Widening the scope for judicial review of an adjudicator’s determination

Wednesday , 6, July 2016 Leave a comment


Case : Probuild Constructions (Aust) Pty Ltd v Shade Systems Pty Ltd [2016] NSWSC 770

judicial_review

The decision in Probuild1 significantly expands the scope for parties to challenge adjudication determinations under the Security of Payment Act2.

It was previously understood that judicial review was only available where an adjudicator had made a jurisdictional error. However, Probuild suggests that a determination may be subject to judicial review where it was made on the basis of an error of law on the face of the record.

This is likely to lead to an increase in the number of challenges to determinations and, ultimately, a reduction in the number of erroneous determinations. On the other hand, it is also likely to undermine the objective of the Security of Payment Act to provide a means of quickly and relatively inexpensively resolving disputes in relation to progress payment claims.

Given the fairly uniform nature of the relevant legislation across Australia, we anticipate that the approach in Probuild will be followed in other jurisdictions. It will be interesting to see whether the various State legislatures seek to amend the legislation to address the consequences of the decision.

The adjudicator’s determination

Shade Systems applied for an adjudication of a payment claim it made against Probuild. Probuild’s response to the adjudication application was that no progress payment was payable on the basis that Probuild was entitled to liquidated damages from Shade Systems. However, the adjudicator determined that Shade Systems was entitled to a progress payment of $277,755.03.

The challenge to the determination

Probuild filed a summons in the Technology and Construction List of the Supreme Court of New South Wales seeking an order under section 69 of the Supreme Court Act3 quashing the adjudicator’s determination. One argument in support of the summons was that the adjudicator had made an error of law on the face of the record by his construction of the provisions of the contract governing Probuild’s entitlement to liquidated damages.

Pursuant to section 69 of the Supreme Court Act, the Court has jurisdiction to quash a tribunal’s determination on the ground that there has been an error of law on the face of the record. The record includes the reasons for decision. Emmett AJA reasoned that this jurisdiction would ordinarily extend to an adjudicator’s determination under the Security of Payment Act because the adjudicator when making the determination is exercising a statutory power. The issue before the Court was whether the Security of Payment Act ousts that jurisdiction. In Brodyn,4 Hodgson JA concluded that the Court could not set aside an adjudicator’s determination if it was made on the basis of a non-jurisdictional error of law.

Emmett AJA held that Hodgson JA’s remarks in Brodyn on this topic were not binding. Emmett AJA accepted that the policy of the Security of Payment Act was to provide for an entitlement to progress payments and a mechanism by which disputes over that entitlement can be resolved with minimal delay. However, his Honour held that was not sufficient to oust the Court’s jurisdiction to subject an adjudicator’s determination to judicial review; express language or a clear implication was required to that effect, and neither was present in the Security of Payment Act. On that basis, Emmett AJA concluded that an adjudicator’s determination could be quashed if it had been made on the basis of an error of law on the face of the record.

Emmett AJA held that the adjudicator had erred in his construction of the contract. The adjudicator’s determination was set aside and the matter was remitted to the adjudicator for re-determination.

Source : JWS

Supreme Court of NSW Opens the Door to Challenging Adjudication Determinations on the Basis of an Error of Law

On 15 June 2016, in Probuild Constructions (Aust) Pty Ltd v Shade Systems Pty Ltd [2016] NSWSC 770, the Supreme Court of New South Wales (NSW) decided that adjudication determinations made under theBuilding and Construction Industry Security of Payment Act 1999 (NSW) (SOP Act) can be judicially reviewed for an error of law on the face of the record. This decision may have significant impacts on the building and construction industry.

The Facts

Probuild argued that the Adjudicator had made an error of law on the face of the record by concluding that the onus was on Probuild to demonstrate that Shade Systems was in default before it was entitled to liquidated damages. Probuild argued that because of that error the determination should be set aside pursuant to section 69 of the Supreme Court Act (NSW).

The Decision

In Brodyn Pty Ltd v Davenport (2004) 61 NSWLR 421, the Court suggested that relief under section 69 of the Supreme Court Act by way of judicial review was not available unless a determination was affected by jurisdictional error. The Court in Probuild found that these suggestions were obiter dicta.

Relying on the decision of the High Court of Australia in Kirk v Industrial Relations Commission of New South Wales (2010) 239 CLR 531 the Court concluded that non-jurisdictional errors of law on the face of the record can be subject to review. The Court found that in order to exclude the power of judicial review under section 69 of the Supreme Court Act, the SOP Act would need to use ‘express language’ and that there was nothing specific in the SOP Act to exclude this jurisdiction.

The Court concluded that the Adjudicator had made an error of law on the face of the determination. The onus of proof did not lie with Probuild to establish its entitlement to liquidated damages. Consequently, the Court ordered that the determination be quashed and that the matter of the adjudication be remitted to the Adjudicator for further consideration according to the law.

The Probuild decision reflects the position in Victoria where it was first held in Hickory Developments Pty Ltd v Schiavello (Vic) Pty Ltd & Anor [2009] VSC 156 and later confirmed in Grocon Constructors v Planit Cocciardi Joint Venture (No. 2) [2009] VSC 426 that a party may challenge an adjudicator’s determination for both jurisdictional error and error of law on the face of the record. The reasoning underpinning those decisions, similar to the reasoning in Probuild, was that challenging an error of law is not excluded either expressly or by implication under the Act in Victoria.

Hickory and Grocon have resulted in calls for legislative amendment on the basis that the ability to challenge an adjudicator’s determination for an error of law is contrary to the object of the Act.

What This Means for You

The Probuild decision confirms that a new avenue of challenge is available in NSW to set aside adjudication determinations made under the SOP Act. A Court may order that a decision be set aside and may make an order to remit the matter to the adjudicator for further determination – this last order is notable as the SOP Act does not envisage the adjudicator re-determining an application after the expiry of the time for making a determination.

Widening the bases of challenge from jurisdictional errors of law, to any error of law, will almost certainly result in an increase in applications to set aside adjudication determinations and lead to more determinations being quashed. This is particularly so in circumstances where not all adjudicators are lawyers.

We note that in a related proceeding (Probuild Construction (Aust) Pty Ltd v Shade Systems Pty Ltd (No 2)[2016] NSWSC 878) Shade Systems has indicated that it will file an application for leave to appeal the decision.

Source : KLGATES

 



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