Late last year in the case of Chase Oyster Bar Pty Ltd v
Hamo Industries Pty Ltd  NSWCA 190 (Chase Oyster
Bar), the NSW Court of Appeal opened the door on new
grounds to challenge decisions made by adjudicators under the
Building and Construction Industry Security of Payment Act
1999 (the SOP Act).
It found that if all of the requirements in the SOP Act had not been complied with, the Supreme Court had the right to review and, if required, overturn the adjudication determination. The extent to which that door has been opened was considered in the case of Steel v Beks  NSWSC 1404.
Steel is a supplier of temporary building structures and Beks is
a small building contractor that erects buildings supplied by
Steel. Beks erected building structures for Steel at the Emirates
Resort, Wolgan Valley, Coates Balmain and the Caltex Refinery at
Kurnell in NSW.
Beks prepared progress claims. One was for Emirates Resort and Coates Balmain and the second was for Caltex Kurnell. Beks attempted to send the claims to Steel's facsimile number. The transmission was not successful. On that same day Beks located a website on the internet that displayed a different facsimile number and sent the claim to that number. No payment schedule was received.
Subsequently, notices were then prepared under s 17(2)(b) of the SOP Act. The notices were sent to the facsimile number displayed on the internet. A facsimile of the same notices was also sent to a telephone number. The transmission was said to have been successful.
There was no response by Steel to the notice, so applications for adjudication were lodged and adjudications issued in due course. They were then registered as a judgment.
Steel commenced proceedings seeking:
- a declaration that the two adjudication certificates given under the SOP Act were null and void
- orders restraining the enforcement of the judgment that resulted from the filing of the certificates.
The Court was required to consider whether the payment claim and the s 17 notices had been served on Steel as required under the SOP Act, and the implications if the procedures under the SOP Act had not been complied with.
Macready AsJ of the Supreme Court of New South Wales held that
there was no service of the payment claim and the s 17 notices on
His Honour stated that the law in this regard changed recently in the decision of Chase Oyster Bar, which held that the basic and essential requirements for the existence of a valid determination by an adjudicator, as they appear in Brodyn Pty Ltd v Davenport (2004) 61 NSWLR 421 at 441, may also be characterised as essential pre-conditions for the existence of an adjudicator's determination.
His Honour went on to consider the decision of Chase Oyster Bar in which the first defendant served a payment claim on the applicant. The applicant did not provide a payment schedule in response. The defendant gave the applicant notice of its intention to commence adjudication outside of the 20 business day time limit required under the SOP Act. Despite this, the adjudicator determined that the defendant was entitled to the amount claimed as well as interest. In that case the Court of Appeal unanimously made three findings that his Honour stated were significant to the determination of this case. It decided, firstly, the Supreme Court has power to determine that:
- An adjudication application has not been made in compliance with s 17(2)(a) of the SOP Act.
- The determination of the adjudicator, made in the absence of a valid adjudication application, was invalid.
- There was non-compliance in the present case.
It was also held that the Court has power to grant relief in the nature of certiorari and set the determination aside.
Secondly, in light of the High Court decision in Kirk v Industrial Relations Commission  HCA 1, the decision in Brodyn Pty Ltd v Davenport (2004) 61 NSWLR 421 should not be followed in relation to an adjudication application that was not in compliance with s 17(2)(a) of the SOP Act, so far as it held that:
- The Supreme Court of New South Wales was not required to consider and determine the existence of jurisdictional error by an adjudicator in reaching a determination under the SOP Act.
- An order in the nature of certiorari was not available to quash or set aside a decision of an adjudicator under the SOP Act.
- The SOP Act expressly or impliedly limited the Supreme Court of New South Wales' power to consider and quash a determination for jurisdictional error by an adjudicator in reaching a determination under the SOP Act.
Thirdly, the SOP Act does not limit the power of the Supreme Court of New South Wales to review an adjudicator's determination for jurisdictional error.
Having considered the application of the principles espoused in Chase Oyster Bar to the present case, his Honour held that the adjudicator's finding was not correct. On the evidence, the payment claim and the notices required by s 17(2)(a) were not served on Steel. Accordingly, Steel was not given an opportunity to provide a payment schedule to the claimant pursuant to s 17(2)(b) of the SOP Act. Following the Court of Appeal's reasoning in Chase Oyster Bar, the Court was not bound by the adjudicator's decision that the requirements of s 17(2)(a) had been met.
It appears that the Court of Appeal decision in Chase Oyster Bar
has successfully opened a new door to challenge decisions made by
adjudicators under the SOP Act. Accordingly, strict compliance with
the processes set out in the SOP Act is required, as the Supreme
Court now has jurisdiction to review decisions made by adjudicators
if the SOP Act is not strictly complied with.
© DLA Phillips Fox
DLA Phillips Fox is one of the largest legal firms in Australasia and a member of DLA Piper Group, an alliance of independent legal practices. It is a separate and distinct legal entity. For more information visit www.dlaphillipsfox.com
This publication is intended as a first point of reference and should not be relied on as a substitute for professional advice. Specialist legal advice should always be sought in relation to any particular circumstances.