Introduction

The construction industry is heavily dependent on cash flow and the Security of Payment legislation now in force across Australia was introduced in an attempt to keep cash flowing during construction projects.  Adjudications of payment disputes have become commonplace under the legislation.

Sometimes contractors make an error when applying for adjudication and subsequently realise that the adjudication will end badly if they continue.  In those circumstances, what does the contractor do?  Should it withdraw the application or restart the whole process?  A recent decision of the Court of Appeal of the Northern Territory makes clear the position under the Construction Contracts (Security of Payments) Act 2004 (NT) (“the Act”) as it applies to Northern Territory adjudications[1].

Background

In August 2013, Gwelo Developments Pty Ltd (“Gwelo”) and Brierty Limited (“Brierty”) entered into a construction contract for civil works at a shopping centre in Coolalinga.   Brierty applied to have two separate payment disputes arising under the same contract simultaneously adjudicated.  Under the Act, a party cannot commence an adjudication involving more than one dispute unless both parties give consent.   Brierty omitted to obtain consent from Gwelo before commencing the adjudication.

On receiving the adjudication application, Gwelo wrote to Brierty pointing out no consent had been requested and stating no consent would be forthcoming.  Gwelo said Brierty should immediately withdraw the adjudication application.

Brierty responded saying they would withdraw one of the disputes from the adjudication and allow the adjudication to continue in relation to the other dispute.  Brierty said it would then issue a fresh adjudication application for the withdrawn dispute.

Gwelo responded saying there was no legal basis for partly withdrawing an adjudication and Brierty should withdraw the entire adjudication.  Brierty agreed and did so.  A few days later, Brierty issued two new adjudication applications, one for each dispute.

Gwelo then wrote to Brierty pointing out s27 of the Act precludes a party from issuing an adjudication application when it has issued a previous adjudication application for the same issue.   Gwelo said unless Brierty withdrew the second and third adjudication applications, it would approach the Supreme Court for an order declaring the adjudication application invalid.  Brierty refused to withdraw and Gwelo applied to the Supreme Court.

The Initial Decision

The NT Supreme Court considered the issue on an urgent basis.  Brierty argued the Court should not interfere as it was a matter for the adjudicator to decide.  Brierty also said that while the Act prevents a second adjudication being applied for over the same dispute, this was not applicable to the present circumstances because the application had been withdrawn due to the lack of consent and was not a valid adjudication application.

Justice Kelly agreed with Gwelo.  Her Honour said that s27 of the Act applies equally to a withdrawn adjudication application as it does to a completed adjudication.  The failure by Brierty to obtain Gwelo’s consent was of its own making.  It was incorrect to describe the adjudication as invalid because of the lack of consent.  The adjudication had commenced, an adjudicator had been appointed and fees had been paid. The Court declared the second and third adjudication applications invalid and therefore the adjudication could not proceed.

Appeal to the Court of Appeal

Brierty appealed to the Court of Appeal of the Northern Territory.  The Court held the words “whether or not a determination had been made” in section 27(a) of the Act are significant and indicate a party is not entitled to reapply for adjudication if an application has been determined, but also, if for any reason, the application was not determined.  The Court of Appeal agreed with Justice Kelly and dismissed Brierty’s appeal.

Conclusion

Once a party has made an application for an adjudication of a payment dispute under the NT Act, it cannot re-apply for an adjudication of the same payment dispute, even if the application was withdrawn.

This means a claimant has ‘one shot’ to adjudicate a payment dispute. It is critically important to ensure all requirements of the Act have been met before submitting an adjudication application.  If a contractor is considering withdrawing an adjudication application, it should carefully consider all options.

 

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