Probuild Constructions v Shade Systems [2018] HCA 4: Jurisdiction over Progress Payment Adjudication
Wednesday 14 February 2018 @ 2.18 p.m. | Legal Research | Trade & Commerce
The High Court has handed down a decision in security of payments jurisdiction case, finding unanimously that the Supreme Court of New South Wales does not have jurisdiction to make an order in the nature of certiorari to quash a determination made under the Building and Construction Industry Security of Payment Act 1999 (NSW) ("the Security of Payment Act") by an adjudicator. Chief Justice Kiefel and Justices Bell, Keane, Nettle and Gordon wrote a joint judgment, with Justice Gageler writing a separate but concurring judgment.
Facts
The companies involved in the case, Probuild Constructions (Aust) Pty Ltd ("Probuild") and Shade Systems Pty Ltd ("Shade Systems"), were parties to a building contract involving the supply and installation of louvres for an apartment block. In December 2015, Shade Systems served on Probuild a claim for a progress payment under the Security of Payment Act in the amount of $294,849.33, excluding GST. In January 2015, Probuild provided a payment schedule disputing Shade Systems' claim, and contenting it was entitled to set off an amount of $1,089,900 against the claim for liquidated damages.
Shade Systems applied for adjudication of its claim and was successful, with the adjudicator determining that Probuild should pay $277,755.03 for the progress payment. The adjudicator rejected Probuild's liquidated damages claim, "on the basis that liquidated damages could not be calculated until either "practical completion" (being actual completion of the works) or termination of the subcontract" [at 22].
Probuild sought an order in the nature of certiorari quashing the determination of the adjudicator at the Supreme Court of NSW. At first instance, the primary judge granted the order, finding that there was error of law on the face of the record on two bases, "first, the adjudicator erroneously considered that no entitlement to liquidated damages arose until practical completion or termination of the subcontract; and second, the adjudicator erroneously considered that Probuild needed to demonstrate that Shade Systems was at fault for the delay for which it claimed liquidated damages." at [23]
Shade Systems appealed, with the only question on appeal, "whether the Security of Payment Act excluded the jurisdiction of the Supreme Court to make an order in the nature of certiorari for error of law on the face of the record" [at 24]. The Court of Appeal of the Supreme Court of New South Wales found that the jurisdiction was ousted, and overturned the primary judge's decision.
Probuild then appealed to the High Court.
Decision
The High Court agreed with the Court of Appeal, with the majority finding that:
"The Security of Payment Act evinces a clear legislative intention to exclude the jurisdiction of the Supreme Court to make an order in the nature of certiorari to quash an adjudicator's determination for non-jurisdictional error of law on the face of the record." [at 35]
The majority decision considered a number of factors, including the intended object of the Act, to determine the standing of parties expeditiously and in a self-contained fashion, and the informal procedures used by the adjudicator to come to the conclusion.
The majority rejected Probuild's argument that allowing the adjucator's decision to stand, given that it was erroneous, was "manifestly absurd", saying:
"A non-jurisdictional error of law may have serious consequences. But those consequences are dealt with by s 32 of the Security of Payment Act. The limited exclusion of review does not irrevocably entrench the consequences of an erroneous determination. Where it is contended that an adjudicator has made an error of law within jurisdiction, resulting in a progress payment that is inadequate or excessive, the dispute may be resolved through civil proceedings under the construction contract. If necessary, a restitutionary order can be sought." [at 51]
TimeBase is an independent, privately owned Australian legal publisher specialising in the online delivery of accurate, comprehensive and innovative legislation research tools including LawOne and unique Point-in-Time Products. Nothing on this website should be construed as legal advice and does not substitute for the advice of competent legal counsel.
Sources:
Probuild Constructions (Aust) Pty Ltd v Shade Systems Pty Ltd [2018] HCA 4 (14 February 2017) & judgment summary
