Review of Adjudication Decisions under the Building and Construction Industry Payments Act 2004

What was the effect of the amendment?

The result of the amendment was to add Part 3, Division 2 of the BCIPA to the list of enactments to which the JRA does not apply.

Section 18 of the JRA provides that the JRA has effect despite any law in force at its commencement, but that the JRA does not apply to decisions made, proposed to be made, or required to be made under an enactment mentioned in Schedule 1, Part 2⁴.

Objects of BCIPA and role of Adjudicators

The operative provisions of the BCIPA commenced on 1 October 2004. The Act substantially mirrors the New South Wales equivalent legislation, the Building and Construction Industry Security of Payments Act 1999 (NSW) (the “NSW Act”)⁵.

The Objects of the BCIPA are set out in section 7:

“The object of this Act is to ensure that a person is entitled to receive, and is able to recover, progress payments if the person —

(a)    undertakes to carry out construction work under a construction contract; or

(b)    undertakes to supply related goods and services under a construction contract.”

Part 3, Division 2 of the BCIPA deals with adjudication of disputes.  

Position in New South Wales

Review in New South Wales is sought pursuant to s 69 of the Supreme Court Act 1970⁶ which relevantly provides:

“69    Proceedings in lieu of writs

(1)    Where formerly:

(a)      the Court had jurisdiction to grant any relief or remedy or do any other thing by way of writ, whether of prohibition, mandamus, certiorari or of any other description, or…..

then, after the commencement of this Act:

(c)      the Court shall continue to have jurisdiction to grant that relief or remedy or to do that thing; but

(d)      shall not issue any such writ, and

(e)      shall grant that relief or remedy or do that thing by way of judgment or order under this Act and the rules, and

(f)      proceedings for that relief or remedy or for the doing of that thing shall be in accordance with this Act and the rules…..”.

The New South Wales Court of Appeal has consistently held that review of adjudication decisions under the NSW Act is not available for non-jurisdictional error of law and that the NSW Act discloses a legislative intention to give an entitlement to progress payments, and to provide a mechanism to ensure that disputes concerning the amount of such payments are resolved with the minimum of delay⁷. However, the Court has held that for a document purporting to be an adjudicator’s determination to have the strong legal effect provided by the NSW Act, it must satisfy whatever conditions are laid down by the Act as essential for there to be such a determination.

The basic and essential requirements for the existence of an adjudicator’s determination have been held to include the following:

1. The existence of a construction contract between the Claimant and the Respondent to which the Act applies.
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.
5. The determination by the adjudicator of that application by determining the amount of the progress payment, the date on which it becomes or became due and payable, the rate of interest payable, and the issue of a determination in writing.

Hodgson JA also held that the policy of the NSW Act did not require exact compliance with all of the more detailed requirements of that Act to be essential to the existence of a valid determination⁸.

At [55] Hodgson JA said:

His Honour also indicated that if there was fraud on the claimant in which the adjudicator was involved, the determination would be void because the adjudicator had not bona fide attempted to exercise the power. If the determination was induced by fraud on the Claimant, in which the adjudicator was not involved, His Honour was inclined to think that the determination was not void, but voidable, and was liable to be set aside in proceedings of the kind appropriate to judgments obtained by fraud¹⁰.

Where the adjudicator’s determination is void for one of the abovementioned reasons then until it is filed as a judgment, proceedings can be brought in a Court with jurisdiction to grant declaratory and/or injunctive relief, to establish that it is void and to prevent it being filed. However, once it is filed, the resulting judgment is not void and it would be necessary to bring an application to set aside the judgment¹¹.

Declaratory relief in Queensland

Section 128 of the Supreme Court Act of 1995 provides:

Parties aggrieved by adjudication decisions are still able to apply to the Supreme Court seeking declaratory and/or injunctive relief, pursuant to s 128 of the Supreme Court Act of 1995.

The question is, what grounds might be available on such an application.  

Possible grounds for declaratory relief

A misinterpretation of a material provision of a building contract, involves an error of law¹³.  

There does not appear to be any policy reason why an error of that nature could not properly be the subject of an application for declaratory and injunctive relief, notwithstanding the amendments made to the JRA referred to previously herein¹⁴.

Where fraud of the type described by Hodgson JA in Brodyn at [60] can be demonstrated, there seems little doubt that an aggrieved party would have a right to seek declaratory and injunctive relief.

There is some question whether or not a party aggrieved by an adjudication decision can seek review of that decision on the same sorts of grounds as those which were discussed by Hodgson JA in Brodyn, at [55].

In Hodgson JA’s view, any such non-compliance by an adjudicator will result in the determination being void and it would not be necessary to seek certiorari to quash the decision. A Court of competent jurisdiction could grant appropriate declaratory and injunctive relief in such circumstances.

The correctness of this part of His Honour’s decision has not been seriously doubted in any subsequent decision of the New South Wales Court of Appeal. However, the situation in New South Wales is somewhat different to Queensland because New South Wales does not have a Judicial Review Act, and review pursuant to s 69 of the Supreme Court Act NSW for orders in the nature of prohibition, mandamus and certiorari has not been excluded by any provision of the NSW Act, or otherwise.

In Queensland, relief by way of prerogative orders and prerogative injunctions has been excluded as a result of the amendments made by the Justice and Other Legislation Amendment Act 2007¹⁵.

Hodgson JA discusses some of these issues at [56] — [58] of his reasons in Brodyn. His Honour refers to the decision of the Privy Council in Anisminic Ltd v Foreign Compensation Commissioner¹⁶ and the decision of the High Court in Craig v South Australia¹⁷.

If the adjudicator’s decision is void as a result of an error of law which goes to the adjudicator’s jurisdiction to make the decision, then it does seem to be me that a Court of competent jurisdiction¹⁸ would have jurisdiction to grant declaratory and injunctive relief, notwithstanding the amendments to the JRA resulting from the Justice and Other Legislation Amendment Act 2007.

This could mean that the scope for review is quite broad because the sorts of errors which can amount to a jurisdictional error have been redefined by the High Court in such cases as Craig v South Australia ¹⁹.  

In Yusuf²⁰, Justices McHugh, Gummow and Hayne JJ said, at [82]:

The only case which seems to have been decided after the amendment to the JRA, referred to previously herein, is the decision of Skoien AJ in Hitachi Ltd v O’Donnell Griffin Pty Ltd²¹. That decision involved the hearing of two applications together. Both applications arose out of an engineering subcontract between Hitachi Ltd (“Hitachi”), as head contractor, and O’Donnell Griffin Pty Ltd (“ODG”), as subcontractor.

The grounds in support of Hitachi’s application were as follows:

(a)    The adjudicator failed to consider the payment schedule and submissions properly made in the adjudication response, as required of the Second Respondent by the BCIPA, s 26(2)(d);

(b)    The adjudicator failed to include reasons for the adjudication decision, as required by BCIPA s 26(3)(b);

(c)    The adjudicator failed to provide the measure of natural justice required to be dispensed by adjudicators acting under the BCIPA; and

(d)    The adjudicator failed to act reasonably, and bona fide, in making the adjudication decision.

His Honour considered the grounds at [43] — [61], and seems to have accepted that the grounds referred to in the NSW decisions referred to herein were available in Queensland. He rejected each ground in the circumstances of that case.

His Honour then considered the ODG application.

His Honour gave some detailed consideration to the scope for arguments of abuse of process,²² and denial of natural justice,²³ in applications for declaratory relief. His Honour concluded, at [96], that for the reasons that he gave, Hitachi had committed a material abuse of process in the second adjudication application which led to a denial of natural justice to ODG, and that the adjudication decision therefore had to be set aside. His Honour also concluded that there was a denial of natural justice by reason of apprehended bias in relation to the second adjudication decision which was the subject of the application by ODG. His Honour declared the adjudication decision of the second adjudicator as void, and of no effect, and ordered that it be set aside²⁴.

Summary and conclusion

As appears from the foregoing, there is continued scope for judicial review of adjudication decisions made pursuant to Part 3, Division 2 of the BCIPA. The grounds of review are likely to be similar to the grounds available in New South Wales, pursuant to s 69 of the Supreme Court Act 1970 (NSW), although it is arguable that the grounds available might be narrower in Queensland as a result of the aforesaid amendments. 

If declaratory relief can be sought wherever there has been jurisdictional error resulting in the decision under review being void, as opposed to voidable, then the scope of review would be quite broad, and not materially different to the position which pertained prior to the aforesaid amendments. Given the number of adjudications in Queensland, and the amounts which are frequently involved in those adjudications, it seems likely that parties will continue to seek judicial review in appropriate cases, notwithstanding the aforesaid amendments.

Peter Bickford
 

Footnotes

1. No 37 of 2007; the “JOLA”.
2. See 2007 SL No 241.
3. See State of Queensland v Epoca Constructions Pty Ltd [2006] QSC 324 [16] — [35]; JJ McDonald & Sons Engineering v Gall [2005] QSC 305; ACN 060 559 971 Pty Ltd v O’Brien [2007] QSC 91, at [16]; however, applications could be stayed or dismissed pursuant to s 48 JRA, having regard to s 100 BCIPA; see Intero Hospitality Projects Pty Ltd v Empire Interior (Australia) Pty Ltd [2008] QCA 83; see also Minimax Fire Fighting Systems Pty Ltd v Bremore Engineering (WA) Pty Ltd [2007] QSC 333 at [51] — [53]; Altys Multi-Services Pty Ltd v Grandview Modular Building Systems Pty Ltd [2008] QSC 26, at [36] — [39].
4. See subparagraph 18(2)(b) JRA; the tentative obiter views expressed by Chesterman J in Intero, supra, at [60] — [61], would not, with respect, appear to be correct; see Bezzina Developers PL v Deemah Stone (Qld) PL [2008] QCA 213, per Fraser JA, at [75], fn 25. 
5. The Chief Justice in Can’t Contracting Pty Ltd v Casella & Anor [2006] QSC 242, at [11] — [12], has described the New South Wales Act as “comparable” with the BCIPA. 
6. No 52 of 1970. 
7. See Brodyn Pty Ltd trading as Time Cost and Quality v Davenport (2004) 61 NSWLR 421, at [51], per Hodgson JA. 
8. See Project Blue Sky Inc v Australian Broadcasting Authority (1998) 194 CLR 355, at 390-391; Hodgson JA at [55]. 
9. See R v Hickman; Ex parte Fox and Clinton (1945) 70 CLR 598.  
10. See paragraph [60]. 
11. See [61]; see also Transgrid (a statutory state owned corporation) v Siemens Limited & Anor (2004) 61 NSWLR 521, at [28] — [30]; Bitannia Pty Ltd & Anor v Parkline Constructions Pty Ltd (2006) 67 NSWLR 9; Halkat Electrical Contractors Pty Ltd v Holmwood Holdings Pty Ltd [2007] NSWCA 32, [24] — [29]; Downer Construction (Australia) Pty Ltd v Energy Australia & Ors (2007) NSWLR 72. 
12. See also section 58 of the Constitution of Queensland Act 2001. 
13. See Pioneer Shipping Ltd v BTP Tioxide Ltd (“the Nema”) [1982] AC 724; Re Caf-Grains [1994] 2 Qd R 252; Abel Point Mariner (Whitsundays) Pty Ltd v Uher [2006] QSC 295; Hervey Bay (JV) Pty Ltd v Civil Mining and Construction Pty Ltd [2008] QSC 58. 
14. See, for example, the approach taken by McMurdo J in Hervey Bay (supra), where submissions were made on behalf of the Respondent that the application for  review should be stayed or set aside relying upon ss 13(b) and 48 of the JRA. 
15. As discussed previously herein. 
16. (1969) 2 AC 147. 
17. (1995) 184 CLR 163, at 177; and a number of other decisions which dealt with the question whether or not a denial of natural justice generally results in voidness or voidability.  The better view is that a decision which involves a denial of natural justice, where natural justice is required to be observed by the decision-maker, does result in the decision being void, rather than voidable; see, for example, Minister for Immigration v Multi-Cultural Affairs v Bhardwaz (2002) 209 CLR 597, at 630-634. 
18. In this state that would be the Supreme Court of Queensland. 
19. Supra; Minister for Immigration and Multicultural Affairs v Yusuf (2001) 206 CLR 323; Plaintiff S157/2002 v Commonwealth of Australia (2003) 211 CLR 476; Re Minister for Immigration and Multicultural and Indigenous Affairs & Anor; Ex parte Applicants S134/2002 (2002) 211 CLR 441 and Re Minister for Immigration and Multicultural Affairs; Ex parte S20/2002; Appellant S106/2002 v Minister for Immigration and Multicultural Affairs (2003) 77 ALJR 1165. 
20. Supra. 
21. [2008] QSC 135. 
22. At [89] — [96]. 
23. At [97] — [104]. 
24. See [108].