[35]
Senior Counsel for the Plaintiff, Ms Kelly SC, made the following arguments.
[36]
Mr Ford's determination was void for two reasons. First, because the adjudicator stepped outside the function conferred on him by the Act by determining a question which had not been referred to him for determination. Secondly, because a basic and essential requirement for a valid determination was absent, the existence of a payment dispute between the Transcon and Nilsen.
[37]
Mr Ford made the first error when he declined to determine whether the letter of 21 July 2008 was a valid payment claim within the meaning of the Construction Contracts (Security of Payments) Act (NT). Mr Ford wrongly based his determination on his finding that Nilsen's three unpaid invoices were the relevant payment claims. The only payment dispute before Mr Ford was a payment dispute based on Nilsen's letter to Transcon dated 21 July 2008. Had he turned his mind to the issue Mr Ford would have realised that the letter of 21 July 2008 was not a valid payment claim under the Act and he would have dismissed Nilsen's application. The subcontract was terminated on 26 May 2008. All payment claims after that date had to be in accordance with clause 32 of the General Conditions of Contract. The letter dated 21 July 2008 did not comply with clause 32 of the General Conditions of Contract. If there was no payment claim, there was no payment dispute and Mr Ford had no jurisdiction to make a determination.
[38]
Mr Ford also erred in finding that Nilsen's three unpaid invoices, being invoices 104183, 104301 and 104436, were payment claims under the Act. In order for the three invoices to be payment claims within the meaning of the Act it was an imperative requirement of the Act that they must objectively comply with the provisions of clause 28 of the General Conditions of Contract. The three unpaid invoices did not comply with the provisions of clause 28 because they were not rendered at the end of the month, more than two invoices were issued in May 2008, the invoices were not truly serial invoices and the amount claimed in each invoice was not a progressive amount that related to the total value of the subcontract works claimed to have been completed by Nilsen at the date of the invoice. The unpaid invoices were payment claims different in kind to the payment claims contemplated by clause 28 and therefore they were not valid payment claims under the Act.
[39]
In any event, Nilsen's contractual right to pursue the unpaid invoices was lost when the subcontract was terminated for Transcon's convenience. Upon termination of the subcontract Nilsen's only remedy was to make a payment claim in accordance with clause 32 of the General Conditions of Contract.
[40]
Transcon's primary contention is that the existence of an objectively valid payment claim was an essential requirement of the adjudication process described in the Act. An objectively valid payment claim was a payment claim that in fact complied with the payment claim provisions of the General Conditions of Contract. Apart from certain prohibited contractual terms, the aim of the Act was to respect the parties' privity of contract and leave the parties free to determine their own contractual terms. Without the objective existence of a valid payment claim there could be no payment dispute and without a payment dispute an adjudicator had no jurisdiction under the Act.
[41]
The Act establishes a summary dispute resolution process which provides for payment on account. The Act is primarily concerned with maintaining a contractor's or subcontractor's cash flow and does not affect the ultimate recovery of final amounts due between the parties based upon their legal rights. However, pending the final resolution of the parties' contractual rights, the party ordered by an adjudicator to pay an amount under a determination must pay - even if the adjudicator made an error in the facts or the law; even in short if the determination was plainly wrong. An adjudicator's determination may be registered and enforced as a judgment of the Court.
[42]
A corollary of the summary dispute resolution process established by the Act and the easy enforceability of an adjudicator's determination is that for an adjudicator's determination to be valid all essential requirements of the adjudication process described in the Act must be fulfilled. If all of the essential requirements of the adjudication process are not fulfilled then the purported determination will in truth not be an adjudicator's determination: Brodyn Pty Ltd v Davenport[1]. Such a determination is void: Transgrid v Siemens Ltd[2].
[43]
While the legislature intended that the determinations of adjudicators should have strong legal effect within their intended area of operation; it is equally important that the courts ensure that where an adjudicator strayed outside the intended area of operation of the Act appropriate declaratory relief is available. Determinations of adjudicators might otherwise have potentially catastrophic effects. A purported determination will be void if the basic requirements of the Act are not complied with, or if a purported adjudication is not made bona fide, or if there is a substantial denial of natural justice.
[44]
The central importance of a valid payment claim is established by the scheme of the Act. The scheme of the Act is as follows. If a payment dispute arises under a construction contract, any party to the contract may apply to have the dispute adjudicated: s 27 of the Act. A payment dispute arises 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: s 8 of the Act. A payment claim means a claim made under a construction contract by the contractor to the principal for payment of an amount in relation to the performance by the contractor of its obligations under the contract: s 4 of the Act. Once an application for adjudication is made an adjudicator must either dismiss the application or determine the application: s 33 of the Act. An adjudicator's determination is binding on the parties to the construction contract under which the payment dispute arose even if other proceedings relating to the payment dispute have been started before an arbitrator or other person or a court or other body: s 40 of the Act. A determination may be registered and enforced as a judgment of the Court: s 45 of the Act.
[45]
There is nothing non-specific about the definition of "payment claim" in the Act. It is always possible to determine whether a particular claim is a "payment claim". If a construction contract contains a written provision about payment claims the Act defines "payment claim" by reference to the terms of the construction contract actually made by the parties: s 4 of the Act. It is to that contract that the adjudicator must go to determine whether there is a "payment claim" and hence a "payment dispute" for him to adjudicate. If the construction contract does not contain such a written provision the Act implies into the contract the relevant contractual provisions in the Schedule of the Act.
[46]
That does not mean that an adjudicator is free to get the question about whether a payment claim exists wrong. Whether there is a payment claim is a threshold question which an adjudicator has the jurisdiction to determine, but if he makes an erroneous decision in relation to that threshold question, then he steps outside his jurisdiction and any subsequent purported determination is a nullity and is void.