Salini-Impregilo Spa v Floreani - [2020] WASC 358

JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA
IN CIVIL

CITATION:   SALINI-IMPREGILO SPA -v- FLOREANI [2020] WASC 358
CORAM:   HILL J
HEARD:   29 OCTOBER 2019
DELIVERED          :   15 OCTOBER 2020
FILE NO/S:   CIV 1957 of 2019
BETWEEN:   SALINI-IMPREGILO SPA
First Applicant
NRW PTY LTD
Second Applicant
AND
NICHOLAS FLOREANI
Respondent
GEODATA ENGINEERING PTY LTD
Other Party

Catchwords:

Judicial review - Construction contract - Whether adjudication required payment of duplicate item - Whether decision unreasonable, illogical or irrational - Turns on own facts

Legislation:

Construction Contracts Act 2004 (WA), s 6, s 30, s 31(2)(b)

Result:

Application dismissed

Category: B

Representation:

Counsel:

First Applicant	:	Mr D S Ellis
Second Applicant	:	Mr D S Ellis
Respondent	:	No appearance
Other Party	:	Mr J M Healy

Solicitors:

First Applicant	:	Squire Patton Boggs
Second Applicant	:	Squire Patton Boggs
Respondent	:	No appearance
Other Party	:	Murcia Pestell Hillard

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

Associated Provincial Picture Houses Ltd v Wednesbury Corporation [1948] 1 KB 223
Blanket v The Housing Authority [2014] WASC 409
Diploma Construction (WA) Pty Ltd v KPA Architects Pty Ltd [2014] WASCA 91
Duro Felguera Australia Pty Ltd v Samsung C & T Corporation [2018] WASCA 28; (2018) 52 WAR 323
Forrest & Forrest Pty Ltd v Marmion [2017] WASCA 153; (2017) 51 WAR 425
Hamersley Iron Pty Ltd v James [2015] WASC 10
Hossain v Minister for Immigration & Border Protection [2018] HCA 34; (2018) 264 CLR 123
Kirk v Industrial Court (NSW) [2010] HCA 1; (2010) 239 CLR 531
Minister for Immigration & Border Protection v Eden [2016] FCAFC 28; (2016) 240 FCR 158
Minister for Immigration & Border Protection v Singh [2014] FCAFC 1; (2014) 231 FCR 437
Minister for Immigration & Citizenship v Li [2013] HCA 18; (2013) 249 CLR 332
Minister for Immigration and Border Protection v Stretton [2016] FCAFC 11; (2016) 237 FCR 1
Perrinepod Pty Ltd v Georgiou Building Pty Ltd [2011] WASCA 217; (2011) 43 WAR 319
Re Refugee Tribunal; Ex parte Aala [2000] HCA 57; (2000) 204 CLR 82
Salini-Impregilo SPA v Francis [2020] WASC 72
Singh v Minister for Home Affairs [2019] FCAFC 3; (2019) 267 FCR 200
Western Australian Planning Commission v Board of Valuers [2018] WASCA 145

HILL J:

Introduction

The applicants (Salini) are joint venture partners who have been engaged by the Public Transport Authority of Western Australia to design, construct and maintain the underground rail connection as part of the Forrestfield Airport Link (Airport Link). In 2016, Salini engaged the Other Party (Geodata) to provide architectural, engineering and other design services for the Airport Link (Contract).[1] It was not in dispute that the Contract was a 'construction contract' within the meaning of that term in the Construction Contracts Act 2004 (WA) (Act).
[1] Affidavit of Joseph Michael Perkins filed 16 July 2019 JMP‑1.
Under the express terms of the Contract, Geodata was entitled to submit progress claims or interim payment applications (IPA) for its work under the Contract.
On 27 November 2018, Geodata submitted IPA-30, which contained various claims for activities undertaken by Geodata under the Contract and sought payment of $318,394.99.[2] Salini rejected Geodata's claim of $219,230.77 for construction assistance services in IPA-30 on the basis that this claim was already incorporated in another line item in the IPA. For this reason, on 6 December 2018, Salini certified payment to Geodata in respect of IPA-30 in the amount of $99,164.21.
[2] Affidavit of Joseph Michael Perkins filed 16 July 2019 JMP‑2.
On 17 April 2019, Geodata made an application under the Act for an adjudication of the payment dispute in relation to IPA-30 and sought payment of $219,230.77 plus GST. The respondent was appointed to be the adjudicator of the dispute (Adjudicator). On 20 May 2019, the Adjudicator made a determination that Salini was required to pay to Geodata the amount claimed in the application together with $5,189.47 in interest to the date of the adjudication (Determination).
The applicants (Salini) seek judicial review of this Determination on the ground that the decision is unreasonable, alternatively illogical or irrational on the basis that the amount the subject of the Determination was a duplicate claim of another line item and Geodata was not entitled to claim twice for the same item.
For the following reasons, I consider that Salini's application should be dismissed.

Statutory Background

The Act provides, among other purposes, the means for adjudicating payment disputes which arise under construction contracts.
Section 6 of the Act defines 'payment dispute' and sets out the circumstances where a 'payment dispute' arises. Specifically, this section provides that:
6.Payment dispute
(1)For the purposes of this Act, a payment dispute arises if ‑
(aa)a payment claim is rejected or wholly or partly disputed; or
(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
(b)by the time when any money retained by a party under the contract is due to be paid under the contract, the money has not been paid; or
(c)by the time when any security held by a party under the contract is due to be returned under the contract, the security has not been returned.
(2)Despite subsection (1), a payment dispute does not arise under subsection (1)(aa) or (a) to the extent to which the payment claim includes matters that were the subject of an application for adjudication that has been dismissed or determined under section 31(2).
(3)If a payment dispute arises under both subsection (1)(aa) and (a) in relation to a payment claim then, for the purposes of this Act, the dispute arises on the earlier of the 2 occurrences.
'Payment claim' is defined in s 3 of the Act as follows:
payment claim ‑
(a)means a claim made under a construction contract ‑
(i)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
(ii)by the principal to the contractor for payment of an amount in relation to the performance or non-performance by the contractor of its obligations under the contract;
and
(b)includes a payment claim that includes matters covered by a previous payment claim.
The object of an adjudication of a payment dispute is to determine the dispute fairly and as quickly, informally and inexpensively as possible.[3] The determination by the adjudicator does not finally determine the rights of the parties. A party is entitled to institute proceedings in relation to a dispute arising under the construction contract, even where the dispute has been the subject of an adjudication under pt 3 of the Act.[4]
[3] Construction Contracts Act2004 (WA) s 30.
[4] Construction Contracts Act2004 (WA) s 45.
As Pullin JA stated in Diploma Construction (WA) Pty Ltd v KPA Architects Pty Ltd:[5]
The broad purpose of the Act, insofar as it relates to payment disputes, is to ensure that, in construction contracts, progress claims are paid on time and that principals obliged to pay do not act as their own judge and jury and hold up payment on their own assertion that they have a defence warranting refusal to pay. It is a 'pay now, argue later' system, with the primary aim of keeping the money flowing by enforcing timely payment. If a payment dispute arises, then the Act provides for a system of rapid and summary adjudication which is conducted without any oral hearing. If the adjudicator, having received written submissions, makes a determination that the payment has to be made, then that determination gives rise to a debt 'presently due' and payable by the principal. (citations omitted)
[5] Diploma Construction (WA) Pty Ltd v KPA Architects Pty Ltd [2014] WASCA 91 [55] (Newnes & Murphy JJA agreeing).
An adjudicator is required to determine the payment dispute on the balance of probabilities and determine whether any party to the payment dispute is liable to make a payment and, if so, the amount to be paid and any interest payable on the amount under s 33 of the Act.[6]
[6] Construction Contracts Act2004 (WA) s 31(2)(b).
In Duro Felguera Australia Pty Ltd v Samsung C & T Corporation, Buss P and Murphy JA noted in relation to the Act:[7]
[I]t is an Act, according to the long title, 'to provide a means for adjudicating payment disputes arising under construction contracts'. In relation to the adjudication of 'payment disputes' the Act is plainly beneficial legislation. Adjudicators may, but need not, be legally qualified and the prospect of jurisdictional error occurring at times is perhaps unavoidable. In this context, and given the relatively short time frames under which the adjudicator must work, and the 'primary aim of keeping the money flowing down the contractual chain', the Parliamentary intention to be inferred is that decisions of adjudicators, to the extent that they deal with the adjudication of a 'payment dispute', within the meaning of s 31(2)(b), are to have the fullest operation. (footnotes omitted)

Adjudication process

[7] Duro Felguera Australia Pty Ltd v Samsung C & T Corporation [2018] WASCA 28; (2018) 52 WAR 323 [149].

A party to a construction contract may apply to have a 'payment dispute' adjudicated, provided that an application for adjudication has not previously been made in relation to the dispute.[8] The application for an adjudication must be prepared and served within 90 business days of the payment dispute arising.[9] Once served, other parties have 10 business days to prepare and serve their response.[10]
[8] Construction Contracts Act 2004 (WA) s 25.
[9] Construction Contracts Act 2004 (WA) s 26.
[10] Construction Contracts Act 2004 (WA) s 27.
Where an application is served on a prescribed appointor, the appointor must within five business days appoint a registered adjudicator to adjudicate the payment dispute.[11]
[11] Construction Contracts Act 2004 (WA) s 28(1).
The adjudicator has 10 business days from receipt of the response from the other parties to either dismiss the application without making a decision on the merits or to determine the dispute on the balance of probabilities.[12] An adjudicator is required to dismiss an adjudication if the contract is not a construction contract, the applicant gives notice withdrawing the application, the application has not been prepared in accordance with the requirements of s 26(1), (2)(b) or (c) of the Act, an order or judgment has been made about the dispute the subject of the application, or the adjudicator is satisfied that it is not possible to fairly make a determination in the time available.[13]
[12] Construction Contracts Act 2004 (WA) s 31.
[13] Construction Contracts Act 2004 (WA) s 31(2)(a).
The adjudicator acts informally in making their decision, and where possible, makes their determination on the application, any response served, and the attachments to either of these documents. An adjudicator may only obtain additional information in order to have sufficient information to be able to make a determination.[14] The adjudicator is not bound by the rules of evidence.[15]
[14] Construction Contracts Act 2004 (WA) s 32(2).
[15] Construction Contracts Act 2004 (WA) s 32(1).
A determination given under the Act must be in writing and must give reasons for the determination.[16] There is no right of appeal or review of the determination, apart from a determination to dismiss the claim without a review on the merits.[17]
[16] Construction Contracts Act 2004 (WA) s 36.
[17] Construction Contracts Act 2004 (WA) s 46.
Where a determination has been made by an adjudicator under s 31(2)(b) of the Act, judicial review of the decision may be sought on the ground of jurisdictional error.[18] On a review, the court does not engage in a review of the merits of the decision, but is confined to determining whether the adjudicator made a jurisdictional error.[19]
[18] Perrinepod Pty Ltd v Georgiou Building Pty Ltd [2011] WASCA 217; (2011) 43 WAR 319 [96] and [118] (Murphy JA, Martin CJ & McLure P agreeing).
[19] Salini-Impregilo SPA v Francis [2020] WASC 72 [70].

Factual Background

On 24 May 2016, Salini and Geodata entered into the Contract.[20]
[20] Affidavit of Joseph Michael Perkins filed 16 July 2019 JMP‑1 (Contract).
Clause 6.2.1 sets out how interim payment claims were to be made by Geodata and paid by Salini under the Contract. Geodata was required to submit to Salini on or after the 24th of each month an interim payment application, supported by evidence of the amount claimed if required. The IPA was required to show the value of the deliverables achieved and the activities done that month to which Geodata considered it was entitled to be paid. The evidence was required to be in accordance with 'Annex 3 - Schedule of design services payments'. Within 10 business days of submission of the IPA, Salini was required to verify the statement and issue an interim payment certificate (IPC) for the amount which it considered was due and to give notice to Geodata of any deductions, with the necessary reasons for such deductions. After receipt of the IPC, Geodata was authorised to issue an invoice based on the certified amount.
The Contract required Geodata to supply Salini with a detailed design, construction assistance services and the preparation of a bill of quantities.[21] The construction assistance services included the supply of a resident engineer for 26 months and the review of shop drawings prepared by Salini to ensure the initial design intent was preserved.[22] The 26 months was initially scheduled to run from February 2017.[23]
[21] Contract, Third Schedule.
[22] Contract, Third Schedule.
[23] Contract, Third Schedule.
Due to delays in excavation, Salini delayed the commencement of the construction assistance services until 1 August 2017.[24] Between February and August 2017, Geodata provided construction assistance services to Salini on an as needs basis (2017 Construction Assistance) although no IPA was submitted to Salini for this work during this period. The payment for this work was the subject of discussion between the parties from July 2017 until May 2018.[25]
[24] Affidavit of Cheryl Hua-Chien Sun filed 8 August 2019 CS-1, page 126.
[25] Affidavit of Cheryl Hua-Chien Sun filed 8 August 2019 CS-1, page 38 [122].
In April 2018, Geodata submitted IPA-23 seeking payment of $257,311.03 comprising $123,503.72 for design services and $133,807.31 for construction assistance services. The claim for construction assistance services comprised two matters: first, a monthly fee of $36,538.46 and second, an amount for back-office construction services of $97,268.85 (which was the subject of a separate agreement between the parties).[26]
[26] Affidavit of Cheryl Hua-Chien Sun filed 8 August 2019 CS-1, pages 30 - 31, [78].
On 9 May 2018, Salini issued IPC-23.[27] In IPC-23, Salini certified the claim for design services and the one month's fee for construction assistance services. It did not certify the second amount claimed but provided no reason for its rejection of this claim. In addition, Salini certified a further six months of construction assistance services for the 2017 Construction Assistance by retrospectively setting the commencement of the Construction Assistance services back to February 2017, as had been initially agreed.[28] On the same date, Salini issued Change Order no 11 (CO-11) which gave notice that Geodata's fee would be decreased by $459,350 (Negative Variation)[29] as a result of a change in the scope of the works that Geodata was to carry out. Salini offset IPC-23 (including the certification of the additional six months' construction assistance services) against the Negative Variation.[30] As a consequence, IPC-23 was issued for a total of ($80,077.44). This amount (being the balance of the Negative Variation) was offset against IPA-24.[31]
[27] Affidavit of Cheryl Hua-Chien Sun filed 8 August 2019 CS-1, page 65.
[28] Affidavit of Cheryl Hua-Chien Sun filed 8 August 2019 CS-1, pages 64, 68.
[29] Affidavit of Cheryl Hua-Chien Sun filed 8 August 2019 CS-1, pages 26 - 27, [67] - [68].
[30] Affidavit of Cheryl Hua-Chien Sun filed 8 August 2019 CS-1, page 64.
[31] Affidavit of Cheryl Hua-Chien Sun filed 8 August 2019 CS-1, page 32, [81] - [82].
On 17 May 2018, Salini issued Change Order 12 (CO-12). Under the Scope of the Work description, Salini noted that they had: [32]
previously reduced the Provisional Sum associated with Construction Assistance Services by $219,230.80… as part of Change Order No 4. This related to the period Feb 17 to July 17.
[Salini] now wish to reverse this deduction … [Salini] consider that payment of the associated 6 months [Construction Assistance] Services (Feb 17 to July 17) is a reasonable allowance for the time spent by [Geodata] to carry out Shop Drawing Reviews prior to July 17.
[32] Affidavit of Cheryl Hua-Chien Sun filed 8 August 2019 CS-2, page 182.
In September and October 2018, Geodata commenced three applications for adjudication in relation to IPA-23 and IPA-24. No determination was issued in respect of the first adjudication. In the second adjudication, which concerned IPA-24, Geodata was awarded $80,077.04 (plus interest and GST).[33] In relation to the third adjudication (concerning IPA-23), Geodata was awarded $257,311.03 (plus costs and interest) together with the costs of the adjudication.[34] The second and third adjudications were the subject of a separate judicial review application before her Honour Justice Archer.[35]
[33] Affidavit of Cheryl Hua-Chien Sun filed 8 August 2019 CS-1, page 34, [97].
[34] Affidavit of Cheryl Hua-Chien Sun filed 8 August 2019 CS-1, page 35, [104].
[35] Salini-Impregilo SPA v Francis.
On 27 November 2018, Geodata submitted IPA-30[36] to Salini under cover of an email dated 27 November 2018.[37] The email referred to Salini's retrospective decision to commence the supply of construction assistance services from February 2017 and its approval of these services for the period February 2017 to July 2017 despite there being no payment claim for this work. The email then stated:[38]
Interim payment claim 30 regularises [Salini's] purported approval of payments for the provision of … services during the period February 2017 to July 2017 despite there never having been a payment claim.
[36] Affidavit of Cheryl Hua-Chien Sun filed 8 August 2019 CS-1, page 130.
[37] Affidavit of Cheryl Hua-Chien Sun filed 8 August 2019 CS-1, page 128.
[38] Affidavit of Cheryl Hua-Chien Sun filed 8 August 2019 CS-1, page 128.
IPA-30 contained various line items for different activities undertaken by Geodata pursuant to the Contract. IPA-30 included a line item with the reference GEO.OC.4007, which was for 'Construction Assistance for February 2017 to March 2019', a period of 26 months.[39] The cumulative amount shown at line item GEO.OC.4007, which included the monthly payments up to IPA-30 (a period of 22 months), was $803,846.12.[40] $767,307.69 was recorded as the amount that Salini had previously certified for this line item.[41] Geodata sought payment for one month's construction assistance at $36,538.46 which was certified by Salini as payable.[42]
[39] Affidavit of Cheryl Hua-Chien Sun filed 8 August 2019 CS-1, page 133.
[40] Affidavit of Cheryl Hua-Chien Sun filed 8 August 2019 CS-1, 'Progress up to Date', sub-column 'Value', page 146.
[41] Affidavit of Cheryl Hua-Chien Sun filed 8 August 2019 CS-1, 'Previous Work Certified', sub‑column 'value', page 146.
[42] Affidavit of Cheryl Hua-Chien Sun filed 8 August 2019 CS-1, 'Interim Payment Certificate', sub‑column 'Actual Claim' 'Value', page 146.
Immediately below the line reference GEO.OC.4007, Geodata inserted a separate line item into IPA-30 claiming $219,230.77 which it described as:
Construction Assistance (protocol for advancement of tunnel PAT service, execution of as-constructed drawings, shop drawings check) ‑ 26 months, from February 2017 to end of March 2019.
Design-Consultant refers to the following correspondence: [FALSINRW-LET - 02383 - 08.05.18]; [FAL-SINRW-LET - 02376 ‑ 27.04.18]; [FAL‑SINRW‑LET - 02381 ‑ 07.05.18]; [FAL-SINRWLET - 02412 - 23.06.18]; [U03307/LE00132/0142 - 07.06.18]; [FAL-SINRW-LET - 0249 - 15.06.18] and Change Order 12. Design‑Builder approved payment of construction assistance services for the period February to August 2017 despite no payment claim having been submitted for that period. However, by its letter dated 9 May 2017 [FAL-SINRW-LET ‑ 02387] Design-Builder then applied the negative variation by way of offset to the $219,230.77 otherwise approved. Design‑Consultant is now regularising the claim for construction assistance services between Feb 2017 and July 2017 by making a formal payment claim.

Salini certified this line item as 'nil'. The reason given in IPA 30 was that these months had already been approved and included within line item GEO.OC.4007.[43] It is this certification that is the basis of the payment dispute between the parties and was the subject of the adjudication.
[43] Affidavit of Cheryl Hua-Chien Sun filed 8 August 2019 CS-1, 'Interim Payment Certificate', sub-column 'Comments', page 146.
On 6 December 2018, Salini issued IPC-30 certifying a payment to Geodata of $99,164.21 as the total amount payable for IPA-30.[44]
[44] Affidavit of Cheryl Hua-Chien Sun filed 8 August 2019 CS-3, page 143.

The Adjudication

On 17 April 2019, Geodata applied for an adjudication under pt 3 of the Act regarding the payment dispute in the amount of $219,230.77 plus GST.[45] Geodata's application acknowledged they had received payment of $99,164.21 plus GST in relation to IPA-30 but that the balance of IPA-30 remained in dispute.[46]
[45] Affidavit of Joseph Michael Perkins filed 16 July 2019 JMP-2, page 97.
[46] Affidavit of Joseph Michael Perkins filed 16 July 2019 JMP-2, page 107.
On 23 April 2019, the respondent was appointed to be the adjudicator of the dispute (Adjudicator).[47]
[47] Affidavit of Joseph Michael Perkins filed 16 July 2019, JMP‑11 [2], page 182.
On 6 May 2019, Salini provided their response to Geodata's application,[48] which included a statutory declaration of Richard Graham. Salini contended that the Negative Variation was irrelevant to the determination of the payment dispute.[49]
[48] Affidavit of Joseph Michael Perkins filed 16 July 2019 JMP-3, page 124.
[49] Affidavit of Joseph Michael Perkins filed 16 July 2019 JMP‑3, page 126 [5.1].
On 7 May 2019, Geodata sought leave to file responsive material in relation to two matters: the allegation that Salini had paid Geodata the amount the subject of the payment dispute, and the costs of the adjudication.[50]
[50] Affidavit of Joseph Michael Perkins filed 16 July 2019 JMP-4, page 144.
On 9 May 2019, following a request from the Adjudicator for the parties to file submissions as to whether he should exercise his discretion under s 32(2)(a) of the Act to request further submissions limited to the two matters raised by Geodata, and the filing of submissions,[51] the Adjudicator advised the parties that he required further information in order to make his determination.[52] Further submissions were filed by Geodata on 10 May 2019 and Salini on 13 May 2019.[53] No complaint is made by Salini about the Adjudicator's exercise of discretion to receive further submissions.[54]
[51] Affidavit of Joseph Michael Perkins filed 16 July 2019 JMP-6, JMP-7.
[52] Affidavit of Joseph Michael Perkins filed 16 July 2019 JMP-8, page 162.
[53] Affidavit of Joseph Michael Perkins filed 16 July 2019 JMP-9, JMP-10.
[54] Applicants' Outline of Submissions filed 2 September 2019 [45].
On 20 May 2019, the Adjudicator made a determination under s 31(2)(b) of the Act (Determination).[55] The Determination included the Adjudicator's reasons for reaching his decision, as required by s 36(d) of the Act.
[55] Affidavit of Joseph Michael Perkins filed 16 July 2019 JMP-11 (Adjudication Reasons).
After setting out the background to the determination, the Adjudicator first dealt with his jurisdiction to determine the payment dispute before turning to address the merits of the claim.
The first issue raised by Salini relevant to the Adjudicator's jurisdiction was the submission that the line item in IPA-30 for six months of construction assistance services was already included and had been certified in GEO.OC.4007. The Adjudicator summarised the evidence before him in relation to this issue, including the covering emails.[56]
[56] Adjudication reasons, [36] - [38].
The Adjudicator referred to Geodata's reliance on the evidence of Mr Enrione which established that:[57]
(a)the original scope of works under the Contract required Geodata to supply 26 months of construction assistance services between February 2017 and March 2019;
(b)between February to August 2017, Salini did not require the supply of construction assistance services under the Contract but sought construction assistance services from Geodata on an ad hoc basis;
(c)on 18 July 2017, Salini gave notice to Geodata that it required Geodata to commence supplying construction assistance services under the Contract from 1 August 2017. Salini issued VO-4 to Geodata in September 2017 to reduce the scope of works under the Contract to 20 months' construction assistance services;
(d)until the issue of IPC-22 on 12 April 2018, each IPA and IPC reflected this variation to the Contract. On 9 May 2018, by the issue of IPC-23 with an accompanying letter, Salini raised the Negative Variation, certified an amount of $219,230.77 by retrospectively increasing the quantity of construction assistance services to be supplied under the Contract from 20 months to 26 months commencing February 2017 and ending March 2019, and applied the Negative Variation by way of offset against the certified amounts in IPC-23;
(e)on 14 May 2018, Salini issued CO-12 to change the scope of the construction assistance services from 20 months back to 26 months.
[57] Adjudication reasons, [38].
The Adjudicator found that:[58]
(a)IPA-30 was the first application submitted following the adjudication determination which determined the Negative Variation had not been validly applied by Salini;
(b)Geodata included in IPA-30 a claim for construction assistance services prior to August 2017 and limited the claim amount and period to that which was agreed between Salini and Geodata and approved by Salini in IPC-23;
(c)the amount claimed of $219,230.76 (for the period February to July 2017) was different to the amount notionally approved in IPC-23 of $255,769.22 because the latter figure included the approval for one month's construction assistance for April 2018;
(d)on 6 December 2018, Salini issued the original IPC-30 which approved all claims in IPA-30 save for the claim for construction assistance services on the basis that this claim was included as part of GEO.OC.4007;
(e)the original IPC-30 recorded an intention to pay an amount of $329,723.03 being the amount payable in accordance with the Second Determination (regarding IPA-24);
(f)Salini then re-issued PC-30 excluding the amounts payable under the Second Determination.
[58] Adjudication reasons, [39].
The Adjudicator concluded:[59]
It is apparent from a review of Mr Enrione's evidence and from the documents referred to in it, that although [Salini] certified 22 months construction assistance services (in PC-23), it had not in fact paid for it by reason of the set-off applied by way of the Negative Variation. That conclusion resolves this aspect of [Salini's] jurisdictional challenge. I am not satisfied that the line item in IPA-30 for 6 months of Construction Assistance for $219,230.77 is already included by way of application and certification in the line item GEO.OC.4007 directly above it.
[59] Adjudication reasons, [40].
The Adjudicator then considered the second issue raised by Salini in relation to jurisdiction, namely whether the payment dispute concerned disputed amounts in IPC-23. The Adjudicator found that the reference to earlier IPCs, specifically IPC-23 and IPC-24, did not contravene the Act. These matters were raised to provide context for the issue of IPA‑30 and how and when the amount for the 2017 Construction Assistance was certified by Salini.[60]
[60] Adjudication reasons, [42].
For these reasons, the Adjudicator found that he had jurisdiction to determine the payment dispute and turned to consider the merits of the application.
The Adjudicator referred back to his finding that the previous approval of the amount for the 2017 Construction Assistance in IPC-23 did not invalidate IPA-30.[61] He then addressed the issue of whether the Negative Variation was a valid set-off under the Contract.
[61] Adjudication reasons, [45].
Clause 11.1.1 of the Contract provides that where there is no specific notice requirement, written notice is to be given within 14 days after the occurrence that has given rise to the claim for relief. The Adjudicator found that on its proper construction, cl 11.1.1 applied to the Negative Variation.[62] This was because it was a circumstance in which Salini believed it was entitled to relief against Geodata. As a result, if Salini wished to make a claim for the Negative Variation, it was required to give Geodata notice within 14 days of the variation of the design. That is, notice was required to have been given by 23 June 2016 (for the rectangular instruction) and 24 November 2016 (for the circular instruction).[63] In failing to give notice within the contractual timeframe, the Adjudicator found that Salini was not entitled to rely on the Negative Variation as a basis to withhold funds from Geodata.[64]
[62] Adjudication reasons, [60]
[63] Adjudication reasons, [59] - [61].
[64] Adjudication reasons, [62].
As a consequence, Salini could not rely on the Negative Variation and Geodata was entitled to claim for the unpaid portion of the construction assistance services of $219,230.77 in IPA-30.[65]
[65] Adjudication reasons, [63].
On this basis, the Adjudicator awarded Geodata the sum of $219,230.77 plus interest. Both parties were ordered to bear their own costs as the Adjudicator did not consider that the conduct of either party would cause him to exercise his discretion under s 34(2) of the Act.[66]
[66] Adjudication reasons, [80] - [81].

The application for judicial review

Salini applies for a writ of certiorari to quash the Determination, a declaration that the Determination is invalid and of no force and effect and an order that Geodata repay to Salini monies paid pursuant to the Determination.
At the hearing before me on 29 October 2019, counsel for Salini sought leave to amend the Application, which was not opposed by Geodata. The amendment sought to include in the relief sought in the Application, repayment of the monies that have been paid by Salini to Geodata under the Determination. At the hearing, I granted leave for the applicant to rely on the minute of proposed re-amended application filed 24 October 2019 (Application).[67]
[67] ts 2.
There is one ground for the Application, namely that the Adjudicator's decision involved jurisdictional error as it was unreasonable, alternatively, illogical or irrational. The particulars relied upon by Salini for this ground were:
a)The [Adjudicator] found that the line item in payment claim IPA-30 for six month's Construction Assistance in the amount of $219,230.77 was not already included in line item GEO.OC.4007 in IPA-30 and that, even if it was so included, line item GEO.OC.4007 was certified but not paid in full; and
b)That decision was contrary to any reasonable, logical or rational consideration of the evidence before the [Adjudicator], particularly given:
i.The [Adjudicator] based his decision on a finding that an earlier payment claim for Construction Assistance (in IPA-23) had not been paid, which was clearly irrelevant to the issue whether the Construction Assistance the subject of the adjudication application had been claimed under IPA-30 and paid;
ii.The identical wording of the claim for Construction Assistance in line item GEO.OC.4007 in IPA-30 and the claim the subject of the adjudication application;
iii.The contents of Annexure RG-1 'Timeline of Certification of Construction Assistance' to the statutory declaration of Richard Graham, which showed that the [Adjudicator] included the six months Construction Assistance in its payment claims IPA-24 through to IPA-30 and these were certified in IPC-24 through to IPC-30;
ivThe obvious conclusion from the evidence, namely, that the six month's Construction Assistance in the amount of $219,230.77 was included in line item GEO.OC.4007 in IPA-30 and IPC-30; and
v.The admission by [Geodata] at paragraph 17 of the Application that it had been paid the amount certified in IPC-30 (which included full certification of line item GEO.OC.4007),
The Adjudicator did not participate in the hearing and informed the court prior to the hearing that he would abide the outcome of the proceedings.[68]
[68] Email from respondent to Associate to Hill J dated 25 June 2019.

Legal Principles

It is not in dispute that a determination made under s 31(2)(a) or s 31(2)(b) of the Act can be challenged in judicial review proceedings for jurisdictional error.[69]
[69] Perrinepod Pty Ltd v Georgiou Building Pty Ltd [2011] WASCA 217; (2011) 43 WAR 319 [8], [92].
The concept of jurisdictional error was set out by Hayne J in Re Refugee Review Tribunal; Ex parte Aala:[70]
There is a jurisdictional error if the decision maker makes a decision outside the limits of the functions and powers conferred on him or her, or does something which he or she lacks power to do. By contrast, incorrectly deciding something which the decision maker is authorised to decide is an error within jurisdiction. (This is sometimes described as authority to go wrong, that is, to decide matters within jurisdiction incorrectly.) The former kind of error concerns departures from limits upon the exercise of power. The latter does not.
[70] Re Refugee Tribunal; Ex parte Aala [2000] HCA 57; (2000) 204 CLR 82 [163]; quoted with approval by the plurality in Kirk v Industrial Court (NSW) [2010] HCA 1; (2010) 239 CLR 531 [66]; cited in Forrest & Forrest Pty Ltd v Marmion [2017] WASCA 153; (2017) 51 WAR 425 [86] - [88].
The determination of the limits of a decision‑maker's functions and powers is a question of statutory construction.[71]
[71] Hossain v Minister for Immigration & Border Protection [2018] HCA 34; (2018) 264 CLR 123 [27] ‑ [29] (Kiefel CJ, Gageler & Keane JJ).
In Salini-Impregilo SPA v Francis, Archer J summarised the steps involved in determining these limits:[72]
First, it is necessary to identify 'the preconditions which the statute requires to exist for the decision‑maker to embark on the decision‑making process'. It is also necessary to identify the conditions which the statute requires to be observed in order for the decision‑maker to make a decision of that kind. Identifying the preconditions and conditions is a question of statutory construction.
It is ordinarily an implied condition that the decision‑maker proceed by reference to 'correct legal principles, correctly applied'. It is also ordinarily an implied condition that the decision‑maker comply with the standard of legal reasonableness.
Second, if the decision‑maker has failed to comply with a precondition or a condition, it is necessary to determine whether the extent of the non‑compliance resulted in the purported decision 'lacking characteristics necessary for it to be given force and effect by the statute pursuant to which the decision‑maker purported to make it'. If so, the purported decision will involve 'jurisdictional error'; that is, the purported decision will have been made outside jurisdiction. Determining the extent of non‑compliance which will have this result is also a question of statutory construction.
In Hossain, the plurality said:
'[A] statute is ordinarily to be interpreted as incorporating a threshold of materiality in the event of non‑compliance. … [The] threshold of materiality would not ordinarily be met in the event of a failure to comply with a condition if complying with the condition could have made no difference to the decision that was made in the circumstances in which that decision was made.' (citations omitted) (emphasis in original)

Legal Unreasonableness

[72] Salini-Impregilo SPA v Francis[73] ‑ [76].

In Minister for Immigration & Border Protection v Eden, the Full Court of the Federal Court summarised the relevant principles of legal unreasonableness as follows:[73]
First, the concept of legal unreasonableness concerns the lawful exercise of power. Legal reasonableness, or an absence of legal unreasonableness, is an essential element in the lawfulness of decision‑making.
Second, the Court's task in determining whether a decision is vitiated for legal unreasonableness is strictly supervisory. It does not involve the Court reviewing the merits of the decision under the guise of an evaluation of the decision's reasonableness, or the Court substituting its own view as to how the decision should be exercised for that of the decision maker. Nor does it involve the Court remaking the decision according to its own view of reasonableness.
Third, there are two contexts in which the concept of legal unreasonableness may be employed. The first involves a conclusion after the identification of a recognised species of jurisdictional error in the decision making process, such as failing to have regard to a mandatory consideration, or having regard to an irrelevant consideration. The second involves an 'outcome focused' conclusion without any specific jurisdictional error being identified.
…
Fourth, in assessing whether a particular outcome is unreasonable, it is necessary to bear in mind that within the boundaries of power there is an area of 'decisional freedom' within which a decision‑maker has a genuinely free discretion. Within that area, reasonable minds might differ as to the correct decision or outcome, but any decision or outcome within that area is within the bounds of legal reasonableness. Such a decision falls within the range of possible lawful outcomes of the exercise of the power.
Fifth, in order to identify or define the width and boundaries of this area of decisional freedom and the bounds of legal reasonableness, it is necessary to construe the relevant statute. The task of determining whether a decision is legally reasonable or unreasonable involves the evaluation of the nature and quality of the decision by reference to the subject matter, scope and purpose of the relevant statutory power, together with the attendant principles and values of the common law concerning reasonableness in decision‑making. The evaluation is also likely to be fact dependant and to require careful attention to the evidence.
Sixth, where reasons for the decision are available, the reasons are likely to provide the focus for the evaluation of whether the decision is legally unreasonable. Where the reasons provide an evident and intelligible justification for the decision, it is unlikely that the decision could be considered to be legally unreasonable. However, an inference or conclusion of legal unreasonableness may be drawn even if no error in the reasons can be identified. In such a case, the court may not be able to comprehend from the reasons how the decision was arrived at, or the justification in the reasons may not be sufficient to outweigh the inference that the decision is otherwise outside the bounds of legal reasonableness or outside the range of possible lawful outcomes.
Seventh, and perhaps most importantly, the evaluation of whether a decision is legally unreasonable should not be approached by way of the application of particular definitions, fixed formulae, categorisations or verbal descriptions. The concept of legal unreasonableness is not amenable to rigidly defined categorisation or precise textural formulary. That said, the consideration of whether a decision is legally unreasonable may be assisted by reference to descriptive expressions that have been used in previous cases to describe the particular qualities of decisions that exceed the limits and boundaries of statutory power. The expressions that have been utilised include decisions which are 'plainly unjust', 'arbitrary', 'capricious', 'irrational', 'lacking in evident or intelligible justification', and 'obviously disproportionate'. It must be emphasised again, however, that the task is not an a priori definitional exercise. Nor does it involve a 'checklist' exercise. Rather, it involves the Court evaluating the decision with a view to determining whether, having regard to the terms, scope and purpose of the relevant statutory power, the decision possesses one or more of those sorts of qualities such that it falls outside the range of lawful outcomes. (citations omitted)
[73] Minister for Immigration & Border Protection v Eden [2016] FCAFC 28; (2016) 240 FCR 158 [58] ‑ [60], [62] - [65] cited in Western Australian Planning Commission v Board of Valuers [2018] WASCA 145 [172] (Buss P). See also Minister for Immigration & Citizenship v Li [2013] HCA 18; (2013) 249 CLR 332 and Minister for Immigration & Border Protection v Singh [2014] FCAFC 1; (2014) 231 FCR 437.

What is legally unreasonable is not confined to 'Wednesbury unreasonableness', where decisions are irrational or bizarre and are an exercise of power that is so unreasonable that no reasonable person could have exercised the power.[74] Unreasonableness can occur where a decision 'lacks an evident and intelligible justification'[75] or is 'plainly unjust, arbitrary, capricious, or lacking in common-sense'.[76]
[74] Associated Provincial Picture Houses Ltd v Wednesbury Corporation [1948] 1 KB 223.
[75] Minister for Immigration & Citizenship v Li [76] (Hayne, Kiefel & Bell JJ); see also Minister for Immigration and Border Protection v Stretton [2016] FCAFC 11; (2016) 237 FCR 1 [11].
[76] Singh v Minister for Home Affairs [2019] FCAFC 3; (2019) 267 FCR 200 [61].
In Hamersley Iron Pty Ltd v James, Beech J relevantly stated that:[77]
A decision will be unreasonable where it is outside the parameters of reasonable decision‑making contemplated by the statute. Manifest unreasonableness may be found in a decision which is arbitrary, capricious or fanciful, a decision which lacks an evident and intelligible justification, or a decision where, in the circumstances, 'the result itself bespeaks error'.
The test for manifest unreasonableness remains a stringent one, and a finding of jurisdictional error on the ground of manifest unreasonableness will be uncommon. (footnotes omitted)
[77] Hamersley Iron Pty Ltd v James [2015] WASC 10 [110] - [111]. See also Minister for Immigration v Li [67]; Blanket v The Housing Authority [2014] WASC 409 [123] ‑ [124].

Applicant's submissions

Salini submitted that the determination was legally unreasonable for two reasons:[78]
(a)first, the item in IPA-30 for 'Construction Assistance for the months of February 2017 to July 2017' for $219,230.77 was patently a partial duplication of the line-item immediately above for 'Construction assistance for February 2017 to March 2019' for $803,846.16 and Geodata was not entitled to claim twice for the same work; and
(b)second, Salini had clearly made an allowance for construction assistance for the months of February 2017 to July 2017' in Interim Payment Certificate 30 (IPC-30) as part of line-item reference GEO.OC.4007 and Geodata was not entitled to an additional allowance or payment in respect of this same item.
[78] Applicant's submissions, [3].
Originally, there was a third ground of objection concerning the finding that Geodata had not been paid for the amounts allowed in IPC-30[79] but this was not pursued at the hearing before me.[80]

Duplicate claim

[79] Applicant's submissions, [3(c)].

[80] ts 4.

Counsel for Salini submitted that the duplication or overlap between GEO.OC.4007 and the Second Line Item in IPA-30 was 'obvious' and that the 'inescapable conclusion' was that Geodata was claiming twice for the same work.[81] As a result, Salini contended that it was entitled to disallow one of the duplicate items, which it did.[82]
[81] ts 12.
[82] Applicant's submissions, [54].
Counsel for Salini submitted that the error made by the Adjudicator involved his consideration of IPC-23 and whether the Negative Variation was allowed, which counsel described as 'water under the bridge'.[83] IPC-23 was, in counsel's submission, quite separate to the determination the adjudicator was required to make, namely, whether the amount that was claimed in IPA-30 was wrongly denied by Salini.
[83] ts 15.
Salini contended that the undisputed evidence was that the line item ref GEO.OC.4007 was a line item in all IPAs submitted by Geodata from IPC-22 onwards and that these IPAs had been certified by Salini.[84] Salini submitted that an allowance had been made for construction assistance between February 2017 and July 2017 in IPC-30 as part of GEO.OC.4007. As a result, Geodata was not entitled to an additional payment in respect of this work, as claimed under the Second Line Item.

Payment for Construction Assistance Services February to July 2017

[84] Affidavit of Cheryl Hua-Chien Sun filed 8 August 2019 CS-1, page 201, Annexure RG-1.

Salini contended that the Adjudicator attributed the Negative Variation specifically to the line item GEO.OC.4007. Counsel for Salini submitted that this attribution was unreasonably as the Negative Variation was required to be set-off against the total value of the work certified and not to any particular item.
Salini submitted that the attribution was irrational and arbitrary and constituted a jurisdictional error in the Adjudicator's Determination.[85]
[85] Applicant's submissions, [63].

Respondent's submissions

Geodata submitted that in order for Salini to succeed, they were required to show that no reasonable adjudicator would have made the same findings that the Adjudicator did. Geodata contended that this required the applicants to satisfy the court of two matters: first, that Geodata had been paid for the construction assistance services for February 2017 to August 2017 and second, that the applicants' offsetting claim (or Negative Variation) was valid.[86]
[86] Other Party's submissions, [20].
Counsel for Geodata acknowledged the similarities in the description in GEO.OC.4007 and the second line item but submitted that the claims were for different work and there was no overlap in fact in the work being claimed in these items.[87] In this regard, counsel submitted that the work in GEO.OC.2007 was for construction assistance services under the Contract, as varied by VO-4 while the second item was for 2017 Construction Assistance, which was the subject of CO-12.[88]
[87] ts 19.
[88] ts 19.
Geodata submitted that the findings of fact made by the Adjudicator were correct or, at a minimum, were open to him to make on the evidence before him.[89] For this reason, Geodata contended that if there was an error of fact, it was an error within jurisdiction and the applicants had not demonstrated that the Determination was so unreasonable as to be capable of amounting to jurisdictional error.[90]
[89] ts 20.
[90] Other Party's submissions, [54].
Counsel for Geodata emphasised the payment mechanism under the Contract required Geodata to make a claim for payment. Unless and until Geodata made a claim for payment for the services performed between February and August 2017, Salini could not assess what amount was payable in respect of these services or unilaterally include any additional amount in any interim payment claim.[91]
[91] ts 27 - 28.
Geodata submitted that the certification within GEO.OC.4007 in IPA‑30 of 22 months' construction assistance was not relevant to the payment dispute. This was because despite this certification, Geodata had not received payment for 22 months of construction assistance services. For this reason, Geodata contended it was entitled to payment for the Second Line Item. In this regard, Geodata submitted that the evidence before the Adjudicator from both Salini and Geodata was that this amount had not been paid.[92]
[92] Affidavit of Cheryl Hua-Chien Sun filed 8 August 2019, CS-1, page 41 [132], CS-2, pages 166 - 168 and CS-3, pages 199 - 201.

Disposition

Under the Act, the Adjudicator was required to determine:
(a)whether a payment claim had been made by Geodata;
(b)whether there was a payment dispute in respect of that claim;
(c)if so, to determine the payment dispute on the balance of probabilities fairly and as quickly, informally and inexpensively as possible on the basis of the application (and attachments), the response (and attachments) and the written submissions filed by the parties.
The adjudicator considered each of these matters in turn. Specifically, he:
(a)considered the matters raised by Salini as to whether there was a payment claim or whether the claim for construction assistance services for February to July 2017 formed part of GEO.OC.4007 and had been previously certified by Salini. He found that Geodata made a payment claim for the construction assistance services for February to July 2017 for the first time in IPA-30;
(b)found that Salini rejected Geodata's claim, which gave rise to a payment dispute;
(c)determined the payment dispute on the basis of the documents filed by the parties.
That is, the Adjudicator made the decision within the limits of the functions and powers conferred on him and did not do anything that he lacked power to do.
In my view, the Adjudicator's Determination was not manifestly unreasonable in any relevant sense. It was not irrational and was a decision that a reasonable decision-maker could have arrived at.
In relation to the Determination, the Adjudicator:
(a)referred to the relevant two line items in IPA-30 and noted the differences between them;
(b)referred to the history of the IPAs and IPCs until April 2018 which reflected VO-4 which reduced the scope of works of construction assistance services to 20 months;
(c)referred to the events on 9 May 2018 concerning IPC-23, including that Salini inserted the claim for the additional six months before applying the Negative Variation by way of offset and issued CO-12 for the additional six months;
(d)found that by reason of the set-off, Salini had not paid for 22 months of construction assistance services and was not satisfied that the second line item had already been included by way of application and certification in the line item immediately above it;
(e)found that the first time Geodata made a claim for payment for the construction assistance services for February to July 2017 was in IPA-30;
(f)found that Salini was not entitled to set-off the Negative Variation against the unpaid portion of the construction assistance services.
In my view, each of these matters were open to the Adjudicator on the information before him. Given the similarity in the description of the two line items in question, it was open to the Adjudicator to consider and make findings as to whether these items were in fact identical, whether Geodata had made a payment claim for construction assistance services for February to July 2017 prior to IPA-30, and to reject the contention that in IPA-30 Geodata made two claims for the work for the period February 2017 to July 2017. The Adjudicator took into account the evidence and submissions of Salini but reached a conclusion which was different to that contended by Salini. This does not indicate that the Adjudicator misconstrued the statute or the function he was required to perform. In my opinion, the Adjudicator's approach does not reveal error, let alone jurisdictional error.
The effect of the Adjudicator's Determination is not that Geodata was entitled to have its claim for the 2017 Construction Assistance taken into account in determining Salini's liability under GEO.OC.4007 and the second line item, as contended by Salini,[93] but that he was not satisfied that this claim was part of GEO.OC.4007 and that Geodata was entitled to submit a claim for this work. This finding was open to the Adjudicator on the evidence before him and cannot be said to be unreasonable at law. This evidence included that:
(a)the parties had not reached agreement as to the amount to be paid for the 2017 Construction Assistance until 7 June 2018;[94]
(b)the certification by Salini of the additional six months (or 2017 Construction Assistance) in IPC-23 did not form part of the adjudication application or determination in relation to IPC‑23;[95] and
(c)the Contract did not include any term which prevented Geodata from adducing evidence which disputed the contents of any IPC, including whether the amounts shown in the IPC as having been certified had in fact been paid.
[93] Salini's submissions in reply [14].
[94] Affidavit of Joseph Michael Perkins filed 16 July 2019 JMP-3, page 141.
[95] See [24] - [27] above.
In relation to the Adjudicator's attribution of the Negative Variation to the second line item of construction assistance services in [63] of the Determination, I do not accept that this was manifestly unreasonable or irrational.
The only claim in IPA-30 that was disputed by Salini was the second line item for construction assistance services. While I accept that any set-off by Salini should have been against the entirety of the claim and not any particular line item, this is not what occurred. Salini did not seek to set-off the Negative Variation against the amounts which it certified as payable to Geodata. The Negative Variation was only raised in the application by Geodata and the response of Salini.
In any event, the Adjudicator did not consider that Salini had any right of set-off, which finding was within his jurisdiction and cannot be said to be manifestly unreasonable.

Conclusion

For these reasons, I would dismiss Salini's application for judicial review. I will hear from the parties as to the orders to be made and the costs of the application.

I certify that the preceding paragraph(s) comprise the reasons for decision of the Supreme Court of Western Australia.
MG
Research Orderly to the Honourable Justice Hill
15 OCTOBER 2020