Ceerose Pty Ltd v A-Civil Aust Pty Ltd (No 2) [2023] NSWSC 401
Under section 32A of the Building and Construction Industry Security of Payment Act 1999 (NSW) (SOP Act), the Supreme Court has a discretionary power to set aside the whole or part of an adjudicators determination that has been impacted by jurisdictional error.
In Ceerose Pty Ltd v A-Civil Aust Pty Ltd (No 2) [2023] NSWSC 401, A-Civil Aust Pty Ltd (A-Civil) commenced two jobs for Ceerose Pty Ltd (Ceerose) under two separate subcontracts. A-Civil served Ceerose with two payment claims. An adjudication commenced for each subcontract. Determinations were delivered with respect to each adjudication, which were heard by the same adjudicator. Ceerose challenged the determinations in Court. Two separate proceedings commenced but were subsequently joined together. In respect of each determination, the Court used that discretionary power to set aside only the portion of the adjudication determination that contained jurisdictional errors, while upholding the unaffected parts. This article examines how the Court utilised that discretion.
Background
Ceerose Pty Ltd (Ceerose) established two subcontracts with A-Civil Aust Pty Ltd (A-Civil) for two separate construction projects.
Under the first contract, A-Civil submitted a payment claim requesting $3,556,466.80. Ceerose responded by providing a payment schedule in the sum of $895,595.50.
Under the second contract for different works, A-Civil issued another payment claim for $327,492.67. Ceerose scheduled zero.
As a result, adjudication applications were filed in respect of each payment claim on two projects and determinations were made in each in favour of A-Civil.
Issue
In separate proceedings that were subsequently joined, Ceerose contested the legitimacy of the determinations, alleging that the adjudicator made several jurisdictional errors. In an earlier judgement, the Court determined that five out of the nine grounds were proven to be infected with jurisdictional error concerning the first adjudication determination, and one of the alleged grounds was proven in the second adjudication determination.
Decision
The parties reached an agreement regarding which parts of each adjudication determination should be set aside, however, they disagreed on the relevant sums in each determination. Ceerose’s position was that the entire adjudicated sum for each of the items should be severed. A-Civil’s position was that those sums in dispute should be severed.
The Court decided that it was appropriate to sever the sum in dispute because if the adjudicator had not made an error, it is likely that they would have awarded, at minimum, the accepted sum to Ceerose.
Adjudicator’s Fees
It was also found that the adjudicators allocation of fees (split 80/20 against Ceerose) was determined by the adjudicators’ opinion of success of each party during the adjudication process. As the Court determined that the determinations were influenced by jurisdictional error, the allocation of fees were reconsidered as well. Uniquely, as a remedy, the Court directed that both parties would be responsible for sharing the payment of the adjudicators fees equally for both adjudications.
Adjudicators Reasoning
Both parties requested that different sections of the adjudicators reasoning for the determination be invalidated as this could affect any further determinations.
The Court observed that its discretionary power was only limited to setting aside the portion of the determination affected by jurisdictional error and could not sever parts of the adjudicators reasoning.
Key takeaway
This case demonstrates how under section 32A of the SOP Act, the Court has the discretion to support certain aspects of an adjudication determination, while simultaneously setting aside other parts that are tainted by jurisdictional errors. The exercise of the discretion faces difficulties, in particular, where the parts of a determination that are tainted with jurisdictional error may have a consequential effect on parts of the determination that are not.
If you would like to discuss this article with us further, please contact Brett Vincent, Partner, or Barbara Farhat, Paralegal on (02) 9261 5900.