Can an adjudication determination be enforced by an insolvent company?

A recent decision by Justice Beech of the Western Australian Supreme Court in Hamersley Iron Pty Ltd v James [2015] WASC 101 has considered the issue of whether an adjudication determination made under the Construction Contracts Act 2004 (WA) (the Construction Contracts Act) can be enforced by an insolvent company.

SUMMARY

A court hearing an application by a successful party (made under section 43 of the Construction Contracts Act) for leave to enforce a determination will have good reason to refuse leave when:

the successful adjudication applicant is insolvent, and in liquidation, at the time that it applies for adjudication of the relevant payment dispute; and an adjudication respondent is able to establish that it has an arguable counterclaim against the applicant that exceeds the amount of the adjudicated sum. BACKGROUND

In February 2014, Forge Group Construction Pty Ltd (Forge) hit the headlines when it went into voluntary administration. At this time, Forge had a construction contract with Hamersley Iron Pty Ltd (Hamersley). Shortly after the appointment of Forge's administrator, Hamersley had recourse to $5.6M of Forge's contract security and terminated this contract. Forge applied for adjudication (under the Construction Contracts Act) of a payment claim (for an amount of $14.3M) that it had submitted to Hamersley prior to the appointment of Forge's administrator. Hamersley defended the adjudication application on the basis that, after accounting for the recovery of Forge's contractual security, it...