In this Update we look at a recent NT Supreme Court decision on a claim for standby charges for a dredge.[1]  Macmahon Contractors Pty Ltd (“Macmahon”) entered into a contract with Hall Contracting Pty Ltd (“Hall”) for the dredging work on the Darwin Marine Supply Base.   Hall made two successive claims for having the dredge idle on standby for the wet season.  The first claim covered the period from 1 December 2012 to 25 February 2013.  The second claim covered the period from 25 February 2013 to 1 May 2013.  The first claim went to adjudication under the Construction Contracts (Security of Payments) Act (NT) (the “Act”) and Hall was successful, being awarded its claim for standby charges for the first part of the wet season.

Hall then made its second claim which was assessed at nil by Macmahon.  Macmahon’s main reason for refusing to pay was that it denied it had instructed Hall to keep the dredge on standby. Although this argument had been unsuccessful at the first adjudication, Macmahon again put forward the same response.  Hall referred its second claim to adjudication.  This time, the adjudicator dismissed Hall’s claim and awarded it nil.  However, the adjudicator’s reason for denying Hall’s claim was not a reason put forward by Macmahon.  The adjudicator said that Hall had not provided any evidence that the dredge had been idle or on standby.  Both Macmahon and Hall had been in agreement that the dredge had been idle and on standby and Hall was not aware of the adjudicator’s view about this lack of evidence until the determination was published.  Hall applied to the Supreme Court to have the adjudication quashed.

The Supreme Court review

The Court noted that there was clear evidence that the dredge was idle and on standby that had been overlooked by the adjudicator.  Further, the adjudicator had decided the dispute on an issue that had not been raised or considered by either party in its submissions and had not asked the parties to address the issue.  This was clearly an error by the adjudicator.

However, it is well established law that an adjudicator can make errors of law or fact within jurisdiction and this does not render his decision void or of no effect.  In this context, jurisdiction means the limit of the power given to the adjudicator by the Act.   Macmahon said that if the adjudicator had made a mistake, he had made it within jurisdiction.  Therefore Macmahon said, the decision should not be overturned by the Court.

Hall cited numerous grounds upon which it said the decision should be quashed.  First, Hall said that the adjudicator had acted outside of his jurisdiction by failing to take into account a relevant consideration.  Halls said that the adjudicator was bound by the first adjudication outcome and should only have been assessing the quantum of the award.  Halls said that to consider issues outside of this area as the adjudicator had done was to act outside of his jurisdiction.

Second, Hall said that the adjudicator should have asked it to provide more evidence on whether the dredge had been idle and on standby.  It said that the failure to do so had been a substantial denial of natural justice to Hall because not even Macmahon had raised this as a reason to not pay Hall.

The Court said that the adjudicator had acted within jurisdiction.  The adjudicator was entitled to decide whether a payment was due under the contract between Halls and Macmahon and to consider the issues he thought were relevant.  However, the Court said that by deciding the outcome on a point not raised by either party, the adjudicator had denied natural justice to Hall because he had not asked the parties to provide further submissions on whether the dredge was idle and on standby.  The Court quashed the adjudicator’s determination.

Conclusion

The adjudication regime is a quick and cost effective method of ensuring cash keeps flowing in the construction industry.   Inevitably, the speed of the process can lead to glitches in the system.  The safeguard in our system is the oversight of the Court and this is one of the rare cases where that safeguard has been necessarily invoked.   Adjudication remains a quick and cost effective means of resolving disputes over progress payments.

 

[1] Hall Contracting Pty Ltd v Macmahon Contractors Pty Ltd & Anor [2014] NTSC 20