AECOM Australia Pty Ltd v Lend Lease Engineering Pty Ltd

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17/04/14 – AECOM Australia Pty Ltd v Lend Lease Engineering Pty Ltd

Adjudication Application no. 30363

Authorised Nominating Authority

Adjudicator

Registration Number

Claimant

Respondent

Project

 

Payment Claim

 

Payment Schedule

Adjudication Application

Adjudicator’s Acceptance

Adjudication Response

Adjudication Decision

Adjudicated Amount

Due Date for Payment

Rate of Interest

Apportionment of Adjudication Fees

Institute of Arbitrators and Mediators Australia

Chris Lenz

J622914

AECOM Australia Pty Ltd

Lend Lease Engineering Pty Ltd

Lady Cilento’s Children’s Hospital,

SOUTH BRISBANE QLD

Served 3 March 2014 for $1,828,395

including GST

Served 14 March 2014 for $NIL

28 March 2014

3 April 2014 (email & letter)

4 April 2014

17 April 2014

$NIL

7 April 2014 (but no amount payable on that date)

8.5% (but no amount payable)

Claimant 50%

Respondent 30%

 

 

Table of Contents

A. DECISION

B. REASONS

I. Background

II. Application to an ANA and appointment of Adjudicator

III. Material provided in the adjudication

a. Claimant’s Material

b. Respondent’s Material

IV. The Construction Contract

V. Jurisdictional issues

c. Breach of contract damages claim and claims outside the contract

d. Claim for related services more than 12 months ago

VI. Payment Claim

VII. Payment Schedule

VIII. Merits of the claim

e. Claim 1 for $1,316,060

f. Claim 2 for $96,386

g. Claim 3 for $470,452, but reduced to $415,028.90 [paragraph 3 of application]

IX. The amount of the progress payment

X. Due date for payment

XI. Rate of interest

XII. Authorised Nominating Authority and Adjudicator’s fees

 

A. DECISION

I have made a decision under the Building and Construction Industry Payments Act 2004 (“BCIPA”), and in respect of the claimant’s payment claim, that:

as shown on the first page of this decision.

B. REASONS

I. Background

  1. AECOM Australia Pty Ltd (referred to in this adjudication as the “claimant”) was engaged by Abigroup Contractors Pty Ltd, now known as Lend Lease Engineering Pty Ltd (referred to in this adjudication as the “respondent”), to provide design development (DD), contract documentation (CD), contract administration (CN) and post construction services (the “work”) for the respondent for its design and development contract with the State Government for the Lady Cilento Children’s Hospital, South Brisbane.
  2. The parties entered into a professional services contract on 29 September 2010 (the “contract”).
  3. The claimant’s payment claim dated 3 March 2014 claimed:

(i) $1,316,060 of additional work in relation to Issued for Construction (“IFC”) documentation; together with

(ii) $96,385.56 claim for Additional Construction Monitoring; as well as

(iii) $470,452 partly paid Construction Phase Services Claim.

  1. The respondents payment schedule dated 17 March 2014 identified that $NIL was payable, and the schedule identified a set off of $1,573,290 arising out of the respondent’s costs and damage due to design errors of the claimant.
  2. The claimant and respondent had been in dispute in relation to the IFC documentation prior to entry into the contract.

II. Application to an ANA and appointment of Adjudicator

  1. The claimant applied to the Institute of Arbitrators and Mediators (“IAMA”) on 28 March 2014 for adjudication. By letter dated 2 April 2014, IAMA referred the adjudication application no. 30363 for me to determine.
  2. IAMA is an Authorised Nominating Authority under BCIPA and I am a registered adjudicator under BCIPA with registration number J622914.
  3. By letter dated 3 April 2014 sent by email and facsimile to the claimant and to the respondent, I accepted the Adjudication Application and thereby became the appointed Adjudicator.
  4. On 4 April 2014 the respondent delivered 5 folders of its adjudication response.
  5. I find therefore that an adjudication application was made to an authorised nominating authority on 28 March 2014, and that there was a reference to an appropriately registered adjudicator within the time limits prescribed under BCIPA.
  6. On 10 April 2014 at 4:42 PM, I received an email containing submissions from the claimant about the adjudication response and at 5:23 PM on the same day an email from the respondent responding to the claimant’s email.
  7. On 11 April 2014 at 11.06 AM, I emailed both the claimant and respondent advising them that I had glanced at their emails, but had not considered them further, as they had not been requested by me and were therefore not properly made, and requested that no further submissions be given unless I requested them under section 25 (4) of BCIPA.

III. Material provided in the adjudication

  1. I received both an adjudication application and an adjudication response as follows:

a. Claimant’s Material

  1. Adjudication Application served on 28 March 2014 for $1,828,395 including GST with the claimant’s submissions (the “application”) comprising 64 paragraphs of submissions as well as the professional services contract between the claimant and respondent dated 29 September 2010; and
  2. tab 1 – the payment claim, together with attached invoices and variation spreadsheets;
  3. tab 2 – the payment schedule dated 17 March 2014;
  4. tab 3 – the claimant’s letter to the respondent dated 23 September 2010;
  5. tab 4 – the claimant’s letter to the respondent dated 23 September 2010 (it appears to be a duplicate of what was in tab 3);
  6. tab 5 – the claimant’s letter to the respondent dated 25 July 2011;
  7. tab 6 –the claimant’s letter to the respondent dated 26 October 2011;
  8. tab 7 – the claimant’s letter to the respondent dated 24 February 2012;
  9. tab 8 – IFC Re-documentation summary together with attached drawing registers;
  10. tab 9 – highlighted design documentation error register dated 17 December 2013 revision B;
  11. tab 10 – the claimant’s letter to the respondent dated 17 September 2013.

b. Respondent’s Material

  1. Volume 1 – comprising adjudication response submissions, the adjudication application, and statutory declaration of Karl Scott;
  2. Volume 2 – statutory declaration of Malcolm Jacobsen;
  3. Volume 3 – statutory declaration Malcolm Jacobsen continued;
  4. Volume 4 – statutory declaration of Oswald Tang, Mark Moseley and Colin McVeigh;
  5. Volume 5 – statutory declaration of Stuart Dowling attaching expert report as well as some case authorities.

IV. The Construction Contract

  1. Both parties included the same Professional Services Contract dated 29 September 2010 in their material and I am satisfied that this is the contract between the parties.
  2. I need to decide whether this contract falls within the definition of a “construction contract” under BCIPA.
  3. Schedule 2 of BCIPA states that a construction contract means a “contract, agreement or other arrangement under which one party undertakes to carry out construction work for, or to supply related goods and services to, another party.”
  4. I must first consider whether the claimant supplied related goods and services in relation to construction work. I note that the claimant did not make this specific submission, however, I am responsible for deciding whether I have jurisdiction.
  5. Construction work is defined in section 10 of BCIPA and from the material I am satisfied that the construction of a Children’s Hospital falls within the meaning of section 10(1)(a) of BCIPA which provides:

“the construction, …of buildings or structures, whether permanent or not, forming, or to form, part of the land;”

  1. Having regard to the contract and the payment claim. I find that the claimant provided the services of design, building and engineering advisory services relating to construction work, which falls within the definition of section 11(1)(b) of BCIPA.
  2. I am therefore satisfied that by providing these services the claimant supplied related goods and services in relation to construction work in accordance with the definitions in section 11 (1) of BCIPA.
  3. I am satisfied that the contract, whereby the claimant undertook to carry out this work is a construction contract within the meaning of BCIPA because it was a contract entered into on 29 September 2010 for the carrying out of those related goods and services, which fall within section 11 (1) of BCIPA and related to the building of a Children’s Hospital, which was construction work as provided by section 10 (1) of BCIPA.
  4. I am therefore satisfied that there was a construction contract to which the payment claim related and the respondent has not pointed to, nor have I found, that any of the exceptions under section 3 of BCIPA apply. Accordingly, I am satisfied that the matter can be adjudicated.
  5. However, before I further closely examine the payment claim and payment schedules together with the respective submissions as required in the adjudication process, there are a number of important jurisdictional issues that have been raised in the respondent’s submissions (pages 14 to 20) that require my attention before doing so.
  6. It is not practically possible to consider jurisdiction in isolation of the payment claim and payment schedule, and I had already read the payment claim and payment schedule, together with the application and response together with their attached documents before considering the response submissions about jurisdiction.
  7. Nevertheless, the focus in this part of the decision is initially on the jurisdictional issues.

V. Jurisdictional issues

  1. At paragraph 29 of the adjudication submissions, the respondent states that it is entitled to raise jurisdictional issues, despite not having raised in the payment schedule, and it referred to the case of South-East Civil and Drainage Contractors Pty Ltd v AMGW Pty Ltd [2013] QSC 45, at paragraph 34 as authority in support.
  2. I’m satisfied from this authority, and from paragraph 45, that Jackson J has directed adjudicators to consider jurisdictional issues, when not previously raised in a payment schedule, where His Honour said (paragraph 45):

“The conclusion to which I would come, uninstructed by authority, is the respondent’s failure to take the point of non-compliance with section 17 (4) in a payment schedule does not authorise an adjudicator to ignore the point, where it is apparent on the face of the material which the adjudicator is obliged to consider under section 26 (2).”

  1. In paragraph 30 of the respondent’s submissions, it states that I am obliged to deal with relevant jurisdictional and contractual issues that come to my attention whether or not they were raised in the payment claim or payment schedule, and I agree that this correctly states the duty of the adjudicator.
  2. The respondent’s submissions relating to jurisdiction are identified between paragraph 31 and 43, although the last 2 submissions then make reference to further submissions later in the adjudication response from paragraphs 168 onwards. These later submissions are found in that part of the response which was dealing with the merits of the claim in the context of the contract.

c.       Breach of contract damages claim and claims outside the contract

  1. The respondent (at paragraph 31 of the response submissions) refers to paragraph 17 of the claimant’s adjudication application submissions, in which the claimant asserted that (my paraphrasing):

(i) it was unreasonable for the respondent to require IFC drawings to be prepared when key works had not been completed and then assert that the additional work directed fall within the fixed price;

(ii) a refusal to issue a variation in such circumstances, and to deny liability to pay for the additional work amounted to the respondent’s breach of contract;

(iii) by ordering additional work, and then ignoring the contractual mechanism for variations entitled the claimant to be paid for that work as extra work outside the contract.

  1. At paragraph 33 of the response submissions, the respondent made 5 submissions relating to jurisdiction as follows (my paraphrasing):

(i) the claim appeared to be a damages for breach of contract claim;

(ii) a claim outside the contract cannot be made under BCIPA:

(iii) an adjudicator is not entitled to award money on the basis of fairness;

(iv) the case of Pavey and Matthews v Paul (1987) 162 CLR 221 (referred to by the claimant) is a case about restitution under the principles of unjust enrichment, which cannot apply to BCIPA matters;

(v) a claim for quantum meruit (identified in the case of Update Constructions Pty Ltd v Rozelle Child Care Centre Ltd (1990) 20 NSWLR 251 (Update), which had not been referred to by the claimant) is not available when there is a valid and enforceable contract on foot.

  1. At paragraph 34 of the response submissions, the respondent distinguished the case of Liebe v Molloy (1906) 4 CLR 347 on the following bases (my paraphrasing):

(i) it was a 1906 case not dealing with a sophisticated modern construction and engineering contract;

(ii) it did not contain a clause equivalent to clause 18 of this contract relating to a request for variations;

(iii) implied contract cannot be used to circumvent the provisions of the express contract;

(iv) it dealt with a case of principal standing by whilst the contractor carried out extra work in the belief it would be paid, whereas clause 18 of this contract, precluded such a belief from arising;

(v) in referring to Update in paragraph 34(c) of the response, which was not footnoted, but I have found was the judgement of Priestly JA (on pages 28 and 29 of the extract), the respondent appears to have used Update to distinguish extra work from being outside the contract, as had been found in Liebe v Molloy, and then stated that lack of written notice would defeat a (within contract) extras claim;

(vi) in paragraph 34(d) of the response, the respondent submitted that the claimant had not contended that waiver and estoppel was made out, nor evidenced by the claimant. Although the respondent had not referred specifically to what Priestly JA then added in Update on page 29 about estoppel; in paragraph 34(d), it had referred to estoppel having arisen in Update, so its submission on this point is clear.

  1. I accept that the claimant, in its adjudication submissions took issue with the payment schedule by making submissions in paragraph 17 relating to unreasonableness, breach of contract, or work outside the contract.
  2. If these were the bases upon which the payment claim was founded, I would agree with the respondent, because an adjudicator should not be tempted to decide in favour of a claimant:

(i) on the basis for fairness;

(ii) because of a respondent’s breach of contract;

(iii) for payment of work outside the contract;

(iv) on the basis of unjust enrichment in accordance with Pavey and Matthews v Paul (1987) 162 CLR 221;

(v) on the basis of quantum meruit.

  1. I accept that adjudication requires deciding an amount to which the claimant is entitled in relation to a construction contract (s13 of BCIPA) or valuation under a construction contract (s14 of BCIPA) such that:

(i) notions of fairness (unless somehow required by the contract, which I do not find in this case) cannot guide an adjudicator in decision-making, because essentially the determination of the amount of progress payment is based on an amount calculated under the contract, or valued having regard to the contract price, other rates or prices, or any variations agreed by the parties. Nowhere does BCIPA contemplate a subjective notion of fairness;

(ii) valuation of a breach of contract, is not deciding an amount in relation to a construction contract, unless the contract provides a mechanism for valuing such a breach (e.g. an agreed amount for delay damages), and I do not find such a mechanism here. In addition, any award by an adjudicator for a breach of contract, would not be valuing the related goods and services under a construction contract, but would be awarding damages outside the contract, which is not contemplated by BCIPA;

(iii) BCIPA only contemplates payment for work in relation to a construction contract or valuation under a construction contract, so it is not possible to value work outside the contract;

(iv) in Pavey and Matthews v Paul, the Court considered both issues of quantum meruit and unjust enrichment, and the pervading theme in the majority judgements (Mason and Wilson JJ jointly, and Deane J in a separate judgement) in relation to both issues is that recourse to either issue is not enforcing the contract. As Mason and Wilson JJ said at page 228, second paragraph:

“However, when success in a quantum meruit depends, not only on the plaintiff proving that he did the work, but also on the defendant’s acceptance of the work without paying the agreed remuneration, it is evident that the court is enforcing against the defendant an obligation that differs in character from the contractual obligation had it been enforceable.”

As Dean J said at page 256, 1st paragraph:

“The quasi-contractual obligation to pay fair and just compensation for a benefit which has been accepted will only arise in a case where there is no applicable genuine agreement or where such an agreement is frustrated, avoided or unenforceable. In such a case, it is the very fact that there is no genuine agreement or that the genuine agreement is frustrated, avoided or unenforceable that provides the occasion for (and part of the circumstances giving rise to) the imposition by the law of the obligation to make restitution.”

I agree with the respondent that neither unjust enrichment nor quantum meruit falls within the BCIPA regime, because these 2 principles apply when there is no enforceable agreement. In my view, the requirement of an enforceable agreement is the foundation of BCIPA;

(v) the respondent’s reference to Update, which deals with quantum meruit not being applicable when there is a valid and enforceable contract on foot is yet another example of the inapplicability of quantum meruit in BCIPA, because BCIPA deals with a valid and enforceable contract.

  1. Accordingly, I agree that the claimant’s submissions in paragraph 17 of the application, ostensibly justifying a BCIPA claim must be rejected.
  2. However, the payment claim makes no such assertions. At paragraph 1.1.5 of the payment claim, the claimant identifies its payment for additional work to carry out IFC documentation (claim 1) and additional construction monitoring services for January and February 2014 (claim 2).
  3. Furthermore, at paragraph 1.1.6 of the payment claim, the claimant also claimed payment for additional construction monitoring services carried out between August and December 2013, for which it says it was only paid in part (claim 3).
  4. The fact that the claimant in its adjudication submissions took issue with the payment schedule and made additional submissions relating to unreasonableness, breach of contract and claims outside the contract (about which I have already said, would not found an adjudicator’s jurisdiction) does not, in my view, detract from what the claimant had already claimed in its payment claim.
  5. In the adjudication submissions, the claimant did not withdraw the bases of its claims in the payment claim, so I am satisfied so far that I have jurisdiction to deal with the payment claim.
  6. In paragraph 34 of the response submissions, which I have identified in paragraph 48 above, the respondent took issue with the claimant’s reliance upon Liebe v Molloy, and I agree with those submissions that:

(i) it is an old case;

(ii) it did not contain an equivalent of clause 18 regarding the request for a variation;

(iii) it allowed for the recognition of an implied contract, which is no longer applicable because to imply terms now one must satisfy the 5 tests reiterated in the case of Codelfa to which the respondent refers in footnote 5.

  1. Insofar as paragraph 34 of the response submissions deals with the case of Update, I also agree that the claimant’s claim in this adjudication relate to claims within the contract, and also that the claimant has made no assertions or provided any evidence of waiver or estoppel.
  2. The criticisms identified in paragraph 34 of the response submissions attack the claimant’s paragraph 17 application submissions. I have already found that the claimant’s paragraph 17 application submissions are not sustainable; but I have also found that the payment claim submissions did not advance the above invalid bases for making a claim, so I am satisfied so far that adjudication can proceed on the basis that I have jurisdiction. However, I need to deal with the next jurisdictional point.

d.      Claim for related services more than 12 months ago

  1. The response submissions 35 through to 40 deal with an assertion that the claim for related services relating to the IFC documentation was well over 28 months ago, which was more than 12 months ago.
  2. The respondent referred to the case of Barclay Mowlem Construction Limited v Estate Property Holdings Pty Ltd [2004] NSW CA393, which it said was authority for the proposition that some work must be carried out within the 12 month period, which was the second interpretation put forward by the trial judge in the case below.
  3. Hodgson JA, who gave the leading judgement held that one could not divide up the construction work, and at paragraph 19 said:

“[19] However, in my opinion s 13-s 15 of the Act do not provide any basis for dividing up the construction work to which the claim relates into items which may be considered discrete, and asking in respect of each such item whether some work was carried out in the twelve month period. Section 13(2)(b) refers to “the amount” of the progress payment, s 14(4) refers to liability to pay “the claimed amount”, and s 15(4) refers to “the unpaid portion of the claimed amount”: these provisions weigh against the idea that separate consideration should be given to individual items that make up the claimed amount.”

  1. In paragraph 40 of the response submissions, the respondent, with respect, puts a gloss on the principles identified in Barclay Mowlem, which in my view is unsupported by authority. The respondent submits that elsewhere in its submissions it has demonstrated that there is no entitlement to claim 2 and claim 3 of the payment claim. The consequence, the respondent asserts, is that “no work has been carried out in the last 12 months for which AECOM is entitled to claim within the 2nd interpretation adopted in Barclay Mowlem. The respondent asserts that the result of this submission means that the IFC document claim (claim 1) falls foul of section 17(4)b) of BCIPA.
  2. Nowhere in Barclay Mowlem did the Court say that the work carried out in the last 12 months must be work for which the claimant is entitled to payment.
  3. In analysing section 17(4) of BCIPA, nowhere is there a requirement for entitlement to payment in this section. This section is dealing with the activity of construction work having to be carried out within the last 12 months, not whether such construction work then leads to an entitlement to payment, which are dealt with by other sections of BCIPA.
  4. Accordingly, I find that claims 2 and 3 relate to work carried out in January and February 2014, and August to December 2013 respectively, all of which were carried out within 12 months of the date of the payment claim.
  5. Given that Hodgson JA stated, at paragraph 19 extracted above, that one cannot divide up the work into discrete components, the fact that the IFC documentation work was over 2 years ago, does not mean that this payment claim is invalid because claims 2 and 3 relate to work carried out in the last 12 months.
  6. Accordingly, I’m still satisfied that I have jurisdiction to adjudicate the matter.
  7. However, the respondent then makes further jurisdictional submissions in paragraph 42 that there is no claim under the contract identified (which it then refers to paragraph 168 onwards, and at paragraph 179 onwards). I will call this the “no contractual claim” submission.
  8. In addition the respondent at paragraph 43, states that no claim arose prior to the reference date (which it then refers to submissions commencing at paragraph 177). I will call this the “reference date” submission
  9. With respect, it is not entirely clear that these submissions should be dealt with under jurisdiction, because they deal equally with the merits of the claim under the contract.
  10. As mentioned previously, I have considered the jurisdictional issues before carrying out a further analysis of the payment claim and payment schedule and the supporting submissions, because, in my view, there is no point in descending into the merits of the claim if I have no jurisdiction.
  11. I have decided to deal with these objections in paragraph 42 and 43 of the response when dealing with the merits of the claim, because in my view it is not possible to deal with these submissions, as a matter of jurisdiction, without having regard to the merits of the claim.
  12. Furthermore, in paragraph 166, 167 and 212 of the response submissions, the respondent refers to specific paragraphs in the payment schedule as reasons for withholding payment, which in my view demonstrates an engagement with the claimant with respect to the merits of the claim, rather than a higher-level objection regarding jurisdiction.
  13. I find therefore that I have jurisdiction to consider the payment claim and payment schedule in more detail (together with the application and the response) in order to decide the amount to which the claimant is entitled (if any), together with the due date for payment and the rate of interest applicable.

VI. Payment Claim

  1. On 3 March 2014, the claimant served a payment claim relating to 3 components of work that it carried out as follows:

(i) Claim 1 for IFC documentation work carried out between May 2011 and November 2011 for $1,316,060 including GST. Although there was an attached tax invoice listing a series of variations, it was contained within one line item number 146, and described as IFC re – documentation. Despite it only being a one line item, I am satisfied that it identified the related goods and services to which the claim related, and it stated the amount claimed to be payable;

(ii) Claim 2 for extensions to construction monitoring claim between December 20, 2013 and February 28, 2014 amounting to $96,385.56 including GST. Again, although there was an attached tax invoice identifying variations, this was a one line item number 147 headed January and February 2014 construction monitoring. Again, despite it only being a one line item, I am also satisfied that it identified the related goods and services to which the claim related, and it stated the amount claimed to be payable;

(iii) Claim 3 for engineering services comprising an invoice dated 27 August 2013 for $132,000, an invoice dated 25 October 2013 for $138,887.10, another invoice dated 25 October 2013 for $138,887, an invoice dated 6 December 2013 for $138,887.10, and an invoice dated 21 January 2014 also for the sum of $138,887.10. I am satisfied that these invoices, identified the related goods and services to which the claim related, and it stated the amount claimed to be payable.

  1. At paragraph 4.1.2 of the payment claim, the claimant totalled the amount due of $1,882,898 by subtracting $217,096 which had been paid by the respondent, from its total claim of $2,099,994.
  2. At the bottom of the 1st page of the payment claim, the claimant has endorsed, “This is a payment claim made under the Building and Construction Industry Payments Act 2004 (QLD).”
  3. Accordingly, I am satisfied that the payment claim is in accordance with section 17(2) of BCIPA which can be adjudicated.

VII. Payment Schedule

  1. On 17 March 2014 the respondent provided the claimant with a payment schedule comprising 54 submissions in 9 pages, together with 2 letters dated 29 August 2011 and 17 December 2013, as well as an 8 page design documentation error register.
  2. It referred to the payment claim and specified the schedule amount of $NIL, and I find that it was made within 10 business days of receipt of the payment claim.
  3. I’m satisfied therefore that the payment schedule complies with section 18(2) of BCIPA which can be adjudicated.

VIII. Merits of the claim

  1. It is now necessary to consider the merits of the payment claim and the payment schedule. It is important for the parties, and particularly the claimant, to recognise that the claimant bears both the legal and evidentiary onus in relation to its claim. If the claimant discharges its evidentiary onus in relation to the payment claim, the onus then shifts to the respondent to discharge its evidentiary onus supporting the payment schedule. However, at all times it is incumbent upon the claimant to discharge its legal onus about the payment claim.
  2. In my view, however, in seeking a set off as identified in paragraph E of the payment schedule, the respondent bears both the legal and evidentiary onus of its entitlement to do so.
  3. In my view the contest in this adjudication, as identified throughout the payment schedule, is whether the claimant has discharged its legal onus of entitlement to payment, and I must turn in more detail to the payment claim and payment schedule and the application and response.
  4. Before doing so, it is appropriate to remind the parties of the limits to which a dispute can be resolved in adjudication. It is evident from the tenor of the correspondence and the submissions that the parties have a long-standing dispute about additional work and extra costs. This is particularly evident in some adjudication submissions where the claimant submitted:

(i) In short, the grounds for withholding payment are spurious (paragraph 9);

(ii)  Abigroup feigns ignorance of the additional work carried out… These claims do not stand up to scrutiny (paragraph 10);

(iii) In any event, the need for additional work would be obvious to anyone with project experience (paragraph 12);

(iv) It is disingenuous for Abigroup to claim it does not have enough information to precisely understand the additional work and/or amount claimed (paragraph 15);

(v) It is unreasonable for Abigroup to require IFC drawings to be prepared when it knew that the key work packages had not been completed, and then to assert that the additional work associated with this direction fell under the fixed price (paragraph 17);

(vi) For Abigroup to refuse to issue a variation in the situation and to deny liability to pay for the additional work amounts to a breach of contract (paragraph 17);

(vii) AECOM further notes that the cases demonstrate that where the principal orders additional work, but ignores the contractual mechanism for variations, then the contractor is entitled be paid for that work as extra work, outside the contract… (paragraph 17);

(viii) Abigroup has failed to provide evidence supporting its assertion that there is a link between alleged delays to the Developed Design… and the issue of interim IFC documentation (paragraph 19);

(ix) Further, Abigroup has failed to provide any evidence to explain the alleged link between the vague allegation that the Principal was not satisfied and the supposed necessity for interim IFC drawings… That information should have been provided in the payment schedule (paragraph 20);

(x) If this matter proceeds to dispute, AECOM will rely on the September 2010 letter and will seek discovery of relevant documentation from Abigroup to demonstrate that true reason for the direction (paragraph 21);

(xi) Perhaps it is just a convenient coincidence that the amount Abigroup claim slightly exceeds the value of the payment claim made by AECOM for the additional work associated with the IFC documentation(paragraph 27);

(xii) Abigroup is rather coy at paragraph 53 of the payment schedule, but in the absence of any evidence of a “debt or other moneys due”, it appears the purported set off is based on clause 23.6(b) which involves no more than a mere claim (paragraph 30);

(xiii) Abigroup should not be permitted to rely on the set off clause to the extent that this would have the effect of allowing Abigroup to avoid the “pay now, argue later” principle that underpins the Act… The adjudicator should require that Abigroup pay the claimed amount without sent off, at least on an interim basis under the Act, pending a final resolution of the outstanding matters between the parties in accordance with the terms of the Contract (paragraph 36);

(xiv) Abigroup relies on a number of legalistic arguments to defeat AECOM’s claim to payment. Adjudication is not the proper forum for resolution of these issues. The adjudicator should have regard to the purposes and objects of the Act and give full effect to the “pay now, argue later” principle, as outlined below (paragraph 45).

  1. The claimant on the one hand has contended that the simple “pay now, argue later” principle governs adjudication, and yet on the other hand refers to unfairness, breach of contract and claims outside the contract, with the possible inference that adjudication should include consideration of such issues.
  2. The respondent in its response raised some issues regarding :

(i) the IFC claim was for services more than 12 months ago, as a matter of jurisdiction (paragraphs 35-40). This was not raised in the payment schedule;

(ii) no claim prior to the reference date as a jurisdictional point (paragraph 43). This was not raised in the payment schedule;

(iii) the claimant’s 23 September 2010 letter having been written 6 days prior to the execution of the project, and appeared to be an attempt to negotiate a fee price, prior to contract (paragraph 83). This was not raised in the payment schedule;

(iv) AECOM has not sought rectification of the contract (paragraph 84);

(v) AECOM cannot rely on the letter to contradict the terms of the contract….. parole evidence rule… entire agreement clause in Clause 3 (paragraph 85). This was not raised in the payment schedule;

(vi) Lend Lease submits that AECOM has not made a claim under either clause 17 (EOT) or clause 18 (variations), or otherwise in relation to the extension of CPS (paragraph 168). The submission in relation to clause 18 (variations) had not been raised in the payment schedule.

  1. These extracts from the application and the response submissions have only been used to demonstrate “high water marks” of the parties’ expectations, some of which that cannot be satisfied in adjudication. Adjudication is neither arbitration nor litigation, but rather a statutory basis of a fairly rapid assessment (on an interim basis) of the merits of a payment claim of fairly limited scope (the “adjudication limits”).
  2. Whilst the parties may well canvass issues beyond the adjudication limits in order to understandably seek commercial advantage in persuading an adjudicator, an adjudicator’s task is often a matter of sifting through those issues to separate the “wheat” (within the adjudication limits) from the “chaff” (outside the adjudication limits). Thereafter, the wheat is used to bake the bread of the decision with all its limited ingredients and inherent imperfections.
  3. It is not possible for adjudication to deal with the entire dispute which evidently exists between the parties so that matters relating to discovery and rectification of the contract etc., need to be dealt with in another forum.
  4. Having set the scene and lowered the expectation of both parties, I now consider the material in more detail in order to find the ingredients to make a decision within the adjudication limits.

The basis of the claimant’s claim

  1. I have already referred to the payment claim paragraph 1.1.5 and 1.1.6 where the claimant claimed for additional work in claims 1, 2 and 3. When I considered the respondent’s jurisdictional objections, I said that, despite what the claimant had submitted in paragraph 17 of its application (which I have rejected), I was satisfied that I had jurisdiction to consider the payment claim because of what the claimant had asserted in paragraphs 1.1.5 and 1.1.6 of the payment claim.
  2. These claims essentially dealt with additional work that the claimant asserted it carried out. In relation to claims 1 and 2, the claimant asserted that it had been directed by the respondent, to carry out this additional work for which did not been paid. In relation to claim, 3, the claimant stated that it has carried out additional construction monitoring services for which it had only received part payment by the respondent.
  3. It is necessary to consider the legal basis of these claims, and in so doing I will deal with the contending payment schedule and adjudication response submissions to the claim at the same time.
  4. In paragraph 1.1.7 of the payment claim, the claimant claims under clause 23 of the contract, and under BCIPA (my underlining).
  5. The claim is to be considered under BCIPA, and in order to do so, BCIPA requires an adjudicator have regard to the provisions of the contract in order to be satisfied of the contractual entitlement to the claim.
  6. It is important to make it clear that payment under BCIPA, albeit possibly being a “pay now, argue later” jurisdiction, only follows if there is a contractual entitlement to payment. I will come back to this point, after consideration of some of the claimant’s submissions.
  7. The claimant’s payment claim, at paragraph 3.1.3, says that, irrespective of whether the project is over budget or delayed, the claimant is entitled to receive payment for the services which it has performed in accordance with the contract for the benefit of the respondent.
  8. At paragraph 4.1.1 of the payment claim, the claimant reiterates its claims for payments owed under the contract under BCIPA.
  9. 101. However, under heading 6 of the application from paragraphs 45 through to 51, the claimant refers to the respondent’s number of legalistic arguments to defeat the claimant’s claim and argues that this is not the proper forum for resolution of the issues because I am to have regard for the purpose and objects of BCIPA to give full effect to the “pay now, argue later” principle.
  10. 102.The authorities then cited by the claimant included extracts with highlighting of particular parts of each authority to demonstrate the objects of BCIPA. Having read these a number of times, I have come to the view that they have a flavour that the purpose of adjudication is to maintain cash flow by providing prompt payment on account (with freedom from excessive legal formality and conditions precedent) in the face of time-consuming disputes, which could be sidelined and dealt with later.
  11. 103.The authorities contained one case in Queensland and one 2nd reading speech on BCIPA, with the other being the 2nd reading speech to the New South Wales legislation, together with a single judge decision in Victoria and a Court of Appeal case in New South Wales.
  12. At paragraph 60 of the adjudication submissions, the claimant reiterates that the legalistic arguments raised by the respondent should not be resolved in adjudication, and importantly, at paragraph 61 that I should have regard to the purpose and objects of BCIPA and that, “The factual issues and questions of contractual interpretation will need to be resolved in due course via the dispute resolution process. In the meantime, AECOM should be paid for the work which it is carried out at Abigroup’s request.
  13. At paragraph 238 of the respondent’s submissions, the respondent takes issues with the “pay now, argue later” maxim and says that it does not entitle the claimant to payment in cases where there is no entitlement to payment under the contract.
  14. At paragraph 33(b) of the response submissions, the respondent refers to the case of BM Alliance Coal Operations Pty Ltd v BGC Contracting Pty Ltd and Others. [2012] QSC 346 {“BM Alliance”] as authority for the proposition that, “The claim must be brought in relation to an entitlement to claim made in reliance on an identified entitlement to claim under the Contract.” It also referred to the case of Roseville Bridge Marina Pty Ltd v Billingham Marine Australia Pty Ltd [2009] NSWSC 320, where at paragraph [43], Brereton J held that:

“The Act does not create a right to remuneration for construction work – that right is created by the construction contract. What the Act does is to create and regulate a right to obtain a progress payment.”

  1. BM Alliance went to the Court of Appeal in the case of BM Alliance Coal Operations Pty Ltd v BGC Contracting Pty Ltd & Ors [2013] QCA 394. Muir JA at paragraph [29] held that:

“Here the error was jurisdictional because the adjudicator disregarded a limitation on his functions and powers. He could not award an amount for the latent condition unless  there  was  an  entitlement  to  be  paid  for  that  under  the  contract.   An entitlement to be paid could only arise by the mechanism set out in cl 26.3. The parties did not meet to negotiate and the matter was not referred to an independent expert for determination.   These requirements  were  not  steps  in  assessing  an entitlement  conferred  under  the  contract.   Compliance with cl 26.3 was a precondition to the adjudicator having jurisdiction to award a sum at all. Also, the extent of an adjudicator‘s jurisdiction on matters of law is, at best, limited. Bodies other than courts do not have power to authoritatively determine questions of law or make decisions other than in accordance with law, subject to contrary intent in the statute creating the body.”

  1. With respect to the claimant therefore, having regard to authority, I cannot agree that the “pay now, argue later” principle precludes consideration of factual issues and questions of contractual interpretation as the claimant suggests. I am required to investigate whether there is a contractual entitlement of the claimant to make the various claims, otherwise the adjudication may be made with jurisdictional error and that outcome would benefit neither party, particularly in circumstances where there is significant dispute between the parties over these claims.

e. Claim 1 for $1,316,060

  1. The claimant asserted that it provided additional IFC documentation in the period May 2011 to November 2011 and by way of substantiation from paragraph 2.12 onwards it provided a Chronology of events leading to the variation claim.
  2. 110. The claimant therefore characterised this additional work as a variation on the basis that it had been directed by the respondent to release documentation so that the respondent could lock in prices with the various trade package sub contractors (paragraph 2.1.4, 2nd dot point).
  3. The claimant referred to its letter dated 23 September 2010, which it had provided 2 copies of in tabs 3 and 4.
  4. In this letter, the claimant provided a fee estimate of $485,000 and a scope of work, ostensibly in response to the respondent’s request for details of fee variations during the contract documentation phase of the project as a result of the accelerated building services designed program.
  5. At paragraph 2.1.5, the claimant identified that the proposed variation was common sense and was a “best for project” approach by balancing the prejudice the claimant would inevitably suffer in releasing IFC documentation based on uncertain documentation against the need for the respondent to lock in prices with various sub contractors to maintain program.
  6. 114. At paragraph 2.1.6, the claimant asserted that the respondent failed to issue a variation and instead provided a direction to the claimant, notwithstanding the claimant’s concerns, and said that the claimant proceeded to release the final IFC documentation in accordance with the initial directions around late May 2011 and early June 2011.
  7. The respondent’s payment schedule heading B provided reasons for withholding against AECOM’s IFC Documentation Claim and included the following subheadings:

(i) fixed fee;

(ii) no variations;

(iii) deviation from the consultants deliverables program and breach by AECOM;

(iv) no evidence of extra costs incurred;

(v) AECOM are otherwise in breach;

(vi) no deviation for lend lease’s convenience;

(vii) AECOM’s breaches;

  1. In paragraph 67 of the respondent’ s submissions, the respondent referred to Contract Annexure Part C, Service Fee – Lump Sum Contract.
  2. In paragraph 68, the respondent extracted the definition of Services Fee and the extract from annexure part C, which clearly referred to the words “lump sum”. I note from the contract provided that the relevant page of annexure part C had been initialled.
  3. Accordingly, I am satisfied that it was a lump sum contract and as identified in paragraph 72 of the response submissions, it is necessary for the claimant to establish an entitlement for the additional payment under the contract.
  4. Initially, under paragraph 1.1.7 the payment claim claims for payment under clause 23 of the contract and BCIPA.
  5. Clause 23 deals with the contractual mechanism. In relation to payment claims, but not its entitlement, and I am compelled to agree with the respondent’s paragraph 105 response submission that clause 23 does not give the claimant an entitlement to claim variations or amounts in respect of delay.
  6. Later on in paragraph 2.1.5 of the payment claim and following, the claimant refers to this claim as a variation.
  7. Furthermore, in the adjudication application, at paragraph 13, the claimant reiterates its request of the respondent to issue a variation to cover for the estimated amount of rework that was contained in the letter dated 23 September 2010. In this submission the claimant refuted the respondent’s assertions that a variation had not been notified.
  8. I find that the letter dated 23 September 2010 was 6 days before the contract was signed, so I am not satisfied that it could be considered a notification under the contract, which had not yet been entered into.
  9. Other than paragraph 13, the claimant’s application submissions did not engage with the respondent’s payment schedule paragraphs 6 through to 12 relating to the contractual requirements of satisfying clause 18.1 in relation to variations.
  10. Even if I were to accept that the letter dated 23 September 2010 constituted notification to the respondent of a variation (which I have already rejected), the claimant has not provided any evidence that it had received a written direction from the respondent to vary the works, as required by clause 18.1.
  11. As identified in clause 7 of the payment schedule and clause 59 of the respondents submissions, Clause 18.1 is quite specific in the 3rd paragraph in providing that:

“The Consultant has no entitlement to any adjustment to the Services Fee if the Consultant varies the Services without first receiving a written direction from the Contractor under this clause 18.”

  1. The claimant has not submitted any other plausible interpretation of this clause, nor provided evidence of any waiver or estoppel of the strict application of this clause to the contract, and I am bound to construe the contract according to its terms.
  2. I find that there is no evidence from the claimant that the respondent directed that the IFC documentation constitute a variation, which is required by clause 18.1 (for which I must have regard) and therefore the claimant is not entitled to any adjustment to the Services Fee in relation to IFC documentation.
  3. Given that there is no entitlement to a claim, there is no need for me to consider the substantiation and quantum of this payment claim (provided in tab 8) any further, nor is there a need to consider the other submissions contained within the payment schedule and the response in relation to claim 1.
  4. Accordingly, the claimant has not satisfied its legal onus and demonstrated an entitlement to claim number 1, so this claim must fail, and I find the amount of this claim is $NIL.

f. Claim 2 for $96,386

  1. Paragraph 2.2 deals with an extension of the construction phase services for January and February 2014.
  2. In paragraph 2.2.2 the claimant referred to its advice to the respondent through correspondence, monthly reports and minuted meetings that the claimant believed that project would be delayed, and that any works after December 2013 would be considered a variation to the contract.
  3. The claimant, at paragraph 2.2.3 stated that the respondent on 13 September 2013 shifted the completion date unilaterally from 20 December 2013 until 30 June 2014, and in paragraph 2.2.5, that the respondent failed to comply with its obligation to issue a variation under the contract.
  4. Although the claimant did not make reference to the letter dated 17 September 2003 to the respondent that it had attached at tab 10 of the adjudication application, it appears as if this letter is in support of the claim regarding additional construction phase activities.
  5. At paragraph 172 of the response submissions the respondent refers to this letter, and says that it did not purport to be a claim under clause 17 (EOT) [and I’m ignoring reference to clause 18 (variations)] and that no contractual clauses were referred to in the letter.
  6. The respondent’s payment schedule heading C provided reasons for withholding against AECOM’s Extension Of Construction Phase Claim and included the following subheadings:

(i) no act or omission of Lend Lease that caused AECOM delay;

(ii) delay by AECOM;

(iii) construction program;

(iv) no notice of delay provided;

(v) no claim for extension of time provided;

(vi) no mitigation;

(vii) no delay caused by lend lease;

(viii) concurrency of delay – no entitlement;

(ix) deviation from the consultants deliverables program and breach by AECOM;

(x) no extra costs actually incurred

  1. I have already noted above, that in paragraph 168 of the response submissions the respondent makes reference to clause 18 (variations), and this issue had not been canvassed under heading C in the payment schedule. Paragraphs 170 and 172 of the response submissions also make reference in whole or in part to clause 18 (variations).
  2. I have not considered the clause 18 aspects of those submissions in this adjudication because they contravene s24(4) of BCIPA because those reasons have not been provided in the payment schedule.
  3. The claimant needs to demonstrate an entitlement to these additional costs. In paragraph 2.2.1 the claimant refers to the claim broadly relating to site inspections, meetings, reports, reviews of contractor’s submissions, responses to RFI’s carried out in the period December 2013 to February 2014.
  4. Even though I have not been provided with correspondence, monthly reports and minuted meetings (referred to in paragraph 2.2.2) it is open for me to accept that the claimant did advise the respondent that the project would be delayed.
  5. The claimant’s 17 September 2013 letter alludes to there being a cost implication, where Mr Dagnall says:

“… we also need to understand the program moving forward, so that we can continue to adequately resourced the project and also advise lend lease of the implications of this additional work.”

  1. However, there is no evidence provided by the claimant that it provided a notice under clause 17, claiming an extension of time, to which under the last paragraph of clause 17 would entitled the claimant to its direct extra costs.
  2. That is the thrust of the respondent’s paragraph 173 through to 175 response submissions, with which I’m compelled to agree because of the strict wording of the contract. In addition, as stated in paragraph 176 of the response submissions, the claimant has provided no evidence that the requirements of clause 17 were waived.
  3. Accordingly, I am unable to be satisfied that the claimant has demonstrated an entitlement to extra cost for this work (because of the strict requirements of the contract, for which I must have regard), and therefore this claim must fail.
  4. As with claim 1 above, given that there is no entitlement to a claim, there is no need for me to consider this payment claim any further, nor is there a need to consider the other submissions contained within the payment schedule and the response in relation to claim 2.
  5. I find that the value of this claim is $NIL.

g. Claim 3 for $470,452, but reduced to $415,028.90 [paragraph 3 of application]

  1. Paragraph 2.3 of the payment claim describes this claim, as broadly relating to site inspections, meetings, reports, reviews of contractor’s submissions, responses to RFI’s carried out in the period of August 2013 to December 2013.
  2. The respondent’s payment schedule heading D provided reasons for withholding against AECOM’s Partly Paid Construction Phase Claim and they were included the following subheadings:

(i) fixed fee;

(ii) no entitlement to claim costs – not additional work.

  1. Although the claimant provided more substantiation in relation to this claim (5 invoices) than the one line items in the variation schedule for claims 1 and 2, it needs to demonstrate its entitlement to payment.
  2. Again, the respondent asserts that the contract was a lump sum, and that there was no additional work so the claimant needs to provide a contractual mechanism whereby it is entitled to demonstrate that it has satisfied the contractual requirements to generate an entitlement to be paid for this work.
  3. The 2 clauses in the contract which generate an entitlement to additional costs are the ones previously considered above, and they are clause 17 dealing with EOT’s for which actual direct extra costs may be payable, and clause 18 dealing with variations for which there may be an adjustment to the Services Fee.
  4. The claimant bears the legal onus of demonstrating that it is entitled to extra sums pursuant to the contract, and it is provided no evidence that it satisfied either clauses 17 or 18 of the contract.
  5. It did not demonstrate that it sought an EOT, nor did it provide evidence of a written direction from the respondent of a variation.
  6. Accordingly, I conclude (as required by the strict wording of the contract) that the claimant has no entitlement to claim. Again this means that there is no need to consider this payment claim any further, nor do I have to have regard for the further payment schedule and response submissions.
  7. I find the value of this claim is $NIL.

The residual payment schedule assertions

  1. In the payment schedule in heading E, the respondent claims a set off, and there is a significant amount of material detailing the claimant’s alleged breaches of contract entitling the respondent to set off an amount of $1,573,290.
  2. Given that I have found that the claimant has failed to discharge its legal onus in relation to any of the claims, there is no need for me to consider the claimant’s alleged breaches of contract and the respondent’s right to set off in any further detail.
  3. Furthermore, any of the other submissions made by the respondent in the payment schedule and the response do not require further consideration.
  4. Nevertheless, it is important for the parties to appreciate that I had to read all of the material, some in more depth than others, in order to understand the dispute between the parties, despite now limiting the material for which I had to have detailed regard in dealing with the merits.

IX. The amount of the progress payment

  1. Adjudication requires valuation of the payment claim for work done under a construction contract.
  2. However, there needs to be an entitlement by the claimant to make a claim in accordance with the contract before the amount of any claim is to be considered.
  3. Given that I have found that the claimant has not demonstrated any entitlement, I find that there is no amount payable by the respondent to the claimant in this adjudication.
  4. Accordingly, I find is the adjudicated amount is $NIL.

X. Due date for payment

  1. s15 of BCIPA deals with the due date for payment, wherein the definition under clause 2.1, the due date for payment was no later than 25 business days after delivery of the payment claim in accordance with clause 23.1 and 23.2 of the contract.
  2. I find that the payment claim was delivered on 3 March 2014 and I agree with the response submissions that the 25 business days is not void under section 67U or 67W of the Queensland Building And Construction Commission Act 1991.
  3. Accordingly, the due date for payment of 25 business days from 3 March 2014 is 7 April 2014.
  4. However, I have found that the adjudicated amount is $NIL, so although I must find the due date for payment, it really does not apply because there is no money payable.

XI. Rate of interest

  1. I’m obliged to find that the interest rate, and I find that the contract did not provides an interest rate for late payments.
  2. S15(2) 0f BCIPA provides that:

‘(2) Subject to subsection (3), interest for a construction contract is payable on the unpaid amount of a progress payment that has become payable at the greater of the following rates—

(a) the rate prescribed under the Civil Proceedings Act 2011, section 59(3) for a money order debt;

(b) the rate specified under the contract.  ‘

  1. Section 59(3) of the Civil Proceedings Act 2011 provides:

 (3) The interest is payable at the rate prescribed under a practice direction made under the Supreme Court of Queensland Act 1991 unless the court otherwise orders.

  1. I agree with the respondent’s submissions that the current rate of interest is 8.5%, according to the Chief Justice’s practice direction.
  2. I find the rate of interest is 8.5% interest payable on the adjudication amount, but that amount as nil.

XII. Authorised Nominating Authority and Adjudicator’s fees

  1. The default provision contained in s34(3)(b) of BCIPA makes the parties are liable for the ANA’s fees is in equal proportions, unless I decide otherwise. The same approach applies to the adjudicator’s fees in s35(3) of BCIPA, with equal contributions, unless I decide otherwise.
  2. The claimant has not succeeded in its payment claim, but by far the bulk of the material was contained in 5 lever arch folders of the adjudication response.
  3. Quite some time was spent on this adjudication in dealing with the jurisdictional issues which were important to allow the adjudication to proceed.
  4. Whilst some of those jurisdictional issues only emerged once the adjudication application had been made dealing with breach of contract damages claim and claims outside the contract, there was one issue that could have been raised in the payment schedule regarding a claim for related services more than 12 months ago.
  5. Furthermore, there were other submissions in the response (listed at paragraph 88 and 137 and 138 of the decision), which had not been made in support of a reason in the payment schedule.
  6. Accordingly, I am not satisfied that I should disturb the default provision because of the time I had to spend dealing with the jurisdictional issues, and checking that the response submissions had been in support of a payment schedule reason.
  7. Accordingly, the claimant and respondent are equally liable to pay the ANA’s fees under s34(3)(b) and my fees under 35(3) of the Act.

Chris Lenz

Adjudicator

17 April 2014