JURISDICTION : STATE ADMINISTRATIVE TRIBUNAL

STREAM : COMMERCIAL & CIVIL

ACT : CONSTRUCTION CONTRACTS ACT 2004 (WA)

CITATION : DIGDEEP INVESTMENTS PTY LTD and NW CONSTRUCTIONS PTY LTD [2013] WASAT 60

MEMBER : JUDGE T SHARP (DEPUTY PRESIDENT)

MR M SPILLANE (SENIOR MEMBER)

HEARD : 1 FEBRUARY 2013

DELIVERED : 1 MAY 2013

FILE NO/S : CC 1706 of 2012

BETWEEN : DIGDEEP INVESTMENTS PTY LTD

Applicant

AND

NW CONSTRUCTIONS PTY LTD

Respondent

Catchwords:

Construction Contracts Act 2004 (WA) - Application for review of decision by adjudicator - Whether document a notice of dispute

Legislation:

Construction Contracts Act 2004 (WA), s 6, s 6(a), s 10, s 16, s 17, s 18, s 25, s 26, s 31(2)(a), s 31(2)(b), s 46(1), s 46(3), cl 7, cl 7(1), cl 7(2), Div 2 Pt 2, Div 5 Sch 1

State Administrative Tribunal Act 2004 (WA), s 29(3)(c)(ii)

Result:

The application is successful

Summary of Tribunal's decision:

Digdeep Investments Pty Ltd applied to the Tribunal for a review of an adjudicator's decision to dismiss their application for adjudication in respect of a progress payment under an earthworks contract with NW Constructions Pty Ltd.

Digdeep Investments Pty Ltd submitted that the adjudicator in dismissing the application under s 31(2)(a)(ii) of the Construction Contracts Act 2004 (WA) had incorrectly found that an email of 1 August 2012 sent by NW Constructions Pty Ltd was a notice of dispute.

Having considered the matter, the Tribunal found that the adjudicator was not correct, and that his decision should be set aside and the matter referred back to the adjudicator to make a further determination under s 31(2)(b) of the Construction Contracts Act 2004 .

Category: B

Representation:

Counsel:

Applicant : Mr I McKellar (Acting as Agent)

Respondent : Ms A Dowley

Solicitors:

Applicant : N/A

Respondent : Contract Intelligence Pty Ltd

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

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

South Coast Scaffolding and Rigging and Hire Access Pty Ltd [2012] WASAT 5

REASONS FOR DECISION OF THE TRIBUNAL :

Background facts

1 Digdeep Investments Pty Ltd (applicant) T/As Metro Bobcats was engaged by NW Constructions Pty Ltd (respondent) to carry out earthworks on Lot 901, at the corner of William and Newcastle Streets, Perth, Western Australia.

2 The contract documents comprised of:

1) applicant's quotation, dated 12 December 2011;

2) Earthworks Contract Agreement Part 1, dated 13 January 2012, but signed by the parties on 22 February 2012 (Earthworks Contract); and

3) Contract Scope of Works, General Conditions Works Contract, Part 2, dated 13 January 2012, also signed by the parties on 22 February 2012 (General Conditions).

3 It was common cause that the contract was a construction contract for the purposes of the Construction Contracts Act 2004 (WA) (CC Act).

4 Clause 3 of the Earthworks Contract stated:

ix. PAYMENTS CLAIMS

Payment claims will be assessed to the Contract Price and in accordance to the Program Schedule of Payments established under the agreement or contract. Payment claims received before the scheduled time and date defined by [the respondent] under payment terms shall be treated as being received late and will be dealt with in the following payment cycle.

The contract will not claim any fees or damages for late payments as they delivered the claim past the payment terms defined. [The respondent] will not accept a facsimile invoice for any claim or payment[.]

[The respondent] will accept electronic progress claims, being an invoice issued by email.

[The respondent] will only accept an invoice when it is identified as an electronic invoice; this is done by adding invoice above the ATO required Tax Invoice title required of [sic] under the Goods and Services Act 1999. Should an incorrectly structured or formatted invoice be issued [the respondent] will not advise of its non[-]conformance and will not process the claim, this clause is only available to those that have a signed agreement or contract to this policy.

[The respondent] will receive either an original invoice (via mail) or an Invoice (via email) that will commence the claim process.

Either claim MUST be accompanied by a completed Sub Contractor Statement and a signed, numbered and completed NW Works Completion Certificate related to the progress claim. If all items are not attached to a mailed original claim or an invoice claim, the claim will not be processed.

An Invoice must be followed up by a mailed original invoice or emailed invoice.

All payment Claims will be dealt under the WA Trade Practices.

5 The following two paragraphs of the Earthworks Contract dealt with 'Payment Terms' and 'Payment Periods', and stated:

x. PAYMENT TERMS

[The respondent] will treat any claim for payment to the following test:

a. Trade Labour only contracts will be dealt with each 14 days.

…

c. The processing of any invoice will take up to 14 days, which within [sic] that period a cheque will be issued to the Sub Contractor, to the Australian Post Office mail business address registered with [the respondent].

d. A cheque can be made available for picking up at [the respondent's] business office, to be eligible for a pickup, the contractor must [sic]:

(1) Must issue a notice (release) in either the progress or final claim, on the contractor company letterhead, requestion [sic] a pickup payment, and

(2) They must nominate the person to pick this payment up,

(3) The nominated person will have to produce a copy of the letter and a picture identification, and

(4) The nominated person must be prepared to have a copy of the ID taken on the back or front of the release.

e. No invoice will be processed unless the invoice is:

(1) A Tax Invoice as prescribed under the Goods and Services Act,

(2) Attached to:

(a) A NW Construction Sub Contract or Statement, and

(b) A NW Construction issued Works Completion Certificate, the Works Completion Certificate must nominate all materials ([if] any), and labour undertaken to the agreement or contract, nomination the Purchase Order identified on the agreement or contract.

f. If the Invoice is not received on the second (2nd) or Fourth (4th) Thursdays of the Month will be rolled over to the following 14 day period.

xi. PAYMENT PERIODS

Trade Labour only agreements or contracts will be dealt with each 14 days.

Materials and Labour agreements or contracts will be dealt with on the fourth Thursday of each month

6 The Earthworks Contract did not however, deal with how payment claims should be responded to. In the circumstances, as will be discussed later, pursuant to s 17 of the CC Act, the provisions of Div 5 of Sch 1 of the CC Act were implied into the contract. These provisions set out how payment claims should be responded to.

7 On 31 July 2012 the applicant served three progress claims on the respondent for work completed, namely:

a) Progress Claim No 1, dated 31 July 2012 - dollar value nil;

b) Progress Claim No 2, dated 31 July 2012 - dollar value $155,840; and

c) Progress Claim No 3, dated 31 July 2012 - dollar value $239,055.

8 For the purposes of this matter only Progress Claim No 3, dated 31 July 2012, in the sum of $239,055, is relevant as that was the only payment claim dealt with by the adjudicator in the decision under review.

9 That payment claim, although not dealt with in any detail by either party at the hearing, appeared to be contained in two documents, both included in the applicant's bundle of documents and both dated 31 July 2012.

10 The first of those documents was a three-page covering letter from the respondent to the applicant which began by stating:

Please find attached our Progress Claim No 3 for the above-mentioned contract.

11 It then went on to note a number of issues, with the only ones relevant to this matter appearing on the second page of the letter at paragraphs 7 and 8, which stated:

7. The attached Progress Claim No. 3 states the whole amount owing at this point in time under the contract.

8. Whilst Progress Claims No.'s 1 and 2 are attached, they are:

a. provided for information only as to what should have been the correct progress claims issued under the contract, had they been properly issued under the contract and at the appropriate time.

b. superseded by Progress Claim No 3; and,

c. are [sic] not due or payable (that is, only Progress claim No 3 is due and payable and which is due to be paid on or before 14 August 2012).

12 The second document, dated 31 July 2012, was a four-page document which appeared to be the actual payment claim, which stated:

Re: EARTHWORKS CONTRACT FOR THE PROPOSED RESIDENTIAL DEVELOPMENT LOCATED AT CNR WILLIAM AND NEWCASTLE STREETS, NORTHBRIDGE

MATTER: PROGRESS CLAIM NO 3

CONTRACTOR: Digdeep Investments Pty Ltd trading as Metro Bobcats

PRINCIPAL: NW Construction Pty Ltd

The amount stated below is hereby claimed for payment under the Contract for work performed by the Contractor under the Contract (in addition to variations carried out under the instructions of the Principal):

1 The Contractor claims payment from the Principal in the amount of:

$239,055.00

2 The amount claimed above includes GST in the amount of:

$21,732.00

3 The amount claimed above falls due for payment on:

28 August 2012

A calculation schedule supporting the amount claimed for payment is attached hereto as Appendix A.

Please note that, pursuant to the Contract, the Principal must, within 14 days (that is on or before 14 August 2012) notify the Contractor in writing whether it accepts this claim or rejects any part or rejects the whole of this claim.

…

Chris Muir

Director [of the applicant]

13 On 1 August 2012, Mr William Wong, Project Manager for the respondent, sent an email to the applicant in respect of that payment claim which stated:

Subject: Northbridge Project - Progress Claim No 3

Chris,

We acknowledged receipt of your progress claim No 3. In order for us to process your claim, please provide the necessary documentations:-

a) Truck dockets including volumes

b) ASS treatment validation certificates from the landfill facility

c) Copy of the treatment facility's ASS management plan and/or evidence that the facility is accredited by the DEC for ASS treatment

d) Detail[ed] breakdown of the claim/work carried out to-date

e) Less all backcharges

Until we [receive] all the above documentations, your progress claim no 3 will be withheld.

Regards

William Wong

Project Manager

14 By letter dated 13 August 2012, the applicant replied to Mr Wong's email, stating:

Dear Mr Wong

I refer to your email dated 1 August 2012. In response to each of the items you raise, we respond as follows (and in the same order):

15 The applicant then went on to explain each item, and closed by stating:

Please ensure payment is made in full by the due date (28 August 2012), or if you do not intend to make a payment or are only going to make a part payment, that you formally raise a dispute (giving reasons as to the basis for the disputed amount) in accordance with the Contract and on or before 14 August 2012.

16 By further email dated 15 August 2012 the respondent replied, stating:

Chris, Please find attached our response pertaining to your progress claim No 3.

17 The attached response, in part, stated:

Dear Sir,

Re: Proposed Mixed Used Development at Lot 551-561 William Street, Northbridge

With reference to your Progress Claim No. 3 dated 13th August 2012, we will pay you for works carried under item[s] 1 and 3. As for item 2 in your progress claim, we will only pay you up to 66% of works completed less all back charges and uncompleted work.

…

18 By application, bearing the date 5 September 2012, the applicant applied for adjudication of the matter pursuant to s 26 of the CC Act.

19 As part of that application, under the heading 'Implied terms' at paragraphs 9 and 10, the applicant stated:

9 There is no provision in the contract in relation to the principal responding to a payment claim by the contractor.

10 The implied terms in Schedule 1, Division 5 of the Construction Contracts Act 2004 (CCA), apply to a contract which does not have a written provision about when and how to respond to a payment claim … (see s 17 of the CC Act and Blackadder Scaffolding Services (Aust) Pty Ltd and Mirvac Homes (WA) Pty Ltd [2009] WASAT 133 ( Blackadder ) at [42]).

20 At paragraphs 35 and 36 under the heading 'Deemed due', the applicant stated:

35 [The applicant] did not receive any complying notice of dispute or objection from [the respondent] as to the payment claim. It did receive a response to the payment claim [ATTACHMENT 3.10] but this was provided late, on 15 August 2012, so does not alter the effect of the implied provisions.

36 By operation of implied provision 7 of Schedule 1, Division 5 of the Act, [the respondent's] failure to issue a complying notice of dispute within 14 days means that [the respondent] was obliged to pay the whole of the payment claim, without deduction, within 28 days after receiving the payment claim (by 28 August 2012).

21 At paragraphs 37 and 38 under the heading 'The dispute', the applicant further stated:

37 As at the date of this application, Metro has not received full or even part payment of the payment claim.

38 By section 6 of the Act, the payment dispute arose either on:

38.1 14 August 2012, by operation of the 14 day payment terms in the contract (see paragraph 8); or alternativelyt

38.2 28 August 2012, by operation of the implied provisions.

22 An adjudicator was duly appointed in the matter and, having considered all of the relevant documents and submissions, issued a determination dated 4 October 2012.

23 At paragraphs 20 - 25 of that determination the adjudicator stated:

Date of the Dispute and the Application.

20 The Respondent contends that the application is out of time as the dispute arose not on the non[-]payment at 14 August 2012, but when it was rejected by email on 1 August 2012. By the Respondent's contention the application was due to be lodged 28 days after the dispute arose being 29 August 2012. The Respondent claims as the application was not served until 7 September 2012 it was out of time in regard to the requirements of s26 of the Act.

21 The Applicant contends that as the contract does not contain provisions for responding to a payment claim that the implied provisions of the Act in s7 of Schedule 1, Division 5 apply.

22 The Applicant also contends in paragraph 35 of the application that the Applicant did not receive a complying objection to the payment claim until after the payment was due. It contends a letter attached to an email dated 15 August 2012 was the only dispute notification, and that it did not conform with the requirements in the implied terms in the Act in Schedule 1, Division 5 s7(2) for a notice of dispute.

23 The Respondent has provided in Tab D of the response a copy of an email dated 1 August 2012 from Mr. William Wong of the Respondent to the Applicant requesting four separate pieces of extra information and a fifth item stating the claim should be ' Less all back charges '. The email goes on to state that ' Until we receive all the above documentation, your progress claim no3 will be withheld '[.]

24 The Respondent points out in the WA State Administrative Tribunal decision Blackadder Scaffolding Services (Aus4t) Pty Ltd and Mirvac Homes (WA) Pty Ltd [2009] WASAT 133 at 58 that:

A non-complying notice of dispute will nevertheless trigger the establishment of a payment dispute and thereby require an adjudication application to be served within 28 days of that event.

25 I determine that the request for further information and the advice that the claim would be subject to deduction of back charges is a notice of dispute in regard to Progress Claim 3 and that the dispute arose on 1 August 2012. As such[,] the application for adjudication was due within 28 days after the dispute arose. The last date for service was the 29 August 2012. It was not served until 7 September 2012 and therefore does not comply with the requirements of s26(1) of the Act and the application must be dismissed under the provision of s31(2)(a)(ii)[.]

24 Pursuant to s 46(1) of the CC Act, a person who is aggrieved by a decision made under s 31(2)(a) of the Act may apply to the State Administrative Tribunal for review of the decision. Section 46(3) states:

Except as provided by subsection (1) a decision or determination of an adjudicator on an adjudication cannot be appealed or reviewed 25 As the determination in this matter was made pursuant to s 31(2)(a) of the CC Act, the applicant is entitled to bring an application to this Tribunal to review the adjudicator's decision, and on 22 October 2012, the applicant lodged such an application.

The relevant provisions of the CC Act

26 During the course of this decision a number of relevant provisions of the CC Act will be referred to, which are:

6. 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.

27 At Div 2 of Pt 2 of the CC Act under the heading 'Implied provisions', s 16, s 17 and s 18 state:

16. Making claims for payment

The provisions in Schedule 1 Division 4 are implied in a construction contract that does not have a written provision about how a party is to make a claim to another party for payment.

17. Responding to claims for payment

The provisions in 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.

18. Time for payment

The provisions in Schedule 1 Division 5 about the time by when a payment must be made are implied in a construction contract that does not have a written provision about that matter.

28 As mentioned earlier, although the Earthworks Contract at clause 3(ix) set out how a claim for payment of money under the contract could be made, and in clause 3(x) and clause 3(xi) dealt with the time by when payment must be made, it did not set out how to respond to a payment claim. Therefore, as per s 17 of the CC Act set out above, the provisions in Sch 1 Div 5 were implied into the contract. Clause 6 of Sch1 states:

Interpretation in Division 5

In this Division -

payment claim means a claim -

(a) by the contractor to the principal for payment of an amount in relation to the performance by the contractor of its obligations under this 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 this contract.

29 Clause 7(1) of Sch 1 states:

Responding to a payment claim

(1) If a party that receives the 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 then, within 14 days after receiving a claim, give the claimant a notice of dispute.

30 Clause 7(2) of Sch 1 goes on to state:

(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.

The proceedings before this Tribunal

31 The principal issue for the Tribunal to determine is whether the finding by the adjudicator at paragraph 25 of his decision, that the email of 1 August 2012 from Mr Wong (set out above) was a notice of dispute for the purposes of this CC Act, is correct. If not, should that decision be set aside?

Issue: Was the finding by the adjudicator that the email of 1 August 2012 was a notice of dispute for the purposes of the CC Act correct and, if not, should the adjudicator's decision be set aside?

32 The applicant filed written submissions supplemented by further oral submissions at the hearing.

33 A summary of those submissions are:

• The contract the subject of the dispute did not have a provision about when and how a party was to respond to a payment claim. Therefore by virtue of s 17 of the CC Act the provisions contained in Sch 1 Div 5 were implied into the contract.

• Where those provisions are implied into and form part of the construction contract they provide the framework as to the timing and content of documentation required to be delivered between the parties before either party could deem that a payment dispute within the contract had arisen. Compliance with the contract must be strict and literal and either party could deny the existence of a payment dispute if the provisions of Sch 1 Div 5 cl 7(1) or cl 7(2) were not met.

• If a payment dispute had not arisen by virtue of giving notice compliant with Sch 1 Div 5 cl 7, then, by the time payment had fallen due and payment had not been made, s 6 of the CC Act allows the party to treat the situation as being that a payment dispute has arisen. It is not open to a party nor the adjudicator to unilaterally wave the provisions of Sch 1 Div 5 cl 7 as they are contract provisions and can only be varied by agreement between the parties.

• It was submitted that the finding at [58] by this Tribunal in Blackadder was incorrect where the Tribunal stated:

We consider that the same reasoning compels a conclusion that a non-complying notice of dispute will nevertheless trigger the establishment of a payment dispute and thereby require an adjudication application to be served within 28 days of that event.

• If the contract provides a mechanism for dispute resolution, and how a payment claim is to come forward, and how it is to be dealt with, the dispute must be resolved within the contract.

• It is incumbent upon a party receiving a payment claim if it wishes to raise a dispute. 'If it wishes to turn its mind to disputing it must do this'. The dispute must be within the contract as the contract specifies that you must do these things. 'If you have turned your mind to disputing it, you must do these things'. (T:32; 1.02.13)

• If the other side receives a non-complying notice of dispute they may waive the requirements of the contract and accept that notice, but it is a decision that the party who receives a non-complying notice of dispute must make. Its not for the adjudicator to waive compliance with the contract.

• The email transmitted by the respondent to the applicant on 1 August 2012 failed to comply with clause 7(1) and clause 7(2) of Sch 1 Div 5, in that:

In relation to clause 7(1), the respondent:

• neither admitted nor denied the quantum of the claim, did not communicate whether it intended to dispute the quantum and simply asked for further information;

• did not go as far as to say they would never pay the claim by the due date;

• failed to state the reasons for the belief that the claim had not been made in accordance with the contract;

• failed to identify each item of the applicant's payment claim that was disputed and to state, in relation to each of those items, the reasons for disputing it; and

• failed to sign it.

• The respondent's failure to comply with clause 7 was not trivial. The respondent failed to comply on the most substantial of elements, namely identifying which of the items of the claim were 'in dispute', and signing the notice.

• As at 1 August 2012 there was no 'payment dispute' under the provisions of the contract; and

• It is not open to apply for adjudication as at 1 August 2012 as they did not have the right under s 25 of the CC Act.

• In holding that a 'payment dispute' erupted between the parties on 1 August 2012 by virtue of a 'non-complying' notice of dispute, the adjudicator rewrote the parties' contract which the adjudicator is not, under the CC Act, empowered to do. The adjudicator's function is to determine what the contract is/was and to reject and/or disregard anything, either constructive or administrative in nature, which falls outside of compliance.

34 In oral submissions the applicant stated:

• … The point I make in the appeal is that if there's a non[-]compliant notice of dispute it's outside the contract. … (T:26; 01.02.13)

• … [I]f the contract provides a mechanism for dispute resolution, how a payment claim is to come forward, and how it's to be dealt with, the dispute must be resolved within the contract. (T:27; 01.02.13)

• You have got to read the totality of the email, not just its last line. Right? It says, 'we're processing. Give us a bit of information' … [then] everything else after that has to be read in the light of the first sentence. (T:39; 01.02.13)

• … [It] wasn't specifically clear enough whether it was the processing … or the payment that they weren't going to proceed with. … (T:39; 01.02.13)

35 The respondent also provided written and oral submissions, a summary of which follows:

• The keys words in the definition of 'payment dispute' in s 6 of the CC Act which are relevant to this application are 'a payment dispute arises if … the claim has been rejected or wholly or partly disputed'.

• The definition of a 'payment dispute' has the purpose of triggering the entitlement to make an application for adjudication in relation to a payment claim under s 25 of the CC Act.

• The definition applies to all construction contracts either when those contracts contain their own provisions dealing with how and when to respond to payment claims or when the provisions of Sch 1 of the CC Act are implied into the construction contract.

• The use of the word 'disputes' in paragraph (1)(b) of cl 7 of Sch 1 suggests the word has been used in the context of a belief that some amount of the claim is not payable, either all or part. Similarly, s 6 of the CC Act refers to the claim being 'wholly or partly disputed'. This suggests consistent use of the term 'disputed' to mean an assertion to part or all of the amount of the claims not being payable. This is also consistent with the dictionary definition.

• Having determined that the implied provisions set out in Sch 1 and s 6 of the CC Act are consistent in their terminology (and use those terms consistent with their dictionary definition); the fact that Sch 1 adopts (for its purposes) the term 'notice of dispute' and provides by subparagraph 7(2) further formal requirements, while s 6 adopts (for its purposes) the term 'payment dispute' and contains no formal requirements, suggests a clear intention of the part of legislature to distinguish between the two concepts.

• The one concept ('payment dispute') enlivens the applicant's right to apply to adjudicate a dispute over payment, in circumstances where there is either a breach or anticipatory breach of payment terms. The other concept ('notice of dispute') is a form of contractual requirement to allow proper administration of the contract to determine the quantum of the claim that will become payable on the due date for payment.

• The interpretation adopted in Blackadder and South Coast Scaffolding and Rigging and Hire Access Pty Ltd [2012] WASAT 5 must be correct. Finding a 'payment dispute' does not arise on the issue of a technically deficient notice of dispute would require an applicant for adjudication to wait until the payment falls due before making an application notwithstanding a clear and equivocal statement by the respondent that payment would not be forthcoming. Failure to interpret a clear and unequivocal statement as a dispute may well cost a party an anticipatory breach of the payment provisions.

• It would be a peculiar interpretation of the CC Act, very much contrary to its purpose, for a party to be able to take contractual action (such as termination) and/or legal action in the event of a clear anticipatory breach of payment obligations whilst that party is not entitled to bring an application for rapid adjudication of the payment claim.

• Given that payment terms can be up to 50 days (refer s 10 of the CC Act), a party who has been given clear indication that payment will not be made on the very day the payment claim was received will have to wait the entire 50 day payment period before being able to apply for adjudication of the dispute.

• In response to the payment claims served on 31 July 2012, the respondent immediately replied on 1 August 2012 by way of email, stating in opening:

In order for us to process your claim please provide the necessary documentation [sic].

The email closes with the statement:

Until we receive all of the above documentation [sic], your progress claim No 3 will be withheld.

• That email clearly indicates that the payment claim has been rejected as it does not contain the 'necessary documentation' [sic] and that it will be 'withheld until such time as the documentation [sic] listed has been provided.

The 'payment dispute' arose on 1 August 2012 by virtue of that email which was a clear and unequivocal rejection of the payment claim.

But if it was a misguided rejection, then it was a clear anticipatory breach. It is irrelevant whether or not it constituted a valid notice of dispute for the purposes of Sch 1 clause (7). That clause of the CC Act uses the words 'reject' and 'dispute' very separately and deliberately.

• 'The use of the word ''rejection'' connotes a putting back to the applicant that their claim is somehow insufficient as a claim; but there is a technical deficiency with it; that it cannot be processed. It cannot be paid. There is something wrong with it. This is a rejection.' (T:41; 01.02.13)

• 'The second word that is used is ''dispute'', and dispute connotes a disagreement between the parties as to whether or not the amount is properly payable. So a dispute would arise if you identified a portion of the claim which you thought for some reason it not to be paid.' (T:41; 01.02.13)

• 'However, a rejection is one that's ''your claim is not sufficient''.' (T:42; 01.02.13)

• If a respondent to a payment claim rejects that the payment claim is a payment claim at all, for lacking the necessary particularity, then arguably they never had the obligation to issue a notice of dispute at all and that is what this email does.

Consideration

36 If the email of 1 August 2012 was to qualify as a notice of dispute then, pursuant to s 6(a) of the CC Act, the claim had to be rejected or wholly or partly disputed. If the respondent meant to reject the claim, as they submitted, is that what the email of 1 August 2012 did?

37 As set out earlier, the email of 1 August 2012 stated:

Chris,

We acknowledged receipt of your progress claim no 3. In order for us to process your claim, please provide the necessary documentations:-

a) Truck dockets including volumes

b) ASS treatment validation certificates from the landfill facility

c) Copy of the treatment facility's ASS management plan and/or evidence that the facility is accredited by the DEC for ASS treatment

d) Detail[ed] breakdown of the claim/work carried out to-date

e) Less all backcharges

Until we [receive] all the above documentations, your progress claim no 3 will be withheld.

Regards

William Wong

Project Manager

38 'Reject' is defined in the Macquarie Dictionary Online (2013) as:

1. To refuse to have, take, recognise, etc. 2. To refuse to grant (a demand etc.). 3. to refuse to accept (a person); rebuff. 4. To throw away, discard, or refuse as useless or unsatisfactory. 5. To cast out or reject[.]

39 The final line of the email confirms that the claim was not being rejected but merely withheld pending further information which would enable the respondent to process the claim. For example, was all of the information required by clause 3(ix) of the Earthworks Contract in respect of payment claims supplied?

40 It is noted that at paragraph 25 of his reasons, the adjudicator recognised the email as a request for further information by his use of the words:

'I determine that the request for further information'. …

41 He then continued by stating:

… [A]nd the advice that the claim would be subject to deduction of back-charges is a notice of dispute in respect of Progress Claim 3 … .

42 The adjudicator found that due to the combination of both of those factors, namely:

a) the request for further information; and

b) the advice that the claim would be subject to a deduction of back-charges, the email of 1 August 2012 was a notice of dispute for the purposes of the CC Act.

43 A request for further information could not of itself be seen as a rejection or partly or wholly disputing the claim.

44 Furthermore, a simple statement 'less all back-charges', without anything more, could also not be seen as a rejection or disputation of all or part of the payment claim, particularly when clauses 15(4), 15(17), 15(49) and 15(73) of the General Conditions allow the respondent to 'back charge' the applicant for various items, usually at the time of each invoice.

45 For example, clause 15(4) states:

It is accepted that the sub contractor has allowed for a trade clean of all work areas on completion. All general rubbish will be removed on a daily basis and put into waste receptacles provided. If this does not occur, NW will undertake an area clean and back charge the sub contractor at the next invoice a minimum of 5hrs at $65/hr.

46 In the circumstances, the Tribunal finds that the email of 1 August 2012 did not reject or dispute any part of the applicant's claim and was not, and could not be, a notice of dispute for the purposes of s 6 of the CC Act.

47 At best, it was a request for further information and a confirmation that the respondent intended to deduct back-charges. Without something more, no dispute arose nor was there a rejection of the claim.

48 The Tribunal therefore sets aside the decision dated 4 October 2012 and the matter will be referred back to the adjudicator to allow him to make a further determination under s 31(2)(b) of the CC Act.

49 Even though the applicant's and the respondent's submissions went mainly to the issue of whether a non-complying notice of dispute could trigger a payment dispute under the CC Act, it is unnecessary to consider that issue. It is not determinative and it is best left to be considered at a more appropriate time.

Conclusion

50 The Tribunal finds that the email of 1 August 2012 was not a notice of dispute for the purposes of the CC Act and that the decision of the adjudicator dated 4 October 2012 was incorrect. The adjudicator's decision will be set aside. Pursuant to s 29(3)(c)(ii) of the State Administrative Tribunal Act 2004 (WA), the matter will be referred back to the adjudicator to make a further determination under s 31(2)(b) of the CC Act within 14 days of the date of the Tribunal's orders or any extension of time consented to by the parties.

Orders

1. The decision of the adjudicator dated 4 October 2012 is set aside.

2. The matter is referred back to the adjudicator to make a further determination under s 31(2)(b) of the Construction Contracts Act 2004 (WA) within 14 days of the date of this order, or any extension of time consented to by the parties.

I certify that this and the preceding [50] paragraphs comprise the reasons for decision of the State Administrative Tribunal.

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JUDGE T SHARP, DEPUTY PRESIDENT