Shade Systems Pty Ltd v Probuild Constructions (Aust) Pty Ltd (No 2) [2016] NSWCA 379

In the middle of last year, a case in New South Wales in relation to the Building and Construction Industry Security of Payment Act 1999 (NSW) (Security of Payment Act) caused ripples through the construction industry. Emmett AJA found that, contrary to the position previously followed in New South Wales, an adjudicator’s decision could be challenged not only for jurisdictional error but also for error of law on the face of the record.

However, the Court of Appeal has recently overturned Emmett AJA’s decision and affirmed the approach previously followed in New South Wales, that judicial review of an adjudicator’s determination is available only for jurisdictional error and not for error of law on the face of the record.

Facts

Shade Systems subcontracted with Probuild to supply and install external louvres to the façade of a building at Chadstone. It submitted a payment claim to which Probuild responded with a payment schedule indicating that it proposed to make no payment and claiming liquidated damages. An adjudicator found in the claimant’s favour, dismissing Probuild’s claim for liquidated damages.

Probuild sought review of the adjudicator’s decision on the grounds of jurisdictional error, and non-jurisdictional error of law on the face of the record. Justice Emmett at first instance allowed the application on the latter basis: Probuild Constructions (Aust) Pty Ltd v Shade Systems Pty Ltd [2016] NSWSC 770. In doing so, his Honour found that the reasons of Hodgson JA in Brodyn Pty Ltd v Davenport (2004) 61 NSWLR 421, which included a finding to the effect that judicial review is not available for non-jurisdictional error of law on the face of the record, were obiter, and had been put “substantially in doubt” by the High Court’s decision in Kirk v Industrial Relations Court of New South Wales (2010) 239 CLR 531.

His Honour found that s 69 of the Supreme Court Act 1970 (NSW) provides the court with jurisdiction to grant any relief or remedy by way of writ, including certiorari, including jurisdiction to quash an adjudication determination made on the basis of an error of law on the face of the record. The adjudicator’s statutory powers were subject to s 69, which was not to be excluded absent any clear legislative intention to the contrary.

Court of Appeal

In Shade Systems Pty Ltd v Probuild Constructions (Aust) Pty Ltd (No 2) [2016] NSWCA 379, Basten JA, who delivered a judgment with which Bathurst CJ, Beazley P, Macfarlan and Leeming JJA agreed, found that a reconsideration of the scope of the court’s supervisory jurisdiction under the Security of Payment Act was justified. However, ultimately his Honour considered that the principles in Brodyn had been applied subsequently by numerous courts in New South Wales and other jurisdictions and there was no basis upon which to now depart from them.

In considering whether there was ouster of the court’s jurisdiction in relation to non-jurisdictional error of law on the face of the record, Basten JA considered the tension between two features of the Act. On the one hand, the absence of a privative clause ousting the express power of the Supreme Court pursuant to s 69 of the Supreme Court Act to review the decisions of adjudicators for error of law on the face of the record could be seen to indicate an intention to allow review by the Supreme Court for errors of law. On the other, the deliberate omission of a statutory right of appeal for error of law in the Security of Payment Act demonstrated an intention to the contrary. His Honour found that these competing positions had to be resolved by examining the content, structure and practical operation of the Act: [27], [33], [48].

His Honour noted that s 32 makes provision for a court to order restitution of money previously paid under the Security of Payment regime on determination of a contractual dispute. This is consistent with a scheme that does not permit review of an adjudicator’s determination made within power ([61]), because the respondent (if ordered to pay on adjudication) is not left without a remedy on a final (curial) determination of the parties’ rights.

The availability of review for any error of law by an adjudicator would, his Honour found, be inconsistent with the purpose of the Security of Payment regime identified in Chase Oyster Bar Pty Ltd v Hamo Industries Pty Ltd (2010) 78 NSWLR 393, namely, to provide an efficient mechanism for ensuring cashflow to builders. The “coherent and expeditious” procedure provided by the Act would be undermined if judicial review were available for error of law on the face of the record.

Victorian position

The decision in Shade Systems v Probuild confirms the difference in position between New South Wales and Victoria, where judicial review continues to be available in relation to both jurisdictional error and non-jurisdictional error of law on the face of the record: Hickory Developments Pty Ltd v Schiavello (Vic) Pty Ltd (2009) 26 VR 112, [90], [91] (Vickery J) (Hickory Developments).

In Shade Systems, Basten JA noted that Vickery J in Hickory Developments had remarked upon the risk that the purpose of the security of payment regime would be thwarted by the availability of challenges on “fine points of law”.

Ultimately, the differences between the legislative and constitutional regimes in the two States has led to the differences in the scope of judicial review in those jurisdictions. However, the observations of both Basten JA and Vickery J remain apposite in the Victorian context, where there is significant scope for judicial review of adjudicator determinations.

It seems likely that these differences of approach will be addressed in the forthcoming Federal review of security of payment laws, announced in December last year. Until then, or until such time as the High Court considers the position, the two States will retain their divergent approaches in relation to judicial review.