[2010] WASAT 165

JURISDICTION : STATE ADMINISTRATIVE TRIBUNAL

STREAM : COMMERCIAL & CIVIL

ACT : CONSTRUCTION CONTRACTS ACT 2004 (WA)

CITATION : FUEL TANK & PIPE PTY LTD and DECMIL AUSTRALIA PTY LTD [2010] WASAT 165

MEMBER : JUDGE T SHARP (DEPUTY PRESIDENT) MR C RAYMOND (SENIOR MEMBER)

HEARD : 9 SEPTEMBER 2010

DELIVERED : 12 NOVEMBER 2010

FILE NO/S : CC 766 of 2010

BETWEEN : FUEL TANK & PIPE PTY LTD

Applicant

AND

DECMIL AUSTRALIA PTY LTD

Respondent

Catchwords:

Construction Contracts Act 2004 (WA) - Application for review of a decision by an adjudicator to dismiss - Grounds of decision to dismiss that application not served in time

Legislation:

Construction Contracts Act 2004 (WA), s 3, s 6, s 6(a), s 26, s 31(2)(a),

s 31(2)(a)(ii), s 31(2)(b)(ii), s 46(1)

Result:

The application is dismissed

Category: B

Representation:

Counsel:

Applicant : Mr S Ellis

Respondent : Mr McGowan

Solicitors:

Applicant : Lewis Blyth & Hooper

Respondent : Tottle Partners

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

Blackadder Scaffolding Services (Aust) Pty Ltd and Mirvac Homes (WA) Pty Ltd [2009] WASAT 133

Project Blue Sky Inc and Australian Broadcasting Authority (1998) 194 CLR 335

[2010] WASAT 165

REASONS FOR DECISION OF THE TRIBUNAL :

Summary of Tribunal's decision

1 The applicant applied under s 46(1) of the Construction Contracts Act 2004 (WA) to review a decision of an adjudicator to dismiss an adjudication application without a determination of its merits. The adjudicator dismissed the application on the ground that it was made more than 28 days after the dispute had arisen.

2 The Tribunal concluded that the adjudicator's decision was correct. The application for review was accordingly refused and the decision of the adjudicator was affirmed.

Introduction

3 This is an application for review by the Tribunal under s 46(1) of the Construction Contracts Act 2004 (WA) (CC Act). The review relates to the decision of an adjudicator to dismiss an adjudication application under s 31(2)(a)(ii) of the CC Act. The issue raised by the applicant is whether the adjudicator was correct in his reason for dismissing the adjudication application, the reason being that it was made more than 28 days after the payment dispute arose.

Facts and the decision under review

4 On 11 June 2008, the applicant and the respondent entered into an agreement entitled Sub-Contract Agreement under which the applicant would carry out certain construction works at Rio Tinto's Brockman Four Project at Tom Price, Western Australia ( Contract ). The Contract is a construction contract within the meaning of s 3 of the CC Act.

5 Certain disputes arose between the applicant and the respondent in relation to payments said to be due under the Contract. As a result of those disputes, on 25 February 2010 the applicant made a 'payment claim', as defined under s 3 of the CC Act, on the respondent. On 26 February 2010, the respondent rejected the applicant's payment claim and on 28 April 2010, the applicant applied under the CC Act to have the dispute adjudicated.

6 On 30 April 2010, Mr Alex During was duly appointed an adjudicator under the CC Act.

7 By written determination made on 21 May 2010, the adjudicator determined that the application be dismissed under s 31(2)(a) of the CC Act on the basis that the adjudication application had been submitted more than 28 days after the payment dispute arose and thus was not served in accordance with s 26 of the CC Act.

Statutory framework

8 Section 3 of the CC Act defines 'payment claim' and 'payment dispute' respectively as follows:

…

payment claim means a claim made under a construction contract -

(a) 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; or

(b) by the principal to the contractor for payment of an amount in relation to the performance or non-performance by the contractor of its obligations under the contract; payment dispute has the meaning given to that term in section 6;

…

9 Section 6 of the CC Act sets out how a payment dispute arises:

Payment 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;

(b) by the time when any money retained by a party under the contract is due to be paid under the contract, the money has not been paid; or

(c) by the time when any security held by a party under the contract is due to be returned under the contract, the security has not been returned.

10 Section 26 of the CC Act governs the manner in which an application to have a payment dispute adjudicated is made:

Applying for adjudication

(1) To apply to have a payment 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 other party to the contract;

(i) if the parties to the contract have appointed a registered adjudicator and that adjudicator consents, on the adjudicator;

(ii) if the parties to the contract have appointed a prescribed appointor, on that appointor; (iii) otherwise, on a prescribed appointor chosen by the party;

and

(d) provide any deposit or security for the costs of the adjudication that the adjudicator or the prescribed appointor requires under section 44(8) or (9).

(2) The application -

(a) must be prepared in accordance with, and contain the information prescribed by, the regulations;

(b) must set out the details of, or have attached to it -

(i) the construction contract involved or relevant extracts of it; and

(ii) any payment claim that has given rise to the payment dispute;

and

(c) must set out or have attached to it all the information, documentation and submissions on which the party making it relies in the adjudication.

(3) A prescribed appointor that is served with an application for adjudication made under subsection (1) must comply with section 28.

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

(2) 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;

The adjudicator's reasoning

12 The adjudicator's decision contains the following statements:

…

18. I am to dismiss the Application without making a determination if I find that any one of the circumstances referred to in Section 31(2)(a)(i) - (iv)of the Act exist.

19. These matters must be decided by me before looking at the merits.

20. I find that the following requirements for a valid adjudication exist:

a. The Contract is a construction contract as defined in the Act.

b. There is no Arbitrator or other person or a court which has dealt with this matter.

c. It is possible to fairly make a determination on this matter.

21. However, I find that the following requirements for a valid adjudication do not exist.

a. The Application has not been prepared and served in accordance with Section 26 of the Act. Section 26 requires the Application to be served with 28 days of the payment dispute arising. The payment dispute arose on 26 February 2010. The Application was served on 28 April 2010.

22. Although not expressly stated, my interpretation of Section 4 of the Application is that the Applicant is of the opinion that the Respondent's letter of 26 February does not constitute a proper response to a payment claim, thus the payment claim was not rejected meaning that the payment dispute arose when the time that the Payment Claim was due to be paid had expired.

23. As stated in the Response, the date on which a payment dispute arises was considered by the State Administrative Tribunal (SAT) in Blackadder Scaffolding Services (Aust) Pty Ltd and Mirvac Homes (WA) Pty Ltd . The SAT held that a payment dispute arises under section 6 of the Act when a payment claim is disputed or the time when the payment claim is due to be paid under the contract has elapsed without payment being made, whichever occurs sooner. The SAT also held that information rejection or disputation of a claim is effective to give rise to a payment dispute under the Act and it is not necessary for a respondent to follow any contractual claims assessment formality in order for a payment dispute to arise.

The SAT said:

'a non[-]complying notice of dispute will nevertheless trigger the establishment of a payment dispute and thereby require an adjudication application to be submitted within 28 days of that event. The purposes of the CC Act are in no way advanced by requiring a claimant to sit back and ignore a manifest rejection of a claim until such time as the date for payment under the contract falls due.'

24. The Respondent's letter of 26 February 2010 included the wording 'your claim … is hereby formally rejected'. This statement, by any standard, constituted a manifest rejection of the Payment Claim.

25. Given the above, while it is difficult not to have sympathy for the Applicant because it is evident to me that some of the grounds for nonpayment stated by the Respondent in its letter of 26 February 2010 are, prima facie, entirely without merit, I must find that the Application is to be dismissed.

The applicant's position

13 The applicant submits that, because payment of the amount in dispute was not due by the respondents under the Contract until 1 April 2010, the period of 28 days under s 26 of the CC Act should be counted from 1 April 2010, not from the date specified by the adjudicator, 26 February 2010.

14 The applicant argues that s 6 of the CC Act should be construed so that the 28 day period begins on the date when the amount claimed in a payment claim is due to be paid under the Contract and that therefore that period expired on 28 April 2010.

15 On that basis, the applicant argues that its application for adjudication was prepared and served within time and therefore in accordance with s 26 of the CC Act.

16 The applicant's argument is based on an interpretation of s 6 of the CC Act which was considered by the Tribunal in Blackadder Scaffolding Services (Aust) Pty Ltd and Mirvac Homes (WA) Pty Ltd [2009] WASAT 133 ( Blackadder ). There, at [33] - [39] it was stated:

The parties contended for differing interpretations of s 6(a) of the CC Act.

According to Blackadder, the words 'by the time when the amount claimed in a payment claim is due to be paid under the contract' apply to both contingencies which follow - namely, the amount is not paid in full; or the claim has been rejected or disputed (wholly or in part). Blackadder submitted that this clause sets the date at which the dispute arises by reference not to the events themselves, but to the date by which the section requires an assessment as to whether either of the stated contingencies has arisen (being the due date for payment). Reliance was placed upon the actual words and punctuation of the provision. The first comma appearing after 'paid under the contract' was said to be the critical indicator of such an interpretation.

The effect of Blackadder's interpretation, if accepted, is that the payment dispute did not arise until the date on which payment was due under the contract, which, in respect of the particular progress payment claim, is 31 January 2009.

Mirvac, on the other hand, submitted that s 6(a) of the CC Act provides for two different scenarios in which a payment dispute might arise: the first, where the amount of a payment claim had not been fully paid by the time it was due; and the second, where the claim is rejected or disputed. In support of its interpretation, Mirvac pointed to the purpose of the CC Act to have payment disputes determined as quickly as possible. Mirvac gave the example of a contract with a 50 day payment term where a payment claim was made on day one and rejected on day two. On Blackadder's interpretation, the contractor would be required to wait 50 days from the date of claim before commencing the adjudication application. Mirvac also submitted that if Blackadder's interpretation was correct, the words 'or the claim has been rejected or wholly or partly disputed' would be unnecessary, because where the claim was rejected or disputed, it would invariably be the case that the claim would not be fully paid by the due date.

We prefer Mirvac's interpretation of s 6(a) of the CC Act. Although the words (and punctuation) used do not make it entirely clear, we believe that the submission as to the utility of a separate reference to rejection or disputation of a claim, in circumstances where it would otherwise always be necessary for the parties to await the expiry of the payment period has much force. At the very least, the provision does give rise to an ambiguity of meaning, permitting reference to extrinsic material such as the second reading speech in accordance with s 19(1) of the Interpretation Act 1984 (WA) (Interpretation Act).

The primary purpose of the CC Act, as referred to in the second reading speech (Hansard, 3 March 2004 at p 274 at 275) is to keep the money flowing in the contracting chain by enforcing timely payment. By s 18 of the Interpretation Act 2004 (WA), a construction should be preferred which promotes that purpose. Mirvac's interpretation avoids a disputed claim being delayed. This outcome most effectively enforces timely payment.

It follows, that on a proper construction of s 6(a) of the CC Act, the adjudication application had to be served within 28 days of 21 January 2009, when Mirvac disputed Blackadder's claim, in part, assuming that such rejection is effective and can be relied upon. The application may have been served in time if the provisions set out in Sch 1 Div 5 of the CC Act apply in the manner for which Blackadder contends. We accordingly turn to that issue.

17 The applicant submits that the decision in Blackadder is incorrect because, where a determination is made before the due date of payment under the Contract, Blackadder has the effect of altering the contractual arrangements between the parties by bringing forward the due date for payment of a progress claim under the Contract.

18 With respect, the Tribunal disagrees with this argument, for two reasons. First, s 26 of the CC Act does not change the time for payment or any of the other terms of the Contract. The time for payment will remain the time as fixed by the terms of the Contract. Section 26 does no more than enable an adjudicator to determine a payment dispute before the date for payment of a payment claim. This is clear from s 31(2)(b)(ii) of the CC Act which requires an adjudicator to specify the dates for payment of any amount determined to be payable. It makes it possible for a claimant to make an adjudication application immediately after payment claim has been disputed or rejected. This is the 'parallel remedy' referred to in the second reading speech for the CC Act at (Hansard 3 March 2004 at page 274):

The Bill provides a rapid adjudication process that operates in parallel to any other legal or contractual remedy.

19 Second, to accept the applicant's interpretation of s 6(a) of the CC Act, namely that the expression 'by the time when the amount claimed in a payment claim is due to be paid' is applied to the whole of the balance of s 6(a), means that the words ' or the claim has been rejected or wholly or partly disputed' at the end of s 6(a) become redundant. In Project Blue Sky Inc and Australian Broadcasting Authority (1998) 194 CLR 335 at [71] it was stated that '[a] court construing a statutory provision must strive to give meaning to every word of the provision'.

20 In our opinion, the better view is that s 6(a) of the CC Act should be interpreted so that it provides for two possible dates when a payment dispute could arise, the first being the due date for payment under the contract, if the payment has not been made by that date, and the second being the, presumably earlier, date when the claim has been rejected or disputed.

Conclusion

21 We respectfully consider that, for the two reasons stated above, Blackadder is correctly decided. Consequently, the application which is before us must be dismissed.

Order

22 The Tribunal accordingly makes the following orders:

1. The application for review of the decision of the adjudicator reflected in the determination made on 21 May 2010 is dismissed.

I certify that this and the preceding [22] paragraphs comprise the reasons

for decision of the State Administrative Tribunal.

___________________________________

JUDGE T SHARP, DEPUTY PRESIDENT