2011 saw developments in the areas of security of payment claims and contracting out of proportionate liability.
SECURITY OF PAYMENT CLAIMS-FURTHER GROUNDS TO REVIEW AN ADJUCATOR'S DETERMINATION
Jurisdictional error usually occurs when a decision-maker makes a decision outside the limits of his or her functions or powers conferred on them. In the context of the Building and Construction Industry Security of Payment Act 1999 (NSW) (SoP Act), the relevant decision-maker is an adjudicator hearing security of payment applications.
In 2010, the New South Wales Court of Appeal widened the possible grounds of review of an adjudicator's decision to include jurisdictional error. Previously, jurisdictional error had been ruled out as a ground for reviewing an adjudicator's decision.
It all started with the High Court's feisty decision of Kirk v Industrial Relations Commission of New South Wales  HCA. That case had nothing to do with building payment claims, but it set the stage for a series of cases contesting adjudicators' decisions. The High Court ruled that a state's Supreme Court must retain its power to provide relief in the event of "jurisdictional error" and that any legislation to the contrary is unconstitutional.
Soon after in relation to an adjudication under the SoP Act, the New South Wales Court of Appeal was asked to decide whether an adjudicator's decision was valid in Chase Oyster Bar Pty Ltd v Hamo Industries Pty Ltd  NSWCA 190 (Chase decision). The case concerned time limits under the SoP Act. Hamo Industries had not observed a time limit and Chase argued that the adjudicator therefore had no jurisdiction to hear the security of payment application.
The Court of Appeal agreed with Chase and said that the time limit issue put the matter beyond the jurisdiction of the adjudicator. Therefore, to proceed to hear the matter was a jurisdictional error by the adjudicator and was a ground for review of the decision by the Supreme Court. The case marked a turning point because previously, in Brodyn Pty Ltd v Davenport (2004) 61 NSWLR 421, jurisdictional error had been ruled out as a ground for reviewing an adjudicator's decision.
While the Chase decision indicates that jurisdictional error can be a ground to review an adjudicator's decision, it is probably not surprising that 2011 has seen a spate of cases that highlight the difficulty in distinguishing between jurisdictional error and non-jurisdictional error and the underlying tension surrounding state Supreme Court interventions into statutory decision-making powers, which are designed to be final.
The way in which the Chase decision has subsequently been applied or distinguished in several cases around Australia demonstrates this difficulty.
In Thiess Pty Ltd v MCC Mining  WASC 80, the Supreme Court of Western Australia considered jurisdictional issues arising from the Construction Contracts Act 2004 (WA) (CC Act). As in the Chase decision, it was argued that as the claim had been made out of time, the adjudicator had no jurisdiction to hear the dispute. However, the adjudicator refused to dismiss the adjudication application. In finding that the failure to bring an application within time was not a jurisdictional fact, the court found that Thiess was entitled to enforce the judgment, effectively upholding the adjudicator's decision. In particular, the court considered that the conclusion in the Chase decision that it was for the court to determine whether the adjudication application had been made in time does not apply to judicial review of a decision under s 31(2) (a) of the CC Act.
In Olympia Group v Hansen Yuncken  NSWSC 165, the adjudicator concluded that he did not have jurisdiction to determine a dispute because the work was performed outside New South Wales. The Supreme Court of New South Wales agreed the adjudicator had no jurisdiction because the contract did not deal with construction work in New South Wales, as required by the SoP Act.
In H M Australia Holdings v Edelbrand  NSWSC 604, it was argued that the defendant's contract was for the coordination of services, not for construction work, and that as such the adjudicator had no jurisdiction. The Supreme Court of New South Wales agreed and held that "the adjudicator made a basic and essential error in proceeding to a determination in the absence of a construction contract".
In Perrinepod Pty Ltd v Georgiou Building Pty Ltd  WASCA 217, the Court of Appeal of Western Australia considered a case where an adjudicator decided not to dismiss an application under the CC Act but to make a determination on its merits. It was argued that the matter was too complex for the adjudicator, but the adjudicator disagreed. The Court of Appeal found that there was no right of review of a decision by an adjudicator not to dismiss an adjudication application and dismissed the appeal. The adjudicator's decision stood.
In VK Property Group Pty Ltd and Ors v Conias Properties Pty Ltd and Anor  QSC 54, the Supreme Court of Queensland had to determine whether an adjudication made under the Building and Construction Industry Payments Act 2004 (QLD) should be set aside by reason of numerous alleged jurisdictional errors. No jurisdictional errors were found and the application to dismiss the adjudication was dismissed. Again, the adjudicator's decision stood.
CONTRACTING OUT OF PROPORTIONATE LIABILITY
Proportionate liability continues to create difficulties in the construction industry, particularly in jurisdictions such as Tasmania, New South Wales and Western Australia where it is permitted to contract out of proportionate liability legislation. Contracting out of proportionate liability legislation can lead to serious gaps in insurance cover. Proportionate liability law continues to develop and it is timely to revisit a little-heralded case in Tasmania.
In Aquagenics Pty Ltd v Break O'Day Council  TASFC 3, the Full Court of the Supreme Court of Tasmania considered whether a principal (Break O'Day) and contractor (Aquagenics) had contracted out of the proportionate liability legislation, even in circumstances where they did not specifically intend to at the time of entering the contract. The contract between the parties provided for arbitration in the event of a dispute. Aquagenics issued court proceedings (since its position was that the contract had been repudiated) and Break O'Day successfully applied for a stay of the court proceedings so that the parties could arbitrate. Aquagenics appealed the stay to the Full Court. Aquagenics argued that the court proceeding should proceed because the claim involved complex questions in relation to proportionate liability of sub-contactors.
The Full Court dismissed the appeal, and held that:
- The parties had contracted out of the proportionate liability legislation, despite there not being any specific exclusion to that effect in the contract.
- There does not need to be an express provision between the parties to abandon a right under the Act, or that it even needs to include a reference to that Act.
- The contract "made provision for each parties' rights, obligations and liabilities in relation to any matter to which the Civil Liability Act applied", which is all the Act requires in order to "contract out".
Having removed the proportionate liability obstacle, the parties were entitled to proceed to arbitration. While there was no need for the court to find whether proportionate liability would apply to arbitration proceedings, it gave a clear message that it was most unlikely. This was primarily based on the presumption that other parties could not be joined to the arbitration.
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