Ace v ECR

It is perhaps surprising that one of the rather rare decisions on the Western AustralianConstruction Contracts Act 2004 should have come, not from a Western Australian Court, but from the Local Court of New South Wales.  But, that is what happened in Ace Constructions & Rigging Pty Ltd v ECR International Pty Ltd.

The case arose out of a contract for work in Western Australia, although both parties were based in New South Wales.  The plaintiff subcontractor was seeking to enforce the decision of the adjudicator appointed under the Western Australian Act, and had registered the decision as a judgment.  The defendant was seeking to have the judgment set aside, on the basis that the adjudicator’s decision was a nullity on no less than three grounds.

Section 43 of the Construction Contracts Act provides that adjudicators’ decisions may be enforced as judgments with the leave of a “Court of competent jurisdiction”.  Presumably, the Act envisaged that that would be a Western Australian court, but the plaintiff in this case persuaded the registry of the Local Court in New South Wales that it could enter judgment.  For practical reasons, no issue was taken as to this by the defendant.

Two threshold points

As a threshold point, the plaintiff argued that the Court, having entered judgment, had no jurisdiction to set it aside unless and until the adjudicator’s determination had been quashed or declared by void by a court with such jurisdiction (which would not include the Local Court).  The Court disagreed.  Applying a dictum from Brodyn, the Court found that it was open for the defendant to have the judgment set aside on the grounds that the decision was void without going to the additional expense of declaratory relief.

A second jurisdictional argument by the plaintiff met with no more success.  An assertion by a defendant that if an adjudicator’s decision is void does not amount to a process of judicial review.  The wording of the Construction Contracts Act on this point is rather curious.  Under Section 46, a person whose aggrieved by a decision of an adjudicator to dismiss an application without a determination on the merits (for example, because the adjudicator finds that the contract concerned is not a construction contract) has the right to apply to the State Administrative Tribunal for a review of such decision, that there seems to be no express power of review of a decision that is made on the merits.  Be that as it may, the exclusion of appeals and reviews under Section 46(3) does not lend any validity to a decision which is void on natural justice grounds.

Apprehended bias from exposure to without prejudice material

The first substantive ground of challenge concerned without prejudice material; the plaintiff had included within the material put before the adjudicator at the outset a without prejudice offer made by the defendant.  The defendant invited the adjudicator to recuse himself on the basis of apprehended bias, but the adjudicator refused to go.  The plaintiff argued that if the adjudicator was right not to disqualify himself because the rules of evidence, which might otherwise have forbidden production of the “without prejudice” document do not apply in adjudications.  However, the Court found that the apprehended bias rules do apply; the relevant question is whether a notional fair-minded observer, armed with full knowledge, would have apprehended bias or pre-judgement on the adjudicator’s part.  On the facts, however, the Court found that this particular without prejudice offer would not have led to such apprehension, and so the adjudicator’s determination was not a nullity on that ground.

Non-consideration of the Response

The Court then considered a point concerning the Adjudication Response.  The defendant’s solicitors had attempted to serve their response on the last day by fax, but without success.  They accordingly emailed the decision on that day to both the adjudicator and the plaintiff’s solicitors.  The plaintiff’s solicitors said, however, that the email had gone into its junk mail folder, and that whilst delivery by post or hand would be deemed service under the Interpretation Act 1984 (WA) there was no deemed service in the case of emails.  The adjudicator had accepted that argument, and delivered his decision without regard to the contents of the response.

The Court found that, on this ground, the adjudicator’s decision was in breach of natural justice and void.  First, the Court remarked that the response had been properly served.  It remarked that if the plaintiff’s “spam-killer software siphoned the email message and attachments into a junk mail folder on its email system, this was, from an administrative perspective, no different from misplacing and failing to open a postal mail delivery”.  Further, the Court said that even if it was wrong in taking the view that the response had been properly served, the adjudicator was wrong not to consider it.  Under the Act, the adjudicator may inform himself “in any way he or she thinks fit” and is given wide investigative powers.  Natural justice or procedural fairness required each party having an appropriate opportunity of being heard.  Accordingly, the adjudicator’s decision was void, and accordingly the Court judgment was entered irregularly and was set aside.

The Time Bar

Given that conclusion, the Court found it unnecessary to consider the remaining point, which was perhaps of the most general interest.  The Western Australian model contains a much tighter timescale than the Eastern model of adjudication.  Under Section 26 of the Construction Contracts Act, a party who wants to have a payment dispute adjudicated must bring his adjudication within 28 days after the dispute arises.  In this case, the plaintiff’s invoice had been issued, and all the disputes raised, much earlier than the start of that 28 day period.  However, the plaintiff sought to re-enliven the dispute by issuing another invoice, identical in substance to its original invoice, asserting that failure to pay the second duplicate invoice gave rise to a fresh dispute.

The plaintiff’s argument had succeeded before the adjudicator, but it is suggested that it would be most unlikely to survive any judicial consideration, for two reasons.  First, on the wording of Section 6 of the Act, the question of when a payment dispute arises is to be determined by reference to when the sum claimed is due to be paid under the contract, and not by reference to when the claim is made.  In other words, a claimant cannot postpone the adjudication deadline by delaying the time he makes his claim, let alone by duplicating the claim.  Secondly, from a purposive point of view, to allow a claimant to revive stale claims by the simple expedient of re-invoicing would drive a coach and horses through the intent of the legislation.  The position may be different in some forms of contract, where the contractor has a fresh contractual right, every month, to a fresh valuation and payment of all his work done to date.  But there was no such contractual provision in this case.

Had the Court concluded that the adjudication was time barred, it would then have followed that, under Section 31, the adjudicator’s only jurisdiction would have been to have dismissed the application, and that any determination on the merits would have been without jurisdiction and thus void.

Summary

Pacific & Solomon showed that even on the Eastern model, where much more rigid time bars apply, the function of an adjudicator is to determine what is due.  That principle is the more overriding under the Western Australian model, and this case is a welcome reminder that adjudication is all about the just and economical resolution of disputes, and not just about imposing deadlines.

 

ECR were represented by Robert Fenwick Elliott as counsel and Fenwick Elliott Grace as solicitors

Full judgment