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Focus: When will a WA court restrain an adjudicator from making a determination?

29 November 2013

In brief: The WA Supreme Court recently looked at whether interlocutory relief should be given to restrain a subcontractor from progressing an adjudication application and an adjudicator from making a determination. Partner Stephen McComish and Lawyers Andrew Kirk and Helen Dolling report.

How does it affect you?

  • If you are a respondent to an adjudication application under the Construction Contracts Act 2004 (WA) (the Act) and you wish to manage the risk of the adjudicator making a determination where there is no jurisdiction to do so, you should ensure that you serve a response conforming with the requirements of the Act and set out, or have attached to it, all the information, documentation and submissions on which you rely for the view that the adjudicator should dismiss the application under section 31(2)(a) of the Act.

Background

Enerflex Process Pty Ltd is constructing the Gorgon Domestic Gas Custody Transfer Meter Station for Chevron Australia's Gorgon Natural Gas Project. Enerflex entered into an engineering, procurement, construction and pre-commissioning contract with Chevron Australia for the meter station. The contract scope included the pipework to interconnect each of the meter station's main process units (the Pipework). Enerflex subcontracted Kempe Engineering Services (Australia) Pty Ltd to fabricate, assemble, examine, post weld, heat treat and package the Pipework (Pipework Contract).

Kempe undertook work in performance of the Pipework Contract and issued various invoices to Enerflex. Enerflex rejected the invoices. On 17 October 2013, Kempe made an adjudication application. On 29 October 2013, Enerflex applied for an interlocutory injunction to restrain Kempe from progressing the adjudication and the adjudicator from making a determination.

Enerflex submitted that:

  • the Pipework Contract is not a construction contract;
  • Kempe was not entitled to apply to have its dispute with Enerflex adjudicated under the Act; and
  • the adjudicator did not have jurisdiction to make a determination on whether Enerflex is liable to make a payment to Kempe under s31(2)(b) of the Act.

The decision

Is there a serious question to be tried?

The first issue concerned whether the Pipework Contract was a 'construction contract' to which the Act applies. A construction contract is defined to mean a contract, among other things, under which a person has an obligation to carry out construction work. However, s4(3)(c) provides that construction work does not include constructing any plant for the purposes of extracting or processing oil, natural gas or any derivative of natural gas, or any mineral bearing or other substance.

The parties disagreed on the purposes of the Pipework. Enerflex said the Pipework's purpose was extracting or processing natural gas1 and therefore not included in the definition of 'construction work'. On the other hand, Kempe said that the processing of natural gas takes place at the processing plant on Barrow Island and the purpose of the Pipework is for transmission and measuring of gas only, not processing.2

Justice Le Miere held that there was a serious question to be tried regarding the purposes of the Pipework and whether it constitutes construction work under the Act. His Honour declined to comment any further on this issue.3

Is there a cause of action?

The second issue concerned whether Enerflex had any cause of action against either Kempe or the adjudicator.

Kempe referred to O'Donnell Griffin Pty Ltd v Davis [2007] WASC 215, in which Justice Templeman dismissed an application for an interlocutory injunction because the applicant did not identify any legal, statutory or equitable rights against the defendant.4

Justice Le Miere held that Enerflex had failed to establish that it had any legal or equitable rights against the defendants. His Honour adopted the rationale that the adjudicator had not yet purported to make a determination contrary to the Act, and until the adjudicator does or threatens to do so, Enerflex has no cause of action to restrain the adjudicator from making a determination under s31(2)(b).5

The balance of convenience

The third issue concerned how Justice Le Miere should exercise his discretion if, contrary to his finding, Enerflex had made out a prima facie case for relief.

Given Enerflex intended to serve a response under s27 of the Act irrespective of whether or not an injunction is granted, his Honour found that the most convenient course is not to restrain the adjudicator from exercising his jurisdiction. That jurisdiction being to dismiss the application without making a determination of its merits if the contract concerned is not a construction contract or otherwise making a determination under s31(2)(b). If the adjudicator dismisses the application, then no injunction would have been necessary.6 However, if the adjudicator makes a determination and the contract is not a construction contract, then the adjudicator will have acted unlawfully and beyond power.7 His Honour states that at that time it would then be appropriate for Enerflex to seek relief, because Enerflex would then have a prima facie cause of action.

Effect of the decision

Following this decision, where there is a serious question to be tried as to whether a contract the subject of an adjudication application is a construction contract and the adjudicator has not made or threatened to make a determination, a court is unlikely to grant an interlocutory injunction to restrain an adjudicator from making a determination.

Footnotes
  1. Enerflex Process Pty Ltd v Kempe Engineering Services (Australia) Pty Ltd [2013] WASC 406, [4].
  2. Ibid., [8].
  3. Ibid., [9].
  4. Ibid., [10].
  5. Ibid., [12].
  6. Ibid., [14].
  7. Ibid., [14].

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