3 February, 2017
In June 2016 and August 2016, we updated you on two important decisions concerning the Building and Construction Industry Security of Payment Act 1999 (NSW). Both decisions have now been overturned on appeal. We set out below a brief summary of the state of the law as a result of the successful appeals.
High Court confirms that the existence of a reference date under a construction contract is a precondition to the making of a valid payment claim
In August 2016, we reported on the successful special leave application by Southern Han Breakfast Point Pty Ltd to have the High Court consider whether the existence of a "reference date" under the Building and Construction Industry Security of Payment Act (NSW) is a jurisdictional fact.
The consequence of the question is ultimately whether the existence of a 'reference date' is a matter for determination by an adjudicator or whether it is a pre-condition to the making of a valid payment claim, such that an adjudication determination which is incorrectly made on the basis that a 'reference date' for the payment claim existed, may be quashed by the Court for jurisdictional error.
As reported at the time, the New South Wales Court of Appeal in Lewence Construction Pty Ltd v Southern Han Breakfast Point Pty Ltd [2015] NSWCA 288 found that the existence of a reference date to support a payment claim is not a jurisdictional fact and, therefore, not an essential pre-condition for the making of a valid payment claim.
This decision has now been overturned by the High Court.
The High Court unanimously agreed with the primary judge and determined that the existence of a reference date under a construction contract is a precondition to the making of a valid payment claim. No such reference date existed in the present case. Accordingly, the adjudicator had no jurisdiction to make a determination in respect of the payment claim.
Status quo restored – adjudication determinations are not open to judicial review for non-jurisdictional errors of law
In June 2016, we reported on the decision in Probuild Constructions (Aust) Pty Limited v Shade Systems Pty Limited [2016] NSWSC 770 in which an adjudication determination under the Building and Construction Industry Security of Payment Act 1999 (NSW) was quashed on the basis that the adjudicator's interpretation of the relevant contract leading to the determination amounted to an error of law.
As we reported at the time, prior to this decision the scope for judicial review of an adjudication determination was assumed to be much narrower and did not extend to non-jurisdictional errors of law made by adjudicators (such as where the adjudicator simply makes an error in interpreting the relevant construction contract or the facts before them).
This decision has now been overturned by the NSW Court of Appeal.
Basten JA concluded that that it was not open to the first instance judge to depart from the previously consistently applied authority in Brodyn Pty Ltd v Davenport (2004) 61 NSWLR 421; [2004] NSWCA 394. In any event, no sufficient reason had been put forward to doubt the correctness of Brodyn in which it was concluded that relief is not available to quash an adjudicator's determination on a ground other than jurisdictional error and that any contrary conclusion would undermine the underlying purpose of the Act to allow contractors to swiftly recover progress payments, which is often informally described as a 'pay now argue later' approach.
For further information, please contact:
Kon Nakousis, Partner, Clyde & Co
kon.nakousis@clydeco.com
