MORONEY & ANOR and MURRAY RIVER NORTH PTY LTD [2008] WASAT 111 (20 May 2008)

Last Updated: 30 May 2008

JURISDICTION : STATE ADMINISTRATIVE TRIBUNAL

STREAM : COMMERCIAL & CIVIL

ACT : CONSTRUCTION CONTRACTS ACT 2004 (WA)

CITATION : MORONEY & ANOR and MURRAY RIVER NORTH PTY LTD [2008] WASAT 111

MEMBER : DR B DE VILLIERS (MEMBER)

HEARD : 21 APRIL 2008

DELIVERED : 20 MAY 2008

FILE NO/S : CC 1822 of 2007

BETWEEN : WADE MORONEY

MARTIN JENSEN

Applicants

AND

MURRAY RIVER NORTH PTY LTD

Respondent

Catchwords:

Construction contracts - Grounds for dismissal without considering the merits - Jurisdiction - Must each of the grounds for dismissal be considered - When does a payment dispute arise - Implications if a construction contract is not in writing - Implied terms of a contract - What are the review functions of the Tribunal in matters arising from construction contracts - Can the Tribunal substitute a decision of the adjudicator with its own decision

Legislation:

Construction Contracts Act 2004 (WA), s 6 , s 6(a) , s 7 , s 17 , s 26 , s 26(1) , s 26(2) , s 28 , s 29 , s 29(3) , s 30 , s 31(2) , s 31(3) , s 46 , s 46(1) , s 46(2) , Sch 1 Div 5, Sch 1 s 7

State Administrative Tribunal Act 2005 (WA), s 5, s 29, s 29(3), s 31(1)

Result:

The decision of Mr Riley to dismiss the application on grounds of s 31(2)(a)(ii) of the Construction Contracts Act 2004 (WA), is reversed

None of the conditions in s 31(2)(a) of the Construction Contracts Act 2004 (WA) for a dismissal of the application without consideration of the merits, is present

The matter is remitted back to Mr Riley under s 46(2) of the Construction Contracts Act 2004 (WA) to make a determination in accordance with s 31(2)(b) of the said Act

Category: B

Representation:

Counsel:

Applicants : Mr JD Finlay

Respondent : Mr R Machell (Acting as Agent)

Solicitors:

Applicants : JD Finlay & Co

Respondent : Murray River North Pty Ltd

Case(s) referred to in decision(s):

REASONS FOR DECISION OF THE TRIBUNAL :

Summary of Tribunal's decision

1 The applicants seek a review of a decision by the adjudicator to dismiss their application for payment. It is alleged by the applicants that the dispute arose under the Construction Contracts Act 2004 (WA).

2 The applicants contend that the claim was lodged within the prescribed time and that the adjudicator erred by dismissing it as being out of time. The applicants requested the Tribunal to set aside the decision of the adjudicator and to determine all the remaining issues rather than to remit any questions back to the adjudicator.

3 The respondent questioned the jurisdiction of the adjudicator to determine the application since it is not, according to the respondent, a construction contract but an employer-employee contract. The respondent contends that the decision of the adjudicator should in any case be affirmed since the application was brought out of time. The respondent also contends that the review should be dismissed since it has become "protracted and complex".

4 The Tribunal finds as follows:

1. There are no grounds to dismiss the application for reason that it has become "protracted and complex".

2. The adjudicator erred by not applying the implied terms for notice of refusal to pay as set out in the Construction Contract Act 2004 (WA). The application for adjudication was prepared and served within the specified time if the implied terms were followed. The decision of the adjudicator must therefore be set aside.

100. The adjudicator erred in light of comments he made by not considering the other three grounds for dismissal pursuant to s 31(2) of the Construction Contract Act 2004 (WA). In light of the failure to consider the other three grounds, the Tribunal must assume that the adjudicator had dismissed the application under each of those grounds and that those decisions are also subject to this review.

4. The dispute arose from a contract that is a construction contract. The information before the Tribunal does not support a finding that it was an employer-employee relationship.

5. No other arbitrator, person, court or other body has made an order, judgment or finding about the dispute.

6. The matter is not too complex to fairly make a determination of the issue. Possible lack of information does not equate to complexity. The adjudicator is required to make a determination on the "balance of probabilities".

7. The Tribunal cannot determine the matter on the balance of probabilities since that is the role of the adjudicator. The Tribunal cannot usurp the role of the original decision-maker.

8. The matter is therefore remitted to the adjudicator to determine on the balance of probabilities whether the respondent is liable to make a payment to the applicants.

Background

5 The applicants sought review of a decision made by the adjudicator (Mr Riley) on 22 October 2007. Mr Riley was appointed pursuant to the Construction Contracts Act 2004 (WA) (CC Act). Mr Riley decided to dismiss an application for adjudication on grounds that the application was lodged outside of the statutory period of 28 days from the date upon which the dispute arose (s 26 of the CC Act).

6 These reasons for decision must be read with the Tribunal's reasons for decision handed down on 19 February 2008 in regard to the same application ( Moroney & Anor and Murray River North Pty Ltd [2008] WASAT 36 ( Moroney )).

7 In its decision of 19 February 2008, the Tribunal remitted Mr Riley's decision back to him under s 31(1) State Administrative Tribunal Act 2004 (WA) (SAT Act) with an invitation to clarify the findings he had made in regard to (a) whether the contract was a construction contract or not, and (b) whether the issues involved where of such complexity that the application had to be dismissed. The Tribunal wanted to know in particular whether Mr Riley utilised the mechanisms provided for in the CC ACT to obtain clarification on some of the issues that he regarded as complex.

8 Mr Riley responded on 4 March 2008 with supplementary reasons (supplementary reasons).

9 In his supplementary reasons, Mr Riley clarified aspects of the reasons dated 22 October 2007. In summary, Mr Riley explained that:

1. The reason for the dismissal of the application was that it had not been prepared and served within the statutory period of 28 days as required by s 26 of the CC Act. It therefore had to be dismissed pursuant to s 31(2)(a)(ii) of the CC Act ([10] of the supplementary reasons);

2. He had jurisdiction to deal with the matter by virtue of his appointment pursuant to s 28 of the of the CC Act ([2] of the supplementary reasons);

100. The remarks made by him in his previous reasons for decision in regard to the complexity of the dispute were merely aimed to assist and guide the parties and should not be treated as reasons for his decision. He acknowledged that with the benefit of hindsight those remarks "may have caused some confusion" ([7] of the supplementary reasons); and

4. It was not necessary for him to determine whether the contract was a construction contract; whether another person, tribunal or court had already issued a judgment concerning the matter; or whether it was not possible to make a determination because of the complexity of the matter ([11] of the supplementary reasons).

10 Both parties made further written and oral submissions following the supplementary reasons of Mr Riley.

11 The parties requested that, if the Tribunal found reason to set aside the decision of Mr Riley, the matter should not be remitted back to him for a decision. The parties preferred for the Tribunal to make a new determination and to substitute the decision of Mr Riley, with its own decision.

12 The Tribunal heard oral submissions on 21 April 2008 and reserved its decision on the same day.

13 In their submissions the parties did not restrict themselves to the question whether the application was prepared and served in accordance with s 26 of the CC Act. They also addressed other issues raised by Mr Riley in his initial reasons, namely whether the contract was a construction contract or an employeremployee contract; and whether the issue was too complex to determine in light of claims of fraudulent action, previous claims and uncertainty as to the exact amount payable. The submissions of the parties were made in reference to documentation before the Tribunal and were consistent with those made to Mr Riley.

14 The Tribunal will deal with the issues raised by the parties under the following headings:

1. Preliminary issue raised by the respondent: proposed dismissal of the application due to it being "protracted and complex".

2. Was the application prepared and served within 28 days after the dispute arose?

3. What about the other grounds for dismissal set out in s 31(2)(a) of the CC Act?

4. Does the dispute arise from a construction contract?

5. If Mr Riley had to consider the other grounds for dismissal and he failed to do so, what next?

6. Is another arbitrator, person, court or other body dealing with the matter?

7. Is the matter too complex or the time not sufficient to make a determination?

8. Can the Tribunal substitute the decision of Mr Riley with its own decision?

9. Summary of findings.

10. Orders.

1) Preliminary issue: Proposed dismissal of application due to it being "protracted and complex".

15 Mr Machell, for the respondent, requested the Tribunal during the hearing on 21 April 2008 to dismiss the application on grounds that the matter "should be interpreted to be a 'protracted and complex' dispute". He submitted that, in light of the objectives of the CC Act for a speedy resolution of disputes, the matter had gone "out of control" and should be dismissed. The event occurred in September 2007 and no finality has yet been given.

16 The Tribunal invited Mr Machell to expand on his contentions and in particular to demonstrate whether the Tribunal had the power to dismiss a matter due to it being "protracted and complex".

17 Mr Machell was not able to refer to any provision in the SAT Act or the CC Act to support a dismissal of the application for reason of it being "protracted and complex".

18 The Tribunal explained orally during the hearing that although the provisions of the CC Act envisage a speedy resolution of disputes, a matter may for various reasons become more protracted when it is submitted to the Tribunal for review. The Tribunal hears the matter de novo ; the Tribunal is not subject to the same time constraints as the adjudicator; and the Tribunal must afford parties an opportunity to make submissions and if necessary present oral arguments and opportunity to highlight or clarify aspects that had been placed before the adjudicator.

19 The adjudicator must, in accordance with s 31(1) of the CC Act, hand down its decision within 14 days unless the parties consent to an extension of time. When an application for review is lodged with the Tribunal, a similar timeframe does not apply. It is therefore possible, and in fact probable, that a review application before the Tribunal may take longer than the time allowed for the adjudicator to make a determination.

20 The mere fact that a review application may take longer than the initial determination does not in itself mean it has become "protracted and complex". Even if it does become "protracted and complex" that in itself is no ground for an application for review to be dismissed or struck out.

21 The Tribunal could find no ground upon which to dismiss the application on grounds of it being "protracted and complex".

22 The Tribunal therefore dismissed the interim application.

2) Was the application prepared and served within 28 days after the dispute arose?

23 Mr Riley found in his primary and supplementary reasons for decision that the application was not filed and served within the statutory required period of 28 days after the payment dispute arose. The requirements of s 26(2)(a)(ii) of the CC ACT were therefore not met.

24 Mr Riley found that the payment dispute arose on 5 September 2007 when the respondent, after the written demand for payment had been received, informed the applicant's representative on site that it would not pay the amount claimed. According to Mr Riley, the period of 28 days for an application to be lodged, therefore, had to be calculated from 5 September 2007.

25 The applicant contended that since there was an unwritten understanding that a period of up to three days was allowed for the amount to be paid, the dispute could only have arisen if no payment had been received at the expiry of the third day. The date of the payment dispute, according to the applicant, was therefore 8 September 2007.

26 The application for adjudication was dated 3 October 2007.

27 Mr Riley found on the facts that the payment dispute arose on 5 September 2007. Mr Riley dismissed the submission by the applicant that an informal agreement existed that a three day period was allowed for payment and that a dispute could therefore only arise at the expiry of the three days. Mr Riley concluded that the application had been filed too late. The application therefore had to be dismissed pursuant to s 31(2)(a)(ii) of the CC Act.

28 The legal framework against which the dispute must be determined is as follows:

29 Section 31(2)(a)(ii) of the CC Act provides as follows:

"An appointed adjudicator must, within the prescribed time or any extension of it made under section 32(3)(a) –

(a) dismiss the application without making a determination of its merits if -

...

(ii) the application has not been prepared and served in accordance with section 26;"

30 Section 26 of the CC Act provides as follows:

"(1) To apply to have a dispute adjudicated, a party to the contract, within 28 days after the dispute arises or, if applicable, within the period provided for by section 37(2)(b), must -

(a) prepare a written application for adjudication;

(b) serve it on each party to the contract;

..."

31 Section 6(a) of the CC Act defines when a payment dispute arises for purposes of this dispute:

"For the purposes of this Act, a payment dispute arises if –

(a) 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;"

32 In their submissions to Mr Riley and to the Tribunal, the parties explored the proper construction of s 6(a) of the CC Act. They, and Mr Riley, focused on the nature of the (oral) contract between the parties, the behaviour of the parties on 5 September 2007, the way in which previous payments were dealt with and, matters related thereto.

33 It was only at an advanced stage of the review hearing before the Tribunal that the parties directed their attention to the provisions of s 17 of the CC Act. Section 17 of the CC Act specifically deals with a situation where parties do not have a written contract setting out how to deal with a payment dispute. If no written contract exists, the implied provisions of the CC ACT apply.

34 Section 17 of the CC Act provides as follows:

"The provisions of Schedule 1 Division 5 about when and how a party is to respond to a claim for payment made by another party are implied in a construction contract that does not have a written provision about that matter." (Tribunal emphasis)

35 Schedule 1 Division 5 of the CC Act sets out in detail when and how a notice of a payment dispute must be given, the form of the notice, the information that must be contained in the notice and related matters.

36 It is unclear to the Tribunal why neither of the parties nor Mr Riley did not make reference to s 17 of the CC Act or the implied terms of Sch 1 Div 5 of the CC Act in the earlier proceedings. Proper consideration of the implied terms of the CC Act would have saved the parties time and resources, and could have prevented the matter becoming so protracted and drawn out.

37 It was agreed between the parties that there was no written contract to set out the "when and how" to which a response to a payment claim had to comply. Mr Riley therefore erroneously relied on verbal arrangements between the parties and the previous conduct of the respondent when making payments.

38 Although Mr Finlay, for the applicant, contended during the review hearing that there was evidence that one payment had been made after a three day period (with three payments in a shorter period), the parties could not refer the Tribunal to any agreed written provision on how to deal with issues arising from a payment dispute.

39 The parties and Mr Riley should therefore, in light of the absence of a written provision about how to give notice of a payment dispute, have reverted to the implied provisions of s 7 of the CC Act to guide them through the dispute.

40 The Tribunal is therefore satisfied that:

(a) there was no written agreement between the parties in regard to the "when and how" to respond to a claim for payment; and

(b) the implied provisions of Sch 1 Div 5 should have been adhered to as required by s 17 of the CC Act.

41 Section 7 of the implied provisions in Sch 1 Div 5 of the CC Act provides as follows:

"(1) If a party that receives a payment claim -

(a) believes the claim should be rejected because the claim has not been made in accordance with this contract; or

(b) disputes the whole or part of the claim,

the party must, within 14 days after receiving the claim, give the claimant a notice of dispute.

(2) A notice of dispute must -

(a) be in writing;

(b) be addressed to the claimant;

(c) state the name of the party giving the notice;

(d) state the date of the notice;

(e) identify the claim to which the notice relates;

(f) if the claim is being rejected under subclause (1)(a) - state the reasons for the belief that the claim has not been made in accordance with this contract;

(g) if the claim is being disputed under subclause (1)(b) - identify each item of the claim that is disputed and state, in relation to each of those items, the reasons for disputing it; and

(h) be signed by the party giving the notice.

(3) Within 28 days after a party receives a payment claim, the party must do one of the following, unless the claim has been rejected or wholly disputed in accordance with subclause (1) -

(a) pay the part of the amount of the claim that is not disputed;

(b) pay the whole of the amount of the claim."

42 In essence, the implied terms stipulate that the respondent had to comply with the following requirements for a payment dispute to be declared:

1. Notice of the dispute had to be given in writing within 14 days from the date of receiving the payment claim (Sch 1 Div 5 s 7(1) of the CC Act); and

2. The notice had to meet statutory specified requirements such as it had to be in writing, the date of the notice had to be specified and the reasons for the rejection of the payment claim had to be set out (Sch 1 Div 5 s 7(2) of the CC Act).

43 If a payment claim is not rejected in accordance with the provisions above, it must within 28 days of receipt of the demand, be paid in whole or the part (Sch 1 Div 5 s 7(3) of the CC Act).

44 If a payment claim is not rejected in accordance with the written contract between the parties or in accordance with Sch 1 Div 5 s 7(1) of the CC Act, the claim is deemed to have been rejected "by the time when the amount claimed in a payment claim is due to be paid ..." (s 6 of the CC Act) - meaning the end of the 28 days period specified in Sch 1 Div 5 s 7(3) of the CC Act.

45 The Tribunal will now deal with each of these implied requirements separately:

2.1) Was proper notice of the dispute given as per Sch 1 Div 5 s 7(1) of the CC  Act?

46 The respondent contended that it had given proper notice of the rejection of the payment claim when its representative told the applicant on 5 September 2007 that the amount claimed would not be paid. The respondent did not follow the verbal notification up with a written notification to confirm the content of the discussion.

47 In response to questions by the Tribunal, Mr Machell contended that the notice requirements of Sch 1 Div 5 s 7(2) of the CC Act are merely for "guidance" and are not intended to be an exact checklist that each notice of dispute should comply with. The parties were, according to Mr Machell, sufficiently aware of the dispute and their behaviour reflected this knowledge. Strict compliance with the CC Act was therefore not required. The verbal notification on 5 September 2007 should therefore be accepted by the Tribunal as substantial compliance with Sch 1 Div 5 s 7(2) of the CC Act.

48 Mr Finlay contended that although the applicants may have been aware of the payment dispute, strict compliance with the CC Act is nevertheless required. The formal requirements set out in Sch 1 Div 5 s 7(2) of the CC Act were mandated by Parliament and that, in the absence of a written agreement, there is no discretion for the respondent or the Tribunal to deviate from the statutory requirements.

49 The Tribunal concurs with the submission made by Mr Finlay for the following reasons.

50 The overriding purpose of Sch 1 Div 5 s 7 of the CC Act is to provide a "safety net" in an event where parties fail to agree to certain matters in writing. Rather than to revert to protracted legal proceedings about the nature and content of oral agreements, or whether proper notice of a payment dispute had been given, the legislature introduced "implied terms" that bind parties.

51 The parties therefore had a choice whether they agreed in writing on the "when and how" a payment dispute should be dealt with, or whether they reverted to the implied terms of the CC Act. If they failed to enter into a written agreement, the CC Act provides that the requirements of Sch 1 Div 5 must automatically apply (s 17 of the CC Act).

52 This legal regime of implied terms was designed to ensure certainty and consistency in dealing with disputes that arise from construction contracts. The implied terms are therefore consistent with the objectives of the CC Act to deal with payment disputes "fairly and as quickly, informally and inexpensively as possible" (s 30 of the CC Act).

53 The implied terms were designed specifically to prevent a situation arising, as in this matter before the Tribunal, where uncertainty exists as to the day upon which a payment dispute arose or for a determination to be made on the terms of an oral agreement. There ought to be no confusion as to the date when a demand for payment is received and the date upon which payment is rejected. The reliance by Mr Riley on an oral arrangement between the parties highlights the risks of delay if the implied provisions are not pursued.

54 In these proceedings where there was no written agreement to set out how a payment dispute should be dealt with, the implied provisions of the CC Act had to be followed.

55 The notice requirements set out in the implied provisions of Sch 1 Div 5 require that the party disputing the payment claim "must" within 14 days of receiving the claim give notice of the dispute and such notice "must" comply with the requirements set out in Sch 1 Div 5 s 7(2) of the CC Act.

56 The notice of dispute "must" be in writing; it "must" state the date of the notice; and it "must" specify the reasons for the refusal to pay. These requirements are "implied" in order to ensure certainty as to the nature of the dispute, the identity of the parties and the date upon which the payment dispute arose. It also provides the claimant an opportunity to be informed why the claim is being challenged. Such information is essential for an applicant to decide if it wants to lodge an application before an adjudicator.

57 Neither Mr Riley nor the Tribunal has the authority to divert from these requirements. The parties may, through written agreement establish their own procedures but in this matter they did not. The fact that parties were aware of the dispute does not mean the formal statutory requirements can be waived by Mr Riley or the Tribunal.

58 For the purpose of these proceedings, the Tribunal therefore finds that the oral notice of refusal on 5 September 2007 did not comply with the statutory requirements of Sch 1 Div 5 s 7(2) of the CC Act, for example - the notice of the dispute was not in writing, the date of the dispute was not in writing and the reasons for rejecting the demand were not given in writing.

59 The Tribunal does not accept the contention of the respondent that "substantial" compliance with Sch 1 s 7(2) of the CC Act was achieved through the oral notice. If parties fail to enter into a written contract or if they choose not to enter into a written contract to regulate the treatment of a payment dispute, the statutory provisions must apply.

60 The Tribunal therefore finds that the verbal notice of dispute given by the representative of the respondent on 5 September 2007 did not comply with the form or content of Sch 1 Div 5 s 7(2) of the CC Act.

61 As a result of the above finding, the respondent did not give notice of the dispute within 14 days of receiving the payment claim as required by Sch 1 Div 5 s 7(1) of the CC Act.

2.2) In light of the finding that notice of a payment dispute was not given in accordance with the CC ACT, when did the dispute arise?

62 The implied provisions of the CC Act provide that, unless the claim was disputed in part or in full, the respondent had to pay the whole amount of the claim or the part that was not in dispute, within 28 days from the date upon which it received the payment claim (Sch 1 Div 5 s 7(3) of the CC Act).

63 It is undisputed that the payment claim was received in writing on 5 September 2007.

64 Starting on 5 September 2007, the respondent therefore had 28 days to make the payment or part of the payment. It is agreed that no payment was made at the expiry of the 28 days.

65 As quoted above, s 6 of the CC Act defines the date upon which a payment dispute arises. A payment dispute arises " by the time when the amount claimed in the payment claim" is due to be paid, the amount has not been paid (Tribunal emphasis).

66 In this matter the claimed amount was, in accordance with the implied provisions of the CC Act, due to be paid 28 days after receipt of the demand for payment on 5 September 2007. That means the last date for payment was 2 October 2007.

67 The date whereupon the payment dispute arose must, in the absence of a written agreement, be calculated in accordance with the implied provisions of the CC Act. The respondent therefore had until midnight of the 28th day after the demand was received, namely 2 October 2007, to make the payment. By failing to pay, the date upon which the dispute arose was 3 October 2007.

68 The Tribunal finds that the payment dispute arose on 3 October 2007 when the respondent failed to make the payment in part or in full and that Mr Riley erred in its finding that the payment dispute arose on 5 September 2007.

2.3) In light of the finding that the payment dispute arose on 3 October 2007, was the application made within the statutory time?

69 The application for adjudication was made on 3 October 2007.

70 Section 26(1)of the CC Act provides that a party must "within 28 days after the dispute arises" prepare a written application and serve it on the other party.

71 Mr Riley, in determining that the dispute arose on 5 September 2007, found that it was lodged out of time.

72 As pointed out above, Mr Riley erred in his finding.

73 The correct way of calculating the last day upon which an application could be lodged is to add 28 days from the day upon which the dispute arose. The Tribunal found above that the dispute arose on 3 October 2007. The application should therefore have been lodged within 28 days from the date of the dispute bringing it to 30 October 2007.

74 The Tribunal finds that the application for adjudication was lodged within the prescribed time: s 26 of the  CC Act. The finding of Mr Riley that the application was lodged out of time should therefore be set aside.

2.4) Finding

75 The correct timeline for dealing with the dispute in accordance with the implied terms of s 17 of the CC Act can be summarised as follows:

1. The demand for payment was received on 5 September 2007;

2. The respondent had to make the payment not later than midnight on 2 October 2007 which is 28 days after receipt of the demand for payment;

3. The payment dispute arose on 3 October 2007 after the responded had failed to make the payment;

4. The applicant had from until 3 October 2007 until 30 October 2007 to lodge an application for adjudication in accordance with s 26 of the CC Act; and

5. The application for adjudication was lodged on 3 October 2007.

76 The Tribunal finds that Mr Riley erred by finding that the payment dispute arose on 5 September 2007. The payment dispute only arose on 3 October 2007.

77 The decision of Mr Riley to dismiss the application must therefore be set aside and that matter must be remitted to him in accordance with s 46(2) of the CC Act.

3) What about the other grounds for dismissal set out in s 31(2)(a)(i), s 31(2)(a)(iii) and s 31(2)(a)(iv) of the CC Act that were not considered by Mr Riley?

78 The question that arises next is what about the other grounds for dismissal in s 31(2)(a) and whether Mr Riley was correct in his interpretation that it was not necessary for him to make a finding in regard to those matters.

79 It appears from the reasoning of Mr Riley that he construed s 31(2)(a) of the CC Act to mean that if a finding is made to justify a dismissal on any one of the grounds in s 31(2)(a)(i) - s 31(2)(a)(iv) of the CC Act, then there is no need to make a finding in regard to the remaining grounds for dismissal. This is due to the word "or" used to separate the four grounds for dismissal.

80 As a result of this reasoning, Mr Riley found that after he had dismissed the matter as being out of time pursuant to s 31(2)(a)(ii):

"It was therefore not necessary for me to determine whether:

(a) the contract concerned was a construction contract;

(b) another person or court had already issued a judgment or order concerning the matter; or

(c) it was not possible to make a determination because of the complexity of the matter." (Page 11 supplementary reasons.)

81 At first reading of s 31(2)(a) of the CC Act, the reasoning of Mr Riley seems to be logical. The fact that the legislature used the word "or" can give rise to an interpretation that if an application is dismissed for any one of the grounds listed in s 31(2)(a)(i) - s 31(2)(a)(iv) of the CC Act, there is no reason to consider the other potential grounds for dismissal.

82 This, however, is not in the view of the Tribunal the correct construction of s 31(2) of the CC Act. The preferred construction is that, in light of the comments made by Mr Riley in his original decision and supplementary reasons for decision, each of the remaining grounds had to be considered.

83 There are two main reasons why the interpretation given by Mr Riley is not consistent with the CC Act.

84 Firstly, the grounds for dismissal must be read with the entire review process pursuant to s 46 of the CC Act. A decision of Mr Riley to dismiss a matter without consideration of the merits pursuant to s 31(2)(a)(i) - s 31(2)(a)(iv)of the CC Act is reviewable by the Tribunal pursuant to s 46(1) of the CC Act. If the Tribunal "reverses" the decision of Mr Riley, he must then make a determination of the matter on the "balance of probabilities whether any party to the payment dispute is liable to make a payment ..." (s 46(2) of the CC Act and s 31(2)(b) of the CC Act). Mr Riley cannot, when the matter is remitted to him, consider any of the other grounds for dismissal in s 31(2)(a) of the CC Act.

85 Section 46(2) of the CC Act provides as follows:

"If, on a review, a decision made under section 31(2)(a) is set aside and, under the State Administrative Tribunal Act 2004 section 29(3)(c)(i) or (ii), is reversed the adjudicator is to make a determination under section 31(2)(b) within 14 days after the date on which the decision under section 31(2)(a) was reversed or any extension of that time consented to by the parties."

86 The consequence of s 46(2) of the CC Act is that Mr Riley does not have another opportunity to consider any grounds for dismissal under s 31(2)(a)(i) – s 312)(a)(iv) of the CC Act. Mr Riley has only one chance to consider a summary dismissal without consideration of the merits. This is consistent with the objectives of a speedy resolution of disputes under the CC Act.

87 If Mr Riley in these proceedings were correct in his construction of the CC Act, it would have two unsustainable and unintended consequences:

(a) If Mr Riley considered only one ground for dismissal under s 31(2)(a) of the CC Act and that decision is reversed by the Tribunal, the matter would have to be remitted to Mr Riley to consider possible dismissal under the other grounds. Applied to these proceedings it would mean that with the reversal of Mr Riley's decision that the matter was not lodged in time, Mr Riley would now have to be given an opportunity to consider any one of the other three grounds for dismissal before he deals with the matter on its merits. The decision of Mr Riley to dismiss the application on one of the other grounds may then again be the subject of a review application and so the process would continue until each of the four grounds had been considered. This would be inconsistent with the objectives of the CC Act and there is no ground to support such an interpretation. Section 46(2) of the CC Act leaves no doubt that Mr Riley must on reversal of a decision to dismiss, deal with the matter on its merits in accordance with s 31(2)(b) of the CC Act. This means Mr Riley does not have another opportunity to consider the grounds for dismissal pursuant to s 31(2)(a) of the CC Act.
(b) It would mean that if a matter is dismissed on one ground (say that it was lodged out of time as in these proceedings) and that decision of Mr Riley is reversed, that the application could, in accordance with s 46(2) of the CC Act, be dealt with by Mr Riley on its merits without the other grounds for dismissal having been considered. If such a course of action were adopted in these proceedings, it would mean that Mr Riley must now deal with the matter on merit without having considered the other grounds for dismissal in s 31(2)(b)(i), s 31(2)(b)(iii) or s 31(2)(b)(iv) of the CC ACT. That would be an illogical and unintended outcome, especially in light of the concerns he raised in regard to the purported complexity of the matter.

88 Secondly the use of the word "or" to separate the grounds for dismissal in s 31(2)(a) of the CC Act must be read in the context of the entire CC Act - in particular the review provisions in s 46 of the CC Act.

89 At face value the use of the word "or" suggests that if one of the grounds for dismissal is met, there is no need to consider the other grounds. This is, in effect, the construction followed by Mr Riley.

90 It is, however, not the correct construction of s 31(2)(a) of the CC Act.

91 On proper consideration of s 31(2)(a) of the CC Act read with the review powers, it appears that each of the grounds for dismissal had to be considered at the initial referral by Mr Riley. The "or" is not to be interpreted that only one ground need to be considered, but rather that if any one of the grounds for dismissal is satisfied, the matter must be dismissed. That, however, does not obviate the obligation on Mr Riley to consider each of the grounds. If, for example, an adjudicator finds that the contract is not a construction contract, he remains under the obligation to consider the other grounds for possible dismissal as well. Such an interpretation is consistent with the review provisions of s 46(2) of the CC Act.

92 This construction is also consistent with sound policy whereby an adjudicator would be expected, as a matter of course, to consider each of the grounds for possible dismissal and demonstrate what his finding is in regard to each of those grounds. That would provide the parties and the reviewing authority with clarity and certainty as to the mindset of the adjudicator.

93 The outcome of the finding of the Tribunal in response to the question can therefore be summarised as follows:

1. Mr Riley had to consider each of the grounds for dismissal set out in s 31(2)(a) of the CC Act;

2. Mr Riley had to dismiss the application without determining the merits thereof if any one or more of the grounds were satisfied; and

3. If the decision to dismiss a matter is taken on review and the Tribunal reverses the decision of Mr Riley, Mr Riley must determine the matter in accordance with s 31(2)(b) of the CC Act.

4.  

94 The finding of the Tribunal is therefore that Mr Riley erred in his reasoning that it was not necessary for him to consider the grounds for dismissal found in s 31(2)(a)(i), s 31(2)(a)(iii) or s 31(2)(a)(iv) of the CC Act.

4) If Mr Riley had to consider the other grounds for dismissal but he failed to do so, what next?

95 In his initial reasons for decision it appeared as if Mr Riley made findings in regard to the complexity of the matter.

96 However, in response to the Tribunal's invitation to clarify aspects of the reasons, Mr Riley indicated in his supplementary reasons that he had not made any determination pursuant to s 31(2)(a)(iv) of the CC Act but that he merely made comments on the complexity of the matter "for the sake of completeness" ([7] supplementary reasons). This, he acknowledges, "may have caused some confusion".

97 Mr Riley indicated in his supplementary reasons that although he anticipated some difficulties to make a determination since payment rates had not been agreed, such comments "were not determinative of the question of complexity of the issues" ([13] supplementary reasons). He went on to say he merely wanted to "flag the possible future complexity of issues raised in the adjudication application and response, they (initial reasons) made no attempt to deal with the substance of those issues" ([14] supplementary reasons).

98 It is clear from the supplementary reasons that no decision was made by Mr Riley in regard to the grounds for dismissal found in s 31(2)(a)(i), s 31(2)(a)(iii) and s 31(2)(a)(iv)of the CC Act.

99 In accordance with the Tribunal's reasoning above, the matter cannot be remitted to Mr Riley to consider the remaining grounds for dismissal. The Tribunal must therefore, in accordance with s 31(3) of the CC Act, assume that the application was dismissed under each of these grounds.

100 Section 31(3) of the CC Act provides as follows:

"If an application is not dismissed or determined under subsection (2) within the prescribed time, or any extension of it made under section 23(3)(a), the application is taken to have been dismissed when the time has lapsed." (Tribunal emphasis)

101 Mr Riley only made a decision under s 31(2)(a)(ii) of the CC Act. No decision was made on the other grounds found in s 31(2)(a)(i), s 31(2)(a)(iii) or s 312)(a)(iv) of the CC Act. The Tribunal therefore concludes that, due to an effluxion of time, the matters were dismissed under each of those remaining grounds.

102 The Tribunal must therefore, in this review, also consider the dismissal of the application under grounds found in s 31(2)(a)(i), s 31(2)(a)(iii) and s 31(2)(a)(iv) of the CC Act.

103 The Tribunal will henceforth consider the remaining grounds.

5) Does the dispute arise from a construction contract?

104 Mr Riley did not make a decision whether the contract concerned was a construction contract or not. As a result, the respondent took issue with the jurisdiction of the Tribunal to hear to review. The respondent contended that unless Mr Riley was satisfied that the dispute arose from a construction contract, there was no ground for him to deal with the remainder of the questions in s 31(2)(a) of the CC Act.

105 The parties made submissions at the Tribunal hearing on 8 February 2008 as to whether the dispute arose from a construction contract. The respondent contended that if the contract was not a construction contract, Mr Riley should have dismissed the application pursuant to s 31(2)(a)(i) of the CC Act and there was no need to deal with issues of service of the application or complexity of the dispute.

106 In  Moroney , the Tribunal invited Mr Riley to clarify the remarks he made in regard to the question whether the dispute arises from a construction contract. The reason why the Tribunal invited Mr Riley to clarify its reasoning was summarised by the Tribunal as follows:

"The Tribunal is of the view that until, and unless, Mr Riley makes an unequivocal determination on the question of jurisdiction and provided reasons for the decision, the Tribunal cannot undertake a review of its decision or make a decision on behalf of Mr Riley" ( Moroney at [24]).

107 Mr Riley in his supplementary reasons responded as follows:

"1. While adjudicators in Western Australia have been encouraged (largely on the basis of experience gleaned from the Eastern States) to believe that the first thing that they must do in any adjudication application is to determine that the contract is a construction contract as defined and that they have no jurisdiction unless that is so in each case, I respectfully submit that the CC Act does not support that premise, at least not in such simple terms.

2. An adjudicator attracts jurisdiction to deal with a dispute under the Act upon appointment under s 28.

...

5. For the reasons stated above, I am of the view that the wording of the CC Act enabled me to treat the dispute as falling within the CC Act by virtue of my appointment under s 28 and the absence of a disqualification under s 29 (see Decision paragraphs 1 to 6). This is notwithstanding the possibility that the contract in question may not be a construction contract.

6. As stated above, it is by habit that, after confirming their appointment, adjudicators would normally determine whether the dispute arose under a construction contract and then whether the application was made in accordance with the Act. This order of thought process is suggested by the order of the sub-paragraphs of s 31(2)(a).

...

10. Having made the factual finding that the adjudication application had not been prepared and served in accordance with s 26 of the CC Act, I was obliged to dismiss the application.

11. It was therefore not necessary for me to determine whether:

4. 1. the contract concerned was a construction contract;

..."

108 In light of the fact that Mr Riley remained silent on the question whether the contract concerned was a construction contract or not and the comments he made about the "complexity" of the question, the Tribunal has already found that, on proper construction of s 31(3) of the CC Act, it is taken that Mr Riley determined that the contract was not a construction contract.

109 The Tribunal is of the opinion that Mr Riley had erred in his reasoning that he was able "to treat the dispute as falling within the CC Act by virtue of my appointment under s 28 ..." ([5])

110 The fact that Mr Riley was appointed under the CC Act merely gave him the power to receive submissions in regard to the matter and to determine whether indeed the dispute fell within his jurisdiction before dealing with the issues in dispute. The same process applies to any court or tribunal when a new application is lodged. The court or tribunal has the power (and duty) to consider whether the dispute comes within its jurisdiction. The mere fact that an application is lodged with a specific court, tribunal or adjudicator does not automatically mean that court, tribunal or adjudicator has jurisdiction to determine the matter.

111 The term "jurisdiction" is, according to the High Court, a "'generic term' generally signifying authority to adjudicate" ( Australian Securities and Investment Commission v Edenson Nominees Pty Ltd [2001] HCA 1 at [2] ). Mr Riley had to be satisfied that he had the "authority to adjudicate" before he could consider specific disputes arising from an application.

112 The very first step to take for any court, tribunal or adjudicator is to be satisfied that a matter does indeed come within its jurisdiction before any other issues in dispute are considered. This means Mr Riley in these proceedings had to first deal with the question if the contract concerned was a construction contract or not. If he was satisfied that it was a construction contract he should have noted it. If he found that it was not a construction contract, he should have dismissed the matter after also having considered the other grounds for dismissal.

113 The question of jurisdiction was prevalent during the entire proceedings. The respondent contended that the contract was an employer-employee contract and not a construction contract and that should have drawn the attention of Mr Riley to consider the question as a priority. By not addressing the question whether it was or was not a construction contract, valuable resources and time have been wasted.

114 The practice that has apparently developed in the Eastern States and followed by adjudicators in Western Australia namely "that the first thing that they must do in any adjudication application is to determine that the contract is a construction contract" ([1] supplementary reasons) is, as far as the Tribunal is concerned, sound and good practice, and consistent with the approach of other courts and tribunals when new matters are considered.

115 Although s 31(2)(a)(i) of the CC Act is worded in the negative - "the contract concerned is not a construction contract" - Mr Riley should, if the contract was a construction contract, at least have expressed an opinion in that regard especially in light of the fact that the respondent in these proceedings disputed that the contract was a construction contract.

116 Mr Finlay contended that the contract was a construction contract. He referred the Tribunal to the invoices submitted by the applicants, the fact that they claimed GST, the claims for "extras" and the absence of an employer-employee contract. Mr Finlay emphasised that the characterisation of the contract must be on substance and not on form and that the substance supports a conclusion that it was a construction contract.

117 Mr Machell contended that it was an employeremployee relationship and that the level of control that is necessary for such a relationship to be found, was in place. He referred to the fact that the claims were made every fortnight in the way employees would do, the travel arrangements of the applications were made and paid for by the respondent, the applicants were not responsible for defects arising from the works, and the applicants did not carry the risks of the project.

118 The comments of Mr Riley were not helpful in making a determination. As set out in Moroney , Mr Riley commented that the classification of the contract "is complex in itself and raises jurisdictional issues for me as the appointed adjudicator" ([27] Moroney ). He did not in his comments deal with the merit of the submissions before him.

119 The Tribunal finds that the contract was indeed a construction contract. This finding is based on the following considerations:

• There is insufficient evidence of control by the respondent over the applicants to adduce an employeremployee relationship.

• There is no written employeremployee contract or terms of employment.

• There is no affidavit or witness statement by the purported employer to set out the terms and conditions upon which the purported employees were employed.

• Mr Machell, by his own admission, said that the respondent had initially intended to enter into a construction contract and it was not understood at the time that an employer-employee contract had been entered into. It was only at a later stage that the respondent contented that an employeremployee contract existed.

• No superannuation was paid to the applicants as required by statute for employees

• The invoices contained ABN numbers which are not associated with an employeremployee relationship.

• The fact that claims were made fortnightly is not unique to an employer-employee contract.

• The fact that some transport arrangements were made and paid for by the respondent is in itself not sufficient information to classify the relationship as that of an employeremployee.

• Extras were claimed by the applicants which re-enforces the finding that they were not employees but contractors.

120 The conclusion of the Tribunal is that if all the information is taken into account, the substance of the relationship was that of a contractor and not an employee.

121 The Tribunal therefore finds that the contract is a construction contract.

6) Is another arbitrator, person, court or other body dealing with the matter?

122 The matter must be dismissed if "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" (s 31(2)(a)(iii) of the CC Act).

123 There is no evidence before the Tribunal that this condition has been satisfied.

124 The Tribunal therefore finds no reason to dismiss the application pursuant to s 31(2)(a)(iii) of the CC Act.

7) Is the matter too complex or the time not sufficient to make a determination?

125 The matter had to be dismissed if Mr Riley was "satisfied that it is not possible to fairly make a determination because of the complexity of the matter or the prescribed time or any extension of it is not sufficient for any other reason ..." (s 31(2)(a)(iv) of the CC Act).

126 Mr Finlay contended that the matter is not so complex that it would justify a dismissal. He contended that the test for what is too complex is a combination of objective and subjective considerations. He contended that the reasons raised by the respondent in support of complexity were not convincing, since Mr Riley could identify issues on which he could not make a determination and then make a determination on the other issues. For example, there are four other paid invoices that could be used to determine what the fee structure was; and the allegations of fraud were not supported by any evidence other than the general claim made by the respondent in written submissions.

127 Mr Machell contended that the matter was clearly too complex to be determined and therefore must be dismissed by the Tribunal. According to him it was not clear what the relationship was between the applicants, there was a possibility of fraudulent claims; and the fee structure to determine claims was not clear.

128 Mr Riley did not deal in detail with any of the contentions of the parties although he commented in his initial reasons that it appears as if the matter was too complex to be determined and therefore had to be dismissed.

129 The Tribunal does not accept the contention that the matter was too complex to be determined. This finding rests on the following considerations:

130 Firstly, Mr Riley and the Tribunal, in its review capacity, are not required to make a final and conclusive determination of all the contractual issues that may arise between the parties. The purpose of the legislation is to "keep the funds flowing", but that does not mean that parties cannot pursue any other remedies at their disposal at a later stage.

131 Secondly, the same applies to allegations of fraud. The mere fact that some allegation of fraud or complexity is made, does in itself mean the matter must be dismissed. Mr Riley should have applied his mind to the application and all the information before it. Mr Riley may also have sought an extension of time, he could have invited further submissions, he could have invited parties to attend a conference or he could have engaged an external expert to assist him (s 32(2) of the CC Act). All these mechanisms are aimed at resolving a dispute at the level of Mr Riley as adjudicator as soon as possible.

132 Thirdly, although no written contract exists in these proceedings, there is evidence that the respondent made at least four payments in response to pay demands submitted by the applicants. Those pay demands and payments can therefore be used as a basis to determine the dispute. It may require some mathematical exercise but that does not bring the matter into the realm of "too complex to determine".

133 Fourthly, the allegation made by Mr Machell of fraud is nothing but an unsupported claim. Mr Machell did not provide any detailed reasons for the allegation, no affidavit was submitted from those who allege fraud, no witness statements were provided and no complaint lodged with the appropriate authorities. The Tribunal cannot conclude that upon such an unsupported claim, the matter is too complex to determine. If indeed there is insufficient evidence to enable Mr Riley to make a determination for payment for say scaffolding, day works or any item claimed, it does not automatically make the claim too complex to determine. The appropriate course for Mr Riley would be to make decision of the "balance of probabilities" as required by s 31(2)(b)of the CC Act.

134 Fifthly, it appears as if Mr Machell and Mr Riley confused "complexity" with "lack of information". The mere fact that a payment claim is disputed or not supported by sufficient information does not automatically mean it is too complex to be determined. Mr Riley is required to make a decision "on the balance of probabilities whether any party to the payment dispute is liable to make a payment ..." (s 31(2)(b) of the CC Act. If, on reflection, there is not sufficient information to make a finding on the balance of probabilities that a party is entitled to a payment, then the claim should be dismissed.

135 The Tribunal is not satisfied that the matter cannot be fairly determined because of complexity. There is insufficient reason for it to be dismissed on grounds of s 31(2)(a)(iv) of the CC Act.

8) Can the Tribunal substitute the decision of Mr Riley with its own decision?

136 Mr Finlay, in written and oral submissions, urged the Tribunal to determine all outstanding questions arising from the application in order to save time, bring certainty and to prevent the matter having to be remitted to Mr Riley.

137 Both parties, for different reasons, were of the view that Mr Riley should not have any further dealings with the matter.

138 Mr Finlay contended that the review function of the Tribunal pursuant to s 29 of the SAT Act included the power to (a) substitute the decision of Mr Riley with a decision of the Tribunal and (b) to make a determination of issues that had not yet been fully dealt with in the reasons of Mr Riley.

139 Mr Machell contended that the Tribunal is limited in its review function by s 29(3) of the SAT Act to the review of the "decision" of Mr Riley. Mr Machell contended that in these proceedings Mr Riley only made one decision namely that the application was not lodged on time, and as a result the Tribunal can only review that decision.

140 The Tribunal concurs with the submissions made by Mr Machell that it (Tribunal) is limited to a review function and cannot usurp the functions of the original decision maker.

141 The review functions of the Tribunal in matters arising from the CC Act are found in s 46 of the CC Act and s 29 of the SAT Act.

142 These sections must be read with s 5 of the SAT Act which deals with an inconsistency that might arise between the CC Act and the SAT Act.

143 Section 46(2) of the CC Act provides as follows:

"If, on a review, a decision made under section 31(2)(a) is set aside and, under the State Administrative Tribunal Act 2004 section 29(3)(c)(i) or (ii), is reversed the adjudicator is to make a determination under section 31(2)(b) within 14 days after the date on which the decision under section 31(2)(a) was reversed or any extension of that time consented to by the parties." (Tribunal emphasis)

144 Section 29(3)(c) of the CC Act provides as follows:

"(3) The Tribunal may -

(a) ...

(b) ...

(c) Set aside the decision that is being reviewed and -

(i) substitute its own decision; or

(ii) send the matter back to the decision-maker for reconsideration in accordance with any directions or recommendations that the Tribunal considers appropriate,

..."

145 Section 5 of the SAT Act provides as follows:

"If there is an inconsistency between this Act and an enabling Act, the enabling Act prevails."

146 Although Mr Riley made only one decision in these proceedings, the Tribunal is required, for the reasons explained above, to assume that the application was also dismissed for reasons found in s 31(2)(a)(i), s 31(2)(a)(ii) and s 31(2)(a)(iv) of the CC Act. The Tribunal therefore reviewed each of those grounds.

147 The question that arises is if the Tribunal may also make a determination under s 31(2)(b) of the CC Act by determining on the balance of probabilities if the respondent is liable to make a payment.

148 The answer to the question is negative.

149 Under the SAT Act, the Tribunal can set aside the decision of, however, the decision-maker and substitute it with its own decision. Under the CC Act, the Tribunal's powers are more limited. It can set aside the decision of Mr Riley but it must then remit the matter to Mr Riley to be dealt with under s 31(2)(b) of the CC Act. The Tribunal cannot substitute the decision of Mr Riley with its own decision.

150 There is as a consequence no ground for the Tribunal to make a decision as an original decision-maker pursuant to s 46(2) of the CC Act. The matter must be remitted to Mr Riley to make a decision pursuant to s 31(2)(b) of the CC Act.

151 The Tribunal therefore dismisses the contention of Mr Finlay that the Tribunal is empowered to substitute the decision of Mr Riley with its own decision. The inconsistency between the Tribunal's power must, according to s 5 of the SAT Act, be resolved in favour of the enabling Act.

9) Summary of findings

152 The findings of the Tribunal can therefore be summarised as follows:

1. There are no grounds to dismiss the application for reason that it has become "protracted and complex'.

2. The dispute arose from a contract that is a construction contract.

3. The application for adjudication was prepared and served in accordance with s 26 of the CC Act.

4. No other arbitrator, person or court or other body has made an order, judgment or finding about the dispute.

5. The matter is not too complex to fairly make a determination.

6. The Tribunal cannot determine the matter on the balance of probabilities since that is the role of Mr Riley.

7. The matter must be remitted to Mr Riley to determine in accordance with s 31(2)(b) of the CC Act on the balance of probabilities whether the respondent is liable to make a payment to the applicants.

10) Orders

1. The decision of Mr Riley to dismiss the application on grounds of s 31(2)(a)(ii) of the Construction Contracts Act 2004 (WA), is reversed.

2. None of the conditions in s 31(2)(a) of the Construction Contracts Act 2004 (WA) for a dismissal of the application without consideration of the merits, is present.

3. The matter is remitted back to Mr Riley under s 46(2) of the Construction Contracts Act 2004 (WA) to make a determination in accordance with s 31(2)(b) of the said Act.

I certify that this and the preceding [152] paragraphs comprise the reasons for decision of the State Administrative Tribunal.

___________________________________

DR B DE VILLIERS, MEMBER