BM Alliance Coal Operations Pty Ltd v BGC Contracting Pty Ltd

In the case of BM Alliance Coal Operations Pty Ltd v BGC Contracting Pty Ltd, the appellant, BM Alliance Coal Operations Pty Ltd (BMA), brought proceedings against the first respondent, BGC Contracting Pty Ltd (BGC), following a dispute over a progress payment claim under a contract for the construction of a dam. BGC served a payment claim on BMA, which included claims for alleged latent conditions and termination costs. This claim was referred to adjudication, and BGC was awarded a progress payment which included sums on account of latent conditions and termination costs. BMA sought a declaration that the adjudication decision was void as a result of three jurisdictional errors. The primary judge initially held that the adjudicator had made a jurisdictional error in the determination of the termination costs claim and declared the decision of the adjudicator void. However, the primary judge later revoked this declaration and dismissed BMA’s application after BGC undertook to repay to BMA the portion of the adjudicated amount affected by jurisdictional error.

The court was required to decide whether the primary judge erred in finding that a decision affected by jurisdictional error was not necessarily invalid for all purposes and has some residual effect. The court also had to consider whether the primary judge erred in law in withholding the relief sought by BMA and whether the matter should be remitted to the adjudicator for determination according to law. Additionally, the court needed to determine whether clause 26.3 of the contract operated subject to the determination of the existence of latent conditions under clause 37, and whether the adjudicator committed a jurisdictional error in awarding BGC a progress payment which included a sum in respect of latent conditions. Lastly, the court had to decide on the appropriate rate of interest to be awarded on the sum repayable to BMA.

The court held that the primary judge's conclusion that a decision affected by jurisdictional error was not necessarily invalid for all purposes and has some residual effect was correct. The court found that the primary judge did not err in law in withholding the relief sought by BMA, as BGC's undertaking to repay the portion of the adjudicated amount affected by jurisdictional error resolved the issue. The court also held that clause 26.3 of the contract did not operate subject to the determination of the existence of latent conditions under clause 37, and that the adjudicator did not commit a jurisdictional error in awarding BGC a progress payment which included a sum in respect of latent conditions. Finally, the court held that the primary judge did not err in accepting and acting on evidence of commercial interest rates when awarding interest on the sum repayable to BMA.

The appellant is directed to consult with the respondent and bring in draft minutes of order reflecting these reasons within 28 days of today’s date.