JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA IN CHAMBERS

CITATION : ERTECH PTY LTD -v- GFWA CONTRACTING PTY LTD [2010] WASC 181

CORAM : ACTING MASTER CHAPMAN

HEARD : 19 JULY 2010

DELIVERED : 26 JULY 2010

FILE NO/S : CIV 1782 of 2010

BETWEEN : ERTECH PTY LTD

Plaintiff

AND

GFWA CONTRACTING PTY LTD

Defendant

Catchwords:

Building and construction - Payment dispute - Determinations by adjudicator under the Construction Contracts Act 2004 (WA) - Application for leave to enforce as a judgment of the Supreme Court Procedure - Judgments and order - Enforcement of judgments and orders

Legislation:

Civil Judgments Enforcement Act 2004 (WA)

Construction Contracts Act 2004 (WA), s 43

Result:

Leave to enforce granted

Suspension of enforcement refused

Category: B

Representation:

Counsel:

Plaintiff : Mr M J Feutrill

Defendant : Mr A J Musiaknth

Solicitors:

Plaintiff : Middletons

Defendant : Taylor Smart

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

O'Donnell Griffin Pty Ltd v John Holland Pty Ltd [2008] WASC 58

RJ Neller Building Pty Ltd v Ainsworth [2008] QCA 397

1 ACTING MASTER CHAPMAN : I have two applications before me. The first is an originating summons filed by the plaintiff on 26 May 2010 seeking leave to enforce a determination pursuant to s 43 of the Construction Contracts Act 2004 (WA) (the Act). The second was filed by the defendant on 9 July 2010 seeking the application of the plaintiff be adjourned sine die, dismissed or a suspension order be made pursuant to the Civil Judgments Enforcement Act 2004 (WA).

2 It is accepted by the parties they entered into a contract, a dispute arose and on 28 April 2010 an adjudicator made a determination under the Act in favour of the plaintiff against the defendant. The defendant was required to pay an amount specified in the determination by 14 May 2010 and that amount has not been paid.

3 A dispute between the parties has been referred to arbitration pursuant to the terms of the contract. On 31 May 2010 directions were made by the arbitrator in those proceedings. In the points of claim the defendant contends that the determination is incompetent and seeks the arbitrator makes orders pursuant to s 45(4)(b) of the Act.

4 In O'Donnell Griffin Pty Ltd v John Holland Pty Ltd [2008] WASC 58, Beech J said:

Beyond the statutory provision for appeals or setting aside awards, an application for leave does not provide another method for a party to an arbitration to call the arbitrator's award into question: Cockatoo Dockyard (694 - 696); Diploma Constructions [9]. In my opinion, the same observation may be made of the grant of leave to enforce an adjudicator's determination. An application for leave to enforce an arbitrator's determination is not an occasion to revisit the correctness of the decision made by the adjudicator, or to open up the merits of any underlying dispute(s) between the parties. The adjudicator's decision determines only whether a payment must be made pending the determination (by agreement, arbitration or litigation) of any substantive dispute. The substantive dispute is, as it is expressed in the Explanatory Memorandum, 'sidelin[ed]' by the adjudication process. See also s 30. The evident purpose of the adjudication process would be defeated if an application for leave to enforce a determination permitted a review of the correctness of the adjudicator's determination.

The grounds for appeal or judicial review of an arbitrator's determination are very limited: s 46. While that makes the task of a party seeking to resist enforcement of an adjudicator's determination more difficult, in my opinion it does not detract from the application of the principles stated by Rolfe J in the context of an application under s 43(2) of the Construction Contracts Act .

In this case, there is no evidence of any attempt to appeal or otherwise challenge the Determination [47] - [49]

With respect I agree. In this case the defendant contends there is an attempt to challenge the determination by the reference to the arbitrator and the matter has come on before the arbitrator for directions.

5 Section 45(4)(b) of the Act reads:

[M]ay make orders for the restitution of any amount so paid, and any other appropriate orders as to such a determination.

Counsel for the defendant contends that the inclusion of the words 'any other appropriate orders as to such a determination' in that subsection would enable the arbitrator to set aside the determination.

6 Section 46 of the Act reads:

46. Review, limited right of

(1) A person who is aggrieved by a decision made under section 31(2)(a) may apply to the State Administrative Tribunal for a review of the decision.

(2) 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.

(3) Except as provided by subsection (1) a decision or determination of an adjudicator on an adjudication cannot be appealed or reviewed.

The plaintiff argues that in light of s 46(3), s 45(4)(b) should be read down limiting a challenge to a determination by application to the State Administrative Tribunal (SAT) or possibly by way of judicial review. I must say I consider the argument contended for by the plaintiff has some force. Whilst I accept the arbitrator has power to restore any amount paid under the determination I think there is some doubt he could overturn the determination. That matter is not formally before me and I will say no more about it save to say I am content that if monies are paid under the determination the arbitrator may make orders for their return if he considers that course is appropriate.

7 Prima facie the plaintiff is entitled to enforce the determination. I am not satisfied the reasons put forward by the defendant establish grounds upon which the determination should not be enforced. That being the case I will grant the leave sought by the plaintiff.

8 Having reached that conclusion that effectively deals with par 1 and 2 of the defendant's chamber summons. I will now turn to consider whether or not the enforcement of the judgment should be suspended . Both parties accept that one of the aims of the Act is to keep the money flowing in the contracting chain by enforcing timely payments and sidelining protracted or complex disputes. It is also accepted that the contract in question is at an end. The defendant argues that therefore the aim plays a considerable lesser role than might otherwise be the case. That I accept, but do not consider this, by itself, would justify a suspension of any enforcement proceedings.

9 Section 15(1) and (3) of the Civil Judgments Enforcement Act reads:

(1) A person against whom a judgment is given may apply for an order suspending the enforcement of all or part of the judgment to -

(a) the court that gave the judgment; or

(b) a court that is dealing with an appeal against the judgment.

…

(3) On such an application, the court may only make such an order if there are special circumstances that justify doing so.

It is perhaps a moot point as to whether or not a judgment has yet been given, but given the point has not been taken I will say no more about it.

10 In the terms of s 15(3) what are the special circumstances which would justify making a suspension order? There is an argument as to the applicable principles which apply in the exercise of the discretion to suspend the enforcement where the subject matter relates to a determination under the Act. The plaintiff argues that the clear intention of the Legislature is that claims like those advanced by the defendant in the arbitral proceedings are to be sidelined and are not to hold up payments under the adjudicator's determination. It is argued the whole scheme of the Act is built on the notion that parties are required to pay now and argue later in order to maintain the cash-flow of all contractors working on construction projects. That policy it is said would be undermined if the defendant were granted a suspension order.

11 Whilst I accept an order suspending the enforcement is open I consider some weight has to be given to the legislative intention of the Act. In RJ Neller Building Pty Ltd v Ainsworth [2008] QCA 397, Keane JA said:

It is evidently the intention of the BCIP Act, and, in particular, ss 31 and 100 to which reference has been made, that the process of adjudication established under that Act should provide a speedy and effective means of ensuring cash flow to builders from the parties with whom they contract, where those parties operate in a commercial, as opposed to a domestic, context. This intention reflects an appreciation on the part of the legislature that an assured cash flow is essential to the commercial survival of builders, and that if a payment the subject of an adjudication is withheld pending the final resolution of the builder’s entitlement to the payment, the builder may be ruined.

The BCIP Act proceeds on the assumption that the interruption of a builder’s cash flow may cause the financial failure of the builder before the rights and wrongs of claim and counterclaim between builder and owner can be finally determined by the courts. On that assumption, the BCIP Act seeks to preserve the cash flow to a builder notwithstanding the risk that the builder might ultimately be required to refund the cash in circumstances where the builder’s financial failure, and inability to repay, could be expected to eventuate. Accordingly, the risk that a builder might not be able to refund moneys ultimately found to be due to a non-residential owner after a successful action by the owner must, I think, be regarded as a risk which, as a matter of policy in the commercial context in which the BCIP Act applies, the legislature has, prima facie at least, assigned to the owner.

The mere existence of the very kind of risk on which the provisions of the BCIP Act in favour of the builder are predicated would not ordinarily be sufficient of itself to justify a stay of an execution warrant based on the registration of a certificate of adjudication. There may, of course, be other circumstances, which, together with this risk, justify the staying of a warrant of execution based on the registration of an adjudication certificate. For example, the builder may have engaged in tactics calculated to delay the ultimate determination of the rights and liabilities of the parties so as unfairly to increase the owner’s exposure to the risk of the builder’s insolvency. Or the builder may have restructured its financial affairs after the making of the building contract so as to increase the risk to the owner of the possible inability of the builder to meet its liabilities to the owner when they are ultimately declared by the courts. In this case there are no such circumstances [39] - [41].

12 On the evidence before me I am not persuaded that the arbitration proceedings will be rendered nugatory should a suspension order not be made. In the arbitration proceedings the arbitrator must take into consideration any payments made under the determination and may order any amount paid be returned. I am told it is anticipated the arbitration will be concluded before the end of the year and nothing has been brought to my attention which would indicate the plaintiff has taken any steps to increase the owner's exposure to the risk of the builder's insolvency.

13 In the circumstances I would decline to make an order suspending the enforcement of the determination.