Another adjudication determination quashed for jurisdictional error

4 minute read  19.04.2018 Tom French, Chris Hey

Clough Projects Australia Pty Ltd v Floreani [2018] WASC 101 is significant as it confirms that an adjudicator may adjudicate more than one payment dispute between parties, without the consent of the parties, where the adjudicator is satisfied that doing so will not adversely affect his or her ability to adjudicate the dispute fairly and as quickly, informally and inexpensively as possible.

Clough Projects Australia Pty Ltd (respondent) and the Oceanic Offshore Pty Ltd (claimant) entered into a lump-sum Subcontract under which the claimant was to provide diving services at Mundaring Weir (Subcontract). The Subcontract contained a provision that the claimant could not vary the work without a written direction from the respondent. In May and June 2017, the claimant issued fifteen separate invoices, nine of which were disputed by the respondent.

On 17 October 2017, the claimant served an adjudication application on the respondent, seeking payment of $605,963 in relation to the disputed invoices, which the claimant characterised as a single 'payment dispute' under the Construction Contracts Act 2004 (WA) (Act). The adjudicator determined that the invoices constituted fifteen separate payment claims, which had given rise to nine separate payment disputes. Nonetheless, the adjudicator determined that on the proper construction of section 32(3)(c) of the Act he had jurisdiction to determine the nine separate payment disputes simultaneously without first obtaining the consent of the respondent.

Having concluded that he had jurisdiction to determine the payment disputes, the adjudicator was required to consider the respondent's contention that the claimant had no entitlement to payment in respect of certain variation claims because no written directions had been provided. In finding that the claimant had a partial entitlement to payment for seven of the nine payment disputes, the adjudicator found that a separate implied contract arose in relation to certain variations. This was not a submission advanced by either party.

The respondent applied to the Supreme Court of Western Australia to quash the determination.

Decision

Ultimately, Tottle J held that the adjudicator was entitled to adjudicate one or more payment disputes between the same parties without both parties' consent; however, the adjudicator fell into jurisdictional error by:

  • denying the respondent procedural fairness by making the determination on a basis that was not advanced by either party; and
  • making a determination on the basis of an implied contract that he found to have been formed, and not on the basis of the Subcontract under which the adjudication application was brought.

In finding that section 32(3)(c) of the Act permitted an adjudicator to adjudicate a payment dispute simultaneously with one or more other payment disputes, Tottle J considered that such a construction of the Act was consistent with the plain language of the section, the Act's object to determine payment disputes 'fairly and as quickly, informally and inexpensively as possible' and the extrinsic materials available.

However, the court considered that the adjudicator's finding that one or more implied contracts had been formed between the parties was not readily available on the parties' submissions. The respondent should have been given the opportunity to respond to matters prejudicial to its interests that were known only to the adjudicator and which might have been taken into account in the adjudicator's final determination of the issues. The adjudicator's failure to invite submissions amounted to a denial of procedural fairness.

Further, the adjudicator's jurisdiction was limited to adjudicating payment disputes under the Subcontract. By making the determination on the basis of implied contracts, Tottle J considered that the adjudicator exceeded his jurisdiction.

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