COMMENTARY
MARCH2018
TheProblem:TheConstructionContractsAct2004(WA)containsanumberofprovisionsthatareto
beimpliedintoconstructioncontractsthataresilentastothosematters.Theseimpliedtermshave
beenasteadysourceofconfusionforthosetaskedwithassessingwhenandhowthosetermsaretobe
impliedaswellastheirpropermeaningandeffect.
Significantly,confusionregardingtheimpliedtermsmaterialisedinalongstandingperceptionthat
certainclausesconcerningresponsestopaymentclaimsifimplied(andnotcompliedwith)wouldresult
inpaymentclaimsbeingdeemeddueandpayable,irrespectiveoftheirmerits.Thisinturnledto
adjudicatorsconsideringitnecessarytodisregardthemeritsoftheunderlyingpaymentclaimsinthese
circumstances.
TheDevelopment:TheWASupremeCourtinTotalEdenPtyLtdvCharterishasclarifiedthattheterms
withinclause7Schedule1oftheCCAaretobeimpliedonlytotheextentnecessarytoaddressthe
gapsinaconstructioncontractandarenotnecessarilytobeimpliedinfull.
TheSupremeCourthasalsodismissedthepotentialdeemingeffectofcl.7(3)oftheCCAwhile
soundingawarningtoadjudicatorsthatfailuresinproperlyimplyingorconstruingtheseimpliedterms
canresultinjurisdictionalerror.
LookingAhead:Thisdecisionmaycomeasawarningtoadjudicatorsthaterrorsintheprocessof
implyingprovisionsintoaconstructioncontractand/orfailingtoproperlyconstruetheseprovisions
canamounttojurisdictionalerror.
ECASystems("ECA")andTotalEdenPtyLtd("TotalEden")enteredintoasubcontractforelectricalwork
inthePilbara("Subcontract").InAugust2016,ECAsubmittedaninvoicethatwasnotformallyrejected
orpaidbyTotalEden.ECAsystemscommencedanadjudicationinrespectoftheoutstandinginvoice.In
itsadjudicationresponse,TotalEdenallegedaclaimofsetoff.Anadjudicatorwasappointedunderthe
ConstructionContractsAct2004(WA)("CCA")whodeterminedinfavourofECA.
InfindingforECA,theadjudicatordeterminedthatimpliedtermswithintheCCAregardinghowTotal
EdenwastorespondtoapaymentclaimweretobeimpliedintotheSubcontract.However,the
adjudicatorerredwithrespecttothefollowingconclusionsandfellintojurisdictionalerror.
Thecourtheldthattheadjudicator'sconstructionofcl.7(3)as
a'deemingprovision'wasnotsupportedbythetextofcl.7
(3).
ApplicationoftheImpliedTerms
Onceidentifyingthatcertainprovisionsincl.7oftheCCAregardingresponsestopaymentclaimswere
tobeimpliedintotheSubcontract,theadjudicatorincorrectlydeterminedthatallofthetermsincl.7
weretobeimplied(includingcl.7(3)concerningthetimeforanypaymentbyTotalEden).
WhiletheadjudicatorwascorrecttoseektoimplycertainprovisionsinSchedule1oftheCCAintothe
Subcontract,heerredwhenconcludingthatallofcl.7wastobeimplied.PritchardJclarifiedthatonly
theclausesnecessarytofillthegapsintheSubcontract(beingcl.7(1)and7(2))werenecessary.By
seekingtoimplytheentiretyofcl.7intotheSubcontract,theadjudicatormisunderstoodwhatwas
requiredfromhimundertheCCAandfellintojurisdictionalerror.
DeemingProvisions
Afterconcludingthattheentiretyofcl.7wastobeimpliedintotheSubcontract,theadjudicatorerred
whenconsideringtheeffectoftheseprovisions,includingthatnoncompliancewithcl.7(3)(whichwas
erroneouslyimpliedintotheSubcontract)meantthatthetotalvalueofECA'spaymentclaimwas
deemedtobedueandpayableandthatanydefencefromTotalEdencouldnotbeconsideredinthe
adjudicationproceedings.
Theadjudicator'sconstructionofcl.7(3)isnotnovelandhasbeenanareaofdebateandconfusionsince
theCCAwasenactedin2005.Theargumentthatcl.7(3)containsthisformof'deemingprovision'was
raisedinsubmissionstoProfessorEvans'sreviewoftheCCAin2016(PhilipEvans,'Reportonthe
OperationandEffectivenessoftheConstructionContractsAct2004(WA)'(August2015)80).
Thecourtheldthattheadjudicator'sconstructionofcl.7(3)asa'deemingprovision'wasnotsupported
bythetextofcl.7(3),whichisproperlyconcernedwithclarifyingwhenapaymentdisputearises.
THREEKEYTAKEAWAYS
1.
TheSupremeCourtofWesternAustraliahasclarified
thatthetermswithinclause7Schedule1oftheCCA
aretobeimpliedonlytotheextentnecessaryto
addressthegapsinaconstructioncontract.
2.
Theconstructionofclause7(3)asa'deeming
provision'hasbeenfoundtobeincorrect.An
adjudicatorisrequiredtoassessthemeritsofa
respondent'sdefence.
3.
Anadjudicator'sfailuretoproperlyimplyprovisionsin
theCCAintoaconstructioncontractcanamountto
jurisdictionalerror.
AUTHORS
SimonBellas
Perth
StephenMcComish
Perth
KennethP.Hickman
Perth
BenjaminI.Holloway
Perth
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Importantly,HerHonourheldthatevenifcl.7(3)wastobeimpliedintotheSubcontract,itwouldnot
bearontheadjudicator'sdeterminationofliability,didnotaffectTotalEden'sliabilitytoECAunderthe
Subcontract,andwouldnotexcludeTotalEden'srecoursetoasetoffdefence.HerHonourconsidered
thattheadjudicator'sincorrectconstructionofcl.7(3)causedhimtofailtoproperlydetermineTotal
Eden'sliability(byignoringitssetoffdefence)accordingtothetermsoftheSubcontract,which
amountedtojurisdictionalerror.
AdjudicationCosts
Despitetheusualstartingpointthateachpartybearsitsowncostsoftheadjudication,theadjudicator
concludedthatTotalEdenoughttopayECA'scostsoftheadjudicationonthebasisthatTotalEdenhad
engagedinafrivolousorvexatiousdisputebyassertingadefencethat'wasalwaysboundtofail'dueto
theimpliedprovisionsoftheCCA.HerHonourheldthattheadjudicator'sdecisioninthisrespect
constitutedamanifestlyunreasonableexerciseofthediscretionandamountedtojurisdictionalerror.
Conclusion
TotalEden providesusefulguidanceastotheprocesstofollowwhenimplyingtermsintoaconstruction
contractandtheproperconstructionofcl.7(3)oftheCCA.Importantly,thisdecisionaddressesthe
'deemingprovision'riskthathaspersistedintheCCAforoveradecade.However,PritchardJ'sfindings
shouldalsoserveasawarningtoadjudicatorsthatafailuretoproperlyimplyandconstruetheimplied
termsintheCCAcanleadtojurisdictionalerror.
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