The New South Wales Court of Appeal in Chase Oyster Bar v. Hamo Industries1 (Chase) has handed down an important decision about the Building and Construction Industry Security of Payment Act 1999 (NSW) (SoPA). The Court confirmed that the Supreme Court can set aside an adjudicator’s decision made under the SoPA where the necessary elements for the adjudicator to have power to make a decision do not exist. In legal speak, nothing in the SoPA removes the Supreme Court’s power to quash a decision made by an adjudicator in circumstances where an adjudicator has made a jurisdictional error of law.

The decision in Chase expands the options that were previously available to a disgruntled party to challenge an adjudicator’s decision.

Overturning an adjudicator’s decision prior to Chase

Prior to Chase, the ability of a Court to quash an adjudicator’s determination was guided by the New South Wales Court of Appeal decision of Brodyn v Davenport2(Brodyn). The Court in Brodyn held that the only available options for reviewing an adjudicator’s decision were limited to circumstances where:

  1. the adjudicator did not make a bona fide attempt to exercise its power under the SoPA
  2. the claimant fraudulently exercised its rights under the SoPA with which the adjudicator was involved
  3. the adjudicator substantially denied at least one party natural justice, and
  4. the basic and essential requirements of the SoPA were not complied with. These requirements included:

1. the existence of a construction contract

2. the service by the claimant on the respondent of a payment claim

3. the making of an adjudication application by the claimant to an authorised nominating authority

4. the reference of the application to an eligible adjudicator, who accepts the application, and

5. the adjudicator determining the application deciding the amount of the progress payment, the date on which it becomes or became due and the rate of interest payable, and the issue of a determination in writing.

As a result, an adjudicator’s decision could not be quashed even in circumstances where the adjudicator had made a jurisdictional error of law as it did not fall within the categories listed above.

Chase

In Chase, the Court generally disagreed with the decision of Brodyn and followed the recent decision of the High Court in Kirk v Industrial Relations; Commission of New South Wales Kirk Group Holdings Pty Ltd v WorkCover Authority of New South Wales (Inspector Childs)3 to determine that the State legislature, in any event, cannot remove the Court’s power to quash a decision made by an adjudicator which is infected by jurisdictional error.

This means that a decision made by an adjudicator under the SoPA (which is a State based Act) cannot overrule the Court’s power provided under the Constitution despite the intention of the State legislature.

The key issue is now what features of the SoPA will amount to jurisdictional facts which, if wrongly decided, amount to a jurisdictional error. That is, as the Court in Chase acknowledged, a difficult question with no hard and fast rule and one which will likely be answered in the cases following this decision.

Impact

It is clear, following the decision in Chase, that disgruntled parties to an adjudicator’s decision have more avenues of appeal than previously thought. It is likely that there will be more court proceedings commenced challenging adjudicator’s decisions and the key questions to be determined in those proceedings will be what aspects of the SoPA amount to jurisdictional facts.

At the moment, parties and the adjudicator should ensure that the preliminary requirements of the SoPA are closely followed to prevent the (sometimes) unwelcome result of the Courts overturning an adjudicator’s decision.