There is a perception that the Construction
Contracts Act 2004 (WA) (the Act) is weighted in favour of
parties who are in 'subordinate' positions on the payment
pecking order (generally contractors and subcontractors). The
recent Western Australian District Court decision in Kuredale
Pty Ltd v John Holland Pty Ltd  WADC 61 arguably
reinforces that perception and is an example of how the courts are
willing to construe the purpose and object of the Act to favour
contractors and subcontractors. This decision also adds to a
growing body of case law that provides guidance about the
circumstances that will provide a court with 'sufficient
reason' to decline to grant leave to enforce adjudication
determinations under s 43 of the Act.
By a construction contract dated 3 August 2011, John Holland Pty
Ltd (as head contractor) (John Holland) engaged
Kuredale Pty Ltd, trading as Metro Lintels, (as supplier)
(Metro Lintels) to supply steel in respect of
works on the Gorgon NPI, Barrow Island project in Western Australia
Relevantly, Metro Lintels issued a payment claim
(Payment Claim 34) under the Supply Contract
seeking payment of a total amount of about $699,000 (including an
amount of $498,000 for 'workshop building'). John Holland
certified Payment Claim 34, disputing that payment for workshop
Metro Lintels subsequently adjudicated John Holland's
assessment of Payment Claim 34.
Between the time the adjudication application was served and the
adjudicator's determination issued, John Holland received a
subsequent payment claim (Payment Claim 35) from
Metro Lintels. By Payment Claim 35, Metro Lintels sought a total
amount of about $124K. That claim included a further claim for
payment for 'workshop building'. John Holland assessed
Payment Claim 35 and paid Metro Lintels, on 15 September 2014
(before the adjudicator issued his determination), a sum of
$470,000 (GST exclusive). John Holland led evidence in the
enforcement proceedings that about $377,000 of this payment related
to works that Metro Lintels had claimed in Payment Claim 34.
On 24 September 2014, the adjudicator determined that John
Holland pay Metro Lintels an amount of $525,000, including $431,000
for 'workshop building'.
Metro Lintels applied for leave, under s 43 of the Act, to
enforce the adjudicator's determination as a judgment of the
THE COURT'S DECISION
The central issue in the proceeding was whether Metro
Lintels' Payment Claim 35 included a claim for work that was
the subject of Payment Claim 34.
Ultimately, Keen DCJ allowed Metro Lintels' application to
enforce the determination, notwithstanding a finding that John
Holland had appeared to have paid for the relevant item of work
twice. Having made this finding, his Honour concluded that an
overpayment under the contract would not be a sufficient reason for
him to exercise his discretion against granting leave. In reaching
this view, his Honour considered the object and purpose of the Act
and, in particular, focused on the interim nature of the
adjudication regime under the Act.
Justice Keen's closing remarks were that "[n]ot to
grant leave pursuant to the [Act] would be to fly in the face of
the intent and purpose of the statute and that could bring the
administration of justice into disrepute." Those comments are
arguably surprising because the effect of his Honour's orders
was an overpayment down the contractual payment chain. Keeping
money flowing in the contracting chain is the primary intent and
purpose of the Act. Allowing subcontractors, contractors or
suppliers to enforce determinations in circumstances where an
overpayment under the contract will occur is arguably beyond that
intent and purpose.
Keen DCJ made new law in holding that an overpayment under the
contract does not constitute a 'sufficient reason' for a
court to decline to grant leave under s 43 of the Act. This
decision suggests that principals and head contractors should not
attempt to pre-empt an adjudication determination by paying some or
all of the disputed amount before that determination is made in an
attempt to off-set any determination debt. The result also raises
the question of whether the primary object and purpose of the Act
(which is to keep money flowing in the contracting payment chain)
will be achieved if the position on the operation of s 43 taken in
this case, continues to be adopted by Western Australian
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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