Australia: Decisions Of Interest – Security For Payment

Last Updated: 3 September 2009
Article by Tony Mylne

The Supreme Court of Queensland in this case (Nebmas Pty Ltd –v– Subdivide Pty Ltd, 1 May 2009), examined whether certain provisions of Sections 21(2) and 21(3) of the Building and Construction Industry Payments Act (2004)(Qld), which relate to the role/decision of an adjudicator of a dispute, are mandatory or "an essential precondition" for the existence of an adjudicator's determination. Those experienced in the area will know that the phrase "an essential precondition" is particularly important when dealing with matters where it is alleged that the adjudicator has acted without jurisdiction. Acting without jurisdiction is one of the few occasions when an adjudicator's decision will be voided.

In this instance an adjudication was made in favour of the subcontractor in circumstances where, on any interpretation, the subcontractor had failed to provide a notice required under Section 21(2) which provides:

"An adjudication application to which Section 1(b) applies [which is where the respondent failed to both serve a payment schedule and pay amounts owing] cannot be made unless:

  1. The claimant gives the respondent notice within 20 business days immediately following the due date for payment, of the claimant's intention to apply for adjudication of the payment claim; and
  2. The notice states that the respondent may serve a payment schedule on the claimant within 5 business days after receiving the claimant's notice."

Under Section 21(3) an adjudication application must be made within 10 business days after the end of the 5 day period referred to in Section 2(b) as mentioned above.

The terminology used, i.e. "cannot be made" (Section 21(2)) and "must" (Section 21(3)) suggests these steps are essential preconditions for a valid determination by an adjudicator.

The Court made the observation that these particular stipulations had never before been identified as part of basic and essential requirements "for a valid determination". In the test referred to in the case of Brodyn Pty Ltd –v– Davenport (NSW case) the judge, Hodgson JA, refers to the following:

"... it is preferable to ask whether the requirement being considered was intended by the legislature to be an essential precondition for the existence of an adjudicator's determination."

The applicant in the proceedings, Nebmas, cited the decision of Kell and Rigby Pty Ltd –v– Guardian International Properties Pty Ltd which suggested that the equivalent provision in the New South Wales legislation was a "mandatory condition".

The Court approved comments made by the New South Wales Court of Appeal in Co-ordinator Construction Co Pty Ltd –v– Cliamatech (Canberra) Pty Ltd in which it was stated on review of another section as to whether it was an essential precondition (section 13(2) – this provision in the NSW Act relates to what a payment claim must set out) that there were three points in favour of an argument that that section 13(2) was not a mandatory condition:

  • Identification of matters for the purposes of a claim is within the special experience of an adjudicator and he is intended by the legislation to bring to that task some evaluative judgment;
  • It relates to a procedural step in the claim process rather than some external criterion (unlike say, for instance, a payment schedule having been served within 12 months of the work being performed);
  • "The Act reflects in its objects and procedures provisions for a speedy and effective means of ensuring progress payments are made during the construction contract without undue formality or resort to the law."

In accordance with these principles and the fact that in Brodyn the Court did not mention the equivalent of section 21(2) was an essential precondition, the Court found that the non-compliance with 21(2) did not result in the adjudicator's decision being void.


It is difficult to be convinced by the Court's reasoning. The decision narrows further the circumstances in which adjudications can be declared void. The Queensland decision of Nebmas –v– Subdivide is in apparent direct conflict with Kell and Rigby Pty Ltd –v– Guardian International Properties Pty Ltd a decision on the equivalent New South Wales provision. The apparent inconsistencies and uncertainties associated with timing of notices and the effect on adjudications are likely to continue and be an area for conflict.

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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