Case Notes: Probuild Constructions (Aust) Pty Ltd v Shade Systems Pty Ltd [2018] HCA 4 (Probuild); and  Maxcon Constructions Pty Ltd v Vadasz [2018] HCA 5 (Maxcon).

ADJUDICATION

Case Notes: Probuild Constructions (Aust) Pty Ltd v Shade Systems Pty Ltd [2018] HCA 4 (Probuild); and  Maxcon Constructions Pty Ltd v Vadasz [2018] HCA 5 (Maxcon).

James Healy
Barrister, Francis Burt Chambers, Perth, Australia
View Profile

 

 

On 14 February 2018 (Valentine’s Day), the High Court handed down (2) unanimous decisions in relation to Security of Payment legislation:-

The High Court held that Courts do not have the power to review adjudication determinations made under the relevant Security of Payment legislation for non-jurisdictional error of law on the face of the record (non-jurisdictional error).

The High Court affirmed that the availability of judicial review to quash an adjudication under the Security of Payment legislation was limited to cases of jurisdictional error only.

These cases held that:-

  • determinations made by adjudicators appointed under the Security of Payment legislation are not reviewable for errors of law alone;
  • Courts may only, in very limited circumstances, overturn a determination under the statutory adjudication process.

Accordingly, an error made by an adjudicator in considering the effect of a contract, or applying legal principles is unlikely, without more, to amount to jurisdictional error.

Security of Payment legislation has been enacted in every Australian state and territory to ensure that construction contractors and sub-contractors are promptly paid for the work they perform and to ensure, amongst other things, that there is no failure to “keep the money flowing”.

Although different in each state/territory, the legislation establishes a fast track process for the interim resolution (not final resolution) of progress payment disputes under construction contracts by an adjudicator and these as well as other fundamental factors form the gravamen of both High Court decisions above.

Both cases specifically considered whether errors of law on the part of the adjudicator could amount to jurisdictional error, such that the adjudicator’s decisions should be quashed and rendered void.  The adjudicator had been appointed to determine payment disputes which had arisen in respect of building projects in New South Wales (the Probuild case), and South Australia (the Maxcon case).

The adjudicator determined that amounts were payable to claimants.  Both respondents (the principal to the construction contracts) sought judicial review of the determinations contending that the adjudicator had committed reviewable errors when wrongly applying certain terms of the contracts.

As indicated, both cases unanimously held judicial review is limited to cases of jurisdictional error only, and that the Courts do not have power to review adjudication determinations for non-jurisdictional error of law on the face of the record.  Wrongly applying terms of the contract was considered to be a non-jurisdictional error of law on the face of the contract.

Following the handing down of the decisions in Probuild and Maxcon, some commentators suggested the High Court had basically reverted to the position espoused in Musico v Davenport [2003] NSWSC 977, almost (15) years ago.

Certainly, prior to 2010 (and the handing down of the Chase Oyster Bar case), the commonly accepted position, at least in NSW, was that the Security of Payment legislation did preclude jurisdictional review except where an adjudication determination failed to comply with certain “basic and essential requirements” of the Security of Payment legislation.  This was the position stated in the NSW Court of Appeal decision of Brodyn Pty Ltd v Davenport (2004) 61 NSWLR 421.

That position changed in 2010 with the NSW Court of Appeal decision in Chase Oyster Bar v Hamo Industries [2010] NSWCA 190.  The Chase Oyster Bar case removed any doubt that Courts could at least quash a determination which was infected with jurisdictional error – i.e. an error which goes to the authority or power of the decision maker (in this case – the adjudicator) to make his decision.

However, the decision in Chase Oyster Bar did not determine whether a review might be available for non-jurisdictional error of law on the face of the record.

This question has now been conclusively determined by Probuild.  Probuild specifically looked at whether the Court power to quash a determination for non-jurisdictional error of law on the face of the record was available in the case of Security of Payment adjudication determinations or whether Parliament had intended that it be excluded.

Following a detailed consideration of the regime created by the Security of Payment legislation, the High Court found the Security of Payment Act should be understood to exclude review for non-jurisdictional error at law on the face of the record.

 

Relevant considerations identified by the Court in support of this conclusion included that the Security of Payment Act:-

  • was “enacted to reform payment behaviour in the construction industry” and provide claimants with the ability to recover progress payments promptly;
  • is not concerned with “finally and conclusively determining the entitlements of parties to a construction contract”;
  • provides very short timeframes which are “not conducive to lengthy consideration by an adjudicator of detailed submissions on all questions of law”;
  • permits informal procedures in the conduct of an adjudication, such as a conference of the parties; and
  • deliberately omits any right of appeal from an adjudicator’s determination.

The High Court has held that the regime of the Security of Payment Act empowers an adjudicator to make a determination in spite of the possibility that the determination might be based on a wrong legal interpretation of the construction contract in question.

The Probuild decision significantly narrows the available grounds for challenge to adjudication determinations.  The misapplication or incorrect construction of a contractual provision will no longer leave a determination at risk of being quashed.

 

For respondents to adjudication applications, the inability to challenge a determination in Court for a non-jurisdictional error reinforces the already apparent importance (following the Chase Oyster Bar case) of identifying jurisdictional error as a means of challenging a determination.  This requires respondents to carefully scrutinise the compliance of the claimant and the adjudicator with all procedural requirements of the Security of Payment legislation so as to identify any non-compliance which might give rise to jurisdictional error on the part of the adjudicator.