Can the re-agitation of payment claims ever be OK?

Case note: Arconic Australia Rolled Products Pty Limited v McMahon Services Australia Pty Ltd [2017] NSWSC 1114

Date of decision: 17 August 2017

There have been a number of cases which have made it clear that the Building and Construction Industry Security of Payment Act 1999 (NSW) was not intended to provide another chance for a claimant to issue repeat payment claims and require Adjudicators to determine issues which had already been determined by an earlier adjudicator.

In a recent decision of Arconic Australia Rolled Products Pty Limited v McMahon Services Australia Pty Ltd¹ delivered on 17 August 2017; the Supreme Court considered when a repetitious claim under the Act was capable of being determined by an Adjudicator.

The decision contains a helpful review of some key cases and provides clarity as to if and when the Act may  permit the determination of a re-agitated Payment Claim.

 

The facts

Arconic engaged McMahon to decommission an aluminium plant.

There were three Payment Claims No 13, 14 and 15 made by McMahon that were the subject of four separate adjudication applications.

The contentious element in each Payment Claim was a claim described in different ways as delay costs for variations relating to undocumented hazardous material discovery.

McMahon made a number of attempts over four adjudication applications to have an issue of a claim for indirect costs determined by an Adjudicator.

The first adjudication application failed because McMahon sought to rely on without prejudice material that was not entitled to put to an Adjudicator.

The second attempt failed because, the Adjudicator concluded that the claim advanced in the second adjudication application was not the same as the claim advanced in the Payment Claim.

The third attempt failed because there was no reference date to support Payment Claim 14 on which the adjudication application was based.

A fourth adjudication application was lodged in respect of Payment Claim 15

The parties agreed that nothing should happen in relation to a fourth adjudication application until the court determined the proceedings.

 

What were the arguments?

The amount in each payment claim included  an amount, in round figures and exclusive of GST, of $2,344,000 for indirect costs.

Arconic argued that McMahon could not re-agitate that claim in the fourth adjudication application on the grounds that:

1. a)there has been a determination on the claim by the Adjudicator on the second adjudication application):
2. b)that McMahon was estopped from re-agitating the fourth adjudication application.
3. c)the repetitious re-agitation of the claim was an abuse of process

McMahon argued that:

1. a)the precise issue had never been determined by the second adjudicator,
2. b)the principle of issue estoppel had no relevance;
3. c)as there had never been a decision on the merits of its claim to be paid the indirect costs in question, there could be no question of abuse of process.

 

The Cases

The Court reviewed the decision of the Court of Appeal in Dualcorp Pty Ltd v Remo Constructions Pty Ltd² which said at [69]:

“…for the principle of issue estoppel to apply, the same issue must have been earlier determined as is later sought to be re-agitated“

As also held in Ku-Ring-Gai Council v Ichor Constructions Pty Ltd³, “an issue estoppel can only arise where an issue has already been decided“.

In AE & E Australia Pty Ltd v Stowe Australia⁴ the Court, at [46], said that the doctrine of issue estoppel applied because, as a matter of substance, the adjudicator had decided the claimant was not entitled to the amounts in question.

 

Issue estoppel

The question before the Court turned on the reasons contained in the determination of the second Adjudication Application.

In that determination; the Adjudicator said, that the claim, in the Adjudication Application, was not one that he could consider, because it was materially different to the claim put in the underlying Payment Claim (No 13).

Applying the principles laid out in Leighton v Arogen⁵  in his determination the Adjudicator said:

[21]  Under the Act a claimant cannot advance one basis of entitlement and then change to another and supplement the payment claim with information prepared nominally six (6) weeks after the payment claim was served and claim that the submission is ‘duly made’.

[23]  Therefore, with regard to all of the foregoing the adjudicated amount is the scheduled amount that the respondent has agreed to pay of $773,157.43 (inc GST).

 

What did the Court say?

According to Justice McDougall, this was not a case where a previous adjudicator had as a matter of substance considered the merits of the question of entitlement and came to a view that there was no entitlement as in the decision of AE & E Australia Pty Ltd v Stowe Australia.

By contrast, His Honour said that this was a case where:

a)the Second Adjudicator took the view that it was not open to him to consider the claim as it had been framed.

b)the Second Adjudicator did not decide the merits of the issue namely whether McMahon was entitled to be paid for the variation claim.

Accordingly; the Court held that McMahon was not prevented by reason of issue estoppel from agitating the fourth adjudication application.

 

Abuse of process

As to the abuse of process issue; the Court made the following observations:

• there is nothing in the Act which prevents a claimant from claiming, in successive adjudication applications, amounts that have been the subject of previous payment claims.

This position is clear from  section 13(6) of the Act.

• to support a conclusion of abuse of process, there must be something more than simply resubmitting the same claim.
• the authorities demonstrate that what lies at the heart of abuse of process, in the context of adjudications under the Act, is the repetitious re-agitation of a claim had already been decided on its merits, using different bases or pretexts to justify the reconsideration of the same claim.

The Court referred to the decision of Stevenson J in Ku-Ring-Gai Council v Ichor Constructions Pty Ltd, where His Honour dealt with the question of abuse of process at [37].

In Ichor, Stevenson J:

• reviewed the authorities, and concluded that mere repetition of a claim earlier made did not necessarily indicate abuse of process.
• expressed the view that the facts before him showed a lot more than mere repetition of a claim earlier made.
• said at [53] that the reason the claim was repeated in the second application was that it had failed (on the merits) in the first application, because the first adjudicator concluded that Ichor’s evidence was “inadequate to the task”.
• considered that it was not appropriate for Ichor to use the first adjudicator’s reasons as an advice on evidence, and to supplement its proof with further evidence so as to seek to achieve the result that it could and might have got first time around had its proof been sufficient.

 

What did the Court decide on abuse of process?

The Court held that:

• had the second adjudicator dealt with the claim on its merits, and concluded that claim failed because the evidence was inadequate, then what Stevenson J said in Ichor would have direct application.
• the second adjudicator did not deal with the claim on its merits. Instead; he took the view in substance, that the claim, as it was framed in the adjudication application, was not one that he could deal with.
• there could be no question of abuse of process. This was because McMahon was not using the decision of the second adjudicator to improve its position.
• Rather McMahon was trying to get the fourth Adjudicator to deal with its claim on the merits which had not happened.

 

Take home lessons

The Act does not preclude the re-agitation of claims.

As confirmed by the authorities however, the Act does preclude the re-agitation of claims if they had been previously determined by an Adjudicator.

The facts of this case were quite unique. Despite a convoluted history; the re agitation of claims in this case was permissible.

The take home message however is that there are still no second chances if a claim is unsuccessful at Adjudication.

It is essential that Claimants prove all the elements of their claim and get the claim right the first time!

This communication is sent by Kreisson Legal Pty Limited (ACN 113 986 824). This communication has been prepared for the general information of clients and professional associates of Kreisson Legal. You should not rely on the contents. It is not legal advice and should not be regarded as a substitute for legal advice. The contents may contain copyright.

 

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¹[2017] NSWSC 1114

²(2009) 74 NSWLR 190

³[2014] NSWSC 1534

⁴[2010] QSC 135

⁵[2012] NSWSC 1323