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[2018] NTCA 6
Court of Appeal (NT)
2018-06-26
Grant CJ, Southwood J, Mildren AJ
Original judgment source is linked above.
[54] It is clear enough from the Adjudicator's correspondences, and from the submissions in response, that the parties contemplated that the implication would bear upon the time within which objection to a payment claim must be notified; and that the implication of cl 6 would operate to supplant the contractual provision. It is also evident from a plain reading of cl 6 that unless notice of dispute is given within the prescribed time the party receiving the payment claim must pay the whole amount.
[55] It would seem unlikely given the timing of the submissions that the solicitors for INPEX were aware of the content of JKC's submissions at the time the INPEX submissions were finalised. There is no suggestion otherwise in the evidence. However, even if INPEX's advisors did take some comfort from the fact that JKC's submissions echoed their own, that did not mean that they were entitled to sit back and expect that the Adjudicator would inevitably make a finding on the matter of statutory implication as the parties submitted he should. Nor was it incumbent on the Adjudicator to seek further submissions as to the consequences of cl 6 being implied in circumstances where the possibility of that implication had been notified to the parties and those consequences would flow naturally from the implication.
[56] The Adjudicator identified the "critical issue or factor"[22] underlying his preliminary view and upon which the Determination ultimately turned. This was not simply an identification of the general issue joined between the parties in dispute. Although the Determination turned on a point of law not contended for by either of the parties, the issue was squarely identified by the Adjudicator and the parties were given opportunity to address it. That being so, in our opinion the Adjudicator did not fail to provide procedural fairness to INPEX on these grounds.[23]
[57] The single ground in the Notice of Contention is expressed in the following terms:
Her Honour erred in finding that the obligation imposed on the Adjudicator under s 33(1)(b) of the Act could be discharged in the absence of any consideration by the Adjudicator as to whether the amount claimed "was 'due' in the sense that the underlying work had been performed and correctly valued under the contract" [58].
Her Honour should have found that, in the absence of a bona fide or any consideration as to whether "any party to the payment dispute is liable to make a payment" including whether the subject payment claim was a valid payment claim within the meaning of the Act, the Adjudicator had no jurisdiction to make a determination under s 33(1)(b) and any purported determination was necessarily void.
[58] INPEX does not here suggest that the Adjudicator had no jurisdiction to determine the payment dispute, or that the error in implying cl 6 into the EPC Contract was jurisdictional in nature and therefore reviewable, or that there was otherwise any jurisdictional error in the interpretation of the EPC Contract or the Act. Rather, the contention is that the Adjudicator did not make a bona fide attempt to comply with the essential requirements of the Act.
[59] INPEX's argument in this respect proceeds on the assumption that cl 6 was properly implied into the EPC Contract. It is said that in order for cl 6(2) to be engaged there must be a "payment claim" within the meaning of cl 6(1)(a), which denotes "a claim for payment of an amount in relation to the performance by [JKC] of its obligations under the contract".[24] This is said to give rise to an obligation on the part of an adjudicator to make findings in relation to the "obligations" performed under the contract and the components of the claim referable to that performance.
[60] INPEX seeks to draw a distinction in that respect between an adjudicator's task in determining whether a payment claim has been made for the purpose of assuming jurisdiction, and the task under s 33(1)(b) of the Act of determining on the balance of probabilities whether a respondent to a payment dispute is liable to make a payment (and in what amount) in circumstances where that respondent has failed to give a notice of dispute within the time prescribed under cl 6(2)(a)(i) of the implied term.
[61] In that distinction, the first task is said not to require any assessment on the merits, while the second task is said to require a consideration of such matters as possible calculation errors, whether the work claimed falls outside the scope of the contract, and whether the claim has been valued in accordance with the terms of the contract.
[62] The ground presently expressed in the Notice of Contention formed the third ground in the application for review at first instance. The court below dealt with that contention in the following terms:
The third ground relied upon by INPEX for asserting that the Determination was a nullity was that [the Adjudicator] failed to undertake the statutory task in s 33(1)(b) which required him to consider whether it had been demonstrated that a particular amount was due. I do not agree that an adjudicator must always look into the underlying "merits" of whether or not an amount claimed in a payment claim was "due" in the sense that the underlying work had been performed and correctly valued under the contract. As has been said many times in cases connected with this Act, the focus of the Act is on the contract. If the contract between the parties provides for a claim to be paid in full if not disputed within a given time, then there is no reason why an adjudicator ought not give effect to that provision in making a determination on the merits under s 33(1)(b), and every reason why he should.[25]
[63] The relevant parts of the Determination provide:
- As noted, on 24 November 2016 Inpex issued the Notice of Dispute, 21 days after the Payment Claim was lodged. I have no evidence Inpex issued a notice of dispute, compliant or otherwise, within 14 days after receiving the Payment Claim as required by clause 6(2)(a) of the Schedule. In the absence of any compliant notice of dispute and pursuant to clause 6(2)(b) of the Schedule, which was necessarily implied into the Contract, Inpex was obligated to pay the Payment Claim in full when payment fell due on 1 December 2016, that is 28 days from 3 November 2016. It failed to do so. As noted below, the obligation remains.
[64] That determination involved the finding that cl 6 was implied into the EPC Contract; the finding that there had been no notice of dispute given within the time prescribed under that clause; the finding that INPEX was obliged to pay the claim within 28 days after it was made; and a consequent finding that the part of the disputed amount claimed by JKC was payable. It is common ground that this determination did not involve undertaking the tasks which counsel for INPEX asserts were required in the circumstances.
[65] Section 33(1)(b) of the Act confers both an authority and an obligation in the following terms:
(1) An appointed adjudicator must, within the prescribed time or any extension of it under section 34(3)(a):
(b) otherwise - determine on the balance of probabilities whether any party to the payment dispute is liable to make a payment or to return any security and, if so, determine:
(i) the amount to be paid, or security to be returned, and any interest payable on it under section 35; and
(ii) the date on or before which the amount must be paid or the security must be returned.
[66] A determination in the exercise of that authority will only give rise to jurisdictional defect, and so be reviewable on the ground asserted in the Notice of Contention, if the Adjudicator did not make a genuine attempt to exercise that authority in accordance with requirements of the Act and by reference to the power conferred.[26]
[67] The relevant question is whether in making the Determination the Adjudicator exceeded the authority conferred by s 33(1)(b) of the Act, with the consequence that what purported to be a determination within the scope of that authority was no more than an "ostensible determination".[27]
[68] A number of matters presented to the Adjudicator in exercising the authority conferred by s 33(1)(b) of the Act in discharge of the obligation it imposed. First, there was a valid payment claim. Second, there was a valid payment dispute, whether sourced in a disputation of the claim or the failure to pay the amount claimed when due.[28] Third, in the application of cl 6(2) to the finding that no notice of dispute had been given within the prescribed time, INPEX was liable to pay the amount of the claim.
[69] In the circumstances which presented, undertaking those steps was all that was required in making the determination on the balance of probabilities that INPEX was liable to make a payment of that part of the disputed amount claimed by JKC. As the court below effectively determined, where the contract between the parties (as found) provides for a claim to be paid in full if not disputed within a specified time, then in giving effect to that provision an adjudicator is making a determination as required by the merits of the case.
[70] A number of matters are significant in that conclusion. First, the implication of cl 6(2) into the EPC Contract with that consequence did not give rise to jurisdictional defect, and nor does INPEX contend that it did. Second, the authority conferred by s 33(1)(b) of the Act was not in the circumstances conditioned by a requirement that the Adjudicator examine whether the works had been carried out (and particularly not in circumstances where INPEX did not suggest in its response to the Adjudicator that they had not). Finally, the clear legislative intention is that in the absence of a valid notice of dispute payment must be made on an "interim" basis without prejudice to the parties' substantive rights. In that respect, the Determination has no effect on INPEX's right to prosecute in civil proceedings any contentions it may have in relation to calculation errors, the scope of the contract, and whether the claim has been valued in accordance with the terms of the contract.
[71] For the reasons given by counsel for JKC, the observations made in Pacific General Securities Ltd & Anor v Soliman and Sons & Ors[29] do not lead to any different conclusion. The relevant comment in that case was directed to whether the absence of a valid response to an adjudication application obliged an adjudicator to allow the payment claim in full. In those circumstances, it was held that before allowing a payment claim an adjudicator must determine that the works identified in the payment claim were undertaken, and their value.
[72] Those observations were made in the context of the New South Wales legislation, which contains no requirement that a respondent is liable to pay the amount of the claim in the absence of a response. The position obtaining in the application of cl 6 under the Act is quite different.
[73] The following orders are made:-
(a) The appeal is allowed.
(b) The contention made by notice dated 27 July 2017 is dismissed.
(c) The orders made on 15 June 2017 and the judgment given on 26 July 2017 are set aside.
[74] We will hear the parties in relation to costs.
[1] Citing AJ Lucas Operations Pty Ltd v Mac-Attack Equipment Hire Pty Ltd [2009] NTCA 4; (2009) 25 NTLR 14.
[3] Trans Australian Constructions Pty Ltd v Nilsen (SA) Pty Ltd [2008] NTSC 42; (2008) 23 NTLR 123 at 138 [43]; Independent Fire Sprinklers (NT) Pty Ltd v Sunbuild Pty Ltd [2008] NTSC 46; (2008) 24 NTLR 15 at 25 [49]; AJ Lucas Operations Pty Ltd v Mac-Attack Equipment Hire Pty Ltd [2009] NTSC 48; (2009) 25 NTLR 1 [29]; Hall Contracting Pty Ltd v MacMahon Contractors Pty Ltd [2014] NTSC 20; (2014) 34 NTLR 17 at 31 [34]. See also Probuild Constructions (Aust) Pty Ltd v Shade Systems Pty Ltd [2018] HCA 4 which was delivered 8 months after the decision at first instance in this matter.
[4] Citing Zurich Bay Holdings Pty Ltd v Brookfield Multiplex Engineering and Infrastructure Pty Ltd [2014] WASC 40 at [10]
[5] Citing Stead v State Government Insurance Commission [1986] HCA 54; (1986) 161 CLR 141; Zurich Bay Holdings Pty Ltd v Brookfield Multiplex Engineering and Infrastrcuture Pty Ltd [2014] WASC 40 at [12].
[6] A "construction contract" is defined by s 5 of the Act to include a contract to carry out construction work, including on-site services and professional services related to the construction work.
[8] SZBEL v Minister for Immigration and Multicultural and Indigenous Affairs [2006] HCA 63; (2006) 228 CLR 152 at 160-161, [26].
[10] Probuild Constructions (Aust) Pty Ltd v Shade Systems Pty Ltd [2018] HCA 4 at [44], citing Falgat Construction Pty Ltd v Equity Australia Corp Pty Ltd [2005] NSWCA 49; (2005) 62 NSWLR 385 at 389 [22].
[12] Laing O'Rourke Australia Construction Pty Ltd v Samsung C&T Corporation [2016] WASCA 130 at 426 [98].
[13] [2017] NSWCA 151 at [102]- [107], [130].
[14] See Probuild Constructions (Aust) Pty Ltd v DDI Group Pty Ltd [2017] NSWCA 151 at [105].
[15] Probuild Constructions (Aust) Pty Ltd v DDI Group Pty Ltd [2017] NSWCA 151 at [144].
[17] M & P Builders Pty Ltd v Norblast Industrial Solutions Pty Ltd (2014) 34 NTLR 162 at [41].
[18] Zürich Bay Holdings Pty Ltd v Brookfield Multiplex Engineering and Infrastructure Pty Ltd [2014] WASC 40 at [10].
[19] Musico v Davenport [2003] NSWSC 977 at [108].
[20] [2008] NTSC 46; (2008) 24 NTLR 15 at 25 [55]- [56].
[21] See Amasya Enterprises Pty Ltd v Asta Developments (Aust) Pty Ltd (No 2) [2015] VSC 500 at [165]
[22] Cf John Holland Pty Ltd v TAC Pacific Pty Ltd [2009] QSC 205 at [50].
[23] Probuild Constructions (Aust) Pty Ltd v DDI Group Pty Ltd [2017] NSWCA 151 at [137], [144].
[24] See para (a) of the definition of "payment claim" in s 4 of the Act.
[25] INPEX Operations Australia Pty Ltd & Anor v JKC Australia LNG Pty Ltd & Anor [2017] NTSC 45 at [58].
[26] Citing Brodyn Pty Ltd t/as Time Cost and Quality v Davenport (2004) 61 NSWLR 42; [2004] NSWCA 394 at [55].
[27] See the question as formulated by Gageler J in Maxcon Constructions Pty Ltd v Vadasz [2018] HCA 5 at [35].
[28] See para (a) of the definition of "payment dispute" in s 8 of the Act.
JKC Australia LNG Pty ltd
Inpex Operations Australia Pty Ltd & Ors [2018] NTCA 6
AJ Lucas Operations Pty Ltd v Mac-Attack Equipment Hire Pty Ltd [2009] NTCA 4; (2009) 25 NTLR 14, Amasya Enterprises Pty Ltd v Asta Developments (Aust) Pty Ltd (No 2) [2015] VSC 500, Brodyn Pty Ltd t/as Time Cost and Quality v Davenport (2004) 61 NSWLR 42, Independent Fire Sprinklers (NT) Pty Ltd v Sunbuild Pty Ltd [2008] NTSC 46; (2008) 24 NTLR 15, John Holland Pty Ltd v TAC Pacific Pty Ltd [2009] QSC 205, Laing O'Rourke Australia Construction Pty Ltd v Samsung C&T Corporation [2016] WASCA 130, Maxcon Constructions Pty Ltd v Vadasz [2018] HCA 5, M & P Builders Pty Ltd v Norblast Industrial Solutions Pty Ltd (2014) 34 NTLR 162, Musico v Davenport [2003] NSWSC 977, Pacific General Securities Ltd & Anor v Soliman and Sons & Ors [2006] NSWSC 13; (2006) 196 FLR 388, Probuild Constructions (Aust) Pty Ltd v Shade Systems Pty Ltd [2018] HCA 4, Probuild Constructions (Aust) Pty Ltd v DDI Group Pty Ltd [2017] NSWCA 151, SZBEL v Minister for Immigration and Multicultural and Indigenous Affairs [2006] HCA 63; (2006) 228 CLR 152, Zurich Bay Holdings Pty Ltd v Brookfield Multiplex Engineering and Infrastructure Pty Ltd [2014] WASC 40, referred to.
Australia Pty Ltd & Ors [2018] NTCA 6
The question in this case is whether there has been a substantial denial of natural justice. In this regard, the plaintiff placed considerable reliance on cases such as the Zürich Bay Holdings Pty Ltd v Brookfield Multiplex Engineering and Infrastructure Pty Ltd [[2014] WASC 40] and Musico v Davenport [[2003] NSWSC 977]. However, the gravamen of those cases was that the parties did not have proper notice of the basis of the decision of the adjudicator or could not have reasonably anticipated that the adjudicator would make his decision on such a basis and were thereby deprived of an opportunity to be heard.[17]
(2009) 25 NTLR 14
(2004) 61 NSWLR 42
(2008) 24 NTLR 15
(2014) 34 NTLR 162
(2006) 196 FLR 388
(2006) 228 CLR 152
(2008) 23 NTLR 123
(2009) 25 NTLR 1
(2014) 34 NTLR 17
(1986) 161 CLR 141
(2005) 62 NSWLR 385