The purpose of the WA Act

6.6 The fast-track adjudication process, provided for in Part 3 of the WA Act, is a tradeoff between speed and efficiency (on the one hand) and contractual and legal precision (on the other). Its primary aim is to keep the money flowing in the contracting chain, by enforcing timely payment and sidelining protracted, or complex, disputes while retaining the parties’ full rights, if not satisfied, to go to court, or use any other dispute resolution mechanism available under the contract.⁷

6.7 As stated in the latest annual report on the operation of the legislation,⁸ the WA Act provides measures of security and fairness to building and construction industry participants by:

• .1 prohibiting unfair payment provisions in construction contracts that inhibit the movement of funds through the contracting chain;
  
• .2 implying fair and reasonable payment terms into construction contracts that are not in writing;
  
• .3 clarifying the right to deal in unfixed materials when a party to a contract becomes insolvent; and
  
• .4 providing a mechanism supporting rapid adjudication of construction contract payment disputes.

Application of the WA Act

6.8 The ambit as well as the exclusion of construction work under the WA Act is similar to that of the NSW Act. However, the WA Act applies to contracts for carrying out of construction work and related services, including non-core construction works, certain activities undertaken in the mining industry and the traditional construction of commercial buildings and homes. Also, the WA Act excludes constructing a plant for the purpose of processing minerals, oil or natural gas and does not cover construction related to artistic works or watercraft.

Statutory mechanism

6.9 Under the WA Act, a payment claim is defined as a claim under a construction contract by the contractor against the principal, or vice versa, relating to performance, or non-performance, by the contractor of its obligations. For the purposes of the WA Act, a payment dispute arises if:

• .1 By the time when the amount claimed in a payment claim is due to be paid under the contract, the amount has not been paid in full, or the claim has been rejected, or has been wholly, or partly disputed;
  
• .2 By the time when any money retained by a party under the contract is due to be paid under the contract, the money has not been paid; or
  
• .3 By the time when any security held by a party under the contract is due to be returned under the contract, the security has not been returned: see section 6 of the statute.

Therefore, the ambit of potential disputes is quite wide.

6.10 In order to have a payment dispute adjudicated, a party to the contract must, within 28 days after the dispute arises, prepare a written application for adjudication, serve it upon (1) each other party to the contract, (2) if the parties to the contract have appointed a registered adjudicator and that adjudicator consents, upon the adjudicator, (3) if the parties to the contract have appointed a prescribed appointor, upon that appointor, or (4) upon a prescribed appointor chosen by the party. The claimant may have to provide a deposit or security for the costs of the adjudication, see section 26 of the WA Act.

Adjudication process

6.11 If an application for adjudication is served upon a prescribed appointor, the appointor, within five days after being served, must appoint a registered adjudicator to adjudicate the payment dispute concerned and send the application and any response received by it to the adjudicator: see section 28 of the WA Act. An appointed adjudicator, who has a material personal interest in the payment dispute, or the construction contract under which the dispute has arisen, or in any party to the contract, is disqualified from adjudicating the dispute: see section 29(1) thereof. If an appointed adjudicator is disqualified, the adjudicator must notify the parties in writing of the disqualification and the reasons for it after which the adjudicator’s appointment ceases, unless, within five days after the date of the adjudicator’s notice, all of the parties authorise the adjudicator in writing to continue as the appointed adjudicator: see section 29(2) thereof.

Adjudicator’s powers

6.12 Unlike under the East Coast model, adjudicators under the WA Act, for the purposes of making a determination, must act informally and are not bound by the rules of evidence and may inform themselves in any way they think fit. In order to obtain sufficient information to make a determination, they may arrange for anything to which the payment dispute relates to be tested, or engage an expert to investigate and report on any matter relevant to the payment dispute, unless all the parties object: see sections 32(1) and 32(2) of the WA Act. In practice, however, adjudicators tend not to use such inquisitorial powers because of the tight time constraints to make the determination. The parties involved in a payment dispute are jointly and severally liable to pay the costs of an adjudication of the dispute: see section 44(5) of the statute. The parties are to bear their own costs, except where the adjudicator is satisfied that a party to a payment dispute incurred costs of the adjudication because of frivolous, or vexatious, conduct on the part of, or unfounded submissions by, another party. The adjudicator may decide that the other party must pay some, or all, of those costs: see section 34(1) thereof.

Adjudicator’s duty to dismiss

6.13 The appointed adjudicator must, within 14 days after the response has been served, or the last date on which a response is required to be served, or any extension of it made under the WA Act, dismiss the application without making a determination of its merits if:

• .1 The contract concerned is not a construction contract;
  
• .2 The application has not been prepared and served in accordance with the Act;
  
• .3 An arbitrator, another person, a court, or other body, dealing with a subject-matter arising under a construction contract, makes an order, judgment, or other finding about the dispute that is the subject-matter of the application; or
  
• .4 Is satisfied that it is not possible to make a fair determination because of the complexity of the matter, the prescribed time, or any extension of it is not sufficient for any other reason.

The dismissal approach has no equivalent in the Eastern States (save for Queensland, where an adjudicator is required to decide whether they have jurisdiction).

Adjudicator’s determination

6.14 In any other scenario, the adjudication must determine on the balance of probabilities whether any party to the payment dispute is liable to make a payment, or to return any security. If this is the case, they must determine the amount to be paid, or returned, and any interest payable on it and the date on, or prior to, which the amount is to be paid, or the security is to be returned: see section 31(2) of the WA Act. The WA Act provides that reasons must be given for determinations on the merits under section 36 thereof and also for dismissing applications: see section 37 thereof. It has previously been held by the courts that the reasons given by the adjudicators for reaching a determination must be adequate.9 A similar level of reasoning is required to dismiss applications.¹⁰

6.15 An appointed adjudicator’s determination is binding upon the parties to the construction contract under which the payment dispute concerned arose, even though other proceedings relating to the payment dispute may have been commenced before an arbitrator, or other person, or a court, or other body: see section 38 of the WA Act. A party that is liable to pay an amount under a determination must do so on or before the date specified in the determination: see section 39(1) of the WA Act. If, on the adjudication of a payment dispute, the adjudicator makes a decision, the adjudicator cannot subsequently amend, or cancel, the decision, except with the consent of the parties; and a party to the dispute may not apply subsequently for an adjudication of the dispute: see section 41(1) thereof. However, on the application of a party, or after notifying the parties, the adjudicator may, on his own initiative, correct the determination if an adjudicator’s determination contains an accidental slip, or omission, a material arithmetic error, or a material mistake in the description of any person, thing, or matter: see section 41(2) thereof.

6.16 An adjudicator’s decision made under section 31(2)(b) of the WA Act must, inter alia, be:

• .1 In writing;
  
• .2 Prepared in accordance with the regulations;
  
• .3 State the amount to be paid and the date on, or prior to which, it is to be paid; or
  
• .4 State the security to be returned and the date on, or prior to which, it is to be returned and give reasons for the determination as the case requires: see section 36 thereof.

Regulation of adjudicators and prescribed appointers

6.17 An individual is eligible to be a registered adjudicator if they have the qualifications and experience prescribed by the Construction Contracts Regulations 2004 (WA) (the Regulations)¹¹ [Appendix 9.2]. Section 9 of the Regulations provides that the individual must:

• .1 Have a degree from a university, or other tertiary institution in Australia, in an approved course, or an equivalent qualification from an overseas university, or tertiary institution;
  
• .2 Be eligible for membership of an approved professional institution; or
  
• .3 Be a registered builder.

6.18 Moreover, the individual must have had at least five years of experience in administering construction contracts, or dispute resolution relating to construction contracts. The individual must have successfully completed an appropriate training course, which qualifies the person for the performance of the functions of an adjudicator under the Act: see section 9 of the Regulations 2004.

6.19 Such detailed regulations do not have any equivalent under the New South Wales legislation. In practice, 73 % of adjudicators in Western Australia are not legally trained, whilst a significant number of claims has been prepared by lawyers and included detailed legal submissions.12 Within 14 days after the date upon which a party to a construction contract is served with an application for adjudication, the party must prepare a written response to the application. The response must set out the details of, or have attached to it, any rejection, or dispute, of the payment claim that has given rise to the dispute and must set out, or have attached to it, all the information, documentation and submissions on which the party making it relies in the adjudication: see section 27 of the WA Act.

6.20 In addition, the WA Act requires adjudicators to comply with the principles set out in the Code of Conduct and Practice Guidelines for Adjudicators (the Code).¹³ The Code includes essential directions to adjudicators, such as professional conduct, confidentiality, conflict of interest and setting and collecting fees. The Code also provides useful guidelines about the conduct of adjudicators, including the nature of the adjudicator’s rôle as a statutory contract administrator and the issues that should be considered in the process of making a determination, such as reviewing the conduct of the parties and disclosure of any likely conflict of interest. A similar code was also established for the prescribed appointers entitled Prescribed Appointers’ Responsibilities.¹⁴

6.21 If a determination requires the principal to pay the contractor an amount and the principal does not pay in accordance with the determination, the contractor may give the principal notice of the contractor’s intention to suspend the performance of its obligations: see section 42 of the WA Act. A determination may, with the leave of a court of competent jurisdiction,¹⁵ be enforced in the same manner as a judgment, or order of the court, to the same effect and, if such leave is given, judgment may be entered in terms of the determination: see section 43(2).

Immunity of adjudicators and appointers

6.22 An action in tort does not lie against an adjudicator, or an appointer, for anything done, in good faith, in the performance, or purported performance, of a function under this Act: see section 54(3) thereof. Therefore, adjudicators could be held liable under any contract they may have entered into with the parties, or under statute (eg, for breach of a statutory probation on misleading, or deceptive conduct).16

Limited rights of review

6.23 There is an express right of review by application to the State Administrative Tribunal (the SA Tribunal) in respect of an adjudicator’s decision to dismiss an adjudication application without making a determination of the merits of the application. An adjudicator’s decision on the merits is not subject to review by the SA Tribunal.¹⁷ Part of the rationale for the requirement to provide sufficient reasons for a decision is so that the unsuccessful party can assess whether, or not, to challenge the decision or, in the context of the WA Act, to apply for a review by the SA Tribunal.¹⁸ Accordingly, the reasons must be sufficient to give effect to that right and must disclose the intellectual process by which the relevant conclusions have been reached.¹⁹

6.24 Where an adjudicator dismisses an adjudication application without making a determination of its merits, on any of the grounds set out in section 31(2)(a) of the WA Act, the adjudicator must examine all relevant material to determine whether the grounds relied upon are made out.²⁰ Consequently, the SA Tribunal has set aside an adjudicator’s decision to dismiss where the adjudicator’s reasons for the decision were extremely brief and did not reveal the intellectual reasoning by which the adjudicator had arrived at the conclusion.²¹

6.25 An adjudicator’s decision to dismiss can be reviewed by the State Administrative Tribunal. The decision can be affirmed, varied, set aside, or sent back to the adjudicator for reconsideration in accordance with any directions, or recommendations that the SA Tribunal considers appropriate.²² If the decision is reversed and remitted, the adjudicator is to make a determination within 14 days after the date on which the decision was reversed, or any extension of that time consented to by the parties: see section 46(2) of the WA Act. Notwithstanding the provisions of the State Administrative Tribunal Act 2004 (the SAT Act) giving wide powers, namely for hearing de novo, it would be inconsistent with the whole scheme of the WA Act for the SA Tribunal to consider any material other than that which was before the adjudicator.²³ The rationale for not permitting new materials is so that if the decision under review is reversed, and the matter referred back to the adjudicator, the adjudicator must remain bound to decide the matter on the material that was originally before them.²⁴

6.26 However, preventing new materials does not include submissions on the basis of law regarding the material that was before the adjudicator.²⁵ The SAT Act allows for review of applications objecting to the appointment of an adjudicator for conflict of interest under section 29(3) thereof. This provides that a party to a payment dispute may apply to the SA Tribunal for a declaration that an appointed adjudicator is disqualified under section 29(1) of the SAT Act, provided that the application is made before the person is notified of a decision, or determination made under section 31(2) thereof. An application for review should be made within 28 days of the date of the adjudicator’s decision under rule 9 of the State Administrative Tribunal Rules 2004 (WA), although the SAT Tribunal has a discretion to extend that period.

6.27 In practice, this discretion was hardly ever exercised by the SA Tribunal to maintain the speedy and informal process intended by the legislation. The WA Act provides that, unless provided as a right for limited review, a decision, or determination, of an adjudicator cannot be appealed, or reviewed.26 It was held by the courts that this section does not prevent an aggrieved respondent from seeking prerogative relief in respect of a decision by an adjudicator to refuse the dismissal of an adjudication application under section 31(2)(a) of the WA Act. It only limits the appeal before the SA Tribunal, whilst judicial review will still be open to the aggrieved party.²⁷ In any event, state legislation might preclude judicial review by a state the Supreme Court for error of law on the face of the records, but not for jurisdictional error following Kirk v Industrial Court of New South Wales.²⁸

6.28 With regard to the scope of a review by the SA Tribunal, the WA ACT is not clear as to whether an aggrieved party has the right to apply for review in situations where an adjudicator decided not to dismiss an application and proceeded with the determination. Whilst the SA Tribunal has always been of the view that failure to dismiss an adjudication application was not open for review,²⁹ it took a while for the Supreme Court to give certainty in law and clarify the intention of the legislation in this regard. Initially, in O’Donnell Griffin Pty Limited v John Holland Pty Limited,³⁰ Beech J held: