JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA IN CHAMBERS

CITATION : ALLIANCE CONTRACTING PTY LTD -v- JAMES [2014] WASC 212

CORAM : BEECH J

HEARD : 6 JUNE 2014

DELIVERED : 19 JUNE 2014

FILE NO/S : CIV 1022 of 2014

BETWEEN : ALLIANCE CONTRACTING PTY LTD

Applicant

AND

LAURIE EDMOND JAMES

First Respondent

TENIX SDR PTY LTD

Second Respondent

Catchwords:

Administrative law - Prerogative writs - Whether adjudication under Construction Contracts Act 2004 (WA) should be declared to be invalid in part Building and construction - Security of payment legislation - Scope of payment dispute - Whether counterclaim by contractor part of the payment dispute arising from payment claim by principal - Whether jurisdictional error by adjudicator

Legislation:

Construction Contracts Act 2004 (WA), s 31

Result:

Application dismissed

Category: B

Representation:

Counsel:

Applicant : Mr P G Clifford

First Respondent : No appearance

Second Respondent : Mr M N Solomon SC

Solicitors:

Applicant : Lavan Legal

First Respondent : No appearance

Second Respondent : Corrs Chambers Westgarth

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

BM Alliance Coal Operations Pty Ltd v BGC Contracting Pty Ltd [2013] QCA394

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

Cardinal Project Services Pty Ltd v Hanave Pty Ltd [2011] NSWCA 399; (2011) 81 NSWLR 716

Certain Lloyd's Underwriters v Cross [2012] HCA 56; (2012) 248 CLR 378

Craig v The State of South Australia [1995] HCA 58; (1995) 184 CLR 163

Diploma Construction (WA) Pty Ltd v KPA Architects [2014] WASCA 91

James Trowse Constructions Pty Ltd v ASAP Plasterers Pty Ltd [2011] QSC 145

Kidd v The State of Western Australia [2014] WASC 99

Kirk v Industrial Court of New South Wales [2010] HCA 1; (2010) 239 CLR 531

Multiplex Constructions Pty Ltd v Luikens [2003] NSWSC 1140

Newcastle City Council v GIO General Ltd (1997) 191 CLR 85

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

Palgo Holdings Pty Ltd v Gowans [2005] HCA 28; (2005) 221 CLR 249

Perrinepod Pty Ltd v Georgiou Building Pty Ltd [2011] WASCA 217; (2011) 43 WAR 319

R v Young [1999] NSWCCA 166; (1999) 46 NSWLR 681

Re Carey; Ex parte Exclude Holdings Pty Ltd [2006] WASCA 219; (2006) 32 WAR 501

Re State Administrative Tribunal; Ex parte McCourt [2007] WASCA 125; (2007) 34 WAR 342

Seabay Properties Pty Ltd v Galvin Construction Pty Ltd [2011] VSC 183

The Wilderness Society of WA (Inc) v Minister for Environment [2013] WASC 307; (2013) 45 WAR 471

Thiess Pty Ltd v Warren Brothers Earthmoving Pty Ltd [2012] QSC 373

Thiess Pty Ltd v Warren Brothers Earthmoving Pty Ltd [2013] QSC 141

BEECH J :

Introduction

1 The applicant (Alliance) and the second respondent (Tenix) entered into a construction contract. Tenix made an adjudication application under the Construction Contracts Act 2004 (WA). In its response, Alliance contended that Tenix owned money to it. The adjudicator determined that there was a balance in favour of Alliance of an amount over $6 million. The adjudicator determined that he did not have power to make an order that the second respondent pay a sum to Alliance. He determined that there was a nil sum payable by Alliance to Tenix.

2 In these proceedings for judicial review, Alliance asserts that the adjudicator had power to determine that a sum was payable by Tenix to Alliance and was wrong to conclude otherwise. For the reasons set out below, in my opinion the adjudicator was correct, and the application must be dismissed.

The facts

3 The facts are not in dispute.

4 On 20 November 2012 Tenix and Alliance entered into a sub-contract under which Tenix engaged Alliance to do work for the construction of the Karratha waste water treatment plant for a lump sum of just under $11 million.

5 Clause 12 of the sub-contract governs the procedure for payments under the sub-contract. Clause 12.1 provides for monthly progress payments. Clause 12.2 provides the mechanism for the making of a final claim and issue of a final certificate. Once Tenix issued a certificate of practical completion under cl 9.4.2 Alliance was to submit, within 30 days, a final invoice endorsed 'final claim' that included all of Alliance's outstanding claims for payment from Tenix, whether under the sub-contract or otherwise. Clause 12.2.2 provides for Tenix to then issue a final certificate providing the details of the amount which Tenix considered is finally due from one party to the other. This amount is to be paid within 42 days of the last day of the month in which the final certificate is issued. Clause 12.2.3 provides for either party to issue a notice of dispute, either before or within 28 days after the issue of the final certificate.

6 On 2 September 2013 Tenix certified practical completion as at 17 August 2013.

7 Also on 2 September 2013 Tenix gave notice to Alliance that:

(a) by reason of the delay in practical completion (from the contractual date of 21 February 2013 to 17 August 2013) Alliance was liable to Tenix for liquidated damages in the sum of $885,000 pursuant to cl 9.5 of the sub-contract; and

(b) Tenix had had recourse to the security, namely two bank guarantees in a total sum of $548,972, in partial satisfaction of the liquidated damages;

8 By letter dated 2 September 2013, Alliance advised Tenix that it did not consider that Tenix was entitled to have recourse to the bank guarantees. Further, in the letter Alliance asserted that Tenix had had recourse to the bank guarantees to assert financial pressure on Alliance in circumstances where Alliance was due to provide its final claim under cl 12 of the sub-contract, and that would include substantial claims yet to be assessed by Tenix.

9 On 13 September 2013 Alliance gave Tenix a formal notice of dispute alleging that Tenix was in breach of the sub-contract by its claim for liquidated damages and by its having had recourse to the security.

10 Also on 13 September 2013 Alliance issued its final claim and final invoice pursuant to cl 12.2.1 of the sub-contract. In its final claim, Alliance claimed the sum of $8,928,986.16.

11 On 26 September 2013 Alliance commenced an application for adjudication under s 26 of the Construction Contracts Act 2004 (WA) (the Act).

12 By this earlier adjudication application, Alliance sought payment of the sum of $548,972, being the value of the two bank guarantees drawn down by Tenix on 2 September 2013. Alliance's application asserted that the payment claim founding the payment dispute was Tenix's letter of 2 September 2013 and that that letter gave rise to a payment dispute when Alliance wrote, also on 2 September 2013, objecting to what had occurred. Alternatively, Alliance asserted there was a payment dispute when Alliance submitted its formal notice of dispute of 13 September 2013.

13 On 11 October 2013 Tenix issued its final certificate pursuant to cl 12.2.2 of the sub-contract.

14 In the final certificate Tenix assessed the amount finally due from one party to the other as being an amount of $3,676,815.70 owing by Alliance to Tenix. Thus by the final certificate Tenix rejected Alliance's claims set out in the final claim.

15 Acting under cl 12.2.3 and cl 13, on 25 October 2013 Alliance gave Tenix a formal notice of dispute by which Alliance gave notice that it 'entirely disputes Tenix's claims/purported claims set out in the final certificate'.

16 On 7 November 2013 the adjudicator dismissed the earlier adjudication application, without a determination of its merits, under s 31(2)(a) of the Act.

17 On 19 November 2013 Alliance issued an application in the State Administrative Tribunal seeking to set aside the adjudicator's decision and seeking an order that the earlier adjudication application be determined on its merits.

18 On 22 November 2013 Tenix made the application for adjudication which is the subject of these proceedings. The adjudication application stated that:

(a) Tenix's final certificate was a payment claim by Tenix to Alliance;

(b) on 25 October 2013 Alliance rejected Tenix's payment claim, disputed payment of the amount claimed and refused to pay it; and

19 The adjudication application in effect defined the payment dispute as being the dispute in respect of the full amount of Tenix's payment claim.

20 On 6 December 2013 Alliance provided its response pursuant to s 27 of the Act. Alliance's response in substance reflected the position adopted by it in its final claim.

21 On 20 December 2013 the adjudicator published his determination.

The adjudicator's determination

22 The adjudicator's written determination included the following:

(1) the adjudication concerned a payment claim, defined by the adjudicator as 'the Payment Claim', in the form of a final certificate submitted by Tenix to Alliance on 11 October 2013 and rejected by Alliance on 25 October 2013, whereby a dispute arose for the purposes of the Act;

(2) the application was made within 28 days after the dispute arose in that the dispute arose on 25 October 2013, and the application was lodged and served on 22 November 2013;

(3) the adjudicator rejected Alliance's submission that the application by Tenix was not made within the 28 days required by the Act;

(4) the adjudicator rejected Alliance's submissions that individual items in the Payment Claim were recycled and had been the subject of a prior adjudication;

(5) Tenix made the Payment Claim in the form of a final certificate on 11 October 2013 asserting that Alliance was liable to Tenix for $3,794,125.75 plus GST;

(6) the adjudicator outlined the items in the Payment Claim in dispute as being primarily a number of disputed variations, some of which were for credits in favour of Alliance that had been reduced or rejected by Tenix. Further there were variations where Tenix had assessed substantial reductions in the sub-contract sum which were disputed by Alliance;

(7) the adjudicator resolved the merits of the competing contentions;

(8) the adjudicator set out his calculations of the net balance, leading to a sum in favour of Alliance of $6,242.232.90;

(9) the adjudicator stated that 'it is not possible for me in this determination to order any sum to be paid by Tenix to Alliance. What the above calculations shows is that there is no balance in favour of Tenix against Alliance and therefore there is on my assessment no sum payable by Alliance to Tenix'; and

(10) the adjudicator determined that the adjudicated amount was nil.

23 The nub of Alliance's case on this application is that the adjudicator erred in the conclusion quoted in subparagraph (9). Alliance contends that the adjudicator had the power to order that Tenix pay to Alliance the sum he had found to be the balance in favour of Alliance, and should have done so.

24 On 10 January 2014 Alliance filed its application for judicial review of the determination.

25 On 16 January 2014 the adjudicator published an amended determination. The amended determination sets out reasons why the adjudicator did not make the determination in favour of Alliance.

26 It is not necessary to detail the reasons given by the adjudicator in his amended determination. Alliance submits that s 41 of the Act means that the adjudicator did not have power to amend the determination without the consent of the parties, and no such consent was given. In any event, the parties were agreed that this application turns on the proper construction of s 31(2)(b), so that it is not necessary to give attention to the reasons stated by the adjudicator for the construction which he adopted.

Alliance's application

27 Alliance's application for judicial review applied for a writ of mandamus and order that Tenix pay Alliance the sum of $6,242,232.90 plus GST. The grounds of the application were stated as being that the adjudicator failed to exercise his jurisdiction, in that having found that there was a balance due to Alliance in the sum of $6,242,232.90 by Tenix, he wrongly found that he did not have jurisdiction to award that sum in favour of Alliance.

28 The orders ultimately sought by Alliance were set out in a minute of proposed orders as follows:

1. There be a declaration that:

1.1 the following parts of the adjudication determination (as amended) are null and void:

1.1.1 the first sentence of paragraph 14.2;

1.1.2 paragraphs 14.2A and 14.2B;

1.1.3 paragraph 16;

1.2 the adjudication reasons otherwise stand.

1.3 section 41(2) of the Construction Contracts Act 2004 (WA) enables the first respondent to insert into the adjudication determination a date within which the second respondent is to pay the applicant the sum of $6,242,232.90.

2. Pursuant to Order 56 rule 28 of the Rules of the Supreme Court 1971 (WA), there hereby be an order in the nature of a writ of mandamus issued to the first respondent, whereby the first respondent is directed to exercise his discretion pursuant to section 41(2) of the Construction Contracts Act 2004 (WA) to nominate in the adjudication determination a date on or before which the sum of $6,242,232.90 is to be paid to the applicant.

29 It is convenient to outline the provisions of the Act before turning to the merits of Alliance's contentions.

The statutory framework

30 The following outline of the scheme of the Act draws on what was said by Murphy JA in Perrinepod Pty Ltd v Georgiou Building Pty Ltd .

31 Relevantly, the primary object of the Act is to provide a means for adjudicating payment disputes arising under construction contracts.

32 Section 25 permits any party to a construction contract to apply to have a payment dispute adjudicated under pt 3 of the Act, subject to stated exceptions. The first exception is if an application for an adjudication of that payment dispute has already been made by a party. The second exception is if the dispute is the subject of an order, judgment or other finding by an arbitrator or court or other body dealing with a matter arising under a construction contract.

33 By s 3, 'payment dispute' has the meaning given to that term in s 6. Section 6 provides as follows:

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;

(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.

34 For the purpose of this application, attention can be directed to the first limb of the definition, as set out in par (a) of s 6. In short, a payment dispute arises if 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.

35 Section 3 defines a 'payment claim' to mean 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.

36 It should be noticed, therefore, that a payment claim may be a claim for payment by either the contractor or by the principal.

37 Section 26 sets out the process for commencing an application for adjudication of a payment dispute. It provides that an application must be made within 28 days after the payment dispute arises. It sets out what the applicant must file and serve, and the required content of the application.

Section 26(2)(c) provides that the application must set out or have attached to it all the information, documentation and submissions on which the party making it relies in the adjudication.

38 By s 27, the respondent to the application must serve its response within 14 days of being served with the application. Section 27(2) states that the response must set out the details of or have attached to it any rejection or dispute of the payment claim that has given rise to the dispute and must set out or have attached to it all the information, documentation and submissions on which the party making it relies in the adjudication.

39 Section 28 provides a process for the appointment of an adjudicator in the absence of agreement between the parties.

40 Division 3, comprising s 30 to s 37, is headed 'The adjudication process'.

41 Section 30 provides that the object of the adjudication process is to determine the dispute fairly and as quickly, informally and inexpensively as possible.

42 Section 31 sets out what the adjudicator must do. It prescribes a short timeframe, namely within 14 days of receipt of the respondent's response, within which an adjudicator is required to make a determination. That timeframe can only be varied with the consent of the parties.

43 The proper construction of s 31(2)(b) is the primary issue in this application. Section 31 is in the following terms:

Adjudicator's functions

(1) In this section -

prescribed time means -

(a) if the appointed adjudicator is served with a response under section 27(1) - 14 days after the date of the service of the response;

(b) if the appointed adjudicator is not served with a response under section 27(1) - 14 days after the last date on which a response is required to be served under section 27(1).

(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-

(i) the contract concerned is not a construction contract;

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

(iii) 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; or

(iv) 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;

(b) otherwise, determine on the balance of probabilities whether any party to the payment dispute is liable to make a payment, or to return any security and, if so, determine -

(i) the amount to be paid or returned and any interest payable on it under section 33; and

(ii) the date on or before which the amount is to be paid, or the security is to be returned, as the case requires.

(3) If an application is not dismissed or determined under subsection (2) within the prescribed time, or any extension of it made under section 32(3)(a), the application is to be taken to have been dismissed when the time has elapsed.

44 Section 32 deals with matters of procedure in an adjudication. It provides that an adjudicator must act informally, is not bound by the rules of evidence and may inform itself as it sees fit and may request further submissions or information from the parties. Section 32(3) provides that with the consent of the parties an appointed adjudicator may adjudicate simultaneously two or more payment disputes between the parties, and with the consent of all the parties concerned, may adjudicate the payment dispute simultaneously with another payment dispute.

45 Section 36 sets out the content of an adjudicator's determination.

46 By s 38, an appointed adjudicator's determination is binding on the parties to the construction contract under which the payment dispute concerned arose, even though other proceedings relating to the payment dispute may have been commenced before an arbitrator or other person or before a court.

47 Section 45 provides, in summary, that parallel proceedings before an arbitrator or court can be commenced and will be determined without regard to evidence of things said or done in the adjudication process.

48 Section 46 provides as follows:

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.

49 I adopt the following observations of Pritchard J as to the scheme of the Act:

These provisions, particularly when considered in light of the purpose of the CC Act as a whole, indicate that adjudications under the CC Act are intended to be a rapid process for the resolution of disputes within the context of construction contracts, the aim of which is to 'keep the money flowing in the contracting chain'. The 'rapid adjudication process is a trade-off between speed and efficiency on the one hand, and contractual and legal precision on the other'.

Within that context, the role of an adjudicator in conducting an adjudication is intended to be relatively confined. The area of inquiry is confined to the subject of the payment dispute, and the questions for the adjudicator are similarly confined to whether a party to the dispute is liable to make a payment, and if so the amount and due date of the payment. The fact that the adjudication determination does not preclude the parties from litigating about broader issues of dispute under their construction contract also reinforces the limited scope of the adjudicator's inquiry. That would tend to suggest that questions of how the particular payment claim fits into broader disputes arising under the contract in question should be pursued in other fora.

The proper construction of s 31(2)(b)

50 Alliance submits that the adjudicator made a jurisdictional error in his construction of s 31(2)(a) of the Act. The adjudicator construed that section as meaning that he did not have any power to order that a sum be paid by Tenix to Alliance. Alliance submits that s 31(2)(b), properly construed, meant that, in the circumstances of this case, the adjudicator had power to determine that a sum be paid by Tenix to Alliance.

51 The central foundation of Alliance's submission is the breadth and generality of the words 'any party' in s 31(2)(b). That section empowers the adjudicator to 'determine whether any party to the payment dispute' is liable to make a payment. Alliance submits that if the legislature had intended to restrict the power of the adjudicator to award a payment in favour of the applicant it could, and would, have said so in clear terms. On Alliance's submission, s 31(2)(b) would have referred to determining whether 'the respondent to the adjudication application' is liable to make a payment, rather than to whether 'any party to the payment dispute' is liable.

52 Alliance submits that the phrase 'any party' in s 31(2)(b) encompasses not only the respondent in an adjudication application, but also the applicant. Thus, in certain cases, described later in these reasons, on Alliance's submission the adjudicator can make a determination in favour of the respondent, requiring the applicant to pay a sum to it.

53 There is a limit to the work that can be done by the broad words 'any party'. Those words do not mean that the adjudicator has a free-floating power to determine, without reference to the payment dispute, that a sum is payable by an applicant to a respondent. An adjudication under pt 3 of the Act is confined to a payment dispute. Section 25 provides for parties to construction contracts to apply to have a payment dispute under the contract adjudicated. See also s 26, s 30 and s 31. Section 31(2) of the Act must, of course, be read as a whole, and construed in the context of the Act as a whole. The words 'determine ... whether any party to the payment dispute is liable to make a payment' mean to determine whether any party to the payment dispute is liable to make a payment in respect of the payment dispute. As Pritchard J has observed, the area of enquiry for the adjudicator is confined to the payment dispute. The power of the adjudicator in relation to payments is likewise confined.

54 That directs attention to what constitutes the payment dispute in this case, and what the adjudicator's powers were in relation to that dispute.

55 Alliance submits that, in this case, the payment dispute is the dispute over the competing contentions advanced by each party in the final certificate payment claim, and, having resolved the merits of those contentions, the adjudicator had power to determine liability in favour of either party.

56 For the reasons that follow, I do not accept that submission.

57 The task is not to construe definitions in isolation. Rather, the definitions need to be inserted into the relevant operative provisions, in particular s 31 and pt 3 generally, and the sections construed accordingly.

58 The definition in par (a) of s 6 provides that a payment dispute arises if, 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. Section 6 governs more than just when a payment dispute arises: it identifies the payment dispute. The definition of payment dispute in par (a) of s 6 directs attention to the identification of the payment claim that gave rise to the dispute.

59 When a party to a construction contract receives a payment claim, the non-payment, rejection or disputation of that claim by the recipient gives rise to, and constitutes, the payment dispute.

60 In my view, the determination by an adjudicator of whether any party to a payment dispute is liable to make a payment involves, and is limited to, determining whether the recipient of the payment claim (the non-payment or rejection of which constitutes the payment dispute) is liable to make a payment in respect of that payment claim. So, on my construction, the adjudicator's power is confined to accepting, wholly or in part, or rejecting that the recipient of that payment claim must pay that claim to the party which made the claim. The function of the adjudicator is to determine the merits of the payment claim the disputing of which constitutes the payment dispute, and to determine whether any party to that payment dispute is liable to make a payment in respect of that payment claim.

61 In this case, the payment claim the subject of the adjudication application was correctly identified by the adjudicator as being Tenix's final certificate issued on 11 October 2013.

62 On a straightforward reading of s 6(a) of the Act, the payment dispute the subject of the adjudication in this case was constituted by Alliance's rejection or disputation of Tenix's payment claim. On that view, the payment dispute relates to whether, as Tenix claimed by its final certificate, Alliance was liable to pay the sum claimed by Tenix in its final certificate, or any lesser sum.

63 Alliance's rejection of Tenix's claim was on the grounds of the competing claims asserted by Alliance which, Alliance had asserted, meant that Tenix was liable to pay money to Alliance. Alliance submits that when that occurred, the payment dispute that arose encompassed both parties' claims. More particularly, Alliance submits that, in such circumstances, the power of the adjudicator extends beyond resolving the payment claim first made by determining that a payment should be made in favour of the claiming party or not. Alliance submits that the adjudicator's powers include the power to determine that a sum is payable in respect of the counterclaim raised in the respondent's response to the initiating payment claim.

64 Alliance's submissions did not explain how that view of the scope of the payment dispute and the powers and functions of the adjudicator was to be accommodated in the language of the definitions of payment dispute and payment claim.

65 As I have said, in my view, the definition of payment dispute directs attention to the payment claim, the rejection of which constitutes the payment dispute. In my view, where, as here, party B's response to a payment claim by party A is to assert a counterclaim that contends that party A is liable to party B, although the merits of the counterclaim will be considered in determining whether B is liable to make a payment on A's payment claim, that counterclaim is not itself subsumed into the payment dispute constituted by B's rejection of A's payment claim. Rather, B's counterclaim is itself a separate payment claim, the rejection of which will give rise to and constitute another payment dispute. Although factually overlapping, indeed intertwined, there are, in my view, nevertheless two payment disputes and two payment claims for the purposes of pt 3 of the Act.

66 Alliance's submissions point out, correctly, that in the course of the adjudication reasons the adjudicator dealt with the merits of Alliance's counterclaims that it raised in answer to Tenix's payment claim. It is true that it was necessary for the adjudicator to give attention to the merits of Alliance's competing claims, put as Alliance's answer to Tenix's payment claim, in order to determine the merits of Tenix's payment claim, and the adjudicator did so. In my view, that practical reality does not control or detract from the proper identification of the payment claim and the payment dispute the subject of the adjudication, and of the scope of the adjudicator's powers.

67 This construction does not produce results that are significantly inconvenient and so unlikely to have been intended. Subject to compliance with the strict time limits in the Act, it is open to each party to refer to adjudication the payment dispute constituted by its own disputed payment claim. With the consent of the parties an appointed adjudicator could adjudicate the two payment disputes simultaneously. Further, as explained further later in these reasons, it is open to either party to apply for an adjudication of the payment dispute arising from the payment claim made against it.

68 But that did not occur in this case. In this case, neither Tenix nor Alliance applied for an adjudication of the payment dispute constituted by Tenix's rejection of Alliance's payment claim. Alliance's payment claim was made on 13 September 2013 by its final invoice, and rejected on 11 October 2013 by Tenix's final certificate. Thus any application for adjudication in respect of that payment dispute had to be commenced by 8 November 2013. No application was commenced.

69 Alliance accepts that one consequence of its construction of s 31(2)(b) is that, in substance, a party's right to apply for adjudication may be revived, notwithstanding the expiration of the 28 day period delimited by s 26. This point can be illustrated by reference to the facts of this case. Alliance's right to apply for an adjudication application in respect of the payment dispute constituted by Tenix's rejection of Alliance's payment claim expired on 8 November 2013. Nevertheless, on Alliance's construction, because Tenix made an adjudication application in respect of Tenix's payment claim, and because Alliance's response to Tenix's payment claim reasserted Alliance's competing payment claim as Alliance's answer to Tenix's payment claim, Alliance was entitled to an adjudication determination in its favour in respect of its payment claim, in the course of the adjudication of Tenix's payment claim. In my view, the scheme of the Act deliberately imposes strict time limits for all steps in respect of adjudication applications. To my mind, the Act does not reveal an intention that the strictness of these time limits is qualified by the potential revival of a right to obtain an adjudication determination after expiration of the time limit. This consequence of Alliance's construction seems to me to be a factor militating against its acceptance.

70 Alliance submits that its construction is consistent with the evident objects of the Act stated in s 30 involving quick, informal and inexpensive determination of payment disputes. I do not accept that the object stated in s 30 favours Alliance's construction over the construction I have adopted. First, it should be noticed that the object stated in s 30 is an object of an adjudication of a payment dispute. That brings one back to the identification of the payment dispute. Further, a legislative purpose, discerned from the text and extrinsic material, assists in choosing between constructional choices that are open on the language of the statute; it cannot sustain a construction that is not available as a meaning of the language of the text. More generally, caution is needed in asserting a purpose of a statute as sustaining a construction that results in what some might regard as the desirable result. The purpose of legislation must be derived from what the legislation says, and not from any assumption about the desired or desirable reach or operation of the relevant provision. For the reasons I have stated, I do not consider that the construction I have adopted results in any undue inconvenience or inefficiency.

71 Alliance further submits that on Tenix's construction, a principal to a construction contract could immunise itself from an adjudication application by making its own application, because s 25(a) would then prevent an adjudication application from being made by the contractor. I do not accept that submission. It is founded on an assumption that the competing claims between the two parties create a single payment dispute. For reasons I have explained, I do not accept that assumption. In my view, the payment claim by each party gives rise to a separate payment dispute once the claim is disputed. Consequently, s 25(a) does not operate in the way Alliance contends.

72 Alliance submits that Tenix's construction of s 31(2)(a) involves reading limits into the words 'any party' in that section. I do not accept that that is the effect of Tenix's construction. Tenix's submission, which I accept, is that:

(1) an adjudication application may be made by a party who advances a payment claim, or by a party against whom a payment claim has been made;

(2) in the latter situation, the adjudicator will have power to order that the applicant make a payment to the respondent in respect of the payment claim that had been made by the respondent and disputed by the applicant; and

(3) that explains and accommodates the language 'any party' in s 31(2)(b).

73 In response to that submission, Alliance submits that it is commercially unlikely that the recipient of a payment claim would bring an application for what would necessarily only be a provisional determination that it is not liable to make a payment in respect of that payment claim. Consequently, the submission continues, the prospect of the initiation of an adjudication application by the recipient of a payment claim should not be taken to explain the language 'any party' in s 31(2)(b). For the reasons in the following paragraph, I do not accept that submission of Alliance.

74 The prospect of an adjudication application by the recipient of a payment claim is not a fanciful one. There may well be circumstances in which the recipient of a payment claim has commercial reasons for seeking a determination that it is not liable to pay, notwithstanding that the determination would be a provisional one. For example, the recipient might be faced with a threat that a bank guarantee or other security might be called in. There may be internal corporate or joint venture reasons for seeking an adjudication. The bringing of an adjudication application might be part of a strategy of attempting to discourage substantive litigation. I note that in Perrinepod Pty Ltd v Georgiou Building Pty Ltd Murphy JA (with whom Martin CJ agreed) contemplated the prospect of the recipient of a payment claim seeking an early determination that it in fact owes no money, and took that prospect into account in determining the proper construction of the Act.

75 For these reasons, in my view, on a proper construction, the power of the adjudicator is to determine that a party is liable to make a payment arises only in respect of the payment claim the disputing or rejecting of which gave rise to and constituted the payment dispute the subject of the application. The function of the adjudicator is to determine the merits of the payment claim the disputing of which constituted the payment dispute, and to determine whether any party to that payment dispute is liable to make a payment in respect of that payment claim. Thus, the adjudicator was correct in concluding that he had no power to determine that Tenix was liable to make a payment to Alliance.

76 That conclusion means that the application must be dismissed. As the matter was fully argued, I will briefly state my conclusions on some of the other questions that arise if I am wrong in the construction of s 31(2)(b) I have adopted.

Jurisdictional error?

77 In my opinion, if Alliance had succeeded on its contention as to the construction of s 31(2)(b), with the result that the adjudicator had had power to determine that Tenix was liable to Alliance, such error would have been a jurisdictional error amenable to a writ of certiorari. That is so for the following reasons.

78 A determination made pursuant to s 31(2)(b) of the Act can be challenged by proceedings for judicial review.

79 Section 46 does not preclude judicial review for jurisdictional error.

80 Insofar as the distinction between an inferior court and other administrative body has utility, an adjudicator under the Act is more akin to an inferior court.

81 One well established category of jurisdictional error by an inferior court is where the court misconstrues the statute establishing it in conferring jurisdiction and thereby misconceives the nature or the function which it is performing or the extent of its powers in the circumstances of the case.

82 In my opinion, the error alleged by Alliance is of this character. If established, it would mean that the adjudicator had misconstrued the Act and misconceived the extent of his powers in the circumstances of the case.

Relief

83 If Alliance had established the error it alleges, the question then arises as to what relief should be given.

84 The starting point is the general proposition that an administrative decision made under a jurisdictional error is liable to be quashed, via a writ of certiorari, on the ground of the jurisdictional error.

85 Alliance seeks to avoid that approach in this case. That is because of the operation of s 31(3) of the Act. That section provides that if an adjudicator does not make a determination within the prescribed time, 'the application is taken to have been dismissed when the time has elapsed'. So if the determination is quashed, the adjudication application will be taken to have been dismissed on 20 December 2013, when the time limit in s 31(3) expired, thus denying a remedy to Alliance.

86 It is to be noted that the Act does not qualify the operation of s 31(3) by reference to a situation where the adjudicator makes a jurisdictional error and the determination is quashed. Similar provisions in the payment security legislation in other States have been construed as operating in accordance with their terms notwithstanding the consequences where the adjudication is later quashed for jurisdictional error. I would adopt a like construction of s 31(3).

87 Cases concerned with security payment legislation in other States have consistently held that, absent specific legislative provision to the contrary, an adjudication determination that a party is liable to pay a specified amount that is made under a jurisdictional error is void in its entirety, and cannot be severed, even if the error infected only an identifiable part of the determined amount.

88 In BM Alliance Coal Operations Pty Ltd v BGC Contracting Pty Ltd the appellant commenced proceedings for a declaration that the adjudication decision was void as a result of two jurisdictional errors. The primary judge upheld the appellant's case in respect of only one of the errors, but in the exercise of discretion refused to make the declaration of invalidity sought by the appellant. Instead, the primary judge dismissed the application upon an undertaking by the respondent to repay to the appellant the portion of the adjudicated amount in respect of which the adjudicator had made an jurisdictional error. The Court of Appeal unanimously upheld an appeal from that decision. The Court held that the appellant was entitled to a declaration of invalidity of the whole of the adjudication. Muir JA held, that once a court determines that an adjudication decision is affected by jurisdictional error, the decision cannot give rise to legal consequences.

89 These cases present an obstacle to acceptance of Alliance's contention that the court can sever or in some other fashion find a part of the determination to be invalid but other parts to be legally effective.

90 In oral submissions, Alliance sought to avoid a like conclusion in the present case by asserting that it did not rely on severance. Rather, Alliance submits that it seeks only to impugn the erroneous part of the adjudication reasoning in which the adjudicator failed to take the last step of giving effect to his decision that there was a balance payable in favour of Alliance.

91 In my view, the adjudication cannot be divided into component steps in its reasoning, and one or more separate steps then impugned by judicial review. It is the adjudication that is liable to judicial review, not elements of the reasoning adopted in the adjudication. If the adjudicator made the jurisdictional error alleged by Alliance, the adjudication is liable to be quashed. The substance of what is sought by Alliance is to preserve the whole of the adjudication, except for the adjudicator's conclusion that he had no power to award a sum in favour of Alliance. I am not persuaded that it would be open to grant the relief sought by Alliance.

Conclusion

92 For the reasons I have explained, in my opinion the adjudicator was correct in concluding that he had no power to determine that Tenix was liable to pay any sum to Alliance. Consequently, I would dismiss the application.