A recent WA Supreme Court case affirms the narrow interpretation of the term “arisen under a construction contract” contained in the Construction Contract Act 2004 (WA) (CCA) to exclude a quantum meruit claim based on quasi-contract or restitution. On that basis, an adjudicator will have no jurisdiction to hear the merits of such a purported payment dispute.
Delmere and Alliance Infrastructure Pty Ltd entered into a subcontract on 20 December 2013 under which Alliance agreed to supply, deliver and install pipes at a site in Cape Lambert, Western Australia.
On 9 October 2014, Alliance submitted a variation claim (VC17) headed “Re: VARIATION CLAIM No 017”. This was rejected by Delmere.
On 7 November 2014, Alliance filed an adjudication application under the CCA using VC17 as the basis of the claim. Alliance did not issue a payment claim to Delmere in respect of VC17 until three days after the adjudication application had been filed (Invoice 024).
The adjudicator (Mr Barry Green) determined (inter alia) that Delmere had been unjustly enriched by changing the subcontract work methodology and ordered Delmere to pay AU$873,011.87 (including GST) to Alliance.
Construction Contracts Act
Under section 25 of the CCA, a party can apply for adjudication if a “payment dispute” has arisen under a construction contract (emphasis added).
A “payment dispute” has occurred if sums claimed in a payment claim are due to be paid under the contract and have (a) not been paid full by the time it is due to be paid; or (b) the payment claim has been rejected in full or wholly or partly disputed.1
Delmere sought judicial review of the adjudicator’s determination and cited six grounds in its application, including:
- The adjudicator misconstrued the definition of “payment claim” (section 3 of the CCA) and wrongly proceeded on the basis that a “payment claim” includes a claim for unjust enrichment; and
- The adjudicator had failed to consider the terms of the subcontract in determining whether there was a “payment claim” under the subcontract for the purposes of the CCA.
Judicial Review Determination
Justice Martin quashed the adjudicator’s decision and held that a relevant “payment claim” had not been issued by Alliance as:
- VC17 did not constitute a payment claim. Despite an attempt by Alliance to re cast VC17 as a payment claim, it was clearly designed by Alliance as a variation claim to which approval was sought; and
- Invoice 024 (which was a payment claim) was issued by Alliance three days after the adjudication application had been filed.
As a payment claim had not been issued to Delmere, it was determined that a “payment dispute”2 had not occurred therefore Mr Green had no jurisdiction to adjudicate on the merits of Alliance’s claim.
In addition, Martin J restated the principle that claims being pursued outside of the underlying contract do not satisfy the requirement that a “payment dispute” has arisen under a construction contract.
Instead, Martin J interpreted the words “under a construction contract” narrowly to exclude payment disputes which are “in relation to” the construction contract, such as a claim for unjust enrichment.
In another recent case, Kellogg Brown & Root Pty Ltd (KBR) applied for judicial review to determine (inter alia) that claims made by Doric Contractors Pty Ltd were not made “under a construction contract” as they were made after the contract was terminated; therefore a “payment dispute” under the CCA had not occurred.3
The substantive hearing for KBR’s judicial review application is pending.