Laing O'Rourke Australia Construction Pty Ltd v Samsung C & T Corporation
[2015] WASC 237
•3 JULY 2015
JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA
IN CIVIL
CITATION: LAING O'ROURKE AUSTRALIA CONSTRUCTION PTY LTD -v- SAMSUNG C & T CORPORATION [2015] WASC 237
CORAM: MITCHELL J
HEARD: 10 - 11 JUNE 2015
DELIVERED : 3 JULY 2015
FILE NO/S: CIV 1644 of 2015
BETWEEN: LAING O'ROURKE AUSTRALIA CONSTRUCTION PTY LTD
Plaintiff
AND
SAMSUNG C & T CORPORATION
Defendant
FILE NO/S :CIV 1645 of 2015
BETWEEN :SAMSUNG C & T CORPORATION
Applicant
AND
GRAHAM IVAN ANSTEE-BROOK
RespondentLAING O'ROURKE AUSTRALIA CONSTRUCTION PTY LTD
Other Party
FILE NO/S :CIV 1733 of 2015
BETWEEN :SAMSUNG C & T CORPORATION
Applicant
AND
GRAHAM IVAN ANSTEE-BROOK
RespondentLAING O'ROURKE AUSTRALIA CONSTRUCTION PTY LTD
Other Party
FILE NO/S :CIV 1793 of 2015
BETWEEN :LAING O'ROURKE AUSTRALIA CONSTRUCTION PTY LTD
Plaintiff
AND
SAMSUNG C & T CORPORATION
Defendant
Catchwords:
Judicial review - Jurisdictional error - Unreasonableness - Inferred error - Construction contract adjudication - Failure to determine payment dispute by reference to the terms of the construction contract
Construction contracts - Leave to enforce adjudicator's determination - Whether leave should be refused because payment has already been made
Words and phrases - 'Payment claim' - 'Payment dispute' - Whether payment dispute can arise before the payment is due under the construction contract
Legislation:
Construction Contracts Act 2004 (WA), s 6, s 31, s 32, s 41, s 43, s 45
Result:
Certiorari issued
Leave to enforce determination refused
Category: A
Representation:
CIV 1644 of 2015
Counsel:
Plaintiff: Mr S K Dharmananda SC & Mr M R Collins
Defendant: Mr C G Colvin SC & Mr B Millar
Solicitors:
Plaintiff: Clyde & Co Australia
Defendant: Herbert Smith Freehills
CIV 1645 of 2015
Counsel:
Applicant: Mr C G Colvin SC & Mr B Millar
Respondent: No appearance
Other Party : Mr S K Dharmananda SC & Mr M R Collins
Solicitors:
Applicant: Herbert Smith Freehills
Respondent: No appearance
Other Party : Clyde & Co Australia
CIV 1733 of 2015
Counsel:
Applicant: Mr C G Colvin SC & Mr B Millar
Respondent: No appearance
Other Party : Mr S K Dharmananda SC & Mr M R Collins
Solicitors:
Applicant: Herbert Smith Freehills
Respondent: No appearance
Other Party : Clyde & Co Australia
CIV 1793 of 2015
Counsel:
Plaintiff: Mr S K Dharmananda SC & Mr M R Collins
Defendant: Mr C G Colvin SC & Mr B Millar
Solicitors:
Plaintiff: Clyde & Co Australia
Defendant: Herbert Smith Freehills
Case(s) referred to in judgment(s):
A v Corruption and Crime Commission [2013] WASCA 288; (2013) 306 ALR 491
Alcan (NT) Alumina Pty Ltd v Commissioner of Territory Revenue [2009] HCA 41; (2009) 239 CLR 27
Alliance Contracting Pty Ltd v James [2014] WASC 212
Australian Broadcasting Commission v Australasian Performing Right Association Ltd (1973) 129 CLR 99
Avon Downs Pty Ltd v Federal Commissioner of Taxation (1949) 78 CLR 353
Balog v Independent Commission Against Corruption (1990) 169 CLR 625
Barrett v Coroner's Court of South Australia [2010] SASCFC 70; (2010) 108 SASR 568
Blackadder Scaffolding Services (Aust) Pty Ltd and Mirvac Homes (WA) Pty Ltd [2009] WASAT 133
BM Alliance Coal Operations Pty Ltd v BGC Contracting Pty Ltd [2012] QSC 346
Cape Range Electrical Contractors Pty Ltd v Austral Construction Pty Ltd [2012] WASC 304
Certain Lloyd's Underwriters v Cross [2012] HCA 56; (2012) 248 CLR 378
Chase Oyster Bar Pty Ltd v Hamo Industries Ltd [2010] NSWCA 190; (2010) 78 NSWLR 393
Codelfa Construction Pty Ltd v State Rail Authority of NSW (1982) 149 CLR 337
Commissioner of Australian Federal Police v Magistrates' Court of Victoria [2011] VSC 3
Corporation of the City of Enfield v Development Assessment Commission [2000] HCA 5; (2000) 199 CLR 135
Craig v South Australia (1995) 184 CLR 163
Delmere Holdings Pty Ltd v Green [2015] WASC 148
Diploma Construction (WA) Pty Ltd v KPA Architects Pty Ltd [2014] WASCA 91
Electricity Generation Corporation t/as Verve Energy v Woodside Energy Ltd [2014] HCA 7; (2014) 251 CLR 640
Federal Commissioner of Taxation v Consolidated Media Holdings Ltd [2012] HCA 55; (2012) 250 CLR 503
Field Deployment Solutions Pty Ltd v SC Projects Australia Pty Ltd [2015] WASC 60
Fifty Property Investments Pty Ltd v O'Mara [2006] NSWSC 428
Fuel Tank & Pipe Pty Ltd and Decmil Australia Pty Ltd [2010] WASAT 165
Gedeon v Commissioner of the NSW Crime Commission [2008] HCA 43; (2008) 236 CLR 120
Hamersley Iron Pty Ltd v James [2015] WASC 10
House v The King (1936) 55 CLR 499
Hunter v Minister for Planning [2012] WASC 247
K & J Burns Electrical Pty Ltd v GRD Group (NT) Pty Ltd [2011] NTCA 1; (2011) 29 NTLR 1
Kirk v Industrial Court (NSW) [2010] HCA 1; (2010) 239 CLR 531
Minister for Aboriginal Affairs v Peko‑Wallsend Ltd (1986) 162 CLR 24
Minister for Employment and Workplace Relations v Gribbles Radiology Pty Ltd [2005] HCA 9; (2005) 222 CLR 194
Minister for Immigration v Eshetu [1999] HCA 21; (1999) 197 CLR 611
Mustac v Medical Board of Western Australia [2007] WASCA 128
Nannup Timber Processing Pty Ltd v Minister for Commerce [2014] WASC 438
Northbuild Construction Sunshine Coast Pty Ltd v Beyfield Pty Ltd [2014] QSC 80
Northern Territory v Urban and Rural Contracting Pty Ltd [2012] NTSC 22
O'Donnell Griffin Pty Ltd v John Holland Pty Ltd [2008] WASC 58; (2008) 36 WAR 479
Parisienne Basket Shoes Pty Ltd v Whyte (1938) 59 CLR 369
Patrick Stevedores Operations No. 2 Pty Ltd v McConnell Dowell Constructors (Aust) Pty Ltd [2014] NSWSC 1413
Perrinepod Pty Ltd v Georgiou Building Pty Ltd [2011] WASCA 217; (2011) 43 WAR 319
Plaintiff M70/2011 v Minister for Immigration (2011) 244 CLR 144
Plaintiff S10/2011 v Minister for Immigration [2012] HCA 31; (2012) 246 CLR 636
Plaintiff S4/2014 v Minister for Immigration [2014] HCA 34; (2014) 88 ALJR 847
Project Blue Sky Inc v Australian Broadcasting Authority [1998] HCA 28; (1998) 194 CLR 355
R v Blakeley; Ex parte Association of Architects, Engineers, Surveyors and Draughtsmen of Australia (1950) 82 CLR 54
R v Connell; Ex parte Hetton Bellbird Collieries Ltd (1944) 69 CLR 407
R v Toohey; Ex parte Northern Land Council (1981) 151 CLR 170
Re Anstee‑Brook; Ex parte Mount Gibson Mining Ltd [2011] WASC 172; (2011) 42 WAR 35
Re Ellis; Ex parte Triple M Mechanical Services Pty Ltd [No 2] [2013] WASC 161
Re Macks; Ex parte Saint (2000) 204 CLR 158
Re Refugee Review Tribunal; Ex parte Aala [2000] HCA 57; (2000) 204 CLR 82
Re Walsh; Ex parte Deputy Commissioner of Taxation (NSW) (1982) 42 ALR 727
Red Ink Homes Pty Ltd v Court [2014] WASC 52
Saeed v Minister for Immigration [2010] HCA 23; (2010) 241 CLR 252
Samsung C & T Corporation v Laing O'Rourke Australia Construction Pty Ltd [2015] WASC 83
State of New South Wales v Kable [2013] HCA 26; (2013) 252 CLR 118
Thiess Pty Ltd v MCC Mining (Western Australia) Pty Ltd [2011] WASC 80
Thiess Pty Ltd v Warren Brothers Earthmoving Pty Ltd [2012] QCA 276; [2013] 2 Qd R 75
Thompson v Randwick Corporation (1950) 81 CLR 87
Timbarra Protection Coalition Inc v Ross Mining NL (1999) 46 NSWLR 55
Watpac Construction (Qld) Pty Ltd v KLM Group Ltd [2013] QSC 236
Western Export Services Inc v Jireh International Pty Ltd [2011] HCA 45; (2011) 282 ALR 604
Wilson v The State of Western Australia [2010] WASCA 82
WQube Port of Dampier v Philip Loots of Kahlia Nominees Ltd [2014] WASC 331
Zheng v Cai [2009] HCA 52; (2009) 239 CLR 446
Table of contents
Summary
Statutory background
Overview
Purpose and object of the Act
Adjudicator's determination is not final
Expedited process
Adjudicator's qualifications
Section 31(2) of the Act
Limited right of review
Enforcing determinations
Fundamental concepts: 'construction contract'
Fundamental concepts: 'payment claim'
Fundamental concepts: 'payment dispute'
Factual background
The Subcontract
Payments under the Subcontract
January Progress Claim and Subcontract termination
Interim Deed
First payment under the Interim Deed
February Claim
Retention of materials
First Adjudication Application
Second payment under the Interim Deed
Injunction proceedings
Third payment under the Interim Deed
First Determination
Second Adjudication Application
Second Determination
Procedural background
Issues
General principles to be applied in a judicial review application
Jurisdictional error
Jurisdictional fact
Reasonableness
First issue: existence of a payment dispute
Grounds
First proposition: proper construction of s 6(a) of the Act
Second proposition: liability to make payment after termination
Third proposition: time when payment under cl 39A.2 is required
Fourth proposition: payment dispute as a condition for the valid exercise of power
Fifth proposition: misunderstanding provisions which confer power
Conclusion
Second issue: whether the determinations were authorised by s 31(2)(b) of the Act
Grounds
Adjudicators and inferior courts
The adjudicator's function under s 31(2)(b) of the Act
Limits on the adjudicator's power
LORAC's submissions
Whether the adjudicator performed and understood his function in making the First Determination
Whether the adjudicator performed and understood his function in making the Second Determination
Conclusion
Other matters
Third issue: leave to enforce determinations
Principles
Grounds for refusing leave
Proper construction of the Interim Deed
Payment has already been made
Orders
Annexure 1: terms of the Subcontract
Annexure 2: terms of the Interim Deed
MITCHELL J:
Summary
On 21 February 2014, Samsung C & T Corporation (Samsung) and Laing O'Rourke Australia Construction Pty Ltd (LORAC) entered into a contract called the 'Roy Hill Iron Ore Project Subcontract for Package 3 - Port Landside (SMP E&I Works)' (Subcontract). On 10 February 2015, Samsung terminated the Subcontract for convenience. On 21 February 2015, Samsung and LORAC entered into an 'Interim Deed', which provided for Samsung to make certain payments to LORAC. One of those payments, of $45 million 'on account' only, was made under the Interim Deed.
Subsequent to the payment of that $45 million, an adjudicator appointed under the Construction Contracts Act 2004 (WA) (Act) made two determinations with the combined effect that Samsung must pay LORAC a total of $44,140,518.
In these proceedings, Samsung seeks the issue of writs of certiorari to quash the adjudicator's determinations for jurisdictional error. LORAC seeks leave to enforce the determinations as judgments of this court.
By the end of the hearing there were three issues to be determined.
The first issue is whether the first of the determinations should be quashed because there was no payment dispute (as defined by the Act), or alternatively because the adjudicator did not properly form an opinion that there was a payment dispute.
The first issue should be determined negatively (that is, in LORAC's favour). This is essentially because s 6(a) of the Act should be construed as providing that a payment dispute arises when a payment claim is rejected or disputed, even if the time for payment under the construction contract has not yet arisen. It is common ground that the relevant payment claim had been disputed by the time at which LORAC made the first adjudication application.
The second issue is whether both determinations should be quashed because the adjudicator failed to exercise or understand his adjudicative function, adopted illogical and irrational reasoning or made an unreasonable decision.
The second issue should be determined in Samsung's favour on the ground that the adjudicator failed to exercise or understand his adjudicative function, and so committed jurisdictional error. In summary, the adjudicator committed jurisdictional error by failing to resolve the payment disputes by reference to the terms of the Subcontract which were before him, thereby misapprehending the nature of his function. It follows that the determinations were not authorised by the Act, and are invalid.
The third issue is whether leave to enforce the determinations should be refused because the determinations are invalid, or because the payments on account required by those determinations have already been made under the Interim Deed. This third issue is determined in Samsung's favour. Leave to enforce will be refused on both grounds.
In the result, I would grant certiorari to quash the determinations and refuse leave to enforce the determinations in the same manner as judgments of this court.
My reasons for reaching these conclusions follow.
Statutory background
In Field Deployment Solutions Pty Ltd v SC Projects Australia Pty Ltd,[1] I considered the general structure and operation of the Act. The following summary is based on that account.
Overview
[1] Field Deployment Solutions Pty Ltd v SC Projects Australia Pty Ltd [2015] WASC 60 [17].
The Act is, by its long title, intended to provide a means for adjudicating payment disputes arising under 'construction contracts'. It achieves this purpose by providing for a party to a 'payment dispute' to apply to have the dispute adjudicated by an adjudicator,[2] who must either dismiss the application in prescribed circumstances or determine the liability of a party to the payment dispute to make a payment and any interest thereon.[3] A determination is binding on parties to the construction contract, and creates a statutory liability to pay an amount under a determination on or before the date specified in the determination.[4] With the leave of a court of competent jurisdiction, a determination may be registered and enforced as a judgment of the court.[5]
Purpose and object of the Act
[2] Section 25 and s 26 of the Act.
[3] Section 31 and s 33 of the Act.
[4] Section 38 and s 39 of the Act.
[5] Section 43 of the Act.
In Diploma Construction (WA) Pty Ltd v KPA Architects Pty Ltd,[6] Pullin JA (with whom other members of the court agreed) described the purpose of the Act in the following terms:
The broad purpose of the Act, insofar as it relates to payment disputes, is to ensure that, in construction contracts, progress claims are paid on time and that principals obliged to pay do not act as their own judge and jury and hold up payment on their own assertion that they have a defence warranting refusal to pay. It is a 'pay now, argue later' system, with the primary aim of keeping the money flowing by enforcing timely payment. If a payment dispute arises, then the Act provides for a system of rapid and summary adjudication which is conducted without any oral hearing. If the adjudicator, having received written submissions, makes a determination that the payment has to be made, then that determination gives rise to a debt 'presently due' and payable by the principal. (citations omitted)
[6] Diploma Construction (WA) Pty Ltd v KPA Architects Pty Ltd [2014] WASCA 91 [55].
The general object of the Act has also been described by Kenneth Martin J in the following terms, with which I agree:[7]
It is of fundamental importance, in my view, to understand that the object of this legislation was to attempt to reform earlier unacceptable scenarios of inequality of bargaining power in the construction contract environment. Contractors were highly vulnerable to being hurt by being kept out of funds due to them by an ongoing legal dispute in circumstances where they had performed the contracted work, but had not been paid. It is easy to see how a contractor who is leveraged and pressed for funds may lack the time, opportunity or resources to press its position to a result in a drawn out fight for payment against a well resourced principal, in a protracted arbitration or contested litigation. The speedy and informal procedures delivered as reforms by the [Act] do not make the adjudicator's decision on the payment of funds final (save as to the capacity to obtain and enforce payment).
Adjudicator's determination is not final
[7] Re Anstee‑Brook; Ex parte Mount Gibson Mining Ltd [2011] WASC 172; (2011) 42 WAR 35 [60]; see also Perrinepod Pty Ltd v Georgiou Building Pty Ltd [2011] WASCA 217; (2011) 43 WAR 319 [60].
A determination under pt 3 of the Act does not finally determine the rights of the parties to the payment dispute concerning a payment claim made under the construction contract. Part 3 does not prevent a party to a construction contract from instituting proceedings before an arbitrator or other person, or a court or other body, in relation to a dispute or other matter arising under the contract.[8] Subject to limited exceptions, evidence of anything said or done in the adjudication is not admissible in other proceedings.[9]
[8] Section 45(1) of the Act.
[9] Section 45(3) of the Act.
Section 45(4) of the Act provides that:
An arbitrator or other person or a court or other body dealing with a matter arising under a construction contract:
(a) must, in making any award, judgment or order, allow for any amount that has been or is to be paid to a party under a determination of a payment dispute arising under the contract; and
(b) may make orders for the restitution of any amount so paid, and any other appropriate orders as to such a determination.
That is, a court or arbitrator may determine a dispute arising under a construction contract on its merits without reference to what was said or done in the adjudication. If an adjudicator determines that a payment is due and a court or arbitrator subsequently determines that no payment or a lesser payment is due, then the court or arbitrator may make orders for the repayment of amounts paid under the adjudicator's determination.
An adjudicator's determination does not, therefore, finally determine the rights, duties or liabilities of any party to a construction contract. A party who is dissatisfied with the adjudicator's determination that they are liable to make a payment may institute legal proceedings which might determine that no liability, or a lesser liability, arises. That may result in an order for restitution of amounts paid under an adjudicator's determination. Equally, a claimant who is dissatisfied with an adjudicator's decision to dismiss their adjudication application, or an adjudicator's determination that a respondent is not liable to pay a claimed amount, is able to institute legal proceedings in support of their claim.
Expedited process
The Act provides for an expedited process for adjudication. An application for adjudication must be prepared and served within 28 days after the payment dispute arises.[10] Other parties to the contract have 14 days after the adjudication application is served on them to prepare and serve their response.[11] Both the application and response must set out or attach all the information, documentation and submissions on which the party making it relies in the adjudication.[12] The appointed adjudicator must either make a decision or determination within 14 days after service of the response or, if no response is served, 14 days after the last date on which a response is required to be served.[13] The time for the adjudicator to make his or her determination may only be extended with the consent of the parties to the payment dispute.[14] If the application is not dismissed or determined within time it is taken to have been dismissed.[15]
[10] Section 26(1) of the Act.
[11] Section 27(1) of the Act.
[12] Section 26(2)(c) and s 27(2)(c) of the Act.
[13] Section 31 of the Act.
[14] Section 31(2) and s 32(3)(a) of the Act.
[15] Section 31(3) of the Act. In the case of such a deemed dismissal the applicant may make another adjudication application within 28 days after the previous application is taken to have been dismissed: see s 26(1) and s 37(2) of the Act.
The adjudicator is not bound by the rules of evidence.[16] The object of the adjudication is to determine the payment dispute fairly and as quickly, informally and inexpensively as possible.[17]
Adjudicator's qualifications
[16] Section 32(1)(b) of the Act.
[17] Section 30 of the Act.
The adjudicator may have a law degree but need not be a legal practitioner.[18] The adjudicator must act informally and, if possible, make a determination on the basis of the application, the response and the attachments to those documents.[19]
Section 31(2) of the Act
[18] Section 48(1) of the Act read with reg 9 of the Construction Contracts Regulations 2004 (WA).
[19] Section 32(1)(a) of the Act.
This subsection provides:
An appointed adjudicator must, within the prescribed time or any extension of it made under section 32(3)(a):
(a)dismiss the application without making a determination of its merits if:
(i)the contract concerned is not a construction contract;
(ii)the application has not been prepared and served in accordance with section 26;
(iii)an arbitrator or other person or a court or other body dealing with a matter arising under a construction contract makes an order, judgment or other finding about the dispute that is the subject of the application; or
(iv)satisfied that it is not possible to fairly make a determination because of the complexity of the matter or the prescribed time or any extension of it is not sufficient for any other reason;
(b)otherwise, determine on the balance of probabilities whether any party to the payment dispute is liable to make a payment, or to return any security and, if so, determine:
(i)the amount to be paid or returned and any interest payable on it under section 33; and
(ii)the date on or before which the amount is to be paid, or the security is to be returned, as the case requires.
(3)If an application is not dismissed or determined under subsection (2) within the prescribed time, or any extension of it made under section 32(3)(a), the application is to be taken to have been dismissed when the time has elapsed.
Limited right of review
Section 46 of the Act permits an aggrieved party to apply to the State Administrative Tribunal for a review of an adjudicator's decision to dismiss an application without making a determination of its merits under s 31(2)(a) of the Act. It does not create any right of review in a case such as the present, where the adjudicator makes a determination under s 31(2)(b) of the Act. Section 46(3) provides that, except as provided by s 46(1), a decision or determination of an adjudicator on an adjudication cannot be appealed or reviewed.
Enforcing determinations
Section 42 and s 43 of the Act provide two means of enforcing determinations. Section 42 provides for a self‑help remedy, entitling a contractor who has not been paid in accordance with a determination to suspend the performance of its obligations without being liable for damages or forfeiting its rights under the contract.
Section 43(2) of the Act provides:
A determination may, with the leave of a court of competent jurisdiction, be enforced in the same manner as a judgment or order of the court to the same effect, and if such leave is given, judgment may be entered in terms of the determination.
In addition, a contractor which obtains a determination in its favour may issue a statutory demand to the principal, if (as will often be the case) the principal is a company incorporated under the Corporations Act 2001 (Cth). The fact that the underlying liability is disputed will not ordinarily be a ground for setting aside the statutory demand.[20]
Fundamental concepts: 'construction contract'
[20] See Diploma Construction [59].
The subject to which the Act applies is a 'construction contract'. Detailed provisions of s 3 ‑ s 5 of the Act define that term. While a proper understanding of the concept demands attention to the entirety of the definitional provisions, I will not recite the whole of the provisions due to their length. Given that both parties accepted that the Subcontract was a construction contract, it suffices to note that the definition includes a contract under which a person has an obligation to carry out 'construction work' on a site in Western Australia.[21]
[21] Section 3 (paragraph (a) of the definition of 'construction contract'), read with s 4, of the Act.
The operation of the Act in relation to a contract depends, in many respects, on its status as a 'construction contract'. For example, the right of a party to a contract to make an adjudication application depends on the contract being a construction contract. Section 31(2)(a)(i) of the Act provides that an appointed adjudicator must dismiss an application without making a determination of its merits if the contract concerned is not a construction contract. Section 38 makes an adjudicator's determination 'binding on the parties to the construction contract', requiring that the relevant contract be a construction contract before the parties to it are bound by the adjudication.
Fundamental concepts: 'payment claim'
Relevantly for the purposes of these proceedings, a 'payment claim' is defined by s 3 of the Act as:
[A] claim made under a construction contract … by the contractor to the principal for payment of an amount in relation to the performance by the contractor of its obligations under the contract.
To be a payment claim the claim must be made 'under a construction contract'. In Delmere Holdings Pty Ltd v Green,[22] Kenneth Martin J made the following observations about this requirement, with which I agree:
It is also clear that the chosen phrase 'under a construction contract' is relatively narrow in ambit. For instance, the terminology of a dispute 'in relation to', or surrounding a construction contract, is not the chosen terminology. The dispute must be 'under' the parties' construction contract. So, for instance, a claim in quasi contract, such as a quantum meruit claim seeking only a reasonable remuneration, such as where the underlying contract was uncertain, or had failed for some reason, would not present a dispute arising 'under' the construction contract for the purposes of the [Act]. (original emphasis)
[22] Delmere Holdings Pty Ltd v Green [2015] WASC 148 [39].
It has been held that Northern Territory legislation, broadly similar to the Act, requires a payment claim to be a claim for money in accordance with or subject to the conditions of a construction contract.[23] There is merit in this view being applied to the Act as, without such a requirement, the mere assertion of a right to claim under a construction contract would be sufficient to invoke the adjudication procedure. Such an assertion would then create a right to make a claim otherwise than by reference to the terms of the relevant construction contract (including the terms implied by the Act).
[23] K & J Burns Electrical Pty Ltd v GRD Group (NT) Pty Ltd [2011] NTCA 1; (2011) 29 NTLR 1 [151], [236].
The definition of 'payment claim' is fundamental, as a 'payment claim' is a necessary element of the definition of a 'payment dispute'.
Fundamental concepts: 'payment dispute'
The definition of the term 'payment dispute' is critical to the operation of pt 3 of the Act. A party to a construction contract may only apply for adjudication under pt 3 if a payment dispute arises under the contract.[24]
[24] Section 25 of the Act.
Section 6 of the Act defines 'payment dispute' in the following terms:
For the purposes of this Act, a payment dispute arises if:
(a)by the time when the amount claimed in a payment claim is due to be paid under the contract, the amount has not been paid in full, or the claim has been rejected or wholly or partly disputed;
(b)by the time when any money retained by a party under the contract is due to be paid under the contract, the money has not been paid; or
(c)by the time when any security held by a party under the contract is due to be returned under the contract, the security has not been returned.
Factual background
The Subcontract
On 21 February 2014 Samsung and LORAC entered into the Subcontract. The Subcontract provided for LORAC to undertake landside port construction work, referred to as Subcontract Works, for the Roy Hill Project in the Pilbara.
The Subcontract incorporated general conditions of subcontract (General Conditions), amended from an Australian Standard.[25] I have set out the provisions of the General Conditions of most relevance to the resolution of the present dispute in appendix 1 to these reasons. To assist the understanding of these reasons I set out below a very general summary of the central terms.
Subcontract Works
[25] AS 4902‑2000.
Clause 2.1 of the General Conditions required LORAC to carry out relevant works, and for Samsung to pay LORAC the 'Subcontract Sum' adjusted by any additions or deductions made pursuant to the Subcontract. Clause 1.1 of the General Conditions defines 'Subcontract Sum' by reference to the value of the Subcontract Works actually performed, and provides a basis for the calculation of that value. Clause 2.3(c) of the General Conditions provides that the Subcontract Works will be measured at 'Practical Completion', to the extent they have not already been measured.
Progress Payments
Under cl 37.1 of the General Conditions, LORAC was entitled to claim certification of its entitlement to the Subcontract Sum progressively. Clause 37.1(b) provided for LORAC to issue a Progress Claim, stating the value of works completed in accordance with the Subcontract up to the date of the Progress Claim, by the 25th day of each calendar month. Clause 37.1(c) required Samsung's representative to issue a Progress Certificate, which stated the amount which he or she considered to be then payable on account of the Subcontract Sum, by the 10th day of the following month. Clause 37.2 provided for LORAC to issue a 'Payment Claim'[26] in the amount of the Progress Certificate, within 2 days after the issue of a Progress Certificate. If Samsung failed to issue a Progress Certificate then the amount of the Payment Claim was the amount of the corresponding Progress Claim. Clause 37.3 required payment to occur on or before the last day of the month in which a Payment Claim was submitted.
[26] Neither party contended that a 'payment claim' for the purposes of the Act was to be equated with a 'Payment Claim' for the purposes of cl 37.
Samsung's obligation to make payments under cl 37.3 was subject to its right under cl 37.8 to deduct amounts otherwise owed by LORAC to Samsung. Clause 37.8 was the only part of cl 37 which was expressed to survive termination of the Subcontract.
Final Payment Claim
Clause 37.6 provided for the eventual issue of a Final Payment Claim, and the issue of a Final Certificate evidencing the moneys finally due and payable between Samsung and LORAC 'on any account whatsoever in connection with the subject matter of the Subcontract'.
Termination
Clause 39A.1 of the General Conditions gave Samsung the right to terminate the Subcontract 'at any time for its sole convenience'. Such termination was expressed to be without prejudice to the rights of either party to recover damages in respect of any prior breach of contract by the other party.
Clause 39A.2 of the General Conditions made provision as to LORAC's rights and obligations where the Subcontract was terminated under cl 39A.1. Subject to cl 37.8, cl 39A.2(a) entitled LORAC to payment of certain amounts 'reasonably determined by [Samsung's] Representative', up to the Subcontract Sum. LORAC was obliged to take all steps possible to mitigate certain costs, immediately hand over certain documents and cause certain plant and materials to be delivered to Samsung. Clause 39A.2 was expressed to survive termination of the Subcontract under cl 39A.1.
Payments under the Subcontract
Until January 2015, claims for progress payments were made in the manner contemplated by cl 37. On one occasion, a dispute as to one of the progress payments was determined under the Act. The total amount paid by Samsung up to 23 January 2015 was $78,711,508 exclusive of GST.[27]
January Progress Claim and Subcontract termination
[27] Attachment DD2 to affidavit of Danilo Dragovic sworn 2 June 2015 page 17, and Further Supplementary Affidavit of Marcus Carne sworn 4 June 2015, being $123,715,372.36 - $45,000,000 - $3,863.92.
On 27 January 2015 LORAC submitted its January Progress Claim to Samsung, in which LORAC valued the relevant works at $43,443,517.
On 1 February 2015 Samsung responded to the January Progress Claim by a document which has been described in these proceedings as an 'assessment'. It is not necessary for me to determine the contractual character of this document in these proceedings.
Samsung's Progress Certificate was due to be given to LORAC by 10 February 2015. However, on that date, Samsung terminated the Subcontract for convenience under cl 39A.1 without having issued a Progress Certificate. No January Payment Claim had been issued by LORAC at that time.
Interim Deed
On 21 February 2015, Samsung and LORAC entered into an 'Interim Deed', headed 'without prejudice'. The Interim Deed is a relatively short document, and I set out in full at appendix 2 to these reasons. Again, I will provide a very general summary of the provisions.
The Interim Deed recites entry into, and termination of, the Subcontract and the parties' interim agreement. Clause 2.1(a) of the Interim Deed obliged Samsung to pay LORAC $45 million.[28] Thirty million dollars was payable on execution of the Interim Deed, and a total of $15 million was to be paid on the novation of specified subcontracts and supply agreements to Samsung. Clause 5.1 of the Interim Deed contained LORAC's agreement to use reasonable endeavours to procure the novations within a specified time. Clause 2.2 provided that the payment of $45 million was on account only.
[28] In fact a total of $49.5 million was paid, in accordance with cl 3 which also required the payment of GST where applicable.
Clause 2.1(b) of the Interim Deed obliged Samsung to pay to LORAC the sums due to it under cl 39A.2 of the Subcontract. Certain specified matters were included in cl 2.1(b)(i) ‑ cl 2.1(b)(iv) of the Interim Deed, in terms which generally reflect those of cl 39A.2(a)(i) ‑ cl 39A.2(a)(iv) of the General Conditions. It is common ground between the parties that the differences are not material to the present applications.
The payments described in cl 2.1(a) and cl 2.1(b) of the Interim Deed were together described as 'Termination Costs'.
Clause 2.1(c) obliged Samsung to pay to LORAC costs for Subcontract Works carried out between the termination of the Subcontract and the novation of the specified agreements. The costs were to be assessed as those which would have been payable at the date of novation if the Subcontract had not been terminated. These were referred to as 'Pre-Novation Costs'.
Clause 10 of the Interim Deed indicated that the Interim Deed was entered into solely in connection with the practical handover and transition of the relevant works following termination of the Subcontract.
First payment under the Interim Deed
On 24 February 2015, Samsung paid LORAC $30 million, exclusive of GST, under the Interim Deed.
February Claim
On 25 February 2015 LORAC submitted a claim for $54,713,156.47 in respect of works carried on prior to termination of the Subcontract (February Claim). Samsung has previously disputed LORAC's entitlement to submit the February Claim on the ground that it did not claim the whole of LORAC's asserted entitlements under cl 39A.2. Samsung did not press this contention for the purposes of the present applications.
Retention of materials
At about the same time LORAC removed or retained certain construction materials to be used for the landside port works, on the basis that it had not been paid the amount which it claimed for those materials.[29]
First Adjudication Application
[29] See Samsung C & T Corporation v Laing O'Rourke Australia Construction Pty Ltd [2015] WASC 83 [54] ‑ [58].
On 3 March 2015 LORAC applied to have a payment dispute, which it contended had arisen in relation to the January Progress Claim, adjudicated under pt 3 of the Act (First Adjudication Application). Samsung accepts that it had disputed the January Progress Claim by 3 March 2015, but contends that the time when the amount claimed was due to be paid under the Subcontract had not then arrived.
Second payment under the Interim Deed
Also on 3 March 2015, Samsung made its second payment, in the amount of $10 million, exclusive of GST, under the Interim Deed.
Injunction proceedings
On 5 - 6 March 2015, Edelman J heard an application in separate proceedings commenced by Samsung for injunctions preventing LORAC from removing or interfering with relevant construction materials, and requiring LORAC to deliver materials to Samsung. On 9 March 2015, Edelman J granted an injunction having this effect.[30]
Third payment under the Interim Deed
[30] Samsung C & T Corporation.
On 20 March 2015, Samsung paid LORAC the third instalment of $5 million under the Interim Deed. At this time the whole of the payment of $45 million on account had been made under the Interim Deed, and the total amount paid by Samsung to LORAC under the Subcontract and Interim Deed was $123,715,372 exclusive of GST.
First Determination
On 1 April 2015 Mr Graham Anstee‑Brook, who had been appointed as the adjudicator to determine the alleged payment dispute relating to the January Progress Claim, delivered his determination (First Determination). He determined that Samsung must pay LORAC $20,965,076 by no later than 5.00 pm on 13 April 2015.
No dismissal without determination on the merits
The adjudicator considered the matters referred to in s 31(2)(a) of the Act and concluded, in effect, that he was not required to dismiss the First Adjudication Application without making a determination of its merits. In relation to the requirements of s 26 of the Act, the adjudicator treated the January Progress Claim as the 'payment claim' for the purposes of the Act. He appears to have treated the response to that claim on 1 February 2015 as disputing the claim, so as to give rise to a payment dispute for the purposes of the Act before the First Adjudication Application was made on 3 March 2015.[31]
Reference to cl 39A.2(a)
[31] See paragraphs 8.1 - 8.4, 13.3 and 13.8 of the First Determination.
The adjudicator considered various claims for certain categories of Subcontract Works, and concluded that Samsung was liable to pay LORAC $20,870,302 in respect of the January Progress Claim. In determining the amount payable by Samsung to LORAC the adjudicator did not refer to cl 39A.2(a) of the General Conditions.
Interest
The adjudicator also made an award of interest of $94,774 from 11 February 2015 until 2 April 2015. The adjudicator's reasons do not explain why he chose the day after the termination of the Subcontract as the date from which interest would be payable. The adjudicator rejected Samsung's submission that there should be no payment because there had been no default, although he did not explain why.
Interim Deed
In the course of his reasons, the adjudicator noted the Interim Deed and the parties' submissions in relation to that document. He referred to information contained in a statutory declaration as to a draft of the Interim Deed, which had contained a specific provision for payment in respect of the January Progress Certificate, before referring to the terms of the executed deed. He said:
Of note is that the [Interim Deed] makes no mention of the payment claim and progress certificate which in my view are the subject of this adjudication. On the contrary at clause 4.2 of the [Interim Deed] the following is found:
Nothing herein shall prejudice the right of a party to institute proceedings to enforce obligations due under this Deed to preserve any statutory entitlements or to seek adjunctive or urgent declaratory relief.
In my view it was always open to [Samsung] to ensure clarity if [Samsung] wished the payments under the [Interim Deed] to be made in respect of the claims the subject of this adjudication. I infer from the failure of [Samsung] to do so that there was nothing in the [Interim Deed] to preclude LORAC making an application for adjudication or applying for any other relief pursuant to clause 4.2 of the [Interim Deed] and determine that the [Interim Deed] and the payments thereunder do not preclude LORAC from a determination under this Application. Further I determine that any payments made pursuant to the [Interim Deed] were not payments on account of any claims by LORAC the subject of this adjudication. (original emphasis)
Second Adjudication Application
On 7 April 2015, LORAC applied to have a payment dispute, which it contended had arisen in relation to the February Claim, adjudicated under pt 3 of the Act (Second Adjudication Application). Samsung accepts that it had disputed the February Claim by 7 April 2015. Mr Anstee‑Brook was again appointed to adjudicate that dispute.
Second Determination
The adjudicator determined the Second Adjudication Application in two parts, on 1 and 4 May 2015 (Second Determination). In these proceedings no issue was taken as to this bifurcation. On 1 May 2015, the adjudicator determined that Samsung must pay LORAC $8,287,786.01 by no later than 5.00 pm on 8 May 2015. On 4 May 2015 the adjudicator determined that Samsung must pay LORAC an additional $14,887,656 by the same time, with interest calculated from 5 May 2015.
No dismissal without determination on the merits
The adjudicator again considered the matters referred to in s 31(2)(a) of the Act and concluded, in effect, that he was not required to dismiss the First Adjudication Application without making a determination of its merits. There is no longer any challenge to that conclusion in these proceedings.
Subcontract Sum
In its response to the Second Adjudication Application, Samsung in effect contended that:
1.It had paid, or been determined liable to pay, $144,680,448 exclusive of GST, being $123,715,372 paid under the Subcontract and the Interim Deed and $20,965,076 which was the subject of the First Determination.
2.It had calculated the Subcontract Sum adjusted in accordance with the Subcontract as $127,639,635.
3.It had, therefore, already paid $17,040,813 more than the maximum amount which could be payable under cl 39A.2(a), and so could not be liable to pay any further amount.
The adjudicator dealt with this issue in the following terms:
I am of the opinion that there are too many vagaries to assess the capped amount given the allegations by [Samsung] of damages claims and any further claims which will be brought by LORAC (as stated in the Application) pursuant to clause 39A.2. Such claims pursuant to the Interim Deed must include any entitlement that LORAC has pursuant to clause 2.1(c) of the Interim Deed.
I am not satisfied as to any quantum of any capped amount and this argument of [Samsung] is rejected. (original emphasis)
Set off
In its response to the Second Adjudication Application, Samsung also claimed that it was entitled to set off the sum of $49,620,821.92 from moneys otherwise due to Samsung, under cl 37.8(b) of the General Conditions. Clause 37.8(b) allowed Samsung to deduct from any moneys otherwise due to Samsung 'any Claim to money which [Samsung], acting reasonably and bona fide, considers will become a debt due and payable under the Subcontract or otherwise at law'.
In support of that contention, Samsung relied on a statutory declaration of Mr Paul Halstead. Mr Halstead said that Samsung considered it would likely have heads of claim, which included damages incurred as a result of LORAC's unlawful withholding of materials that had been the subject of the injunction proceedings before Edelman J. Mr Halstead said this withholding was likely to cause Samsung delay in the works under the head contract it had with Roy Hill Holdings Pty Ltd. The head contract provided for Samsung to pay liquidated damages of approximately $55,900,000 per month that it is delayed in reaching the relevant completion milestone under the head contract, being 'first ore on ship'. Mr Halstead noted that it was not possible to finally assess the precise amount of damages, as first ore on ship had not yet been achieved. He said:
However, in [Samsung's] view, a reasonable assessment of the debt that will become due and payable by [LORAC] is the amount of the liquidated damages which [Samsung] will be liable to pay under the Head Contract as a result of the delay which may be caused by [LORAC's] unlawful conduct.
Mr Halstead estimated those liquidated damages would amount to $49,620,821.92, based on a delay of 27 days (being the time between the termination of the Subcontract on 10 February 2015 and the return of the material on 9 March 2015).
The adjudicator dealt with this issue in the following terms:
Clause 37.8(b) refers to any Claim to money which the Contractor … By reference to the definition of Claim this clause is ambiguous in that the definition of Claim refers to an increase in the Subcontract Sum. Clause 37.8(b) refers to a Claim which the Contractor may have which would not increase the Contract Sum but under this clause is used to setoff claims by [Samsung] against LORAC.
[Samsung] must thus rely on clause 37.8(a) which entitles a set off in respect of any debt or money due from LORAC to [Samsung].
Halstead states that he has not been able to make a full assessment of [Samsung]'s claims against LORAC but that it will be likely to have at least the following heads of claim against LORAC. I am not satisfied that there is sufficient evidence to support the requirement that there is any debt or other money due from LORAC to [Samsung] and any entitlement to a setoff claimed by [Samsung] is rejected. (original emphasis)
Acceleration claims
The Second Determination dealt with a number of particulars of the disputed claim.
One aspect of the payment dispute before the adjudicator concerned costs claimed by LORAC in relation to accelerating certain works in relation to 'screen house bins'.
It is unnecessary in these reasons to descend into the details of that dispute. However, it is relevant to note that the adjudicator resolved this question on the basis that Samsung had accepted that it had some responsibility for the acceleration measures taken by LORAC. This alleged acceptance was found in an email dated 13 November 2014, in which a representative of Samsung indicated that Samsung would 'consider compensating [LORAC] by [a] mechanism' which involved making certain payments. The offer was said to be 'a without prejudice offer' and Samsung 'reserve[d] its rights under the Subcontract if both parties cannot reach agreement'. The offer was never accepted.
The adjudicator said:
Whilst there is a substantial dispute between the parties as to liability I am satisfied that [Samsung] accepted that it has some responsibility for the acceleration measures taken by LORAC. Whilst the offer in the correspondence of 13 November 2015 is said to be without prejudice in my view the without prejudice aspect related to the quantum of the amounts to be paid as opposed to there being an acknowledgement by [Samsung] that LORAC was entitled to some payment.
The contention that LORAC's claims for acceleration should be dismissed is rejected.
The adjudicator later repeated those comments, accepted LORAC's method of calculating the claim and allowed $7,248,600.90 in respect of acceleration.[32]
Interim Deed
[32] Paragraphs 19.11 ‑ 19.14 of the Second Determination.
In the course of his reasons, the adjudicator dealt with Samsung's submission that the $45 million paid under the Interim Deed had been paid in part satisfaction of its liability under cl 39A.2. He observed:
LORAC argues that the payment of $45 million was in respect of LORAC's claims for payment which had been submitted prior to Christmas 2014 which were outstanding at the time of executing the Interim Deed and which exceeded the amount payable under the Interim Deed. This is the evidence given by Marcus Alan Carne in his statutory declaration (Carne) which forms part of the Application.
Carne gives evidence that he was involved in the negotiation of the Interim Deed and was involved in the events leading up to the execution of the Interim Deed. (original emphasis)
After noting that there was 'no denial by [Samsung] of the allegation by Carne as to the reasons for paying the $45 million', and other matters, the adjudicator continued:
I accept the evidence of Carne and note that clause 2.1 of the Interim Deed provides for three discrete payment regimes being payment of $45 million, payment pursuant to clause 39A.2 of the subcontract and payment in respect of Subcontract Works post termination. The Interim Deed whilst stating that payments are on account provides further that nothing in the Deed prejudices a party's right to institute proceedings and preserves any statutory entitlements. That I find includes an entitlement to make this Application.
Given the structure of the Interim Deed in clause 2.1 it was open to [Samsung] at the time of negotiating the Interim Deed to clearly stipulate that the payment of $45 million was to be linked to amounts due to LORAC under clause 39A.2. No such link was made.
I am not persuaded that the payment of $45 million is to be set off against any amount that may be due under the February Claim.
When the above passages are considered in light of the evidence of Mr Carne, it appears that the adjudicator resolved the construction of the Interim Deed by reference to Mr Carne's subjective understanding of its provisions.
Interest
For the purpose of considering whether interest was payable, the adjudicator identified the date of default in payment.
In essence, the adjudicator concluded that, because cl 39A.2 does not prescribe how a claim is to be made, s 16 of the Act implied the provisions in cl 5 of sch 1 to the Act as to how LORAC was to make a payment claim under cl 39A.2.
The adjudicator also accepted LORAC's submission that a term implied by s 18 of, and cl 7(3) in sch 1 to, the Act required payment of the amount within 28 days after receipt of the payment claim.
Before me, both parties accepted the correctness of this conclusion.
The adjudicator therefore allowed interest from 26 March 2015 to the date of the determination.
Procedural background
On 5 May 2015, LORAC commenced proceedings by originating summons for leave to enforce the First Determination under s 43(2) of the Act (CIV 1644 of 2015). On the same day Samsung applied for judicial review, seeking a writ of certiorari to quash the First Determination and a declaration (CIV 1645 of 2015).
On 18 May 2015, Samsung applied for judicial review, seeking a writ of certiorari to quash the Second Determination and a declaration (CIV 1733 of 2015). On 26 May 2015, LORAC sought leave to enforce the Second Determination under s 43(2) of the Act (CIV 1793 of 2015).
All matters were admitted to my CMC list, and came on for directions before me on 27 May 2015. At that time I made directions listing all matters for hearing on 10 and 11 June 2015.
The grounds on which judicial review was sought were amended at the commencement of the hearing on 10 June 2015, and further amended on the morning of 11 June 2015, to take account of developments in the parties' written and oral submissions.
Issues
By the end of the hearing there were three issues for my resolution, which, broadly expressed, were:
1.Should the First Determination be quashed because there was no payment dispute, or alternatively because the adjudicator did not properly form an opinion that there was a payment dispute?
2.Should the First and Second Determinations be quashed because the adjudicator failed to exercise or understand his adjudicative function, adopted illogical and irrational reasoning or made an unreasonable decision?
3.Should leave to enforce the First and Second Determinations be refused because the determinations are invalid or because the payments on account required by those determinations have already been made under the Interim Deed?
General principles to be applied in a judicial review application
Before turning to consider these issues, I note some of the general principles to be kept in mind.
Jurisdictional error
Section 46 of the Act provides that, except to the limited extent provided for in that section, a decision or determination of an adjudicator on an adjudication cannot be appealed or reviewed. It is established that s 46 of the Act does not preclude this court from exercising its constitutionally protected supervisory jurisdiction to grant relief on account of jurisdictional error so as to enforce the limits on the exercise of State executive and judicial power by persons and bodies other than this court.[33]
[33] Kirk v Industrial Court (NSW) [2010] HCA 1; (2010) 239 CLR 531 [99] - [100]; Perrinepod [121] - [126].
Samsung accepts that to succeed in the judicial review application it must demonstrate jurisdictional error.
The concept of jurisdictional error was described in the following terms by Hayne J in Re Refugee Review Tribunal; ex parte Aala:[34]
There is a jurisdictional error if the decision maker makes a decision outside the limits of the functions and powers conferred on him or her, or does something which he or she lacks power to do. By contrast, incorrectly deciding something which the decision maker is authorised to decide is an error within jurisdiction. (This is sometimes described as authority to go wrong, that is, to decide matters within jurisdiction incorrectly.) The former kind of error concerns departures from limits upon the exercise of power. The latter does not.
[34] Re Refugee Review Tribunal; Ex parte Aala [2000] HCA 57; (2000) 204 CLR 82 [163].
This passage was quoted with approved by the plurality in Kirk.[35]
[35] Kirk [66].
It follows from this definition of the concept that, where action taken in the purported exercise of a statutory power is sought to be impugned for jurisdictional error, the only question will be whether what was done was authorised by the empowering legislation. The answer to that question will turn on the identification of the limits of the authority conferred by the relevant statutory provision, and an analysis of the facts to ascertain whether those limits have been exceeded. The identification of those limits may also be described as identifying the conditions for the valid exercise of the statutory power.
The identification of the conditions for the valid exercise of the relevant statutory power is entirely a question of statutory construction. The proper construction of the relevant statute is 'reached by the application of rules of interpretation accepted by all arms of government in the system of representative democracy'.[36]
[36] Zheng v Cai [2009] HCA 52; (2009) 239 CLR 446 [28].
Those rules require primary attention to be directed to the text of the relevant provisions.[37] There must be regard to the language of the statute viewed as a whole, considered in its context.[38] An important part of that context will be the purpose of the legislation, ascertained from what the legislation says (rather than any assumption about the desired or desirable reach or operation of the relevant provisions).[39] Once the purpose of the legislation is established, a construction that would promote that purpose shall be preferred to a construction that would not do so.[40]
[37] Alcan (NT) Alumina Pty Ltd v Commissioner of Territory Revenue [2009] HCA 41; (2009) 239 CLR 27 [47]; Federal Commissioner of Taxation v Consolidated Media Holdings Ltd [2012] HCA 55; (2012) 250 CLR 503 [39].
[38] Project Blue Sky Inc v Australian Broadcasting Authority [1998] HCA 28; (1998) 194 CLR 355 [69]; Plaintiff S4/2014 v Minister for Immigration [2014] HCA 34; (2014) 88 ALJR 847 [42].
[39] Certain Lloyd's Underwriters v Cross [2012] HCA 56; (2012) 248 CLR 378 [26]; Minister for Employment and Workplace Relations v Gribbles Radiology Pty Ltd [2005] HCA 9; (2005) 222 CLR 194 [21].
[40] Section 18 of the Interpretation Act 1984 (WA).
Some rules of statutory construction relate to assumptions which are to be made in reading legislation. For example, it is presumed that legislation does not overthrow fundamental principles or depart from the general system of law without expressing that intention with irresistible clearness.[41] Where two alternative constructions of legislation are open, that which is consonant with the common law is to be preferred.[42]
[41] Saeed v Minister for Immigration [2010] HCA 23; (2010) 241 CLR 252 [15].
[42] Balog v Independent Commission Against Corruption (1990) 169 CLR 625, 635 ‑ 636.
Other rules of statutory construction concern what are often referred to as grounds of judicial review. For example, common law rules of statutory construction will assume that the rules of procedural fairness condition the valid exercise of certain statutory powers.[43] Grounds of review such as taking irrelevant considerations into account, or failing to take relevant considerations into account, are based on a construction of legislation as either prohibiting or requiring that regard be had to those matters.[44] A ground of review which asserts improper purpose asserts that a power was exercised for a purpose not authorised by the relevant Act.[45] A ground which asserts misapprehension of the nature or limits of the relevant statutory power[46] reflects a requirement of the law that a decision‑maker understand his or her statutory powers and obligations.[47]
[43] Plaintiff S10/2011 v Minister for Immigration [2012] HCA 31; (2012) 246 CLR 636 [97].
[44] Minister for Aboriginal Affairs v Peko‑Wallsend Ltd (1986) 162 CLR 24, 39 ‑ 40; A v Corruption and Crime Commission [2013] WASCA 288; (2013) 306 ALR 491 [88] - [90].
[45] Thompson v Randwick Corporation (1950) 81 CLR 87; R v Toohey; Ex parte Northern Land Council (1981) 151 CLR 170, 186, 233; Hunter v Minister for Planning [2012] WASC 247 [24].
[46] Kirk [72]; Craig v South Australia (1995) 184 CLR 163, 177 ‑ 178.
[47] Li [71].
Where the alleged jurisdictional error arises out of a failure to comply with legislative requirements, it is necessary to ask whether it was a purpose of the legislation that an act done in breach of the provision should be invalid. Answering that question is also a matter of construction of the relevant legislation, having regard to the language of the relevant provision and the scope and object of the whole statute.[48]
[48] Project Blue Sky [91] - [93].
An assertion of jurisdictional error in relation to the exercise of a statutory power is therefore a contention that the holder has purported exercised his or her power other than in accordance with the conditions for the valid exercise of the relevant power. The identification of the conditions which mark the limits of the holder's authority to decide is purely a matter of statutory construction. Those limits are to be identified by the application of common law and statutory rules of construction to the language which Parliament has chosen understood in the context in which it appears.
Therefore, the issues raised in the present case are to be resolved by construing the Act to identify the limits on the adjudicator's power to determine a payment dispute, followed by a factual inquiry to see if he has transgressed those limits on his authority. Put simply, the question is whether the First and Second Determinations were authorised by the Act.
Jurisdictional fact
Submissions in this case were directed to the issue of whether the existence of a payment dispute in relation to a payment claim under a construction contract was a 'jurisdictional fact'.
A 'jurisdictional fact' is simply a condition for the existence of jurisdiction, or authority, to exercise a statutory power;[49] ie, one kind of condition for the valid exercise of a statutory power. The legislature may decide to make the valid exercise of a statutory power conditional upon the existence of some set of circumstances. If those circumstances do not exist then the person to whom the statutory power is directed does not have the authority to exercise the power. In reviewing the lawfulness of the purported exercise of the power, the court may determine whether those circumstances in fact exist.
[49] Gedeon v Commissioner of the NSW Crime Commission [2008] HCA 43; (2008) 236 CLR 120 [43]; Craig (177).
The phrase 'jurisdictional fact' has been described as awkward.[50] The use of the phrase may have a greater tendency to confuse than enlighten the debate. For one thing the 'jurisdictional fact' need not be a fact. It may be a complex of elements.[51] The decision‑maker's assessment or evaluation may be an element of the 'jurisdictional fact' or it may be the jurisdictional fact itself. For example, where a power is expressly conditioned upon the formation of a state of mind by the decision‑maker (such as an opinion, belief, state of satisfaction or suspicion) the existence of the state of mind itself will constitute a jurisdictional fact.[52]
[50] Minister for Immigration v Eshetu [1999] HCA 21; (1999) 197 CLR 611 [130].
[51] Corporation of the City of Enfield v Development Assessment Commission [2000] HCA 5; (2000) 199 CLR 135 [28].
[52] Plaintiff M70/2011 v Minister for Immigration (2011) 244 CLR 144 [57].
The language has been further refined by referring to 'jurisdictional facts' in the 'broad' and 'narrow' sense. In Perrinepod, Murphy JA referred to 'jurisdictional facts in the narrow sense' as facts which must actually exist for the decision‑maker's ultimate actions to be valid. A 'jurisdictional fact in the broad sense' was one defined by reference to the belief or opinion of the decision‑maker.[53] The use of these terms in the context of the Act was discussed by Kenneth Martin J in Delmere Holdings,[54] where he expressed 'a degree of unease in proceeding too much further with any attempted application of a nomenclature characterisation as between broad and narrow jurisdictional facts' in light of recent developments to which he referred.
[53] Perrinepod [101] - [102]; see also Cape Range Electrical Contractors Pty Ltd v Austral Construction Pty Ltd [2012] WASC 304 [73] - [74].
[54] Delmere Holdings [91] - [100].
A further complication under the Act is that s 31(2)(a) operates by imposing a duty rather than conferring a power. 'Jurisdictional facts' usually condition the valid exercise of a statutory power or discretion. In the case of the Act, the valid exercise of the power to make a determination under s 31(2)(b) is conditioned by the absence of a duty to dismiss under s 31(2)(a) of the Act. That is, an adjudicator does not have the authority to determine an application which must be summarily dismissed under s 31(2)(a) of the Act.[55]
[55] Perrinepod [113] - [114].
The term 'jurisdictional fact' is well established by authority. However, in light of the above issues, I find it more useful to approach the task by an inquiry into the conditions for the valid exercise of the relevant power, identifying whether they are objective facts or the existence of a state of mind in the adjudicator. That different use of language does not reflect any substantive difference to the approach taken using the terminology 'jurisdictional fact'.
Reasonableness
The grounds for judicial review also challenge the adjudicator's decision on the ground of unreasonableness.
In Eshetu,[56] Gleeson CJ and McHugh J observed:
Someone who disagrees strongly with someone else's process of reasoning on an issue of fact may express such disagreement by describing the reasoning as 'illogical' or 'unreasonable', or even 'so unreasonable that no reasonable person could adopt it'. If these are merely emphatic ways of saying that the reasoning is wrong, then they may have no particular legal consequence.
[56] Eshetu [40].
To give an allegation of unreasonableness the consequence of invalidating an exercise of statutory power, it is necessary to identify a requirement of reasonableness as a condition for the valid exercise of the power. This may occur in a number of ways. It may be that the statute confers a discretionary power with an implied requirement of reasonableness as a condition for the valid exercise of the power.[57] If the valid exercise of the power is conditioned by the decision-maker forming an opinion, it may be that the there is an implied condition that the opinion be reasonably formed.[58]
[57] Li [64] - [65], [88] - [89].
[58] R v Connell; Ex parte Hetton Bellbird Collieries Ltd (1944) 69 CLR 407, 432; Li [90]; A v Corruption and Crime Commission [120] ‑ [122].
A decision which is regarded as unreasonable may also give rise to an inference that some other kind of jurisdictional error has been made. This process of inferring error is well known to the law.[59] The concept was illustrated by Dixon J in Avon Downs Pty Ltd v Federal Commissioner of Taxation,[60] in the following terms:
If the result appears to be unreasonable on the supposition that he addressed himself to the right question, correctly applied the rules of law and took into account all the relevant considerations and no irrelevant considerations, then it may be a proper inference that it is a false supposition. It is not necessary that you should be sure of the precise particular in which he has gone wrong. It is enough that you can see that in some way he must have failed in the discharge of his exact function according to law.
[59] House v The King (1936) 55 CLR 499, 505; Wilson v The State of Western Australia [2010] WASCA 82 [2]; Li [85].
[60] Avon Downs Pty Ltd v Federal Commissioner of Taxation(1949) 78 CLR353, 360.
That illustration was given in a context where the relevant Commissioner lacked jurisdiction to decide questions of law, unlike the present case. However, in the present case it remains open to infer error by reference to the result reached, on the basis that the result could not have been arrived at if no jurisdictional error was made, so long as the result is not explicable by a non-jurisdictional error of law. An inference of jurisdictional error may also be supported by comments made in the adjudicator's reasons, either alone or in combination with the result at which the adjudicator arrived. As will become apparent, I have found the impugned determinations to be unreasonable in this last sense.
First issue: existence of a payment dispute
Grounds
In contending that the First Determination was invalid by reference to the absence of a 'payment dispute' for the purposes of the Act, senior counsel for Samsung advanced the following five propositions, which reflect the amended grounds:
1.There can be no 'payment dispute' under the Act until the time when the amount claimed would be due for payment if the contract were performed according to its terms.
2.Once the Subcontract was terminated, the only relevant right to payment was under cl 39A.2.
3.The due date for payment under cl 39A.2 had not been reached by the time of the First Adjudication Application, so there was no 'payment dispute' within the meaning of the Act.
4.The adjudicator lacked jurisdiction to make the First Determination under s 31(2)(b) of the Act because there was no payment dispute.
5.Alternatively to 4, the adjudicator made a jurisdictional error by misconstruing s 6(a) of the Act (because he proceeded on the basis that a payment dispute could arise before payment was due).
I shall consider these propositions in turn.
First proposition: proper construction of s 6(a) of the Act
Senior counsel's argument depends on the correctness of the first proposition, which turns on the proper construction of s 6(a) of the Act. I have set out the text of s 6(a) above.
Parties' contentions
Senior counsel for Samsung submits that s 6(a) should be construed as providing that a payment dispute arises if:
1.by the time when the amount claimed in a payment claim is due to be paid under the contract, the amount has not been paid in full; or
2.by the time when the amount claimed in a payment claim is due to be paid under the contract, the claim has been rejected or wholly or partly disputed.
By contrast, senior counsel for LORAC submits that s 6(a) should be construed as providing that a payment dispute arises if:
1.by the time when the amount claimed in a payment claim is due to be paid under the contract, the amount has not been paid in full; or
2.the claim has been rejected or wholly or partly disputed.
That is, the dispute as to the proper construction of s 6(a) of the Act turns on whether the opening words of par (a) attach to all the words in the remainder of that paragraph, or only to the words 'the amount has not been paid in full'.
Previous authority
This question is not answered by reference to any authority binding on me.
It is evident that, in Cape Range,[61] Pritchard J read s 6(a) in the manner for which Samsung contends. However, Pritchard J's comment was made in the course of dealing with what the adjudicator in that case had considered. The issue agitated before me did not appear to be the subject of any significant contention between the parties in Cape Range.
[61] Cape Range [110].
In Field Deployment,[62] I made some observations about how s 6(a) of the Act might be construed in a manner which assumed that the opening words of the paragraph qualified everything that remained. However, I did not attempt to resolve any constructional issues concerning s 6(a) in that appeal, and did not have the benefit of submissions in relation to the issue when I made those observations.
[62] Field Deployment [31] - [35].
In Alliance Contracting Pty Ltd v James,[63] Beech J found that a payment dispute arose in circumstances where a notice of dispute of a final certificate for payment was given 14 days after the issue of the certificate, but payment was not due until 42 days after the last day of the month in which the certificate was issued.[64] However, the question of whether a payment dispute could arise before payment was due does not appear to have been agitated in the parties' submissions in that case. Beech J did not expressly consider the competing constructions advanced in this case.
[63] Alliance Contracting Pty Ltd v James [2014] WASC 212.
[64] Alliance Contracting [5], [13] - [15], [61] - [62].
The issue was argued before and considered by the State Administrative Tribunal in Blackadder Scaffolding Services (Aust) Pty Ltd and Mirvac Homes (WA) Pty Ltd[65] and Fuel Tank & Pipe Pty Ltd and Decmil Australia Pty Ltd.[66] In those cases, the Tribunal adopted the construction of s 6(a) now advanced by LORAC. While I find the reasoning adopted by the Tribunal in those cases to be persuasive, the decision of an administrative tribunal is clearly not binding on me.[67]
[65] Blackadder Scaffolding Services (Aust) Pty Ltd and Mirvac Homes (WA) Pty Ltd [2009] WASAT 133.
[66] Fuel Tank & Pipe Pty Ltd and Decmil Australia Pty Ltd [2010] WASAT 165.
[67] See Mustac v Medical Board of Western Australia [2007] WASCA 128 [37] - [48].
The issue was also considered in the context of broadly similar legislation to the Act by Barr J in Northern Territory v Urban and Rural Contracting Pty Ltd.[68] In that case, Barr J construed the Northern Territory provision in a manner consistent with the approach Samsung advocates. However, Barr J was dealing with different legislation, and distinguished the Tribunal decisions to which I have referred by reference to differences in the legislation.[69]
[68] Northern Territory v Urban and Rural Contracting Pty Ltd [2012] NTSC 22 [16] - [20].
[69] Urban and Rural Contracting [26] - [27].
Therefore, such authority as exists on the question is conflicting and the issue was not live in many of the cases to which counsel referred. The question posed in this case has not been resolved by previous authority.
Proper construction of s 6(a)
There are two considerations which lead me to favour the construction of s 6(a) of the Act advanced by LORAC.
First, the words 'or the claim has been rejected or wholly or partly disputed' are rendered otiose by Samsung's construction. On Samsung's construction, that limb of s 6(a) could only apply where a payment claim is rejected or disputed by the time it is due to be paid, but is nevertheless paid in full at that time. That seems an unlikely scenario. Moreover, if the scenario did arise then there could be no point to the adjudication process for which the Act provides. That process is designed to achieve a payment on account which does not finally determine the rights, duties or liabilities of any party. If payment has been made, by whatever means,[70] then there would be no point to an adjudication leading to a requirement that a party was liable to pay, on account, an amount which it had already paid.
[70] cf Urban and Rural Contracting [29].
This is a factor which influenced the Tribunal in the cases referred to above. The Tribunal referred to the constructional rule that a 'court construing a statutory provision must strive to give meaning to every word of the provision'.[71] I find the Tribunal's reasoning persuasive, and do not favour an approach which denies any practical operation to the concluding words of s 6(a) of the Act.
[71] Project Blue Sky [71], cited in Fuel Tank & Pipe [19].
In contrast, LORAC's construction does give practical content to the concluding words of s 6(a) of the Act. On that construction, a payment dispute arises when a payment claim is disputed or rejected prior to the date when payment is due, or when the amount claimed is not paid in full on the due date.
Secondly, LORAC's construction of s 6(a) better achieves the purpose of the legislation. That purpose includes providing for a speedy resolution of disputes to ensure that contractors are paid on time and the money continues to 'flow'.
The terms implied by the Act, in the absence of written provision in a construction contract, expressly contemplate that a payment claim may be rejected or disputed before it is due. Those terms require notice of dispute to be given 14 days after receiving a payment claim but do not require payment until 28 days after the claim is received.[72] When the construction contract contains written terms, payment may be required up to 50 days after it is claimed.[73] A payment claim may be rejected or disputed immediately after it is made. The regime provided for by the Act allows for disputes to arise a significant time before payment is due.
[72] Clause 7(1) and 7(3) of sch 1 to the Act.
[73] Section 10 of the Act.
It is inconsistent with the purpose of the Act to require a contractor whose payment claim is immediately rejected or disputed to wait until payment is due before making the application under s 26 of the Act which commences the adjudication process. Contractors are more likely to be paid on time if they can institute the adjudication process as soon as a payment claim is disputed, as opposed to being able to institute that process only after payment is due. LORAC's construction advances the purpose of the adjudication regime established by the Act, while Samsung's construction detracts from the achievement of that purpose.
Samsung's submissions
Senior counsel for Samsung made a number of submissions against a construction of s 6(a) of the Act which would allow a payment dispute to arise before payment is due. I consider those submissions below, and conclude they do not demonstrate LORAC's proposed construction to be incorrect.
Certainty
Samsung relies on what it says is the increased certainty produced by its proposed construction. It notes that, when s 6(a) refers to 'the time when the amount claimed in a payment claim is due to be paid under the contract', it is referring to a time period that can always be calculated once a payment claim has been made. It can be calculated by reference to the time within which, on a proper construction of the contract, payment would be due if the contract were performed according to its terms in respect of a claim of the kind made.
Samsung says that, by contrast, LORAC's construction would give rise to factual disputes as to when payment claim was rejected or disputed. It points to the debate in the present case (which it is unnecessary for me to resolve) as to whether Samsung's 'assessment' of 1 February 2015 constituted a notice disputing the claim, and to examples of debates of that kind in other cases in the Tribunal.
Samsung points out that the identification of the date when a payment dispute arises is of critical importance. Under s 26(1) of the Act an adjudication application can only be made within 28 days after a payment dispute arises. If a contractor makes an application too early, they may only discover the error when the adjudicator dismisses the application under s 31(2)(a)(ii) of the Act. By that time, which could be up to 28 days after the contractor made the adjudication application,[74] the time for making another application is likely to have expired.
[74] Allowing for the 14 days which the other party has to respond under s 27(1) of the Act, and the 14 days thereafter which the adjudicator has to deal with the application under s 31 of the Act.
While there is some force to these submissions, Samsung's construction of s 6(a) does not remove the potential for uncertainty as to when a payment dispute arises. Uncertainty may also arise from the terms of the relevant construction contract as to when payment is due. There is nothing in the material before me to indicate that disputes as to the meaning of payment provisions in a contract are apt to arise less often than factual disputes concerning whether a payment claim has been rejected or disputed. Nor is there anything to show that legal disputes as to the operation of the contract will be easier to resolve than factual disputes as to whether a claim has been disputed or rejected, particularly by those who are charged with the administration of construction contracts. In these circumstances, considerations of certainty do not demand adoption of Samsung's construction of s 6(a) of the Act.
Bar to claim
Samsung also submits that it is unlikely that Parliament intended parties to be strictly barred from bringing a claim under s 26 of the Act by reference to a time period calculated from a date before payment was due under the construction contract.
I do not accept that submission. It is consistent with the general scheme of the Act that a party to a construction contract be required to act promptly once a payment claim is rejected or disputed. On Samsung's construction, a claim for payment due after 50 days could be immediately rejected or disputed. The party making the claim would then be required to wait 50 days, and could wait a further 28 days thereafter, before making an adjudication application. It is incongruous that a responding party should be put to the onerous timeframes provided for in the Act if the institution of the adjudication process is delayed in that manner.
Interfering with contractual relations
Samsung submits that it would be fundamentally inconsistent with the evident purpose of the Act if a party could invoke the adjudication procedure in the Act by making a payment claim outside the process provided for in the contract (including provisions implied by the Act). This would also result in a fundamental interference with the common law contractual rights of the parties and, it is submitted, any ambiguity is to be resolved by preferring a construction which does not lead to that outcome. Samsung submits that LORAC's construction would allow a payment claim to be made which was not provided for in the contract and the claim to then be used to generate a payment dispute before the time when the amount the subject of the claim would be due to be paid under the contract, if the contract were performed according to its terms.
I accept that the Act should not be construed so as to require payment to be made before it is due under the contract. However, LORAC's proposed construction of s 6(a) of the Act does not produce that result. Section 31(2)(b)(ii) requires an adjudicator to determine the date on or before which a relevant amount is to be paid. That provision should not be construed as enabling the adjudicator to determine that payment is to be made before it is due. Section 31(2)(b)(ii) preserves the contractual capacity of parties to agree when payment is due, subject to the provisions of pt 2 of the Act.
In my view, there is no interference with contractual provisions if a dispute is determined before payment is due, so long as the determination does not require payment to be made before it is due under the terms of the relevant construction contract.
Interest
Samsung submits that the provisions of s 33 of the Act as to pre‑determination interest support its position.
Section 33(1)(a) applies if 'the payment is overdue under the construction contract', while s 33(2)(b) applies 'otherwise'. Section 33(1)(a) contemplates that a payment dispute may be determined when payment is not overdue under the contract. That aspect of the provision tends to support LORAC's construction.
Section 33(1)(b) of the Act, in a case to which it applies, confers a discretionary power to award interest 'from the date the payment dispute arose'. Samsung contends that this provision favours its construction of s 6(a), which avoids a payment dispute arising and therefore interest being awarded at a date before payment is due under the construction contract. This is a factor favouring Samsung's construction, but it is not compelling. The same result can be achieved by construing s 33 as not authorising an adjudicator to interfere with existing contractual rights, so that s 33(1)(b) would not authorise the awarding of interest from a date before the payment was due under the relevant construction contract.
(b)The Payment Claim must set out a clear allocation of the amount in the Payment Claim between WUSC on or in connection with the Project's minesite and WUSC performed on or in connection with the rest of the Site or Subcontract Works (or both).
(c) The Subcontractor's Payment Claim must be accompanied by separate valid tax invoices for each currency in respect of which payment is claimed.
37.3 Payment
Provided the Subcontractor has complied in full with clause 37.10 and subject to clause 37.8, the Contractor shall pay the amount shown on any invoice submitted in accordance with clause 37.2 above on or before the last day of the month on which the Payment Claim is submitted.
37.4 Payment on account only
Neither a Progress Certificate nor an invoice nor payment of moneys shall be evidence that the subject WUSC has been carried out satisfactorily. Payment other than Final Payment shall be payment on account only. At any time and from time to time, the Contractor's Representative may by a further certificate correct any error which has been discovered in any previous certificate, other than a Certificate of Practical Completion.
The Contractor may audit the Subcontractor's books and records in so far as they relate to the WUSC or have audits carried out by an auditing firm appointed by the Contractor in its absolute discretion.
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37.6 Final payment claim and certificate
Within 28 days after the latter of the expiry of the last Defects Liability Period or the rectification by the Subcontractor of all Defects in accordance with clause 35, the Subcontractor shall give the Contractor's Representative a written Final Payment Claim endorsed 'Final Payment Claim' being a Progress Claim together with all other Claims whatsoever in connection with the subject matter of the Subcontract. Within 20 days after the receipt by the Contractor's Representative of the Final Payment Claim, the Contractor's Representative shall issue to both the Subcontractor and the Contractor a Final Certificate evidencing the moneys finally due and payable between the Subcontractor and the Contractor on any account whatsoever in connection with the subject matter of the Subcontract.
Those moneys certified as due and payable shall be paid by the Contractor or the Subcontractor, as the case may be, within 25 days after the debtor receives the Final Certificate.
After the date for submitting the Final Payment Claim has passed, the Subcontractor releases the Contractor from any new or additional Claim in respect of any fact, matter or thing arising out of or in connection with the Subcontract Works, the WUSC or the Subcontract except for any Claim included in the Final Payment Claim submitted in compliance with this clause 37.6.
37.7 Interest
Interest in Item 35 shall be due and payable after the date of default in payment.
37.8 Right of set-off
The Contractor may deduct from any moneys otherwise due to the Subcontractor:
(a) any debt or other moneys due from the Subcontractor to the Contractor under the Subcontract; or
(b) any Claim to money which the Contractor, acting reasonably and bona fide, considers will become a debt due and payable,
under the Subcontract or otherwise at law, and if the moneys due to the Subcontractor are insufficient to discharge the debt or Claim, the Contractor may have recourse to any Security or retention provided by the Subcontractor or both.
The rights given to the Contractor under this clause 37.8 are in addition to and do not limit or affect any other rights of the Contractor under the Subcontract or at law and nothing in the clause affects the right of the Contractor to recover from the Subcontractor the whole of the debt or Claim in question or any balance that remains owing.
Failure by the Contractor to deduct from an amount otherwise due to the Subcontractor any amount which the Contractor is entitled to deduct under this clause 37.8, will not prejudice the Contractor's right to subsequently exercise its right of deduction under this clause.
This clause 37.8 will survive any termination of the Subcontract.
37.9 Security of Payment Legislation
(a)In this clause 37.9, 'Security of Payment Act' means any legislation which provides for rapid interim adjudication of claims under construction contracts under a policy to promote security of payment.
(b) If the Security of Payment Act applies:
(i) the Subcontractor must ensure that, within 12 hours after any notice is given or received under the Security of Payment Act by the Subcontractor or any Sub‑subcontractors, a copy of that notice is given to the Contractor's Representative and the Superintendent;
(ii) the Contractor's Representative will act as the Contractor's agent for the purposes of issuing payment schedules pursuant to the Security of Payment Act (where applicable);
(iii) the parties agree that for the purpose of the Security of Payment Act the authorised nominating authority shall be one of:
(A)the Institute of Arbitrators and Mediators Australia; or
(B) LEADR,
which persons may be amended as agreed by the parties in writing from time to time;
(iv) if a Sub-subcontractor becomes entitled to suspend Subcontract Works under a Sub-subcontract pursuant to the Security of Payment Act because of a failure by the Subcontractor to pay moneys due and payable to the Sub‑subcontractor, the Subcontractor must provide the Contractor's Representative with immediate notice of such suspension and the Contractor may pay to the Sub‑subcontractor the amount owing to the Sub‑subcontractor in respect of that Subcontract Works, and any amount so paid by the Contractor shall be a debt due and immediately payable from the Subcontractor to the Contractor; and
(v) the Subcontractor indemnifies the Contractor against all damages, losses, costs and expenses suffered or incurred by the Contractor as a result of the Subcontractor's failure to pay any Subcontractor.
(c) Nothing in this clause 37.9 will prevent a party from contending that this Subcontract is not a construction contract as that term is defined in the Construction Contracts Act 2004 (WA).
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39A Termination for convenience
39A.l Right to terminate
Without prejudice to any of the Contractor's other rights or entitlements or powers under the Subcontract, the Contractor:
(a) may at any time for its sole convenience, including where the Main Contract has been terminated, by written notice to the Subcontractor terminate the Subcontract from the date stated in the notice; and
(b) may thereafter either itself or by third parties complete the uncompleted part of WUSC.
The termination of the Subcontract by the Contractor pursuant to this clause 39A.l shall be without prejudice to the rights of either party to recover damages in respect of any prior breach of contract by the other party.
39A.2 Costs
If the Contractor terminates the Subcontract under clause 39A.l, the Subcontractor:
(a) subject to clause 37.8 and the limitations (if any) set out in clause 6 of the Formal Instrument of Agreement, shall be entitled to payment of the following amounts as reasonably determined by the Contractor's Representative:
(i) for Subcontract Works carried out prior to the date of termination the amount which would have been payable if the Subcontract had not been terminated and the Subcontractor submitted a Payment Claim for Subcontract Works carried out to the date of termination;
(ii) the cost of plant or materials reasonably ordered by the Subcontractor for the Subcontract Works for which the Subcontractor is legally bound to pay provided that:
(A) the value of the plant or materials is not included in the amount payable under clause 39A.2(a)(i); and
(B) title in the plant and materials shall vest in the Contractor upon payment;
(iii) the reasonable cost of removing from the Site all labour, Constructional Plant and other things used in connection with WUSC,
(iv) the cancellation charge for the Sub-subcontracts and Subcontractor's Consultants.
but in no case shall the total amount payable to the Subcontractor under this clause 39A.2(a), when added to other amounts already paid and payable to the Subcontractor, be more than the Subcontract Sum as adjusted in accordance with the Subcontract; and
(b) shall:
(i) take all steps possible to mitigate the costs referred to in clauses 39A.2(a)(ii), (iii) and (iv);
(ii) immediately hand over to the Contractor all copies of any documents provided by the Contractor under this Subcontract; and
(iii) cause to be delivered to the Contractor any plant and materials referred to in clause 39A.2(a)(ii) or any unfixed plant and materials for which the Contractor has paid pursuant to clause 37 .2.
The amount to which the Subcontractor is entitled under this clause 39A.2 shall be a limitation upon the Contractor's liability to the Subcontractor arising out of, or in any way in connection with, the termination of the Subcontract and the Subcontractor shall not make any Claim against the Contractor arising out of, or in any way in connection with, the termination of the Subcontract other than for the amount payable under this clause 39A.2 (as may be limited by clause 6 of the Formal Instrument of Agreement).
After the Subcontractor has satisfied its obligations under this clause 39A.2, the Contractor shall release all Securities to the Subcontractor then held by the Contractor.
This clause 39A.2 shall survive termination of the Subcontract by the Contractor under clause 39A.l.
Annexure 2: terms of the Interim Deed
Between:
(1)Samsung C&T Corporation (ABN 49 160 079 470) of 2 Bagot Road, Subiaco, Western Australia 6008 (Contractor)
(2)Laing O'Rourke Australia Construction Pty Ltd (ABN 39 112 099 000) of Level 1, 3 Craig Street Burswood, Western Australia 6100 (Subcontractor).
Background
(A)On 21 February 2014, the Contractor and the Subcontractor entered into subcontract ROYSCT-S014 the (Subcontract) to construct certain Subcontract Works (Subcontract Works).
(B)On 10 February 2015, the Subcontract was terminated by the Contractor.
(C)The Contractor and Subcontractor have agreed to an interim agreement in accordance with the terms set out in this Deed.
It is agreed as follows:
1Definitions and interpretation
1.1In this Deed, unless the context otherwise requires, words and expressions have the same meaning as in the Subcontract and the following words and expressions have the following meanings:
Advance Payment Guarantee means the security provided by the subcontractor under the Subcontract.
AUD means Australian Dollars.
Deed means this document, including any schedule or annexure to it.
Critical Novation Agreements means the sub‑contracts or supply agreements to be novated to the Contractor or its nominee listed in Schedule 1.
Effective Date means the date of this deed.
Hire Agreements and Purchase Orders means the agreements listed in Schedule 3 between the Subcontractor and third parties.
Other Novation Agreements means the sub‑contracts or supply agreements to be novated to the Contractor or its nominee listed in Schedule 2.
Performance Security means the Security provided by the Subcontractor under clause 5.1 of the Subcontract and held by the Contractor.
Related Body Corporate has the meaning given to that term in section 50 of the Corporations Act 2001 (Cth).
Related Entity means, in relation to a party, any Related Body Corporate of the party and any past or present officer, employee or agent of the party or one of its Related Bodies Corporate.
1.2A provision of this Deed must not be construed to the disadvantage of a party merely because that party was responsible for the preparation of the Deed or the inclusion of the provision in the Deed.
1.3If an act must be done on a specified day that is not a Business Day, it must be done instead on the next Business Day.
2Payment
2.1The Contractor must, pay to the Subcontractor:
(a)AUD45 million as follows:
(i)AUD30 million upon execution of this Deed, this being a pre-condition to all other obligations under this Deed;
(ii)AUD10 million upon novation of the Critical Novation Agreements;
(iii)AUD5 million upon novation of the Other Novation Agreements.
(b)Costs due to the Subcontractor under clause 39A.2 of the Subcontract including:
(i)for Subcontract Works carried out prior to the date of termination, being the amount which would have been payable if the Subcontract had not been terminated and the Subcontractor submitted a Payment Claim for Subcontract Works carried out to the date of termination;
(ii)the cost of plant or materials reasonably ordered by the Subcontractor for the Subcontract Works for which the Subcontractor is obliged to pay under the Subcontract provided the value of the plant or materials is not included in the amount payable under clause (i);
(iii)the reasonable costs of removing from Site all labour, Constructional Plant and other things used in connection with WUSC (Demobilisation Costs);
(iv)the cancellation charge for the Sub-subcontracts and Subcontractor's Consultants,
(together, the Termination Costs);
(c)the costs for Subcontract Works carried out on or from the date of termination of the Subcontract to the date of novation of the Sub‑subcontracts (including the Critical Novation Agreements and the Other Novation Agreements). The costs will be assessed by reference to the costs which would have been payable to the Subcontractor for the Subcontractor works at the date of novation of the Sub-contract, if the Subcontract had not been terminated. (Pre‑Novation Costs);
2.2The payment of moneys referred to in clause 2.1(a) shall be on account only and shall not constitute:
(a)evidence that the Subcontractor has completed any WUSC; or
(b)a release or discharge by either party of any claim.
3Goods and Services Tax
If GST is payable in relation to a supply made under or in connection with this Subcontract then the party ('Recipient') providing consideration to another party ('Supplier') for that supply must pay an additional amount to the Supplier equal to the GST payable in relation to that supply at the same time as any other consideration is to be first provided for that supply subject to the issue of a valid invoice by the Supplier to the Recipient.
4 Cooperation to resolve the final account
4.1In considering the Subcontractors entitlement under 39A.2 the Contractor and Subcontractor agree to negotiate in good faith using best endeavours to resolve all differences, disputes and Claims and achieve a negotiated outcome.
4.2Nothing herein shall prejudice the right of a party to institute proceedings to enforce obligations due under this Deed, to preserve any statutory entitlements or to seek injunctive or urgent declaratory relief.
5Novation of Sub-subcontracts
5.1Over and above the continuing obligations of the Subcontractor under clause 39A of the Subcontract, but subject to the return of the Advance Payment Security and the Security referred to in clause 7.1 of this Deed, to the Subcontractor, the Subcontractor has agreed to:
(a) use reasonable endeavours to procure the novation of the Critical Novation Agreements within 7 days of the Date of the Deed; and
(b)use reasonable endeavours to procure the novation of the Other Novation Agreements within 28 days of the date of this Deed.
5.2Where any work is undertaken by the Contractor or another contractor or subcontractor that was previously part of the Subcontractor's WUSC, the Subcontractor is not liable for the work carried out by the other contractor, or the consequences of any of those acts or omissions in carrying out work by another contractor or subcontractor.
6Plant and Equipment
6.1The Subcontractor agrees to use reasonable endeavours to facilitate the transfer of the Hire Agreements and Purchase Orders to the Contractor or its nominee. The Contractor will pay the Subcontractor the costs incurred under the Hire Agreements and Purchase Orders and associated with this clause in accordance with 2.1(b) and 2.1(c) of this Deed.
6.2The Subcontractor undertakes to advise and inform the Contractor if any commercial offer from the third party in relation to the Hire Agreements and Purchase Orders is inconsistent with the current contractual arrangement between the Subcontractor and the third party.
7 Security
7.1Contemporaneous with execution of the Deed, the Contractor shall return the Advance Payment Guarantee held by the Contractor.
7.2Upon completion of novation to the Contractor of all Critical Novation Agreements under clause 5.1(a) of this Deed the Contractor shall return the Performance Securities. In exchange for the return of the Performance Securities, the Subcontractor shall procure in favour of the Contractor a single Security, in substantially the same form as the Performance Security (unless otherwise agreed by the Contractor) in the amount of $7.5 million (Replacement Security), which expires 12 months after the Effective Date.
7.3Unless 48 hours notice is provided in advance of any call on the Replacement Security or the Performance Securities, the Contractor will not call on the Replacement Security or the Performance Security from the Effective Date until its release under clause 7.2.
8Costs
8.1The parties shall each bear their own legal costs in relation to the preparation and execution of this Deed.
9Warranties and authority
9.1Each party warrants and represents to the other with respect to itself that it has the full right, power and authority to execute, deliver and perform this Deed.
10No admission
This Deed is entered into solely in connection with the practical handover and transition of WUSC following termination of the Subcontract by the Contractor. It is not, and will not be represented or construed by the parties as, an admission of liability or wrongdoing on the part of either party to this Deed or any other person or entity.
11Severability
If any provision of this Deed is found to be void or unenforceable, that provision will be deemed to be deleted from this Deed and the remaining provisions of this Deed will continue in full force and effect and the parties shall use their respective reasonable endeavours to procure that any such provision is replaced by a provision which is valid and enforceable, and which gives effect to the spirit and intent of this Deed.
12Entire agreement
12.1This Deed constitutes the entire understanding and agreement between the parties in relation to the rights and obligations of the parties for the purpose of this deed.
13Confidentiality
The parties acknowledge and affirm the obligations under Clause 8.5 of the Subcontract.
14Governing law and jurisdiction
14.1This Deed shall be governed by, and construed in accordance with, the laws of Western Australia and the Commonwealth of Australia.
14.2 Any dispute arising out of or in connection with, or concerning the carrying into effect of, this Deed shall be referred to arbitration. The arbitration shall be administered in accordance with Clause 42 of the Subcontract.
15Execution of counterparts
15.1 This Deed may be executed in any number of counterparts. Each counterpart is an original but the counterparts together are one and the same instrument.
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