Court of Appeal decision relating to claim to extend operation of Building and Construction Industry Security of Payment Act 1999

29/05/2017

The Court of Appeal in New South Wales has recently considered an appeal on a case over the Security of Payments Scheme under the Building and Construction Industry Security of Payment Act 1999 (NSW) which could have greatly altered that scheme.

The case is called Probuild Constructions v Shade Systems and was heard by the Court of Appeal on 5 December 2016.

Shade Systems applied for an Adjudication under the Security of Payments Scheme in New South Wales for about $215,000 for work that Shade Systems carried out for Probuild.

In NSW under the Security of Payments Scheme, a building contractor who has undertaken work can issue an appropriate Payment Claim under the Building and Construction Industry Security of Payment Act.  If payment is not made, the Builder can apply for an Adjudicator to decide whether the Contractor is owed money.

The adjudication scheme has the advantage that the contractor does not need to engage in a costly and lengthy court case and can apply to the Adjudicator for a decision.

Adjudications involve the preparation of a relatively small number of documents.

Shade Systems prepared its application and submitted it for Adjudication.

The Adjudicator then considered the documents from the parties and made the decision namely that Probuild should pay Shade Systems the amount of $277,755.03. This was more than $60,000 greater than the amount Shade System had originally claimed. The effect of this award was that Shade Systems could go to a Court and register a certificate for $277,755.03 and proceed to apply for judgment so as to recover the money.

The right of appeal from an Adjudicator’s decision is limited.  See for example the decision in Chase Oyster Bar in which Watson & Watson acted for Chase Oyster Bar.

Probuild made an application to the Supreme Court for “judicial review” alleging that the Adjudicator had made errors of law while preparing his decision.

The problem for Probuild was that various cases in NSW had been decided on this point (including the Chase Oyster Bar case) which held that one could only appeal if there was one type of legal error, namely a “jurisdictional error”.

Probuild was effectively asking the court to expand the ways parties to Adjudications could appeal.   If accepted this might have had the effect that adjudication applications and determinations could become more like court cases and so lose some of their usefulness.

Probuild’s application to the Supreme Court was decided on 15 June 2016 when His Honour Justice Emmett decided the case. His Honour decided in favour of Probuild and effectively expanded the grounds of review in adjudication cases. He decided that where an Adjudicator makes an error of law it may be possible to appeal.

A party was not restricted to establishing “jurisdictional errors” by the Adjudicator to have a successful appeal.

Shade Systems who lost the case before Justice Emmett then lodged an appeal against his decision to the Court of Appeal.

The Court of Appeal of the Supreme Court of New South Wales heard the case on
5 December, 2016.

On 23 December 2016 the Court of Appeal gave its decision. Unusually for that Court, five judges (rather than three) heard the appeal.

The result of the case was that all five judges allowed the appeal and overturned the decision of Justice Emmett. The Court did not agree with Probuild in its argument that the Adjudicator had made errors of law in terms in which an appeal would be allowed from the Adjudicator’s decision. The Court repeated that the only thing that could be challenged by appeal to the Court was a “jurisdictional error”. 

Probuild accordingly lost the appeal and the result was that it was unable to challenge the Adjudicator’s Determination against it.

Watson & Watson, Building and Construction lawyers can assist in advising you on building issues, contracts and disputes. Please feel free to contact Richard Watson or his assistant Shereen Da Gloria if you have any enquiries or concerns in this regard.