Australia: New South Wales Netball Association Ltd v Probuild Construction (Aust) Pty Ltd [2015] NSWSC 1339: Security of payment

Construction Law Update - October 2015



An adjudicator's determination based an invalid payment claim is a nullity at law. While the setting aside of the determination is discretionary, even an opportunistic change in position is unlikely to cause relief to be withheld.

Costs in responding to an invalid payment claim are unlikely to be recoverable. The delivery of an invalid payment claim is unlikely to amount to misleading conduct, or to support an estoppel. By way of comparison, it was agreed that Netball NSW's costs in responding to a ~$10,000,000 payment claim were $99,563.80.

The facts

Probuild agreed to construct a Netball Centre of Excellence at Sydney Olympic Park for the New South Wales Netball Association. Probuild made a payment claim (payment claim 24) for about $10,000,000. Netball NSW contended this payment claim was invalid (as it was the second payment claim in relation to a reference date), but an attempt to restrain the adjudication process failed: New South Wales Netball Association Ltd v Probuild Constructions (Aust) Pty Ltd [2015] NSWSC 408.

The adjudicator proceeded to make a determination. She determined a progress payment of about $125,000 (that is, less than 2% of the amount claimed). As a result, the commercial ground shifted: it was in Netball NSW's interest to contend for the validity of the payment claim (and therefore the adjudicator's determination), and in Probuild's interest to contend for the invalidity of the payment claim (to preserve the potential to try again).

Netball NSW also claimed damages for misleading conduct under the Australian Consumer Law. It argued that, in serving payment claim 24, Probuild represented that it was entitled to issue the claim and that Netball NSW was required to respond to it to avoid Probuild enforcing it as a judgment under the Act. Netball NSW contended that this was misleading (as Probuild now contended that was wrong), and it suffered loss because of Probuild's conduct (in the form of the costs of the adjudication process).

The decision

Stevenson J held that the previous payment claim, payment claim 23, was valid (at [16]). It was common ground that payment claim 24 was otherwise a valid payment claim and in relation to the same reference date (at [8]). The adjudicator's determination was therefore in excess of jurisdiction and a nullity (at [48]).

Two issues then arose: (1) whether, as a matter of discretion, the Court should withhold relief due to Probuild's previous reliance on payment claim 24's validity, and (2) whether Netball NSW could claim its costs of responding to payment claim 24 and the subsequent adjudication process as a result of Probuild's misleading conduct.

Withholding relief as a matter of discretion

Stevenson J noted that while Probuild "sought to have it both ways: to approbate and reprobate" (at [40]), both parties opportunistically engaged in a volte face when it suited their interests (at [3], [39], [46]). Stevenson J accepted this was "a factor, indeed a powerful factor" in deciding whether to decline to grant the ordinary relief (at [45]).

Ultimately, Stevenson J decided not to withhold the relief, because (1) at law, it was no decision at all (at [47]–[50]); (2) another reference date would still arise and the status of the adjudication on payment claim 24 should be resolved before that reference date (at [51]–[52]); and (3) Probuild's conduct, while opportunistic, did not involve acquiescence, delay, or abandonment, or bad faith (at [37]).

Costs of the adjudication process

By analogy with the position with pleadings, Stevenson J said that a statement in a payment claim (for example that it is a payment claim under the Act) is not a "representation" at law (at [58]–[59]). Probuild's conduct was simply to claim an amount due, which was not misleading (at [56]–[57], [60]–[62]). Stevenson J held that service of a payment claim did not amount to a representation of the truth of the matters in it (at [63]).

In any event, Stevenson J concluded that Netball NSW did not respond to the adjudication application "because of" what was stated in it, but rather because it did not agree with what was stated in it and because of the exigencies imposed on it by the Act (at [65]). Therefore even if Probuild's conduct was misleading, the damages claimed by Netball NSW did not follow.

An alternative argument based on equitable estoppel on the same facts was weakly raised, and failed for the same reasons (at [66]).

Costs of the proceedings

Stevenson J's preliminary view was that, despite succeeding, Probuild ought to pay Netball NSW's costs of the proceedings on the indemnity basis (at [68]). After receiving further submissions, he decided that there was no relevant basis for indemnity costs, but that "the fair result is that the chips should lie as they have fallen, and there should no order as to costs": New South Wales Netball Association Ltd v Probuild Construction (Aust) Pty Ltd [2015] NSWSC 1401, [12]. nsw/NSWSC/2015/1339.html

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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