Australia: Jurisdictional Error May Once Again Be Enough To Challenge An Adjudication Determination Under The Building and Construction Industry Security of Payments Act 1999 (NSW) ("the Act")
Building and Construction Update

The recent High Court decision of Kirk v Industrial Relations Commission (NSW) [2010] HCA 1 may have the effect of again widening the scope to challenge adjudication determinations.

Pre Brodyn – relief in the nature of certiorari was available

Prior to the Court of Appeal's decision in Brodyn v Davenport (2004) NSWCA 394, the Supreme Court accepted that adjudication determinations could be challenged for jurisdictional error and the determination quashed pursuant to section 69 of the Supreme Court Act 1970 (NSW).

Jurisdictional error included adjudicators refusing to exercise, or acting in excess of, jurisdiction. Examples include adjudicators failing to address a question referred to adjudication, adjudicators determining a question which is not referred to adjudication or adjudicators determining a question they had no power to determine.

This position resulted in the often referred to 'tsunami of litigation' in the 2000 – 2004 period.

Post Brodyn (and current status) – shrinking the goal posts

The Court of Appeal in Brodyn did not agree with the cases that preceded it; that certiorari was available to quash an adjudication determination for jurisdictional error.

The decision in Brodyn meant that once the "basic and essential" requirements of the legislation had been satisfied, the adjudication determination would not be overturned provided that the adjudicator had acted in good faith and gave both parties the level of fairness required under the legislation.

The basic and essential requirements (non-exhaustive) were stated to be that:

• there was a construction contract;
• a payment claim has been served;
• an adjudication application has been made;
• there has been an acceptance by the adjudicator; and
• there has been a determination by the adjudicator with respect to the amount owing, the due date for payment and any interest applicable.

Back to the future?

In Kirk v IRC, the High Court considered whether state legislation (relevantly, the Occupational Health & Safety Act 1983 (NSW)) which took away from a state supreme court power to grant relief on account of a jurisdictional error was beyond state legislative power.

The High Court held that it was, because it purports to remove a defining characteristic of the supreme court of the state that provides for judicial review. By doing so, the High Court reaffirmed the accepted doctrine that the jurisdiction of the supreme courts to grant certiorari for jurisdictional error could not be denied by statutory privative provisions.

Applying this reasoning to the Act, the flood-gates for challenges to adjudication determinations may once again open on the basis of jurisdictional error and it creates an opportunity to challenge the ratio established in Brodyn. Until then, the decision of Brodyn will continue to be followed.

If the High Court is asked to re-visit Brodyn it will have to carefully consider striking the delicate balance between preserving the purpose and object of the Act (facilitating cashflow to contractors and subcontractors) and preserving the jurisdiction of the supreme court to grant relief for jurisdictional error.

There are currently two concurrent appeals against the Brodyn decision that will be heard in the Court of Appeal. Watch this space!

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