JURISDICTION : STATE ADMINISTRATIVE TRIBUNAL
ACT : CONSTRUCTION CONTRACTS ACT 2004 (WA)
CITATION : FIELD DEPLOYMENT SOLUTIONS PTY LTD and
SC PROJECTS AUSTRALIA PTY LTD
[2014] WASAT 101
MEMBER : MR T CAREY (MEMBER)
HEARD : 30 JULY 2014
DELIVERED : 21 AUGUST 2014
FILE NO/S : CC 816 of 2014
BETWEEN : FIELD DEPLOYMENT SOLUTIONS PTY LTD
Applicant
AND
SC PROJECTS AUSTRALIA PTY LTD
SEA TRUCKS AUSTRALIA PTY LTD
Respondents
Catchwords:
Review of dismissal of adjudication application under Construction Contracts Act 2004 (WA) - Dismissed for being out of time - Whether review limited to ground upon which adjudicator relied - Whether contract concerned a 'construction contract' - Whether any 'payment dispute' - Contractual terms relating to invoicing and payment for services considered
Words and phrases: 'construction contract'; 'construction work'; 'civil works'; 'payment claim'; 'payment dispute'
Legislation:
Construction Contracts Act 2004 (WA), s 3, s 4, s 5(1), s 6, s 6(a), s 26, s 31, s 46, s 46(1), s 46(2)
State Administrative Tribunal Act 2004 (WA), s 5, s 27(1), s 27(2), s 27(3), s 29(1)
Result:
Review application unsuccessful
Summary of Tribunal's decision:
The applicant sought review of a decision of an adjudicator under the Construction Contracts Act 2004 (WA) to dismiss an application for adjudication of a payment dispute claimed to have arisen under that Act. The adjudicator dismissed the adjudication application on the ground that it had not been made with the period permitted by the Act.
Although not raised as a ground before the adjudicator, the respondents relied, in addition to the ground upon which the adjudicator's decision was based, upon their contention that the contract concerned was not a 'construction contract'.
The relevant contract was for the supply and support of off-road vehicles for the haulage of fill material, to be used for the reinstatement of a right of way or road along which a gas pipeline had been installed.
In deciding to affirm the adjudicator's decision to dismiss the adjudication application, the Tribunal:
1) rejected an argument that the review application was to be restricted to determining whether or not the adjudicator was correct in his finding on the time limitation ground;
2) concluded that the services provided by the applicant under its contract with the respondents did not satisfy the requirements for a 'construction contract' under the Construction Contracts Act 2004 (WA); and
3) found that because the applicant had failed to comply with a contractual requirement for the giving of a 30 day invoice, there was no payment dispute, rendering the adjudication application premature.
Category: A
Representation:
Counsel:
Applicant : Mr P Clifford
Respondents : Mr G Warwick
Solicitors:
Applicant : Alan Rumsley Commercial Disputes Lawyer
Respondents : Clyde & Co
Case(s) referred to in decision(s):
Perrinepod Pty Ltd v Georgiou Building Pty Ltd [2011] WASCA 217
REASONS FOR DECISION OF THE TRIBUNAL :
Introduction
1 Field Deployment Solutions Pty Ltd (FDS) contracted with SC Projects Australia Pty Ltd and Sea Trucks Australia Pty Ltd, an unincorporated joint venture trading as Clough Sea Trucks Joint Venture (CSJV), for the supply, hire and support of eight Hagglund BV 206 tipper units (vehicles). The vehicles are military-built artillery support off-road all terrain track mounted vehicles modified with two 'tippers' to carry five tonnes of fill material.
2 The effect of the terms of the contract regarding payment for the supply of the vehicles was the subject of debate. On their face, the relevant terms included requirements for FDS to invoice CSJV the 'Site Instruction Price' (SI Price), CSJV to pay 'within 30 days of receipt of an undisputed invoice', calculation of the SI Price 'in accordance with the rates set out in the Compensation Schedule', and FDS to comply with 'the invoicing and other instructions in the Compensation Schedule', failing which CSJV was not required to pay the invoices concerned.
3 The 'Compensation Schedule' in fact comprised an appended document entitled 'Milestone Payment Schedule'. It provided for payments, on two separate dates within certain periods of agreement signing, and in addition, in respect of each vehicle, three payments: within 14 days of agreement signing, at time of FOB in the UK, and $115,000 plus GST at time of being ready to ship site, Belmont. The claim the subject of the present matter concerns the payments of the latter type (third stage payments).
4 On 4 February 2014, FDS provided CSJV with an invoice for supply of four of the vehicles, in the sum of $506,000. This was at a time prior to the occurrence of the relevant 'milestone' that the vehicles be ready for shipping at Belmont. The invoice stated, as the payment term,
'Upon milestone achievement - FOB Belmont'.
5 Subsequently, on 24 and 29 April and 7 May 2014, FDS informed CSJV by email that three of the four vehicles were ready for shipping, which, according to FDS, gave rise to an immediate obligation, in each case, to pay that portion of the invoiced amount referrable to the relevant vehicle. None of the demands was met.
6 FDS pursued recovery of its unpaid demands by way of an application for adjudication under the Construction Contracts Act 2004 (WA) (CC Act) (adjudication application). It did so on the basis that the amount of FDS' 'payment claim', constituted by its advices that amounts referable to the three vehicles were immediately payable, was not paid, giving rise to a 'payment dispute'.
7 The adjudicator dismissed the adjudication application. He did so on the basis, as found by him, that the application had not been prepared and served within 28 days after the payment dispute arose. In doing so, the adjudicator accepted CSJV's contention that the dispute arose 30 days after the issue of the invoice.
8 FDS seeks review of the adjudicator's dismissal decision.
9 Having regard to written and oral submissions of the parties, the issues for determination of the review application are these:
1) Where an adjudication application is dismissed on one ground, is the review application to be confined to that ground, or is it possible to consider other available grounds, and, in particular, the ground that the contract concerned is not a construction contract?
2) If it is possible to consider other grounds, is the contract in this case a construction contract?
3) Was the adjudication application prepared and served within 28 days after any payment dispute arose?
10 I will deal with each issue in turn.
Availability of fresh ground of dismissal
11 The functions of an adjudicator for the purposes of the adjudication of a payment dispute under the CC Act are set out in s 31 of the CC Act as follows:
Adjudicator's functions
(1) In this section -
prescribed time means -
(a) if the appointed adjudicator is served with a response under section
(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.
12 As I have said, the adjudicator's decision in this case was to dismiss the application without making a determination on its merits. He did so on the basis set out in s 31(2)(a)(ii) of the CC Act, namely:
[T]he application has not been prepared and served in accordance with section 26[.]
13 The respondent, in the adjudication application, relied solely on the same ground.
14 CSJV submits before me that, in addition to the s 31(2)(a)(ii) of the CC Act ground, the Tribunal should affirm the summary dismissal of the application based on the ground provided by s 31(2)(a)(i) of the CC Act, that the contract concerned is not a construction contract.
15 FDS submits that it is not possible, on an application for review under s 46 of the CC Act, for the Tribunal to entertain any argument based on such a fresh ground of dismissal.
16 Section 46 of the CC Act provides:
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.
17 According to FDS, the Tribunal's review of the adjudicator's decision is limited to the issue sought to be joined by FDS as 'a person … aggrieved by' the decision. That issue is whether or not the application was prepared and served within the requisite period. If persuaded that the adjudicator was mistaken in finding that it was not, the Tribunal must remit the matter to the adjudicator, who must then make a determination under s 31(2)(b) of the CC Act, in accordance with s 46(2) of the CC Act.
18 Further, according to FDS, in relation to the ground that the contract concerned is not a construction contract, by determining the adjudication application on the timing issue, the adjudicator must be taken to have formed the view that the contract is a construction contract. That, it was submitted, is a matter appropriately for those registered to act as an adjudicator under the CC Act, and not the Tribunal. The suggestion was also made that had it wished to take the matter up on review, CSJV could have done so by commencing its own review application, but it did not do so.
19 In my view, FDS's contentions erroneously conflate the decision of the adjudicator with the basis or ground for that decision, and ignore provisions of the State Administrative Tribunal Act 2004 (WA) (SAT Act) regarding the nature of review proceedings and the Tribunal's powers on review.
20 In Perrinepod Pty Ltd v Georgiou Building Pty Ltd [2011] WASCA 217 ( Perrinepod ), a decision primarily concerned with the question whether the avenue of review to the Tribunal under s 46 of the CC Act is confined to 'decisions to dismiss' under s 31(2)(a) of the Act, as opposed to 'decisions not to dismiss', Murphy JA undertook a careful consideration of the proper construction of s 46(1) of the CC Act, in light of a number of its other provisions.
21 At no point in Murphy JA's reasoning did his Honour identify, as a 'decision under s 31(2)(a) of the CC Act', dismissal of an adjudication application on a particular ground. His Honour's reasons are replete with references to the relevant decision being a decision to dismiss an adjudication application, rather than a decision to dismiss an adjudication application on a particular ground or grounds: see, for example, Perrinepod at [79], [81], [82], [84], [89], [90], [91], [93], [113] and [115].
22 Significantly for the present matter, in Perrinepod , Murphy JA said at [113]:
Section 31 is in Div 3 which is headed 'The Adjudication Process ' (emphasis added). Section 31(2)(a) itself is expressed in terms conferring jurisdiction on an appointed adjudicator - to dismiss an application. It is the proper exercise (or non-exercise) of that power or function, in its own right, which determines whether s 31(2)(b) has any application. The statutory language is clear. The two are alternative functions. In s 31(2), an appointed adjudicator may not determine an application on its merits if it is required to be dismissed under s 31(2)(a). In other words, an appointed adjudicator may not proceed under s 31(2)(b) to determine an application on its merits if the application is one which must be summarily dismissed under s 31(2)(a). If an appointed adjudicator were purportedly to proceed to determine an application under s 31(2)(b) which ought to have been dismissed under s 31(2)(a), the adjudicator would be acting unlawfully and without power. The prerogative writs of prohibition and certiorari would be available respectively to restrain, or quash, the abuse of power (subject to the effect of s 46(3), discussed later).
23 In Perrinepod at [115], his Honour said:
… The language of s 31(2)(a) is mandatory; the appointed adjudicator 'must' dismiss if one or more of the criteria in subpars (i) - (iv) are satisfied. Section 31(2)(a) does not involve the exercise of a statutory discretion. In my view, the matters in subpars (i) - (iv) of s 31(2)(a) are 'jurisdictional facts' which condition the lawful exercise of the function committed to an appointed adjudicator under s 31(2)(a). …
24 The function committed to an appointed adjudicator under s 31(2)(a) of the CC Act to which Murphy JA referred, as explained in Perrinepod at [113], is 'to dismiss an application'. Properly regarded, therefore, any 'decision' under s 31(2)(a) of the CC Act is simply a decision to dismiss an adjudication application, not to dismiss on a particular ground.
25 The effect of the provisions of the SAT Act regarding the nature of review proceedings and the Tribunal's powers on review for the present matter, assuming the SAT Act provisions apply, include:
• The review of the decision to dismiss the adjudication application is by way of a hearing de novo, and may involve consideration of material not before the decision-maker, whether or not it existed at the time the decision was made: s 27(1) of the SAT Act.
• The purpose of the review is to produce the correct and preferable decision at the time of the decision upon the review: s 27(2) of the SAT Act.
• The adjudicator's reasons for decision do not limit the Tribunal in conducting its review: s 27(3) of the SAT Act.
• The Tribunal has functions and discretions corresponding to those exercisable by the adjudicator: s 29(1) of the SAT Act.
26 In my view, based upon the characterisation of the 'decision' for review as the decision to dismiss the adjudication application, there is nothing in the enabling Act (the CC Act) which is inconsistent with any of these provisions. If there were, s 5 of the SAT Act would require the enabling Act provisions to prevail to the extent of the inconsistency.
27 Section 46 of the CC Act, being the review provision, does no more than provide a particular class of persons a right to apply for review, describe the consequences of a successful review and contain a privative clause. None of these elements is inconsistent with any of the SAT Act provisions to which reference is made above. Therefore, those provisions are to be given their full force and effect.
28 On a review of the adjudicator's decision to dismiss the adjudication application, the Tribunal is required, in light of all the relevant material, to produce the correct and preferable decision, clothed, as far as possible, with the functions and discretions of the adjudicator. The principal function in the current context is the function to dismiss, exercisable where any of the four grounds under s 31(2)(a) of the CC Act applies.
29 Despite the s 31(2)(a)(ii) of the CC Act ground not forming the basis of the adjudicator's decision, and, indeed, that ground not being raised by either party before him, the argument now brought by CSJV requires the Tribunal to consider whether that ground applies, in addition to the ground regarded by the adjudicator to compel him to dismiss the adjudication application.
30 I would go further, and say that even though there had been no reliance before me upon it, if, on the established facts, I formed the view that the additional ground applied, then, standing in the shoes of the adjudicator, I would be compelled to dismiss the application: Perrinepod at [113].
Is the contract a construction contract?
Statutory framework
31 The following definition of 'construction contract' is provided in s 3 of the CC Act:
construction contract means a contract or other agreement, whether in writing or not, under which a person (the contractor ) has one or more of these obligations –
(a) to carry out construction work;
(b) to supply to the site where construction work is being carried out any goods that are related to construction work by virtue of section 5(1);
(c) to provide, on or off the site where construction work is being carried out, professional services that are related to the construction work by virtue of section 5(2);
(d) to provide, on the site where construction work is being carried out, on-site services that are related to the construction work by virtue of section 5(3)(b)[.]
32 'Construction work' is defined in s 4 of the CC Act as follows:
(1) In this section -
civil works includes -
(a) a road, railway, tramway, aircraft runway, canal, waterway, harbour, port or marina;
(b) a line or cable for electricity or telecommunications;
(c) a pipeline for water, gas, oil, sewage or other material;
(d) a path, pavement, ramp, tunnel, slipway, dam, well, aqueduct, drain, levee, seawall or retaining wall; and
(e) any works, apparatus, fittings, machinery or plant associated with any works referred to in paragraph (a), (b), (c) or (d);
site in WA means a site in Western Australia, whether on land or off-shore.
(2) In this Act -
construction work means any of the following work on a site in WA -
(a) reclaiming, draining, or preventing the subsidence, movement or erosion of, land;
(b) installing, altering, repairing, restoring, maintaining, extending, dismantling, demolishing, or removing, any works, apparatus, fittings, machinery, or plant, associated with any work referred to in paragraph (a);
(c) constructing the whole or a part of any civil works, or a building or structure, that forms or will form, whether permanently or not and whether in WA or not, part of land or the sea bed whether above or below it;
(d) fixing or installing on or in any thing referred to in paragraph (c) any fittings forming, or to form, whether permanently or not, part of the thing, including -
(i) fittings for electricity, gas, water, fuel oil, air, sanitation, irrigation, telecommunications, air-conditioning, heating, ventilation, fire protection, cleaning, the security of the thing, and the safety of people; and
(ii) lifts, escalators, insulation, furniture and furnishings;
(e) altering, repairing, restoring, maintaining, extending, dismantling, demolishing or removing any thing referred to in paragraph (c) or any fittings described in paragraph (d) that form part of that thing;
(f) any work that is preparatory to, necessary for, an integral part of, or for the completion of, any work referred to in paragraph (a), (b), (c), (d) or (e), including -
(i) site or earth works, excavating, earthmoving, tunnelling or boring;
(ii) laying foundations;
(iii) erecting, maintaining or dismantling temporary works, a temporary building, or a temporary structure including a crane or other lifting equipment, and scaffolding;
(iv) cleaning, painting, decorating or treating any surface; and
(v) site restoration and landscaping;
(g) any work that is prescribed by regulations to be construction work for the purposes of this Act.
(3) Despite subsection (2) construction work does not include any of the following work on a site in WA -
(a) drilling for the purposes of discovering or extracting oil or natural gas, whether on land or not;
(b) constructing a shaft, pit or quarry, or drilling, for the purposes of discovering or extracting any mineral bearing or other substance;
(c) constructing any plant for the purposes of extracting or processing oil, natural gas or any derivative of natural gas, or any mineral bearing or other substance;
(d) constructing, installing, altering, repairing, restoring, maintaining, extending, dismantling, demolishing, or removing, wholly artistic works, including sculptures, installations and murals;
(e) work prescribed by the regulations not to be construction work for the purposes of this Act.
(4) In this Act -
construction work does not include constructing the whole or part of any watercraft.
The relevant contract
33 The agreement between CSJV and FDS arose from the widely publicised project for the development of gas fields located off the north-west coast of Western Australia known as the Gorgon Project. As part of that project, CSJV was awarded the contract for installation of a subsea and onshore pipeline to transport domestic gas from Barrow Island to mainland Western Australia (Domgas pipeline).
34 As part of CSJV's contractual obligations, it was required to rehabilitate a right of way corridor (ROW or ROW corridor) some 12 kilometres long traversing the Onslow Domgas Intra Tidal Zone (ITZ). The rehabilitation consisted of backfilling excavated trenches and gullies created during the installation of the pipeline along the ROW and reinstating creek features present prior to the beginning of construction. SCJV was required to transport some 40,000m3 of quarried material and stabilisation products from the mainland to be installed in set locations along the ROW.
35 On 2 December 2013, CSJV entered into a 'Services Agreement' with FDS 'for the wet hire and support of a quantity of BV206 tipper units and personal carriers including associated staff and equipment for use at the DOMGAS ITZ by CONTRACTOR'. The vehicles were to be 'used for the general cartage of aggregate fill, to complete ROW reinstatement works'.
36 Although I was taken to various parts of the contract documentation, the best description of the services to be provided appears in the scope of works clause 4.3 as follows:
SUBCONTRACTOR shall under the direction of CONTRACTOR be responsible for the haulage of fill material and various erosion control materials from a stockpile location to the designated work locations along the ROW where reinstatement works shall be taking place. These works shall be managed by CONTRACTOR, and supported by SUBCONTRACTOR to include but not necessarily be limited to the following:
• The supply, maintenance, servicing and operation of Hagglund type vehicles (all required plant and equipment) for the haulage of fill and erosion control materials as required by the CONTRACTOR;
• Supply of all required personnel and manpower to operate and maintain the Hagglund vehicles to be used during the operations;
• Supply all necessary spare parts and/or backup plant and equipment to ensure the reliable operability of the vehicles;
• The daily management of all SUBCONTRACTOR personnel and associated planning required to oversee and manage SUBCONTRACTOR's scope of Services on a day to day basis.
37 It is clear that the main objective of CSJV's contract with FDS was the haulage of fill from the stockpile located elsewhere to the ROW, and deposit of the fill at designated locations, through the agency of the vehicles. The deposited fill would then be utilised by other parties to rehabilitate the ROW.
The case for the existence of a construction contract
38 FDS contends that its contract with CSJV is a contract under which it is obliged 'to carry out construction work', and therefore falls within part (a) of the definition of 'construction contract'.
39 FDS submits that the supply and use of the vehicles for the general cartage of fill to complete ROW reinstatement works falls within the definition of 'construction work' by reason of the inclusion in that definition of 'civil works' by s 4(2)(c) of the CC Act. The particular type of civil work contended to apply is 'a road', within s 4(1)(a) of the CC Act, assisted by the extensions of the 'civil works' definition by s 4(1)(e) of the CC Act to 'any works, apparatus, fittings, machinery or plant associated with any works referred to in paragraph (a) …'. Although there is no evidence before me concerning the status of the ROW as a 'road', CSJV did not dispute its characterisation as such, and I therefore accept it.
40 FDS also relies upon the extension of the definition of 'construction work', by s 4(2)(f) of the CC Act, to include:
…
(f) any work that is preparatory to, necessary for, an integral part of, or for the completion of, any work referred to in paragraph (a), (b), (c), (d) or (e), including-
(i) site or earth works, excavating, earthmoving, tunnelling or boring;
…
(iii) erecting, maintaining or dismantling temporary works, a temporary building, or a temporary structure including a crane or other lifting equipment, and scaffolding;
(iv) cleaning, painting, decorating or treating any surface[.]
Consideration
41 Having regard solely to part (c) of the 'construction work' definition dealing with civil works, and part (a) of the 'civil works' definition including 'a road', the parties' contract falls outside their terms. It cannot be said that the Service Agreement, having the essential nature and objective described above, was for the construction, in whole or in part, of civil works comprising a road.
42 The question to be answered is whether any of the statutory extensions of the scopes of the respective definitions have the effect of including the parties' contract.
43 I do not agree that part (e) of the definition of 'civil works' assists FDS. That part enlarges the reach of 'civil works' to 'any works, apparatus, fittings, machinery or plant associated with' civil works already identified, in this case the ROW corridor or road. But any such works, apparatus (etc.) comes within the definition of 'construction work' only where the work comprises 'constructing' any civil works. The supply of the vehicles to haul and deposit material for rehabilitation purposes is not concerned with any such construction.
44 Part (f) of the 'construction work' definition envisages 'any work' having a nexus with any of the preceding parts of the definition which fits the description 'preparatory to, necessary for, an integral part of, or for the completion of' that other work. There follows a list of five non-exhaustive examples, three of which are relied upon by FDS.
45 In my view, the examples given in part (f) are illustrative of the intrinsic nature of the associated works to the core 'construction work' to which they relate. They point to a broader perspective of what might be regarded as fitting within the umbrella of construction work than the one FDS has urged upon me. Such a perspective requires the inclusion, within that umbrella, of site works, but not the mere supply of equipment and material; earthmoving within a particular site, but not bringing fresh material from an external site; and site restoration, but not haulage of fill to facilitate this.
46 Adopting, as I do, such a broader perspective, the services provided by FDS under its contract with CSJV do not qualify as 'earthmoving' under example (i), nor 'treating any surface' under example (iv). I cannot see how example (iii), upon which FDS relied, can possibly apply to those services.
47 I am not persuaded by any of FDS' contentions as to why the services FDS has been required to perform under the terms of its contract with CSJV come within any part of the definition of 'construction work' under the CC Act. Nor have I been able to fit those services with any other parts of the definition. I have accordingly arrived at the conclusion that the contract between the parties is not a construction contract.
48 Standing in the adjudicator's shoes, the result reached by the adjudicator that the adjudication application be dismissed must stand, albeit on the ground, not dealt with by the adjudicator, that the contract concerned is not a construction contract.
Was the adjudication application prepared and served within time?
49 I now turn to the applicability of the ground upon which the adjudicator based his decision. I do so in case I am wrong in my conclusion on the construction contract ground.
Statutory framework
50 Section 26 of the CC Act states:
(1) To apply to have a payment dispute adjudicated, a party to the contract, within 28 days after the dispute arises or, if applicable, within the period provided for by section 37(2)(b), must -
(a) prepare a written application for adjudication;
(b) serve it on each other party to the contract;
(c) serve it –
(i) if the parties to the contract have appointed a registered adjudicator and that adjudicator consents, on the adjudicator;
(ii) if the parties to the contract have appointed a prescribed appointor, on that appointor;
(iii) otherwise, on a prescribed appointor chosen by the party;
and
(d) provide any deposit or security for the costs of the adjudication that the adjudicator or the prescribed appointor requires under section 44(8) or (9).
(2) The application -
(a) must be prepared in accordance with, and contain the information prescribed by, the regulations;
(b) must set out the details of, or have attached to it -
(i) the construction contract involved or relevant extracts of it; and
(ii) any payment claim that has given rise to the payment dispute;
and
(c) must set out or have attached to it all the information, documentation and submissions on which the party making it relies in the adjudication.
(3) A prescribed appointor that is served with an application for adjudication made under subsection (1) must comply with section 28.
51 It is agreed that the time requirement in this case for the filing of a compliant adjudication application was 'within 28 days after the dispute arises'.
52 Section 6 of the CC Act, concerning payment disputes, states:
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.
53 'Payment claim' is defined in s 3 of the CC Act as follows:
payment claim means a claim made under a construction contract –
(a) by the contractor to the principal for payment of an amount in relation to the performance by the contractor of its obligations under the contract; or
(b) by the principal to the contractor for payment of an amount in relation to the performance or non-performance by the contractor of its obligations under the contract[.]
The relevant contract
54 The contractual provisions relating to the provision of services by FDS and payment for those services are spread over a number of interrelated documents, cumulatively entitled 'Service Agreements for the Hire of Operation of Hagglund Units'. The agreement comprises four 'Sections' and three 'Schedules'.
55 Section 1, 'Form of Agreement', contains the following:
…
3. In accordance with the terms and conditions of the Agreement, the Subcontractor shall perform and complete the Services and the Contractor shall pay the Subcontractor in accordance with Schedule 3 - Compensation.
…
6 If any provision of this Agreement conflicts with the terms of any Schedule of Section [sic], the terms of these General Conditions take precedence and govern. If there are any special conditions, these take precedence over the General Conditions.
56 The General Conditions contain a number of relevant provisions.
57 Clause 2 is headed 'How Contractor will purchase Services'.
Sub-clauses 2.1 and 2.4 to 2.6 state:
2.1 If Contractor wants to purchase the Services, Contractor shall give Subcontractor a written Site Instruction describing;
a) the Services required,
b) the Work Sites,
c) when the Services shall be performed; and
d) other relevant details.
…
2.4 In the event of acceptance, Contactor will prepare and sign a Site Instruction for the Services and issue it to Subcontractor.
The Site instruction will:
a) describe the Services to be provided in the Site Instruction, consistent with the attached proforma Site Instruction;
b) provide further technical and other specifications for the Services, if required;
c) further describe or clarify the Work Sites for the Site Instruction, to extent consistent with this Agreement;
d) State the Completion Date for the Services;
e) state the Site Instruction Price;
f) add or clarify details regarding pricing, cost, payment or invoicing as required by and consistent with the Compensation Schedule, including payment milestones;
g) identify Subcontractor's key personnel;
h) identify Contractor's Site Instruction representative;
i) identify Subcontractor Groups which Subcontractor can use, and which Services those Subcontractor Groups can perform: and
j) incorporate other specific requirements with respect to the Site Instruction, provided they do not conflict with this Agreement.
2.5 Once Subcontractor receives the Site Instruction, Subcontractor shall check the Site Instruction carefully and sign it. If Subcontractor cannot comply with the time schedule or other requirements of the Site Instruction, Subcontractor shall not sign the Site Instuction and instead, Subcontractor shall immediately notify Contractor. Contractor shall then either change the Site Instruction or withdraw the Site Instruction.
2.6 Subcontractor shall only start providing the Services after both Contractor and Subcontractor have signed the Site Instruction.
58 Clause 4, 'Legal effect of a Site Instruction', provides:
4.1 When a Site Instruction has been signed by Subcontractor and Contractor. It is a legal contract.
4.2 Each Site Instruction is a separate legal contract from all other Site Instructions and from this Agreement Every Site Instruction is governed by the provisions of this Agreement, including all schedule and sections. A Site Instruction cannot change the provisions of this Agreement or any other Site Instruction.
4.3 This Agreement takes precedence over any conflicting provisions of the State Instruction.
4.4 Only the specific terms written in the signed Site Instruction and this Agreement are binding on Contractor and Subcontractor. Contractor is not bound by anything which Subcontractor adds to a Site Instruction, or terms and conditions in any other documents (for example, even if Subcontractor's documents say otherwise. Such documents shall be treated as having been formally rejected by Contractor.
59 Clause 14, 'Payment and invoicing', includes the following sub-clauses:
14.1 Subcontractor must invoice Contractor for, and Contractor will pay Subcontractor, the Site Instruction Price for Services performed under each Site Instruction within 30 days of receipt of an undisputed invoice. The Site Instruction Price will be stated in the Site Instruction and must be calculated in accordance with the rates set out in the Compensation Schedule[.]
14.2 Subcontractor must comply with the invoicing and other instructions in the Compensation Schedule. Contractor does not have to pay invoices which do not comply with the Compensation Schedule.
The references in these sub-clauses to 'Compensation Schedule' is to Appendix 2 to Schedule 3, headed 'Milestone Payment Schedule', containing the following payment provisions:
1) Project Initiation
$212,500 plus GST payable within 14 days of Agreement signing
$212,500 plus GST payable within 42 days of Agreement signing
2) Each BV206 Ordered
$95,000 plus GST within 14 days of Agreement signing
$118,500 plus GST at time of FOB in the UK
$115,000 plus GST at time of being ready to ship site, Belmont[.]
The relevant events
60 On 2 January 2014, CSJV issued FDS with a Site Instruction which:
a) instructed FDS to initiate the supply of a second tranche of four vehicles;
b) requested supply of the four vehicles by sea freight to meet readiness for site delivery by 15 April 2014 or earlier; and
c) requested FDS to 'expedite by return the counter-signed [Site Instruction] with associated delivery Schedule Invoice to expedite payment thus [to] enable preparation of the remainder of the units in the above order of delivery'.
61 On 4 February 2014, FDS issued a tax invoice to CSJV, which:
a) referred to the above Site Instruction; and
b) stated:
As per Milestone Payment Schedule: $
2 Second four off (4) x BV206 Tipper Units – Payment 3 of 3 460,000.00
GST thereon 46,000.00
Total Invoice Value $506,000.00
Payment Terms :
Upon milestone achievement - FOB Belmont
62 No issue has been raised about the 'Site Instruction price' being contained in the tax invoice, and not in the Site Instruction, as required by General Condition clause 2.4.
63 By emails dated 24 and 29 April 2014 and a letter dated 16 May 2014, FDS advised CSJV that vehicles BVS006, BVS005 and BVS007 respectively were 'FOB Belmont'. In the two emails, the advice was followed with 'Please progress immediate payment'. The letter stated
'Please make immediate payment under our Invoice No 1402042 (copy attached)', being the invoice to which I have referred.
64 CSJV did not make a payment in response to any of FDS' claims.
65 On 22 May 2014, FDS served the adjudication application on the appointed adjudicator, Mr Barry Tonkin.
Consideration
66 FDS contends for each of the dates that the respective vehicles were ready to be shipped from Belmont as being the date upon which the payment dispute in relation to each vehicle arose. In doing so, it relies upon the three dates as determining 'the time when the amount claimed in a payment claim is due to be paid under the contract' within s 6(a) of the CC Act. It argues that a payment dispute arose, in respect of the supply of each vehicle, on the date of the unsatisfied demand for immediate payment relating to each.
67 Leaving clause 14 of the General Conditions to one side, identification of the 'FOB Belmont' dates as the time of the amount claimed for each vehicle falling due under the contract appears correct.
68 However, the effect of clause 14.1 of the General Conditions is to require an invoice to be given for services performed under each Site Instruction by the subcontractor, and for the contractor to pay within 30 day of receipt of an undisputed invoice. Clause 14.1 of the General Conditions contemplates that once any service is performed in accordance with a request in a Site Instruction, FDS will invoice CSJV for that service, with the final date for payment of an undisputed invoice being required within 30 days from its receipt. Amongst other things, this mitigates the potential prejudice to the debtor arising from the payment being due immediately upon the occurrence of an event not within its control.
69 The second sentence of clause 14.1 of the General Conditions creates no tension with the requirement for a 30 day invoice. It merely prescribes the method of calculation of the Site Instruction price, by reference to the rates in the 'Compensation Schedule'. As I have said, no price was given in the Site Instruction. The price for the four remaining vehicles payable at the stage of being ready to ship site at Belmont, calculated correctly in accordance with the milestone payment schedule, appeared in the anticipatory invoice.
70 FDS' arguments depend upon an alleged dominance of the 'Compensation Schedule', asserted to flow from clause 14.2 of the General Conditions. According to FDS, in order for effect to be given to that provision, the time for the third stage payments falling due must be when the vehicles became ready for shipping at Belmont.
71 As I read clause 14.2 of the General Conditions, it simply casts upon FDS an obligation to 'comply with the invoicing and other instructions in the Compensation Schedule', failing which CSJV is not liable to pay a non-compliant invoice. Again, there is nothing in that clause which conflicts with, or requires a 'reading down' (as submitted by FDS' counsel) of the first sentence of clause 14.1 of the General Conditions. The staged timing of payments for the vehicles, appearing in clause 2 of the milestone payment schedule by reference to particular events, reflects progression in the performance of services under the Service Agreement. Clause 14.1 of the General Conditions requires, in respect of any amount payable at a particular stage of that progression, that FDS invoice CSJV, which CSJV would then have 30 days to pay.
72 Although I consider that the various provisions are capable of being read together as I have indicated, in the event of any conflict between them, clause 6 of Section 1 of the Service Agreement requires the terms of the General Conditions (including clause 14) to take precedence over the terms of any schedule to the Service Agreement (the milestone payment schedule being an annexure to Schedule 3).
73 FDS did not give a 30 day invoice to CSJV for any of the amounts which it subsequently claimed to be payable in the adjudication application. The tax invoice dated 4 February 2014 was not such an invoice. It was not a 30 day invoice, nor could it be, the time for payment not having arrived when it was issued. It also related to four vehicles, not three, and did not distinguish between their differing due dates for payment.
74 The consequence of my preceding findings is that, on the assumption of the existence of a construction contract, no payment dispute has even arisen, making the adjudication application premature. In the language of s 31(2) of the CC Act, the adjudication application was not prepared and served in accordance with s 26 of the Act and was therefore suitable to be dismissed on this ground.
Orders
The Tribunal will issue an order in the following terms:
1. The review application is dismissed.
2. The decision of the adjudicator, Mr Barry Tonkin, to dismiss the adjudication application is affirmed.
I certify that this and the preceding [74] paragraphs comprise the reasons for decision of the State Administrative Tribunal.
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MR T CAREY, MEMBER