In a recent Supreme Court case, an applicant was successful in
having an adjudication determination under the Building and
Construction Industry Security of Payment Act
2002 (SOP Act) judicially reviewed.
The decision is a timely warning to adjudicators that they can
be parties to litigation.
In the case of Grocon Constructors Pty Ltd v Planit
Cocciardi Joint Venture & Ors [2009] VSC 426, Justice
Vickery examined whether there was a right of judicial review under
the SOP Act. The second and third defendants were, respectively,
the initial adjudicator and the review adjudicator, whose decisions
were the subject of the application.
Grocon Constructors Pty Ltd (Grocon) sought a
declaration that the determinations of the adjudicator and review
adjudicator appointed under the SOP Act be declared void or
alternatively quashed. The form of relief sought by Grocon was by
way of certiorari and declaration. The determinations of the
adjudicator at first instance and the review adjudicator directed
that Grocon pay a progress payment to the defendant, Planit
Cocciardi Joint Venture Pty Ltd (PCJV).
History
The work undertaken by PCJV was the modelling and detailing of
structural steelwork for the Melbourne Rectangular Stadium in
Batman Avenue, Melbourne. Grocon was the head contractor and PCJV a
subcontractor.
There was no written contract. The parties were in dispute about
what constituted the construction contract under the SOP Act.
Grocon's position was that the construction contract was governed
by an unexecuted form of contract emailed on 5 May 2008 from PCJV
to Grocon and adopted by the parties, whereas PCJV's position was
that the construction contract comprised its tender dated 6 June
2007 and a verbal agreement entered into on 12 September 2008.
PCJV made a claim for a progress payment under the engineering
design agreement PCJV had with Grocon. PCJV's position was that the
progress payments were due and payable to it under the SOP Act.
The sums claimed by PCJV totalled $544,841.00. In response,
Grocon issued a payment schedule under the Act stating the amount
due to PCJV was nil and that the amount sought by PCJV was an
'excluded amount' under the Act.
PCJV then applied for adjudication under the SOP Act. The second
defendant, John O'Brien (O'Brien), was appointed
as the adjudicator. O'Brien delivered his adjudication
determination on 28 May 2008, finding that PCJV was entitled to be
paid $544,841.00 together with costs.
Grocon objected in writing to the O'Brien determination, arguing
it was contrary to law and affected by jurisdictional error and/or
breaches of procedural fairness.
The third defendant, Phillip Davenport
(Davenport) was appointed as the review
adjudicator under the SOP Act. Davenport delivered a review
adjudication upholding the original O'Brien
determination.
The decision
After a detailed examination of case law, Justice Vickery
decided that the decision of an adjudicator and a review
adjudicator appointed under the SOP Act are prima facie subject to
review by certiorari. He held also that after considering the
functions of an adjudicator, even on the analysis that an
adjudicator is a private body, certiorari will nevertheless have
application to his/her determinations because an appointee under
the SOP Act performs functions of a public nature. Justice Vickery
concluded that relief in the nature of certiorari, on all of the
grounds available under the writ, including error on the face of
the record, is not excluded either expressly or by implication
under the SOP Act in Victoria. Justice Vickery suggested the main
purpose of the SOP Act is:
"….to ensure that any person who carries out
construction work, or provides related goods or services, is able
to promptly recover progress payments. To advance that purpose, the
Act sets up a unique form of adjudication of disputes over the
amount due for a claimed progress payment. Parliament intended that
a progress payment, on account, should be made promptly and that
any disputes over the amount finally due should be decided in
separate proceedings, either by a Court or by an agreed dispute
resolution procedure. But meanwhile the claimant's entitlement, if
in dispute, would be decided on an interim basis by an adjudicator,
and that interim entitlement would be paid." [at 110]
His Honour found that an adjudicator appointed under the SOP Act
is a tribunal within the meaning of the Administrative Law
Act 1978 (ALA) and accordingly, the
reasons for the decision of an adjudicator made under the SOP Act
are part of the record which may be examined on an application for
judicial review.
Grocon relied upon 10 grounds for review of the O'Brien
determination and 16 grounds of appeal for the judicial review of
the Davenport determination. All the grounds Grocon relied upon
failed.
Justice Vickery found that there had been no substantial
breaches of the rules of procedural fairness sufficient to amount
to a denial of the standard required by the SOP Act and thus the
application of certiorari. He commented:
"Further, an adjudication review is not an appeal.
The process should not be used as such. In particular, an
adjudication review should not be used as a basis for a
re-evaluation of the findings of fact made by the adjudicator at
first instance which were used by the adjudicator in reasoning
towards making a finding as to the ultimate fact in question on a
review, namely whether or not the payment claim included an
excluded amount. On a review, the review adjudicator is bound by
the findings of fact made by the adjudicator. The task on review is
to determine, on the basis of the facts as found by the adjudicator
at first instance, whether the payment claim includes an excluded
amount. However, it is not open for a review adjudicator to
overturn any of the other findings of fact as found by the
adjudicator at first instance, because to do so would introduce a
further and impermissible ground of review, namely that the
adjudicator at first instance erred in making the findings in
relation to those other facts."
His Honour stated that a review adjudicator must
only consider the following:
- the provisions of the Act and any regulations made under the
SOP Act;
- the provisions of the construction contract from which the
application arose; and
-
the information provided by the authorised nominating authority
which is listed under s28H of the SOP Act, namely all of the
material which was before the adjudicator at first instance and the
adjudication determination (ss28I(2) and 28H(2)).
Conclusion
Justice Vickery's decision demonstrates that a party aggrieved
by an adjudication and a review adjudication under the SOP Act may
be able to persuade the court to review the adjudicator on the
basis that there has been a breach of the rules of natural justice
in the course of the adjudication.
However there would need to be clear grounds to dismiss a
decision of the adjudicator.
The decision provides a timely warning for adjudicators that, as
a result of their role as adjudicators, they can be parties to
litigation resulting from their decisions.
It also departs from the position adopted by courts in NSW which
have found that adjudications are not subject to judicial
review.
For more information, please
contact:
John Hutchings, Partner
Phone (direct) +61 3 9608
2245
Email
j.hutchings@cornwalls.com.au
or
Jennifer Holdstock, Senior
Associate
Phone (direct) +61 3 9608
2211
Email: j.holdstock@cornwalls.com.au