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Case note – Sandvik Mining and Construction Australia Pty Ltd v Fisher [No 2] [2020] WASC 123

SANDVIK MINING AND CONSTRUCTION AUSTRALIA PTY LTD v FISHER [No 2] [2020] WASC 123

On 10 December 2018, Sandvik received an application for adjudication from Civmec under the Construction Contracts Act 2004 WA (the Act) in relation to Progress Certificate 26, (the First Application). The adjudicator was not required to determine the correctness of any item other than five disputed items the subject of the First Application, the remainder being Unchallenged Items. On 21 January 2019 the appointed adjudicator in the First Application made a determination in respect of the same five disputed items.

On 29 March 2019, Sandvik received an application for adjudication from Civmec under the Act in relation to Progress Certificate 26 (Second Application), challenging seven items of deduction each of which was one of the Unchallenged Items in the First Application.

The essence of Sandvik’s application in this matter was that Mr Fisher did not have jurisdiction to make the Second Determination because the same payment dispute had already been determined in the First Determination. Sandvik contended that a progress claim could only give rise to a single payment dispute.

On 16 April 2020 the WA Supreme Court (Archer J) delivered a judgement in the above matter in which her Honour decided that the critical issue to be determined was whether a contractor, having chosen to challenge particular items in dispute arising from a particular progress claim (including the principal’s response to it), can subsequently choose other items arising from the same progress claim to be the subject of a different application for adjudication.

The court’s jurisdiction was confined to determining whether Mr Fisher had made a jurisdictional error.

The first question was whether on a proper construction of the Act, a progress claim could only give rise to a single payment claim and a single payment dispute. That is, once any part of the progress claim is the subject of an adjudication, does that define the ‘payment dispute’ in relation to that progress claim, with the result that an adjudicator would not have jurisdiction to subsequently adjudicate any of the other disputed items arising from that progress claim?

The court referred to Duro Felguera Australia Pty Ltd v Samsung C & T Corporation [2018] WASCA 28; (2018) WAR 323 [146], in which Buss P and Murphy JA said that the Act ‘recognises that an adjudication of a “payment dispute” may, and perhaps typically will, involve the determination of identifiable, divisible, amounts claimed. In other words, the essential statutory task of the adjudicator will commonly involve the adjudication and determination of divisible amounts’. Given this, ‘where there is one final “amount to be paid" (within the meaning of s 36(c)(i)), it is no more than the mathematical result of the determination of divisible amounts'. Their Honours rejected the proposition that the Act intended that ‘the final, mathematical, result should itself be treated as an organic and indivisible whole’, and found that 'Each itemised amount in a progress claim by a contractor may itself be a "payment claim" as defined in the Act'; and 'a number of divisible amounts claimed for various aspects of work done in a progress claim may be added together and treated as part of one "payment claim", and thereby form part of one "payment dispute" if the progress claim is rejected by the principal.' Their Honours said that 's 31(2)(b) requires the adjudication of each separate component of a "payment dispute" involving unpaid amounts pursuant to a progress claim. The determination of the "amount to be paid" within the meaning of s 31(2)(b)(i) in its application to a progress claim comprising divisible amounts, is a mathematical exercise involving the totalling of each component amount for which a party is found to be ‘liable to make a payment’ within the meaning of s 31(2)(b).'

The court found that [at 62] accordingly, where a progress claim contains a number of itemised demands, each may itself be a ‘payment claim’ as defined in the Act and each may be treated as such. When a single progress claim includes multiple items, and the multiple items are disputed, each item can, in theory, be the subject of an adjudication application. In such a case, each item will be a ‘payment claim’, giving rise to its own ‘payment dispute’. In addition, a group of items from a single progress claim can be aggregated in a single application. In such a case, the group of items will be a ‘payment claim’ giving rise to the ‘payment dispute’.

The Act prevents multiple determinations of the same payment dispute. It does not prevent multiple determinations of different payment disputes in relation to different progress claims. Nor does it prevent multiple determinations of different payment disputes arising from the same progress claim, where the principal seeks an adjudication of the merits of a counterclaim to that claim.

The adjudicator in the First Determination did not determine any of the issues that were agitated in the Second Determination. The issues agitated in the First Application were the merits of five items. The issues at agitated in the Second Application were the merits of different items. While the adjudicator in the First determination took into account the Certified Amount in order to calculate the total amount payable in the First Determination, he did not determine the merits of the Unchallenged Items. Their values were taken into account arithmetically, but their merits were not determined.

The principles of res judicata, issue estoppel and Anshun estoppel have no bearing on the identification of what the ‘payment dispute’ is, because the Act itself expressly prevents multiple determinations of the same ‘payment dispute’.

By asking an adjudicator to deduct the whole of the certified amount from an aggregated claimed amount, and to accept the correctness of each of the other claim items not under challenge, a ‘payment dispute’ should not be construed as extending to all of those other unchallenged items.

Where one adjudication determination does not determine the merits of unchallenged claim items, but the values of those items on merely assumed to calculate the amount determined as payable, the unchallenged items should not be treated as having been determined and may be the subject of the subsequent adjudication application.

The limited form of ‘adjudication estoppel’ referred to by her Honour in the Salini case only prevents the re-agitation of an issue which has been determined in a previous adjudication and which was fundamental to the assessment of the liability to pay and the quantum of the amount found to be payable. It does not apply to claim items which were unchallenged in a previous adjudication and not determined on their merits.