Key takeaways

In this seminal case, Ceerose Pty Ltd v A-Civil Aus Pty Ltd [2023] NSWCA 215, the Court held that an adjudicator does not need to be satisfied that a Claimant at adjudication has indeed performed work for which payment is claimed if the respondent has not disputed performance of the work in a payment schedule.

Previously, it was understood that if a respondent did not raise any reasons for withholding payment, an adjudicator could not automatically determine the progress claim at the amount claimed by the Claimant. Nonetheless, it was understood that an adjudicator was still required to determine on the material available to the adjudicator, that the amount claimed is properly payable.

By contrast, the Court has now found that if an adjudicator rejects all the reasons for withholding payment in a payment schedule, or the respondent fails to provide reasons, the adjudicator is entitled to award the full claimed amount without further interrogation of the material.

What does this mean?

For Claimants, this decision means that success at adjudication will be easier to achieve, particularly if there is no payment schedule or a payment schedule which does not thoroughly dispute entitlement or the performance of the work.

For Respondents, it is more critical than ever that if payment is disputed, payment schedules are provided on time, and that comprehensive and clear reasons for withholding payment are provided, including if there is a dispute about performance or entitlement.

What happened in this case?

In late 2021, Ceerose and A-Civil entered into two separate subcontracts for development projects at York Street, Sydney and Greenknowe Avenue, Elizabeth Bay.

In May 2022, A-Civil issued payment claims under each contract to which Ceerose disputed for the reasons set out in the respective payment schedules. Adjudication applications were made in respect of each payment claim.

By early August 2022, adjudication determinations had been made for Ceerose to pay A-Civil $2,045,453 for the York Street project and $349,324 for the Elizabeth Bay project. Subsequently, Ceerose commenced judicial review proceedings in the Supreme Court of NSW to set aside each determination for jurisdictional error.

On 20 April 2023, Justice Darke of the Supreme Court of NSW set aside each determination in part. This case arose following Ceerose’s appeal of that decision.

A key question on appeal was whether the adjudicator had fallen into jurisdictional error for failure to consider the merits of the claimed amounts beyond the reasons set out in the payment schedule.

What was the outcome?

The Court unanimously dismissed the appeal for the reasons set out by Justice Payne, with Justices Ward and Basten agreeing.

Their Honours held that the adjudicator’s task is to determine the dispute as put by the parties in light of the express restrictions in the Act. The Court was of the view that a requirement for an adjudicator to consider whether construction work has been carried out under the contract (in the absence of a reason put forward by the respondent) is inconsistent with the purpose, text and subject matter of the Act.

His Honour said at [84]:

“The absence of material, including a reason put forward by a respondent for not paying the payment claim, entitles an adjudicator to award the amount of the claim without “addressing its merits” … A requirement that an adjudicator must determine “whether the construction work identified in the payment claim has been carried out”, in circumstances where a recipient of a payment claim has not made any suggestion that it has not… subverts the statutory scheme… The person best able to address the question of “whether the construction work identified in the payment claim has been carried out” namely the recipient of the payment claim, has not… suggested that the work was not carried out, as it was required to do by the Act if it wished not to pay the claim. The statutory task of an adjudicator is to determine the claimant’s entitlement within the framework of the dispute that was propounded by the parties.”

In reaching that conclusion, the Court rejected the authority of a substantial body of previous cases including Coordinated Construction Co Pty Ltd v JM Hargreaves (NSW) Pty Ltd (2005) 63 NSWLR 385; Pacific General Securities Ltd v Soliman & Sons (2006) 196 FLR 388; [2006] NSWSC 13; Laing O’Rourke Australia Construction Pty Ltd v Monford Group Pty Ltd [2018] NSWSC 491; and Acciona Infrastructure Australia Pty Ltd v Chess Engineering Pty Ltd [2020] NSWSC 1423.

Further information / assistance regarding the issues raised in this article is available from the authors, Sarah Hammond, Partner, Emily Barnett, Law Graduate, or your usual contact at Moray & Agnew.