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Can final certificates ‘over-ride’ adjudication decisions made under the Building and Construction Industry Payments Act 2004?

31 Oct 2009

The recent Supreme Court case of Martinek Holdings Pty Ltd v Reed Construction (Qld) Pty Ltd [2009] QSC 328 dealt with an application by a principal to a construction contract to prevent a contractor enforcing an adjudication decision made under the Building and Construction Industry Payments Act 2004 ('the Act').

The application was made on the basis that a final certificate issued by the superintendent for the contract, after the adjudication decision was made (for a lesser sum than the amount awarded to the contractor by the adjudicator), took precedence over the adjudication decision, such that the enforcement of the decision should be permanently stayed.

The application was ultimately unsuccessful, but left an interesting and important issue unanswered, and will not prevent similar applications being made in the future.

In normal circumstances, unless the adjudicator has made a ‘jurisdictional’ error (ie has made a decision he or she had no power to make) or has deprived one party of natural justice, the courts have consistently made it clear that they will not prevent the enforcement of adjudication decisions, which is consistent with ‘pay now, argue later’ system of dispute resolution provided for by the Act.

However, in the Martinek Holdings Pty Ltd v Reed Construction (Qld) Pty Ltd case, the applicant relied on clause 37.4 of the construction contract which stated that 'the final certificate shall be conclusive evidence of accord and satisfaction, and in discharge of each party’s obligations in connection with the subject matter of the contract', except for a number of exceptions, and also section 100 of the Act which stipulates that the adjudication procedures prescribed by the Act do not have any affect on the parties’ rights under the contract.

The thrust of the applicant’s argument was that the final certificate issued pursuant to clause 37.4 was conclusive evidence of, and established on a final basis, the amounts owed under the contract, and took precedence over the adjudication decision pursuant to section 100 of the Act.

The argument failed because under the terms of the contract the final certificate was not in fact conclusive evidence of the amounts owed (a notice of dispute had been served), and it could therefore never take precedence over the adjudication decision.

However, the court did not address what would have happened if a notice of dispute had not been issued and the final certificate was conclusive evidence of the amounts owed, according to the contract.

It could be that superintendent’s certificates can be deemed to be conclusive evidence of the facts stated in the certificate, such that they could ‘override’ an adjudication decision, or they could be deemed to be prima facie evidence only of those facts.

Although there are some influential English cases on that point, the law in Queensland is still uncertain and it may be that in the future, litigants could avoid the enforcement of adverse adjudication decisions by relying on superintendent’s certificates which are binding on the parties pursuant to the terms of the contract.

The decision also raises some interesting questions as to how section 99 of the Act (which states that parties cannot ‘contract out’ of the provisions of the Act) reconciles with section 100 of the Act (which states that nothing in the Act affects the rights of the parties under the contract).

The case therefore serves to highlight that much of the law relating to the Building and Construction Industry Payments Act 2004 remains unclear, and parties to construction contracts must exercise extreme care and obtain clear advice when conducting disputes under its provisions.