Australia: Construction Contracts: Appealing adjudication decisions – common sense may prevail

Last Updated: 17 August 2017
Article by Julian Troy

The High Court in the coming weeks will decide the question of whether adjudicators decisions are open for review (i.e. appeal to a Court) for errors of law on the face of the record. Such errors include where the reasons to support a decision are either absent, or fundamentally contrary to accepted principles of law. Historically, it has been widely accepted across Australia that these types of errors are not reviewable by a Court, and adjudication decisions can only be reviewed for jurisdictional error (i.e. errors concerning the foundation and scope of an adjudicator's statutory duty).

Security of payment legislation across Australia aims to drive fast-track debt recovery of progress payments for construction work – primarily to protect the flow of cash into the hands of contractors and subcontractors, the lifeblood of the industry. This is necessary for a healthy industry. However, the mechanics of security of payment legislation in the various jurisdictions requires adjudicators (often non-lawyers) to consider and determine complex factual matters and technical legal issues in tight frames. Adjudicators, despite doing their best and fulfilling their statutory duty, sometimes get it wrong and fall into this category of legal error.

That wrong decision may adversely affect not just the party that loses out in the adjudication, but where it is a large contractor going unpaid, it may also wipe out many smaller subcontractors down the contractual chain – the very people the legislation was crafted to protect. In those instances, the more immediate remedy of review by a Court seems appropriate, rather than leaving as the only option for the unpaid contractor, a protracted and expensive Court proceeding down the track. Currently, however, no such review is available for error of law on the face of the record.

In June 2016, a decision of Emmett J in the NSW Supreme Court held that adjudication decisions infected by such errors were reviewable by a Court, however subsequently the NSW Court of Appeal in Shade Systems Pty Ltd v Probuild Constructions (Aust) Pty Ltd [2016] NSWCA 379 reversed that decision and restored the historic position. On the presumption that errors of reasoning in adjudicators decisions may easily be found, or at least be readily argued, the historic position was preserved to minimise Court intervention, and maintain the objectives of the interim nature of the process. However, the extent of Court intervention aside, the right of review by a Court of decisions infected by a clear error of law on the record (particularly where it circumvents a significant payment to a head contractor) seems not only appropriate, but for the reasons above, necessary to preserve the objects of the legislation, including the risk apportioned to owners and principals by the legislation of subsequently not being able to recover payments made under construction contracts. This is doubly so where 'getting it right' can be the difference between survival or death of a contractor and possibly many subcontractors down the contractual chain. Whilst often the law moves slowly, common sense may eventually prevail.

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.

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