A recent case in the Northern Territory has confirmed that once a party has made an application for an adjudication of a payment dispute, it can’t re-apply for an adjudication of the same payment dispute, even if the application has been withdrawn. 

As a payment dispute can’t be deferred or retriggered by the resubmission or reformulation of a payment claim, a claimant only has ‘one shot’ to adjudicate a payment dispute under the Construction Contracts (Security of Payments) Act 2004 (NT). This is important to remember if you are considering withdrawing an application for adjudication to allow settlement discussions to occur, or if you are considering applying for multiple payment disputes to be adjudicated in the one application (which requires the consent of the other party).

A detailed explanation of the case in question follows.

Introduction

The Northern Territory Supreme Court of Appeal was recently asked to decide whether Section 27 of the Construction Contracts (Security of Payment) Act 2004 (NT) (“the Act”) precludes a party to a construction contract from making an application for adjudication under the Act where a prior application has been withdrawn.[1]

Background

The appellant, Brierty Ltd (“Brierty”), applied to have two separate payment disputes arising under the same construction contract with the respondent, Gwelo Developments Pty Ltd (“Gwelo”), simultaneously adjudicated.

Brierty required the consent of Gwelo for simultaneous adjudication, which it did not give, causing Brierty to withdraw the first adjudication application and make two new applications, one for each payment dispute.

Gwelo filed an application in the Supreme Court seeking declarations that Brierty was not entitled to re-apply to have the two payment disputes adjudicated.

The trial Judge held that Section 27 of the Act did apply and precluded Brierty from making the second and third applications.

Brierty appealed this decision on the grounds that Section 27 of the Act did not apply to applications withdrawn under Section 28A of the Act.

Section 27 of the NT Act states:

“If a payment dispute arises under a construction contract, any party to the contract may apply to have the dispute adjudicated under this Part unless-

  • an application for adjudication has already been made by a party (whether or not a determination has been made) but subject to Sections 31(6A) and 39(2)”.

Appellant Submissions

Brierty submitted that the grammatical construction of Section 27(a) only refers to applications which remain in existence or have already been determined by an adjudicator at the time the subsequent application was made. Brierty made this submission on the basis that the phrase “an application for adjudication has already been made by a party” uses the present perfect tense and consequently, a withdrawn application for adjudication is not relevant to the present because the application cannot and does not last through to the present.

Brierty also submitted the effect of the trial Judge’s interpretation of Section 27 of the Act was that a party may be able to stop another party proceeding with an application for adjudication of a payment dispute by filing an application and then withdrawing it.

Wording of Section 27(a)

The Court of Appeal thought Brierty’s submissions regarding the construction of Section 27 could not be sustained as it was neither consistent with the text of Section 27 nor the objectives of the legislation.

The Court first considered the wording of Section 27(a) of the Act and held:

“The words ‘whether or not a determination had been made’ are relevant to indicate that a party is disentitled from applying for adjudication of a dispute not only where an application for adjudication of that dispute has been made and determined, but also where an application has been made but, for any reason, not determined”.

In considering the wording of Section 27(a), the Court explained that the Section provides two express exceptions in ss 31(6A) and 39(2), neither of which involves a withdrawal of an application.

The Court thought the wording of Section 27(a) made it clear that the relevant question to be asked immediately prior to an adjudication application being made is: “Has any party to the contract already made an application for adjudication of the payment dispute?”

If the answer to the above question is in the affirmative, then a party applying for adjudication is not entitled to apply to have the payment dispute adjudicated under the Act. The Court stated ‘the ultimate fate or the current status of any earlier application – whether withdrawn, dismissed, determined, or adjudication decision pending – is irrelevant’.

The Court also thought the interpretation of the trial Judge was supported by the provision of Section 28A of the Act which provides that once an adjudicator has been appointed they must refuse a withdrawal of an application if the other party objects and has a legitimate interest in obtaining a determination of the application.

Legislative scheme

The Court then considered the purpose of the Act and noted the objective is to ‘secure payments under construction contracts and provide for an adjudication of disputes about payments under construction contracts’.

The Court also noted the trial Judge pointed out the object of Part 3 of the Act is to determine the dispute fairly, rapidly, informally and inexpensively as possible. The Court stated:

“Her Honour placed weight upon the fact that, inconsistent with this objective, the construction of s 27 proposed by the appellant would allow a party to withdraw an application for adjudication and then, subject to time constraints, make as many further applications as it desired. It is not surprising that the legislative scheme would not permit a situation where an applicant could withdraw an application and substitute a further application”.

Conclusion

The Court of Appeal held the trial Judge’s construction of Section 27(a) of the Act was consistent with the objectives of the Act and dismissed the appeal.

When determining whether to withdraw an adjudication application, a claimant should keep in mind that it is not able to make a subsequent application in relation to that payment dispute regardless of whether a determination has been made and the amount in dispute will not be recoverable under the Act.

 

[1] Brierty Ltd v Gwelo Developments Pty Ltd [2014] NTCA 7.