The High Court of Australia has today handed down its judgments in Probuild Constructions (Aust) Pty Ltd v Shade Systems Pty Ltd  HCA 4 and Maxcon Constructions Pty Ltd v Vadasz  HCA 5.
The judgments run to some 60 pages, but can be summarised in a few words: adjudicators’ decisions are not subject to judicial review on the ground of non-jurisdictional error of law.
The result makes good common sense. Many (cynics might say most) decisions of adjudicators are riddled with errors, including errors of law. Unsurprising, one might think: most adjudicators are not lawyers and system prevents them hearing any oral argument from the lawyers for the parties. So allowing challenges on the ground of non-jurisdictional error of law would drive a horse and cart through the legislation.
The jurisprudential basis for the decision is much less sound. The legislation says nothing about judicial review. The High Court stuck with the orthodoxy that a statutory exclusion of judicial review must be “clearly expressed” (Probuild at ). Adjudicators’ decisions can be challenged on several grounds, including jurisdictional error, breach of natural justice, want of good faith etc. Nevertheless, the High Court said that
35 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.
Quite how legislative silence can have been so very precise about the nature of excluded challenges is not explained.
Anyway, the issue has been knoocking around for a while, and is now settled in Australian on a pragmatic basis.
The case summaries are here:
Case Summary – Maxcon Constructions Pty Ltd v Michael Vadasz  HCA …
Case Summary – Probuild Constructions (Aust) Pty Ltd v Shade Systems Pty.._
The full judgments add little. EXCEPT THIS (a fairly big exception):
- In Maxcon, the subcontract provided that half of the retention was to be released when the CFO (certificate of occupancy) was issued, and the other half 365 days after that;
- The CFO was yoked to completion of the whole of the head contract works, not just the subcontract works;
- Section 12(c) of the Act defines a pay-when-paid provision as including a provision (c) that otherwise makes the liability to pay money owing, or the due date for payment of money owing, contingent or dependent on the operation of another contract;
- The adjudicator was right (and the Supreme Court of South Australia was wrong, both at first instance and on appeal to the Full Court) in finding, therefore, that the retention provision was ineffective as a paid-when-paid provision within the meaning of the Act.
The significance here is that this sort of retention clause is really quite common. There might be scope for argument as to whether this part of the judgment ( to ) is obiter. Such argument is sterile. The point was the subject of careful consideration of the Full Court, will be applied as the law now, and that is that.
Quite a few subcontractors might be looking now for the release of retention money that has been held against them pursuant to such clauses. Whether there are any adjudication proceedings or not.