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Application to register adjudication made under Construction Contracts Act 2004 (WA) - Arguably jurisdictional error made by adjudicator - Whether adjudication ought be registered

1 MASTER SANDERSON: This is the plaintiff's application to register a judgment under the provisions of s 43 of the Construction Contracts Act 2004 (WA) (the Act). In making the application, the plaintiff relies on an adjudication made under the Act and handed down on 13 August 2013. The determined amount was $897,772.87 with interest at the rate of 6% from 2 July 2013.

2 The facts may be shortly summarised. The plaintiff is a road construction contractor. On 28 September 2012, it entered into a construction contract with the defendant to provide bituminous sealing to a highway for the Dampier Highway Duplication Project. The plaintiff performed work under the subcontract and issued invoices in accordance with the terms of the subcontract. The defendant did not pay the amounts invoiced and, consequently, a payment dispute arose. The plaintiff sought adjudication of the payment dispute under the Act.

3 In fact, there were four invoices which were submitted by the plaintiff and not paid by the defendant. They were submitted on four separate dates between 28 May 2013 and 17 June 2013. (In fact, one of these invoices was paid and that dispute fell away.) It is of some significance to note there were three invoices issued on three separate dates for quite distinct work undertaken pursuant to the contractual arrangement between the parties.

4 Section 43 of the Act is in the following terms:

1. Determinations may be enforced as judgments

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.

5 Payment of the adjudication has not been made by the defendant and, prima facie, the plaintiff has a right to have the amount of the adjudication registered as a judgment of this court. The defendant opposes the application.

6 The defendant's submissions may be summarised as follows. Section 6(a) of the Act provides that 'a payment dispute arises if by the time when the amount claimed in a payment claim is due to be paid under the contract, the amount has not been paid in full, or the claim has been rejected or wholly or partly disputed'. Section 26(1) of the Act provides that 'To apply to have a payment dispute adjudicated ...'. The defendant submits that the language in s 6(a) and s 26(1) of the Act refer to a payment dispute in the singular.

7 Section 31(2)(a)(ii) of the Act requires dismissal of an adjudication application if 'the application has not been prepared and served in accordance with s 26'. From this it follows that, in order for an adjudication to be 'prepared ... in accordance with s 26' it can only relate to one payment dispute.

8 The defendant submits this submission is put beyond doubt by s 32(3) of the Act, which provides that:

(b) with the consent of the parties, adjudicate simultaneously 2 or more payment disputes between the parties;

9 On the proper construction of s 32(3) of the Act read in conjunction with s 25 and s 26, the adjudicator has jurisdiction to determine only one payment dispute at a time, unless his jurisdiction is expanded by agreement of the parties under s 32(3) of the Act.

10 The defendant submits the adjudicator himself recognised this to be the case. A copy of the adjudication appears as attachment RN1 to the affidavit of Ricky Nugent, filed in support of this application. Part 3 of the adjudication deals with 'jurisdiction'. At par 3.1(e), the adjudicator says:

Consequently, disputes arose for the purposes of the Act, the subject of this application. Both parties concur in dealing with all disputes in this adjudication.

11 In fact, it would appear the defendant did not consent to all disputes being determined by the adjudicator. Appearing as attachment PAS10 to the affidavit of Paul Andrew Saunders filed in opposition to the application is a copy of what is described as the 'section 27 response'. This is, in effect, the submission put to the adjudicator by the defendant. At par 9 of the response there appears the following:

If the adjudicator elects not to dismiss the application for the reasons set out in paragraph 1 above and decides to determine on the balance of probabilities whether the respondent is liable to make a payment to the applicant, the respondent contends that the adjudicator's jurisdiction is limited to one payment dispute and not the three payment disputes that have arisen from the respondent's amended rejection of the applicant's three payment claims.

12 It was the plaintiff's submission there was, in fact, only one payment claim, albeit the claim was split up between three separate invoices. Counsel referred to the decision of Beech J in O'Donnell Griffin Pty Ltd v John Holland Pty Ltd [2009] WASC 19 [78] [85]. With respect, that decision dealt with a very complex factual situation. That is not the case here. The position is quite straightforward. While there was one contract between the parties, there were three invoices which were not paid and it is arguable that there were three separate payment disputes. So, it is at least arguable the adjudicator has made a jurisdictional error.

13 The defendant submits that is good reason not to register the adjudication as a judgment. In making this submission, counsel relies upon what was said by Murphy JA in Perrinepod Pty Ltd v Georgiou Building Pty Ltd [2011] WASCA 217; (2011) 43 WAR 319. This case was concerned with whether an adjudicator's exercise of powers was amenable to prerogative writs of prohibition and certiorari . In the course of his judgment, Murphy JA said:

On the other hand, if the adjudicator proceeds to make a determination, he or she must give reasons for the determination (s 36). That determination can then be challenged by judicial review on the ground of jurisdictional error, or at the point at which application is made to enforce the determination by a court of competent jurisdiction, under s 43, again on the basis that the determination exceeded the jurisdiction of the adjudicator and therefore was not a 'determination' at all [92].

14 It was the defendant's position the adjudicator had clearly made an error of jurisdiction and consistent with what was said by Murphy JA, I should refuse to register the award. It is important to note that the defendant has not applied to this court for prerogative relief, nor has it issued proceedings seeking to have its rights determined by a court. The defendant maintains those matters are of no consequence. It was submitted what was said by Murphy JA makes it plain, in circumstances such as the present, the adjudication ought not be registered as a judgment.

15 It seems to me I am bound by what his Honour had to say. Counsel for the plaintiff submitted the comments were obiter and could be put to one side. That seems to me to be not the case at all. The statement is direct and is made in the context of consideration of the availability of prerogative relief. But it must be acknowledged if the defendant's submissions are correct, anomalies arise.

16 If an application is made by a party in the defendant's position for prerogative relief and the court finds there is jurisdictional error then the decision can be quashed. That means the adjudication falls away and the obligation on the part of the defendant under the statute to make payment of the adjudicated sum no longer applies. On the other hand, if I was to decline to register the adjudication as a judgment based on jurisdictional error, the adjudication will remain on foot. The plaintiff will be denied the right to enforce that judgment as a judgment of this court, but, in theory at least, it would still be entitled to payment.

17 This may have consequences. For instance there would appear to be nothing to stop a party who has an adjudication award in its favour, but does not have the award registered as a judgment, issuing a statutory demand. In my view, there is real doubt as to whether, in those circumstances, a party in the defendant's position could argue that there was a genuine dispute as to the debt. This illustrates the difficulties which might arise if the defendant's argument is accepted.

18 It was the plaintiff's position where no proceedings had been issued by the defendant seeking prerogative relief or a determination by the court, the court should not refuse to register the judgment. This argument used as its starting point the wellknown decision of Rolfe J in Cockatoo Dockyard Pty Ltd v The Commonwealth of Australia [No 3] (1994) 35 NSWLR 689. That case had to do with the enforcement of an arbitration award. In particular, counsel referred to the often quoted passage as to the proper approach to s 33 of the Commercial Arbitration Act 1984 (NSW). His Honour said:

In my opinion s 33 is not a dispute resolving provision referring a matter the subject of arbitral proceedings to the Court. It provides a summary procedure whereby awards may be enforced 'in the same manner as a judgment or order of the Court to the same effect', and allows judgment to be entered in terms of the award. In the context of the Act that cannot, in my opinion, mean the Court is given power under s 33 to reconsider whether the award should have been made and, if for some reason it concludes it should not, to refuse to enforce the award (695).

19 Using the Cockatoo Dockyard case as a foundation, counsel referred to the decision of Corboy J in Thiess Pty Ltd v MCC Mining (Western Australia) Pty Ltd [2011] WASC 80. His Honour was, there, dealing with s 43 of the Act. He said:

In my view, it not possible to further refine the approach to an application under s 43 by defining more precisely the kind of the reason that would justify refusing to grant leave. In Cockatoo Dockyard, Rolfe J apparently recognised that leave to enter judgment on an award might be refused for reasons other than that there was an arguable case that the award could be set aside. However, it is not easy to envisage other reasons for refusing leave under the CC Act. There is a risk of distorting the intended application of s 43 CC Act if an unduly adjectival description of the quality of the reason required to refuse leave is adopted. I think that the most that can be said at a general level is that:

(a) With a limited exception, the determination is final on the question of the liability of a party to immediately pay the amount that is the subject of the payment dispute. Section 39 CC Act requires a party to pay an amount determined by the adjudicator. A party will seek leave under s 43 where the party liable under the determination has failed to discharge the statutory obligation imposed by s 39. Consequently, the scheme of the CC Act strongly reinforces the proposition derived from Cockatoo Dockyard that prima facie, a party who has the benefit of a determination is entitled to enforce it. That is particularly so under the CC Act, given its policy of maintaining cash flow to the parties during the performance of a construction contract.

(b) Nevertheless, the Act requires the court to oversee the entry of judgment by imposing the requirement for leave. The grant of leave gives the plaintiff access to the court's processes for enforcing its orders. Further, judgment may have significant effects on the commercial interests of the defendant within the construction industry and in many instances, the reason advanced by the defendant as to why leave should not be granted will be directed to the validity of the determination.

(c) Consequently, there must be a sufficient reason for declining to grant leave under s 43 having regard to the scheme and policy of the CC Act. What will be a sufficient reason will, of course, depend on a consideration of all of the relevant circumstances [29].

20 The decision in Thiess was delivered before the decision of the Court of Appeal in Perrinepod. Whether or not his Honour's decision would now hold good is, perhaps, an open question. It is to be noted Pritchard J in Cape Range Electrical Contractors Pty Ltd v Austral Construction Pty Ltd [2012] WASC 304 cited Thiess with approval. Her Honour said:

The principles applicable to the grant of leave to enforce a determination were considered by Corboy J in Thiess Pty Ltd v MCC Mining (Western Australia) Pty Ltd and I respectfully adopt his Honour's analysis. For the reasons set out by his Honour, I agree that the scheme of the CC Act reinforces the proposition that prima facie, a party who has the benefit of a determination is entitled to enforce it. The existence of an arguable case that a determination is invalid and liable to be declared to be so, or to be set aside in the exercise of prerogative relief, would be a reason for refusing the grant of leave to enforce a determination. However, that is not necessarily the only reason why leave might be refused. What will be a sufficient reason for refusing leave to enforce a determination will depend on a consideration of all of the relevant circumstances, and must be assessed bearing in mind the scheme and policy of the CC Act. In this case, an additional reason (apart from the invalidity of the determination) was advanced by Austral, namely that the determination sum had been 'paid' for the purposes of s 39(a) of the CC Act by virtue of Austral's setoff claim. I deal with this submission in [152] - [157] below [49]. (footnotes omitted)

21 Her Honour's decision was made after the decision of the Court of Appeal in Perrinepod, but that case does not figure in her consideration of whether or not the judgment ought be registered. It is also worthy of note her Honour was dealing with two applications. First, an application by the party in whose favour the adjudication had been made to register a judgment, and second, an application by the contractor to quash the adjudication. Her Honour dealt with both matters together. She determined there was no grounds for quashing the adjudicator's decision. Consequently, it is not difficult to see why the Perrinepod decision was not considered in the context of the application to register the adjudication as a judgment.

22 In the end, its seems to me the discretion found in s 43 ought be exercised in favour of the plaintiff. While I would accept it is arguable the adjudicator made a jurisdictional error, I am not satisfied that fact alone warrants my exercising the discretion to refuse to register the judgment. In Re Graham AnsteeBrook; Ex parte Mt Gibson Mining Ltd [2011] WASC 172; (2011) 42 WAR 35, Kenneth Martin J was dealing with an application for an order nisi for a writ of certiorari over matters in dispute under the Construction Contracts Act. His Honour had this to say about an exercise of discretion:

I would, in any event, on the basis of an exercise of discretion, refuse an order nisi for certiorari, bearing in mind the future opportunities Mount Gibson clearly holds under the more traditional paths of arbitration or litigation to pursue any issue over this disputed payment of adjudicated funds to Downer. The importance of the Construction Contracts Act as a swift circuit-breaking mechanism in a construction contract dispute is the fundamental governing criteria in the analysis. The need to swiftly break a construction contract payment deadlock, to enable a contractor to receive payment on an interim basis to relieve that contractor from possibly suffering terminal economic harm in a situation of limited bargaining power, would be undermined if the scope for challenges by judicial review allowed a nitpicking dissection of mere aspects of an adjudicator's reasons. Arguments over minor alleged errors, on analysis, present as second order technical arguments, well capable of being ventilated elsewhere and later, pursuant to a preserved right to arbitrate or to litigate [107].

23 Were it the case here, some steps had been taken by the defendant to overturn the adjudicator's decision, the position may have been different. That is not to say it will always be the case, there must be proceedings on foot before the discretion to refuse to register the adjudication as a judgment is exercised. As is so often said, the discretion conferred by the section is unfettered and must be exercised judicially. Each case will depend upon its circumstances. Moreover, the legislative scheme has to be borne in mind and care must be taken not to undermine its purposes. For those reasons it seems to me proper the adjudicator's award should be registered as a judgment. Subject to hearing from the parties, there will be orders in terms of the plaintiff's originating motion.