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HG Alert: Adjudication Decision Trumps Disputed Final Certificate - 20 Jan 2010

A recent Supreme Court of Queensland case, Martinek Holdings Pty Ltd v Reed Construction (Qld) Pty Ltd (decision of White J), has considered the interaction between an adjudication decision requiring payment and a disputed final certificate.

The key issue in this case was whether an adjudication decision could be stayed (preventing its enforcement) in circumstances where a final certificate was issued requiring payment to the principal, when the contractor had formally challenged the final certificate by issuing a notice of dispute.

The judge in this case held that the adjudication decision could not be stayed, and accordingly, the adjudicated amount was payable.

Key facts of this case

  • The contractor served a final payment claim under Queensland’s Building and Construction Industry Payments Act 2004.
  • The principal submitted a payment schedule under the BCIPA. The superintendent required more time to assess the claim.
  • The contractor filed and served an adjudication application.
  • The principal wrote to the contractor advising that the contractor could not submit its final payment claim because there were significant unrectified defects. The principal asked the contractor to withdraw its final payment claim and agree to rectify the defective work.
  • The principal submitted an adjudication response.
  • The contractor wrote to the principal, disputing that there were any defects that had not been rectified in the extended defects liability period, and refusing to withdraw its claim.
  • On 22 September 2009, the adjudicator made his decision awarding the contractor $919,634.91 (inc. GST).
  • On 24 September 2009, the superintendent issued a final certificate certifying that $72,027.27 (inc. GST) was owed to the principal.
  • Shortly after, the contractor served a notice of dispute of the final certificate, disputing the final payment certificate “in its entirety” and claiming the same amount awarded in its adjudication application.

Key issue

The key issue between the parties in this case was the effect of the adjudication decision, the final certificate and the notice of dispute.

The principal argued that “it obtained final relief in respect of the parties’ entitlements under the construction contract by the issue of the final certificate, with the consequence that [the contractor] may no longer enforce the adjudication decision because it is inconsistent with the final position under the contract.”

The contractor argued that “the contract does not establish on a final basis what is owed under the contract but only prima facie evidence of the monies due and payable.”

The clause of the contract concerning the final certificate provided that it was “conclusive evidence of accord and satisfaction, and in discharge of either party’s obligations in connection with the subject matter of the contract…” It then gave four exceptions to this, including “unresolved issues the subject of any notice of dispute pursuant to clause 42, served before the 7th day after the issue of the final certificate.”

The judge held that the disputed final certificate could not overthrow the contractor’s entitlements under the Act. The adjudication determination required an interim payment, to which the contractor was entitled.

The judge noted that “once a dispute in compliance with the contract has occurred in respect of the final certificate, it cannot be said that the final certificate has finality so as to bring into play the provisions in section 100 of the Payments Act. The adjudication decision stands until the final position has been reached between the parties.”

This case went on appeal, and it was found that the judge’s decision was correct and was upheld.

What does this mean?

A disputed final certificate will not override an adjudication decision. The claimant will be entitled to enforce its rights under the decision until a final determination of the parties’ rights is made.

For more information on this case or the Building and Construction Industry Payments Act 2004, please contact HopgoodGanim’s specialist Construction, Infrastructure and Major Projects practice.