23 Feb 2017

In an earlier article, we looked at how the High Court appeal in Southern Han Breakfast Point Pty Ltd (in Liquidation) v Lewence Construction Pty Ltd & Ors [2016] HCA 52 (“Southern Han”) promised to open the way to challenging adjudicators’ determinations without the need to show jurisdictional error.

This was expected to mark a substantial change in the position that only “jurisdictional error” could ground judicial review: Brodyn v Davenport [2004] NSWCA 394, Chase Oyster Bar [2010] NSWCA 190, applied in WA in Perrinepod [2011] WASCA 217 and O’Donnell Griffin [2007] WASC 215.

The need for “jurisdictional error” has effectively protected adjudicators’ determinations of construction pay disputes from review by the courts, except where the adjudicator could be shown to have had no power to make the challenged determination. Examples of what courts in WA have treated as jurisdictional errors appear in our earlier articles linked below:

                        1) HHG Construction Law Series Part 13

                          2) Court clarifies adjudicator’s role in constructions payment claims

                        3) HHG Construction Law Series Part 8


Free of the need to find “jurisdictional error”, Supreme Courts around Australia might have gained power to overturn adjudicators’ determinations of construction payment disputes based on any misunderstanding of the law.

This change was expected to result from the following developments in the courts:

a)            In Shade Systems [2016] NSWSC 770, NSW Supreme Court Acting Justice Emmett denied that any such distinction between jurisdictional and non-jurisdictional error applied and proceeded to overturn an adjudicator’s decision based on a simple (and not “jurisdictional”) error of law: that is, the adjudicator assumed Probuild was burdened with the onus of demonstrating that Shade Systems was as fault for failing to achieve practical completion by set date before being entitled to liquidated damages.

b)            At about the same time, the contractor’s senior counsel in Southern Han argued in a High Court special leave application (seeking permission to appeal to the High Court from the NSW Court of Appeal), that the High Court should consider following Emmett AJ in Shade Systems.  Senior counsel also pointed to similar doubts about the need for jurisdictional error that Basten JA of the NSW Court of Appeal had expressed earlier in Chase Oyster Bar.

So far, so good.  Then, in a surprise turn of events:

a)            Emmett AJ’s decision in Shade Systems was overturned in a special appeal, determined by five judges of the NSW Court of Appeal instead of the usual three:  Shade Systems Pty Ltd v Probuild Constructions (Aust) Pty Ltd (No 2) [2016] NSWCA 379; and

b)            the contractor’s senior counsel in Southern Han abandoned his argument concerning jurisdictional error and instead, argued that the error in that case concerned a ‘jurisdictional fact’.

As we read the judgments of both the High Court in Southern Han and the NSW Court of Appeal in Shade Systems, neither has foreclosed on the possibility that the need to show jurisdictional error will be dispensed with in the future. Rather, the NSW Court of Appeal simply said that this was a matter for the High Court to determine. Meanwhile, the High Court said that ‘jurisdictional fact’ was nothing more than a convenient ‘label’ and attaching that label to the contractor’s argument added nothing to the court’s analysis of the legislation governing the adjudicator’s powers. That this was the only reference to the concept of ‘jurisdictional fact’ in the entire Southern Han judgment suggests that jurisdictional error was not integral to the Court’s decision in that case. This raises the question whether the High Court might in future, if the issue were squarely raised for its consideration, dispense with the jurisdictional/non-jurisdictional distinction altogether.

Even if this distinction were to be dispensed with altogether, that may only affect adjudicators’ determinations in the east coast. This is because the security of payment provisions in WA’s Construction Contracts Act 2004 limits the courts’ power to review and overturn adjudicators’ determinations in a way that its east coast counterparts do not.

The WA Act does this by expressly providing at section 46 that only a decision or determination of an adjudicator cannot be reviewed by the Court unless it relates to decision by the adjudicator to dismiss the application:

There is no such express limitation (known as a “privative clause”) on the courts’ power to review and overturn adjudicators’ determinations anywhere in the east coast security of payment statutes.

WA’s privative clauses may mean that courts in WA will continue to apply the jurisdictional/non-jurisdictional distinction, even if that distinction is ultimately dispensed with on the east coast.

Consistently with our commitment to the construction community, we will continue to keep construction contractors and their principals updated on developments in this important and rapidly changing area of security of payment law.

This is general information only, and does not constitute specific legal advice. If you would like further information in relation to this matter or other legal matters please contact our office on Freecall 1800 609 945 or email us now


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