectively agreed to submit to any order of the court other than an order as to costs.
   
9. On 22 February 2011, ASC wrote to the parties stating that the adjudicator had requested ASC to advise the parties of the following:

Pursuant to Section 22(2)(a) of the Building and Construction Industry Security of Payment Act (Act) I have formed the opinion that I do not have jurisdiction to determine the adjudication application.

I refer to the Respondent's unsolicited correspondence dated 17 th February 2011, which I note is in relation to jurisdictional issues so I must consider the contents.

The Payment Claim in question is for works carried out in an area of Jervis Bay NSW that comes under the Jervis Bay Territory Acceptance Act 1915 and has been endorsed under the Building and Construction Industry Security of Payment Act 1999 being a NSW Act. The Jervis Bay Territory Acceptance Act 1915, agreement was made [sic] between the Commonwealth of Australia ('Commonwealth') and the State of New South Wales ('State'), to provide for the acceptance of certain territory surrendered by the State to the Commonwealth ...

I am satisfied the ... boundaries [of the Jervis Bay Territory] encompass the construction site the subject of this adjudication application and as such is a territory under Australian Capital Territory jurisdiction.

Based on the above I am satisfied the contract and therefore the payment claim made under the contract is not under the jurisdiction of the Building and Construction Industry Security of Payment Act 1999. As such I have formed the view the Payment Claim the subject of this adjudication application is invalid.

10. Olympia commenced these proceedings on 7 March 2011, seeking urgent relief. Essentially, it makes three claims. First, it says that the adjudicator did have jurisdiction to deal with its claim because the relevant construction work, or at least a substantial part of it, was carried out in New South Wales. Second, Olympia says that the adjudicator failed to determine its claim within the time allowed by s 21(3) of the SOP Act with the consequence that it is now entitled under s 26(2) of the SOP Act to withdraw its original adjudication application and to make a new adjudication application under s 17. Thirdly, Olympia claims (in an amended summons filed on 8 March 2011) that, if the adjudicator did make a determination pursuant to s 22 of the SOP Act, that determination was void.
    

Did the adjudicator determine Olympia's payment claim?

11. It is convenient to deal first with the question whether the adjudicator determined Olympia's payment claim. However, before dealing with that issue, I should mention one preliminary matter. There was a suggestion in Knight Lawyers' letter dated 17 February 2011 that Hansen Yuncken could not raise with the adjudicator the jurisdictional issue because that issue was not raised by its payment schedule. That submission was not seriously pursued at the hearing. In any event, in my opinion, it has no substance. Section 20(2B) of the SOP Act provides:

The respondent cannot include in the adjudication response any reasons for withholding payment unless those reasons have already been included in the payment schedule provided to the claimant.

That section prevented Hansen Yuncken from raising in its adjudication response a reason for not making a payment that was not raised in its payment schedule. It did not prevent it from raising grounds on which it was asserted that the adjudicator did not have jurisdiction to make a determination.

12. In relation to the question whether the adjudicator determined Olympia's claim, Olympia puts its case in two ways. First, it says that the adjudicator did not have power to determine his own jurisdiction. Second, Olympia submitted that, on its face, the decision of the adjudicator was not a determination of its claim. Rather, the adjudicator reached a conclusion that he did not "have jurisdiction to determine the adjudication application" and that the "adjudication application is invalid". These decisions, whatever they were, were not a determination of the claim. That conclusion, according to Olympia, was supported by the fact that the adjudicator reached his decision before Hansen Yuncken served its adjudication response and before the time for it to do so had expired. That was despite the fact that s 21(1) of the SOP Act provides:
    

An adjudicator is not to determine an adjudication application until after the end of the period within which the respondent may lodge an adjudication response.

13. Hansen Yuncken, on the other hand submitted that the letter dated 22 February 2011 from ASC communicating the adjudicator's decision satisfied the requirements of s 22 of the SOP Act. That section relevantly provides:

(1) An adjudicator is to determine:

(a) the amount of the progress payment (if any) to be paid by the respondent to the claimant (the adjudicated amount ), and

(b) the date on which such amount became or becomes payable, and

(c) the rate of interest payable on any such amount.

(2) In determining an adjudication application, the adjudicator is to consider the following matters only: (a) the provisions of this Act;

(b) the provisions of the construction contract from which the application arose,

(c) the payment claim to which the application relates, together with all submissions (including relevant documentation) that have been duly made by the claimant in support of the claim,

(d) the payment schedule (if any) to which the application relates, together with all submissions (including relevant documentation) that have been duly made by the respondent in support of the schedule,

(e) the results of any inspection carried out by the adjudicator of any matter to which the claim relates.

(3) The adjudicator's determination must be in writing and must include:

(a) the reasons for the determination, and

(b) the basis on which any amount or date has been decided, if, before the making of the determination, either the claimant or the respondent requests the adjudicator to include those matters in the determination.

In Hansen Yuncken's submission, the determination of the adjudicator in substance was that the amount of the payment claim was nil because the payment claim was not validly made under the SOP Act and that determination was within the scope of the adjudicator's function. Hansen Yuncken claimed that that conclusion was supported by the decision of the Queensland Supreme Court in John Holland Pty Ltd v Schneider Electric Buildings Australia Pty Ltd [2010] QSC 159. In that case, an adjudicator had concluded that he did not have jurisdiction to determine a claim because only one reference date was available to the claimant and the claimant had previously served a claim in respect of that reference date. Section 17(5) of the Queensland Act, like s 13(5) of the SOP Act, provides that a claimant cannot serve more than one payment claim in relation to each reference date. Applegarth J held that the adjudicator's decision was a decision that fell within s 26 of the Queensland Act (which is in substantially the same terms as s 22 of the SOP Act). Consequently, the claimant was bound by the adjudicator's decision on that point and it could not therefore serve a further claim. Hansen Yuncken also claimed that its submission was supported by the decision of the Court of Appeal in Downer Construction (Australia) Pty Ltd v Energy Australia (2007) 69 NSWLR 72.

14. I do not accept Hansen Yuncken's submissions. In my opinion, the adjudicator's decision was not a determination of the type contemplated by s 22 of the SOP Act. Rather, it was a decision whether the SOP Act applied to the claim made by Olympia having regard to where the relevant construction work was carried out. The adjudicator had to make a decision about that question because it was an essential precondition to the exercise of the powers granted to him by the Act. But is does not follow that, in making that decision, he was exercising a power to make a determination of the type required by s 22. As Spigelman CJ explained in Chase Oyster Bar Pty Ltd v Hamo Industries Pty Ltd [2010] NSWCA 190; (2010) 272 ALR 750 at [36]:
    

The issue to be determined is whether the adjudicator had jurisdiction to determine an "application" which had been made without compliance with the mandatory (in a negative sense) terminology of s 17(2) [which relevantly states in para (a) that an adjudication application cannot be made unless the claimant has notified the respondent within 20 business days immediately following the due date for payment of the claimant's intention to apply for adjudication of its claim]. The issue is not, contrary to some of the submissions made, whether the adjudicator had jurisdiction to determine that s 17(2)(a) had been complied with. That section is not addressed to the adjudicator and is not a matter which he is directed to "determine" within s 22(1) of the Act. It may be that it is a matter which he must "consider" as one of the "provisions of the Act" within s 22(2)(a). However, that section confers no power to determine the issue.

15. The decision of the Court of Appeal in Downer Construction (Australia) Pty Ltd v Energy Australia [2007] NSWCA 49 ; (2007) 69 NSWLR 72 is not inconsistent with the point made by Spigelman CJ. Before dealing with that decision, it is important to put it in context. In Brodyn Pty Limited v Davenport [2004] NSWCA 394; (2004) 61 NSWLR 421, the Court of Appeal held that relief in the nature of certiorari was not available to quash a determination of an adjudicator on the grounds of jurisdictional error. In reaching that conclusion, the court thought that a legislative intention to minimise court involvement in the operation of the SOP Act could be discerned from the terms of the statute. However, the Court of Appeal thought that there were a number of essential preconditions to an adjudication determination which, if they did not exist in a particular case, meant that the determination was void. Those preconditions included:

1 The existence of a construction contract between the claimant and the respondent, to which the Act applies (s 7 and s 8).

2 The service by the claimant on the respondent of a payment claim (s 13).

3 The making of an adjudication application by the claimant to an authorised nominating authority (s 17).

4 The reference of the application to an eligible adjudicator, who accepts the application (s 18 and s 19).

5 The determination by the adjudicator of this application (s 19(2) and s 21(5)), by determining the amount of the progress payment, the date on which it becomes or became due and the rate of interest payable (s 22(1)) and the issue of a determination in writing (s 22(3)(a)). ([2004] NSWCA 394; [2004] NSWCA 394; (2004) 61 NSWLR 421 at [53] per Hodgson JA.)

16. Brodyn was overruled by the Court of Appeal in Chase Oyster Bar Pty Ltd v Hamo Industries Pty Ltd [2010] NSWCA 190; (2010) 272 ALR 750. In that case, the Court of Appeal held, following the decision of the High Court in Kirk v Industrial Relations Commission (NSW) [2010] HCA 1; 239 CLR 531, that the court did have power to grant relief in the nature of certiorari against an adjudicator for jurisdictional error. Clearly, Downer Construction (Australia) Pty Ltd v Energy Australia [2007] NSWCA 49 ; (2007) 69 NSWLR 72 was decided before Chase Oyster Bar and it must be read in that light.
    
17. In Downer Construction, the contract was for the construction of a tunnel to carry electrical cables. A clause in the contract entitled the contractor, Downer, to be paid extra costs if it encountered a "Latent Condition" during tunnelling operations. Downer made a claim under that clause following water ingress into the tunnel. The claim was expressed in different terms in the adjudication application. However, the adjudicator concluded that the claim and the application raised substantially the same issues. Energy Australia took issue with that conclusion and submitted that, since the adjudication application was sufficiently different from the payment claim, the application was not for adjudication of the claim or the adjudicator's determination of the application was not a determination of the claim. On that question, Giles JA (with whom Santow JA and Tobias JA agreed) said (at [87]):
    

In my opinion, determination of the parameters of the payment claim is a matter for the adjudicator, and a reasonable but erroneous decision by the adjudicator does not invalidate the determination. In the present case, in determining the amount of the progress payment (if any) to be made it was for the adjudicator to decide whether the water ingress fell within latent conditions for the purposes of the contract, and the parameters of the payment claim in that respect. He did so. As to both, it could not be said that the adjudicator's decision was without foundation, and if the adjudicator addressed the matters and came to his decisions, even if other decisions could have been come to, he did what the Act required - he determined the adjudicated amount.

What is clear from this passage is that the court took the view that the question whether the claim and application raised the same issue was one of the matters that the adjudicator was required to decide in order to reach a determination under s 22. It was not an issue that went to his jurisdiction either in the narrow sense considered in Brodyn or the broader sense considered in Chase Oyster Bar . The position in the present case is quite different since, even on the narrow approach adopted in Brodyn , the question whether there was a construction contract to which the Act applies - that is, a construction contract which did not involve construction work carried out outside New South Wales or related goods and services supplied in respect of construction work of that type - is a question that goes to whether the adjudicator can exercise jurisdiction. It is not a question the determination of which forms part of the exercise of that jurisdiction.

18. I accept that it is difficult to reconcile the conclusions of the previous paragraph with statements made by Applegarth J in John Holland . However, the decision in that case did not turn on whether the original adjudicator's decision was a decision under s 26 of the Queensland Act. Rather, it turned on the extent to which a decision of an adjudicator was binding in a later adjudication. The resolution of that issue did not depend simply on characterising the decision in relation to the earlier adjudication application as falling within s 26 of the Queensland Act. It also turned on principles of issue estoppel and abuse of process. In any event, John Holland was decided before Chase Oyster Bar . In my opinion, the point made by Spigelman CJ in the latter case is correct and I should follow it.
    
19. In my opinion, the conclusion that the adjudicator did not make a determination under s 22 of the SOP Act is supported by what the adjudicator actually did. He was asked to make a decision on the question of jurisdiction before he accepted his nomination. Faced with that request, he accepted his nomination but, on the same day, caused ASC to write to the parties to say that he accepted that he did not have jurisdiction. He did not wait for an adjudication response as he was required to do before making a determination under s 22. Nor does it appear that he examined the payment claim or the payment schedule in arriving at his decision. Rather, what he relied on was the fact that the construction site was located outside New South Wales. It seems clear from those facts that the adjudicator - correctly, in my view - was not purporting to make a determination under s 22.
    

What are the consequences of what the adjudicator did?

20. Section 26 of the SOP Act relevantly provides:

(1)This section applies if:

(a)a claimant fails to receive an adjudicator's notice of acceptance of an adjudication application within 4 business days after the application is made, or

(b)an adjudicator who accepts an adjudication application fails to determine the application within the time allowed by section 21(3).

(2)In either of those circumstances, the claimant:

(a) may withdraw the application, by notice in writing served on the adjudicator or authorise nominating authority to whom the application was made, and

(b) may make a new adjudication application under section 17.

There is ample authority for the proposition that "fails" in this context simply means "does not". So, for example, if the court holds that the adjudicator's decision was void for some reason, then the adjudicator has failed to determine the application: see Multiplex Constructions Pty Limited v Luikens [2003] NSWSC 1140; Emergency Services Superannuation Board v Sundercombe [2004] NSWSC 405; John Holland Pty Limited v Made Contracting Pty Limited [2008] NSWSC 374; Cardinal Project Services Pty Limited v Hanave Pty Limited [2010] NSWSC 1367 at [22] per McDougall J.

21. In follows, in this case, that Olympia is entitled under s 26(2) of the Act to make a new adjudication application under s 17. However, the court would not permit it to do so unless the court was satisfied that an adjudicator had jurisdiction to determine the claim.
    

Does an adjudicator have jurisdiction to determine Olympia's claim?

22. Section 7 of the SOP Act relevantly provides:

(1) Subject to this section, this Act applies to any construction contract, whether written or oral, or partly written and partly oral, and so applies even if the contract is expressed to be governed by the law of a jurisdiction other than New South Wales.

...

(2) This Act does not apply to a construction contract to the extent to which it deals with:

(a) construction work carried out outside New South Wales; and

(b) related goods and services supplied in respect of construction work carried out outside New South Wales.

...

23. Section 6(1) of the SOP Act provides:

In this Act, related goods and services , in relation to construction work, means any of the following goods and services:

(a) goods of the following kind:

(i) materials and components to form part of any building, structure or work arising from construction work,

(ii) plant or materials (whether supplied by sale, hire or otherwise) for use in connection with the carrying out of construction work,

(b) services of the following kind:

(i) the provision of labour to carry out construction work,

(ii) architectural, design, surveying or quantity surveying services in relation to construction work,

(iii) building, engineering, interior or exterior decoration or landscape advisory services in relation to construction work,

(c)goods and services of a kind prescribed by the regulations for the purposes of this subsection.

24. The question, then, is whether the construction contract in this case "deals with" construction work carried out outside New South Wales or with related goods and services supplied in respect of construction work carried out outside of New South Wales. That question is to be answered by considering the terms of the relevant construction contract in the context in which they operate. In my opinion, that requires the court to identify the subject matter of the contract and to ask whether that subject matter has the required quality (that is, dealing with construction work or related goods and services of the type referred to in s 7(3)). Whether or not it has the required quality does not depend simply on the terms of the contract. It also depends on the objective facts relating to the relevant work.
    
25. In this case, the relevant construction contract is the contract between Olympia and Hansen Yuncken. Clause 2.1 of that contract requires Olympia to "undertake and complete building works to Geelong in the manner of a turnkey solution". The clause then goes on to provide a non-exclusive list of the areas of work to be covered by the contract. Clause 3 of the contract then sets out a more precise description of the works. Clause 3.4 sets out what is required in relation to site preparation including matters such as site cleaning and tree protection. Clause 3.5 requires Olympia to allow for out of sequencing works and to coordinate with other contractors working at HMAS Creswell. Clause 3.6 requires Olympia to provide adequate levels of supervision. Clause 3.8 requires Olympia to complete external infrastructure and civil works adjacent to the Geelong building including stormwater works, civil work such as excavation and reinstatement of grassed areas, electrical and communication services, subsoil drainage works, gas, sewer and water supply services together with demolition work.
    
26. In order to comply with its obligations under its contract, Olympia engaged a number of subcontractors. The work performed by the subcontractors included piling, structural steelwork, carpentry and joinery. The claim that was the subject of the adjudication application included amounts payable to those subcontractors, among others. The relevant subcontractors are based in New South Wales and a substantial amount of the work they did in order to meet their obligations under the subcontracts was performed in New South Wales.
    
27. In my opinion, the contract between Olympia and Hansen Yuncken dealt with construction work outside New South Wales or at least with related goods and services supplied in respect of that construction work. Under the contract, Olympia was to refurbish a building in the Jervis Bay Territory. Necessarily, the work had to be performed in that territory. The fact that goods were sourced in New South Wales and work was carried out in New South Wales in connection with the contract does not mean that the contract between Olympia and Hansen Yuncken dealt with construction work in New South Wales. At most, all that could be said was that the contract for the construction work dealt with related goods and services which were supplied in New South Wales because the contract left it open - or, indeed, given the location of the Jervis Bay Territory, contemplated - that goods and services of that description would be supplied. The goods and services actually supplied in New South Wales were related goods and services to construction work carried on in the Jervis Bay Territory because the goods and services consisted of materials and components which formed part of the work on the Geelong building or the provision of labour in connection with the fabrication of those materials and components. The SOP Act does not apply to those related goods and services by reason of s 7(4)(b) of the Act.
    

Orders

28. In my opinion, the adjudicator was correct to hold that he did not have jurisdiction to deal with Olympia's claim. In those circumstances, its amended summons should be dismissed with costs.
    

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