Australia: Supreme Court Puts Adjudicators On Notice

Last Updated: 10 September 2009

Rebecca Roylance
Jon Erbacher

Where a decision of an adjudicator made under the Building and Construction Industry Payments Act 2004 (Qld) (BCIPA) determines an issue in dispute on a ground for which neither party contended, and the adjudicator fails to notify of that intended determination or allow submissions, the decision may be declared void. The decision in John Holland Pty Ltd v TAC Pacific Pty Ltd & Ors, recently handed down by the Supreme Court, demonstrates this.

The parties

John Holland Pty Ltd and TAC Pacific Pty Ltd were parties to a construction contract. A dispute over a payment claim that TAC submitted went to adjudication under BCIPA.

The adjudication

A key issue, which the adjudicator needed to determine, was whether certain contractual conditions that John Holland relied upon were void by reason of section 99 of BCIPA, and whether TAC was entitled to be paid its claim, where it was alleged that TAC had not complied with certain contractual provisions governing claims for variations.

The adjudicator concluded that TAC was entitled to be paid the amount in the claim and relied on the decision in Plaza West Pty Ltd v Simon's Earthworks (NSW) Pty Ltd. John Holland had relied on the authority of John Goss Projects Pty Ltd v Leighton Contractors in its submissions.

The adjudicator commented that he felt he was compelled to deal with Plaza West, as it was his view that the case effectively overturned the decision in Goss. At no stage, however, did TAC submit that Goss did not reflect the law.

John Holland's argument, that TAC's failure to meet conditions precluded TAC from payment of its claim, was rejected by the adjudicator, who relied on Plaza West in deciding that TAC was entitled to the full amount claimed together with GST, which totalled more than $1 million.

Off to Court: application to have the decision declared void

John Holland applied to the Supreme Court to have the adjudicator's decision declared void. The Court considered the following issues:

  1. Was there a denial of natural justice by the adjudicator? The complaint related to the adjudicator's referral to Plaza West, which neither party referred to in their submissions, and the fact that the adjudicator did not notify the parties of his intention to rely on this decision or allow the opportunity to make further submissions.
  2. Did the adjudicator fail to make a genuine attempt to understand and apply the contract?

Justice Applegarth decided the first of these grounds in favour of John Holland - that is, that there was a substantial denial of natural justice and the adjudicator's decision was declared void.

In deciding whether natural justice had been denied, His Honour noted the following points:

  • Although BCIPA allows an adjudicator to make unreviewable errors of law in the interests of expedience, BCIPA does not permit an adjudicator to make a determination on the basis of a view of the law for which neither party has contended.
  • There will be a denial of natural justice where:
  1. there is a significant or critical legal issue on which the decision is likely to turn;
  2. the adjudicator intends to make his or her decision on a basis for which neither party contended; and
  3. the adjudicator made the decision for the reason that a legal authority, upon which a party placed particular reliance, had been overturned, and was no longer the current law.
  • This decision does not require adjudicators to expose their provisional views on legal issues or seek submissions from the parties on every authority upon which the adjudicator intends to rely.

Significance to the building and construction industry

The general intent of BCIPA is to allow an adjudicator to quickly decide complex legal issues. The adjudicator's reasoning is protected from challenge under BCIPA.

However, in certain circumstances, an adjudicator's reasoning will be subject to the scrutiny of the Courts, and this decision serves as a timely reminder to all building industry participants that where there has been a possible denial of natural justice, the decision may be able to be reviewed by the Court.

© HopgoodGanim Lawyers

Australia's Best Value Professional Services Firm - 2005 and 2006 BRW-St.George Client Choice Awards

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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