The right to be wrong – the ability to review Adjudicators’ determinations

WHO SHOULD READ THIS

• All participants in the construction industry.

THINGS YOU NEED TO KNOW

• The High Court has confirmed that Adjudicators’ determinations are not reviewable for mere error of law.

WHAT YOU NEED TO DO

• Parties to an adjudication dispute should consider the grounds on which any determination may be reviewable.

Under tight time pressures to decide often complex matters, Adjudicators appointed to determine an adjudication application under Security of Payment legislation may make mistakes. When the Adjudicator makes an error of law, are the parties to the determination able to have it set aside?

This was the question confronted by the High Court in two recent cases, Probuild Constructions (Aust) Pty Ltd v Shade Systems Pty Ltd [2018] HCA 4 (Probuild) and Maxcon Constructions Pty Ltd v Vadasz [2018] HCA 5 (Maxcon).

On 14 February 2018, the High Court held that an Adjudicator’s determination cannot be set aside for a mere error of law that is not ‘jurisdictional’ in nature. This confirms the long-held understanding that mere errors of law do not give rise to a right of review.

Background

Every Australian jurisdiction has a Security of Payment regime in operation. Each Act establishes a fast and informal way of resolving disputes about progress payments on construction projects.

The timeframes under these regimes are notoriously tight. The speed at which the process operates places pressure on Adjudicators, with adjudication having been described by the Courts as a ‘pressure cooker environment’¹. This carries an increased risk of Adjudicators making errors.

There are a number of ways in which an Adjudicator can err. For example, an Adjudicator might:

• misconstrue a provision of a construction contract;
• erroneously find that an adjudication application has been validly made in accordance with the legislation when in fact it has not; or
• determine an issue on a basis not contended for by either of the parties to the dispute.

Until recently, it was understood that non-jurisdictional errors of law (such as the first example outlined above) could not be relied on to challenge an Adjudicator’s determination. By contrast, the second and third examples outlined above may give rise to a right of review, because they are ‘jurisdictional’ in nature.

The decisions

The High Court’s decisions in Probuild and Maxcon confirm that the Courts will not set aside Adjudicators’ determinations for non-jurisdictional errors of law.

What this means for you

Determinations by Adjudicators which merely contain errors of law that are non-jurisdictional will not be able to be set aside by the parties to them. A party will instead be required to identify more fundamental, jurisdictional issues to have a determination quashed.

While the decisions in Probuild and Maxcon related to the New South Wales and South Australian legislative schemes, they are also directly relevant to the operation of the Security of Payment regimes in Queensland, Victoria, Tasmania and the Australian Capital Territory, which are similar.

The impact of these two decisions will be discussed at the industry seminars that McCullough Robertson is currently conducting throughout Queensland on the introduction of the Building Industry Fairness (Security of Payment) Act 2017 (Qld) and at McCullough Robertson’s Construction Law Conference in Sydney on 22 March 2018.

Please click here for more details of our upcoming events.

¹ _{Shell Refining (Australia) Pty Limited v A J Mayr Engineering Pty Limited [2006] NSWSC 94, [27] (Bergin J).}

This publication covers legal and technical issues in a general way. It is not designed to express opinions on specific cases. It is intended for information purposes only and should not be regarded as legal advice. Further advice should be obtained before taking action on any issue dealt with in this publication.