Built Environs Pty Ltd v Tali Engineering Pty Ltd & Ors

Citation: SASC 84

Nature of case:
The Plaintiff (“BEP”) successfully challenged the decision of an adjudicator to award the defendant (“Tali”) progress payments of $579, 420.90, with the court finding that BEP had been denied natural justice and that there was also a reasonable apprehension of bias on the part of the Nominating Authority (“Nominator”), both of which were vitiating errors entitling BEP to a declaration that the decision was a nullity and should be set aside.

BEP had engaged Tali, a sub-contractor, to supply and erect structural steelwork for the construction of a shopping centre but the relationship broke down after BEP rejected one of Tali’s payment claims, responding instead with its own payment schedule that set off liquidated damages and assessed Tali’s claim to be zero.

Tali referred the dispute to adjudication, pursuant to the provisions of the Building and Construction Industry Security of Payment Act 2009 (SA) and, in doing so, lodged its application with Nominator, whose general manager was also the CEO of a company that had been advising Tali in connection with the dispute. In its adjudication application, Tali introduced several new claims, described by the court as “confusing”, including that the liquidated damages were punitive, that it was entitled to extensions of time and perhaps invoking the prevention principle. By section 20(4) BEP was prohibited from including any response to these matters, because they were not included in BEP’s payment schedule (and indeed could not have been, because at the time of the payment schedule these new matters had not been raised by Tali). Further, by section 22(2) the adjudicator was prohibited from taking anything BEP might say about these matters into account unless he exercised his power under section 21(4)(a) to call for further submissions from the parties.

Prior to Tali making its application, the CEO had asked another person to act on behalf of Nominator in relation to the anticipated request for a nomination and appointment. The adjudicator determined that BEP was not entitled to set off liquidated damages against the amount claimed by Tali.

In BEP’s application for judicial review, Justice Blue in the Supreme Court of South Australia held in favour of BEP, finding that:

the adjudicator had denied BEP natural justice by determining the claim upon application of the prevention principle without BEP having had a proper opportunity to adduce evidence or make submissions on the issues. BEP had not received adequate notice of an intention by Tali to rely on the prevention principle, nor had the adjudicator made it clear that it might determine the application on this basis. In the circumstances, the adjudicator would have been obliged to call for relevant submissions from both parties before arriving at such a decision.

there was a reasonable apprehension of bias on the part of Nominator because its general manager, in his capacity as CEO of another entity, had been advising Tali in connection with its dispute with BEP. The nominating authority must be and must be seen to be independent. A Chinese wall would not preclude a reasonable apprehension of bias arising given Nominator’s alignment with Tali.
​​The Court did not accept BEP’s further allegations that the adjudicator lacked jurisdiction, and did not consider it necessary to go on and consider whether the adjudicator had made various errors of law and/or failed to exercise his powers bona fide.

Counsel: Robert Fenwick Elliott appeared on behalf of the successful Plaintiff, BEP

Counsel

Robert Fenwick Elliott

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