Australia: Construction contracts: the importance of defining the payment dispute to be adjudicated

The recent Western Australian State Administrative Tribunal (Tribunal) decision in Alliance Contracting Pty Ltd and Tenix SDR Pty Ltd [2014] WASAT 136 is interesting for three reasons. First, it demonstrates the importance of defining carefully what is alleged to be the 'payment claim' and the 'payment dispute' in an application for adjudication under the Construction Contracts Act 2004 (WA) (Act). Secondly, it is an interesting insight into the potentially complex relationship between the adjudication process and the performance security regime common in construction contracts. Thirdly, it touches on the question of the scope of the exclusion from 'construction work' for the purposes of the Act and exposes an interesting anomaly in the Act.


This decision confirms the proposition that only 'payment disputes' which fall within the circumstances set out in section 6 of the Act can be the subject of an adjudication application. An application for adjudication of a dispute not falling within those circumstances will not have been prepared in accordance with section 26 of the Act and must be dismissed.

A separate aspect of the decision touches on the nature of a plant which processes a "mineral bearing or other substance" in the exclusion from the nature of construction work to which the Act applies. The case exposes (but does not resolve) an interesting issue as to why certain non resource industry related processing plants are captured by the section 4(3)(c) exclusion while other similar processing plants may not be.


Alliance Contracting Pty Limited (Alliance) made an application to the Tribunal for review of an adjudicator's decision which dismissed Alliance's application for adjudication (Application).

There were two issues for the Tribunal (Member Aitken) to consider:

  1. whether Alliance's Application was in respect of a 'payment dispute' for the purposes of the Act; and
  2. whether the subcontract in question was, by operation of section 4(3)(c) of the Act, excluded from the rapid adjudication regime provided for by the Act.


The respondent, Tenix SDR Pty Ltd (Tenix), engaged Alliance under a subcontract to undertake works for the construction of a wastewater treatment plant in Karratha.

Under the subcontract, Alliance was required to provide Tenix with performance security in the form of two unconditional undertakings for a total of $548,416.46. Both were required to be returned (if not used) at the end of the defects liability period.

Tenix notified Alliance that, because it considered Alliance had failed to achieve practical completion by the required date, Alliance was obliged to pay Tenix liquidated damages (Tenix Notice). In the same notice, Tenix also advised that it had had recourse to Alliance's security to recover, in part, the liquidated damages it considered Alliance was obliged to pay.

By letter on the same day, Alliance advised Tenix that it considered Tenix had no current entitlement to recourse to the security and Tenix's action in doing so was a breach of the subcontract.

Alliance also issued a notice of dispute under the subcontract in which it alleged that Tenix had no legal right to levy liquidated damages against Alliance and consequently had no legal right to recourse to the security.

Alliance subsequently made its Application. Alliance sought an amount equivalent to the value of the two unconditional undertakings which constituted the security.

The adjudicator dismissed Alliance's Application without making a determination on the merits in accordance with section 31(2)(a)(ii) of the Act.

Alliance applied to the Tribunal, under section 46(1) of the Act, for a review of the adjudicator's decision to dismiss its Application.


The Tribunal dismissed Alliance's review application on the basis that Alliance had, in its Application, sought to have determined a dispute that was not a 'payment dispute' for the purposes of the Act.

Identifying the relevant 'payment claim' and 'payment dispute'

In its Application, Alliance contended that the Tenix Notice was the relevant 'payment claim' which gave rise to the 'payment dispute' upon which its Application was grounded.

Whilst the Tribunal considered that a claim for liquidated damages from a principal to a contractor was capable of giving rise to a payment dispute for the purposes of the Act, it rejected Alliance's contention that this was the relevant payment claim.

In the Tribunal's view, while the Tenix Notice described a claim for liquidated damages, Alliance had, by describing notice as the relevant 'payment claim', conflated Tenix's claim for liquidated damages with Tenix's recourse to the unconditional undertakings. The Tribunal found that Tenix's recourse to the unconditional undertakings was the 'payment claim' upon which Alliance's Application was actually grounded. Although Tenix's recourse to the unconditional undertakings flowed from its liquidated damages claim, such recourse was a separate and distinct matter from Tenix's liquidated damages claim.

Describing, with precision, the payment dispute and the relief sought

The Tribunal confirmed1, that an adjudicator has the power to determine whether a party, against whom a payment claim has been made, is liable to make the payment claimed. Thus, Tenix's payment claim for liquidated damages could be the source of a payment dispute over which Alliance (the respondent to the payment claim) could bring an adjudication application.

That said, the Tribunal held that the scope of section 31(2)(b) of the Act was limited by the circumstances that are set out in section 6 of the Act. That is, an adjudicator is only empowered to determine whether a party to a construction contract is liable to make a payment which falls within the circumstances set out in section 6 of the Act.

The Tribunal analysed in detail the way in which Alliance had articulated its Application. The Tribunal found that Alliance could have, but did not, bring an adjudication application in respect of the payment dispute arising from Alliance's rejection of Tenix's claim for liquidated damages. The Tribunal found that, rather than seek a determination of Tenix's liquidated damages claim, Alliance's Application sought a determination of one or other of two matters:

  1. whether Alliance was entitled to be paid the equivalent of the value of the unconditional undertakings; or
  2. whether those undertakings were to be 'returned'.

As to the first of these, the Tribunal held that a dispute about whether a party is entitled to be paid the equivalent value of security to which the other party has had recourse, is not an application for the adjudication of a payment dispute under section 26 of the Act.

As to the second, there was no question that the security was not due to be returned at the time Tenix had had recourse. It was not due to be returned until the end of the defects liability period, which was many months off.

Thus, the Tribunal held that it could not have been a payment dispute which enlivened the adjudicator's jurisdiction.

Operation of section 4(3)(c) of the Act

Tenix also argued that the exclusion in section 4(3)(c) of the Act (commonly referred to as the "mining exclusion") applied so the Application should have been dismissed anyway on this ground.

The Tribunal found that the works that Alliance performed under the subcontract (relating to a wastewater treatment plant), were "work constructing a plant" for the purposes of section 4(3)(c) of the Act. The Tribunal distinguished the decision of Re Graham Anstee-Brook, Ex parte Karara Mining Ltd2 and applied the reasoning of the Tribunal in Conneq Infrastructure Services (Australia) Pty Ltd and Sino Iron Pty Ltd3.

The question then was whether that plant was for the purposes of extracting or processing "oil, natural gas or any derivative of natural gas, or [relevantly] any mineral bearing or other substance".

The Tribunal relied on its earlier decision in Conneq in concluding that it was unable to find that the exclusion in section 4(3)(c) applied in this case because, on the evidence before it, it could not conclude that the purpose of the subject wastewater treatment plant was to process a mineral bearing substance and, particularly, it could not conclude that the process involved the extraction of minerals (as had been the case in Conneq).

In Conneq the Tribunal had said:

  1. the phrase "other substance" in section 4(3)(c) does not apply to constructing a plant for the purpose of extracting or processing "any" substance; because
  2. the phrase "other substance" cannot be divorced from the context of the rest of the language in section 4(3)(c) (which is concerned with the resources industry); consequently
  3. "other substance" must be a substance which is processed as part of the resources industry.

The Tribunal therefore accepted that the phrase "mineral bearing or other substance" should be construed contextually and therefore it accepted Conneq's submission that "other substance" could include non-mineral bearing but still mining related substances such as coal. In summary, the Tribunal read down the phrase "other substance" in section 4(3)(c) so as to limit it to substances that were related to the resources industry.

However, the ratio of the Tribunal's decision in Conneq went a critical step further. The Tribunal accepted the proposition that the exception in section 4(3)(c) applies to the extracting and processing of a "mineral bearing substance" outside the context of the resources industry, including a desalination plant. That is, the extraction and processing of salt from salt water amounts to the processing of a mineral bearing substance (salt water) because salt is a mineral.

Indeed, the Tribunal in Conneq went to some length to make clear that it was not making a finding that the desalination plant in that case was captured by the exclusion in section 4(3)(c) only because it was, in that case, associated with the supply of water to an iron ore mining project. Its decision rested wholly on the proposition that the relevant plant was for the purpose of processing salt water, which is a mineral bearing substance.

In essence, therefore:

  1. the ratio of Conneq is that the phrase "processing ... any mineral bearing ... substance" is not restricted to the processing of substances which are processed as part of the mining and resources industry. In other words, the Tribunal gave the phrase "mineral bearing ... substance" a wide meaning and did not restrict it to the resources industry;
  2. however, in its comments on the phrase "processing ... any ... other substance", the Tribunal found that this phrase should apply narrowly, only to any substance associated with the resources industry.

The effect of the Conneq and Alliance decisions, therefore, appears to be this:

  1. a municipal desalination plant (not only one which operates on a mine site, as was the case in Conneq) is excluded because it processes salt water, a mineral bearing substance;
  2. however, a wastewater treatment plant (at this stage at least), even though it has a similar public purpose to a desalination plant, is not excluded;
  3. that said, a wastewater treatment plant may be excluded if wastewater happens to contain minerals (and, perhaps, so long as those minerals are processed in some way).

That, of course, raises this question: why should the construction of a plant that is used for extracting a mineral from mineral-bearing water (to produce fresh water) be treated by the Act any differently from the construction of a plant that is used for extracting waste (including, possibly, minerals) from waste-bearing water, to produce fresh water (and possibly potable water, depending on the plant)?

The Tribunal in the Alliance decision did not consider it necessary to grapple with this question and so this apparent anomaly remains for consideration on another occasion.


The Tribunal's decision establishes that, for the purposes of the Act, a payment claim (and a subsequent dispute of that claim) is related to, but distinct from, a dispute arising from the claimant's recourse to performance security (and a dispute about that recourse). The decision is also interesting in that it highlights an apparent anomaly arising from the Conneq decision. That is timely, given Professor Phil Evans' recently released discussion paper in relation to a review of the Act.4


1The Tribunal appears to have had regard to the recent (and related) Supreme Court decision of Alliance Contracting Pty Ltd v James [2014] WASC 212, although that decision is not expressly referred to in the Tribunal's decision.

2[2012] WASC 129.

3[2012] WASAT 13.

4See Professor Phil Evans, "Discussion Paper: Statutory Review of the (Construction Contracts Act 2004 WA)" (October 2014) available here.

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.

Most awarded firm and Australian deal of the year
Australasian Legal Business Awards
Employer of Choice for Women
Equal Opportunity for Women
in the Workplace (EOWA)

To print this article, all you need is to be registered on

Click to Login as an existing user or Register so you can print this article.

Some comments from our readers…
“The articles are extremely timely and highly applicable”
“I often find critical information not available elsewhere”
“As in-house counsel, Mondaq’s service is of great value”

Related Video
Up-coming Events Search
Font Size:
Mondaq on Twitter
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
Email Address
Company Name
Confirm Password
Mondaq Topics -- Select your Interests
 Law Performance
 Law Practice
 Media & IT
 Real Estate
 Wealth Mgt
Asia Pacific
European Union
Latin America
Middle East
United States
Worldwide Updates
Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:
  • To allow you to personalize the Mondaq websites you are visiting.
  • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our information providers who provide information free for your use.
  • Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.
    If you do not want us to provide your name and email address you may opt out by clicking here
    If you do not wish to receive any future announcements of products and services offered by Mondaq you may opt out by clicking here

    Terms & Conditions and Privacy Statement (the Website) is owned and managed by Mondaq Ltd and as a user you are granted a non-exclusive, revocable license to access the Website under its terms and conditions of use. Your use of the Website constitutes your agreement to the following terms and conditions of use. Mondaq Ltd may terminate your use of the Website if you are in breach of these terms and conditions or if Mondaq Ltd decides to terminate your license of use for whatever reason.

    Use of

    You may use the Website but are required to register as a user if you wish to read the full text of the content and articles available (the Content). You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these terms & conditions or with the prior written consent of Mondaq Ltd. You may not use electronic or other means to extract details or information about’s content, users or contributors in order to offer them any services or products which compete directly or indirectly with Mondaq Ltd’s services and products.


    Mondaq Ltd and/or its respective suppliers make no representations about the suitability of the information contained in the documents and related graphics published on this server for any purpose. All such documents and related graphics are provided "as is" without warranty of any kind. Mondaq Ltd and/or its respective suppliers hereby disclaim all warranties and conditions with regard to this information, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. In no event shall Mondaq Ltd and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use or performance of information available from this server.

    The documents and related graphics published on this server could include technical inaccuracies or typographical errors. Changes are periodically added to the information herein. Mondaq Ltd and/or its respective suppliers may make improvements and/or changes in the product(s) and/or the program(s) described herein at any time.


    Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:

    • To allow you to personalize the Mondaq websites you are visiting.
    • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
    • To produce demographic feedback for our information providers who provide information free for your use.

    Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.

    Information Collection and Use

    We require site users to register with Mondaq (and its affiliate sites) to view the free information on the site. We also collect information from our users at several different points on the websites: this is so that we can customise the sites according to individual usage, provide 'session-aware' functionality, and ensure that content is acquired and developed appropriately. This gives us an overall picture of our user profiles, which in turn shows to our Editorial Contributors the type of person they are reaching by posting articles on Mondaq (and its affiliate sites) – meaning more free content for registered users.

    We are only able to provide the material on the Mondaq (and its affiliate sites) site free to site visitors because we can pass on information about the pages that users are viewing and the personal information users provide to us (e.g. email addresses) to reputable contributing firms such as law firms who author those pages. We do not sell or rent information to anyone else other than the authors of those pages, who may change from time to time. Should you wish us not to disclose your details to any of these parties, please tick the box above or tick the box marked "Opt out of Registration Information Disclosure" on the Your Profile page. We and our author organisations may only contact you via email or other means if you allow us to do so. Users can opt out of contact when they register on the site, or send an email to with “no disclosure” in the subject heading

    Mondaq News Alerts

    In order to receive Mondaq News Alerts, users have to complete a separate registration form. This is a personalised service where users choose regions and topics of interest and we send it only to those users who have requested it. Users can stop receiving these Alerts by going to the Mondaq News Alerts page and deselecting all interest areas. In the same way users can amend their personal preferences to add or remove subject areas.


    A cookie is a small text file written to a user’s hard drive that contains an identifying user number. The cookies do not contain any personal information about users. We use the cookie so users do not have to log in every time they use the service and the cookie will automatically expire if you do not visit the Mondaq website (or its affiliate sites) for 12 months. We also use the cookie to personalise a user's experience of the site (for example to show information specific to a user's region). As the Mondaq sites are fully personalised and cookies are essential to its core technology the site will function unpredictably with browsers that do not support cookies - or where cookies are disabled (in these circumstances we advise you to attempt to locate the information you require elsewhere on the web). However if you are concerned about the presence of a Mondaq cookie on your machine you can also choose to expire the cookie immediately (remove it) by selecting the 'Log Off' menu option as the last thing you do when you use the site.

    Some of our business partners may use cookies on our site (for example, advertisers). However, we have no access to or control over these cookies and we are not aware of any at present that do so.

    Log Files

    We use IP addresses to analyse trends, administer the site, track movement, and gather broad demographic information for aggregate use. IP addresses are not linked to personally identifiable information.


    This web site contains links to other sites. Please be aware that Mondaq (or its affiliate sites) are not responsible for the privacy practices of such other sites. We encourage our users to be aware when they leave our site and to read the privacy statements of these third party sites. This privacy statement applies solely to information collected by this Web site.

    Surveys & Contests

    From time-to-time our site requests information from users via surveys or contests. Participation in these surveys or contests is completely voluntary and the user therefore has a choice whether or not to disclose any information requested. Information requested may include contact information (such as name and delivery address), and demographic information (such as postcode, age level). Contact information will be used to notify the winners and award prizes. Survey information will be used for purposes of monitoring or improving the functionality of the site.


    If a user elects to use our referral service for informing a friend about our site, we ask them for the friend’s name and email address. Mondaq stores this information and may contact the friend to invite them to register with Mondaq, but they will not be contacted more than once. The friend may contact Mondaq to request the removal of this information from our database.


    From time to time Mondaq may send you emails promoting Mondaq services including new services. You may opt out of receiving such emails by clicking below.

    *** If you do not wish to receive any future announcements of services offered by Mondaq you may opt out by clicking here .


    This website takes every reasonable precaution to protect our users’ information. When users submit sensitive information via the website, your information is protected using firewalls and other security technology. If you have any questions about the security at our website, you can send an email to

    Correcting/Updating Personal Information

    If a user’s personally identifiable information changes (such as postcode), or if a user no longer desires our service, we will endeavour to provide a way to correct, update or remove that user’s personal data provided to us. This can usually be done at the “Your Profile” page or by sending an email to

    Notification of Changes

    If we decide to change our Terms & Conditions or Privacy Policy, we will post those changes on our site so our users are always aware of what information we collect, how we use it, and under what circumstances, if any, we disclose it. If at any point we decide to use personally identifiable information in a manner different from that stated at the time it was collected, we will notify users by way of an email. Users will have a choice as to whether or not we use their information in this different manner. We will use information in accordance with the privacy policy under which the information was collected.

    How to contact Mondaq

    You can contact us with comments or queries at

    If for some reason you believe Mondaq Ltd. has not adhered to these principles, please notify us by e-mail at and we will use commercially reasonable efforts to determine and correct the problem promptly.

    By clicking Register you state you have read and agree to our Terms and Conditions