COURT CLARIFIES ADJUDICATOR’S ROLE IN CONSTRUCTIONS PAYMENT CLAIMS

The WA Supreme Court has once again struck down adjudicators’ determinations of payment disputes under the Construction Contracts Act 2004. In doing so, the Court has sought to clarify the proper role of an adjudicator and the scope of his or her powers.

The decision highlights the continuing need for training and development of adjudicators in WA. HHG is proud to be one of the few law firms in WA to offer such services to the construction community.

The decision also highlights the importance of the High Court appeal in Southern Han Breakfast Point Pty Ltd v Lewence Construction Pty Ltd and Ors [2016] HcaTrans 173 (28 July 2016). If upheld, that appeal may well open up and simplify challenges to adjudication determinations made in error by making it unnecessary to show that an adjudication error is ‘jurisdictional’ before the Court will have the power to set it aside: see [HHG Construction Law Series Part 9: High Court to Clarify Adjudication Issues].

The decision in Samsung C&T Corporation v Loots [2016] WASC 330 runs over more than 150 pages.  However, its main effect may be briefly summarised as follows:

32. An adjudicator had no power under the Construction Contracts Act 2004 (‘Act’) to make the award he did, of $32.4 million to Duro. That award had resulted from a reversal of a set-off in an earlier progress certificate. At paragraph [212] Justice Beech found that this earlier reversal:

‘was not referable to, or connected to any part of, the claim for payment for work done made in [the relevant] progress claim.’

In other words, this reversal was not actually a payment dispute, as defined in the Ac.  It was therefore not capable of being adjudicated under the Act.

32. Further, by failing even to consider Samsung’s submissions (that is, legal arguments) as to why the adjudicator had no power to make this $32.4 million award, the adjudicator denied Samsung procedural fairness (basically, the right to be heard).
33. At paragraph [279], Justice Beech held that the adjudicator must confine his or her attention when determining an application under the Act, to the payment dispute in question. The adjudicator must not look beyond that particular payment dispute to earlier claims, set-offs, counterclaims, etc. between the same parties.
34. Finally, Justice Beech found that all but one of the adjudication determinations included work that came outside the scope of ‘construction work’ as defined in the Act.

However, His Honour felt that this did not amount to a jurisdictional error, provided that some part of the work included in the adjudication did come within the definition of ‘construction work’. Therefore, although this also constituted an error in four of the five adjudications under consideration, Justice Beech declined to strike down any of them for this reason.

In summary, then, two of the five determinations challenged in front of Justice Beech were set aside: essentially on the basis of:

1. each adjudicator’s reference to matters extraneous to, and not forming part of, the payment disputes before that adjudicaton and
2. each adjudicator’s refusal to consider submissions in regard to the relevant payment claim.

Two more of the five determinations would also have been set aside, if his Honour had considered it fatal to include certain work as part of the adjudication award which in each case exceeded the definition of ‘construction work’ under the Act.

We see this as another in a line of cases across Australia which sharpen the focus on the benefits and purposes of adjudication, which is ultimately to provide greater commercial certainty to contractors.

If you would like further information in relation to this matter or other legal matters please contact our office on Freecall 1800 609 945 or email us now.

*This information serves as a general guide and does not constitute legal advice. It is based on our research and experience at the time of publication. Please consult our knowledgeable Legal Team for any specific inquiries or advice relevant to your circumstances, as the content may not have been updated subsequently.