Insights / February 13th, 2018

Security of Payment : D-Day for Adjudication

A decision that may potentially shake up the construction industry and depart from a long standing decision limiting the grounds of review of an adjudicator’s decision is due to be handed down by the High Court on the morning of Wednesday, 14 February 2018.

As the law currently stands, an error of law on the face of the record does not constitute a ground of review of an adjudicator’s decision. This allows an adjudicator to get the law wrong yet not have his/her adjudication set aside.

The High Court has now had to consider the validity of this position. Should the High Court depart from the current position, this may significantly increase a party’s grounds to appeal an adjudicator’s decision.

How did we get here

Several cases have established the position that an adjudicator’s determination could only be challenged if:

  1. there had been a failure to comply with the basic and essential elements of the Security of Payments legislation (in NSW);
  2. the determination was not a bona fide attempt to exercise powers granted under the act;
  3. there was a denial of natural justice; or
  4. there was a jurisdictional error of law (being an error of law that goes to the jurisdiction of the adjudicator).

This means that an adjudicator could commit a non-jurisdictional error of law and an aggrieved party would have no right to seek to overturn the determination.

In late 2016, the NSW Court of Appeal confirmed in Probuild[1] that an “error of law on the face of the record” was not a ground of review of an adjudicator’s decision. One reason for this was the Court’s view that a contrary finding would have undermined the purpose of the Security of Payments legislation, namely fast resolution of payment disputes.

In early 2017, Blue J (with the concurrence of Lovell J) of the South Australian Supreme Court in Vadasz[2], held that, whilst he could not conclude that the South Australian Security of Payment Act excluded reviews on the basis of an error of law on the face of the record, his Honour felt bound to follow the Probuild decision.

The findings in both cases above were the subject of appeal to the High Court which has indicated that it will hand down its decision on whether an error of law on the face of the record is a ground of review on Wednesday 14 February 2018.

If the High Court finds that an error of law on the face of the record does permit a party to seek a review of an adjudicator’s decision by the Courts, this will fundamentally change the practical operation of the various Security of Payments acts.

We will provide you with a further update on the decision tomorrow when the judgment is delivered.

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

[2] Maxcon Constructions Pty Ltd v Vadasz (No 2) [2017] SASCFC 2.