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Building and construction - Payment dispute - Determinations by adjudicator under the Construction Contracts Act 2004 (WA) - Application for leave to enforce as a judgement

Construction Contracts Act 2004(WA) s43

O'Donnell Griffin Pty Ltd v John Holland Pty Ltd [2008] WASC 58; (2008) 36 WAR 479

O'Donnell Griffin Pty Ltd v John Holland Pty Ltd [2009] WASC 19

Perrinepod Pty Ltd v Georgiou Building Pty Ltd [2011] WASCA 217

Re Graham Anstee-Brook, Ex Parte Mount Gibson Mining Ltd [2011] WASC 172

State Side Electrical Services Pty Ltd v WA Commercial Constructions Pty Ltd [2012] WADC 27

Thiess Pty Ltd v MCC Mining (Western Australia) Pty Ltd [2011] WASC 80

Witham v Raminea Pty Ltd [2012] WADC 1

1 COMMISSIONER GETHING: By originating summons filed 30 January 2012, the applicant sought the leave of the court pursuant to Construction Contracts Act 2004 (WA) (CCA) for leave to enforce a determination made against the respondent on 3 November 2011 (Determination).

2 At some stage after the Determination was made, the respondent commenced judicial review proceedings in the Supreme Court seeking orders to quash the Determination (Supreme Court action CIV 1088 of 2011).

3 The originating summons was listed in registrars' chambers on 12 February 2012. The respondent sought orders adjourning the application pending resolution of the Supreme Court judicial review proceedings. The registrar reserved his decision, delivering it on 1 March 2012. This decision is reported as State Side Electrical Services Pty Ltd v WA Commercial Constructions Pty Ltd [2012] WADC 27. The registrar granted the adjournment.

4 By notice of appeal dated 8 March 2012, the applicant appealed the decision of the registrar on 1 March 2012. This appeal was listed for directions on 20 March 2012, at which time it was adjourned to 10 April 2012.

5 On 2 April 2012, Justice Hall granted an order nisi in relation to the respondent's application for judicial review of the Determination. His Honour made programming orders, the net effect of which is that the respondent will not be in a position to enter the judicial review proceedings for hearing until the beginning of June 2012. The judicial review proceedings have been listed before a single Judge of the Supreme Court.

6 On 10 April 2012, the registrar listed before a judge the issue of whether the appeal commenced on 8 March 2012 should proceed without waiting for the determination of the Supreme Court proceedings. It is this issue that is before me for decision. It is not the hearing of the substantive appeal. In effect, the respondent has sought from the court a stay of the appeal pending the resolution of the Supreme Court judicial review proceedings.

7 The power granted to the District Court to enforce determinations in CCA s 43 is in the following terms:

court of competent jurisdiction, in relation to a determination, means a court with jurisdiction to deal with a claim for the recovery of a debt of the same amount as the amount that is payable under the determination.

(2) A determination may, with the leave of a court of competent jurisdiction, be enforced in the same manner as a judgment or order of the court to the same effect, and if such leave is given, judgment may be entered in terms of the determination.

(3) For the purposes of subsection (2), a determination signed by an adjudicator and certified by the Building Commissioner as having been made by a registered adjudicator under this Part is to be taken as having been made under this Part.

8 The features of the statutory scheme in which CCA s 43 is placed were summarised by Beech J in O'Donnell Griffin Pty Ltd v John Holland Pty Ltd [2008] WASC 58; (2008) 36 WAR 479 [39] - [41] as follows:

The following features of the statutory scheme seem to me to be of particular relevance:

(a) The procedure for determination by an adjudicator is intended to be quick, informal and inexpensive: s 30, s 31, s 32.

(b) A determination is binding on the parties even though other proceedings relating to the substantive dispute between the parties are on foot: s 38.

(c) A party liable to pay under a determination must do so: s 39.

(d) A determination is, with very limited exceptions, final: s 41, s 46.

(e) The substantive dispute (if any) will be determined by other means (such as arbitration or litigation) involving a comprehensive process, and payments made pursuant to a determination are to be taken into account and dealt with in the resolution of the substantive dispute: s 38, s 40, s 45.

The object of the scheme is, as described in the explanatory memorandum and Second Reading Speech, to 'keep the money flowing in the contracting chain by enforcing timely payment and sidelining protracted or complex disputes'.

The plaintiff submitted, and the defendants accepted, that the scheme of the Construction Contracts Act was such that on an application under s 43(2) for leave to enforce a determination, it was for a defendant to point to circumstances which justified a refusal to grant leave. Absent such circumstances, leave will be granted. I accept that submission. In my opinion, the statutory scheme gives rise to a predisposition in favour of a grant of leave. A determination is binding (s 38) and gives rise to a liability to pay (s 39).

9 The issue of judicial review of an adjudicator's decision under the CCA has been the subject of recent consideration by the Court of Appeal in Perrinepod Pty Ltd v Georgiou Building Pty Ltd [2011] WASCA 217 and by other justices of the Supreme Court in Thiess Pty Ltd v MCC Mining (Western Australia) Pty Ltd [2011] WASC 80, Re Graham Anstee-Brook, Ex Parte Mount Gibson Mining Ltd [2011] WASC 172 and O'Donnell Griffin Pty Ltd v John Holland Pty Ltd [2009] WASC 19. In Witham v Raminea Pty Ltd [2012] WADC 1, I reviewed these authorities, and summarised their effect in the following terms:

(a) an adjudicator's decision under the CCA is amendable to judicial review for an error of law going to jurisdiction;

(b) the test for jurisdictional error by an adjudicator under the CCA is that applicable to an inferior court;

(c) an adjudicator's decision under the CCA is not amendable to judicial review for a non-jurisdictional error or law;

(d) a denial of procedural fairness is a non-jurisdictional error of law, at least for the purposes of decisions of adjudication under the CCA; and

(e) the court should take into account whether the adjudicator's decision would be open to successful judicial review in exercising the discretion in CCA s 43.

10 In relation to the last point, a 'determination' which is attended by an error of law going to jurisdiction is not a 'determination' for the purposes of CCA s 43, and thus may not be enforced.

11 The registrar identified that the application required him to form a view as to whether the issues which are raised by the Supreme Court judicial review proceedings raised points of sufficient strength to justify a refusal of leave to issue execution on the adjudication which has been filed in the District Court.

12 The registrar identified four issue of concern from the respondent's submissions. The first was that the process of adjudication was not properly entered into because the invoices the subject of the adjudication did not comply with the requirements of CCA. This was because each was not signed, did not specify the date of the claim and did not contain sufficient information to allow the respondent to assess them. The registrar found that there was merit in this ground. The second was that the application was not prepared in accordance with CCA s 26(2)(b). The registrar identified that certain critical information was not provided to the adjudicator. The third was that one of the amounts claimed was out of time. The fourth was that the application was not in proper form because it bundled up claims for a number of invoices over a number of jobs in a manner which is not contemplated or permitted by the CCA. The registrar found that there were valid concerns as to the validity of the adjudication which the applicant sought to enforce. The registrar was not prepared to grant leave to enforce the adjudication and adjourned the application pending the outcome of the Supreme Court proceedings.

13 Counsel for the respondent submitted that the appropriate course was for the present appeal, and thus the CCA s 43 application, to be stayed pending the outcome of the Supreme Court judicial review proceedings. In this way no decision would be made as to whether or not to enforce the Determination until there had been a ruling on whether the Determination was a valid one in the sense of not been tainted by jurisdictional error.

14 Counsel for the applicant placed weight on the object of the CCA. This is to provide a 'rapid adjudication process that operates in parallel to any other legal or contractual remedy', so as to 'keep the money flowing in the contracting chain by enforcing timely payment and sidelining protracted or complex disputes': Hansard, CCA, Second Reading Speech WA (3 March 2004) 275.

15 The applicant submitted that the preferable course is for the District Court to determine the issue of whether or not to grant leave to enforce the judgment. In doing so, the District Court would consider the jurisdictional error issues in detail. This is what occurred in Theiss and Witham v Raminea Pty Ltd [2012] WADC 1.

16 The determination of the present application raises an important question of policy, namely the interaction between a CCA s 43 application and parallel judicial review proceedings seeking to challenge the determination sought to be enforced pursuant to CCA s 43.

17 In order to give effect to the object of the CCA (which I have set out above), the adjudication process under the CCA is to proceed ahead of any determination of the underlying merits of the claim, with the ability of the court or arbitrator dealing with the underlying merits to make orders to rectify any overpayment that become apparent as a result of the payment pursuant to the determination. Specifically, the 'adjudicator's determination is binding on the parties to the construction contract under which the payment dispute concerned arose even though other proceedings relating to the payment dispute have been commenced before an arbitrator or other person or a court or other body': CCA s 38. The CCA does not prevent the parties from 'instituting proceedings before an arbitrator or other person or a court or other body in relation to a dispute or other matter arising under the contract': CCA s 45(1). In dealing with the dispute, the court or arbitrator must adjust the award made in light of the determination, including by making orders for the restitution of any money paid: CCA s 45(4). The jurisdiction of the adjudicator only comes to an end once 'an arbitrator or other person or a court or other body dealing with a matter arising under a construction contract makes an order, judgment or other finding about the dispute that is the subject of the application': CCA s 31(2)(a)(iii).

18 The ability to resist the enforcement of a determination pending proceedings raising a jurisdictional error has the potential to undermine the objective of providing a rapid adjudication process which keeps the money flowing pending the resolution of the underlying merits of the dispute.

19 On the other hand, the enforcement of a determination pursuant to CCA s 43 may have significant commercial implications to the party required to pay money. That party is entitled to insist on the adjudicator making his or her determination according to law, before paying out any money.

20 In my view, the preferable approach is that adopted in Thiess. In that case, the applicant sought leave to enforce the determination pursuant to CCA s 43. In response, the respondent raised issues which it said gave rise to a jurisdictional error. Corboy J considered the issue of the existence of a jurisdictional error in some detail. His Honour concluded that, on the facts before him leave ought to be granted to enter the judgment. A similar procedure was adopted in Witham.

21 In order to determine the appropriate orders in the present case, it is instructive to analyse the various scenarios that might arise should the stay be granted or refused.

22 As I have noted, from the programming orders made on 2 April 2012, it is apparent that the respondent (the applicant in the Supreme Court proceedings), will not be able to enter the matter for hearing until the beginning of June 2012. There was some discussion as to the time delays to hearing in the Supreme Court compared to the District Court, as well as the time delays from hearing to judgment in each court. However, perhaps the only point I am able to draw from this discussion, and my own knowledge of the District Court lists, is that the substantive appeal (which would include the question of the grant of leave pursuant to CCA s 43) would be able to be heard in the District Court prior to beginning of June 2012. There is thus a real risk that there would be a determination from a District Court judge prior to there being a determination by a Supreme Court justice in the judicial review proceedings.

23 If the District Court declined to enforce the judgment, then the need for the Supreme Court judicial review proceedings would fall away.

(a) the District Court judge hearing the CCA s 43 application formed the view that the jurisdictional error issues has no basis, and granted leave to enforce the determination;

(b) pursuant to (a) the amount of the determination is paid out (under threat of statutory demand or enforcement action); and

(c) subsequently, the Supreme Court justice hearing the judicial review proceedings forms the view that the jurisdictional error issues were made out, and that the determination was therefore not a 'determination' for the purposes of CCA s 43.

25 Counsel for the applicant was of the view that, in this scenario, there is no power to set aside the order of the District Court judge, and that it could only be done so on appeal. Presumably, the respondent may well need to commence an appeal from the decision of the District Court judge within the usual time limits, but then seek a stay of it pending the resolution of the Supreme Court judicial review proceedings. The Court of Appeal would then be asked to set aside the decision of the District Court judge on the basis that the reasoning of the Supreme Court justice was to be preferred. The application could equally commence an appeal from the decision of the Supreme Court justice on the basis that the District Court judge's view is to be preferred.

26 Having done all that, the parties would then need to consider whether to commence action in relation to the merits of the underlying dispute.

27 To my mind, it is undesirable for there to be two hearings on the same issue whether the Determination is tainted by jurisdictional error - with the potential for the two judicial officers to make contrary findings.

28 In my view, the key to the resolution of the issue is the fact that a party seeking to oppose the grant of leave to enforce a determination in parallel judicial review proceedings must persuade a Supreme Court justice that the proposed grounds have sufficient merit for the grant of an order nisi. I agree with the submission by counsel for the respondent that this provides a 'control value' on the ability of a party to resist payment under a determination by commencing judicial review proceedings.

29 The decision of Kenneth Martin J in Anstee-Brook is an example of the Supreme Court closely scrutinising an application for an order nisi in relation to the review of a decision of an adjudicator under the CCA. His Honour referred to a number of authorities on the appropriate test to be applied prior to the grant of an order nisi, referring to tests like 'reasonably arguable', 'no so clearly untenable that it cannot succeed' and 'no reasonable prospect of success'. His Honour then commented [28]:

I find it is unhelpful to lay down unduly semantic or inflexible tests regarding an order nisi threshold. The potential arguability of grounds advanced by an applicant seeking the order nisi must be evaluated on the merits of each individual case, in the invariably unique underlying contexts of each application. If an argument advanced by the applicant is purely one of law, it may be capable of being more safely evaluated as to its long term merit in contrast to arguments rooted around contentious facts. A cautious approach to the summary dismissal of pleaded causes of action, classically explained by Barwick CJ in General Steel Industries Inc v Commissioner for Railways of New South Wales [1964] HCA 69; (1964) 112 CLR 125, as referred to by McLure J (as she then was) in Re McTiernan; Ex parte Coogee Coastal Action Coalition Inc [2004] WASC 264 can provide a helpful analogue in some instances. However, grounds which can be safely evaluated as ultimately being bound to fail (meaning that the argument presents with negligible prospect of ultimately sustaining an order absolute) can hardly surmount the order nisi threshold. The assessment threshold for an order nisi should not be set at such a low level as to facilitate the wasteful furtherance of meritless arguments, on meritless grounds, on meritless applications.

30 His Honour declined to grant the order nisi. I note also that his Honour's detailed decision was delivered within six weeks of hearing, demonstrating that the determination of judicial review proceedings can be done in a timeframe consistent with the objective in the CCA of providing for the rapid adjudication of disputes to which the CCA applies.

31 In the present case, as the order nisi has been made, it is appropriate that the present application be stayed. I will hear from counsel as to the appropriate consequential orders, including whether the present application should be remitted to the Supreme Court. As the registrar has expressed views on the merits of the CCA s 43 application, it is appropriate that any further hearing of that application take place before a judge.