LONGMONT CONSOLIDATED PTY LTD and FLEETWOOD PTY LTD - [2010] WASAT 22

JURISDICTION : STATE ADMINISTRATIVE TRIBUNAL

STREAM: COMMERCIAL & CIVIL

ACT: CONSTRUCTION CONTRACTS ACT 2004 (WA)

CITATION: LONGMONT CONSOLIDATED PTY LTD and FLEETWOOD PTY LTD [2010] WASAT 22

MEMBER: MR C RAYMOND (SENIOR MEMBER)
MS J HAWKINS (MEMBER)

HEARD: 18 NOVEMBER 2009

DELIVERED : 17 FEBRUARY 2010

FILE NO/S: CC 1442 of 2009

BETWEEN: LONGMONT CONSOLIDATED PTY LTD
Applicant
AND
FLEETWOOD PTY LTD
Respondent

Catchwords:

Construction Contracts Act 2004 (WA) - Application for review of decision by adjudicator to dismiss - Grounds of dismissal that application not served in time - Whether provisions of Sch 1, Div 5 to be implied

Legislation:

Construction Contracts Act 2004 (WA), s 3, s 6, s 16, s 17, s 18, s 26, s 26(1), s 32, s 46(1), s 53, Sch 1 Div 4, Sch 1 Div 5, Sch 1 Div 5cl 7, Sch 1 Div 5 cl 7(3)
State Administrative Tribunal Act 2004 (WA), s 29(3)

Result:

Application for review dismissed

Category: B

Representation:

Counsel:

Applicant: Mr G Morrow
Respondent: Mr CA Ryder

Solicitors:

Applicant: Downings Legal
Respondent: Corrs Chambers Westgarth

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

Blackadder Scaffolding Services (Aust) Pty Ltd and Mirvac Homes (WA) Pty Ltd [2009] WASAT 133
Longmont Consolidated Pty Ltd and Fleetwood Pty Ltd [2010] WASAT 23
Marine & Civil Bauer Joint Venture and Leighton Kumagai Joint Venture [2005] WASAT 269

REASONS FOR DECISION OF THE TRIBUNAL:

Summary of Tribunal's decision

The applicant applied under s 46(1) of the Construction Contracts Act 2004 (WA) to review a decision of an adjudicator to dismiss an adjudication application as being out of time without a determination of the merits.
The Tribunal held that the decision of the adjudicator to the effect that the adjudication application was out of time was correct, although for different reasons.
The Tribunal concluded that the relevant contractual provision concerning payments to the applicant was dependent on an approved invoice being submitted. The relevant contractual provision required the applicant to submit estimates of work performed and projected for performance during that month and by the 20th of each month. Once such an estimate is provided, the respondent was required to review the estimates and, upon approval, return them to the applicant to be submitted on the 1st of the following month. The relevant clause went on to provide that only following that process was the respondent to make payment to the applicant 30 days after receipt of an approved invoice.
The Tribunal held that the relevant contractual provision was silent as to what was to occur should an estimate not be approved or where no response to an estimate was given, and therefore did not provide a mechanism for making or responding to a payment claim, as defined in s 3 of the Construction Contracts Act 2004 (WA).
Alternatively, the Tribunal found that such a contractual provision purports to modify or restrict the operations of the Construction Contracts Act 2004 (WA) and had no effect by virtue of s 53 of that Act.
On either bases, the Tribunal found that s 16, s 17 and s 18 of the Construction Contracts Act 2004 (WA) applied and that, consequently, no payment dispute ever arose and, therefore, the adjudication application was not made within 28 days of a payment dispute arising.
The Tribunal, therefore, dismissed the application to review.

Decision under review

This is an application for review under s 46(1) of the Construction Contracts Act 2004 (WA) (CC Act) of an adjudication decision. The adjudication decision related to transport costs and is dated 24 August 2009, being adjudication No 04-09-11 (Transport Costs decision). This matter was heard together with another application for review made by the applicant, being CC 1447/2009. The review in CC 1447/2009, (Longmont Consolidated Pty Ltd and Fleetwood Pty Ltd [2010] WASAT 23) concerned an adjudication decision involving the same parties and the same contractual provisions (Spotters Costs decision). As the proceedings were not consolidated, separate reasons for each matter, CC 1442/2009 and CC 1447/2009, have been published. The adjudication applications were dismissed as the adjudicator determined they were made out of time. The applications were not determined on their merits.

Transport Costs decision and submissions

The applicant (Longmont) and the respondent (Fleetwood) entered into a contract to construct the Worsley Efficiency & Growth Camp Accommodation (project) in Collie in or about April 2008 (contract). Longmont is referred to in the contract as the contractor and Fleetwood is referred to as the company
There is no dispute between the parties that the contract is a construction contract as defined in the CC Act.
Longmont claims a dispute arose with Fleetwood in respect to a payment claim made for Transport Costs dated 31 May 2009, being invoice No 90548 for the amount of $535,870.50.
Longmont made the application for adjudication on 28 July 2009.
Both the Transport Costs decision and the Spotters Costs decision involved interpretation of Special Condition 15 (SC-15) in the contract.
The terms of SC-15 that were before the adjudicator were as follows:
15.1CONTRACTOR shall prepare and submit invoices as follows:
(a)CONTRACTOR shall submit estimates of Work performed and projected for performance during that month by the 20th of each month, and
(b)COMPANY shall review the estimates with CONTACTOR and upon approval shall return them for submittal with CONTRACTOR'S invoice on the 1st of the following month.
CONTRACTOR shall certify in each invoice that (a) there are no known liens against the Project or COMPANY'S property arising from or related to the Work and (b) that all of the CONTRACTOR'S due and payable bills related to the Work have been paid or are included in the application for payment.
Within 30 days after receipt of a correct invoice, COMPANY will pay the approved invoice amount.
During the hearing before this Tribunal, Fleetwood argued that the form of SC-15 in the executed contract between the parties was different and did not state that within 30 days after receipt of the correct invoice, the company would pay the approved invoice. Fleetwood maintained, therefore, that the Tribunal should have regard to this different version of the contract. For the reasons that follow later, there is no need to set out details of this different version of SC15.
The adjudicator treated the invoice of 31 May 2009 as a payment claim. He noted that the contract was silent as to what was to occur in the event that the claim was not assessed as correct pursuant to SC15. As a result, he implied the provisions of Sch 1 Div 5 cl 7(3) of the CC Act He decided that a payment dispute arose 28 days after the day the invoice of 31 May 2009 was submitted, being 29 June 2009. Therefore, he found that the latest date for service of the adjudication application was 27 July 2009. He went on to find that Longmont was one day late in serving their adjudication application as it was served on 28 July 2009.
Longmont argues that the adjudicator was incorrect to import the terms under Sch 1 Div 5 cl 7(3) of the CC Act into the contract. Longmont submits that there was no need to imply those terms as SC-15 provided that payment must be made within 30 days.
In summary, Longmont submits that:
•The payment claim was made simply by Longmont submitting their invoice dated 31 May 2009. Alternatively, Longmont argues that the invoice of 31 May 2009 was an approved invoice as contemplated by SC15.
•The 28 day period mentioned under Sch 1 Div 5 cl 7(3) cannot be implied as s 18 of the CC Act did not apply as the contract contained a written term requiring payment within a specified time (namely payment within 30 days).
•By applying the 30 days, mentioned in SC-15, the payment claim was due to be paid on or before 30 June 2009. By application of s 6 and s 26 of the CC Act, Longmont maintains, therefore, that the Transport Costs payment dispute arose on 1 July 2009. Therefore, the time for making an application for adjudication was 29 July 2009 (being 28 days after the payment dispute arose on 1 July 2009). Longmont submits that their application for adjudication was made to the adjudicator within time, having been served on 28 July 2009.
•As to the correct contract, Longmont maintains that at no time during the adjudication did Fleetwood raise this issue.
Fleetwood has raised a number of arguments in response, the first being that the adjudicator did not have regard to the correct version of SC15. As such, Fleetwood submits that the matter should be referred back to the adjudicator under s 29(3) of the State Administrative Tribunal Act 2004 (SAT Act).
Alternatively, if it is accepted that the version of SC15 before the adjudicator applies, Fleetwood supports the decision of the adjudicator that the adjudication application was made out of time.

The relevant statutory provisions

The regime under the CC Act requires an adjudicator to dismiss an application without making a determination of the merits on a number of stated grounds, which include the application not having been served in accordance with s 26 of the CC Act.
Section 26(1), relevantly, provides that to apply for an adjudication application, the party must apply within 28 days after a payment dispute arises:
Section 6 of the CC Act provides, when a payment dispute arises, as follows:
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; …
Section 3 of the CC Act defines payment claim as follows:
payment claim means a claim made under a construction contract
(a)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; or
(b)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;
Section 16, s 17 and s 18 of the CC Act set out when terms will be implied into a construction contract. Those sections provide as follows:
16. Making claims for payment
The provisions in Schedule 1 Division 4 are implied in a construction contract that does not have a written provision about how a party is to make a claim to another party for payment.
17.Responding to claims for payment
The provisions in Schedule 1 Division 5 about when and how a party is to respond to a claim for payment made by another party are implied in a construction contract that does not have a written provision about that matter.
18. Time for payment
The provisions in Schedule 1 Division 5 about the time by when a payment must be made are implied in a construction contract that does not have a written provision about that matter.
Clause 7(3) of Sch 1 Div 5 of the CC Act follows:
…
(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.
…

Consideration

The first issue to determine is whether the matter should be referred back to the Adjudicator to allow him to have regard to the executed contract, which allegedly contains a different version of SC-15. Fleetwood did not raise this issue at the time of the adjudication.
The Tribunal does not consider it appropriate to do so.
We apply the same reasoning expressed in Marine & Civil Bauer Joint Venture and Leighton Kumagai Joint Venture[2005] WASAT 269 at [69] [70], that no new material should be permitted, because if the matter was referred back to the adjudicator, it must be decided on material originally before him in accordance with s 32 of the CC Act.
This matter is therefore determined by regard to the terms of SC15 that were before the adjudicator at the time of the adjudication.
Although SC15 at first glance suggests a time limit within which payment must be made, the mechanism for payment in SC15 is dependent on an approved invoice being submitted. SC15 requires Longmont to submit estimates of work performed and projected for performance during that month by the 20th day of each month.
Once such an estimate is provided, Fleetwood is to review the estimates and, upon approval, return them for submittal by Longmont on the 1st of the following month.
It is only following that process that SC15 provides for payment to be made 30 days after receipt of an approved invoice.
A similar, although in some respects significantly different, clause was the subject of consideration in Blackadder Scaffolding Services (Aust) Pty Ltd and Mirvac Homes (WA) Pty Ltd [2009] WASAT 133 (Blackadder). The issue of when and how a response to a payment claim is to be made was discussed in Blackadder.
The Tribunal found that as the clause did not contain the method of how and when to respond to a payment claim, it was necessary, pursuant to s 17 and s 18 of the CC Act , to imply the terms set out in Sch 1 Div 5 cl 7(3) of the CC Act. At [42] of Blackadder, the Tribunal stated:
It is clear that it was Parliament's intention that the contract should itself stipulate both when a response to a payment claim is to be made, and how to respond, failing which the provisions in the schedule about 'that matter' will be implied. ...
We do not consider that, in this case, SC-15 stipulates how a payment claim is to be made. Longmont argues that the payment claim was made when it issued its invoice dated 31 May 2009.
SC-15 simply refers to Longmont submitting estimates of work performed, and estimated to be performed, during that particular month. It then refers to a system by which Fleetwood reviews that estimate. In Blackadder, the relevant contractual provision referred to submitting a 'Provisional Progress Claim'. In this case, SC15 speaks not in terms of the making of a payment claim, but refers to the submission of an estimate of work performed and projected for performance for approval. A payment claim under s 3 of the CC Act is a claim for payment of an amount in relation to the performance by the contractor of its obligations under the contract. It is not a claim for payment in relation to the estimated performance by the contractor under the contract.
Further, SC15 only allows payment upon an approved invoice.
It remains silent as to the process to be employed when an invoice is not an approved invoice.
We do not consider that Longmont's invoice was an approved invoice within the meaning of SC15. Firstly, there was never any express agreement from Fleetwood that the invoice of 31 May 2009 was accepted by Fleetwood as an approved invoice. We were referred to an email from Fleetwood to Longmont of 19 May 2008, by which it is alleged that Longmont was requested by Fleetwood to issue a purchase order. It was argued that by Fleetwood doing so, they had agreed the amounts referred to in Longmont's invoice of 31 May 2009 as Fleetwood were aware of the unit costs referred to in that invoice. However, Longmont's counsel conceded that there was no information before the Tribunal to establish that Fleetwood was aware of the unit costs referred to in the invoice of 31 May 2009 and had agreed to that rate.
So, although SC15 stipulates a time within which payment of an approved invoice is to be made, the provision is silent as to what is to occur should the estimate not be approved or where no response to an estimate is given.
In our view, in the context of the CC Act read as a whole, the references in s 16, s 17 and s 18 thereof to making a claim for payment, or the time within which a payment must be made, must be read as being a reference to a payment claim within the meaning of s 3 of the CC Act. Therefore, we do not consider that SC15 is a written provision which provides a mechanism for making or responding to a payment claim. Despite SC15 referring to a time within which payment is to be made, the provision for when payment is to be made has no application because it does not relate to a payment claim as defined in s 3 of the CC Act. We find for the above reasons that the provisions in Sch 1 Div 4 referred to in s 16, s 17 and s 18 of the CC Act are implied into the contract.
If we are wrong in that conclusion, a provision which allows a claim to be made only for, and obliges a contractor only to pay within a stated timeframe, an approved amount, in our view, is a provision which purports to modify or restrict the operation of the CC Act, and, as such, has no effect by virtue of s 53 of the CC Act.
Therefore, on either of the above bases, s 16, s 17 and s 18 of the CC Act apply, and as no payment claim was ever made, no payment dispute ever arose and, consequently, the adjudication application was not made within 28 days of a payment dispute arising.
The adjudicator treated Longmont's invoice of 31 May 2009 as a payment claim, but found that as there was no provision for disputing an invoice which had not been approved, the provisions of Sch 1 Div 5 cl 7 of the CC Act were implied into the contract. On that basis, the adjudicator found that the payment dispute arose on 29 June 2008, that the adjudication application was filed one day too late and, therefore, fell to be dismissed for noncompliance with s 26(1) of the CC Act.
The decision of the adjudicator to the effect that the adjudication application was out of time is therefore correct, although we have arrived at that conclusion for different reasons. The application to review must therefore be dismissed and the decision affirmed.

Orders

1.The application to review the adjudicator's decision of 24 August 2009 in adjudication No 040911 is dismissed.
2.The decision of the adjudicator in adjudication No 040911 is affirmed.

I certify that this and the preceding [46] paragraphs comprise the reasons for decision of the State Administrative Tribunal.
___________________________________
MR C RAYMOND, SENIOR MEMBER