Building and Construction Industry Payments Act 2004 (Qld) (Act) – where the adjudicator omitted to consider one backcharge – whether the validity of the determination overall has been impugned – the application of the 'good faith' test to jurisdictional error
This case is significant because it canvasses the question of whether an error of law by an adjudicator will only invalidate their decision if there is also a lack of good faith by the adjudicator. Gotterson JA followed the Brodyn and Holmwood line of authority, Jackson J rejected it and Morrison JA did not adopt it on the facts of this case.
McNab Developments (appellant) issued payment claims to MAK Construction Services (first respondent). The claims went to adjudication, and the adjudicator determined that $241,441.20 was payable by the appellant to the first respondent.
The appellant sought a declaration at first instance that the adjudication decision was void for jurisdictional error. The application was dismissed. The appellant appealed on the bases that:
- the adjudicator did not give the appellant an opportunity to respond to the construction of the contract adopted by the adjudicator before the adjudicator acted upon it;
- the adjudicator's decision to prefer the respondent's interpretation of the contract was unreasonable;
- the adjudicator misapplied the Act;
- the adjudicator wrongly disallowed a number of backcharges; and
- the adjudicator failed to consider one backcharge for $11,727 addressed in the payment schedule and adjudication submissions.
Gotterson JA delivered the leading judgment. The appeal was dismissed unanimously on the basis that there was no jurisdictional error or failure to provide natural justice.
However, Morrison JA and Jackson J disagreed with Gotterson JA in relation to the adjudicator's failure to consider one backcharge for $11,727. This did not change the outcome of this appeal.
Gotterson J followed a line of authority that held that a failure to consider a matter properly raised in a payment schedule, submissions or supporting documentation would only amount to a jurisdictional error if the adjudicator also acted without good faith.
Jackson J expressly rejected this line of authority. Morrison JA and Jackson J held that a failure to consider a matter properly raised in a payment schedule is an error of law on the part of the adjudicator and that good faith, or lack thereof, is not a relevant consideration.
Jackson J stated that on the proper construction of the Act, the legislature could not have intended that failure to consider one backcharge would have the consequence of invalidating the entire adjudication decision. His Honour stated the adjudicator had complied with her obligations under section 26(2) of the Act, but simply by accident or error omitted to deal with one part. This 'accidental slip or omission' could be rectified under section 28 of the Act.
Jackson J noted that there remained instances where lack of good faith is a ground of invalidity for the exercise of an administrative power and could be a jurisdictional error.