Disputes Deferred Under West Coast Model

The Supreme Court of the Northern Territory has declined to follow a string of Western Australian decisions as to the interpretation of Section 8(a) of the Construction Contracts (Security of Payments) Act (NT), which is in very similar terms to Section 6(a) of the Construction Contracts Act 2004 (WA).  The Section provides that a Payment Dispute arises if “when the amount claimed in a Payment Claim is due to be paid under the contract, the amount has not been paid or the claim has been rejected or wholly or partly disputed”.  The question was whether the reference to the amount claimed being due to be paid qualifies just the non payment, or also the rejection or dispute.

In other words, if a claimant puts in a Payment Claim, which is rejected the next day, has a payment dispute arisen (the early date construction) or does no dispute arise until the Payment Claim would be due for payment (the late date construction) or does a payment dispute arise both when the claim is disputed, and also when it falls due without being paid (the multiple trigger construction)?

The point is important because this date sets time running for the window within which an adjudication application must be made (90 days in the Northern Territory, but just 28 days in Western Australia).

In a string of cases (Blackadder v Mirvac [2009] WASAT133, South Coast Scaffolding v Hire Access [2012] WASAT5 and Fuel Tank v Decmil [2010] WASAT165 the Western Australian State Administrative Tribunal had found for the early date construction.  But in the recent decision of DCI v URC [2012] NTSC22 Barr J has found for the late date construction.  The facts in that case were that there was no doubt about their having been a payment dispute, that the Payment Claim had been disputed before the adjudication application was made, and that, at the time of the Adjudicator’s decision, the Payment Claim had fallen due.  Nevertheless, the Court found that, because the adjudication application was made a few days before the Payment Claim was due, there was a failure of an “essential precondition” such that the Adjudicator’s decision was void for jurisdictional error.

The decision will come as a surprise to many in the industry, who will naturally have assumed that when a Payment Claim is disputed, that amounts to a payment dispute.

It is by no means clear whether there will be any sufficient incentive on URC to appeal, since at the hearing of the original challenge, some time before the reserved judgment was delivered, the Judge dismissed DCI’s application for a stay, and told them to pay, which DCI did.  In any event, in light of the NSW decision in Cardinal v Hanave, URC made a further adjudication application, which is before the same Adjudicator.

The decision is likely to cause some difficulty, particularly in Western Australia.  Should claimants follow the Western Australia authorities in favour of the early date construction, ie make their adjudication applications within 28 days from when the Payment Claim is first disputed? Or should they wait until the money claimed is due, as decided in DCI v URC?  There are risks either way: if claimants take the first course, they run the risk of ending up in the Supreme Court and DCI v URC being applied to declare the whole process void.  If they take the latter course, they run the risk of being outside the 28 day window.

The DCI said that they wanted to run this as a test case, but the result appears to have had entirely the opposite effect, and it seems inevitable that the courts will have to return to this issue in Western Australia and/or the Northern Territory.

Robert Fenwick Elliott, instructed by Fenwick Elliott Grace, was counsel for URC.

Full case reference:  Northern Territory of Australia, acting through the Department of Construction and Infrastructure Construction Division v Urban & Rural Contracting Pty Ltd [2012] NTSC 22.  A copy of the Judgment is here.

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