NRW Pty Ltd as trustee for NRW Unit Trust v Samsung C & T Corporation

Case •

[2015] WASC 369

•

6 OCTOBER 2015

JURISDICTION     :   SUPREME COURT OF WESTERN AUSTRALIA

IN CIVIL

CITATION:   NRW PTY LTD AS TRUSTEE FOR NRW UNIT TRUST -v- SAMSUNG C & T CORPORATION [2015] WASC 369

CORAM:   MITCHELL J

HEARD:   14 SEPTEMBER 2015

DELIVERED          :   6 OCTOBER 2015

FILE NO/S:   CIV 2072 of 2015

BETWEEN:   NRW PTY LTD AS TRUSTEE FOR NRW UNIT TRUST

Plaintiff

AND

SAMSUNG C & T CORPORATION
Defendant

FILE NO/S              :CIV 2161 of 2015

BETWEEN              :SAMSUNG C & T CORPORATION

Applicant

AND

GRAHAM IVAN ANSTEE-BROOK
Respondent

NRW PTY LTD AS TRUSTEE FOR NRW UNIT TRUST
Other Party

Catchwords:

Judicial review - Jurisdictional error - Construction contract adjudication - Whether claims 'recycled' - Whether payment dispute determined by reference to the terms of the construction contract - Whether construction contract construed reasonably

Construction contracts - Leave to enforce adjudicator's determination - Set off

Legislation:

Construction Contracts Act 2004 (WA), s 26

Result:

Certiorari refused
Leave to enforce determination granted

Category:    B

Representation:

CIV 2072 of 2015

Counsel:

Plaintiff:     Mr S K Dharmananda SC & Mr M R Collins

Defendant:     Mr C G Colvin SC & Mr B Millar

Solicitors:

Plaintiff:     Solomon Brothers

Defendant:     DLA Piper

CIV 2161 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:     DLA Piper

Respondent:     No appearance

Other Party                   :     Solomon Brothers

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

A J Lucas Operations Pty Ltd v Mac‑Attack Equipment Hire Pty Ltd (2009) NTCA 4; (2009) 25 NTLR 14; (2009) 234 FLR 328

DPD Pty Ltd v McHenry [2012] WASC 140

Field Deployment Solutions Pty Ltd v SC Projects Australia Pty Ltd [2015] WASC 60

Georgiou Group Pty Ltd v MCC Mining (Western Australia) Pty Ltd [2011] WASAT 120; (2011) 77 SR (WA) 112

K & J Burns Electrical Pty Ltd v GRD Group (NT) Pty Ltd [2011] NTCA 1; (2011) 29 NTLR 1; (2011) 246 FLR 285

Laing O'Rourke Australia Construction Pty Ltd v Samsung C & T Corporation [2015] WASC 237

SC Projects Australia Pty Ltd v Field Deployment Solutions Pty Ltd [2015] WASC 339

Thiess Pty Ltd v MCC Mining (Western Australia) Pty Ltd [2011] WASC 80

MITCHELL J: 

Summary

  1. In these proceedings, Samsung C & T Corporation (Samsung) seeks certiorari to quash a determination made by an adjudicator under the Construction Contracts Act 2004 (WA) (Act). On 1 July 2015, the adjudicator determined that Samsung must pay NRW Pty Ltd $17,467,884.10 by no later than 5.00 pm on 8 July 2015 (Determination). NRW seeks leave to enforce the Determination as an order of this court.

  2. The first issue raised by Samsung's judicial review application is whether there is a payment dispute and, if so, whether the adjudication application was made within 28 days after the payment dispute arose.  I have concluded that a payment dispute arose on 10 May 2015 when Samsung disputed a payment claim made by NRW on 30 April 2015.  The adjudication application of 27 May 2013 was made within the permissible time.

  3. The second issue raised by Samsung's judicial review application is whether the adjudicator committed jurisdictional error by determining the merits of the payment dispute other than by reference to the terms of the construction contract which were before him.  I have concluded that the adjudicator did determine the merits of the dispute by reference to the terms of the construction contract, and so did not commit jurisdictional error on that ground.

  4. The third issue raised by Samsung's judicial review application is whether the adjudicator committed jurisdictional error by unreasonably construing provisions of the construction contract which relate to the construction of a light vehicle road and batter trimming.  I have concluded that any such error was no more than a misconstruction of the construction contract, and was an error within the adjudicator's jurisdiction.

  5. The final issue, raised by Samsung's submissions in opposition to NRW's application for leave to enforce the Determination, is whether leave should be refused by reason of Samsung's rights of set off under the construction contract.  I have concluded that Samsung's claimed set offs do not provide a valid reason for refusing leave to enforce the Determination.

  6. It follows that Samsung's judicial review application should be dismissed and NRW should have leave to enforce the Determination as an order of this court.

  7. My reasons for these conclusions are set out in greater detail below.

Previous decisions

  1. I considered applications of the same kind, in relation to a contract based on the same Australian Standard,[1] in Laing O'Rourke Australia Construction Pty Ltd v Samsung C & T Corporation.[2]  I there set out many of the provisions of the Act and the principles which I identified as governing applications of this kind.  I also considered the operation of the Act in SC Projects Australia Pty Ltd v Field Deployment Solutions Pty Ltd[3] and Field Deployment Solutions Pty Ltd v SC Projects Australia Pty Ltd.[4]  I adopt what I said about the Act in those cases without repeating the analysis here. 

    [1] AS 4902-2000.

    [2] Laing O'Rourke Australia Construction Pty Ltd v Samsung C & T Corporation [2015] WASC 237.

    [3] SC Projects Australia Pty Ltd v Field Deployment Solutions Pty Ltd [2015] WASC 339.

    [4] Field Deployment Solutions Pty Ltd v SC Projects Australia Pty Ltd [2015] WASC 60.

The Subcontract

  1. Samsung has been engaged to carry out construction works associated with the Roy Hill iron ore mine in the Pilbara.  On 18 September 2013, Samsung subcontracted NRW to carry out earthworks and associated drainage works for 320 km of railway between Port Hedland and the mine. 

  2. The general structure of the contract is similar in many respects to that which I considered in Laing O'Rourke.  Clause 2.1 of the General Conditions requires NRW to carry out 'WUSC', or subcontract works, and for Samsung to pay NRW the 'Subcontract Sum' adjusted by any additions or deductions made pursuant to the Subcontract.  The Subcontract Sum is essentially the value of Subcontract Works actually performed, calculated on the basis of rates and prices set out in the Bill of Quantities. 

  3. Clause 2.3 of the General Conditions provides for either party to the Subcontract to require any part of the Subcontract Works to be measured, and for the measurement of the Subcontract Works at Practical Completion.  The clause provides for the Contractor's Representative to measure the items, and contains the parties' agreement that the rates and prices set out in the Bill of Quantities shall apply even if actual quantities are different from those specified.  Clause 2.3(g) provides for items omitted from the Bill of Quantities, which should have been included, to be a deemed Variation. 

  4. The Bill of Quantities contains rates and prices for a very large number of items, and estimated quantities for the items.  The total estimated value of the Subcontract Works was $619,491,485.00.

  5. The Date for Practical Completion was specified in the Subcontract as 31 January 2015.  The Subcontract also provides for a series of Dates for Milestone Completion.  Clause 34.7 of the General Conditions provides for NRW to pay liquidated damages of 0.03% of the Subcontract Sum per day if Practical Completion is not achieved by the Date for Practical Completion or if Milestone Completion is not achieved by a relevant Date for Milestone Completion. 

  6. Clause 37.1 - cl 37.4 of the General Conditions provide for NRW to receive progress payments in respect of work performed.

  7. Clause 37.1(a) of the General Conditions provides:

    [NRW] shall be entitled to claim certification of its entitlement to the Subcontract Sum progressively in accordance with this clause 37.1.

  8. Clause 37.1(b) provides for NRW to deliver a written Progress Claim on the last day of each calendar month before the month in which the Date of Practical Completion occurs.  The 'Date of Practical Completion' is defined as the date stated in a Certificate of Practical Completion or such other date as is determined in any arbitration or litigation.  The Progress Claim must be in a form approved by Samsung.  It must include 'the value of WUSC completed by [NRW] in accordance with the Subcontract up to the date of the Progress Claim'.  This value is to be relevantly ascertained by 'multiplying the rates and prices set out in the Bill of Quantities by the corresponding quantities actually performed'.  The Progress Claim is also to include 'sufficient evidence of that WUSC to enable the Contractor's Representative to assess the Subcontract value thereof'.  The Progress Claim may also include 'details of other moneys then due to [NRW] pursuant to the provisions of the Subcontract'.

  9. Clause 37.1(c) provides for Samsung's representative to issue a Progress Certificate within 10 days after receiving a Progress Claim.  The Progress Certificate shall state the value of WUSC completed in accordance with the Subcontract up to the date of the Progress Claim, less the value of WUSC completed up to the date of the previous Progress Claim, and less other amounts including 'any other amount [Samsung] is entitled to … set off under this Subcontract'.   Clause 37.8 provides for a right of set off in terms substantially the same as those considered in Laing O'Rourke.

  10. Clause 37.2(a) of the General Conditions entitles NRW to issue a Payment Claim within two days after the issue of a Progress Certificate.  The amount of the Payment Claim is to be the amount of the Progress Certificate 'for the value of the WUSC performed in the month prior to the month of the Payment Claim'.  The Payment Claim is to be accompanied by tax invoices, which under cl 37.3 are to be paid within 21 days after the Payment Claim is submitted.  Clause 37.4 provides that payments other than Final Payment shall be on account only.

  11. Clause 37.6 of the General Conditions provides for the issue of a Final Payment Claim within 28 days after the expiry of the last Defects Liability Period.  Clause 35 provides for the Defects Liability Period to end 18 months after the Date of Practical Completion.

Progress Claims

  1. Up to March 2015, NRW had made 20 Progress Claims, for which Samsung issued Progress Certificates certifying work to the value of $585,182,470.82, less set‑offs claimed for flights and accommodation, block booked flights and the diesel fuel rebate.  Samsung has paid $559,845.514.56 of that sum.

  2. The parties are in dispute as to whether and when Practical Completion of the Subcontract Works was achieved.  NRW contends that Practical Completion was achieved on 24 April 2015, and that the Date for Practical Completion was extended to that time.  However, no Certificate of Practical Completion has been issued.

  3. On 30 April 2015, NRW submitted Progress Claim No 21.  Included in the claim was a claim for $10,280,381.99 for '[r]emeasurement of the light vehicle road', $4,033,504.64 for batter trimming and $2,678,284.66 for constructing drains in rock.  The total amount claimed in Progress Claim No 21 was $91,560,968.45.

  4. On 10 May 2015, Samsung issued a Progress Certificate assessing the value of work done in April at $3,744,521.79.  That amount was set off against an amount claimed for flights and accommodation, so that the Progress Certificate was for a zero amount.

  5. On 27 May 2015, NRW made an adjudication application under the Act for determination of the payment dispute which NRW contended had arisen in relation to Progress Claim No 21.  In the Determination of 1 July 2015, the adjudicator determined that Samsung must pay NRW the amounts claimed for the light vehicle road and batter trimming, as well as $2,675,342.77 for constructing drains in rock and $478,654.69 in respect of rail service track maintenance.  The determination was that Samsung pay NRW $17,467,884 plus GST by no later than 5.00 pm on 8 July 2015.  The rail service maintenance decision is not separately challenged in these proceedings.

  6. Samsung now seeks to impugn the validity of the Determination on a number of grounds, which are classified as grounds 1 ‑ 5 in Samsung's Outline of Submissions.  I shall adopt the same classification in these reasons.

Grounds 1 - 3: no payment dispute/adjudication application not prepared and served in accordance with s 26 of the Act

  1. Samsung's first two grounds of challenge are based on its contention that the subject matter of Progress Claim No 21 was work that had been carried out over previous months and had been the subject of previous Progress Claims.  Samsung contends that claims for the light vehicle road, batter trimming, and drains in rock were 'recycled' claims which the adjudicator had no jurisdiction to determine.  Samsung contends that there was therefore no payment claim and no payment dispute. 

  2. Samsung also contends that the adjudication application was made more than 28 days after the payment dispute had arisen, contrary to s 26 of the Act. It contends that payment disputes arose when earlier Progress Claims and Progress Certificates were issued.

  3. Alternatively, ground 3 contends that the adjudication application was not made within 28 days after the payment dispute arose.  This is said to be because no payment dispute could arise until the time when the amount claimed was due to be paid under the Subcontract.  Ground 3 argues that the adjudication application was premature because it was made before payment was due under the Subcontract, and so before any payment dispute arose.

'Recycled' claims

  1. The concept of a 'recycled' claim under the Act and similar legislation in the Northern Territory has been considered in a number of cases.[5]  Three distinct concepts stand behind the label.

    [5] See Georgiou Group Pty Ltd v MCC Mining (Western Australia) Pty Ltd [2011] WASAT 120; (2011) 77 SR (WA) 112 [47] ‑ [82]; Thiess Pty Ltd v MCC Mining (Western Australia) Pty Ltd [2011] WASC 80 [109]; DPD Pty Ltd v McHenry [2012] WASC 140 [42] ‑ [49]; A J Lucas Operations Pty Ltd v Mac‑Attack Equipment Hire Pty Ltd (2009) NTCA 4; (2009) 25 NTLR 14; (2009) 234 FLR 328; K & J Burns Electrical Pty Ltd v GRD Group (NT) Pty Ltd [2011] NTCA 1; (2011) 29 NTLR 1; (2011) 246 FLR 285.

  2. First, it may be that the relevant construction contract does not provide for the re‑issue of a claim for a progress payment.  In such a case, the re‑issued claim is not 'made under' the construction contract for the purposes of the definition of 'payment claim' in s 3 of the Act.  This involves considering the terms of the contract to determine whether they provide for the making of such a claim.  If the 'recycled' claim is not 'made under' the construction contract it will not be a 'payment claim', and cannot give rise to a payment dispute, for the purposes of the Act. 

  3. If there is no payment dispute, the adjudicator has no power to make a determination under s 31(2)(b) of the Act.[6]

    [6] My reasons for this conclusion are explained in Laing O'Rourke [185] ‑ [192].

  4. Second, even if the 'recycled' claim is 'made under' the construction contract, the payment dispute relating to that claim may have arisen when the claim was first made. If the payment dispute arose when the claim was first made, more than 28 days before the adjudication application, then the application will not have been prepared and served in accordance with s 26(1) of the Act.

  5. If that is the case, then the adjudicator may be under a duty to dismiss the application without making a determination of its merits, under s 31(2)(a) of the Act.

  6. Third, the concept of a 'recycled claim' may go to the determination of the merits of a payment dispute under s 31(2)(b) of the Act in a case where jurisdiction to make such a determination exists.  The conclusion that a claim is repeated or recycled may inform the question of whether a party to a construction contract is entitled to receive payment which has been claimed under the contract.  For example, if the value of work performed under a construction contract has previously been claimed, and paid for in full, then an adjudicator may well conclude that no further payment is due. 

  7. This third concept standing behind the label 'recycled claim' involves the exercise, rather than the existence, of the adjudicator's jurisdiction to determine the merits of a payment dispute. 

Whether there was a payment claim and payment dispute

  1. Senior counsel for Samsung accepted that Progress Claim No 21 was validly issued under cl 37.1(b) of the General Conditions.[7]  That concession was correctly made.  Clause 37.1(a) provides for NRW to claim progress payments in accordance with cl 37.1 of the General Conditions.  NRW does that by submitting a Progress Claim including the value of the work done to the date of the Progress Claim.  This is what Progress Claim No 21 did.  It follows that Progress Claim No 21 was made under the Subcontract for the purposes of the definition of 'payment claim' in s 3 of the Act.

    [7] ts 31.

  2. The Progress Claim provided for by cl 37.1 of the General Conditions is a payment claim for the purposes of the Act.  As cl 37.1(a) makes plain, the Progress Claim is the means by which NRW claims progress payments for subcontract works.  What cl 37.2(a) refers to as a Payment Claim cannot be the only 'payment claim', within the meaning of the Act, for which the Subcontract provides.  Otherwise the potential for a payment dispute to arise would be limited in a manner not contemplated by the Act, as a Payment Claim under cl 37.2(a) can only be for an amount which Samsung has agreed (and therefore does not dispute). 

  3. NRW accepts Samsung's contention that most of the work the subject of Progress Claim No 21 had been carried out over previous months and had been the subject of previous Progress Claims under the Subcontract.  However, that does not deny Progress Claim No 21 the status of a Progress Claim under s 37.1(b) of the General Conditions or a payment claim as defined in s 3 of the Act.  The Progress Claim for which cl 37.1(b) provides does not need to state only work carried out over the previous month or work which has not previously been the subject of a claim.  Rather, the Progress Claim is to specify the value of all Subcontract Works completed up to the date of the Progress Claim, which will include work done in previous months and work which has previously been claimed. 

  4. Samsung contends that, on a proper construction of cl 37.1 of the Subcontract, NRW is only entitled to receive progress payments for work completed in the month in which a Progress Claim is issued.  Samsung contends that unclaimed work undertaken in previous months can only be the subject of a Final Payment Claim under cl 37.6 of the General Conditions.

  5. Assuming that to be the case (without deciding the point), that result would follow from action which the Contractor's Representative takes under cl 37.1(c) after the Progress Claim is received.  The result does not turn on any action by NRW.  If Samsung is correct, then NRW was only entitled to be paid for work undertaken in April 2015, but was entitled to deliver a Progress Claim specifying the value of all work completed up to the end of that month.  That is, Samsung's point goes to NRW's entitlement to be paid after making Progress Claim No 21, rather than whether that Progress Claim was a payment claim made under the Subcontract. 

  6. In my view, Progress Claim No 21 was a payment claim made under a construction contract, which could give rise to a payment dispute for the purposes of the Act.

Adjudicator's finding as to when the payment dispute arose

  1. The adjudicator found that, when the Contractor's Representative issued a Progress Certificate for a zero amount on 10 May 2015, Samsung disputed the claim made in Progress Claim No 21.  At that point the adjudicator considered a payment dispute to arise within the meaning of s 6(a) of the Act.

Payment claim too late

  1. Samsung contends that the payment dispute had arisen more than 28 days before the adjudication application was prepared and served on 27 May 2015.  It says that this occurred where Progress Claims for work undertaken between October 2013 and March 2015 were certified, on some occasions for amounts less than was claimed.  On this basis, Samsung contends that the adjudication application was made too late.

  1. There is uncontested evidence that Progress Claims were made and certified for roads, batter trimming and surface drains between October 2013 and March 2015.  However, there is no evidence that NRW had previously made the particular payment claims advanced for that work in Progress Claim No 21.

Light vehicle road

  1. Item 1.1.8.1 of the Bill of Quantities provides for a rate of $54.75 per linear metre in respect of approximately 323 km of 'Construction Access Road'.  Between October 2013 and March 2015, Samsung certified for payment in respect of approximately 330 km of Construction Access Road. 

  2. Item 1.1.8.2 of the Bill of Quantities provided for a rate of $3.07 per sqm of 'all lay down areas, pads and misc access roads'.  The estimated quantity for this item was approximately 1.1 million m2.  Between October 2013 and March 2015, Samsung had certified for approximately 2.2 million m2 under this item.

  3. Progress Claim No 21 sought payment of $10,280.381.99 in respect of approximately 3.3 million m2 of light vehicle road, under item 1.1.8.2 of the Bill of Quantities.  Senior counsel for NRW accepted that the previously certified claims under item 1.1.8.1 of the Bill of Quantities were made in respect of building the light vehicle road.[8]  However, there is no evidence that any of the previous claims under item 1.1.8.2 of the Bill of Quantities related to the light vehicle road.

    [8] ts 72 - 74.

  4. In its written submissions, Samsung accepted that, by Progress Claim No 21, NRW 'for the first time'[9] sought to be paid an additional sum for the construction of approximately 330 km of light vehicle road, on the basis that the light vehicle road was not part of the Construction Access Road provided for in item 1.8.1.1 of the Bill of Quantities but was rather a 'misc access road' provided for in item 1.1.8.2 of the Bill of Quantities.

    [9] Samsung's Outline of Submissions par 22.

  5. This was a new claim, even if it related to work which had previously been completed and been the subject of a claim under a different item.  30 April 2015 was the first occasion on which NRW claimed an entitlement to payment of an additional $10 million for the light vehicle road under item 1.1.8.2 of the Bill of Quantities.  The first occasion on which NRW's claim to receive such a payment was disputed was 10 May 2015, when the Progress Certificate was issued in relation to Progress Claim No 21.  There is no evidence of that payment dispute arising at any earlier time.

Batter trimming

  1. Items 1.6.3.1 and 1.6.3.2 of the Bill of Quantities provide for a rate of $18.95 (cut) and $15.02 (fill)  per linear metre for the quantity of approximately 637 km of batter trimming.  Prior to April 2015, NRW had claimed and been paid for approximately 636 km of batter trimming.

  2. In Progress Claim No 21, NRW sought to be paid for an additional 220 km of batter trimming at the rates provided for in items 1.6.3.1 and 1.6.3.2 of the Bill of Quantities.  Samsung again accepts that this claim for additional batter trimming was made 'for the first time' in Progress Claim No 21.[10] 

    [10] Samsung's Outline of Submissions par 29.

  3. There is no evidence of NRW previously having claimed payment for an additional 220 km of batter trimming.  The new claim was based on NRW's contention that stepping of sloped surfaces at various locations involved the construction of more than one 'batter' on each side of the track. 

Drains in rock

  1. Item 1.10.8 of the Bill of Quantities provided for a rate per m3 for constructing certain kinds of drains, including an estimated 353,048 m3 of embankment toe drains at a rate of $16.85 per m3.  Between April 2014 and March 2015 Samsung certified for the construction of 481,788 m3 of embankment toe drains which NRW had claimed.

  2. Under the heading 'other items', Progress Claim No 21 claimed $2,678,284.65 for constructing drains in rock.  NRW contends that the Bill of Quantities does not provide for a rate for constructing drains in rock, as opposed to other material, and that it is entitled to claim for constructing drains in rock as an agreed Variation under cl 2.3(e) of the General Conditions.  Again, Samsung  accepts that this claim was made 'for the first time' in Progress Certificate No 21.[11]  There is no other evidence of claims being made for an additional sum for constructing drains in rock.

When payment dispute arose

[11] Samsung's Outline of Submissions par 34.

  1. The claims advanced in Progress Claim No 21 for payment of $10,280,381.99 for the light vehicle road, $4,033,504.64 for batter trimming and $2,678,284.66 for constructing drains in rock were not repeated claims.  They were new claims made for the first time in Progress Claim No 21 on 30 April 2015.  The fact that the work to which the claims related was not completed in April 2015 did not change this.  Nor does the fact that other claims had previously been made and certified in respect of that work require that the new and different claims be classified as recycled or repeated. 

  2. On the evidence adduced in this court, I agree with the adjudicator's conclusion that these new payment claims were made on 30 April 2015, and first disputed on 10 May 2015. The adjudication application of 27 May 2015 was prepared and served within 28 days after the payment dispute arose, in accordance with s 26 of the Act.

  3. In those circumstances, the adjudicator was not required to dismiss the adjudication application without making a determination of its merits under s 31(2)(a)(ii) of the Act. That is so even if the existence of the duty to dismiss depends on whether the application has actually been prepared and served in accordance with s 26 of the Act, rather than the adjudicator's state of mind.[12]

Payment claim premature

[12] As to which, see my discussion in Laing O'Rourke [173] - [183].

  1. Alternatively, Samsung contends that no payment dispute had arisen at the time the adjudication application was prepared and served on 27 May 2015.  This is on the basis that, if the payment claim in Progress Claim No 21 had been accepted, the amount would not have been payable under cl 37.3 of the General Conditions until 12 June 2015.  Samsung contends that a payment dispute cannot arise under s 6(a) of the Act until the payment claim is due to be paid under the construction contract, even if the claim is disputed at an earlier time.  On that basis, Samsung contends that the adjudication application was premature.

  2. I rejected this argument in Laing O'Rourke.[13]  I reject the same submission made in the present case for the same reasons.  A payment dispute arises under s 6(a) of the Act when a payment claim is wholly or partly disputed, regardless of whether the payment is due at that time.  In the present case Progress Claim No 21 was disputed by 10 May 2015, when the Progress Certificate for a lesser amount was issued.  The adjudication application made on 27 May 2015 was not premature.

Conclusion as to grounds 1 - 3

[13] Laing O'Rourke [130] - [155].

  1. For the reasons explained above, on 10 May 2015 a payment dispute arose in relation to a payment claim under a construction contract. The adjudication application of 27 May 2015 was made within 28 days after the payment dispute arose, in accordance with s 26 of the Act. The adjudicator therefore had jurisdiction to make a determination of the merits of the payment dispute. Samsung has not made out grounds 1 ‑ 3 of the judicial review application.

Ground 4:  determination of payment dispute by reference to the terms of the Subcontract

Extent of the adjudicator's authority

  1. In Laing O'Rourke,[14] I held that s 31(2)(b) of the Act requires an adjudicator to determine liability to make a relevant payment by reference to the terms of the construction contract which are before the adjudicator.  The adjudicator will fail to perform that task, and will misapprehend his or her statutory function, if the adjudicator determines the merits of the payment dispute otherwise than by reference to the terms of the construction contract which are before him or her.  To act in that manner is to exceed the authority conferred by s 31(2)(b) of the Act.  However, a determination of the merits of a payment dispute by reference to the terms of the construction contract will not be invalid merely because those terms are misconstrued.

    [14] Laing O'Rourke [219].

  2. In the present case, Samsung submits that the adjudicator committed jurisdictional error by failing to determine its liability to make a payment by reference to the terms of the Subcontract.  I reject that submission for the following reasons.

The adjudicator's approach

  1. After dealing with jurisdictional matters, the adjudicator began his substantive determination by considering a claim for $51,812.327.67 for controlled blasting.  The adjudicator set out cl 37.1 and cl 37.2 of the General Conditions.  After considering the parties' arguments, the adjudicator determined that no amount was payable for controlled blasting as NRW had already claimed $66,955,604.99 for controlled blasting and the claim for the same work in Progress Certificate No 21 was a 'recycled claim'.

  2. Turning to the light vehicle road claim, the adjudicator considered the contract drawings, the Scope of Works and the Bill of Quantities.  These are all documents forming part of the Subcontract.  He concluded that the Subcontract provided for the construction of two roads, a construction access road and a light vehicle road, which were dealt with by two items in the Bill of Quantities.  The adjudicator reached this conclusion entirely by reference to documents which formed part of the Subcontract, and in doing so determined the payment dispute by reference to the terms of the Subcontract which were before him.

  3. In dealing with the claim for batter trimming, the adjudicator referred to contract drawings, the Bill of Quantities and the 'method of measurement'.  These are all contractual documents.  The adjudicator noted the competing arguments as to whether a series of stepped batters constituted a single batter or a series of separate batters for the purposes of the Subcontract. 

  4. The adjudicator noted NRW's contention that, within the civil construction industry, a batter is understood to be a singular finished sloping surface.  He also noted that Samsung did not deny this contention.  There is nothing remarkable about the adjudicator construing a technical term in a construction contract by reference to its commonly understood meaning within the relevant industry.

  5. The adjudicator concluded that each stepped sloped surface in a series of steps was a batter for the purposes of the Bill of Quantities.

  6. The adjudicator determined the claim for construction of drains in rock by considering various terms of the Subcontract, and concluded that it was a deemed Variation under cl 2.3(f) of the General Conditions.  He made an adjustment to the rate claimed by NRW, but otherwise allowed the claim.

  7. In the manner described above, the adjudicator determined the payment dispute entirely by reference to the provisions of the Subcontract before him.  He dealt with Samsung's argument that the payment claims were 'recycled' by concluding that there were separate bases for claiming the relevant works, which had not been the subject of a previous claim.

Failing to consider whether claims could be made for previous months

  1. Samsung submits that the adjudicator did not consider whether the Subcontract allowed a further Progress Claim to be made for work undertaken in previous months, after Progress Certificates had been issued in respect of the work.  There are two difficulties with this submission. 

  2. First, the adjudicator did refer to cl 37.1 and cl 37.2 of the General Conditions and did consider how those provisions operated when dealing with the controlled blasting claim.  He did not need to restate the analysis when considering other claims, which he concluded were claims for separate work not previously made and to which NRW was entitled under the Subcontract. 

  3. Secondly, Samsung's response to the adjudication application did not contend that cl 37.1 and cl 37.2 should be construed as providing for Progress Claims only in respect of the month in which each Progress Certificate was issued.  Rather, Samsung relevantly contended that:

    •the 'Construction Access Road' included the light vehicle road;

    •the Subcontract only allowed for one batter to be claimed on each side of the railway;

    •Item 1.10.8.2 of the Bill of Quantities provided for the construction of drains in both common and rock ground; and

    •the claims for payment were recycled, in the sense that they had been the subject of previous payment claims which were disputed on dates which put NRW outside of the mandatory time limit in the Act.

  4. An adjudicator can only be expected to deal with arguments as to the proper construction of a contract advanced by the parties in the adjudication application and response.  The adjudicator can hardly be said to have determined a payment dispute unreasonably, or otherwise than by reference to the terms of the Subcontract, merely because he failed to deal with an argument as to the proper construction of the Subcontract which Samsung did not advance in its response.

Conclusion as to ground 4

  1. In my view the adjudicator did determine the merits of the payment dispute by reference to the terms of the Subcontract which were before him.  The adjudicator applied those terms in resolving the arguments which the parties advanced in the adjudication application and response.  Even on the assumption that Samsung is correct in submitting that the Subcontract only provides for progress payments in respect of work completed in the month in which the Progress Claim is made, the adjudicator did no more than misconstrue the Subcontract.  Such an error in the proper construction of the contract would not cause the adjudicator to exceed his jurisdiction.

Ground 5:  unreasonable construction

  1. As advanced in Samsung's oral submissions, ground 5 related only to the adjudicator's determination of the claims for the light vehicle road and the batter trimming claims.  Samsung submits that the adjudicator's conclusions in respect of these claims were unreasonable in a sense which meant that the adjudicator had acted beyond power.

  2. In essence, Samsung contends that it was not reasonably open to construe the reference to the 'Construction Access Road' in the Bill of Quantities as not including the light vehicle road.  It contends that it was not reasonably open to construe the reference to a 'batter' in the Bill of Quantities as being other than one batter on each side of the railway, even where the batter comprises a stepped series of sloping surfaces. 

  3. The main force in Samsung's submission derives from the quantities estimated in the Bill of Quantities.  The Construction Access Road is estimated as the length of the railway.  The area of a light vehicle road running the length of the railway track would be three times the area estimated in the Bill of Quantities for 'all lay down areas, pads and misc access roads'.  The length of batter trimming estimated in the Bill of Quantities is twice the length of the railway in a contract which contemplates stepped sloping surfaces.  Samsung's submissions as to the meaning of the phrases 'Construction Access Road', 'misc access roads' and 'batter' are consistent with the estimates in the Bill of Quantities.  That is a significant factor favouring Samsung's construction of the phrases.

  4. Samsung also points to the fact that the light vehicle road is generally part of the same pavement structure as the construction haul road.  It is also significant that the light vehicle road is to be rehabilitated after construction (and so is only a construction access road for light vehicles).  Other arguments, which I regard as subsidiary, are also advanced.

  5. While I see considerable force in Samsung's arguments as to the proper construction of the Subcontract, the adjudicator's conclusion does not seem to me to be unreasonable or irrational or lack an evident and intelligible justification.  The quantities in the Bill of Quantities are estimates only.  The function of the Bill of Quantities is to identify the rates to be applied to the work actually performed.  The contract drawings, which take precedence over the Bill of Quantities,[15] can be read as showing a separate light vehicle road and a series of batters on each side of the railway at some locations.  There is a limit to the reliance which can be placed on estimated quantities in a schedule of rates contract with a very large number of items.  The language used in the Bill of Quantities is somewhat ambiguous.

    [15] The contract drawings form part of the Preliminary Design, to which cl 3(e) and cl 3(g) of the Formal Instrument of Agreement give precedence over the Bill of Quantities, which is Annexure I to  the General Conditions.

  6. While Samsung's position may ultimately be vindicated if the matter is litigated in the courts or determined in arbitration, the adjudicator's construction of the Subcontract was open and not unreasonable.  In my view, Samsung has not done more than identify possible errors of construction which were within the adjudicator's jurisdiction to make.  Jurisdictional error has not been established.

Leave to enforce the Determination

  1. For the above reasons, Samsung's challenge to the validity of the Determination fails on all grounds.  The alleged invalidity of the Determination does not provide a basis for refusing leave to enforce the Determination as an order of this court.

  2. Samsung also contends that leave to enforce should be refused because Samsung has a right to set off the payment required by the Determination against NRW's liability to pay liquidated damages for late Practical Completion or failure to achieve milestones under cl 34.7 of the General Conditions.

  3. I am not satisfied that leave to enforce the Determination should be refused on this basis.  It appears from the material before me that there are disputes between Samsung and NRW as to whether the Date for Practical Completion was extended to 24 April 2015, whether Practical Completion was achieved on that date, whether Milestone Completion Dates have been met and whether there are defects in the subcontract works.  An application for leave to enforce a determination under the Act is not the occasion to resolve those disputes.  In any event, the evidence before me as to these matters generally is of claims being made by the parties' representatives and is not sufficient to enable me to form any concluded views as to the merits of the claims. 

  4. Further, the appropriate time to claim such a set off was in Samsung's response to the adjudication application.  This was not done.  Rather, Samsung sought to set off amounts said to be owed for flights and accommodation (a claim not pursued in these proceedings).  The adjudicator has determined that Samsung should pay approximately $17 million notwithstanding the Subcontract's provision for set offs to be deducted in Progress Certificates.  Effect should be given to that determination.

  5. Finally, it should be noted that there are, at least potentially, significant amounts owing by Samsung to NRW.  Under Samsung's own valuation, but for its alleged entitlement to set offs, $25,336,956.26 in progress payments remain owing to NRW.  This comprises the certified sum of $585,182,470.82 less amounts paid to NRW of $559,845,514.56.  In addition, determinations made under the Act require Samsung to pay NRW $17,467,884.10 (the Determination), $8,478,608.57 (a determination made on 3 August 2015)[16] and $8,823,700.25 (a determination made on 3 September 2015).

    [16] I will disallow Samsung's objection to the affidavit of Deon Robert Baddock affirmed 21 August 2015 so far as it refers to the fact that a determination was made in this amount.  I do not consider receiving evidence of the fact of the making of the determination to infringe s 45(3) of the Act.  It is unnecessary for me to rule on objections which were made to me receiving evidence of other aspects of this determination, as I have not found it necessary to have regard to that material in determining this application.

  1. Samsung also holds an insurance bond in the amount of $30,974,574.00 and a retained sum of $1,500,000.00 to be returned to NRW on Practical Completion.  Samsung has withheld $92,581,723.18, and claims a set off of at least $35,000,000 up to 14 August 2015.  On the evidence before me it is far from clear that Samsung's security will be insufficient to satisfy its claims against NRW, even if the Determination is enforced.

  2. As I noted in Laing O'Rourke,[17] the fact that a debtor alleges the existence of claims against the other party which could be set off against the determination will not ordinarily justify the refusal of leave.  In the circumstances described above, I do not consider Samsung's claimed right to set off to be a valid reason to refuse the grant of leave to enforce the Determination as an order of this court.

    [17] Laing O'Rourke [259].

Orders

  1. For the above reasons I will dismiss Samsung's application for judicial review of the Determination and grant NRW leave to enforce the Determination as an order of this court.


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