Probuild Constructions (Aust) Pty Ltd v Shade Systems Pty Ltd [2016] NSWSC 770

The decision in Probuild1 significantly expands the scope for parties to challenge adjudication determinations under the Security of Payment Act2.

It was previously understood that judicial review was only available where an adjudicator had made a jurisdictional error. However, Probuild suggests that a determination may be subject to judicial review where it was made on the basis of an error of law on the face of the record.

This is likely to lead to an increase in the number of challenges to determinations and, ultimately, a reduction in the number of erroneous determinations. On the other hand, it is also likely to undermine the objective of the Security of Payment Act to provide a means of quickly and relatively inexpensively resolving disputes in relation to progress payment claims.

Given the fairly uniform nature of the relevant legislation across Australia, we anticipate that the approach in Probuild will be followed in other jurisdictions. It will be interesting to see whether the various State legislatures seek to amend the legislation to address the consequences of the decision.

The adjudicator’s determination

Shade Systems applied for an adjudication of a payment claim it made against Probuild. Probuild’s response to the adjudication application was that no progress payment was payable on the basis that Probuild was entitled to liquidated damages from Shade Systems. However, the adjudicator determined that Shade Systems was entitled to a progress payment of $277,755.03.

The challenge to the determination

Probuild filed a summons in the Technology and Construction List of the Supreme Court of New South Wales seeking an order under section 69 of the Supreme Court Act3 quashing the adjudicator’s determination. One argument in support of the summons was that the adjudicator had made an error of law on the face of the record by his construction of the provisions of the contract governing Probuild’s entitlement to liquidated damages.

Pursuant to section 69 of the Supreme Court Act, the Court has jurisdiction to quash a tribunal’s determination on the ground that there has been an error of law on the face of the record. The record includes the reasons for decision. Emmett AJA reasoned that this jurisdiction would ordinarily extend to an adjudicator’s determination under the Security of Payment Act because the adjudicator when making the determination is exercising a statutory power. The issue before the Court was whether the Security of Payment Act ousts that jurisdiction. In Brodyn,4 Hodgson JA concluded that the Court could not set aside an adjudicator’s determination if it was made on the basis of a non-jurisdictional error of law.

Emmett AJA held that Hodgson JA’s remarks in Brodyn on this topic were not binding. Emmett AJA accepted that the policy of the Security of Payment Act was to provide for an entitlement to progress payments and a mechanism by which disputes over that entitlement can be resolved with minimal delay. However, his Honour held that was not sufficient to oust the Court’s jurisdiction to subject an adjudicator’s determination to judicial review; express language or a clear implication was required to that effect, and neither was present in the Security of Payment Act. On that basis, Emmett AJA concluded that an adjudicator’s determination could be quashed if it had been made on the basis of an error of law on the face of the record.

Emmett AJA held that the adjudicator had erred in his construction of the contract. The adjudicator’s determination was set aside and the matter was remitted to the adjudicator for re-determination.