LEEVILLA PTY LTD and DORIC CONTRACTORS PTY LTD
[2015] WASAT 127
•16 NOVEMBER 2015
JURISDICTION : STATE ADMINISTRATIVE TRIBUNAL
ACT: CONSTRUCTION CONTRACTS ACT 2004 (WA)
CITATION: LEEVILLA PTY LTD and DORIC CONTRACTORS PTY LTD [2015] WASAT 127
MEMBER: MS K WHITNEY (MEMBER)
HEARD: 29 SEPTEMBER 2015
DELIVERED : 16 NOVEMBER 2015
FILE NO/S: CC 644 of 2015
BETWEEN: LEEVILLA PTY LTD
Applicant
AND
DORIC CONTRACTORS PTY LTD
Respondent
Catchwords:
Construction Contracts Act 2004 (WA) When payment dispute arises Exercise of contractual right of setoff Whether strict compliance with s 26 required
Legislation:
Construction Contracts Act 2004 (WA), s 3, s 6(a), s 16 s 18, s 25, s 26, s 26(1), s 31(2)(a), s 31(2)(a)(ii), s 31(2)(b), s 32(2)(a), s 32(a)(ii), s 46, s 46(1), cl 5(2), cl 7, Sch 1, Div 4, Div 5
State Administrative Tribunal Act 2004 (WA), s 27, s 29
Result:
Application dismissed
Summary of Tribunal's decision:
The applicant sought review under s 46(1) of the Construction Contracts Act 2004 (WA) of a decision by an adjudicator dismissing part of an application for adjudication pursuant to s 31(2)(a)(ii) of the Act without making a determination on the merits.
The applicant maintained that the payment dispute arose in 2015, when it issued an invoice purporting to 'claim back' the amount of negative variations issued by the respondent in 2013, and which were paid to the respondent in 2013 via the respondent's exercise of its contractual right of setoff. The applicant maintained in the alternative that the adjudicator 'paid undue attention to legal technicalities and failed to address the substance of the dispute contrary to the objects of the [Construction Contracts Act 2004 (WA)]. The respondent maintained that the payment dispute arose in 2013 and the adjudicator's decision was the correct and preferable decision.
The Tribunal was satisfied that the adjudicator's decision to dismiss part of the application for adjudication pursuant to s 31(2)(a)(ii) of the Construction Contracts Act 2004 (WA) without making a determination on the merits was the correct and preferable decision. The Tribunal found that there were two payment disputes, both arising in 2013. Accordingly, the applicant's statutory right to adjudicate the payment disputes expired in 2013 and the applicant's application for adjudication in 2015 was not prepared and served in accordance with s 26 of the Act. Summary dismissal was required by s 32(a)(ii) of the Act, and it was not open to the adjudicator to determine the merits of that aspect of the adjudication application.
Category: B
Representation:
Counsel:
Applicant: In Person
Respondent: Ms Van Der Plas
Solicitors:
Applicant: N/A
Respondent: N/A
Case(s) referred to in decision(s):
GRC Group Pty Ltd and Kestell [2005] WASAT 11
Match Projects Pty Ltd and Arccon (WA) Pty Ltd [2009] WASAT 134
Modular Forms Pty Ltd and Cecich [2015] WASAT 76
Perrinepod Pty Ltd v Georgiou Building Pty Ltd [2011] WASCA 217
REASONS FOR DECISION OF THE TRIBUNAL:
Introduction
This is an application for review brought under s 46(1) of the Construction Contracts Act 2004 (WA) (CC Act).
The facts
Except where otherwise indicated, the facts are not in dispute and the Tribunal finds as follows.
On 10 October 2012, Doric Contractors Pty Ltd (respondent) entered into Subcontract Order 4462259 by which Leevilla Pty Ltd trading as CBH Coatings (applicant) agreed to undertake epoxy floor works at the central precinct of the Jimblebar Mine Site for payment of $380,500 exclusive of GST (Respondent's Bundle of Documents (RBD) at 19 21). Incorporated into the terms of Subcontract Order 4462259 were various annexures including the Jimblebar Special Purpose Subcontract and Schedules (subcontract) (RBD 19 70). The subcontract was the subject of variations totalling a further $234,206.80, with a total adjusted subcontract sum of $614,706.80 excluding GST.
Clause 17 of the subcontract 'Progress Claims and Payment' provided as follows:
17.1The Subcontractor shall ensure that all progress claims:
(a)are in a form acceptable to DORIC;
(b)provide a detailed description of that work under the Subcontract performed;
(c)shows the period in which the work under the Subcontract was carried out; and
(d)are accompanied by accurate verification documentation as DORIC's Representative may request.
17.2All payment claims by the Subcontractor shall include:
(a)the Subcontractor's valuation of work executed;
(b)the amount and particulars of any adjustment to the Contract Sum;
(c)the total amount previously certified;
(d)the total amount paid under this Subcontract;
(e)the amount then claimed by the Subcontractor; and
(f)a statutory declaration certifying that all amounts owing to any consultants, subcontractors, suppliers and employees engaged with respect to the work undertaken pursuant to the Subcontract have been paid.
17.3Prior to submitting each progress claim, the subcontractor shall contact DORIC so that DORIC may inspect the work with the Subcontractor and measure and assess the quantity or percentage of work completed to date for each item code or activity on the payment claim.
17.4The Subcontractor shall be entitled to receive payment less any deductions or set off provided for under the Subcontract, for the value of completed work, as determined by DORIC.
17.5DORIC may deduct from any money due to the Subcontractor:
(a)any amount up to the value of any defective or incomplete work carried out by the Subcontractor; and
(b)liquidated damages.
17.6The Subcontractor's entitlement to a progress payment shall be calculated having regard to:
(a)the value of the work executed on work complete assessed against the Contract Sum; and
(b)the amount of any adjustment to the Contract Sum calculated in accordance with the terms of the Subcontract.
17.7The Subcontractor shall submit a claim for the value of work carried out including any variations, damages, costs, or other charges arising out of the Subcontract Works on a monthly basis by the 26th day of each month. If no progress claim is submitted the Subcontractor shall be deemed not to require payment for that month. No claims will be accepted if submitted after the 26th of each month.
17.8DORIC will assess the claim for payment. If DORIC assesses the claim as being due and payable either in whole or in part, it will make payment of the sum assessed 45 days following the end of month of claim. To the extent DORIC makes payment of a sum less than that claimed, or makes no payment, the claim is disputed.
17.9Payment of monies shall not be evidence of the value of work or an admission of liability or evidence that work has been executed satisfactorily but shall be a payment on account only.
… (RBD 53 54)
Clause 6.2 of the subcontract 'Provision of Security' provided for retention monies to be withheld in the amount of 10% of each progress claim payment to a total of 10% of the adjusted contract sum inclusive of variations (RBD 50).
Clause 20 of the subcontract 'Setoff by DORIC' provided as follows:
Without limiting DORIC's other rights and remedies DORIC may at any time and from time to time deduct from monies otherwise due to the Subcontractor any monies due or claimed to be due from the Subcontractor to DORIC whether under the Subcontract or otherwise (including other projects) and for all losses, costs, expenses and damages suffered or incurred by DORIC in respect of which the Subcontractor is or may be liable. If those monies are insufficient, DORIC may at its option, have recourse to retention monies or security under this Subcontract. (RBD 55)
Clause 27.1(a) of the subcontract 'Indemnity by Subcontractor' provided that '[t]he Subcontractor shall indemnify DORIC against: (a) loss of or damage to property of DORIC including existing property in or upon which the Subcontract Works are being carried out … caused by or arising out of with [sic] the carrying out by the Subcontractor of the Subcontract Works' (RBD 57).
Apart from clause 20, there were no written provisions of the subcontract addressing how the respondent was to make any claims for payment arising under the subcontract against the applicant. Likewise, there were no written provisions of the subcontract addressing how, and by when, the applicant was to respond to any claims for payment arising under the subcontract made against it by the respondent.
On 24 June 2013, the applicant issued tax invoice 473 claiming payment of $59,400 (inclusive of GST) pursuant to clause 17.7 of the subcontract (the June 2013 payment claim) (RBD 184). Pursuant to the terms of clause 17.8 of the subcontract, the respondent was required to make payment of the June 2013 payment claim within 45 days following the end of the month of the claim (that is, by about 15 August 2013), failing which the claim was deemed disputed.
The respondent did not pay the June 2013 payment claim within this timeframe. Neither the applicant nor the respondent tendered evidence of any further action by the applicant in respect of the respondent's nonpayment of the June 2013 payment claim.
On 21 August 2013, the respondent issued to the applicant a document headed 'Final Account' (the 21 August 2013 final account) (RBD 76). Annexed to the 21 August 2013 final account were the following four variations to the subcontract issued by the respondent totalling -$51,961.43 (the negative variations):
•Variation 506 dated 28 May 2013 for the supply and install of checker plate to the refrigerator of the Dry Mess to cover the marks and splashes of the flooring epoxy: ($27,893.00) (RBD 90);
•Variation 508 dated 8 August 2013 to comply with clause 8.12 Indigenous Engagement: ($19,756.99) (RBD 91 92);
•Variation 509 dated 13 August 2013 for telehandler support as per subcontract order 4462-259: ($811.44) (RBD 93 - 94); and
•Variation 510 dated 16 August 2013 for demobilisation: ($3,500.00) (RBD 95 - 97).
The 21 August 2013 final account set off the total of the negative variations from the amounts outstanding under the subcontract. The 21 August 2013 final account indicated that a further sum of $40,538.57 (excluding GST) (retention and deliverables amount) would be retained under the subcontract until practical completion and final completion.
By covering email sent on 21 August 2013, the respondent requested that the applicant 'sign and return [the 21 August 2013 final account] at your earliest convenience' (RBD 186). Neither the applicant nor the respondent tendered evidence of any further action by the applicant prior to 17 January 2014 in respect of the 21 August 2013 final account or the negative variations. On 17 January 2014, Aherns Lawyers issued a letter of demand on behalf of the applicant claiming $47,649.99 due under the subcontract, being:
•reversal of Variation 506 in the amount of $27,893.00; and
•reversal of Variation 508 in the amount of $19,756.99. (RBD 98 99)
Neither the applicant nor the respondent tendered evidence of any action by the respondent in response to the letter of demand.
On 27 January 2015, the applicant issued tax invoice 587 in the amount of $101,750 (2015 invoice) (RBD 71). The 2015 invoice claimed as follows:
| Date | Description | Amount (incl GST) |
| 27/01/2015 | Claim for return of reductions to contract made by Doric in Variation 506 | $30,682.30 |
| 27/01/2015 | Claim for return of reductions to contract made by Doric in Variation 508 | $21,732.69 |
| 27/01/2015 | Claim for return of reductions to contract made by Doric in Variation 509 | $892.58 |
| 27/01/2015 | Claim for return of reductions to contract made by Doric in Variation 510 | $3,850.00 |
| 27/01/2015 | Monies held until approval of contract deliverables (E.02) | $2,242.43 |
| 27/01/2015 | Retention | $42,350.00 |
By email letter dated 3 February 2015 (sent 4 February 2015), the respondent rejected the 2015 invoice 'in its entirety' (RBD 72 75).
On 4 March 2015, the applicant made an application for adjudication (adjudication claim) pursuant to s 25 of the CC Act (RBD 1 128). The respondent to the adjudication claim was the respondent. The appointor was the Institute of Arbitrators and Mediators, which appointed Mr Michael Murrey (adjudicator) as the adjudicator in the matter.
By the adjudication claim, the applicant sought a determination that it was entitled to payment of $101,750.00 inclusive of GST plus interests and costs of the adjudication, pursuant to the subcontract (RBD 17).
On 31 March 2015, the adjudicator issued a determination in respect of the adjudication claim (the determination) (RBD 312 327) as follows:
1.1The Applicant's claim to reverse the Respondents [sic] negative variations nos. 506, 508, 509, 510 is dismissed.
1.2The Respondent must pay the Applicant an amount of $44,592.43 INCL GST in respect of retentions and money held for contract deliverables. This amount must be paid on or before 10 April 2015.
1.3No interest is applicable.
1.4The parties shall bear their own costs.
1.5The cost of the adjudication is $5,544.00 INCL GST to be borne equally by the parties. I shall refund each party an amount of $228.00 in respect of deposits paid.
The adjudicator's reasons for dismissing the aspect of the claim identified at paragraph 1.1 were set out at paragraphs 4.4.10 of the determination:
I find that a payment dispute for the purposes of the Act in relation to Variation 506 and 508 arose on 21 August 2013 when the Respondent issued his 'Final Account' or at the very latest on 24 January 2014 when the Applicant through his lawyer sent his letter of demand. Furthermore the deductions made in relation to Variation 509 and 510 are not unrealistic in this type of contract and I find that the Applicant by not raising a claim against these offsets conceded the debt and cannot now resurrect the claim. Otherwise logically he would have included the amounts in his demand for payment of 24 January 2014 in which case it would be recycled. I thus find that the Claims for repayment of the negative variations are stale for the purposes of the CCA and these items are dismissed. Notwithstanding my dismissal the Applicant is at liberty to pursue the matter in another forum. (RBD 321)
The adjudicator went on to conclude at paragraph 4.4.23 of the determination that:
I do not have jurisdiction to consider the claims for reversal of negative variations as these claims were made by the Applicant previously and are now time barred for the purpose of the CCA. These claims are therefore dismissed under S31(2)(a) of the CCA. (RBD 324)
The application
Pursuant to s 46(1) of the CC Act, the applicant applied to the Tribunal for a review of the adjudicator's decision to dismiss the aspect of the adjudication claim pertaining to the negative variations under s 31(2)(a) of the CC Act (application). The decision sought by the applicant at page 5 of the application is:
Overturn adjudicator's decision to dismiss part of the application for being out of time under s26 and remit to adjudicator for his decision on the merits.
The grounds for review identified at page 6 of the application are:
The adjudicator made an error in determining the date of the payment dispute in relation to the backcharges from Doric for cost of indigenous employment and installation of checkerplate.
The above reference to 'indigenous employment' is to negative variation 508 and the reference to the 'installation of checkerplate' is to negative variation 506. Although not specifically referred to in the grounds for review, the applicant confirmed at the hearing before the Tribunal that by the application he seeks review of the adjudicator's decision concerning all of the negative variations. The respondent raised no objection.
In its statement of issues, facts and contentions filed 15 July 2015 (Applicant's SIFC), the applicant identifies at paragraph 19 the issue for determination as 'whether the adjudicator erred in dismissing the part of its application for adjudication regarding negative variations on the basis the adjudicator lacked jurisdiction under s 26 of the [CC Act]'.
The respondent's statement of issues, facts and contentions filed 28 July 2015 (Respondent's SIFC) raises the following two issues for determination by the Tribunal:
1.Whether the review application filed by the Applicant with the Tribunal on 28 April 2015 is a reviewable decision under section 46(1) of the [CC Act].
2.Whether the decision by the adjudicator to dismiss the negative variations/backcharges for being out of time under the [CC Act] was correct.
However, at the hearing before the Tribunal the respondent withdrew issue 1 and its supporting contentions, relying on the Tribunal's recent decision in Modular Forms Pty Ltd and Cecich [2015] WASAT 76. The applicant did not object.
It is not in dispute between the parties that the subcontract is a construction contract within the meaning of the CC Act, and that the applicant is a contractor and the respondent is a principal within the meaning of the CC Act.
The relevant legislation
Section 46 of the CC Act provides for a right of review to the Tribunal in limited circumstances:
(1)A person who is aggrieved by a decision made under section 31(2)(a) may apply to the State Administrative Tribunal for a review of the decision.
(2)If, on a review, a decision made under section 31(2)(a) is set aside and, under the State Administrative Tribunal Act 2004 section 29(3)(c)(i) or (ii), is reversed the adjudicator is to make a determination under section 31(2)(b) within 14 days after the date on which the decision under section 31(2)(a) was reversed or any extension of that time consented to by the parties.
(3)Except as provided by subsection (1) a decision or determination of an adjudicator on an adjudication cannot be appealed or reviewed.
Section 31(2)(a) of the CC Act provides:
An appointed adjudicator must, within the prescribed time or any extension of it made under section 32(3)(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[.]
Section 25 of the CC Act provides that if a payment dispute arises under a construction contract, '… any party to the contract may apply to have the dispute adjudicated under this Part …'. It is the existence of a 'payment dispute' within the meaning of the CC Act which may give rise to an adjudication under the CC Act: GRC Group Pty Ltd and Kestell [2005] WASAT 11.
Section 26 of the CC Act provides that to apply to have a payment dispute adjudicated, a party to the contract must, within 28 days after the dispute arises, prepare a written application for adjudication as provided for in that section. Preparing and serving an application for adjudication in accordance with s 26 of the CC Act is a precondition to the exercise of power under s 31(2)(b) of the CC Act. Failure to do so requires summary dismissal under s 31(2)(a)(ii) of the CC Act. The CC Act requires strict compliance with s 26: Match Projects Pty Ltd and Arccon (WA) Pty Ltd [2009] WASAT 134 at [64] and [65] (Match Projects). See also Perrinepod Pty Ltd v Georgiou Building Pty Ltd [2011] WASCA 217 (Perrinepod) at para [115].
A 'payment dispute' arises under the CC Act if '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': s 6(a) of the CC Act.
A payment claim includes a claim under a construction contract by the contractor to the principal for payment of an amount relating to the performance by the contractor of its obligations under the contract: s 3 CC Act. A payment claim also includes a claim under a construction contract by the principal to the contractor for payment of an amount in relation to the performance or nonperformance by the contractor of its obligations under the contract: s 3 CC Act.
The Tribunal's review powers are provided for in the State Administrative Tribunal Act 2004 (WA) (SAT Act). Section 27 of the SAT Act provides relevantly:
(1)The review of a reviewable decision is to be by way of a hearing de novo, and it is not confined to matters that were before the decision‑maker but may involve the consideration of new material whether or not it existed at the time the decision was made.
(2)The purpose of the review is to produce the correct and preferable decision at the time of the decision upon the review.
(3)The reasons for decision provided by the decisionmaker, or any grounds for review set out in the application, do not limit the Tribunal in conducting a proceeding for the review of a decision.
Section 29 of the SAT Act provides, relevantly:
(1)The Tribunal has, when dealing with a matter in the exercise of its review jurisdiction, functions and discretions corresponding to those exercisable by the decision‑maker in making the reviewable decision.
(2)Subsection (1) does not limit the powers given by this Act or the enabling Act to the Tribunal.
(3)The Tribunal may
(a)affirm the decision that is being reviewed; or
(b)vary the decision that is being reviewed; or
(c)set aside the decision that is being reviewed and
(i)substitute its own decision; or
(ii)send the matter back to the decisionmaker for reconsideration in accordance with any directions or recommendations that the Tribunal considers appropriate,
…
(9)To avoid doubt it is declared that this section and section 27 do not extend to requiring or enabling the Tribunal to deal with a matter that is different in essence from the matter that was before the decisionmaker.
The issue
It is not in dispute that the applicant is a person who is aggrieved by a decision made under s 31(2)(a) of the CC Act and the Tribunal is satisfied that it has jurisdiction to review the decision under s 46(1) of the CC Act.
The only issue for determination is whether dismissing the aspect of the adjudication claim in respect of the negative variations pursuant to s 31(2)(a) of the CC Act is the correct and preferable decision. This issue turns on when the payment dispute arose.
The parties' contentions
The respondent's position is that the payment dispute arose on 21 August 2013, when it issued the 21 August 2013 final account certifying that, by reason of the setoff of the negative variations, no monies were owed by the respondent to the applicant (Respondent's SIFC paragraphs 45 46).
The applicant's position is that the payment dispute arose only when it issued the 2015 invoice.
20.The applicant's first contention is that the adjudicator incorrectly dismissed the application in finding there was no jurisdiction under CC Act s 26 to consider the negative variations. The applicant maintains its position that there was no payment dispute because:
20.1The negative variations amounted to a setoff not a rejection of a payment claim giving rise to a payment dispute under CC Act s 6; and
20.2The negative variations first mentioned in the [21 August 2013 final account] constituted ongoing negotiations and thus could not give rise to a payment dispute under CC Act s 6.
21.The applicant's second contention is that the adjudicator incorrectly dismissed the application in respect of the negative variations because the adjudicator paid undue attention to legal technicalities and failed to address the substance of the dispute contrary to the objects of the CC Act.
22.The applicant requests the SAT find the adjudicator had jurisdiction to determine the negative variations and remit the issue to the adjudicator for determination.
23.Alternatively, the applicant requests the SAT makes a decision on the merits (Applicant's SIFC).
Analysis
Significant confusion has arisen in the present matter about when the payment dispute arose. This is because the respondent's failure to pay the June 2013 payment claim within the contractual timeframe has been conflated with the respondent's subsequent claim in respect of the negative variations. The Tribunal considers that these two events should be analysed separately.
The June 2013 payment claim was a payment claim within the meaning of the CC Act because it was a claim made under clause 17.7 of the subcontract (being a construction contract) by the applicant to the respondent for payment of an amount in relation to the performance by the applicant of its obligations under the subcontract: s 3 of the CC Act, namely work performed by the applicant under the subcontract.
Pursuant to clause 17.8 of the subcontract, the respondent was required to assess and make payment of any progress claim by 45 days after the end of the month of the claim. Payment of a lesser amount or failure to make payment was, by the terms of the subcontract, a disputation of the claim. The final day for payment of the June 2013 payment claim under the subcontract was on or about 15 August 2013, being 45 days after the end of June 2013.
The respondent did not make payment of the June 2013 payment claim by the date it was due to be paid under the subcontract and under the terms of the subcontract it was deemed disputed. Accordingly, a payment dispute within the meaning of the CC Act was triggered on or about 15 August 2013 (the June 2013 payment dispute).
On the evidence before the Tribunal, the applicant took no further action in respect of the June 2013 payment dispute. To adjudicate the June 2013 payment dispute under the CC Act, the applicant was required to prepare and serve a written application for adjudication within 28 days after the dispute arose: s 26(1) CC Act. The CC Act requires strict compliance with s 26 and preparing and serving an application for adjudication in accordance within 28 days after the dispute arose is a precondition to the exercise of power under s 31(2)(b) of the CC Act. The Tribunal finds that the applicant's statutory right to adjudication of the June 2013 payment dispute expired by midSeptember 2013 at the latest.
The respondent made its claim for the negative variations on 21 August 2013 in the 21 August 2013 final account. The claim for the negative variations was a claim made under the construction contract by the respondent to the applicant for payment (by way of setoff under the terms of the subcontract) of an amount in relation to the performance or alleged nonperformance by the applicant of its obligations under the subcontract: s 3 of the CC Act. The Tribunal therefore finds that the respondent's 21 August 2013 final account was a payment claim within the meaning of the CC Act (the August 2013 payment claim).
In the absence of any written provisions of the subcontract addressing:
•how the respondent was to make claims for payment against the applicant; and
•how and by when the applicant was to respond to claims for payment made by the respondent against the applicant;
s 16 to s 18 of the CC Act provide that the provisions in Sch 1 Div 4 and Div 5 of the CC Act are implied in the construction contract.
Clause 5(2) of Sch 1 provides as follows:
A payment claim must
(a)be in writing;
(b)be addressed to the party to which the claim is made;
(c)state the name of the claimant;
(d)state the date of the claim;
(e)state the amount claimed;
…
(g)in the case of a claim by the principal describe the basis for the claim in sufficient detail for the contractor to assess the claim;
(h)be signed by the claimant; and
(i)be given to the party to which the claim is made.
Copies of the August 2013 payment claim were adduced by the respondent in its bundle of documents (RBD 76 97 and 186 208). On this evidence, the Tribunal is satisfied that the claim was made in writing, addressed to the applicant on the respondent's letterhead, and included negative variation orders 506, 508, 509 and 510 which described the claims made by the respondent to the applicant in sufficient detail to enable the applicant to assess the claims. Furthermore, it was not in dispute that the August 2013 payment claim was provided to the applicant by the respondent by email on 21 August 2013. The Tribunal is therefore satisfied that the August 2013 payment claim complied with the formal requirements of cl 5(2) of Sch 1 of the CC Act.
Clause 7 of Sch 1 provides as follows:
(1)If a party that receives a payment claim
(a)believes the claim should be rejected because the claim has not been made in accordance with this contract; or
(b)disputes the whole or part of the claim,
the party must, within 14 days after receiving the claim, give the claimant a notice of dispute.
(2)A notice of dispute must
(a)be in writing;
(b)be addressed to the claimant;
(c)state the name of the party giving the notice;
(d)state the date of the notice;
(e)identify the claim to which the notice relates;
(f)if the claim is being rejected under subclause (1)(a) state the reasons for the belief that the claim has not been made in accordance with this contract;
(g)if the claim is being disputed under subclause (1)(b) identify each item of the claim that is disputed and state, in relation to each of those items, the reasons for disputing it; and
(h)be signed by the party giving the notice.
(3)Within 28 days after a party receives a payment claim, the party must do one of the following, unless the claim has been rejected or wholly disputed in accordance with subclause (1)
(a)pay the part of the amount of the claim that is not disputed;
(b)pay the whole of the amount of the claim.
(4)If under this contract the principal is entitled to retain a portion of any amount payable by the principal to the contractor
(a)subclause (3) does not affect the entitlement; and
(b)the principal must advise the contractor in writing (either in a notice of dispute or separately) of any amount retained under the entitlement.
Having received the August 2013 payment claim on 21 August 2013, the applicant had two options. If the applicant disputed the whole or part of the claim, the applicant was required to provide the respondent with a notice of dispute complying with cl 7(2) of Sch 1 within 14 days (that is, by about 4 September 2013). If, however, the applicant did not reject or dispute the claim in accordance with cl 7(1), the applicant was required to pay the claim within 28 days (that is, by about 18 September 2013).
There is no evidence before the Tribunal that the applicant provided the respondent with notice of dispute complying with cl 7(2) of Sch 1 of the CC Act within 14 days after receiving the August 2013 payment claim. For these reasons, the Tribunal finds that the applicant did not dispute the August 2013 payment claim as required by cl 7(2) of Sch 1 and payment was due on or about 18 September 2013.
To adjudicate a payment dispute under the CC Act, a written application for adjudication must be prepared and served within 28 days after the dispute arises: s 26(1) CC Act. The CC Act requires strict compliance with s 26 and preparing and serving an application for adjudication in accordance within 28 days after the dispute arose is a precondition to the exercise of power under s 31(2)(b) of the CC Act. In the present matter, the applicant made its adjudication claim on 4 March 2015, well outside the 28 days provided for in the CC Act to adjudicate the dispute arising from the August 2013 payment claim: s 26(1) CC Act.
The Tribunal does not accept the applicant's contention that the payment dispute arose in respect of the August 2013 payment claim when it issued the 2015 invoice.
The applicant contended that no payment dispute arose prior to it issuing the 2015 invoice because 'the negative variations amounted to a set-off not a rejection of a payment claim giving rise to a payment dispute' under the CC Act. This contention conflates the respondent's failure to pay the June 2013 payment claim within the contractual timeframe with the respondent's subsequent claim in respect of the negative variations. The Tribunal considers that these two events should be analysed separately and doing so results in two separate payment disputes, both arising for determination in 2013. Accordingly, the Tribunal is satisfied that both disputes arose for determination prior to 2014.
The applicant also contended that no payment dispute arose prior to it issuing the 2015 invoice because it was engaged in 'ongoing negotiations' with the respondent concerning the merits of the respondent's August 2013 payment claim against the applicant. However, the applicant tendered no evidence of any negotiations between 21 August 2013 and the end of 2013. Accordingly, the Tribunal is satisfied that both disputes arose for determination prior to 2014 and the applicant's adjudication claim made on 4 March 2015 was well outside the 28 days provided for in the CC Act to adjudicate the dispute.
Finally, the Tribunal does not accept the applicant's contention that the adjudicator 'incorrectly dismissed the application in respect of the negative variations because the adjudicator paid undue attention to legal technicalities'.
Preparing and serving an application for adjudication in accordance with s 26 of the CC Act is a precondition to the exercise of power under s 31(2)(b) of the CC Act. Failure to do so requires summary dismissal under s 31(2)(a)(ii) of the CC Act. The CC Act requires strict compliance with s 26: Match Projects at [64] and [65]. See also Perrinepod.
Conclusion
For the above reasons, the Tribunal is satisfied that the adjudicator's decision to dismiss the aspect of the claim pertaining to the negative variations pursuant to s 31(2)(a) of the CC Act was the correct and preferable decision.
Order
The Tribunal makes the following orders:
1.The adjudicator's decision to dismiss aspects of adjudication no 431501 pursuant to s 32(2)(a) of the Construction Contracts Act 2004 (WA) is affirmed.
2.The application for review pursuant to s 46(1) of the Construction Contracts Act 2004 (WA) is dismissed.
I certify that this and the preceding [60] paragraphs comprise the reasons for decision of the State Administrative Tribunal.
___________________________________
MS K WHITNEY, MEMBER
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