[2014] WASC 40

JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA IN CHAMBERS

CITATION : ZURICH BAY HOLDINGS PTY LTD -v- BROOKFIELD MULTIPLEX ENGINEERING AND INFRASTRUCTURE PTY LTD [2014] WASC 40

CORAM : LE MIERE J

HEARD : 6 AUGUST 2013

DELIVERED : 12 FEBRUARY 2014

FILE NO/S : CIV 1349 of 2013

MATTER : An Adjudication Determination pursuant to the Construction Contracts Act 2004 (WA)

BETWEEN : ZURICH BAY HOLDINGS PTY LTD

Plaintiff

AND

BROOKFIELD MULTIPLEX ENGINEERING AND INFRASTRUCTURE PTY LTD

Defendant

FILE NO/S : CIV 1275 of 2013

MATTER : An application for a Writ of Certiorari against Phillip Cornelius Loots, an adjudicator appointed under the Construction Contracts Act 2004 (WA)

EX PARTE

BROOKFIELD MULTIPLEX ENGINEERING AND

INFRASTRUCTURE PTY LTD

Applicant

Catchwords:

Administrative law - Construction Contracts Act 2004 (WA) - Application for adjudication - Denial of procedural fairness - Whether adjudicator acted beyond jurisdiction

Administrative law - Application to enforce adjudicator's determination as a judgment

Legislation:

Construction Contracts Act 2004 (WA), s 3, s 4(3)(d), s 17, s 31, s 32, s 43, s 46, s 53

Result:

Application for writ of certiorari granted

Application for leave to enforce the determination refused

Category: B

Representation:

CIV 1349 of 2013

Counsel:

Plaintiff : Ms P E Cahill SC

Defendant : Mr D H Solomon & Mr D J Marsh

Solicitors:

Plaintiff : Jackson McDonald

Defendant : Solomon Brothers

CIV 1275 of 2013

Counsel:

Applicant : Mr D H Solomon & Mr D J Marsh

Solicitors:

Applicant : Solomon Brothers

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

Avopilang (NSW) Pty Ltd v Menard Bachy Pty Ltd [2012] NSWSC 1466

Cape Range Electrical Contractors Pty Ltd v Austral Constructions Pty Ltd [2012] WASC 304

Commissioner for Australian Capital Territory Revenue v Alphaone Pty Ltd (1994) 49 FCR 576

John Holland Pty Ltd v TAC Pacific Pty Ltd [2009] QSC 205; [2010] 1 Qd R 302

K-Generation Pty Ltd v Liquor Licensing Court [2007] SASC 319; 99 SASR 58

Kirk v Industrial Relations Court (NSW) (2010) 239 CLR 531

McKay v Commissioner of Main Roads [2013] WASCA 135

Musico v Davenport [2003] NSWSC 977

O'Donnell Griffin Pty Ltd v John Holland Pty Ltd [2009] WASC 19

Perrinepod Pty Ltd v Georgiou Building Pty Ltd [2011] WASCA 217

Police and State of South Australia v Lymberopoulos [2007] SASC 247; 98 SASR 433

Re Carey; Ex Parte Exclude Holdings Pty Ltd [2006] WASCA 219

Re Graham Anstee-Brook; Ex Parte Karara Mining Limited [No 2] [2013] WASC 59

Re Graham Anstee-Brook; Ex Parte Mount Gibson Mining Ltd [2011] WASC 172; (2011) 42 WAR 35

Stead v SGIO (1986) 161 CLR 141

Thiess Pty Ltd v MCC Mining (Western Australia) Pty Ltd [2011] WASC 80

LE MIERE J

1 LE MIERE J : Zurich Bay Holdings Pty Ltd (Zurich) applied for adjudication by an adjudicator under the Construction Contracts Act 2004 (WA) (the Act) of a payment dispute arising out of a subcontract under which Brookfield Multiplex Engineering and Infrastructure Pty Ltd (Brookfield) engaged Zurich to carry out earthworks, drainage and road work requirements for the Roy Hill Iron Ore accommodation village. The adjudicator determined that Brookfield pay Zurich $1,191,402.84 and interest. Zurich applies for leave to enforce the determination pursuant to s 43 of the Act. Brookfield applies for a writ of certiorari to quash the determination. I will first consider Brookfield's application to quash the determination.

Brookfield's grounds

2 Brookfield claims that the determination should be quashed on two related grounds. The first ground is that the adjudicator denied Brookfield natural justice by failing to give Brookfield notice of his intention to determine the dispute on a basis not contended for by either of the parties. That is that cl 42.1 of the subcontract purports to exclude, modify, or restrict the operation of the Act, has the effect of contracting out of the Act, is void by reason of s 53 of the Act and deprived Brookfield of an opportunity to make submissions on that matter. The second ground is that the adjudicator acted beyond his jurisdiction under s 32(1) of the Act because no question as to whether or not cl 42.1 had the effect of contracting out of the Act was raised in the application and its attachments or the response and its attachments, but the adjudicator was obliged by s 32(1)(a) to make the determination on the basis of the documents and, if necessary, information obtained under s 32(2).

3 Zurich submits that relief should be refused on the grounds that the adjudicator's conclusions about cl 42.1 having the effect of contracting out of the Act were not germane to his decision. Brookfield contends that the adjudicator's conclusion that cl 42.1 has the effect of contracting out of the Act affected his decision, and that his decision may have been different if Brookfield had had an opportunity to make submissions on the issue. I will consider the two grounds of appeal together. Before doing so it is convenient to outline the adjudicator's reasons for determination.

Adjudicator's reasons for determination

4 The structure of the adjudicator's reasons for determination is as follows. First, the adjudicator decided that the subcontract is a construction contract for the purposes of the Act, and therefore that he had jurisdiction to determine the dispute. Brookfield had argued that the work which Zurich was engaged to carry out under the subcontract was the construction of plant for the purposes of extracting or processing any mineral bearing or other substance, hence by reason of s 4(3)(d) of the Act it is not construction work and therefore the subcontract is not a construction contract as defined by s 3 of the Act.

5 Secondly, the adjudicator considered Zurich's contention that there is no provision in the subcontract about when Brookfield is to respond to a payment claim. Therefore pursuant to s 17 of the Act, the provisions of sch 1 div 5 about when and how a party is to respond to a claim for payment are to be implied in the subcontract. The adjudicator concluded that the implied terms of the Act concerning when and how a party is to respond to a payment claim must be implied into the subcontract because there are no express written terms about those matters in the subcontract. The effect of sch 1 div 5 cl 7 is that when a party receives a payment claim it must give the claimant a notice of dispute or, if it does not give the claimant a notice of dispute, it must pay the amount of the claim. The adjudicator found that Brookfield did not issue a notice of dispute, and hence in accordance with sch 1 div 5 cl 7 Brookfield should pay the amount claimed.

6 Thirdly, the adjudicator found that cl 42.1 of the subcontract was a provision in the subcontract that purported to exclude, modify or restrict the operation of the Act and accordingly has no effect because s 53 of the Act provides that a provision in an agreement that purports to exclude, modify or restrict the operation of the Act has no effect.

7 Fourthly, the adjudicator considered Brookfield's claim to set-off amounts owing to it against Zurich's claim. The adjudicator found that the term 'retain' in sch 1 div 5 cl 7(4) of the Act means to 'hold back' in the context of 'retention monies' provided for in the subcontract, and not as an entitlement to withhold the whole of the amount payable, because such a construction would defeat the objects of the Act and would amount to contracting out of the Act. The adjudicator concluded that Brookfield must pay the amount claimed.

8 Fifthly, the adjudicator considered matters relating to the provision of construction water under the subcontract. The adjudicator found that Brookfield failed to provide construction water as required by the contract, and was in breach of the subcontract with the result that its direction was unlawful and consequently its show cause notice and take out notices were also unlawful. The adjudicator found that for those reasons Brookfield had no grounds for its claims for increased costs by reasons of engaging an alternative contractor and was accordingly not entitled to a set off.

Brookfield was denied procedural fairness

9 Brookfield claims that it was denied natural justice in that the adjudicator made the contracting out conclusion when the issue had not been raised by the parties, and the adjudicator did not inform them of his intention to make that conclusion or give them an opportunity to make submissions in relation to it. Brookfield's second ground, that no question as to whether or not cl 42.1 had the effect of contracting out of the Act was raised in the application or the response, and hence the adjudicator act beyond jurisdiction because s 32(1)(a) of the Act required him to make the determination on the basis of the application and the response, essentially raises the same questions.

10 Procedural fairness does not normally require decision makers to disclose their proposed conclusions. A decision maker should notify the parties of proposed conclusions that were not put forward by the parties and could not be easily anticipated: see Commissioner for Australian Capital Territory Revenue v Alphaone Pty Ltd (1994) 49 FCR 576; Musico v Davenport [2003] NSWSC 977; John Holland Pty Ltd v TAC Pacific Pty Ltd [2009] QSC 205; [2010] 1 Qd R 302; Avopilang (NSW) Pty Ltd v Menard Bachy Pty Ltd [2012] NSWSC 1466. Generally speaking, the parties must anticipate possible findings and make submissions at the trial of the potential findings on the issues litigated. Never theless, procedural fairness may require the judge to hear the parties further if certain matters emerge in the judge's consideration of the case after trial which the judge regards as potentially dispositive but in relation to which, in all the circumstances, it is to be inferred that the parties did not have a proper opportunity to address at trial: McKay v Commissioner of Main Roads [2013] WASCA 135 [156] (Murphy JA).

11 The contention that cl 42.1 was void because it had the effect of contracting out of the Act was not raised by the parties. It could not reasonably be anticipated by Brookfield that the adjudicator would conclude that cl 42.1 was void on that ground. Zurich had not submitted that cl 42.1 was void. The issue of whether the sch 1 div 5 terms were to be implied into the subcontract was critical. The adjudicator treated the issue of whether cl 42.1 of the subcontract purported to exclude, modify or restrict the operation of the Act as being relevant to what terms of the subcontract concerning responding to a claim for payment were enforceable terms of the contract. Those were matters which related to the terms of the contract concerning response to payment and to the applicant's claim. The adjudicator should have heard the parties further in relation to the issue of the sch 1 div 5 terms being implied, and the interrelationship between that question and whether cl 42.1 of the subcontract purported to exclude, modify or restrict the operation of the Act. The adjudicator failed to do so. The adjudicator failed to afford procedural fairness to Brookfield by failing to draw the issue to its attention and give it an opportunity to make submissions on the issue.

When relief will be refused

12 Relief may be refused where an applicant has been denied natural justice. The decision should not be quashed if a new hearing in which Brookfield would have an adequate opportunity of presenting submissions on the issue of cl 42.1 and contracting out could make no difference to the result. If the matter in respect of which Brookfield was denied the opportunity of making submissions is a question of law and the question of law must clearly be answered unfavourably to it, it would be futile to order a new hearing and relief would be refused. Zurich did not argue that this was such a case. Relief will not be refused if the court finds no more than that a fresh hearing would probably make no difference to the result. All that a party denied procedural fairness needs to show is that the denial of procedural fairness deprived it of the possibility of a successful outcome:

Stead v SGIO (1986) 161 CLR 141.

Contracting out issue affected adjudicator's decision

13 Counsel for Zurich, Ms Cahill, submits that the adjudicator concluded that the implied terms of the Act concerning how and when a party is to respond to a payment claim must be implied in the subcontract without considering the contracting out issue. Ms Cahill submits that the adjudicator reached that conclusion at [62] of his reasons without reference to the contracting out issue. Ms Cahill submits that the adjudicator then considered the effect of the implied terms and concluded at [66] that because Brookfield did not issue a notice of dispute as required by the implied terms, Brookfield was to pay the amount claimed. Ms Cahill submits that the adjudicator's conclusions about contracting out were additional and independent reasons for concluding that the provisions of sch 1 div 1 s 7 must be implied into the subcontract. Ms Cahill submits that the adjudicator reached two conclusions concerning contracting out. The first is that because cl 42.1 purports to exclude, modify or restrict the operation of the Act in that it allows the respondent to avoid stating the reasons for the belief that the claim has not been made in accordance with the subcontract before rejecting it, or if the claim is disputed in whole or in part, identifying each item of the claim that is disputed and the reasons for disputing it, the written terms of the subcontract have the effect of contracting out of the Act and cl 42.1 is therefore of no effect with the result that the sch 1 div 1 s 7 terms must be implied. The adjudicator then considered cl 42.8(a) of the subcontract, which provides that Brookfield may set-off or deduct from amounts due to the subcontractor any monies due or which may become due from the subcontractor to Brookfield. The adjudicator concluded that the ability to withhold 'amounts which may become due' indefinitely also purports to exclude, modify or restrict the operation of the Act with the result that sch 1 div 5 s 7 of the Act must be implied.

14 Counsel for Brookfield, Mr Solomon, disputes that the adjudicator's conclusions about contracting out are separate and independent from his conclusion that the implied terms must be implied because there are no express written terms about how to respond to a payment claim in the subcontract. Mr Solomon says that the adjudicator concluded that the subcontract did not have written provisions about when and how a party is to respond to a claim for payment because he found that Brookfield is, under cl 42.1, entitled to elect not to issue a payment schedule at all and in such event when and how Brookfield is to respond to a claim for payment including how the assessment is to be communicated is not provided for. The adjudicator found that cl 42.1 did not provide for how and when the respondent is to provide a responsive response in some situations, and because those situations are part of a matter within s 17, cl 42.1 did not provide for when and how a party is to respond to a claim for payment. The adjudicator found that for that reason the implied terms were to be implied into the subcontract. Mr Solomon says that the adjudicator then found himself 'running into a subway wall' because he had found that the implied terms should be implied into the subcontract but the subcontract would then contain implied terms that were inconsistent with the express terms of cl 42.1. Mr Solomon says it is to overcome that difficulty that the adjudicator concluded that cl 42.1 was of no effect because it had the effect of purporting to exclude, modify or restrict the operation of the Act and was therefore rendered of no effect by s 53 of the Act.

15 The question I must ask is not whether the adjudicator's conclusions about contracting out affected his conclusion that the implied terms must be implied into the subcontract. The proper question is whether it could make any difference to the adjudicator's decision if Brookfield was given an opportunity to make submissions on the contracting out issue. The answer is that it could make a difference. A provision in a contract does not purport to exclude, modify or restrict the operation of the Act merely because it makes provision about when and how a party is to respond to a claim for payment. It is implicit in s 17 that a contract may properly have provisions about when and how a party is to respond to a claim for payment. The implied terms are only to be implied when the contract does not have such a written provision. The Act does not prohibit a contract from making provisions about when and how the parties respond to a claim for payment in terms which are substantially different from the implied terms. If Brookfield had an opportunity to make submissions on the contracting out issues then the adjudicator may have been persuaded that cl 42.1 is not a provision that purports to exclude, modify or restrict the operation of the Act and is not rendered of no effect by s 53. The adjudicator may then have had to consider how to reconcile the implied terms with cl 42.1 which is, or is arguably, inconsistent at least insofar as it provided that payment is to be made within 50 days. That may lead the adjudicator to reconsider the construction of s 17 or its application to the subcontract or both. I am unable to conclude that it could not have made any difference to the outcome if Brookfield had an opportunity to make submissions on the contracting out issue.

16 Furthermore I am not satisfied that the adjudicator's conclusion on the contracting out issue did not affect his finding that the implied terms of the Act concerning how and when to respond to a payment claim must be implied in the subcontract because there were no express written terms about those matters into the subcontract. I must read the reasons for determination fairly and in context. I must not read them with an eye finely tuned for error. Adopting that approach I am unable to conclude that the adjudicator's conclusion that cl 42.1 was of no effect because it had the effect of purporting to exclude, modify or restrict the operation of the Act did not affect his conclusion that there are no express written terms about the matters in the subcontract.

Availability of judicial review

17 The limited right of a person aggrieved by a decision to apply for review of the decision is described in s 46 of the Act. Section 46(1) provides that a person who is aggrieved by a decision made under s 31(2)(a) may apply to the State Administrative Tribunal for a review of the decision. Section 46(3) provides that except as provided by s (1), a decision or determination of an adjudicator on an adjudication cannot be appealed or reviewed. A determination made pursuant to s 31(2)(b) of the Act can be challenged by judicial review: Perrinepod Pty Ltd v Georgiou Building Pty Ltd [2011] WASCA 217 [11] (Martin CJ), [7] - [8] (McLure P), [92], [95] (Murphy JA).

18 Counsel for Brookfield, Mr Solomon, said that there may be a threshold question of whether an adjudicator is analogous to a court or a tribunal for the purposes of determining whether there has been a jurisdictional error of law. Mr Solomon said that the court should follow the decision of Kenneth Martin J in Re Graham Anstee-Brook; Ex Parte Mount Gibson Mining Ltd [2011] WASC 172; (2011) 42 WAR 35 (Mount Gibson Mining) that the adjudicator is analogous to a tribunal rather than to a court. Counsel for Zurich, Ms Cahill, submitted that the weight of judicial opinion supports the position that an adjudicator reaching a determination under the Act is more akin to that of an inferior court than an administrative tribunal for certiorari purposes: Perrinepod [118] (Murphy JA), Martin CJ agreeing at [1]; O'Donnell Griffin Pty Ltd v John Holland Pty Ltd [2009] WASC 19 [102]; Thiess Pty Ltd v MCC Mining (Western Australia) Pty Ltd [2011] WASC 80 [59]; Re Graham Anstee-Brook; Ex Parte Mount Gibson Mining Ltd [19] - [22]; Cape Range Electrical Contractors Pty Ltd v Austral Constructions Pty Ltd [2012] WASC 304 [138]; Re Graham Anstee-Brook; Ex Parte Karara Mining Limited [No 2] [2013] WASC 59 [6].

19 The scope and content of jurisdictional error in respect of an inferior court is more limited than that in respect of an administrative tribunal: Re Carey; Ex Parte Exclude Holdings Pty Ltd [2006] WASCA 219 [181]; Kirk v Industrial Relations Court (NSW) (2010) 239 CLR 531 [67] - [73] (French CJ, Gummow, Hayne, Crennan, Kiefel & Bell JJ).

20 However, I find it unnecessary to consider whether an adjudicator is more akin to an inferior court or a tribunal because breach of procedural fairness is a ground for granting a writ of certiorari whether an adjudicator is considered to be analogous to a tribunal or to a court.

21 Ms Cahill referred to the decision of the Full Court of the Supreme Court of South Australia in Police and State of South Australia v Lymberopoulos [2007] SASC 247; 98 SASR 433. The court there considered whether a failure by a magistrate to afford procedural fairness constitutes jurisdictional error, and if it does not whether an order in the nature of certiorari is available to quash the decision notwithstanding that the failure by the magistrate did not amount to a jurisdictional error. Doyle CJ, with whom Bleby and Sulan JJ agreed, concluded that the failure to accord procedural fairness by the magistrate did not mean that the magistrate's decision was one that was made without jurisdiction or in excess of jurisdiction. However, the court went on to hold that a failure to comply with applicable requirements of procedural fairness was a basis for making an order in the nature of certiorari, even though the error made is not to be categorised as a jurisdictional error. Subsequently, in K-Generation Pty Ltd v Liquor Licensing Court [2007] SASC 319; 99 SASR 58 the Full Court of the Supreme Court of South Australia held that the court had power to grant judicial review of a decision of the Licensing Court for breach of procedural fairness. In Mount Gibson Mining Kenneth Martin J heard an application for an order nisi for a writ of certiorari to quash a decision of an adjudicator under the Act. His Honour held that, for the purpose of arguments at the order nisi stage, a breach of procedural fairness would be capable of sustaining the prerogative writ of certiorari, notwithstanding s 46(3) of the Act: Mount Gibson [55]. In Cape Range Electrical Contractors Pty Ltd v Austral Construction Pty Ltd Pritchard J considered an application for leave pursuant to s 43 of the Act for a determination of an adjudicator to be enforced. The defendant opposed the grant of leave and entry of judgment in the enforcement proceedings on the ground that the determination was invalid because, amongst other things, the adjudicator had denied the defendant procedural fairness. Pritchard J held that the defendant had not made out a breach of natural justice but although a failure by an inferior court to afford procedural fairness has sometimes been viewed as an example of jurisdictional error, the balance of authority suggests that a denial of procedural fairness should be treated as a discreet basis for relief on judicial review: [140].

22 In this case I have found that there has been a breach of procedural fairness and it has not been shown that the breach of procedural fairness could not have affected the adjudicator's decision. In those circumstances it is open to the court to grant relief by way of a writ of certiorari.

Discretion

23 The court retains a discretion whether to issue a writ of certiorari. Zurich submits that the court should refuse to grant relief in this case because there is no utility in granting a writ of certiorari. Zurich submitted that the adjudicator had, for separate reasons that were not challenged, determined that the implied provisions applied to the contract and therefore concluded that Brookfield is obliged to pay the amount the subject of the determination. For the reasons I have given, I do not accept that submission. I am unable to conclude that the adjudicator's conclusion that cl 42.1 of the subcontract was of no effect because it had the effect of purporting to exclude, modify or restrict the operation of the Act did not affect his conclusion that there are no express written terms about the relevant matters in the subcontract.

24 Zurich further submits that, in any event, the court should refuse to grant a writ of certiorari on discretionary grounds, bearing in mind the objectives of the Act, the interim character of the determination, Brookfield's future opportunities to dispute Zurich's entitlement to payment and to have that dispute finally determined pursuant to the relevant provisions of the subcontract. I do not accept that argument. By quashing a decision because of the manner in which it was made the court is enforcing the requirement of legality. Furthermore, the requirement to accord procedural fairness can be categorised as a restriction on the exercise of the power conferred on the adjudicator. There is no sufficient reason to refuse relief on discretionary grounds.

Application for enforcement

25 I have determined that the determination of the adjudicator should be quashed on the ground of denial of procedural fairness. It follows that leave to enforce the determination of the adjudicator must be refused.