The Opal Tower case: Claim by Builder for payment - Update on recovery under the Security of Payments legislation

25/01/2019

The Opal Tower building at Australia Avenue at Sydney Olympic Park has recently been in the news. Various people noticed cracking in this multi-storey apartment building in January 2019.  After investigation all of the residents left the building and after many weeks have not returned. It is not known when the extent and nature of the defects in the building will be ascertained and how and when the building will be repaired.

However the Opal Tower also made the news in late 2018 when a dispute between its Builder reached the NSW Court of Appeal. In that case the Court gave a further example of the rule that appeals against Adjudicators’ decisions under the Building Industry Security of Payments legislation are difficult to mount except on specific grounds.

That case Icon Co (NSW) Pty Limited v Australia Avenue Developments Pty Limited (Australia Avenue) was decided on 21 December 2018. 

Australia Avenue was the developer which organised the building of the structure. Icon Co was the Head Contractor which carried out building work at the request of Australia Avenue.  Icon Co claimed it had carried out work and issued invoices to Australia Avenue for payment.  Australia Avenue had not paid the invoices and the Builder Icon Co had made a claim to an Adjudicator for an award of the amounts claimed. This process took place under the provisions of the Building Industry Security of Payments legislation in NSW.

This legislation was enacted to allow Builders and sub-contractors to obtain payment for building work without the delays inherent in normal court proceedings. The process is that a Builder serves a document called a Payment Claim on the party who has engaged the Builder (the Principal). If the Principal rebuts the claim, he or she must serve on the Builder a Payment Schedule which sets out the reasons why the Principal disputes the claim. Following this the Builder is entitled to make an application to a person called an Adjudicator who has the task of deciding whether and the extent that the claim is payable.

Once the Adjudicator has made his or her decision the Claimant (in this example the Builder) seeking payment can have a Certificate issued for the amount determined by the Adjudicator as payable which can be filed in Court as a court judgment. The whole process is streamlined so that a claim can be considered and made in a short period of time.

In particular, parties to the dispute who are unhappy with the decision cannot appeal the decision except on narrow grounds. The grounds are that there is a jurisdictional error. A jurisdictional error is where an Adjudicator hears a case which the law says he or she cannot hear.   This is what occurred in the case of Chase Oyster Bar (Chase) v Hamo Industries Pty Limited (Hamo) [2010] NSWCA 190 decided 24 September 2010 in which Chase claimed money from Hamo.  We refer to our article 30 March 2016.

Watson & Watson acted on behalf of Chase in 2010 which the Supreme Court of NSW set out the law relating to jurisdictional error overturning numerous cases decided in the years before the Chase case.

Since that time there have been numerous cases claiming jurisdictional error.  However as we have indicated jurisdictional error is a narrow issue.  The mere error by the Adjudicator is not a jurisdictional error.

Apart from appeals on jurisdictional grounds, there are no appeals from Adjudicators’ decisions.  Any amount that the Adjudicator decides is payable is required to be paid within a short period of time.

However if either party is unhappy with the decision of the Adjudicator, that party can bring separate Court proceedings to determine what sum is the appropriate sum to be paid.

In the Icon Co case, Icon Co had carried out some work for which it claimed it had not been paid. Icon Co prepared a Payment Claim and served it on Australia Avenue. Australia Avenue served its Payment Schedule disputing the claim.  The dispute was referred to an Adjudicator who considered the matter, determined an amount was payable and gave a decision with reasons.

Australia Avenue considered the decision and formed the view that the Adjudicator had made some errors in her decision on the dispute. Australia Avenue said that the Adjudicator had incorrectly included in her decision some amounts which were not the subject of the Payment Claim and so were not able to be considered by the Adjudicator or included in her final determination.

The Supreme Court in the initial judicial review hearing held that the adjudicator had made a jurisdictional error and it allowed Australia Avenue’s appeal and set aside the determination.

However Icon Co then appealed to the Court of Appeal which found differently. The Court of Appeal initially considered whether the Adjudicator had properly calculated the amount claimed. However, after reviewing the arguments, it stated that an error by the Adjudicator in construing the contract or in understanding the payment claim does not constitute jurisdictional error. The Court of Appeal went on to say there was no appealable error in the case.

The Court of Appeal has in this case repeated the principle that an error of fact or law does not give grounds to a party to an Adjudication to appeal a decision. The only basis that an aggrieved party can succeed on appeal is if there is a jurisdictional error.

This case has effectively overruled some recent decisions of the Supreme Court which had set aside on Adjudication Determination where there was no jurisdictional error.  Some of those cases had not previously been appealed.  In cases where no appeal was lodged, the original decisions still stand and the amount as determined by the Adjudicator became payable.

The aggrieved party must pay the adjudicated amount however, can re-litigate the matter in a Court and claim return of the any overpayment.

There are critical time requirements to bring or defend a claim under the Building & Construction Security of Payment Act.

Watson & Watson are experts in building and construction law and can advise you on all aspects of the law of these areas.  If you have any concerns regarding a claim or proposed claim under the Building & Construction Security of Payment Act and seek clarity as to a potential “jurisdictional error”, its ramifications and the recourse available to you to achieve a resolution, please contact Richard Watson Accredited Specialist Building & Construction or his Personal Assistant Shereen Da Gloria to discuss your concerns and seek the appropriate advice.

This is only a preliminary view and is not to be taken as legal advice without first contacting Watson & Watson Solicitors on 02 9221 6011.