Clough Projects Australia Pty Ltd v Floreani - [2018] WASC 101

JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA
IN CIVIL

CITATION:   CLOUGH PROJECTS AUSTRALIA PTY LTD -v- FLOREANI [2018] WASC 101
CORAM:   TOTTLE J
HEARD:   28 FEBRUARY 2018
DELIVERED          :   10 APRIL 2018
FILE NO/S:   CIV 2976 of 2017
BETWEEN:   CLOUGH PROJECTS AUSTRALIA PTY LTD
Applicant
AND
NICHOLAS FLOREANI
Respondent
OCEANIC OFFSHORE PTY LTD
Other Party

Catchwords:

Judicial review - Application for writ of certiorari - Determination made by adjudicator under Construction Contracts Act 2004 (WA) - Whether adjudicator exceeded jurisdiction - Whether denial of procedural fairness - Where adjudication of multiple payment disputes between same parties - Where determination made on basis that implied contract arose outside of contract - Where determination made on basis not argued for by parties

Legislation:

Construction Contracts Act 2004 (WA), s 32(3)(b), s 32(3)(c)
Interpretation Act 1984 (WA)

Result:

Application granted

Category: A

Representation:

Counsel:

Applicant	:	Mr J M Healy
Respondent	:	No appearance
Other Party	:	Mr C P K Russell

Solicitors:

Applicant	:	HFW Australia (Perth)
Respondent	:	No appearance
Other Party	:	Baker & McKenzie (Victoria)

Case(s) referred to in decision(s):

Cape Range Electrical Contractors Pty Ltd v Austral Construction Pty Ltd [2012] WASC 304
Commissioner for ACT Revenue v Alphaone Pty Ltd [1994] FCA 1074; (1994) 49 FCR 576
Delmere Holdings Pty Ltd v Green [2015] WASC 148
John Holland Pty Ltd v Chidambara [2017] WASC 179
Kioa v West [1985] HCA 81; (1985) 159 CLR 550
Lampson (Australia) Pty Ltd v Fortescue Metals Group Ltd [No 3] [2014] WASC 162
Liebe v Molloy [1906] HCA 67; (1906) 4 CLR 347
Pavey & Matthews Pty Ltd v Paul [1987] HCA 5; (1987) 162 CLR 221
Perrinepod Pty Ltd v Georgiou Building Pty Ltd [2011] WASCA 217; (2011) 43 WAR 319
Project Blue Sky Inc v Australian Broadcasting Authority [1998] HCA 28; (1998) 194 CLR 355
Thiess v Collector of Customs [2014] HCA 12; (2014) 250 CLR 664
Zurich Bay Holdings Pty Ltd v Brookfield Multiplex Engineering and Infrastructure Pty Ltd [2014] WASC 40

TOTTLE J:

Introduction

The applicant, Clough, applies for a writ of certiorari to quash a determination made by the respondent, an adjudicator appointed under the provisions of the Construction Contracts Act 2004 (WA) (the Act). The determination was made on 13 November 2017. The adjudicator determined that Clough should pay the Other Party, Oceanic, $465,658.[1]
[1] All figures have been rounded to the nearest dollar.
The principal issues are:
(i)Did the adjudicator have the power to adjudicate more than one payment dispute between the parties simultaneously without Clough's consent?
(ii)Did the adjudicator determine the payment disputes on a basis that was not argued by the parties, thus denying Clough procedural fairness?
(iii)Did the adjudicator exceed his jurisdiction by determining the payment disputes on the basis of findings that one or more implied contracts had been made between the parties?

Background

The background is not contentious and is as follows.
Clough and Oceanic entered into a lump-sum subcontract dated 12 April 2017 (the Subcontract) pursuant to which Oceanic was to provide diving services at Mundaring Weir. The contract price was $408,467. This diving work was part of a broader range of construction work undertaken by Clough to upgrade the Mundaring Weir. Clough had a head contract with the Water Corporation of Western Australia.
The work performed by Oceanic under the Subcontract was to be conducted in two separate 'diving campaigns'. Only the first diving campaign was completed, and it was the work performed as part of this first diving campaign that was the subject of Oceanic's adjudication application.
The Subcontract provided that that Oceanic was able to claim payment for its work progressively by making progress claims at the end of each month.
The Subcontract also contained a provision, cl 22 of the Subcontract conditions, which governed variations to the work to be undertaken by Oceanic. For present purposes the important features of cl 22 are twofold: first, Oceanic could not vary the work without a direction from Clough and, second, any direction to vary the work had to be in writing.
In May and June 2017, Oceanic submitted fifteen separate invoices to Clough. Eight invoices were submitted in May 2017, and seven invoices were submitted on 30 June 2017. Oceanic contended that the May invoices constituted one payment claim and the June invoices constituted another payment claim. Clough contended that there were fifteen separate payment claims. Clough disputed nine of the fifteen invoices. The adjudicator grouped the disputed invoices into the following categories:
•Disputed Invoice 6145 (VP-001) claims compensation on the basis that Oceanic was prevented from proceeding with the diving services because of amendments to documents;
•Disputed Invoices 6146, 6161 and 6163 (VP‑003, VP‑007 and VP‑009) claim compensation on the basis of Oceanic's inability to adhere to the Dive Schedule;
•Disputed Invoices 6147, 6148, 6160 (VP‑004, VP‑005 and VP‑006) claim compensation for standby while Oceanic was waiting for stainless steel inlets to arrive on site; and
•Disputed Invoices 6162 and 6164 (VP‑008 and VP‑010) claim compensation for Oceanic not being able to work on a public holiday (WA Foundation Day) and having to work on particular Saturdays and Sundays.
On 17 October 2017, Oceanic served an application seeking resolution of a payment dispute under the Act. In the application, Oceanic sought payment of $605,963 (exclusive of GST) in relation to works performed under the first diving campaign. It characterised the disputes about the invoices referred to above as a single 'payment dispute'.

The determination

The adjudicator found that there were 15 separate payment claims. As only nine of the payment claims were disputed, the 15 payment claims gave rise to nine payment disputes.
In its response to the application Clough contended that Oceanic's attempt 'to wrap up nine disputed payment claims into a single application [was] fatal to the application' and that the application should have been dismissed on the ground that it had not been prepared in accordance with s 26(1) of the Act.
The adjudicator concluded that on the proper construction of the Act he had jurisdiction to determine the nine payment disputes. His reasoning was as follows:[2]
58I do not accept Clough's submission that I do not have jurisdiction to determine more than one payment dispute. Section 32 of the Act was amended by the Construction Contracts Amendment Act 2016 to provide, by way of an amendment to s. 32(3)(c), adjudicators with a discretion to adjudicate a payment dispute simultaneously with one or more payment dispute [sic] if satisfied that doing so will not adversely affect the ability to adjudicate the disputes in accordance with s. 30 of the Act.
59As such, I am permitted to adjudicate the 9 payment disputes provided that I am satisfied that doing so will not prejudice my ability to adjudicate in accordance with s. 30 of the Act. I am satisfied that adjudicating the 9 payment disputes will not adversely affect my ability to do so in accordance with s. 30 as the disputes are relatively straight forward, follow a common theme and [are] chronologically linked.
[2] Determination [58] - [59].
Each of Oceanic's payment claims rested on the proposition that Clough had varied the work. Oceanic invoked cl 22 of the Subcontract conditions as the basis of its entitlement to payment. I interpolate that Oceanic's claims were maintained as claims that arose under the Subcontract. No other contractual or restitutionary basis for the claims was identified by Oceanic.
Clough resisted Oceanic's claims on a number of grounds. These included arguments that the activities for which Oceanic had claimed formed part of the work to be undertaken under the Subcontract, and that no written directions to undertake the alleged variations were given.
In his consideration of the payment disputes arising from Oceanic's invoices numbered 6146, 6161 and 6163 the adjudicator referred to Clough's contention that no written instruction for variations had been given. The adjudicator said:
129Clough says that none of the work for which compensation is claimed under these invoices were performed on the basis of any written instruction issued by Clough. Clause 22.1 of the GCC provides that Oceanic shall not vary the WUC except as directed in writing. In addition, clause 15 of the GCC provides:
'Except where the Contract otherwise provides, the Principal may give a direction orally but shall as soon as practicable confirm it in writing. If the Contractor in writing requests the Principal to confirm an oral direction, the Contractor shall not be bound to comply with the direction until the Principal does so.'
The adjudicator's analysis continued as follows:
130Clough referred to the High Court decision in Liebe v Molloy (1906) 4 CLR 347 (Liebe v Molloy) in support of a submission that in order for Oceanic to make out that a variation had, in fact, been ordered it would need to do so on the basis that there had been an agreement to change the manner in which variations were instructed under the Subcontract (ie. That variations need not be in writing and could be issued by personnel on site). I read the case of Liebe v Molloy as standing for a different proposition.
131Liebe v Molloy involved a claim for extras for which there was no order in writing in the context of a lump sum written contract that provided that payment for such extras should not be allowed. The High Court held that if the proper inferences from the facts were (i) that the owner had actual knowledge of the extra works as they were being done: (ii) that the owner knew that they were outside the contract; and (iii) that the builder expected to be paid for them as extras; then a contract to pay for them could properly be implied. If, however, the fact was that the owner did not know the particular works were extras or did not know or believe that the builder expected to be paid for them, then it would be proper to conclude that no contract to pay for them should be implied.
132In my view these inference [sic] as described in Liebe v Molloy arise in the case of invoices 6146, 6161 and 6163 (VP003, VP007 and VP009) such that in relation to these variations, an implied contract to pay for them should arise.
In his analysis of the payment disputes arising from Oceanic's invoices numbered 6147, 6148 and 6160 the adjudicator adopted a similar approach as is apparent from the following paragraphs of the determination:
150Clough does not appear to dispute that a direction was given by its construction manager, William Quinn for Oceanic to retain its current dive teams on standby between 23 May 2017 and 1 June 2017. Instead, Clough says that the instruction did not vary or increase Oceanic's scope of work.
151I do not accept that a direction to standby resources does not amount to a variation under clause 22.1 of the GCC. The fact that the parties included in the Unit Rates for Variations rates for standby, indicates that the parties specifically contemplated that a direction to standby would amount to a variation.
152 Further, I do not accept that the fact there was no written direction to standby disentitles Oceanic to the variations sought. In my view, these are Liebe v Molloy claims and an implied contract to pay for them arises.
The parties' contentions in relation to the payment dispute arising from Oceanic's invoice numbered 6162 were similar to those raised in relation to the other invoices in which Oceanic claimed payment for work it said constituted variations. These included a contention by Clough that there was no applicable direction, written or otherwise. The adjudicator's finding was as follows:
169I consider that Clough's direction to Oceanic for its resources not to attend site is a variation for the purposes of clause 22.1 of the GCC and that Oceanic is entitled to be paid $11,158.78 being the daily lump sum standby rate (Item 8) and I so find on the balance of probabilities.
Clough submits that although the adjudicator did not refer expressly to Liebe v Molloy[3] when making this finding it may be assumed that he applied his earlier reasoning based on Liebe v Molloy to determine this payment dispute. [4] I accept that submission.
[3] Liebe v Molloy [1906] HCA 67; (1906) 4 CLR 347.
[4] Clough's written submissions par 22.
Although the adjudicator did not say so expressly, I infer from his reasoning that he found that a separate implied contract arose in relation to each activity that was the subject of a variation claim by Oceanic.
The adjudicator found that Oceanic had a partial entitlement to payment in relation to seven of the nine payment disputes. The adjudicator determined the amount payable based on the unit rates that were applicable to variations as set out in the Subcontract. Those unit rates were stated by the adjudicator to be applicable for the individual delays claimed to be encountered by Oceanic.
The adjudicator did not allow Oceanic's claims for delay damages, and in relation to invoice numbered VP010, the adjudicator did not allow Oceanic's claim for penalty rates. In rejecting those claims, the adjudicator found that the payment of such delay damages and penalty rates were in addition to the unit rates for variations under the Subcontract, and were contrary to the terms of the Subcontract.

Did the adjudicator have the power to adjudicate more than one payment dispute between the parties simultaneously without Clough's consent?

Relevant provisions of the Act

Before turning to the parties' submissions it is convenient to set out s 32(3) and s 32(4) of the Act. They state:
(3)An appointed adjudicator may -
(a)with the consent of the parties, extend the time prescribed by section 31(2) for making a determination;
(b)with the consent of the parties, adjudicate simultaneously 2 or more payment disputes between the parties;
(c)adjudicate a payment dispute simultaneously with one or more other payment disputes if satisfied that doing so will not adversely affect the adjudicator's ability to adjudicate the disputes in accordance with section 30.
(4) If an appointed adjudicator adjudicates simultaneously 2 or more payment disputes, the adjudicator may, in adjudicating one, take into account information the adjudicator receives in relation to the other, and vice versa.
Section 30 of the Act states:
The object of an adjudication of a payment dispute is to determine the dispute fairly and as quickly, informally and inexpensively as possible.
In its present form s 32(3) is the result of amendments made to the Act by the Construction Contracts Amendment Act 2016 (WA) (Amendment Act). The insertions and deletions made to s 32(3) by the Amendment Act were as follows:
(3)An appointed adjudicator may -
(a)with the consent of the parties, extend the time prescribed by section 31(2) for making a determination;
(b)with the consent of the parties, adjudicate simultaneously 2 or more payment disputes between the parties;
(c)~~with the consent of all the parties concerned,~~ adjudicate ~~the~~ a payment dispute simultaneously with ~~another~~ one or more other payment ~~dispute~~ disputes if satisfied that doing so will not adversely affect the adjudicator's ability to adjudicate the disputes in accordance with section 30.
Section 32(3) has not been considered by the courts since it was amended.

Clough's submissions

Clough submits the adjudicator misconstrued his jurisdiction as he erroneously exercised his power in relation to s 32(3)(c) of the Act by determining nine payment disputes simultaneously when Clough had not provided its consent.
Clough submits s 32(3)(c) allows an adjudicator to determine payment disputes simultaneously provided they are between different parties. Clough maintains that s 32(3)(c) does not deal with the issue of determining one or more payment disputes between the same parties. It argues disputes between the same parties are addressed in s 32(3)(b). In its written submissions, Clough submits:
53[O]ne of the objects of the change made to s 32(3)(c) was to avoid an adjudicator having to obtain the consent of all parties before having an ability to work on more than one adjudication at a given time. Except where the payment disputes are 'between the parties' and rightly dealt with under s 32(3)(b), the amendment now permits an adjudicator to determine a payment dispute simultaneously with one or more other payment disputes.
54That change is both logical and desirable as it provides adjudicators with the ability to, if they wish, take on as many adjudications as they can comfortably accommodate. It presents an opportunity for adjudicators to potentially be engaged as an adjudicator on a full-time basis. This opportunity was significantly curtailed under the previous regime as adjudicators needed to obtain consent of 'all parties concerned' and given that most claimants are keen to ensure their own payment dispute is given priority, it can be inferred that such consent was not easily obtained.
55Section 32(3)(c) now provides adjudicators with the discretion to determine the number of adjudications they can take on provided that in adjudicating a payment dispute simultaneously with one or more other payment disputes it does not adversely affect the adjudicator's ability to determine the payment disputes fairly, and as quickly, informally and inexpensively as possible.
Clough argues that construing s 32(3)(c) as conferring a discretion to adjudicate more than one dispute between the same parties simultaneously would render s 32(3)(b) superfluous and, thus, such a construction would be contrary to the interpretative principle that no clause, sentence, or word shall prove superfluous, void, or insignificant if by any other construction, they may all be made useful and pertinent.[5] Clough's submissions on the correct construction of s 32(3)(c) rest heavily on this argument. In oral submissions Clough's counsel, Mr Healy, accepted that if s 32(3)(b) was not present in the Act then it would be appropriate to construe s 32(3)(c) as applying in circumstances in which there were one or more payment disputes between the same parties. Mr Healy described such a construction as being 'irresistible'.[6]
[5] Project Blue Sky Inc v Australian Broadcasting Authority [1998] HCA 28; (1998) 194 CLR 355 [71] (McHugh, Gummow, Kirby & Hayne JJ).
[6] ts 32 - 33.
Clough supports its construction by pointing to the inclusion in s 32(3)(b) of the words 'the parties' and the omission of those words from s 32(3)(c). It argues this textual difference supports its contention that s 32(3)(b) operates when there are simultaneous payment disputes between the same parties whereas s 32(3)(c) is concerned with cases in which there are two or more payment disputes between different parties.
Clough argues that if the intention of Parliament was to enable an adjudicator to determine one or more payment disputes between the same parties then different words would have been used to make this clear. Alternatively, s 32(3)(c) would have been amended to include the words 'between the parties' to ensure consistency with s 32(3)(b), if it was intended to operate in the same circumstances as s 32(3)(b).
Clough submits in this case s 32(3)(b) applied because the separate payment disputes were between the same parties and, accordingly, the adjudicator did not have jurisdiction to determine the payment disputes simultaneously as Clough did not provide consent. On this basis, Clough submits the adjudicator exceeded his jurisdiction by misconstruing the statute.

Oceanic's submissions

Oceanic submits there is nothing in the text of s 32(3)(c) which limits the discretion of an adjudicator to those cases in which the payment disputes are between different parties. Oceanic submits:[7]
7[T]he ordinary meaning of the words used allow for the following two circumstances:
(a)first, where parties have more than one payment dispute between them, then the parties themselves can consent to those disputes being adjudicated simultaneously without leaving it up to the adjudicator to exercise his or her discretion: s 32(3)(b); and
(b)second, if an adjudicator is satisfied that adjudicating a payment dispute simultaneously with one or more other payment disputes will not adversely affect the adjudicator's ability to adjudicate the disputes fairly and as quickly, informally and inexpensively as possible, then whether or not the parties consent, the adjudicator can do so: s 32(3)(c).
[7] Oceanic's Outline of Submissions [7].
Oceanic submits that such an approach is consistent with the purpose and objectives of the Act which are to determine payment disputes fairly, and as quickly and inexpensively as possible, as well as to ensure the flow of funds in projects by enforcing timely payment. To have separate adjudications, with separate adjudicators, would be antithetical to this purpose as costs would be dramatically increased.
Oceanic submits that the difference in language used between the subsections, specifically the reference to 'the parties' in s 32(3)(a) and s 32(3)(b), and the absence of 'the parties' in s 32(3)(c), is necessary because in s 32(3)(a) and s 32(3)(b) something is required from the parties. In s 32(3)(c) nothing is required from the parties and, accordingly, there is no reference to them. Oceanic submits the adjudicator did not misconstrue the statute and, accordingly, did not make a jurisdictional error.

Applicable principles of statutory construction

The construction of a statute begins and ends with the words of the text. The text must be considered in its context.[8] A decision as to the meaning of the text requires consideration of the context, in its widest sense, including the general purpose and policy of the provision.[9] Context also includes the legislative history as well as extrinsic materials.[10] In the interpretation of a provision of a written law, a construction that would promote the purpose or object underlying the written law is to be preferred to a construction that would not promote that purpose or object.[11]
[8] Thiess v Collector of Customs [2014] HCA 12; (2014) 250 CLR 664 [22] (French CJ, Hayne, Kiefel, Gageler & Keane JJ).
[9] Project Blue Sky Inc v Australian Broadcasting Authority [69] (McHugh, Gummow, Kirby & Hayne JJ).
[10] Thiess v Collector of Customs [22] (French CJ, Hayne, Kiefel, Gageler & Keane JJ).
[11] Interpretation Act 1984 (WA) s 18.

Disposition

In my opinion s 32(3)(c) of the Act gives an adjudicator the discretion to adjudicate a payment dispute simultaneously with one or more other payment disputes between the same parties if the adjudicator is satisfied that doing so will not adversely affect the adjudicator's ability to adjudicate the dispute in accordance with s 30. My reasons for reaching this conclusion are as follows.
First, there are no words in s 32(3)(c) that limit its application to payment disputes between different parties. There is no textual foundation for the construction for which Clough contends.
Second, I do not accept that construing s 32(3)(c) as applicable to payment disputes between the same parties renders s 32(3)(b) superfluous. The subsections are directed to different circumstances, s 32(3)(b) is the source of an adjudicator's jurisdiction to determine more than one payment dispute between the same parties simultaneously where the parties consent. Section 32(3)(c) is the source of an adjudicator's jurisdiction when the consent of one party is not forthcoming. In the latter case the adjudicator must be satisfied that adjudicating more than one payment dispute simultaneously will not adversely affect his or her ability to adjudicate the dispute in accordance with s 30. The structure of the section follows a logical order. Subsections 32(3)(a) and (b) are concerned with circumstances in which the parties consent and, as one would expect, the adjudicator's discretion is not subject to any express limitation. Consent is not mentioned in s 32(3)(c). When the consent of one of the parties to simultaneous adjudications is not forthcoming, in order to safeguard the interests of the non-consenting party, it is logical that an adjudicator's discretion should be constrained by the necessity that the adjudicator be satisfied the dispute can be adjudicated in accordance with s 30.
Third, it is reasonable to approach the construction of s 32(3)(c) on the basis that adjudicating payment disputes between the same parties simultaneously is less likely to adversely affect an adjudicator's ability to adjudicate in accordance with s 30 than adjudicating payment disputes between different parties simultaneously. It is unlikely that the legislature intended to confer a discretion on an adjudicator to undertake simultaneous adjudications between different parties but not simultaneous adjudications between the same parties.
Fourth, the object of the adjudication scheme created by the Act is to determine payment disputes arising out of construction contracts 'fairly and as quickly, informally and inexpensively as possible' with the primary aim of keeping the money flowing down the contractual chain.[12] Construing s 32(3)(c) as conferring a discretion on an adjudicator to adjudicate simultaneously more than one payment dispute between the same parties in the absence of the consent of one party promotes the object of the Act. Multiple payment disputes between the same parties often arise out of the same project. Frequently such payment disputes will be governed by the same contract and they will have a common factual substratum. The potential for savings in time and costs if one adjudicator deals with more than one payment dispute is readily apparent. To require payment disputes of this kind to be adjudicated by different adjudicators in the absence of the consent of one party would be likely to generate increased costs and protract the dispute resolution process. The risk of inconsistent findings would be increased. There is considerable potential for one party to frustrate the object of the Act as stated in s 30 by insisting on separate adjudications when simultaneous adjudications of payment disputes would otherwise achieve that object. The construction contended for by Clough would not serve the purpose of the Act. Section 32(4) recognises and facilitates the efficiencies that may be achieved by having one adjudicator adjudicate multiple payment disputes simultaneously by permitting an adjudicator to take into account information which the adjudicator receives in relation to the other payment disputes.
[12] Perrinepod Pty Ltd v Georgiou Building Pty Ltd [2011] WASCA 217; (2011) 43 WAR 319 [87] (Murphy JA, Martin CJ agreeing).
Fifth, the preferred interpretation of s 32(3)(c) is supported by relevant extrinsic materials. Those materials are a report prepared by Professor P Evans following the statutory review of the operation and effectiveness of the Act in 2015,[13] as well as the explanatory memorandum to the Construction Contracts Amendment Bill 2016.
[13] P Evans, 'Report on the Operation and Effectiveness of the Construction Contracts Act 2004 WA' (August 2015).
In his report Professor Evans stated: [14]
The Act currently requires that an adjudicator obtain the consent of the parties to adjudicate simultaneously two or more payment disputes
…
Examples were given of parties with multiple payment claim disputes running simultaneously. In State Side Electrical Services Pty Ltd v WA Commercial Constructions Pty Ltd [2012] WADC 27 and State Side Electrical Services Pty Ltd v WA Commercial Constructions Pty Ltd [No 2][2012] WADC 60, a single application was submitted for two different payment claims for different projects, but both from the same applicant and respondent.
It appears that the adjudicator chose to undertake the two payment claims simultaneously and 'determine the dispute fairly and as quickly, informally and inexpensively as possible'.
The court noted that the adjudicator did not seek the consent of the parties, although it appears that the respondent had insisted that they were not going to participate in the payment claim dispute, were not going to give consent to hearing the payment claim disputes simultaneously and had decided not to submit a response. The decision by the District Court appears to have failed to consider s 30. The cost to the parties would have increased as a consequence of the two separate determinations
…
It is recommended that with respect to determining the payment dispute 'fairly and as quickly, informally and inexpensively as possible' the adjudicator should have the discretion to determine whether the matters should be adjudicated simultaneously.
[14] P Evans (86 - 87).
In relation to the amendments made to s 32(3)(c), cl 13 of the explanatory memorandum to the Amendment Bill states:
Clause 13 Section 32 amended
…
Section 32(3)(c) of the Act also provides that the adjudicator may with the consent of all parties adjudicate a payment dispute simultaneously with another payment dispute.
The Review recommended that in the interests of determining payment disputes fairly and as quickly, informally and inexpensively as possible, the adjudicator should have the discretion to determine whether two payment disputes should be adjudicated simultaneously.
This clause gives effect to the recommendation by amending section 32(3)(c) to provide that an adjudicator may adjudicate a payment dispute simultaneously with one or more other payment disputes if satisfied that doing so will not adversely affect the adjudicator's ability to adjudicate the disputes in accordance with section 30.
For the five reasons discussed above, the adjudicator did not act outside his jurisdiction in exercising his discretion to adjudicate more than one payment dispute between the parties simultaneously without Clough's consent.

Did the adjudicator determine the payment disputes on a basis that was not argued by the parties and thus deny Clough procedural fairness?

Clough's submissions

Clough contends the adjudicator failed to afford it procedural fairness because:
(i)he considered material which was not provided to him by either Oceanic or Clough when making the determination; and,
(ii)he did not notify Clough of his intention to base the determination on the existence of implied contracts.
Clough submits that the adjudicator was required to advise the parties of his intention to base the determination on the existence of one or more implied contracts and invite submissions before making a determination on that basis. Clough argues it was denied the opportunity to make submissions in opposition to the adoption of the implied contract approach.
Clough also argues that in reasoning that there were one or more implied contracts the adjudicator reached conclusions on which there had been no submissions. Clough submits Oceanic did not argue for, and did not adduce evidence that would support, a finding based on an implied contract.

Oceanic's submissions

Oceanic denies the adjudicator failed to accord procedural fairness to Clough. Oceanic submits it was open to the adjudicator to base the determination on the existence of implied contracts. Oceanic submits Clough had anticipated the adjudicator was considering adopting an implied contract approach, and Clough had made submissions in opposition to such an approach. To support this proposition, Oceanic points to pars 4.16 - 5.4 of Clough's Adjudication Response. I set out these paragraphs later in this section of these reasons.
Oceanic submits the fact that Clough anticipated that the adjudicator would adopt the implied contract approach, and made submissions in opposition to such an approach, militates against a finding of denial of procedural fairness.

Procedural fairness - applicable principles

A writ of certiorari may be granted to quash a determination where an appointed adjudicator has failed to afford a party procedural fairness in the adjudication.[15] In the absence of a clear manifestation of contrary legislative intention, a decision maker is required to afford procedural fairness to a person whose rights and interests are affected by the exercise of legislative power.[16] As the Full Court of the Federal Court observed in Commissioner for ACT Revenue v Alphaone Pty Ltd:[17]
Where the exercise of a statutory power attracts the requirement for procedural fairness, a person likely to be affected by the decision is entitled to put information and submissions to the decision-maker in support of an outcome that supports his or her interests. That entitlement extends to the right to rebut or qualify by further information, and comment by way of submission, upon adverse material from other sources which is put before the decision-maker. It also extends to require the decision-maker to identify to the person affected any issue critical to the decision which is not apparent from its nature or the terms of the statute under which it is made. The decision-maker is required to advise of any adverse conclusion which has been arrived at which would not obviously be open on the known material. Subject to these qualifications however, a decision-maker is not obliged to expose his or her mental processes or provisional views to comment before making the decision in question. (emphasis added)
[15] Zurich Bay Holdings Pty Ltd v Brookfield Multiplex Engineering and Infrastructure Pty Ltd [2014] WASC 40 [20], [22], [24]; John Holland Pty Ltd v Chidambara [2017] WASC 179 [53] - [54].
[16] Kioa v West [1985] HCA 81; (1985) 159 CLR 550, 584, 609, 632.
[17] Commissioner for ACT Revenue v Alphaone Pty Ltd [1994] FCA 1074; (1994) 49 FCR 576, 591 - 2.
In John Holland Pty Ltd v Chidambara,[18] Chaney J stated that:
It can be accepted that relief by way of a writ of certiorari is available where an adjudicator has determined the matter in breach of procedural fairness where it has not been shown that the breach of procedural fairness could not have affected the adjudicator's decision. That proposition stems from the general principle that a party should be given the opportunity to respond to matters prejudicial to its interests that are known only to the decision-maker and which might be taken into account in the determination of issues that may affect the party's property, rights or legitimate expectations. (Footnotes omitted)
[18] John Holland Pty Ltd v Chidambara [53].

Disposition

In my judgment the adjudicator denied Clough procedural fairness by failing to disclose to it that he proposed to find that one or more implied contracts had been formed between Oceanic and Clough concerning variations and that he proposed to allow Oceanic's variation claims on that basis. This was not a process of reasoning that was obviously open on the application or any of the supporting materials. It was not the basis upon which Oceanic advanced its case.
The submission that Clough had anticipated that the adjudicator might allow the claims on the basis of the existence of an implied contract and that it made submissions opposing such an approach is not supported by the relevant paragraphs of Clough's response. They read as follows:
4.16The Subcontract provides a clear distinction between:
(a)a variation to the scope of work (governed by the provisions in clause 22 of the General Conditions of the Subcontract); and
(b)a delay to the works that would result in practical completion not being achieved by the date for practical completion (governed by the provisions in clause 20 of the General Conditions of the Subcontract).
4.17In the case of Oceanic having an entitlement to compensation for a variation it would need to demonstrate:
(a)that there had been a written instruction by Clough to vary the scope of work; and
(b)that, if rates were to be applied for the variation, the written instruction was given to Oceanic in advance of having undertaken any variation to the scope of work.
4.18In the case of Oceanic having an entitlement to compensation for delay it would need to demonstrate:
(a)a qualifying cause of delay;
(b)its impact on the critical path on the then current Subcontract program; and
(c)the costs necessarily incurred as a result of the delay including an amount for overheads (not including profit).
4.19Notwithstanding that the Subcontract draws a clear distinction between these two situations, Oceanic ignores the clear terms of the Subcontract and, for the delay events complained, seeks to be paid on the premise of the rates set out in the Scope of Work in relation to variations.
5.No variation instructed by Clough
5.1The Application makes repeated reference to verbal instructions issued by Clough. The Contract is clear that variations (for which rates are payable in accordance with the relevant provisions in Scope of Work) are only triggered through the written direction from Clough.
5.2The Application also appears to be premised on the argument that because the WUC took longer than Oceanic would have liked it should be compensated for the unanticipated associated costs. This is not how lump sum contracts operate. In such contracts the contract price will be taken to include all work incidentally necessary to achieve the contractual object, however difficult and costly this might prove to be.
5.3As the Contract provides that a written direction must be given by Clough before a variation will be ordered it follows that to the extent Oceanic performs work which is outside of or in addition to the Scope of Work without a written instruction from Clough, such work is performed at Oceanic's cost.
5.4In order for Oceanic to make out that a variation had, in fact, been ordered it would need to do so on the basis that there had been an agreement to change the manner in which variations were instructed under the Contract (i.e. that variations need not be in writing and could be issued by personnel on site). No such argument has been made by Oceanic nor any evidence led to support such an argument. (emphasis added) (footnotes omitted)
Liebe v Molloy was cited in a footnote to the first sentence of paragraph 5.4 of Clough's response. As can be seen Liebe v Molloy was not cited to rebut an argument advanced by Oceanic that implied contracts were formed between it and Clough but in support of a different proposition, namely, that to succeed Oceanic would need to establish that the parties had impliedly agreed to vary cl 22 of the Subcontract conditions.
It is apparent from the adjudicator's observations that he understood that Clough had not referred to Liebe v Molloy to respond and answer the process of reasoning he adopted. Immediately after referring to the fact that Clough had cited Liebe v Molloy the adjudicator stated, 'I read the case of Liebe v Molloy as standing for a different proposition'.[19] The failure to accord procedural fairness arises from the failure of the adjudicator to put that different proposition to Clough and invite submissions. Given the absence of any invocation of Liebe v Molloy (as that case was interpreted by the adjudicator in Oceanic's application) Clough could not reasonably have anticipated that the adjudicator would determine seven of Oceanic's claims on the basis of findings that implied contracts had been formed.
[19] Determination [130].
I find that the adjudicator failed to afford Clough procedural fairness in a material way, that is, had Clough been afforded the opportunity to make submissions, those submissions could have affected the adjudicator's decision. Whether a denial of procedural fairness in the context of an adjudication application is regarded as a jurisdictional error or a discrete basis for judicial review is an issue discussed in the authorities.[20] Whatever view is taken of that question, a writ of certiorari quashing the determination should issue.

Did the adjudicator exceed his jurisdiction by determining the payment disputes on the basis of findings that a number of implied contracts had been made between the parties?

Clough's submissions

[20] Cape Range Electrical Contractors Pty Ltd v Austral Construction Pty Ltd [2012] WASC 304 (Pritchard J); Zurich Bay Holdings Pty Ltd v Brookfield Multiplex Engineering And Infrastructure Pty Ltd [18] - [22] (Le Miere J).

Clough argues that the adjudicator made a jurisdictional error, or alternatively an error of law on the face of the record, in basing the determination on the existence of an implied contract or implied contracts. Clough submits that even if an implied contract existed (which Clough does not accept), then the adjudicator fell into jurisdictional error in making the determination on this basis because under the Act his jurisdiction was limited to determining claims which arose under the Subcontract. If an implied contract arose at all, it would have been outside the Subcontract, and therefore the adjudicator did not have the jurisdiction to adjudicate the payment dispute.

Oceanic's submissions

Oceanic submits that adjudicator must be taken to have found one or more implied contracts in the sense of genuine and separate agreements. Oceanic submits that the adjudicator was not using the term 'implied contract' to signify that he was applying restitutionary principles to Oceanic's claims.
Oceanic submits that as the implied contract was a genuine contract, the claims could be determined under the Act. Oceanic submits that there was evidence on which the adjudicator could find facts or draw inferences in order to be satisfied that the elements of Liebe v Molloy were present in this case.

Applicable principles

In Delmere Holdings Pty Ltd v Green,[21] Kenneth Martin J held that the the Act provides a means for adjudicating payment disputes that arise under a construction contract and adjudicators do not have jurisdiction to adjudicate payment disputes that arise from restitutionary claims. [22] His Honour quashed a determination that allowed a claim based on quantum meruit as that was a claim that could only arise outside of the construction contract.
[21] Delmere Holdings Pty Ltd v Green [2015] WASC 148.
[22] Delmere Holdings Pty Ltd v Green [38] - [39], [118].
The use of the term 'implied contract' in Liebe v Molloy is ambiguous because, as explained by Edelman J in Lampson (Australia) Pty Ltd v Fortescue Metals Group Ltd [No 3],[23] it may refer to a genuine contract which arises by implication or inference rather than the express declarations of the parties. Alternatively, it may be a reference to the fiction of an implied contract that formed the basis of restitutionary claims prior to the High Court's decision in Pavey & Matthews Pty Ltd v Paul.[24]
[23] Lampson (Australia) Pty Ltd v Fortescue Metals Group Ltd [No 3] [2014] WASC 162.
[24] Pavey & Matthews Pty Ltd v Paul [1987] HCA 5; (1987) 162 CLR 221.

Disposition

Although he did not say so expressly, I think it is clear that when the adjudicator expressed the view that an implied contract was formed he was expressing his conclusion that a separate and genuine contract had been formed by the parties. There is nothing in the adjudicator's observations to suggest that he was determining Oceanic's claims on restitutionary principles.
The difficulty with the approach taken by the adjudicator is that by holding that Oceanic was entitled to succeed on the basis of one or more implied contracts he was not adjudicating payment disputes that had arisen under the Subcontract. Rather, he was adjudicating payment disputes that had arisen under the implied contracts which he determined had been formed and, in so doing, he exceeded his jurisdiction. The adjudicator's jurisdiction was limited to adjudicating payment disputes that had arisen under the Subcontract.
I should add that if I am wrong in my view that the adjudicator concluded that separate genuine contracts were formed and that he was using the term 'implied contract' to signify that he was applying restitutionary principles then in so doing he exceeded his jurisdiction for the reasons explained by Kenneth Martin J in Delmere Holdings Pty Ltd v Green.
I find that by exceeding his jurisdiction the adjudicator made a jurisdictional error and the determination should be quashed on that basis.
Clough also argued that the 'implied contract' conclusions reached by the adjudicator were unreasonable and irrational. In the light of the conclusions I have reached it is not necessary for me to consider this argument.
I will hear the parties as to the orders which should be made and as to costs.
I certify that the preceding paragraph(s) comprise the reasons for decision of the Supreme Court of Western Australia.
JB
ASSOCIATE TO TOTTLE J
10 APRIL 2018