25 Mar 2018

We recently reported on the decision in Probuild Constructions (Aust) Pty Ltd v Shade Systems Pty Ltd [2018] HCA 4.  There, the High Court held that Australian security of payment legislation did not allow adjudicators’ decisions to be challenged for:

  • misinterpreting contracts; or
  • misinterpreting the law.

The High Court did, however, reaffirm the position that State Supreme Courts around Australia had been taking, that adjudications could be challenged based on “jurisdictional errors”.

This raises the question: what is a jurisdictional error?

Justice Pritchard of the WA Supreme Court sheds light on this question in Total Eden Pty Ltd v Charteris [2018] WASC 60.

Her Honour reminds us that a jurisdictional error is basically a mistake about the nature and limits of an adjudicator’s role under security of payment laws. So, for example, as Justice Chaney had said in Delmere Holdings v Green [2015] WASC 148, adjudicators are constrained by the contract in determining a construction payment dispute.

In WA, adjudicators who search for a legal basis to determine a construction payment dispute outside the four corners of the contract overstep the limited powers that the legislature has given to them. They therefore commit jurisdictional error.

Such decisions will still be quashed by a State Supreme Court despite the High Court’s decision in Probuild.

In the case of Total Eden, the adjudicator made the following errors about the proper limits of his powers under WA’s security of payment legislation, which is found in the Construction Contracts Act 2004:

  • he implied a term about the timing of payments into a contract which already had an express term in it about the timing of payments and then ignored that express term;
  • he implied into the same contract, a term that if the principal did not respond to a payment claim within a certain period, this meant that the claim would be deemed accepted in full, even though the contract said no such thing; and
  • he relied on provisions that appear in some standard form contracts, but did not appear in the contract that he had to interpret; and
  • he relied on what he called “common-place, fair and reasonable etiquette”.

All these errors involved the adjudicator looking beyond the terms that were either expressed in the contract or that the law says adjudicators are allowed to imply into the contract. These are jurisdictional errors because the Construction Contracts Act says that in WA, an adjudicator can only award payments that the construction contract entitles the contractor to be paid.  In other words, the adjudicator is constrained by the contract.

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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