Broadley Rees Hogan Lawyers' Special Counsel John Merlo discusses challenging the decision of an adjudicator for lack of jurisdiction under the Building and Construction Industry Payments Act.
Status of Adjudication Decisions
The Building and Construction Industry Payments Act 2004 ("BCIPA") provides a statutory entitlement to progress payments which runs parallel to a construction contract.
Under the BCIPA, a party may engage a registered adjudicator to make a decision as to the amount payable to a claimant pursuant to payment claim.
Typically the court will take the view that an adjudicator's decision is binding on parties irrespective of any error of fact.
When will the court overrule an Adjudicator's Decision
However the courts will, and do, overrule adjudication decisions in circumstances where an adjudicator commits a jurisdictional error. Jurisdictional error typically falls into one of three categories:
- Where an adjudication decision fails to comply with the 'basic and essential requirements' of a valid determination;1 or
- Where a substantial denial of natural justice or failure to apply procedural fairness has occurred; or
- Where it can be shown that there has not been a bone fide 'good faith' attempt by an adjudicator to perform his or her appointed function.
Basic and essential requirements:
The basic requirements for an adjudicator to make a decision under BCIPA are:
- the existence of a construction contract as defined by the BCIPA, between a claimant and a respondent;
- The service by a claimant on a respondent, of a valid payment claim pursuant to BCIPA;
- The service of an adjudication application by a claimant upon an Authorised Nominating Authority ("ANA") or other approved regulatory body;
- The referral by the ANA or other approved regulatory body of the adjudication application to an eligible adjudicator, who subsequently accepts the adjudication application; and
- A determination of that adjudication application, by deciding the amount of the progress payment, the date on which it became or is to become due, the rate of interest payable, and the issue of an adjudication decision in writing.
Accordingly any issues relating to the above may be used to argue whether a payment claim is a valid payment claim, and can be used to argue that a jurisdictional error has been made in respect of an adjudication decision, for example where it is arguable that:
- A payment claim does not contain the level of particularity of detail required by the BCIPA;
- A payment claim is not served in relation to a valid reference date;
- the payment claim does not relate to construction work and/or related goods and services, or an exception to the BCIPA applies.
Natural Justice and Procedural Fairness
The term 'procedural judicial or quasi judicial fairness' is preferable when talking about decision-making, as the term 'natural justice' is associated with the procedures of the courts. However, the meaning of the terms are not dissimilar, and are commonly applied interchangeably.
Principles of procedural fairness or natural justice include:
- Equality before the law – every person should be treated in the same manner by the legal system. The law applies equally to everyone and no person is above the law.
- Freedom from bias (partiality) – decision makers must not have apersonal interest in the decision being made, and must not prefer one person above another when making a decision.
- Fairness – decisions are to be made according to a set of established rules.
- The right to be heard – a person to be affected by a decision made under the legal system has a right to present their submissions and the facts in support of those submissions (evidence), to a decision maker, before a decision is made.
- Transparency – what happens in the legal system can be seen and understood by the public at large. The decisions of tribunals and courts are available to the public.
Adjudication decisions will be considered void where it can be shown there has been a substantial denial of natural justice or procedural fairness.
Most commonly, this will arise where an adjudicator makes a decision on a basis not contended by the claimant or respondent, without giving those parties the opportunity to make submissions.
The Court will only intervene where the denial of natural justice can be shown to be material and a real injustice will be suffered by a party.
Jurisdictional error may be established where there has not been a bone fide 'good faith attempt' by an adjudicator to perform the function required by the BCIPA.
Allegations of a lack of good faith can be difficult to prove. The courts have provided guidance as to what may constitute a lack of good faith.
All Australian jurisdictions have security of payments legislation, and have specific provisions as to what an adjudicator may consider when making a decision:
- Where an adjudicator departs from the only matters the adjudicator is to consider in the making of the decision being:
- the terms of the relevant construction contract;
- the payment claim;
- the payment schedule; and
- together with all submissions properly made.
- Where an adjudicator has truly disregarded duly made submissions of a claimant or respondent;
- Where an adjudicator does not make a bona fide attempt to consider the matters she or he is required to consider;
- Where an adjudicator gives insufficient reasons for the decision;
- Where an adjudicator misconceives her or his role;
- Where the decision demonstrates a degree of unreasonableness which is in all the circumstances unreasonable.
In deciding whether to apply to set aside a decision for jurisdictional error, the relevant question to be considered, is whether the adjudicator arrived at the decision by a process which failed to consider the basic and essential requirements as set out in BCIPA, and not whether a court would have made a different ruling.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought. For more information on the Building and Construction Industry Payments Act 2004 (QLD), please contact Mr John Merlo, Special Counsel at Broadley Rees Hogan, Construction and Infrastructure.
1 Brodyn Pty. Ltd. t/as Time Cost and Quality v. Davenport & Anor. . NSWCA 394
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.