Adjudicator Erred in Building Dispute

In the recent decision Matrix Projects (Qld) Pty Ltd v Luscombe [2013] QSC 4 the Supreme Court of Queensland decided that the adjudicator in the proceedings failed in applying the Building and Construction Industry Payments Act (“the Act”).  

The parties to the proceeding were engaged in a building dispute in relation to a Period Subcontract and appointed an adjudicator under the Act to resolve the dispute. The adjudicator’s decision dumbfounded Matrix Projects (Qld) Pty Ltd (“Matrix”) and an application was brought forward to review the decision.

Matrix took a two-pronged approach to attack the adjudicator’s decision, stating the adjudicator erred on a question of law and failed to correctly execute his powers.

Among other things, the adjudicator was asked to review a Payment Claim made by Jason Luscombe trading as Luscombe Builders (“Luscombe”) under section 17 of the Act. The Payment Claim was in relation to rectification work carried out by Luscombe under the Period Subcontract. The Payment Claim included rectification work from 14 separate projects all in the one claim. Out of the 14 rectification projects, 9 were performed after work orders were issued to Luscombe pursuant to the Period Subcontract, while the remaining 5 jobs were performed after Luscombe received verbal instructions from Matrix.

The adjudicator believed all of these rectification jobs were performed under one Construction Contract as defined by the Act. The adjudicator argued that the series of projects performed by Luscombe all occurred pursuant to one arrangement. The adjudicator made reference to a term in the subcontract that stated Luscombe builders would “perform and complete… Works yet to be agreed” and took the view that this meant any work performed after the commencement of the Period Subcontract, was done so under this one arrangement. As such, the adjudicator believed all the jobs were performed pursuant to a single construction contract.

Matrix argued, and the Court agreed, that the adjudicator erred in correctly applying the Act. The Court stated that the term “arrangement” could not include works performed under a Period Subcontract and works performed pursuant to verbal instructions (referred to as “do and charge” works). Matrix claimed do and charge works were entirely different to works performed pursuant to Work Orders issued under the Period Subcontract. The Court decided the works were in fact entirely separate and therefore found there was more than one construction contract incorporated into the Payment Claim. As a result the Court found that the Payment Claim did not conform to the requirements of the Act, namely section 12 and 17 of the Act, which requires a payment claim to relate to only one construction contract.

In addition, the Court found the adjudicator failed in exercising his powers. The Adjudicator is required by the Act to calculate the value of construction work performed by Luscombe under the Contract. Instead of performing this task, the ajudicator calculated the value of all work Luscombe was given under the Contract including work not yet completed and work that Matrix terminated. 

Further the adjudicator stated in his decision that Luscombe was entitled to receive damages for any loss of income suffered by terminating work under the Contract. The Court found the adjudicator’s reasoning for damages flawed and unintelligible and stated the adjudicators calculations were erroneous as he failed in performing the simple task required by the Act. 

The Court found that the adjudicator’s decision was void because the adjudicator failed to perform the task required of him by the Act, the adjudicator failed to accord to natural justice and because the payment claim covered more than one construction contract.

This case is a timely reminder that:-

  1. Substance over form does not apply when lodging Payment Claims under the Act; and
  2. Adjudicator’s decisions are never final.

Cronin Litigation Lawyers are currently assisting many clients with building disputes and reviewing adjudicator’s decisions. If you have a building dispute or are unhappy with the outcome of adjudication, please phone our offices on (07) 5592 6633 to find out how we may be of assistance.

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Cronin Miller Litigation is a Gold Coast based law firm specialising in resolving commercial disputes, and providing effective results for persons who have a claim of a commercial nature.