16 Jun 2010

Reagitating claims under SOP legislation - Implications for claimants and respondents

by Nick Christopoulos, Jack Fan

Using another legal basis for an SOP claim in an attempt to get a second go isn't an option for claimants.

Recent decisions in NSW and Queensland demonstrate the courts' strong position on the practice of reagitating claims under security of payment (SOP) legislation in circumstances where the same claims were the subject of an earlier determination by an adjudicator.

This article tracks developments since the 2009 NSW Court of Appeal decision in Dualcorp Pty Ltd v Remo Constructions Pty Ltd [2009] NSWCA 69, in particular how that decision has been expanded and the implications for claimants and respondents.

The Dualcorp principle - can you have a second go?

In Dualcorp, the NSW Court of Appeal confirmed that the NSW SOP Act was not intended to permit the repetitious use of the adjudication process to require an adjudicator or successive adjudicators to execute the same task in respect of the same claim. It confirmed that a claimant should not be able to reignite the adjudication process in order to have a second go merely because it is dissatisfied with the result of the first adjudication.

Watpac decision - extension of Dualcorp principle

The facts in Dualcorp were suitable for a court to intervene because Dualcorp's attempt to use the mechanisms in the NSW SOP Act for the same four invoices was a repetitious use of the adjudication process provided for under the legislation.

However, as a practical matter, instances of clear repetitious use of the adjudication process are rare and could easily be avoided by a careful claimant. But what would be the situation if a later claim, although in substance identical to an earlier claim, was reframed so that it is made on a different legal basis? Or, a later claim could be a combination of an earlier claim and other (new) claims? Both of these issues arose in the recent NSW case of Watpac Constructions v Austin Corp [2010] NSWSC 168.

In Watpac, the claimant (Austin) served a payment claim on Watpac in respect of eight variations. The payment claim proceeded to adjudication under the NSW SOP Act. Interestingly, in its adjudication application, Austin did not attempt to establish a contractual entitlement to make the claim but relied on the principles of unjust enrichment. The adjudicator determined that Austin was not entitled to the amount claimed because it had failed to make out a contractual basis for what it claimed (first determination).

Following the first determination, Austin served a second payment claim on Watpac. The second payment claim included the eight variations that were the subject of the first determination, and new variations. Further, the second payment claim was made on a new legal basis.

New legal basis

The court decided that the principles in Dualcorp and Port of Melbourne Authority v Anshun Pty Ltd (1981) 147 CLR 589 operated to prevent Austin from reagitating the eight repeated variations simply by attributing a different legal basis for the entitlement to be paid.

In reaching this decision, Justice McDougall held that:

  • except in special circumstances, a party should put the whole of its case, in support of a particular payment claim, before an adjudicator who is charged with the statutory responsibility of deciding that party's entitlement to the amount claimed; and
  • in cases involving a reagitation of claims, the test of unreasonableness that is discussed in Anshun is applicable. That is, a claimant will not be permitted to raise a matter in later proceedings unless it was reasonable for the claimant not to have raised the matter in earlier proceedings.

Inclusion of new claims

Watpac argued that because Austin's second payment claim included claims that cannot be reagitated, the entire payment claim was not a valid payment claim for the purposes of the NSW SOP Act and that the entirety of the second adjudication determination was void.

Justice McDougall disagreed with this argument, but found that it was ultimately unnecessary for him to reach a final decision on this issue, determining the case on the basis of issue estoppel and abuse of process. Justice McDougall did however express the view that if there was any invalidity to the payment claim, then that invalidity extends only to the reagitated claims.

Justice McDougall also found that a claimant might be restrained from enforcing its rights under a subsequent determination, to the extent to which that subsequent determination allows, in whole or in part, the reagitated claim.

This decision is consistent with his previous position in Urban Traders Pty Ltd v Paul Michael [2009] NSWSC 1072 where Justice McDougall restrained the claimant from seeking an adjudication determination in respect of part of a payment claim that contained reagitated claims, but otherwise allowed the payment claim to proceed.

What's happening in other States?

There have been two recent decisions in the Supreme Court of Queensland by Justice Applegarth (AE&E Australia Pty Ltd v Stowe Australia Pty Ltd [2010] QSC 135 and John Holland Pty Ltd v Schneider Electric Buildings Pty Ltd [2010] QSC 159) which have adopted the Dualcorp principles, as extended by Justice McDougall in Urban Traders and Watpac. Justice Applegarth has taken the approach that the principles applied to the Queensland SOP Act because it is in practically identical terms to the NSW legislation.

The principles in Dualcorp are yet to be considered in other States and Territories. Given the similarities between the NSW legislation and the equivalent legislation in other States, it is possible that the other states will follow the principles in Dualcorp, and the Watpac and other NSW and Queensland decisions.

Implication for claimants

For claimants, the decisions in Dualcorp and Watpac mean that they must be careful to always put forward their whole case in support of a claim. If a claimant is unable to do so, then that claimant should consider not proceeding to adjudication until a later time. A claimant should only consider proceeding to adjudication when it has sufficient evidence in support of its claim, as it will not have a second opportunity under the SOP legislation to bring its claim.

Implications for respondents

For respondents, the Dualcorp and Watpac decisions mean that if a claimant attempts to reagitate claims in a subsequent payment claim then the respondent can:

  • immediately after the subsequent payment claim is received, apply to the court to restrain a claimant from seeking an adjudication determination or taking any other steps under the SOP legislation in respect of the reagitated claims; or
  • if the subsequent claim is referred to adjudication and the adjudicator finds in favour of the claimant on the re-agitated claims, apply to the court to restrain a claimant from enforcing its rights under that determination in respect of the reagitated claims.
Further, the respondent should also oppose the reagitated claims as improper in any payment schedule and adjudication response served under SOP legislation.

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Clayton Utz communications are intended to provide commentary and general information. They should not be relied upon as legal advice. Formal legal advice should be sought in particular transactions or on matters of interest arising from this communication. Persons listed may not be admitted in all States and Territories.