Ian Street Developer Pty Ltd v Arrow International Pty Ltd [2018] VSCA 294

What the court decided

Ian Street Developer Pty Ltd (the proprietor) engaged Arrow International Pty Ltd (the builder) to construct apartments in Noble Park, and the dispute concerned a progress claim under the Building and Construction Industry Security of Payment Act 2002 (Vic) [1]. On 30 June 2017 the adjudicator accepted the builder's adjudication application [25]. At the adjudicator's request, the builder agreed to extend the time for the determination to 31 July 2017 [27], [28]. On 28 July 2017 the parties were told that the determination had been made [31].

Under section 22(4), the adjudicator was to determine the application as expeditiously as possible and, at the latest, within 10 business days after the acceptance took effect, or within any further time the claimant agreed, not exceeding 15 business days after the date on which the acceptance took effect [19]. If the adjudicator does not determine the application in time, section 28(2) allows the claimant to withdraw it and make a new application [21].

The adjudication was completed outside the time limit [4]. That followed from the trial judge's reading of section 22(4)(b), under which an agreed extension could not run beyond 15 business days after the acceptance took effect [79], [80]. On appeal, the President agreed with the judge's reading of that provision [85]. The question was whether the late determination was void, a matter on which the Act is silent [4], [5].

The trial judge (Riordan J) rejected the proprietor's contention that the late determination was invalid [7]. He agreed with McDougall J and Hammerschlag J, who had held under the New South Wales Act that such a determination was not invalid, treating their reasoning as relevant because the provisions are substantially identical [36], [41], [42]. He added that section 22(4) governs how the adjudicator exercises functions already conferred, rather than setting preconditions to their exercise [42].

As the President recounted the judge's reasons, McDougall J had reasoned that the claimant's option to withdraw would serve no purpose if a late determination were a nullity [37]. In Cardinal Project Services Pty Ltd v Hanave Pty Ltd, Basten JA had expressed the view that such a determination was not invalid [38]. Tobias AJA had disagreed, and Macfarlan JA had not dealt with the question [38].

Maxwell P, who gave the principal reasons, agreed with the judge's conclusion [8]. McLeish JA and Niall JA each agreed with the President, for the reasons he gave, that the appeal should be dismissed [88], [91].

The President applied the test in Project Blue Sky Inc v Australian Broadcasting Authority, asking whether the legislature intended an act done in breach of the requirement to be invalid, to be discerned from the statutory scheme as a whole [5], [65]. He accepted the proprietor's submission that the words "is to" in the time limit provision mean "must", but said that imperative language does not decide the question [66]. Apart from those words, he found nothing in the Act indicating an intention that non-compliance with the time limit would invalidate the determination [67].

He noted that section 23(2B) makes a determination void if, or to the extent that, the adjudicator fails to consider any of the matters in section 23(2) or takes into account a matter in section 23(2A) [20], [68]. He observed that both requirements concern the adjudicator's actual decision-making and not procedure, and concluded, on ordinary principles of interpretation, that the provision was intended to be an exhaustive statement of when the adjudicator's non-compliance with requirements governing the adjudication task results in invalidity [69]. The President also relied on section 28(2)(a), which permits but does not require the claimant to withdraw the application [70]. That option, and the claimant's choice not to exercise it, would be unintelligible if the adjudicator's jurisdiction ended automatically when the time ran out [71].

He said the scheme is "avowedly established for the benefit of claimants" [73]. Treating the expiry of the time as ending the adjudicator's jurisdiction would, he said, frustrate that purpose [74]. He added that it could cause great inconvenience to claimants and respondents, as counsel for the proprietor conceded [74]. He agreed with the views of McDougall J in the decisions the judge cited [75]. The adjudicator's conduct, he said, is beyond the claimant's control, a consideration that weighs against invalidity [76]. The proprietor's argument that commercial certainty favoured an automatic lapse of jurisdiction did not persuade him [77], [78].

By its notice of contention, the builder argued that the 15 days ran from the end of the 10-day period, allowing up to 25 business days [81]. The President held that "that date" in paragraph (b) refers back to the date in paragraph (a) [85]. All three judges held that the notice of contention must be dismissed [87], [88], [93].

Before applying Project Blue Sky, the President suggested that the inquiry is better characterised as a gap-filling exercise, starting from the position that Parliament did not intend invalidity [57], [62]. He acknowledged that this is not the present state of the law [65]. McLeish JA left that question for another day, and said that if it arises it would need to be asked whether the gap-filling cases would materially assist [89], [90]. Niall JA said he agreed with the additional observations of McLeish JA [92].

Why it matters

Where the claimant has not withdrawn the application under section 28(2), the determination is not void, on this decision, merely because the adjudicator made it after the time allowed by section 22(4). The Court treated the claimant's option to withdraw and the limited voidness provision in section 23(2B) as pointing against invalidity, and gave weight to the claimant's lack of control over the adjudicator's delay.

The President's suggestion that the inquiry should begin from a starting point against invalidity was not adopted by the other members of the Court. McLeish JA, with whom Niall JA agreed, left it open and said it would need to be asked whether the gap-filling cases would materially assist. On the time limit itself, the Court read the further time that a claimant may agree to as ending no more than 15 business days after the acceptance takes effect.

The decision applied the Act in the form the Court set out, so readers should check the current text of the Act before relying on the decision.

Numbers in square brackets are paragraph numbers of the judgment. This note summarises a decided case for education and is not legal advice. See how the notes are written.