Thomson Geer's construction and infrastructure team has successfully acted for Queensland construction company GCB Constructions Pty Ltd (GCB) in a Supreme Court of Queensland proceeding involving an application to have an adjudicator's decision purportedly made under the Building Industry Fairness (Security of Payment) Act 2017(Qld) (BIF Act) declared void. 

The decision of GCBConstructions Pty Ltd v SEQ Formwork Pty Ltd & Ors [2023] QSC 7 confirms that an adjudicator must correctly identify the existence of a "construction contract" or an "other arrangement" for the purposes of the BIF Act.   

It also reinforces the importance of reducing agreements to writing and ensuring that there are, at the outset, clear terms governing key aspects of the construction work.  

Background 

GCB was engaged to construct two large residential towers at Southport.  GCB sought to engage SEQ Formwork Pty Ltd (SEQ)as a subcontractor to construct and supply formwork for the project.  GCB issued a letter of award to SEQ which expressed to be "subject to agreement about the terms and conditions of the AS4903-2000 Subcontract Agreement". 

At the request of GCB, SEQ commenced works while the parties were still negotiating terms and conditions, on the assumption that a subcontract of the type contemplated by the letter of award would later be executed.  

In April 2022, SEQ lodged an adjudication application under the BIF Act after GCB served a payment schedule in response to a payment claim made by SEQ in March 2022.  The adjudicator found that SEQ was purportedly entitled to be paid $367,124.39. 

GCB, by originating application, sought a declaration from the Supreme Court that the adjudication decision be found void, asserting that: 

a)    the adjudicator had fallen into jurisdictional error; and

b)    there was a want of two jurisdictional facts, which included that an agreement of the kind found by the adjudicator could not amount to a "construction contract" for the purposes of the BIF Act.  

The Decision  

His Honour Justice Burns accepted GCB's submissions with respect to one of the two jurisdictional facts, concluding that an agreement of the kind found by the adjudicator amounted to neither a "construction contract" or an "other arrangement" for the purposes of the BIF Act. 

His Honour reasoned that there was no "concluded state of affairs, which was bilateral," and not enough settled detail to enable work and/or materials to be claimed with precision and valued to the same standard. Given that the March 2021 request was limited to the supply of labour for "capping beam works", there was insufficient mutuality in respect of things such as: 

a)    the supply of or payment for material;

b)    rates to be charged for labour;

c)    time for performance of any of the work;

d)    the making of claims;

e)    the time for payment;

f)     retention money; and

g)    the transfer of ownership,

 to support a finding that the agreement arising out of the request, the scope of which had expanded over time, amounted to an "other arrangement", let alone a "construction contract" for the purposes of the BIF Act. 

Accordingly, the adjudicator's jurisdiction to make a decision with respect to the March 2022payment claim had not been enlivened, and the adjudication decision was therefore declared void and of no effect.

What does this mean? 

The decision reinforces the importance of reducing agreements to writing and ensuring that there are, at the outset, clear terms governing key aspects of the construction work.  

The security of payment regime, which is designed to protect cash flow of parties lower down in the contractual chain, may not be available to a contractor who does not ensure that payment claims are made under an executed contract with clear terms. 

The Thomson Geer team was led by Partner Andrew Kelly and supported by Senior Associate Samuel Speechly.

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