Alaska Construction and Interiors Auckland Limited v Christopher James Lahatte

Lovich Floors Ltd (Lovich) was engaged by Alaska Construction + Interiors Auckland Ltd (Alaska) for construction works on an apartment complex. Lovich issued a notice of adjudication following a series of exchanges between the parties, of payment claims and payment schedules, and Alaska’s failure to respond with a payment schedule to Lovich’s final payment claim dated 16 December 2019 (December payment claim).

The adjudicator issued his determination in favour of Lovich, ordering Alaska to pay the sum of the payment claim because of its failure to respond to the December payment claim. Alaska then applied for judicial review of the adjudicator’s determination, based on the following grounds:

  • The adjudicator erred jurisdictionally by failing to determine the underlying dispute; and
  • The adjudicator failed to discharge his statutory function.

The Court was asked to determine whether the adjudicator erred jurisdictionally by failing to determine the underlying dispute. It was alleged that the dispute was unilaterally varied after the appointment of the adjudicator because Lovich had failed to mention the December payment claim in the notice of adjudication and only referred to it for the first time in the adjudication claim.

Woolford J addressed this issue by referring to s 36(2)(a) of the Construction Contracts Act 2002 (CCA) which states that “the adjudication claim must specify the nature or the grounds of the dispute and, to the extent that it remains relevant, be accompanied by a copy of the notice of adjudication”. He clarified that the words “to the extent that it remains relevant” provide a clear indication that the dispute as set out in the notice of adjudication may be superseded by the adjudication claim, and went on to say that:

  • the role of the notice of adjudication is properly seen as the document that initiates the adjudication (and may have no more significance than that); and
  • s 45(c) of the CCA does not require an adjudicator to consider the notice of adjudication.

Regardless, it was concluded that the underlying dispute was not unilaterally modified by Lovich as the amount claimed in the December payment claim was $113,443.72 and the notice of adjudication set out the dispute as whether “Alaska [was] obliged to pay $113,490.86 (or another amount) to Lovich”.

The Court also addressed the issue of whether the adjudicator’s determination accords with his statutory function, in particular under s 48(1) of the CCA. S 48(1) provides that if an amount of money under the relevant construction contract is claimed in an adjudication, the adjudicator must determine—

  • whether or not any of the parties to the adjudication are liable, or will be liable if certain conditions are met, to make a payment under that contract; and
  • any questions in dispute about the rights and obligations of the parties under that contract.

Woolford J made the following comments in relation to whether the requirements of s 48(1) were met:

  • an amount of money under a construction contract was clearly being claimed in the adjudication;
  • the adjudicator did determine whether any of the parties to the adjudication were liable to make a payment under that contract;
  • in terms of s 48(1)(b), it was essentially said that the adjudicator did not need to determine the rights and obligations of the parties under the contract because they did not relate to the dispute in question. The Court said “the amount of money owed by Alaska to Lovich does not fall easily into the definition of the rights and obligations of the parties under the contract. The rights and obligations of the parties are quite separate from the issue of liability to make a payment under that contract, being dealt with in separate subsections and having different consequences”.

Key takeaways

  • The role of the notice of adjudication was said to initiate the adjudication (and may have no more significance than that) as it could be superseded by the contents of the adjudication claim.
  • The adjudicator was not required to determine the rights and obligations of the parties, if the dispute (as set out in the adjudication claim) was separate / distinct from the question of the rights and obligations of the parties under the contract.
  • The adjudicator was not required to include in their determination matters raised by the respondent (in a reply to an adjudication claim) that did not relate to considering the dispute (as set out in the adjudication claim). This is because it was said that the respondent can assert their claim by issuing their own notice of adjudication or taking ordinary substantive proceedings.

We have reserved our opinion in this case summary on whether we agree with the result and a further piece will follow.

Mariam Baho is a Solicitor in MinterEllisonRuddWatts' Construction team.

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