The Decision: Monadelphous Engineering Pty Ltd v Townsville City Council (Adjudication Decision No. 711540)

Townsville City Council (Council) had a significant win at adjudication in January this year. In deciding the amount of a payment claim made by Monadelphous Engineering Pty Ltd (Monadelphous), the adjudicator decided heavily in Council’s favour awarding an adjudicated amount of $139,987.98 in contrast to the claimed amount of $5,713.965.36.

Facts of the Adjudication Decision

A payment claim was made by Monadelphous in relation to construction works undertaken to upgrade the Cleveland Bay Purification Plant. The payment claim amounting to $5,713.965.36 consisted of various amounts claimed for variations, recovery of liquidated damages, delay costs, and works under the contract.

In response, Council’s corresponding payment schedule only proposed payment of $13,731.80.

A significant portion of the claim, $3,669,945.00, related to delay costs for alleged delays caused by Council. All delay events were addressed individually by the adjudicator who concluded that no contractual entitlement had been established by Monadelphous and awarded no payment for the claimed delay costs.

The payment claim also sought to recover $300,000.00 which had previously been set off by Council in liquidated damages. Monadelphous argued that the parties had agreed to adjust the date of practical completion by approximately 2 months but the adjudicator, who was not satisfied of the evidence to support this submission, found that the date for practical completion had not been extended and awarded no payment for this portion of the claim.

Further to that, of the 15 variations submitted by Monadelphous, only 2 were awarded as part of the adjudicated amount.

The adjudicator allocated 90% of her fees to Monadelphous.

Resolving the Dispute

It is important to recognise that every dispute requires a unique and practical approach that is aimed to obtain the best possible outcome. Sometimes this may require engaging in negotiations for a settlement, and other times adjudication should be utilised in order to achieve an independent decision regarding entitlement to payment and a binding outcome.

This decision is a good example of when adjudication may produce an outcome preferable to that which could be achieved through a compromised settlement. Given the huge disparity between the claimed amount and the scheduled amount, it may be the case that a settlement could not have been reached unless Council compromised significantly on the amount of payment it agreed to make.

In circumstances where Council considers it has a strong contractual position and is staring at making a significant payment, adjudication under the Building Industry and Fairness Security of Payments Act can be an effective tool to maintain Council’s position. Complex claims and disputes should attract experienced adjudicators who can recognise and acknowledge the strength of the parties’ respective positions through their decision.

In summary, Councils should definitely work with its contractors to resolve any issues where possible. But – when hit with a large claim, Councils should rightly consider whether it is a sensible approach to allow an adjudicator to decide payment.