Maxcon Constructions Pty Ltd v Vadasz (No 2)

Significance

The Full Court of the Supreme Court of South Australia has confirmed the finding at first instance that a contract is not void merely by reason of a contractor's failure to disclose his or her bankruptcy in the course of business carried on under another name in breach of the Bankruptcy Act 1966 (Cth). As a consequence no jurisdictional error was found on this point.

The Full Court also overturned the first instance finding that the adjudicator's error in concluding retention sum provisions were unlawful 'pay when paid' provisions was not an error on the face of the record; however, and significantly, found that certiorari on the ground of error of law on the face of the record was impliedly excluded by the Building and Construction Industry Security of Payment Act 2009 (SA) (SA Act).

Facts

The facts of this case are set out in Maxcon Constructions Pty Ltd v Vadasz & Ors [2016] SASC 148, and Maxcon Constructions Pty Ltd v Vadasz (No 2) [2016] SASC 156; both of these cases were summarised in our Roundup of 2016 security of payment decisions.

Relevantly, Maxcon Constructions Pty Ltd (respondent) had brought an application for judicial review seeking to have an adjudication set aside on the basis that, inter alia, the adjudicator lacked jurisdiction because Vadasz (claimant) failed to disclose to the respondent that he was an undischarged bankrupt before entering the contract, rendering the contract void and unenforceable. Stanley J dismissed the application on the basis that:

  • the claimant's failure to disclose the bankruptcy did not render the contract void; and
  • whilst the adjudicator fell into error in holding that the retention provisions of the contract were 'pay-when-paid provisions', such an error was neither jurisdictional, nor on the face of the record – and consequently judicial review does not lie.

The respondent appealed. The claimant brought an alternative contention, asserting that Stanley J failed to have regard to relevant considerations in finding that the claimant did not disclose his bankruptcy to the respondent.

Decision

The Full Court of South Australia dismissed the appeal and upheld Stanley J's decision that the claimant's failure to disclose his bankruptcy did not render the contract void or unenforceable.

In upholding Stanley J's decision, the Full Court considered that it was very unlikely that the legislature intended a contravention of the Bankruptcy Act 1966 (Cth) in this way should have such variable, capricious and adverse consequences for parties to a contract, as well as wider consequences for creditors in the bankruptcy.

Further, the Full Court held that the adjudicator erred in concluding that a provision of the contract constituted a 'pay-when-paid' provision within the meaning of section 12 of the SA Act, and therefore unenforceable under the SA Act. However, the Full Court did not consider this error amounted to jurisdictional error, determining that the adjudicator had jurisdiction to determine matters of law.

The Full Court overturned the trial judge's finding that it was not an error of law on the face of the record, but found that certiorari for such an error was impliedly excluded by the Act. In doing so the Full Court considered it was bound by the NSW Court of Appeal in Shade Systems Pty Ltd v Probuild Constructions (Aust) Pty Ltd (No 2) [2016] NSWCA 379 (also summarised in our Roundup of 2016 security of payment decisions), as the Full Court could not be satisfied the Shade Systems decision was plainly wrong. Interestingly, Blue and Hinton JJs both indicated in their reasons that absent persuasive authority on the point, they would have, from first principles, concluded that certiorari was available for error of law on the face of the record.