Background

Subcontractors will be familiar with their entitlement to apply for adjudication of a payment claim, if the amount scheduled by the contractor is less than the amount claimed by the subcontractor.

Section 97(1) of the BIF Act identifies two circumstances in which an adjudication application is withdrawn. Firstly, under s97(1)(a), an application may be withdrawn if the claimant provides written notice of discontinuation to both the adjudicator and the respondent. Secondly, under s97(1)(b), an adjudication application is taken to have been withdrawn if, before the adjudicator determines the application, the respondent pays the claimant the amount stated in the payment claim that is the subject of the adjudication application.

In Downer EDI, the claimant, DT Infrastructure, served a payment claim on the respondent, Downer, in the amount of around $22 million. Downer responded with a payment schedule for approximately $13.5 million. DT Infrastructure was therefore entitled to apply for adjudication of the difference between the claimed amount and the scheduled amount, approximately $8.7 million, which included claimed variations totalling $681,445.37.

DT Infrastructure’s adjudication application, however, was narrowly framed. The application sought only $681,445.37, being the variation component within the broader $8.7 million disputed amount. DT Infrastructure accepted that its application did not identify the work underpinning the broader $8.7 million claim, nor did it request a determination that Downer pay any amount beyond the variation sum of $681,445.37.

Before the adjudicator issued a decision, Downer paid DT Infrastructure the full variation amount of $681,445.37, while the balance of the $8.7 million remained outstanding. Downer then sought judicial determination as to whether, by making that payment, the adjudication application was “taken to have been withdrawn” pursuant to s 97(1)(b) of the BIF Act.

Key Issues

The central question before the Court was whether Downer’s payment of $681,445.37 constituted payment of “the amount stated in the payment claim the subject of the adjudication application” for the purposes of s97(1)(b), such that the adjudication application was deemed withdrawn.

The Court’s determination that the application was withdrawn would not extinguish DT Infrastructure’s entitlement to pursue the balance of its payment claim (approximately $21.3 million). Instead, DT Infrastructure would have to commence a further adjudication in respect of the remaining disputed amount (approximately $8 million).

The parties agreed that s97 should be construed according to its ordinary meaning, having regard to the text, purpose, and context of the provision, including its place within the statutory scheme as a whole.[1]

Court’s Findings

The Court adopted a contextual interpretation of s97, recognising that the statutory adjudication regime is intended to operate as a rapid and efficient dispute resolution mechanism. The Court emphasised that the subject matter of an adjudication application is confined to those matters genuinely placed in dispute by the application itself, rather than matters omitted or left unarticulated.[2]

Applying this interpretation, the Court held that DT Infrastructure’s adjudication application was limited to the variation sum of $681,445.37. As Downer had paid that amount in full before the adjudicator made a determination the application was deemed to have been withdrawn by operation of s97(1)(b) of the BIF Act.

The Court ordered that DT Infrastructure pay Downer’s costs on the standard basis.

Key Takeaways

• When preparing an adjudication application, a claimant should clearly address (albeit succinctly) the entirety of the payment claim that remains in dispute
• An overly narrow adjudication application risks being unintentionally deemed withdrawn if the respondent pays the specific amount targeted by the application
• To avoid this outcome, an adjudication application should expressly seek determination of the full difference between the payment claim and the payment schedule
• The claimant’s submissions and evidence should consistently address the entire disputed amount identified in the application.

Further information / assistance regarding the issues raised in this article is available from the authors, Michael Gill, Partner, Nicholas Revere, Senior Associate, or your usual contact at Moray & Agnew.