Maxcon in The Shade

chatswoodThe decision in Probuild v Shade Systems earlier this year[1] raised a few eyebrows.  At first instance in the Supreme Court In New South Wales, Emmett AJA had decided that the determination of an adjudicator might be quashed on the basis of a non-jurisdictional error off law on the face of the record.  There had previously been one or two decisions which had suggested this possibility; after all the effect of the decision in Chase Oyster Bar v Hamow Industries had been that the decisions of the adjudicators are amenable to certiorari, an error of law on the face of the record is one of the traditional grounds for certiorari (and in deed the other forms of judicial review, namely mandamus, prohibition, and quo warranto).

On the 23rd of December 2016 five judges in the New South Wales Court of Appeal overturned that decision in Shade Systems v Probuild Construction (No 2)[2], the decision of Basten JA (with whom all the other Judges agreed) was that it is only jurisdictional errors of law which suffice to quash an adjudicator’s determination:

85        …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.

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.


The decision does not very much help to demarcate between non-jurisdictional errors of law and jurisdictional errors of law.  Some matters are plainly jurisdictional.  If, for example, an adjudicator makes an error in finding that there was a construction contract, it seems clear that he or she will have make a jurisdictional error of law.  Failure properly to give effect to that contract is much less certain ground.

Neither does the decision affect the other grounds on which an adjudicator’s determination may be quashed: failure to afford natural justice, want of good faith, lack of jurisdiction etc.

bohem-apartmentsThe decision is based on the New South Wales legislation, but is likely to be applicable throughout Australia.  The first instance decision in Probuild had already been rejected in South Australia in the Maxcon v Vadasz series of cases.

There have been three of these already, and they already resemble something of a dog’s breakfast.  The background is that Vadasz was a piling contractor and at all relevant times was an undischarged bankrupt engaged by Maxcon for the development known as Bohem Apartments in Wright Street, Adelaide.

  • Vadasz completed the piling works in about mid-February 2016.
  • On 25 February 2016 Vadasz served a payment claim on Maxcon for $204,864.55 (inclusive of GST).
  • On 8 March 2016 Maxcon issued a payment schedule $141,163.55 (inclusive of GST).
  • On 6 April 2016 Callum Campbell as Adjudicator determined an entitlement of $214,614.35.
  • On 8 July 2016, Kourakis CJ made an order that Maxcon pay $215,030.85 into Court. Maxcon complied with that order.

Maxcon Constructions v Vadasz [2016] SASC 148 – 9 September 2016

This judgment concerned an application by Vadasz for leave to register judgment for $215,030.85 and an order for payment out of $141,163.55.

Maxcon argued that the subcontract was void for illegality on the basis that Vadasz had failed to disclose his bankruptcy, and also that the adjudicator had erred in his determination.

In the exercise of his discretion, Stanley J refused to order a stay, granted leave to registered Judgment $215,030.85 and ordered payment out in the sum of $141,163.55.

Maxcon v Vadasz (No. 2) [2016] SASC 156 – 29 September 2016

In this judgment, the Court heard and rejected Maxcon’s application for judicial review of the adjudicator’s determination.  In doing so, Stanley J rejected the approach of the first instance decision in Probuild, finding it incompatible with earlier authority.  In finding that an adjudicator’s determination infected with a non-jurisdictional error on the face of the record is not amenable to judicial review, he reached precisely the same conclusion as has now been reached by the Court of Appeal in New South Wales.  He found as a matter of fact that Vadasz had failed to disclose the fact of his bankruptcy, but this non-disclosure did not of itself render the sub-contract void for illegality.  It was common ground that the adjudicator had made errors of law, but these were errors within jurisdiction, such that none of the grounds for judicial review were been made out.

Maxcon v Vadasz [2016] SASCFC 119 – 25 October 2016

This was an appeal against successive refusals by single judges refusing applications for stay of execution.  By the time the appeal was heard, there had been no less than six applications made for stays, the first having been made on 27 July 2016 (this one having been rejected as part of the (2016) SASC 148 decision on 9 September 2016) and the last having been made on 10th October 2016, after both of the previous reported judgments).

Again, the central issue was one of the exercise of discretion, which included a number of detailed matters of claim and cross claim.  The background, of course, was that the bankruptcy of Mr Vadasz gave rise to the inference to the real risk that Mr Vadasz would be unable to repay anything.  Applying the “wisdom of Solomon” the Full Court decided that Mr Vadasz should have payment out of $105,000, and that the rest should be stayed.

It seems unlikely that this is the end of the story.  What is not unlikely is that the legal costs associated with this scrap will end up significantly exceeding the amount of money in dispute.

The moral to be drawn from the Shade Systems v Probuild decision is clear: attacks on adjudicator determinations will not succeed where they are founded on non-jurisdictional errors of law.

The moral to be drawn from the Maxcon v Vadasz cases is much more fuzzy.  It is rare for undischarged bankrupts to be carrying on business in their own names and all the series of decisions really tells us is that it is possible to rack up wholly disproportional costs in successive stay applications, at any rate in South Australia, where there had been numerous decisions in Romaldi v Adelaide Interior Linings about the availability of stays.

In the context of the Western Australian model, judgment is still pending from the Court of Appeal in the Northern Territory in CH2M Hill/UGL JV v ABB[3], in which I have been arguing in support of the first instance decision of Kelly J quashing an adjudicator’s decision.  Error of law has been a sideline in that case, and I put no real weight on the first instance decision in Probuild, merely suggesting that the court should “watch this space”.  With the benefit of hindsight, this seems to have been a wise approach, and there is no real immediate prospect of non-jurisdictional error of law sufficing as a ground for challenge under the West Coast model any more than the East Coast model.


[1] [2016] NSWSC 770

[2] [2016] NSWCA 379

[3] CH2M Hill Australia Pty Limited & Anor v ABB Australia Pty Ltd & Anor [2016] NTSC 42


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