Australia: WA Supreme Court ensures liquidators of insolvent construction contractors give as good as they get: Hamersley iron Pty Ltd v James [2015] WASC 10

Last Updated: 9 February 2015
Article by Murray Thornhill

In construction contracts, payment rights often conflict and compete with each other for priority. Never is this truer than in the context of a contractor's insolvency or an adjudication application under security of payment legislation.

This was the case in Hamersley Iron Pty Ltd v James [2015] WASC 10.

In that case, Hamersley had instructed a construction contractor, Forge Group Construction Pty Ltd, to design and construct fuel hubs. Forge started work on the hubs but was placed into liquidation without having ever finished the job. In the meantime, Forge applied for adjudication of its payment claims, which Hamersley had disputed, and the adjudicator awarded Forge just over $700,000 under its contract with Hamersley.

Forge's liquidators then applied to the WA Supreme Court for leave to enforce the adjudicator's award against Hamersley. Hamersley applied to quash the adjudicator's decision on technical grounds and the Court dismissed that application. However, Hamersley's alternative argument that Forge's liquidators should not be allowed to enforce the adjudication award was a little more successful. Whilst the Court declined to go as far as Hamersley had requested by dismissing the application for leave to enforce the award, the Court did stay (i.e. put a hold on) Forge's leave application pending determination of Hamersley's counterclaims against Forge.

This is interesting because it is well accepted that a principal's counterclaims cannot prevent enforcement of an adjudicator's award, given the "pay-now-argue-later" policy which underscores security of payment legislation. Whilst Beech J in Hamersley expressly acknowledged that security of payment legislation is to be interpreted and applied consistently with this policy, His Honour went on to say that ultimately, this policy is about keeping the money flowing down the contractual chain without allowing payments to be held up by protracted disputes. Since insolvency will remove a contractor from the "contractual chain" altogether, Beech J said that allowing a contractor to enforce an adjudication award no longer has the same policy justification once the contractor becomes insolvent.

According to Beech J, what really mattered in the case of contractor insolvency was the policy underlying section 553C of the Corporations Act 2001. That section basically applies where a corporation becomes insolvent and is either owed money by, or has a claim against, another contracting party.

In these circumstances, section 553C requires the insolvent company's liquidator to work out how much each party owes to the other, set the two amounts off against each other, and then either pay or claim the balance to or from the other party.

Beech J held that the purpose of this section 553C was to protect people who trade with insolvent companies without being aware of the insolvency from becoming liable to pay 100% of their own debts to that company but, because of the insolvency, only being paid a percentage of the company's debts to them.

In Hamersley's case, Hamersley argued, and Beech J accepted, that it had claims against Forge which raised "serious questions" for determination at a trial. These questions, Hamersley argued, if decided in Hamersley's favour, would result in Hamersley getting judgment against Forge which would exceed the adjudicator's award plus all the other claims that Forge was making against Hamersley.

According to Beech J, who accepted these arguments, if Forge were to be allowed to recover the amount awarded by the adjudicator against Hamersley now and if Hamersley were then to get judgment on its counterclaims against Forge, this could give rise to the very situation that section 553C was designed to prevent: that is, Forge getting all of its money from Hamersley and Hamersley getting only some, or perhaps even none, of its money back from Forge.

To make sure the policy of section 553C was not thwarted in this way, Beech J was not prepared to allow Forge to enforce its adjudication award right away. However, His Honour was not prepared to dismiss Forge's application for leave to enforce it either because that would open the way for Hamersley to abandon its counterclaims and avoid ever having to pay the amount awarded to Forge. Instead, then, Beech J decided to stay Forge's application for leave to enforce the adjudicator's award pending determination of Hamersley's appeal. This means that Forge's leave application remains on foot and presumably, if Hamersley does not now prosecute its claims against Forge in a timely way, Forge can ask the Court to relist its leave application for further hearing.

We consider Beech J's decision to have been well-reasoned and unlikely to be overturned on appeal. Principals can and should rely on this decision in resisting applications by insolvent contractors for leave to enforce adjudicators' payment awards. Meanwhile, liquidators of insolvent contractors should think twice about whether there is commercial value in seeking or progressing adjudication applications rather than investing limited resources in more effective and determinative processes for resolving payment disputes.

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.

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.

Murray Thornhill
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
Check to state you have read and
agree to our Terms and Conditions

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.

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 by clicking here .

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.


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.