15 On 20 April 2004, the respondent issued the applicant with a letter of intent of that date. The terms were accepted by the applicant commencing work and it was later signed by the parties.
16 The express purpose of the letter was to notify the applicant of the respondent's intention to award a contract to the applicant for the installation of bored piling in accordance with the Scope of Works detailed in annexure K of attachment 1 thereto (Works), those Works forming part of the Project Works being the provision of design, construction and maintenance works under a contract (the Project Deed) entered into between Leighton Contractors Pty Ltd (as observed above, one of the members of the respondent joint venture) with the Public Transport Authority for the New MetroRail City Contract (project). It was recorded that Leighton Contractors had entered a subcontract to carry out the project works under the Project Deed with the respondent joint venture.
17 In order for the respondent to fulfil its obligations under the Project Deed, the respondent requested that the applicant commence and implement all necessary actions, before the issue of the formal executed Works Contract by the respondent.
18 The letter of intent was expressed to be subject to a number of conditions, and reference is made to those which are relevant below.
19 It was expressly provided that no acceptance of any tender or proposal issued or given by the respondent was given by providing the letter of intent, and that the legal relationship between the parties was governed solely by the terms of the letter until it was superseded by a signed formal Works Contract.
20 The applicant was to initiate necessary actions as directed by the respondent to enable the timely and expeditious progression of the Project Works before the issue of the formal executed Works Contract which was expected to be within two weeks of the date of the letter of intent.
21 The applicant was to carry out any work directed by the respondent and was to comply with any reasonable program, milestone dates or other timing required by the respondent and detailed in annexure O of the draft Works Contract included as attachment 1, was to carry out the work in accordance with all technical requirements and documentation requirements made known to it by the respondent, and was to comply with the technical and documentation requirements of the Public Transport Authority.
22 Importantly, the applicant would only be entitled to claim payment for Works completed at the direction of the respondent and performed in accordance with the terms of the letter. The applicable rates and prices for payment were detailed in annexure M of the draft Works Contract included as attachment 1. Payment would be made by the respondent once the formal Works Contract had been signed, at the time of payment of the first progress claim made under that contract. Alternatively, if the formal Work Contract was not signed, payment would be made when the respondent notified the applicant that it would not be signed and that the applicant was to cease execution of the work, or at the time when the respondent gave notice that it no longer required the applicant to carry out the work. By condition 7, it was again stated that the letter of intent would be superseded by the formal executed Works Contract. Where any inconsistency arose between the signed formal Works Contract and the letter of intent, the formal Works Contract would take precedence.
23 It was stated that the type of contract agreement which the respondent would use when formalising the contract with the applicant would be based on the respondent's Works Contract, a copy of which was supplied with the letter as attachment 1.
24 It is common cause that the Works Contract was not executed until 16 February 2005. There was some limited negotiation over some provisions of the final Works Contract.
25 On or about 7 September 2005, the applicant commenced an adjudication application against the respondent pursuant to the CC Act.
26 The adjudication application was based on the Works Contract dated 16 February 2005. It alleged that a payment dispute arose on 13 July 2005, consequent upon the respondent's part-payment of a progress claim made on 25 June 2005. The progress claim, being progress claim No 11, consisting of part 11A and part 11B, was for an amount of $1 191 971 (excluding GST). The respondent paid an amount of $433 473 (excluding GST) so that the alleged payment dispute was for an amount of $758 498.
27 The payment dispute related to delay/disruption costs, industrial action costs, preliminaries and variation costs.
28 The respondent opposed the application. In doing so, it described itself as being the principal under a letter of award dated 20 April 2004 (being the letter of intent, as apparent from the copy attached) and under a subsequent Works Contract executed on 16 February 2005.
29 The first defence advanced raised an entitlement to a back charge of approximately $41 000 due to errors in measurements. The second defence raised that approximately some $16 500 had already been dealt with in a previous progress claim and, as more than 28 days had elapsed since those progress claims, could no longer be advanced.
30 Further, it was stated that the applicant had no entitlement to make the progress claim, as certain conditions precedent for the making of the claim had not been met.
31 It was stated that, to the extent that the respondent had, in fact, certified monies, that merely constituted particular instances of waiver under cl 44.4 (of the Works Contract) and did not detract from the respondent's general contractual rights to rely on the condition precedent, and further, none of the rejected claims were waived. Thereafter, the respondent addressed the detail of the particular claims made.
32 On 15 August 2005, the adjudicator addressed a series of questions to both parties concerning the letter of intent and some other matters. Both parties provided further information in relation to the letter of intent, with the respondent requiring confirmation that the adjudicator sought the information because he was of the view that it was not possible to make a determination on the basis of the application and the attachments, and the response and its attachments as required by s 32(1) of the CC Act. That confirmation was given and the information was provided by the respondent.
33 Both parties confirmed that work had commenced under the letter of intent in July 2004. The respondent further stated as follows: