Shade Systems Pty Ltd v Probuild Constructions (Aust) Pty Ltd (No 2)

1. [1]

   BATHURST CJ and BEAZLEY P: We agree with the orders of Basten JA and with his conclusion that, as a matter of construction of the Building and Construction Industry Security of Payment Act 1999 (NSW) judicial review of a determination of an adjudicator is precluded except for jurisdictional error. In those circumstances we do not find it necessary to deal with the scope of the principle of legality.

2. [2]

   BASTEN JA: By way of an adjudication under the Building and Construction Industry Security of Payment Act 1999 (NSW) (“the Security of Payment Act”) the appellant, Shade Systems Pty Ltd, became entitled to a progress payment of some $277,000, payable by the first respondent, Probuild Constructions (Aust) Pty Ltd (“Probuild”). Probuild commenced proceedings in the Equity Division seeking judicial review of the determination of the adjudicator. On 15 June 2016 Emmett AJA quashed the determination. [1]

3. [3]

   Before the primary judge, Probuild relied upon two grounds of challenge to the adjudicator’s decision, namely (a) a denial of procedural fairness and (b) an error of law on the face of the record. The first ground, if made good, would have established jurisdictional error entitling Probuild to have the award set aside. The primary judge rejected that challenge. However, the judge accepted the error identified in the alternative ground and held that the Court had jurisdiction to quash an adjudicator’s determination under the Security of Payment Act for error of law on the face of the record.

4. [4]

   Shade Systems lodged an appeal with this Court. The primary ground of appeal (and the only one pressed at the hearing) was that the primary judge was in error in failing to accept that, in accordance with established authority, there was no power to intervene on the basis of an error of law on the face of the record, not constituting jurisdictional error. The primary authority relied upon for the proposition that an adjudicator’s determination could not be quashed for error of law on the face of the record was the decision of this Court in Brodyn Pty Ltd v Davenport. [2]

5. [5]

   Probuild denied that Brodyn stood for that position. If, contrary to its primary submission, there was indeed binding authority as alleged by the appellant, Probuild sought to reopen that authority. Given the real possibility that such a course might prove necessary in order to address Probuild’s case, a five judge bench was constituted to hear the appeal.

Reopening application

1. [6]

   The appellant submitted that Brodyn was a binding authority which precluded the primary judge upholding the challenge on the basis of non-jurisdictional error of law. If that were not so, it was nevertheless of persuasive authority and should have been followed by the primary judge. Even if that submission were to be rejected, the principle established by Brodyn had in fact been applied regularly by single judges, both in this State and interstate, and it would not be appropriate to reopen that decision. Finally, the appellant submitted that if the Court were minded to reopen the decision, it should nevertheless uphold the principle.

2. [7]

   As explained below, there is some uncertainty as to the scope of the principle identified in Brodyn and as to the underlying reasoning. Furthermore, the discussion in Brodyn as to the inter-relationship of the Security of Payment Act and s 69 of the Supreme Court Act 1970 (NSW) preceded the judgment of the High Court in Kirk v Industrial Court of New South Wales. [3] Kirk held that the legislative power of the State did not extend to conferring immunity from judicial review on a statutory tribunal where jurisdictional error was revealed. These considerations justify a reconsideration of the important principle in issue on the appeal as to the scope of the Supreme Court’s supervisory jurisdiction under the Security of Payment Act.

Findings on appeal

1. [8]

   The respondent filed a notice of contention challenging the conclusion of the primary judge that there had been no denial of procedural fairness, but abandoned the ground in its written submissions.

2. [9]

   Upon a full consideration of the issue raised, the appellant’s submissions should be accepted for the reasons set out below. Accordingly, the judgment in the Equity Division being based solely upon an error of law identified on the face of the adjudicator’s reasons, the appeal should be upheld and the judgment and orders in the Equity Division must be set aside.

Background circumstances

1. [10]

   Because the issue is entirely one of statutory construction, the factual circumstances underlying the proceedings may be briefly stated.

2. [11]

   On 14 October 2014 the parties entered into a contract pursuant to which Shade Systems agreed to supply and install external louvres to the façade of a property at 38 Albert Avenue, Chatswood, as a subcontractor to Probuild. The lump sum price was approximately $900,000.

3. [12]

   Pursuant to the Security of Payment Act, a contractor is entitled to claim progress payments from the principal builder by serving upon it on relevant reference dates “payment claims” for specified work which had been undertaken. [4] The payment claim in issue was served on 23 December 2015.

4. [13]

   The Act requires that a respondent who seeks to challenge the amount of the payment claim must do so by providing to the claimant a “payment schedule” indicating the amount of the payment (if any) that it proposes to make. [5] A payment schedule was provided on 11 January 2016. In substance it alleged that no money was owing to the appellant, because a significantly greater amount than that claimed was payable to the respondent as liquidated damages for failure to complete the works by the date specified in the subcontract for practical completion.

5. [14]

   Where a respondent provides a payment schedule indicating that the amount payable is less than the amount claimed, the claimant is entitled to apply to an “authorised nominating authority” for an adjudication of its payment claim. [6] That application, referred to in s 17 as an “adjudication application”, was made on 25 January 2016.

6. [15]

   The nominating authority is then required to refer the application to an adjudicator, [7] who may accept the application by causing a notice to be served on the claimant and the respondent. [8] The second respondent to the appeal, Mr Doron Rivlin, was the nominated adjudicator; he gave notice of his acceptance on 1 February 2016.

7. [16]

   A respondent is entitled to lodge an “adjudication response” with the adjudicator within five business days of receiving the adjudication application or two business days after receiving notice of the adjudicator’s acceptance. [9] Probuild lodged such a response on 3 February 2016.

8. [17]

   The Act further requires that the adjudicator determine the adjudication application “as expeditiously as possible” and in any event within 10 business days of the date of notification of acceptance of the application, or such further time as the parties agree. [10] An adjudication determination was made on 15 February 2016. The adjudicator accepted the bulk of the payment claim and rejected the payment schedule, finding that liquidated damages were not payable. The result was a determination of the amount of the progress payment, being $277,755. The due date for payment was specified as 12 February 2016 and a rate of interest was identified.

9. [18]

   The adjudicator was required to provide a determination in writing and include reasons for the determination. [11] The written reasons ran to some 33 pages, together with a two page annexure setting out the amounts claimed in respect of specified items, together with the figure accepted in the payment schedule and the adjudicated amount. It is sufficient for present purposes to identify the manner in which the adjudicator dealt with the claim in the payment schedule for liquidated damages.

10. [19]

    The reasons for the determination commenced with a summary of Probuild’s claim to deduct from the payment claim amounts owing to it including amounts on account of liquidated damages. [12] The adjudicator noted acceptance by the claimant that his function was to apply the terms of the subcontract. [13] The adjudicator then noted the claimant’s submission that the liquidated damages claim should be rejected for three independent reasons, namely that (a) the liquidated damages could not be calculated in accordance with the subcontract, (b) the respondent cannot benefit from its own wrong and (c) the liquidated damages are a penalty. [14] The adjudicator addressed each submission in turn.

11. [20]

    The first ground noted that the contractual entitlement to liquidated damages for delay required a calculation applying a daily amount for every “date” after the date for practical completion up to the date when practical completion was achieved or the subcontract was terminated. The claimant submitted that, as practical completion had not been achieved and the contract had not been validly terminated, the calculation could not be undertaken. The adjudicator had earlier in his reasons accepted the proposition that a purported termination had not been effective and accordingly the subcontract had not been terminated. He further accepted the claimant’s submission that the calculation could not be undertaken. [15]

12. [21]

    That was enough to dispose of the claim for liquidated damages and the adjudicator expressly noted that: [16]

13. [22]

    The primary judge held that there were two errors of law involved in this reasoning. [17] The errors were identified in the following terms:

14. [23]

    With respect to the first error, the judge stated that “on the proper construction of cl 42, liquidated damages accrue from day to day.” [18] The judge continued:

15. [24]

    With respect to the second error he stated: [19]

16. [25]

    There was no dispute in this Court that each of the errors so identified was indeed an error of law on the part of the adjudicator. Nor was it disputed that the error appeared on the face of the record, namely in the adjudicator’s reasons, which constituted part of the record as defined in s 69(4) of the Supreme Court Act. Further, it was not contended that either error constituted jurisdictional error. Accordingly, the appeal turned squarely on the question whether an error of law on the face of the record was sufficient to allow the Court to set aside the award of the adjudicator.

Available scope for judicial review

1. [26]

   Although it will be necessary to deal further with the reasoning in Brodyn, it is convenient to commence by considering afresh the issues which are relevant to determining the scope of judicial review of an adjudicator’s determination.

2. [27]

   The appropriate starting point is to note two aspects of the statutory scheme. First, there is no right of appeal with respect to a determination of an adjudicator. It is clear from the second reading speech that the omission of any right of appeal was deliberate and was seen as consistent with the intention of the Security of Payment Act that there be a simple and expeditious procedure for ensuring that contractors in the industry obtained prompt payment of any progress payments under the contract. [20] More will need to be said in that regard shortly.

3. [28]

   The second element of the scheme is to be found in s 69 of the Supreme Court Act which provides a modern statutory basis for the historical jurisdiction of the Supreme Court to grant relief by way of prerogative writs, that is, the Court may now make orders without issuing such writs. It has been accepted (and was not challenged in these proceedings) that the supervisory jurisdiction identified in s 69 extended, in principle, to determinations of adjudicators under the Security of Payment Act on the basis that they were exercising statutory powers under a scheme which did not permit contracting out and were therefore to be aligned with inferior courts and tribunals, rather than private arbitrators and domestic tribunals established, for example, by voluntary associations. [21]

4. [29]

   Section 69(3) expressly declares that the jurisdiction to make orders in the nature of certiorari “includes jurisdiction to quash the ultimate determination of a court or tribunal in any proceeding if that determination has been made on the basis of an error of law that appears on the face of the record of the proceedings.” Further, s 69(4) provides that, by way of extension of the general law principles, “the face of the record includes the reasons expressed by the court or tribunal for its ultimate determination.” Again, it was accepted that the determination and award of the adjudicator was relevantly the determination of a tribunal and, although it might be described as having an interim quality, because the amount awarded could be adjusted in proceedings after the completion of the contract, it was an “ultimate determination” because it resulted in an award which could be registered as a judgment of a court with the relevant monetary jurisdiction.

5. [30]

   Further, and importantly for the present proceedings, s 69(5) is in the following terms:

6. [31]

   The apparent purpose of s 69(5) is to ensure that the enactment of the two previous subsections did not derogate from existing privative clauses which had been construed as limiting the supervisory jurisdiction in particular areas to jurisdictional errors, thus excluding relief based on error of law on the face of the record. An important example in practical terms of such a provision was s 176 of the District Court Act 1973 (NSW) which, in relation to the criminal jurisdiction of the District Court, stated that “[n]o adjudication on appeal of the District Court is to be removed by any order into the Supreme Court.” The long established principle that this provision precluded the exercise of the supervisory jurisdiction based on errors of law on the face of the record (though it did not preclude review for jurisdictional error) was preserved by s 69(5). [22]

7. [32]

   There is, however, no explicit privative clause in the Security of Payment Act. As the respondent submitted, there could have been. The Court’s attention was drawn to s 43 of the equivalent legislation in the ACT which expressly excluded jurisdiction to set aside an adjudication determination on the ground of error of fact or law on the face of the decision. [23] Apart from the trite point that such a provision could have been included in the New South Wales Act, the example is immaterial. The fact that the section included reference to “error of fact” (as well as error of law) reveals a different purpose, which is reflected in the following subsection permitting an appeal “on any question of law arising out of an adjudication decision.” [24]

8. [33]

   There being no explicit privative clause, it remains to consider whether, on some other basis, the Security of Payment Act should be understood to preclude judicial review for error of law on the face of the record.

9. [34]

   On one view, any form of judicial review is apt to interfere with the apparent statutory purpose of an unchallengeable and expeditious proceeding to ensure progress payments are made to contractors in the building industry. On the other hand, neither party questioned the proposition that, in keeping with the decision of the High Court in Kirk v Industrial Court of New South Wales, [25] the legislative power of a state does not extend to precluding the exercise of the supervisory jurisdiction of the Supreme Court with respect to jurisdictional error. It may be that not every judicial or administrative decision which does not have a direct effect on rights and interests of individuals, with a degree of finality, will attract that principle. However, for reasons already noted, it need not be doubted that an award which gives rise to a judgment, enforceable immediately, for payment of the determined amount, would fall within the scope of the principle.

10. [35]

    It is necessary then to consider what principles of statutory construction apply in determining whether, absent an explicit privative clause, the structure, individual provisions and purpose of the Security of Payment Act may indicate an intention not to subject the determinations of an adjudicator to review for error of law on the face of the record. In Brodyn, some assistance in determining the scope of available review was sought in principles enunciated in The King v Hickman; Ex parte Fox and Clinton. [26] However, as explained in Plaintiff S157/2002 v The Commonwealth of Australia, [27] those principles were directed to a reconciliation of provisions within a statute, which appeared to identify the limits of the powers conferred on a statutory body, with a privative clause which appeared to render those limits unenforceable. There is no similar process of internal reconciliation required in the present circumstances.

11. [36]

    The respondent invoked the principle of construction identified in The Owners of the Ship “Shin Kobe Maru” v Empire Shipping Company Inc [28] that it is inappropriate to read provisions “conferring jurisdiction or granting powers to a court by making implications or imposing limitations which are not found in the express words.” In Chase Oyster Bar [29] I suggested that, “[g]enerally speaking, a constraint on the Court’s jurisdiction will require express language or at least a clear and unambiguous implication ….”

12. [37]

    No particular conclusion was drawn from that statement in Chase Oyster Bar, nor was it to be found in the judgments of other members of the Court. It should therefore be applied with caution. In particular, and in direct contrast with the circumstances of Shin Kobe Maru, the exercise here does not involve the construction of a provision conferring jurisdiction or granting powers to a court; that is not something that is found in the Security of Payment Act. Rather, the question involves the quest for coherence as between two statutes of the same legislature. [30]

13. [38]

    Reliance was also placed by the respondent on the principle of statutory construction known as the “principle of legality”. The principle was not relied on by the primary judge and there was no clear indication in the submissions in this Court as to why it was engaged.

14. [39]

    Identification of the scope of the principle should be undertaken with caution. The label, “principle of legality” is apt to mislead. Both its ordinary meaning and its traditional usage engage a particular aspect of the rule of law, namely that government action (whether legislative or executive) which intrudes on the rights and liberties of individuals should be justified by legal authority. [31] Its use as a principle of statutory construction is of recent origin. Further, depending on context, it is expressed in variable terms. A common formulation, adopted in Attorney-General for the Northern Territory v Emmerson, [32] was as follows: [33]

15. [40]

    That statement was made in construing a statutory provision permitting the Director of Public Prosecutions to apply to the Supreme Court for a declaration that a person was a drug trafficker, with the consequence, if made, that his or her property might be forfeit to the state. The authorities relied upon for the statement of the principle were Coco v The Queen, [34] and Saeed v Minister for Immigration and Citizenship. [35] Neither case used the term “principle of legality”, though other cases have done so. The passage referred to in Saeed read as follows:

16. [41]

    In other cases, the Court has identified the principle as reflecting the somewhat broader statement of O’Connor J in Potter v Minahan. [37] That approach was succinctly stated by Kiefel J in Lee v New South Wales Crime Commission, [38] namely that “[t]he same requirement must apply to any interference with fundamental principles or departure from the general system of law to which Potter v Minahan drew attention.”

17. [42]

    On other occasions, the principle has been stated yet more broadly. In R v Independent Broad-based Anti-corruption Commissioner [39] the joint reasons stated: [40]

18. [43]

    This passage appears to give effect to the suggestion of French CJ in Momcilovic v The Queen [43] that the use of the adjective “fundamental” as a qualifier of the rights and freedoms covered by the principle might be discarded.

19. [44]

    Stating the scope of the principle in such broad terms, raises a clear tension with the analysis of McHugh J in Malika Holdings Pty Ltd v Stretton, [44] noting “the frequency with which legislatures now amend or abolish rights or depart from the general system of law”. McHugh J concluded: [45]

20. [45]

    The standard of clarity required of the parliament has also been expressed in differing language. However, in X7 v Australian Crime Commission, in a passage cited in R v Anti-corruption Commissioner, Kiefel J stated: [46]

21. [46]

    Although it has not been expressed in such terms, it seems likely that the level of clarity required of the legislature will depend upon the nature of the perceived infringement, the nature of the rights or general principles infringed and, no doubt, other factors. It is not necessary, and is probably misguided, to construct some quasi-constitutional distinction between categories of legislation, requiring different standards of expression on the part of the legislature in order to achieve their apparent purpose. [49] Indeed, what is covered by the “general system of law”, at least in civil jurisdiction, remains to be identified.

22. [47]

    In the present case, there was limited attention paid to how precisely the principle of legality should be applied. On the one hand, the rights and obligations of the parties under the Security of Payment Act are not derived from the common law, but are superimposed by statute on contractual rights and obligations. On the other hand, the availability of relief in the supervisory jurisdiction of the Court is, at least in part, a modern emanation of the inherent jurisdiction of the Court described in Kirk as a “defining characteristic of State Supreme Courts”, and thus enjoying constitutional protection. [50] However, the scope of the supervisory jurisdiction to provide relief with respect to errors of law on the face of the record was not treated in Kirk as an aspect of the “defining characteristic”. It has, in any event, been given a major statutory expansion by redefining the record to include the reasons for decision, a change which saved the ground of review from insignificance. [51]

23. [48]

    The exercise of construction required of this Court concerns the interaction of two pieces of State legislation, namely the Security of Payment Act and s 69 of the Supreme Court Act. Viewed broadly, and somewhat abstractly, it may be seen that s 69, with its expanded concept of the “record”, provides a mechanism for review of ultimate determinations of inferior courts and tribunals little different from a statutory provision granting an appeal for error of law. Statutory appeals so limited are commonplace. On one view, the omission of any such statutory appeal for error of law demonstrates a legislative intention inconsistent with review for errors of law, not constituting jurisdictional error. On the other hand, the absence of a privative clause may indicate an intention to allow review by the Supreme Court for errors of law on the face of the record. To resolve these competing positions it is necessary to look, as the earlier cases have done, at the content, structure and practical operation of the Security of Payment Act.

The Act as discussed in the cases

1. [49]

   In what appears to have been the first careful consideration of the scope of judicial review of an adjudicator’s decision, Musico v Davenport, [52] McDougall J concluded that there was no legislative intention revealed by the Security of Payment Act to exclude the supervisory jurisdiction in relation to jurisdictional error, but that quashing orders would not be available based on non-jurisdictional error of law on the face of the record. [53] That conclusion was based largely on an inference drawn from the operation of s 25(4) of the Security of Payment Act. Before turning to that provision, three earlier provisions should be noted. First, the scope of the adjudicator’s determination and thus the potential for error are matters dealt with in s 22 in the following terms:

2. [50]

   The second provision of significance is s 23, which provides that the respondent must pay the amount determined by the adjudicator in respect of the payment claim, unless the adjudicator fixes a later date, within five business days of the date on which the determination is served on the respondent.

3. [51]

   Thirdly, in the event that the respondent fails to pay “the whole or any part of” the adjudicated amount within the specified time, the claimant may request the provision of “an adjudication certificate” and may serve notice on the respondent of an intention to suspend further construction work. [54]

4. [52]

   Section 25 should be read in this statutory context; it provides, relevantly:

5. [53]

   Musico placed significant reliance on s 25(4). First, that provision assumes an entitlement for a respondent (though not a claimant) to have a judgment based on an adjudication certificate set aside. At least by implication, it does not anticipate such a proceeding prior to filing the certificate, no doubt because of the limited time available for such a challenge to be mounted. Further, par (a) ostensibly precludes any defence arising under the contract and any “challenge” to the adjudicator’s determination. In Musico, McDougall J concluded that, to allow a challenge in the supervisory jurisdiction of the Court, on grounds otherwise precluded by s 25(4) in respect of proceedings to have the judgment set aside, would involve an inconsistency with the statutory scheme of the Security of Payment Act. Whilst plausible in its terms, that reasoning may overstate the negative inferences to be drawn from s 25(4).

6. [54]

   On the one hand, it may be accepted that the section assumes the existence of a valid determination and would not exclude relief based on jurisdictional error where the purported determination did not qualify as a determination under the Security of Payment Act. [55] However, to the extent that the adjudicator is empowered to determine questions of law in the course of reaching a determination (as correctly identified by McDougall J in Chase Oyster Bar at [257]), an error in exercising that function would be an error within jurisdiction and not jurisdictional error. A challenge on that ground could be excluded.

7. [55]

   The terms of s 25(4) are not, however, decisive because they do not directly address the supervisory jurisdiction of the Supreme Court. An adjudication certificate may be filed in any court of competent jurisdiction and, in the present case, could have been filed in the District Court. (In other cases, a determination is likely to be in an amount within the jurisdiction of the Local Court.) Proceedings to set aside a judgment resulting from the filing of an adjudication certificate will be brought in the court in which the certificate is filed, which often will not be the Supreme Court. Yet only the Supreme Court has supervisory jurisdiction. The kinds of grounds upon which a respondent may seek to set aside a judgment would include a complaint that the adjudicated amount had been paid in full before the certificate was filed. The inference that it excludes other challenges to a determination is relatively weak. It is therefore necessary to go beyond s 25(4).

8. [56]

   In Musico, reference was also made to s 30 of the Act. However, that section provides an immunity from personal liability for an adjudicator (and the nominating authority) with respect to acts done in good faith in the exercise of their respective functions. That provision does not bear on the scope of any jurisdiction to challenge the determination.

9. [57]

   In Brodyn, Hodgson JA identified relevant passages in the reasoning in Musico, set out the terms of s 69 of the Supreme Court Act, and continued:

10. [58]

    The first provision relied upon in this reasoning was s 3(4) of the Security of Payment Act. Section 3 established the object of the Act as being to ensure that “any person who undertakes to carry out construction work … is entitled to receive, and is able to recover, progress payments in relation to the carrying out of that work”. [56] That is done by giving the person entitled to receive a progress payment “a statutory entitlement to such a payment regardless of whether the relevant construction contract makes provision for progress payments.” [57] The Act then identifies the means by which that is achieved by reference to the claim process, the provision for a payment schedule, the referral of any disputed claim to an adjudicator for determination and the payment of the progress payment so determined. [58] Section 3(4) then provides:

11. [59]

    In summary, the Act provides a coherent, expeditious and self-contained scheme for resolving disputes with respect to payment claims. There is a prohibition on “contracting out”; any provision of an agreement purporting to exclude, modify or restrict the operation of the Act is void. [59]

12. [60]

    The procedure for making claims and for recovering progress payments is set out in Pt 3 of the Act. Section 32, being the final section in Pt 3, is in the following terms:

13. [61]

    One aspect of this provision, upon which the appellant placed some weight, was the power of a court dealing with any matter arising under a construction contract to order restitution where it was determined that a progress payment had been required in an amount not properly payable under the contract. That provision, it was submitted, correctly, was consistent with a construction of the legislative scheme which did not permit review of any determination of an adjudicator, made within power. The respondent was not left without a legal remedy.

14. [62]

    In considering the effect of s 32 of the Security of Payment Act, Handley JA stated in Falgat Constructions Pty Ltd v Equity Australia Corporation Pty Ltd: [60]

15. [63]

    It was suggested in Brodyn that if the adjudicator’s determination were susceptible to review, s 27 could operate as a “trap”. [61] Section 24 confers a right on a claimant who has not been paid the adjudicated amount to serve a notice of intention to suspend work; s 27 provides that the claimant may suspend work once two days have passed since the service of the notice. The claimant is then entitled to recover from the respondent costs incurred by it in suspending work and is not liable to pay any costs incurred by the respondent as a result of work being suspended.

16. [64]

    How much weight should be placed on this point is contestable. The respondent noted, in respect of this and other arguments, that it tended to demonstrate practical difficulties arising from possible intervention by way of judicial review, rather than demonstrating a statutory intention to exclude judicial review. Further, the significance of any practical inconvenience was diminished when it was understood that judicial review was available for jurisdictional error in any event. As McDougall J explained in Chase Oyster Bar in dealing with the question whether jurisdictional error extended to include the temporal requirement for referral of an adjudication application, [62] such a jurisdictional issue would be unlikely to operate as a trap. [63]

17. [65]

    The answer to the alternative approaches noted at [47] above ultimately requires attention to the problem (mischief) which the Act sought to address and the manner in which it was addressed; the nature of the powers given to the adjudicator; the timelines within which both parties and adjudicator had to operate, and the manner in which the legislation dealt with the inter-relationship between the statutory rights and obligations it created and those which might arise under the construction contract.

18. [66]

    The remedial nature of the legislation is clear (and set out in s 3) and the practical consequence of the legislation is also well understood. Dealing with equivalent provisions in the Building and Construction Industry Payments Act 2004 (Qld), Keane JA stated in R J Neller Building Pty Ltd v Ainsworth: [64]

19. [67]

    This reasoning was adopted and applied to the Security of Payment Act by McDougall J in Chase Oyster Bar. [66] The fact that the inter-relationship with contractual rights and proceedings for enforcement of contractual rights is expressly addressed in the Act is inconsistent with the conclusion adopted by the primary judge that judicial review could lie in order to correct errors in the construction of the contract adopted by the adjudicator. To a significant extent, the coherent and expeditious procedure provided by the Security of Payment Act would be undermined if the determination of the adjudicator were to be subject to judicial review in the supervisory jurisdiction of this Court for any error of law which might be identified in the reasons given by the adjudicator. Indeed, were such relief available, even an arguable error would provide a basis for the respondent to seek a stay of enforcement, potentially displacing the transfer of risk noted by Keane JA.

20. [68]

    An early analysis (in 2003) entirely consistent with this reasoning was adopted by Campbell J in Amflo Constructions Pty Ltd v Jefferies. [67] A similar approach was accepted in principle by Vickery J in an early Victorian case, Hickory Developments Pty Ltd v Schiavello (Vic) Pty Ltd. [68] Further, when the Bill which became the Victorian Act was introduced into parliament, the Victorian Minister for Planning, in her second reading speech, noted the close relationship between the Victorian Bill and the Security of Payment Act, stating that “this has the benefit of allowing building and construction firms with national operations to be subject to common payment requirements in both jurisdictions.” [69]

21. [69]

    Whilst acknowledging the central aspirations of facilitation of timely payments, the rapid resolution of disputes and freedom from excessive legal formality, Vickery J clearly had some doubts about the success of the NSW model in achieving those aspirations: [70]

22. [70]

    Vickery J summarised his understanding of the decision in Brodyn in the following terms: [71]

23. [71]

    After considering later authorities, he concluded: [72]

24. [72]

    Ultimately Vickery J found that he was not able to apply the principles in Brodyn directly because of disparities between the legal and constitutional regimes in New South Wales and Victoria. [73] In Queensland, review is allowed only for jurisdictional error. [74] Similarly, in South Australia, in the absence of any relevant statutory basis for distinguishing the New South Wales cases, they have been followed and the judgement of the primary judge in this case not followed. [75]

Challenges to Brodyn

1. [73]

   The independent consideration of the Security of Payment Act set out above supports the conclusion that review is not available for non-jurisdictional error of law on the face of the record. It is appropriate to address two specific arguments, not so far considered, by which the respondent sought to challenge the reasoning in Brodyn.

2. [74]

   First, the respondent contended that the reasoning of Hodgson JA failed to distinguish between jurisdictional error and error of law on the face of the record and found a statutory intention to exclude both. Reliance was placed on a brief statement in my judgment in Chase Oyster Bar at [90]. The paragraphs in Brodyn ([54] and [58]), which were said to support that conclusion were more adequately considered by other members of the Court.

3. [75]

   The effect of [54] in Brodyn was expressed by Spigelman CJ in Chase Oyster Bar in the following terms: [76]

4. [76]

   On that view, my assumption that Hodgson JA considered the supervisory jurisdiction was broadly excluded, was correct, but failed to explain how he had arrived at that conclusion. The reasoning at [58] in Brodyn was also consistent with the understanding of Spigelman CJ. In the latter passage Hodgson JA limited the power of the court to intervene to those circumstances where the determination was “void”. The ambiguity inherent in the distinction between determinations which are “void and not merely voidable” [77] is generally thought to lack utility because it either incorporates unexpressed assumptions or fails to identify helpfully the underlying grounds. [78] (Similarly, there may be assumptions as to the consequences of a claimant suspending work on the false basis of a “void” determination.)

5. [77]

   More importantly for present purposes, if there had been a failure to distinguish properly between jurisdictional and non-jurisdictional errors of law in Brodyn, the error could be corrected by concluding that jurisdictional error was still a basis for intervention, whilst upholding the conclusion that non-jurisdictional error did not constitute a proper ground for intervention. That is the result of Chase Oyster Bar.

6. [78]

   Secondly, the respondent contended that the analysis in Brodyn was obiter in the sense that it was ultimately unnecessary for the decision because of the findings that the payment claim was not invalid, there was no denial of natural justice and the entitlement under the Security of Payment Act was not lost because the subcontractor was not licensed to undertake residential building work.

7. [79]

   It is neither necessary nor desirable to enter upon a debate as to how much of the statements of principle were necessary for the determination of the appeal. It is apparent that this Court considered the exposition of principle by Hodgson JA to be an integral part of the disposition of the appeal. With respect to the alleged denial of natural justice, it would not have been necessary to address the factual circumstances had it been determined that that was not a ground for exercise of the Court’s supervisory jurisdiction. Similarly, in considering the invalidity of the payment claim, it was necessary first to consider whether there was a failure to comply with the Act; had there been, it would have been necessary to determine whether it formed a basis for judicial review. Having determined that there was no failure to comply, Hodgson JA also addressed the question as to whether, had there been a failure, the determination would have been “void.” [79] Accordingly, the analysis of legal principle informed the subsequent reasoning and was, in that sense, necessary for the determination of the appeal.

8. [80]

   Furthermore, as the appellant noted, in Coordinated Construction Co Pty Ltd v JM Hargreaves (NSW) Pty Ltd [80] Hodgson JA, stated:

9. [81]

   In addressing the same application, I too accepted the assumption that leave to re-argue would be required. [81] That would not have been necessary had the reasoning been obiter.

10. [82]

    The same approach was adopted by the respondent in Downer Construction (Australia) Pty Ltd v Energy Australia, [82] seeking leave to re-argue the scope of the available grounds. In dismissing the application, Giles JA (Santow and Tobias JJA agreeing) considered such a challenge a matter for the High Court. [83] Giles JA noted that, although a relatively recent decision, Brodyn “has already guided many decisions at first instance, and sometimes on appeal, in the frequent challenges to determinations under the Act.” [84] Leave to re-argue was refused.

11. [83]

    The approach adopted by Giles JA in 2007 carries even greater weight, almost 10 years later. Numerous cases have been determined in the interim on the basis that review is not available for non-jurisdictional error of law on the face of the record.

12. [84]

    It is also true that the approach consistently adopted in this Court (and by judges in the Division hearing cases at first instance) has been followed (with relevant adaptation to the circumstances of their legislation) by courts in other states and territories. [85] Limited assistance is obtained by considering those cases, there being differences between the legislation in some other states and that in New South Wales. [86] Nevertheless, the broad understanding of the legislative scheme and the limited availability of judicial review has gained wide acceptance in jurisdictions with similar legislation. [87] To the extent that there has been departure from Brodyn, it has been on the basis, not material for present purposes, that an understanding of what constitutes jurisdictional error and its constitutional significance has developed over the last decade, and particularly following the determination of Kirk v Industrial Court in the High Court.

Conclusion on non-jurisdictional error of law

1. [85]

   It is the unanimous view of cases in this Court that both McDougall J in Musico and this Court in Brodyn concluded that relief is not available to quash an adjudicator’s determination on a ground other than jurisdictional error. (Brodyn may have gone further.) The contrary conclusion would undermine the underlying purposes of the Security of Payment Act, which are manifest in the statement of the object of the legislation (s 3), the scheme revealed by the structure of the Act and, to make the same point from a different perspective, the combined effect of the provisions discussed above. The reasoning has been accepted in numerous cases, not only here but in other jurisdictions. No sufficient reason has been put forward to doubt its correctness.

2. [86]

   It is not necessary to consider what may constitute essential preconditions for the exercise of the adjudicator’s functions, the determination of which is not vested solely in the adjudicator. It is sufficient to conclude that the adjudicator had authority to determine the scope and operation of the construction contract, the provisions of which are a mandatory consideration pursuant to s 22(2)(b). The errors in construing the contract identified by the primary judge did not provide a basis for judicial review.

Orders

1. [87]

   For the reasons set out above, the primary judge was in error in concluding that the supervisory jurisdiction of the Court extended to quashing a decision of the adjudicator on the basis of error of law on the face of the record.

2. [88]

   So far as the question of costs was concerned, the first respondent submitted that even if otherwise successful, the appellant should not have its costs with respect to the second ground of appeal which was abandoned at the hearing. It acknowledged that, on the same basis, it should not have its costs of the notice of contention, which was abandoned in the written submissions filed on 25 November 2016.

3. [89]

   There was no issue but that costs should generally follow the event. So far as some qualification of such an order is sought, the circumstances do not warrant that approach. The second ground of appeal was dealt with briefly in the written submissions for the appellant filed on 26 August 2016 and in the respondent’s written submissions. The Court is not aware precisely when either party first gave notice to the other that ground 2 and the contention respectively were not to be pressed. There should be no departure from the usual order.

4. [90]

   Accordingly, the Court should make the following orders:

   1. (1)

      Allow the appeal and set aside the orders made in the Equity Division on 15 June 2016.

   2. (2)

      In place thereof, order that the summons filed on 29 February 2016 be dismissed and that the plaintiff (Probuild Constructions (Aust) Pty Ltd) pay the costs of the first defendant (Shade Systems Pty Ltd) in the Division and the costs of the second defendant (Doron Rivlin) on a submitting basis.

   3. (3)

      Order that the first respondent pay the appellant’s costs in this Court and the costs of the second respondent, the latter to be assessed on a submitting basis.

5. [91]

   MACFARLAN JA: I agree with Basten JA.

6. [92]

   LEEMING JA: I agree with Basten JA.