Following on from our February update on the importance of time limits in construction contract disputes, the recent decision of the Supreme Court of Western Australia in Re Graham Anstee-Brook; Ex Parte Karara Mining Ltd [No 2] [2013] WASC 59 (delivered on 1 March 2013) illustrates the severe consequences of missing a deadline and emphasises the importance of complying with the time frames imposed by the Construction Contracts Act 2004 (WA), particularly with respect to adjudications.
Background
On 6 July 2010, Karara Mining Pty Ltd (Karara) and DM Drainage and Construction Pty Ltd (DMC) entered into a contract whereby DMC would construct a pipeline and associated works for the transportation and supply of water from the Twin Hills borefield to the Karara mine site.
DMC made a claim under the contract which Karara refused to pay. DMC therefore made an adjudication application to have the dispute determined under the Act. Mr Graham Anstee-Brook was appointed as the adjudicator.
On 24 January 2012, DMC served its adjudication application on Karara. Section 27(1) of the Act required Karara to prepare and serve a response within 14 days, namely by 7 February 2012. Karara served its response on 10 February 2012, three days late.
The adjudicator determined that Karara must pay DMC just under $5m, stating that he was obliged to ignore Karara's response and to determine the issue solely on the strength of application as the response had been served outside the 14 day time limit.
The Proceedings
On 16 March 2012, the Supreme Court was initially of the view that Karara had an 'arguable case' and granted an order to quash the determination (see Re Graham Anstee-Brook; Ex parte Karara Mining Ltd [2012] WASC 129) on two grounds: firstly that the adjudicator made a jurisdictional error in ignoring the response and making the determination on the basis of the application alone; and secondly that Karara was denied procedural fairness.
However, in Karara's recent application for the order to be made absolute, the Court decided to dismiss the application.
Regarding ground 1, in relation to jurisdictional error, the Court held:
- Section 27 of the Act does not confer on the adjudicator a discretion to extend the time for the defendant to file its response and does not allow the adjudicator a discretion to consider a response prepared and served otherwise than in accordance with section 27. This is because "a response filed out of time is not a response for the purposes of section 27 of the Act."
- Requiring the adjudicator to consider the "cogency of the material in the purported response or questions of delay, explanation for delay and prejudice" would be contrary to the scheme of the Act, which provides for a "quick, informal, inexpensive and provisional determination of the dispute."
- The adjudicator was not required to consider the response before proceeding to his determination and this was not an error of law, as the adjudicator did not "misapprehend or disregard the nature or limits of his functions or powers" or "misconceive the nature of the function which he was performing or the extent of his powers in the circumstances of this case as a result of misconstruing the Act."
Regarding ground 2 in relation to procedural fairness, the Court held:
- "Whether procedural fairness has been afforded must be viewed in the context of the statutory framework concerning the relevant power". Section 30 of the Act provides that the object of an adjudication of a payment dispute is "...to determine the dispute fairly and as quickly, informally and inexpensively as possible".
- "The Act gives a party served with an application the opportunity to respond within 14 days of being served with that application. Procedural fairness only requires that a party be given a reasonable opportunity to present his case and not that the decision maker ensures that the party takes the best advantage of the opportunity to which he is entitled."
- As Karara had been given an opportunity to be heard, "...there was no denial of procedural fairness by the adjudicator failing to have regard to material furnished by the applicant outside of the 14 day period required by section 27 of the Act".
Comment
In the light of the statutory context of the Act for adjudications to proceed on a 'quick, informal and inexpensive basis', the fact that an adjudicator is required to make a determination within a short time and that determinations are only of an interim character, it is not difficult to see why the Court appears to support strict compliance with the requirements of the Act.
The Act prescribes the following relevant timeframes:
- A party (the applicant) has 28 days from the date a payment dispute arises to apply to have the dispute adjudicated under the Act; and
- The respondent will have 14 days after it is served with an application for adjudication to prepare and serve a response.
The adjudicator will then have 14 days from the date he/she is served with a response (or the date which he/she was required to be served with a response) to make his/her determination.
As the Act does not give the adjudicator discretion to extend the timeframes for compliance, compliance with the prescribed timeframes is absolutely critical. Further, the adjudicator is under no obligation to consider a response that is filed out of time.
Respondents to adjudication applications must therefore ensure strict compliance with the timeframes or risk a determination being made against them without consideration of their response. In view of the serious consequences for failing to comply with the relevant timeframes and provisions of the Construction Contracts Act 2004, the importance of seeking legal advice on the application of the Act, particularly in relation to adjudication applications, cannot be underestimated.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
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