KEYWORDS: APPEAL FROM ADJUDICATIONS
This case is of interest to lawyers and adjudicators alike, yet it is difficult to identify how contractors or principals should modify their behaviour as a result of it. Nonetheless, the case should give industry participants comfort that adjudication determinations made otherwise than in accordance with proper legal principles will be quashed on application for judicial review.
The case also creates the conceptual space for principals to argue that particular circumstances are too complex for the adjudicator to make a determination in the time available. How adjudicators will receive that argument remains to be seen.
The defendant (Samsung) subcontracted the plaintiff (LORAC) to undertake the Port Landside SMP and E&I Works at the Roy Hill project. In January 2015 LORAC issued a progress claim under the subcontract. Samsung then exercised its contractual entitlement to terminate the subcontract for convenience. A dispute arose.
The parties signed an "Interim Deed" which required Samsung to pay LORAC termination payments including an "on account" amount of $45 million. Samsung paid that amount. Importantly, the other termination costs payable under the Interim Deed were subject to two qualifications, namely, Samsung's right to set-off and, secondly, that the total amount of those payments could not exceed the subcontract sum as adjusted in accordance with the subcontract.
In February 2015 LORAC issued a second claim in respect of works it had performed prior to Samsung's termination of the subcontract. Samsung did not pay and LORAC applied for adjudication of both the January progress claim and the February claim under the Construction Contracts Act 2004 (WA) (Act). The adjudicator determined both applications in favour of LORAC, requiring Samsung to pay LORAC a combined (additional) amount of about $44.1 million.
LORAC sought the Supreme Court's leave to register the determinations as judgments. In response, Samsung applied for judicial review of each determination, seeking to quash the determinations with writs of certiorari. Mitchell J heard LORAC's and Samsung's applications together.
Mitchell J quashed both determinations because the adjudicator committed a jurisdictional error in failing to resolve the payment disputes by reference to the terms of the parties' contract, thereby misapprehending the nature of his adjudicative function.110
In coming to that conclusion, Mitchell J found that that if the adjudicator is asked to embark upon a long and complicated contractual construction exercise or to enquire as to what the actual terms of the parties' contract are or some other legal problem he or she is not able to resolve in the time available, then the adjudicator should summarily dismiss the adjudication application without determining its merits under s 31(2) (a)(iv) of the Act on the ground that the matter is too complex.111
More interesting are Mitchell J's comments surrounding this conclusion. Mitchell J suggests that whether an adjudicator should dismiss an application under s 31(2)(a)(iv) of the Act depends on that particular adjudicator's ability to resolve the issues put before him or her within the time for which the Act provides. This implies that adjudicators who do not have legal training should dismiss applications that turn on difficult questions of contractual construction more readily than adjudicators who have a background as experienced legal practitioners.
Consequently, LORAC's applications for leave to enforce the determinations were dismissed. However, the Court (in obiter) indicated that it would have refused leave under section 43 of the Act to register the determinations as the payments which were the subject of the determinations had already been made under the Interim Deed.112
This result, which is undoubtedly correct, is at odds with the decision by Keen DCJ in Kuredale Pty Ltd v John Holland Pty Ltd  WADC 61 where Keen DCJ held that an overpayment under a construction contract does not constitute a "sufficient reason" for a court to decline to grant leave under section 43 of the Act.
This decision is the latest in a string of decisions where the Supreme Court113 has emphasised the importance of adjudicators making determinations according to correct ordinary legal principles, notwithstanding the speed of the process. It might be argued that Mitchell J's decision in this case stands for the proposition that in cases where the quantum in dispute is large or the primary issue is one of complicated contractual construction and the adjudicator is not legally trained, the adjudicator must dismiss for reasons of complexity under s 31(2)(a)(iv) of the Act. Whether that is so remains to be seen.
110 At 
111 At 
112 At –
113 See Red Ink Homes Pty Ltd v Court  WASC 52; Delmere Holdings Pty Ltd v Green  WASC 148
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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