Security of Payment Act - The Supreme Court of NSW has quashed an adjudication determination on the basis that the adjudicator's contractual interpretaton leading to its determination amounted to an error of law. This significantly broadens the previously considered narrow scope for challenging an adjudication determination.

The Supreme Court of NSW may see a significant increase in dissatisfied parties challenging adjudication determinations under the Building and Construction Industry Security of Payment Act 1999 (NSW) (the Act) after it was found that the court has jurisdiction to grant relief in respect of an error of law on the face of the record.

Prior to last week's decision in Probuild Constructions (Aust) Pty Ltd v Shade Systems Pty Ltd [2016] NSWSC 770, the scope for judicial review of an adjudication determination was assumed to be much narrower.

Background

Probuild challenged an adjudication determination in which the adjudicator had found that Probuild was required to prove that Shade System's failure to reach practical completion by the date for practical completion was caused by Shade System's default before Probuild could be entitled to liquidated damages. Its right to deduct liquidated damages from the amount otherwise due to Shade Systems was subsequently dismissed. Probuild asserted that this determination amounted to an error of law on the face of the record which was open to judicial review.

Shade Systems relied on the commentary of Hodgson JA in Brodyn Pty Ltd v Davenport (2004) 61 NSWLR 421 in which his Honour considered that the scheme of the Act appeared strongly against the availability of judicial review on the basis of non-jurisdictional error of law.

The reasoning for the decision

Emmett AJA determined that Hodgson JA's observations in Brodyn were obiter dicta and therefore the question as to whether relief by way of judicial review is available under section 69 of the Supreme Court Act 1970 (NSW) remained open.

Section 69 of the Supreme Court Act provides the court with jurisdiction to grant any relief or remedy by way of writ, including prohibition, mandamus and certiorati (which includes jurisdiction to quash the ultimate determination of a tribunal in any proceedings if that determination has been made on the basis of an error of law that appears on the face of the record of the proceedings). The face of the record includes the reasons expressed by the tribunal for its determination.

It was held that the adjudication process under Part 3 of the Act is a statutory power conferred by legislation and therefore subject to the Court's powers under section 69 of the Supreme Court Act in the absence of any clear legislative intention to the contrary. His Honour did not consider that there is a clear intention or implication to be found in the Act that the jurisdiction conferred by section 69 of the Supreme Court Act is intended to be excluded.

The determination was quashed and the matter was remitted to the Adjudicator for further consideration and determination according to law.