A tale of two issues: Supreme Court of Queensland decision highlights the importance of timely adjudications and appropriate contractor licensing - Trials & Appeals & Compensation

'It was the best of times, it was the worst of times, it was the age of wisdom, it was the age of foolishness, it was the epoch of belief, it was the epoch of incredulity...' wrote Dickens in A Tale of Two Cities. For some contractors, however, the worst of times, with only foolishness (perhaps of their own and of others) and incredulity, are upon us following the Supreme Court of Queensland's recent decision in Galaxy Developments Pty Ltd v Civil Contractors (Aust) Pty Ltd t/a CCA Winslow (Galaxy Developments).

In this case, the Court considered a tale of two issues: what happens if an adjudicator delivers a decision late about a contractor who has a valid licence for some, but not all, of the contracted works?

In some States, lateness does not invalidate an adjudication decision and it might be thought a contractor can be paid something, even if it does not have a licence for every element of the works. In Galaxy Developments the Court confirmed that this is not the case in Queensland.

The facts

Galaxy Developments Pty Ltd (Galaxy) and Civil Contractors Pty Ltd trading as CCA Winslow (CCA) entered into a contract for various civil works, predominantly bulk earthworks, as part of a small subdivision in Coomera, Queensland. The contract price was approximately $1.3 million. The scope of works included a minor component for the removal and relocation of an existing bus stop shelter and seat and the installation of a bike rack, valued at approximately $37,000 (the bus stop works component).

CCA held a structural landscaping licence, as it is defined in Schedule 2 of the Queensland Building and Constriction Commission Act 1991(Qld) (QBCC Act).

A dispute arose in relation to one of CCA's payment claims, which ultimately went to adjudication.

Although the adjudicator's decision was due to be delivered by 24 October 2019, it was not until 29 October 2019 that the second respondent (the adjudicator) purported to deliver his decision under the BIF Act. The adjudicator held that CCA was entitled to be paid approximately $1.3 million dollars, including payment for the bus stop works component.

The key issues

Galaxy applied to the Supreme Court of Queensland for a declaration that the adjudicator's decision was void either because:

the adjudicator's decision was delivered after the maximum period prescribed by the BIF Act for delivery; or
the contract was void on the basis that CCA was not appropriately licensed.

Was the late adjudication decision void?

Section 85(1) of the BIF Act prescribes the time frames in which an adjudicator must deliver his or her adjudication determination. Both parties in this case accepted that the adjudicator's decision was delivered after the prescribed time frame.

In determining whether an adjudication determination delivered after the prescribed timeframe is void, the Court paid significant attention to the precise wording of the BIF Act (particularly the deliberate and discerning use of the mandatory word 'must') and considered the wording used in the Victorian and New South Wales security of payment regimes, as well as the previous wording of the Building and Construction Industry Payments Act 2004 (Qld).

The Court considered that the wording of the BIF Act supported Galaxy's argument that a late adjudication decision is void for the following reasons:

section 86 of the BIF Act specifically provides for extending the time in which an adjudicator may deliver a decision. This is an indication time limits are very important;¹
the mechanism under section 94(2) of the BIF Act for another adjudication when an adjudication determination is not delivered by the due date was such that a late adjudication determination would be of no effect;² and
the ability to discontinue an adjudication under section 97 of the BIF Act did not appear to apply in circumstances where an adjudication decision is not issued by the due date and the claimant wishes to have a new adjudication under section 94 of the BIF Act, suggesting that the adjudication ceases to be 'live' if the adjudicator fails to deliver the determination within time.³

Although interstate decisions, including the appellate decision of Ian Street Developer Pty Ltd v Arrow International Pty Ltd &Anor, ⁴ hold that a late adjudication determination remains valid, the Court distinguished those cases primarily on the basis of the plain contrast in wording between the Victorian and New South Wales legislation and the Queensland legislation, particularly in relation to a claimant's right to another adjudication if a determination is not provided in time (which right does not exist under the New South Wales and Victorian security of payment regimes). ⁵

Accordingly, the Court considered that the adjudication determination was void and the adjudicator was not entitled to his fee. ⁶

Did CCA hold the appropriate licence?

Given the finding that the adjudicator's determination was void for being delivered outside the statutory maximum period, the Court noted it was strictly unnecessary to deal with the licensing issue, but did so because it was fully argued by the parties.

Section 42 of the QBCC Act provides that a person must not carry out work for which it does not hold the appropriate licence class and any person who carries out building work without the appropriate licence class is not entitled to any monetary or other consideration for doing so.

Galaxy alleged that the bus stop works component did not fall within the scope of works allowed by CCA's landscaping licence and, as a result, CCA could not recover payment under the contract and any adjudication determination considering otherwise was void for want of jurisdiction.

Although the Court noted the absurdness of the issue to consider, given the minor monetary and complexity of the bus stop component works relative to the totality of the contract, the Court was required to consider whether three particular pieces of work fell outside the scope of CCA's licence or whether they were otherwise excluded from the QBCC Regulations:

the relocation of a bus shelter shed;
the installation of a new bike rack; and
the removal and refixing of a small seat at a bus stop.

CCA successfully argued that the bus shelter shed was a 'prefabricated shed' within the allowable scope of works for the landscaping licence. However, CCA was unsuccessful in arguing that the bike rack and bus stop seat fell within the exclusions for 'work on roads' under Schedule 1 to the QBCC Regulations. After a long and detailed consideration of the statutory and common law definition of 'road', it was found that a structure in or under a footpath required a separate licence, which CCA did not hold.

In accordance with section 42 of the QBCC Act, the result of the licensing issue, which the Court noted as being 'absurd in reality', was that CCA was not entitled to be paid for any work under the contract worth $1.3 million (rather than simply those works which fell outside the scope of its licence).

Key takeaways

The case has three key takeaways:

an adjudicator's decision under the Building Industry Fairness (Security of Payment) Act 2017 (Qld) (BIF Act) is void if it is delivered after the statutory maximum period;
an adjudicator who fails to deliver a decision in time is not entitled to his or her fees under the BIF Act; and
undertaking 'building work' without the appropriate licence class will disentitle a contractor to any payment under the contract (includBing payment for works to which an appropriate licence is held) and will prevent access to adjudication under the Queensland security of payment regime. Contractors and subcontractors should ensure that all works under contract fall within the scope of their licence class.

While the Court declared the adjudication determination void on the basis that it was delivered after the statutory maximum period, the Court's consideration of the licensing issues serves as an important reminder to contractors and subcontractors to ensure they hold the appropriate licence class for all building works under contract. Otherwise, the 'worst of times' may be upon them.

Footnotes

¹Galaxy Developments Pty Ltd v Civil Contractors (Aust) Pty Ltd t/a CCA Winslow [2020] QSC 51 at [23].
² Galaxy Developments Pty Ltd v Civil Contractors (Aust) Pty Ltd t/a CCA Winslow [2020] QSC 51 at [25].
³ Galaxy Developments Pty Ltd v Civil Contractors (Aust) Pty Ltd t/a CCA Winslow [2020] QSC 51 at [27]. The choice of which section is used will impact whether an adjudicator is entitled to their fee.
⁴ [2018] VSCA 294.
⁵ Galaxy Developments Pty Ltd v Civil Contractors (Aust) Pty Ltd t/a CCA Winslow [2020] QSC 51 at [43].
⁶ Galaxy Developments Pty Ltd v Civil Contractors (Aust) Pty Ltd t/a CCA Winslow [2020] QSC 51 at [27], [57].

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