Preventing the unpreventable – Can you stay an adjudication application? Peremptory injunctions under WA security of payment legislation

By Dan Dragovic, Stewart McWilliam and Nick Troy

Introduction

The accepted wisdom in Western Australia has been that adjudication applications are an immutable force of nature; nothing can be done to prevent them. A recent decision in WA has, perhaps ever so slightly (and only in certain circumstances), left the immutability door a little ajar.

An injunction might be seen as advantageous:

1. it’s likely to result in a quicker decision than bringing an adjudication application, responding to it and awaiting a determination; and
2. the decision is more likely to be more robust and less likely to be challenged.

Background

In the recent decision of Nepean Conveyors Pty Ltd v Linkforce Industrial Services Pty Ltd [2024] WASC 71 (Nepean v Linkforce), the Supreme Court of Western Australia considered whether an injunction was available to prevent an adjudication application. Although the Building and Construction Industry (Security of Payment) Act 2021 (WA) (SOP Act) has recently come into effect to bring Western Australia broadly into step with other Australian jurisdictions, this case concerned the precursor legislation, now entitled the Construction Contracts (Former Provisions) Act 2004 (WA) (CCFP Act). There are, however, few material differences between the two Acts for present purposes, and the teachings in Nepean v Linkforce will be instructive as to whether injunctions are available, and if so how, in respect of adjudication applications under the new SOP Act.

The facts in Nepean involved a contract between Nepean and Linkforce to construct two overland conveyor systems (Contract) as part of a ‘design and deliver’ contract between Nepean and Roy Hill Iron Ore, in relation to their ROM4 Mine Expansion in the Pilbara. In mid-2023, a payment dispute arose between Nepean and Linkforce. Linkforce made an adjudication application, which resulted in a determination that Nepean pay Linkforce $1.3 million (First Determination). Linkforce then warned Nepean that it intended to make a second adjudication application in early-2024 (Potential Application).

Nepean, dissatisfied with the First Determination and forewarned of the Potential Application, commenced proceedings in the Supreme Court, seeking judicial review of the First Determination and an injunction to prevent the Potential Application. Nepean argued the relevant contract was not a ‘construction contract’ for the purposes of the CCFP Act, and therefore any adjudication application was, or would be, invalid. In particular, the relevant contract fell within the so-called ‘mining exemption’. This exemption was retained, albeit in somewhat different terms, under the new SOP Act.

The issue before the Court was whether it should grant an injunction preventing Linkforce from making the Potential Application. Justice Seaward considered many arguments made by the parties, but ultimately decided not to exercise her discretion to grant the injunction.

The Decision in Nepean

While there were many reasons for this decision, they can be broadly summarised into two categories:

First, lack of evidence that Nepean would suffer any unjustified prejudice if the adjudication was allowed to continue. Justice Seaward found that:

1. disputes were a normal part of construction contracts;
2. Nepean would not suffer any special or unusual harm, including reputational or financial harm, if the injunction was not granted; and
3. there was no evidence that Linkforce would be unable to repay any amounts awarded by the adjudicator if the adjudication determination was reversed on appeal.

Second, the grant of an injunction would undermine the policy and operation of the CCFP Act. Justice Seaward held that the grant of an injunction was contrary to:

1. the role of an adjudicator, under the CCFP Act, to determine if the contract was a ‘construction contract’;
2. the quick resolution of payment claims; and
3. Linkforce’s right to seek a quick resolution of payment claims.

While the reasons identified in Nepean v Linkforce weighed strongly against the grant of the proposed injunction, her Honour’s judgment left open the door for special and unusual circumstances to justify the grant of an injunction in the future. For instance, if a party could show that they would suffer an unusual and substantial adverse impact on their reputation and/or that the opposing party would be unlikely to repay sums if required after an appeal, then a court may grant an injunction staying an adjudication application in the future.

Contrast with other WA decisions

While the door may have been left open for now, there is one notable matter that Justice Seaward did not address in detail. That is whether a court is, as a jurisdictional matter, even able to grant an injunction to prevent an application for adjudication under the CCFP Act. The reason for this open question stems from the court’s limited supervisory jurisdiction in respect of the CCFP Act, which is to judicially review adjudication determinations for jurisdictional error. In contrast, the CCFP Act gives the adjudicator (and not the court) jurisdiction to determine whether a particular contract is a ‘construction contract’. Accordingly, until an adjudicator has exercised their jurisdiction to determine whether a contract is a construction contract, there is arguably no role for the court to play, as there is no potential jurisdictional error enlivening the court’s supervisory jurisdiction. This then raises the question of whether a court can issue an injunction to prevent a possible legal error that has not yet occurred and which may never occur.

This question has been fatal in every other attempt to prevent an adjudication application under the CCFP Act by way of an injunction application; being the decisions of O’Donnell Griffin Pty Ltd v Davis [2007] WASC 215 and Enerflex Process Pty Ltd v Kempe Engineering Services (Australia) Pty Ltd [2013] WASC 406. In both of those cases, the applicant was unable to show that they had a legal cause of action to prevent a hypothetical future legal error. The potential point of difference in Nepean v Linkforce is that the First Determination already involved an alleged legal error, and so it was argued that an injunction should be granted as the Potential Application had to wait for the appeal on the First Determination to be resolved.

Statutory point of difference

It is also worth noting that a key point of difference between the Western Australian and eastern States’ security of payment legislation is that such injunction applications are more feasible in eastern States jurisdictions. In 2016, the Victorian Supreme Court in Vinson v Neerim Properties Developments Pty Ltd [2016] VSC 321 was willing to grant an injunction to prevent adjudication where the purported notice of an intention to commence adjudication was defective. The key difference between that case and the Western Australian cases is that the appointed adjudicator, under eastern States’ security of payment legislation, does not have the jurisdiction to determine the validity of the adjudication application. This is different to the position under Western Australian security of payment legislation. As such, while Nepean v Linkforce may have emphasised the role of an adjudicator as the appropriate decider of the validity of the adjudication application, that emphasis does not exist on the east coast.

Conclusion

In summary, injunctions appear to be available to prevent adjudications under the CCFP Act, and probably the new SOP Act as well. However, those injunctions are limited to only the most exceptional and rare of cases. No application for such an injunction in Western Australia has yet succeeded. Parties should not expect to obtain injunctions in the normal course of business in the construction industry and likewise can be comforted that other parties will be unable to block access to the right to quick resolution of payment claims under Western Australia’s security of payment legislation. But in the rare case, when the stars and planets align, injunctions may be possible to prevent injustice.

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