Adjudicator determination – material denial of natural justice – application to stay proceeding – money paid to court as price of obtaining interlocutory proceedings paid to the first defendant
For there to be a material denial of justice, the adjudicator must resolve the dispute on a basis which has not been raised or 'hinted at' in any of the documents in the adjudication. It is not enough that the parties did not make submissions on the specific argument relied on by the adjudicator.
Quasar (Constructions) Commercial Pty Limited (respondent) engaged Trilla Group Pty Ltd (claimant) to undertake hydraulic work for Quasar for a development at Forest Lodge (contract).
The parties fell into dispute. The claimant served a payment claim on the respondent claiming $861,000 (plus GST). The respondent certified nil in the payment schedule after setting off a claim for liquidated damages.
The dispute was referred to adjudication. The claimant argued that time was at large due to the respondent's acts of prevention in failing to issue a revised construction program and appoint a superintendent to manage the works. The respondent's defence was that the prevention principle had no effect where the contract contained an extension of time (EOT) clause.
The adjudicator determined that the claimant was entitled to $462,000 (including GST). The adjudicator decided that the respondent could not set off liquidated damages, because the claimant: • was unable to assess if the delay had an impact on the critical path because the respondent had not provided an updated construction program; and • therefore could not request an EOT under the contract.
The respondent applied to the court seeking:
- a declaration that the adjudicator's determination was void for the reason it was decided on a basis for which neither party had contended and as such was a material denial of natural justice; and
- a stay of enforcement of the adjudication determination until such time as the respondent's liquidated damages claim could be heard and determined by the court.
The court dismissed the respondent's application. The court determined that there was no denial of natural justice and that there were no grounds for ordering a stay of enforcement of the adjudication determination.
Denial of natural justice
The adjudicator's finding that the claimant was not able to determine the critical path and could not request an EOT was not a material denial of natural justice. The respondent put before the adjudicator the defence that the prevention principle had no effect where the contract contained an EOT clause. That issue having been raised, it was incumbent upon the adjudicator to deal with it as best he could on the material provided and within the tight timeframe allowed.
Application to stay proceedings
McDougall J recognised that the court had jurisdiction to grant a stay in circumstances where a claimant is insolvent (or on the edge of insolvency) and where there is a cross-claim.
In the present case, the claimant's financial results for the last four years showed it had operated at a small but reasonably consistent loss. However the evidence also showed that the claimant is still trading, has won four substantial subcontracts, and its present financial position would be reversed if it were paid the adjudicated amount. His Honour therefore declined to grant a stay and ordered that the money paid into court by the respondent be paid out to the claimant.