Until recently it had been understood within the NSW building and construction law community that, apart from very limited circumstances, the Supreme Court of NSW was not able to grant relief on an application for judicial review of a determination of an adjudicator made under section 22 of the Building and Construction Industry Security of Payment Act 1999 (NSW) (Act). The Court of Appeal in Brodyn Pty Ltd v Davenport (2004) 61 NSWLR 421 (Brodyn) had stood as authority that only very limited grounds for judicial review existed by virtue of the Act. However, in light of the High Court decision of Kirk v Industrial Relations Commission of NSW (2010) 239 CLR 531 (Kirk), the NSW Court of Appeal, comprising Spegelman CJ, Basten JA and McDougall J, has unanimously held in Chase Oyster Bar v Hamo Industries [2010] NSWCA 190 (Chase Oyster Bar) that Brodyn was incorrectly decided and that adjudicators' determinations under the Act are amenable to applications for judicial review for jurisdictional error.

Impact

The decision of Chase Oyster Bar will have great impact on determinations under the Act which had previously been treated as effectively final. The decision has opened the way for applications for judicial review of these adjudications for jurisdictional error. The Courts will no doubt soon hear a far greater number of applications for judicial review of arbitral awards under the Act.

Background to Chase Oyster Bar

The Plaintiff, Chase Oyster Bar Pty Ltd (Chase), and the first defendant, Hamo Industries Pty Ltd (Hamo), entered into a construction contract under which Hamo undertook to carry out fitout work for Chase at the Oyster Bar in Chatswood Chase. Hamo made a payment claim under the Act on 31 December 2009. Chase did not provide a payment schedule in response or pay the amount by the due date of 13 January 2010. Pursuant to section 14(4) of the Act Chase's failure to provide a payment schedule meant that it became liable to pay the claimed amount to Hamo on the due date. Pursuant to section 15(2) of the Act Hamo then had the right to either sue for the claimed amount as a debt or (after a period of notification) make an adjudication application. Hamo chose to make an adjudication application.

Section 17(2)(a) of the Act required that Hamo not make an adjudication application unless it had notified Chase within 20 business days after 13 January 2010 (being the due date for payment) of its intention to do so. Hamo gave notice on 11 February 2010, outside of that period. An adjudicator was nonetheless appointed and Chase lodged its adjudication response with the adjudicator. The adjudicator concluded that he should not consider the adjudication response because Chase had not provided a payment schedule within time.

On 18 March 2010 the Adjudicator determined that Hamo was entitled to payment of the claimed amount with interest. Part of the Adjudicator's determination was that the notice required under section 17(2)(a) was given within time. 

The questions before the Court of Appeal

By order made on 23 April 2010 three questions were removed to the NSW Court of Appeal, which put shortly were:

  1. Whether the adjudicator's determination could be quashed for jurisdictional error where the adjudicator incorrectly concluded that the s 17(2) notice was given within time.
  1. Whether in light of Kirk, Brodyn should not be followed or was incorrectly decided.
  1. Whether the Act is inconsistent with the constitutional requirement that there be a State Supreme Court with jurisdiction so grant relief in the nature of certiorari.

Question 1

All three Justices declined to answer question 1 in the form in which it was framed as it assumed that the adjudicator had made a determination that he could hear and determine the adjudication application.

Basten JA and McDougall J held that if the adjudicator formed such a view as to the matter it was without legal consequence and arguably cannot or should not be quashed or set aside. The reasoning behind this was founded on section 22(1), which sets out the matters which the adjudicator is to determine, and section 22(2) which limits the matters which the adjudicator is entitled to consider. Section 22 makes no reference to the validity of the adjudication application. For these reasons their Honours held that the Act does not permit the adjudicator to determine the validity of the adjudication application. Basten JA went on to say that if this conclusion should be wrong, then any adjudicator's determination in respect of the validity of an adjudication application would not be beyond review.

Their Honours considered that the structure of the Act might suggest that it would be inappropriate to refer an invalid adjudication application to an adjudicator, laying an implied obligation on the authorised nominating authority to consider the validity of the application. However, their Honours did not address this issue further.

The answer given by the Court to Question 1 was:

The Supreme Court, in exercise of its supervisory jurisdiction:

  1. has power to determined that –
  1. an adjudication application has not been made in compliance with s 17(2)(a) of the Act;
  1. the determination of the adjudicator, made in the absence of a valid adjudication application, was invalid; and
  1. there was non-compliance in the present case;
  1. has power to grant relief in the nature of certiorari and set the determination aside.  

Basten JA wished for the Court of Appeal to go further and consider whether or not to grant relief in the nature of certiorari. However, as Spigelman CJ and Basten JA held the view that the matter should be remitted to the Equity Division, his Honour did not pursue the issue.

Question 2

Their Honours answered Question 2 as follows:

To the extent that Brodyn held, in relation to an adjudication application which was not in compliance with s 17(2)(a) of the Act that;

  1. the Supreme Court was not required to consider and determine the existence of jurisdictional error by an adjudicator in reaching a determination under the Act;
  1. an order in the nature of certiorari was not available to quash or set aside an adjudicator's determination under the Act;
  1. the Act expressly or impliedly limited the Supreme Court's power to consider and quash a determination for jurisdictional error by an adjudicator in reaching a determination under the Act;

it was in error.

Question 3

Their Honours held that the Act contained no such limitation on the power of the Supreme Court.

Section 25(4)(a)(iii) was held to have a very limited application. Their Honours held that only proceedings brought to set aside a judgment for a debt, being the adjudication amount, were restrained. The Act says nothing about restrictions on applications for judicial review of the determination. Thus the decision in Kirk, that it is not permissible for State legislation to prevent the exercise by the Supreme Court of its supervisory jurisdiction with respect to jurisdictional error, did not raise any question regarding the Act.

Basten JA addressed one of the considerations of the Court in Brodyn which was treated as weighty support for the view that judicial review was excluded. His Honour consider that the power of a payment claimant to suspend work under the construction contract without liability for any loss or damage suffered by the other party if no payment schedule is provided nor payment of the payment claim made or if an adjudication award is not paid, was not without force. However, his Honour held that it was far from clear that a claimant who suspends work within the framework of the Act will be liable for any loss or damage from which the claimant would otherwise be protected by section 27(3), in circumstances where an application for judicial review is later successful.

McDougall J also considered the issue of whether this construction of the Act would impact adversely on the parties' exercise of the right to stop work. His Honour suspected that in any instance where a party ceases work in conformity with the provisions of the Act and the other party had not asserted that the determination is void for want of satisfaction of a jurisdictional fact, in any subsequent proceedings to have the adjudication quashed discretionary considerations would tell against the grant of relief for any loss or damage caused by the cessation of work.