Probuild Constructions (AUST) Pty Ltd V Shade Systems Pty Ltd [2016] NSWSC 770

KEYWORDS: SECURITY OF PAYMENT; JUDICIAL REVIEW KEY TAKEAWAY

In a decision which goes against the long-standing authority in Brodyn Pty Ltd v Davenport, ¹ a single Judge of the New South Wales Supreme Court held that judicial review is available to quash an adjudicator's determination for a non-jurisdictional error of law on the face of the record.

This is an interesting result, as it has long been held that judicial intervention into adjudication determinations could only occur in instances of a breach of "the basic and essential requirements" which were "laid down for the existence of an adjudicator's determination". Whether or not future cases will follow this decision remains to be seen.

Note: This decision is also the subject of an "In Brief" on the Corrs website: " The Probuild decision: Finding the balance in construction industry payment".

Facts

Probuild engaged Shade to supply and install external louvres to the façade of an apartment complex in Chatswood. During the course of the work, Shade served a payment claim for $324,334.26. Probuild served a payment schedule which asserted that it would pay Shade nil, as Probuild was entitled to liquidated damages of $1,089,900.

Shade subsequently applied for adjudication of its payment claim. Shade revised its claim down to $214,680.88 in its adjudication application. Probuild continued to rely on its entitlement to liquidated damages in its adjudication response. An adjudicator determined that Probuild owed Shade $277,755.03. Probuild then sought to have the adjudicator's determination quashed for reasons including that there was an error of law on the face of the determination, albeit a non-jurisdictional error, relating to the incorrect interpretation by the adjudicator of the liquidated damages clause under the contract, which formed part of the reasons in the determination.

Decision

Emmett AJA, sitting as an additional Judge in the Technology and Construction List, agreed with Probuild, and held:

Emmett AJA subsequently quashed the adjudication determination, and ordered the matter of the adjudication be remitted to the adjudicator for further consideration and determination according to law.

In coming to this decision, Emmett AJA considered three broad issues.

A court has jurisdiction to judicially review adjudication determinations

First, Emmett AJA examined whether a court had jurisdiction to judicially review an adjudicator's decision. After considering the powers of the Court under the Supreme Court Act 1970 (NSW) and the process of adjudication under Part 3 of the Building and Construction Industry Security of Payment Act 1999 (NSW), Emmett AJA found that a determination by an adjudicator is amendable to judicial review:

Brodyn is only obiter for issues relating to judicial review for errors of law

Emmett AJA went on to analyse the decision of Hodgson JA in Brodyn Pty Ltd v Davenport. ⁴ Shade attempted to rely on the case as authority that "the scheme of the Security of Payment Act appeared strongly against the availability of judicial review on the basis of non-jurisdictional error of law"⁵ . However, his Honour did not agree, noting that the case had been thrown into doubt as a result of Kirk v Industrial Court of New South Wales⁶ and that Brodyn was not strictly binding on his Honour:

The Security of Payment Act does not exclude the courts' ability to judicially review an adjudicator's determination

Finally, Emmett AJA considered the language of sections 25 and 27 of the Security of Payment Act, and stated that there was nothing in the language or intention of the Act that operated to exclude the jurisdiction of the courts to undertake judicial review of an adjudicator's determination:⁸

Having identified an error of law made by the adjudicator (namely that Probuild was required to prove fault by Shade before being entitled to deduct liquidated damages), and that it was material, Emmett AJA quashed the determination.⁹

https://www.caselaw.nsw.gov.au/decisio n/575f4f9ce4b058596cb9c344

Footnotes

¹ [2004] NSWCA 394; 61 NSWLR 421
² At [79]
³ At [56]
⁴ [2004] NSWCA 394; 61 NSWLR 421
⁵ At [58]
⁶ [2010] HCA 1; 239 CLR 531
⁷ At [64], [65]
⁸ At [74]
⁹ At [78]–[80]

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