Previously determined or not? It's up to the Adjudicator

The recent decision of the South Australia Supreme Court in Goyder Wind Farm 1 Pty Ltd v GE Renewable Energy Australia Pty Ltd & Ors [2024] SASC 108 considered interesting issues concerning a contractor’s re-agitation of claims, including claims that had been dismissed by an adjudicator in a previous adjudication determination.

Facts

The principal, Goyder Wind Farm 1 Pty Ltd (Goyder) entered into contracts with the contractor, GE Renewable Energy Australia Pty Ltd and Elecnor Australia Pty Ltd (GE-Elecnor) for the construction of a wind farm.

GE-Elecnor made two claims for extensions of time in July and August of 2022 (EOT 1 and 2) and claimed costs arising from those alleged delays. GE-Elecnor subsequently issued three separate payment claims, two of which proceeded to adjudication under the Building and Construction Industry Security of Payment Act 2009 (SA) (the SA Act). Goyder sought an injunction preventing GE-Elecnor from adjudicating the third payment claim. 

The first payment claim and first adjudication determination

In the first payment claim, GE-Elecnor claimed delay costs for the delay events subject to EOT 1 and 2, specifically prolongation costs and costs for thickening of indirect resources. The matter proceeded to adjudication and the adjudicator determined that the combined delay of EOT 1 and 2 was 118 days and that GE-Elecnor was entitled to extra costs incurred by reason of the delay event. The adjudicator also determined that GE-Elecnor had not demonstrated how the delay caused the incurrence of the thickening costs or discharged its burden of proof to establish entitlement to the thickening costs. Accordingly, $nil was awarded for the thickening costs.

The second payment claim and second adjudication determination

In the second payment claim, GE-Elecnor claimed $26.1million of delay costs for procurement premiums arising out of EOT 1 and 2. The claim also progressed to adjudication and the adjudicator determined GE-Elecnor was entitled to the costs of procurement premiums. The adjudicator was satisfied that the costs claimed were separate and did not overlap with the construction work and goods and services the subject of the claim for delay costs in the first adjudication.

The third payment claim

In the third payment claim, GE-Elecnor claimed $20.7mill in respect of thickening costs and procurement premiums.

Issues

Goyder applied for judicial review of the second adjudication determination on the basis that the adjudicator had:

1. failed to apply section 22(4) of the SA Act (Goyder’s First Argument); and
2. wrongfully permitted GE-Elecnor to re-agitate the claim for delay costs arising out of the EOT 1 and 2 (Goyder’s Second Argument).

Section 22(4) provides that where an adjudicator has determined the value of any construction work carried out under a construction contract, an adjudicator in any subsequent adjudication must give that work that same value unless satisfied that the value of the work has changed since the previous determination.  The provision is replicated in substantially identical terms in every other state and territory’s security of payment legislation in Australia.

Goyder also sought an injunction preventing CE-Elecnor pursuing adjudication in relation to the third payment claim for the same reasons.

Court’s decision

Second adjudication determination

In addressing Goyder’s First Argument, her Honour found there was no overlap between the costs awarded in the first and second claims. The prolongation costs claimed in the first payment claim were only claimed in the first payment claim and the first payment claim did not include any amount for procurement premiums which were claimed in the second payment claim. Accordingly, section 22(4) did not apply.

Irrespective of the above, if section 22(4) had applied then her Honour held it would not constitute jurisdictional error. Her Honour found the preferable construction is that section 22(4) falls for consideration in the course of the adjudicators decision-making process in determining the amount of any progress payment to be paid. In reaching this conclusion her Honour cited the recent NSW Court of Appeal decision of EnerMech v Acciona in which it found the purpose of the security of payment legislation is that “… with few exceptions, all questions arising from the construction of the contract and the provisions of the legislation itself as applied to the particular factual circumstances are matters for the adjudicator to determine[1].

In addressing Goyder’s Second Argument, her Honour accepted that conceptions of abuse of process of the SA Act play a role in the context of payment claims and adjudications and the question of abuse of process should be addressed from the perspective of the construction of the SA Act.

Her Honour held that neither the contract nor the SA Act required a claim for all (non-overlapping) delay costs incurred by reason of a delay event be claimed in one progress claim. It was therefore not an abuse of process for GE-Elecnor to fail to include all aspects of the delay costs in one payment claim.

Third payment claim

Her Honour held there was an overlap in the thickening costs claimed in the first and third payment claims and therefore there was a re-agitation of the thickening costs claim. In reaching this conclusion, her Honour relied on the description given by Justice McDougall in the NSW Supreme Court decision of Watpac Constructions v Austin Corp [2010] NSWSC 168. The thickening costs were therefore invalid, and the adjudicator would lack jurisdiction to address it.

Accordingly, her Honour granted the injunction on the basis that the claim had already been determined against GE-Elecnor in the first adjudication.

Key Takeaways

The key takeaways are:

1. the re-agitation of determined claims is not permitted under the security of payment legislation but it is acceptable to claim costs arising from a single delay event in subsequent payment claims / adjudications so long as there is no overlapping of costs:
2. the Court confirmed that claims which have already been rejected in their entirety by an adjudicator cannot be re-argued on a different basis in future adjudications (i.e. consistent with Watpac Constructions v Austin Corp [2010] NSWSC 168);
3. given her Honour’s views, it is likely that if the third payment claim had been adjudicated, the determination would have been upheld. Accordingly, in these circumstances, a respondent should strongly consider seeking an injunction rather than allow the payment claim to go to adjudication; 
4. it is the adjudicator’s role to determine whether a claim has been determined in a previous adjudication or not. In other words, even if the adjudicator makes a mistake in determining whether the particular work has already been valued by a previous adjudication determination, it may be difficult to make judicial challenge on this basis; and
5. this case is consistent with recent NSW Court of Appeal decisions by taking a restrictive view to challenges to adjudicator’s determinations.  Consequently, the scope to challenge adjudication determinations appears to be limited.