Submissions "Duly Made" & The Scope Of The Adjudicator's Obligation To Consider

Bega Valley Shire Council v Kenpass Pty Ltd [2024] NSWSC 399

The recent case of Bega Valley Shire Council v Kenpass Pty Ltd [2024] NSWSC 399 ("Bega Council v Kenpass") discusses the level of consideration an adjudicator must have for each party's arguments under section 22(2) of the Building and Construction Industry Security of Payment Act 1999 (NSW) ("SOPA").

Issues

In Bega Council v Kenpass, Bega Valley Shire Council ("the Council") unsuccessfully sought to set aside an adjudication determination in favour of Kenpass on the grounds of jurisdictional error.

The jurisdictional error alleged by the Council was with respect to a part of the adjudication determination concerning the quantification of delay damages. The Council challenged this on three grounds:

1. the adjudicator wrongfully concluded that the payment schedule had not advanced any "valid" reasons for withholding payment within the meaning of section 22(2)(d) of the SOPA;
2. the adjudicator wrongfully concluded that the reasons for withholding payment in the adjudication response were "new reasons" and that he was barred from considering them under section 20(2B) of the SOPA;¹ and
3. the adjudicator wrongfully accepted Kenpass' quantification of delay damages without considering any of the mandatory elements in section 22(2) of SOPA such as the contractual provisions on stand-down rates and lack of any agreed rate of delay damages.

Principles & Application

The Court dismissed all three grounds made by the Council and:

1. held that it was within an adjudicator's jurisdiction to determine whether any submissions supporting a payment schedule were "duly made" for the purposes of section 22(2)(d);
2. clarified that a question of whether a submission had been "duly made" was "not a matter for objective determination by the Court". This means it was not open for the Court to determine whether the Council's reasons for withholding in the adjudication response were "new" and therefore barred by section 20(2B) of the SOPA; and
3. held that the adjudicator was within his jurisdiction to accept Kenpass' valuation of the claim without further enquiry.

Key takeaway

The SOPA adjudication process is intended to be fast and definitive.

Respondents must be very careful about particularising their reasons for withholding payment when preparing payment schedules. An adjudicator's understanding of the evidence presented to them and its sufficiency (or lack thereof) is often conclusive and not a jurisdictional error.

Footnote

1. Section 20(2B) of the SOPA bars a respondent from introducing in its adjudication response, new payment withholding reasons which were not included in the payment schedule.

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