Perform (NSW) Pty Ltd v MEV-AUS Pty Ltd [2009] NSWCA 157

What the court decided

MEV-AUS Pty Ltd hired out formwork systems, and Perform (NSW) Pty Ltd, a formwork subcontractor, hired them under three agreements [1]. On 10 March 2008 MEV-AUS served a payment claim under the Act for $308,601.86 [2]. Perform's payment schedule of 26 March 2008 proposed to pay nil, relying in part on a payment schedule it had given in reply to an earlier claim [3]. That schedule, provided on 22 February 2008, asserted backcharges against MEV-AUS for supplying an inferior formwork system late and in insufficient quantity [17]. The March schedule said that Perform repeated and incorporated the reasons in the February schedule, but no copy of it was attached [21], [24], [25]. Under the heading for the airport car park agreement, the March schedule also restated the substance of the relevant February contention [21], [26].

The adjudicator held that the scheme of section 14 did not allow incorporation by reference of material outside the payment schedule, and he gave no consideration to the February schedule [41]. He determined that Perform pay $308,601.86 plus interest [8]. Perform sought a declaration that the determination was void, alleging failure to comply with basic and essential requirements, denial of natural justice and no bona fide attempt to exercise the adjudicator's powers [9]. At first instance, Einstein J dismissed the summons and ordered that the money Perform had paid into court be paid to MEV-AUS [12]. On appeal, Giles JA gave the leading reasons, McColl JA agreed with him and Young JA agreed with additional comments [130], [131].

Giles JA said that, even if the adjudicator was wrong, the determination would not be void, but explained why he disagreed with the trial judge's obiter view that the adjudicator was likely correct [43], [45]. He treated "indicate" in section 14(3) as an ordinary word, to be applied "in a common sense practical manner" [49]. In his view, indication did not exclude reference to material outside the schedule, and reasons fully set out in correspondence could be indicated without attaching a copy [50]. Whether a reference indicated reasons was a question of fact, and referring to a recent, specific letter the recipient had received could do so [52]. On that view, which was not necessary to the result, he concluded that the March schedule indicated the February schedule's reasons, in substance the backcharges, at least as to $209,968.68 [53].

Perform's first argument was that the adjudicator had not performed the task the Act required [55]. Giles JA called this "an extraordinary submission" [56]. He rejected it, finding that it lacked substance and should not have been made [57]. The adjudicator had recognised that section 14(3) required reasons to be indicated and, although wrong in Giles JA's view, was applying the Act [56].

The second argument was that what the March schedule objectively indicated was a matter for the court, so that a wrong view of it meant a failure to consider the schedule as section 22(2)(d) required [58]. Giles JA said the submission was contrary to the authorities then current [60]. He noted that Brodyn had asked whether the legislature intended a requirement to be essential to the existence of a determination [61]. That approach had been adopted in many later cases, although, as he observed, it had "not gone unquestioned" [63]. Applying that approach, he held that what a payment schedule indicates as its reasons was a matter for the adjudicator, and an error about it did not invalidate the determination [67]. An incorrect construction of the Act did not necessarily invalidate a determination, and construing section 14(3) to decide what a schedule indicated did not negate an essential precondition [75]. The determination was therefore not void, although Giles JA considered the adjudicator had been wrong [76].

Giles JA added that the adjudicator had in any event considered the backcharges as restated in the March schedule [82]. He had refused them as a set-off because, in his view, neither the agreements nor the Act allowed it, and also because the March schedule did not allow the backcharges to be quantified [82]. That was a sufficient basis on his reasoning, so the adjudicator would have reached the same result had he considered the February schedule, and his error was not material to the result [83], [84].

The ground of denial of natural justice also failed [106]. In a fax to the adjudicator on 29 April 2008, MEV-AUS argued that the backcharges had not been included in the March schedule and that the agreements did not permit Perform to withhold payment [35]. Perform had the opportunity to respond, and the adjudicator did not have to tell it how he proposed to decide those issues [100], [101], [104], [105]. Giles JA said that, if that fax were put aside, there would be more to be said for a denial of natural justice [103]. MEV-AUS had referred to the February schedule in its payment claim and adjudication application without suggesting that it was not part of the March schedule's reasons, and the adjudicator had appeared to accept that it was incorporated [103].

Giles JA said the bona fide ground had no substance and the allegation should not have been made [107]. The adjudicator had carefully and conscientiously applied himself, and being wrong did not mean that he was reckless or capricious [115], [117]. Giles JA also criticised the trial judge's course of adopting, as his reasons, submissions advanced for one party [87].

Perform succeeded only on the costs of MEV-AUS's cross-claim [118], [129]. Giles JA held the trial judge's reasons on those costs inadequate, re-exercised the discretion and made no order as to the costs of the cross-claim [124], [125], [126]. The appeal was otherwise dismissed, and Perform was also ordered to pay 95 per cent of MEV-AUS's costs and the whole of the adjudicator's costs [129].

Young JA added that the Act was intended to provide a quick and fair provisional payment, and that courts should be careful not to be too quick to avoid an assessment for minor error [132], [133]. In remarks he said did not affect the result, he doubted whether adjudicators can take account of equitable set-off, without making a definite ruling [134], [141].

Why it matters

Under the Act as it then stood, and applying Brodyn, the Court of Appeal treated an adjudicator's error about what a payment schedule indicated as one that did not make the determination void, and in this case the error was not material to the result. The view of Giles JA, with whom the other judges agreed, that a schedule could indicate reasons by referring to an earlier payment schedule was not necessary to that result.

The decision applied the Act and the authorities as they then stood. Its Brodyn-based reasoning should not be taken as stating the current law without checking the current Act and later authority.

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.