Limited options for review of adjudication decisions
The High Court's decisions in both 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) mean that parties left unhappy by an erroneous adjudication determination will have very limited options to bring a challenge.
The decision emphasises the interim nature of adjudication determinations. The High Court reinforced that instead of challenging an adjudication determination parties can seek final determination by a court or other agreed alternative dispute procedures.
The risk for industry is that typically on a construction project 'whoever holds the money holds the power'. It may be some months (or years) until a final determination is made to correct the adjudicator's error (if proven).
Facts
The facts in both Probuild and Maxcon are summarised in our February 2017 Construction Law Update.
In brief:
- Probuild concerned a payment claim brought by Shade Systems which Probuild refused to pay on the basis that it was owed a higher amount for liquidated damages than being claimed. The adjudicator rejected Probuild's liquidated damages claim and awarded an amount to Shade Systems; and
- Maxcon concerned a payment claim brought by Mr Vadasz in response to which Maxcon deducted a retention sum and other administrative charges. The adjudicator concluded that the retention provisions were 'pay when paid provisions' and Maxcon was not entitled to retain the retention amount.
The High Court granted special leave to hear appeals from:
- Probuild to overturn the New South Wales Court of Appeal's decision which had found that adjudication determinations are not open to judicial review for non-jurisdictional errors of law; and
- Maxcon to overturn the South Australian Supreme Court's decision, which had followed the Court of Appeal's decision in Probuild.
High Court affirms that an adjudicator's non-jurisdictional errors of law will not be overturned
The High Court unanimously dismissed the appeal by Probuild to overturn the adjudicator's determination.
It was critical for the High Court that the NSW SOP legislation:
- is intended to set up a unique scheme for the expeditious resolution of disputes, even if timeframes may be 'brutally harsh';
- stands apart from the parties' rights under the contract - even if the contractual provisions are contrary to the SOP provisions, the Act will operate in full;
- is intended to set up an informal process to determine adjudication applications;
- deliberately omits a right of appeal from the determination of the adjudicator; and
- defers the final determination of the parties' contractual rights to a different forum.
Accordingly, even obvious (and serious) non-jurisdictional errors of law on the face of the record will not be enough to set aside an adjudicator's determination.
Having reached its decision in Probuild the High Court consistently dismissed the appeal in Maxcon.
Interestingly, the High Court held that, in any event, the adjudicator did not err in law in determining that the retention provisions were 'pay when paid provisions'. We will release a separate alert on this significant finding and its implications shortly.
National inconsistencies in SOP legislation
The decision highlights the nuances and inconsistencies between the operation of SOP legislation in different Australian jurisdictions.
Given that the cases concerned the SOP legislation in New South Wales and South Australia the implications for each State and Territory may be different.
It is, for example, considered unlikely that the High Court's decisions will impact upon the position in Victoria where the Victorian Supreme Court has previously determined (on the basis of the Victorian legislation and Victorian Constitution) that it is open to a party to seek judicial review in relation to determinations that contain non-jurisdictional errors of law.
