Adjudication decision trumps Superintendent’s progress certificate

Court of Appeal decision in Gambaro v Rohrig

In late December 2015 the Queensland Court of Appeal handed down the decision of Gambaro Pty Ltd as Trustee for the Gambaro Holdings Trust v Rohrig (Qld) Pty Ltd; Rohrig (Qld) Pty Ltd v Gambaro Pty Ltd [2015] QCA 288.

This decision highlights the enforceability of adjudication decisions, even where there is a difference between the adjudicated amount and the Superintendent’s progress certificate.

Gambaro Pty Ltd (Gambaro) engaged Rohrig (Qld) Pty Ltd (Rohrig) to construct a hotel and refurbish parts of a building in Caxton Street, Brisbane for a ‘guaranteed maximum price’ (the Contract) under which practical completion was reached on 29 April 2014.

Shortly afterwards and following the usual payment claim process, Rohrig made an adjudication application in excess of $2 million. On 31 July 2014, an adjudicator made a decision that the amount of $956,788.25 was payable by Gambaro under Rohrig’s payment claim. Gambaro paid that amount. Gambaro then issued proceedings seeking restitution of that part of the adjudicated amount that exceeded the total assessed by the Superintendent under the Contract in previous progress certificates.

Gambaro argued that:

  1. under BCIPA, a claimant’s right to recover progress payments is ‘exhausted’ upon payment of the adjudicated amount, such that the respondent ‘is thereafter entitled to recover that amount immediately’ should it exceed the applicant’s contractual entitlement as certified by the Superintendent;\
  2. s100 of BCIPA expressly preserved Gambaro’s contractual right to seek recovery of the adjudicated amount which exceeded Rohrig’s contractual entitlement by way of restitution.

Rohrig argued that:

  1. pending a final determination of the contractual entitlement, a party to the contract cannot prosecute its contractual rights in respect of a progress payment ‘on account’ of that contractual entitlement in a way which would override the statutory entitlement to a progress payment (BCIPA);
  2. there was no temporal limit on the operation of s99 BCIPA ‘such that it ceased to apply upon payment of an adjudicated amount’.

The Court of Appeal held that, in lieu of a final determination, Gambaro was not entitled to restitution of the adjudicated amount merely on the basis of the difference between that amount and the total amount payable pursuant to the superintendent’s progress certificates under the Contract. Fraser JA said that: “thpurpose of s99 is both to put it beyond doubt that the statutory entitlement to progress payments…has effect despite any difference between thastatutory entitlement and thcontractual entitlement to progress payments and to prohibit the exclusion or modification of the statutory right to the adjudicated amount of a progress payment on account…” The Court of Appeal dismissed Gambaro’s appeal with leave to file an amended statement of claim in the event Gambaro could plead material facts in support of an order for restitution after a final determination of the respective contractual entitlements.

 

What is the practical effect of the decision?

Gambaro’s unsuccessful appeal means that a respondent to an adverse adjudication decision who seeks restitution will probably be required to wait for a final determination of contractual rights under the contract at a trial, which may be a number of years away.

The Court of Appeal recognised (without having to finally determine the issue) that immediate conversion of security after an adjudication decision would not be prohibited by operation of the Act, at least where the terms of the contract did not require the contractor to replenish the security (See Patterson Building Group Pty Ltd v Holroyd City Council and Fabtech Constructions Pty Ltd v Laing O’Rourke Australia Construction Pty Ltd).

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