14 Feb 2018

On 14 February 2018, the High Court of Australia unanimously decided that an adjudicator’s determination of a construction pay dispute cannot be challenged in a court unless the adjudicator had no power to make that determination.  To say that the determination was based on a misinterpretation of the law or of the relevant construction contract is simply not enough.

This was the long-awaited finding of the High Court in two related cases that were heard and decided at the same time: Probuild Constructions (Aust) Pty Ltd v Shade Systems Pty Ltd [2018] HCA 4 and Maxcon Constructions Pty Ltd v Vadasz [2018] HCA 5. Having been handed down by the highest court in Australia, this is the final word on the question whether an adjudicator’s mistaken interpretation of the law or a contract is enough for a State Supreme Court to review and quash that adjudicator’s payment award.  The High Court’s answer to that question in each case was a resounding no.

The adjudication awards under challenge in both cases had been made under similar security of payment legislation: the NSW legislation in the case of Probuild and the South Australian legislation in the case of Maxcon.  Security of payment legislation in these two States, as in the other eastern States of Australia, is so similar that it is often referred to collectively as the “East Coast Model”.  This reference is meant in contrast to the “West Coast Model” of rapid pay dispute adjudication that applies in Western Australia under the Construction Contracts Act 2004.  This raises the question: is it arguable that the High Court’s reasoning does not apply in WA because of differences between the East Coast and West Coast Models?  We think the answer is no.

Basically, the High Court’s reasoning was consistent with earlier reasoning of the NSW Court of Appeal in Brodyn Pty Ltd t/as Time Cost and Quality v Davenport and Anor [2004] NSWCA 394.  In that case, as in the two High Court decisions, it was recognised that rough and ready, pay-now-argue-later determination of construction payment disputes was so fundamental to the purpose of security of payment legislation that it would simply not work to have adjudication awards bogged down in judicial review proceedings every time an adjudicator misinterpreted the law or a construction contract.  It was decided in Brodyn and has now been affirmed by the High Court, that this fact, together with the fact that adjudication awards do not finally determine the rights of the parties to a construction contract, support the conclusion that security of payment legislation takes away the State Supreme Courts’ power to review and quash a adjudication award unless the adjudicator had no legal power to make that award.  Unusually, this was found by both the NSW Court of Appeal and by the High Court to be the correct way to interpret security of payment legislation even though that legislation does not expressly say that it is intended to take away the Supreme Courts’ power to review adjudication awards.

The WA Supreme Court considered whether adjudication awards under the West Coast Model could be reviewed and quashed because of a mistaken interpretation of the law or a construction contract in O’Donnell Griffith Pty Ltd v John Holland Pty Ltd [2009] WASC 19.  In that case, Beech J reached the same conclusion (that the answer is no) and gave substantially the same reasons as did the Court in Brodyn and at several points in his judgment, Beech J expressly applied Brodyn.  Since the WA Supreme Court’s refusal in O’Donnell Griffin to allow an adjudication award to be challenged was based on the reasoning in Brodyn and since the reasoning in Brodyn has now been approved by the High Court, it follows, in our view, that in WA, as on the East Coast, the possibility that an adjudication award might be challenged for any reason other than the adjudicator lacking the power to make it, has been foreclosed throughout Australia.

DANIEL MORRIS | Download as pdf

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 at reception@hhg.com.au or call us on 1800 609 945.

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