Allens

Construction & Major Projects

Focus: Uncertainty about review of adjudicators' decisions clarified

28 October 2011

In brief: Significant uncertainty regarding parties' rights to have an adjudicator's decision reviewed has been resolved, following a recent Western Australia Court of Appeal decision. Partner Stephen McComish (view CV) , Senior Associate Jeremy Quan-Sing and Law Graduate Samantha Lord report.

How does it affect you?

  • This case has clarified the operation of the Construction Contracts Act 2004 (WA) (the Act) specifically on the ability to challenge an adjudicator's decision not to dismiss an application but to make a determination on its merits.
  • It is now clear that the right of review by the State Administrative Tribunal (the SAT) under the Act is limited to a decision to dismiss an adjudication application. For example, if an adjudicator decides not to dismiss an application and makes a determination on the merits, the respondent does not have a right to apply to the SAT for review of the determination.
  • However, a determination on the merits can be challenged by:
    • judicial review (ie the Supreme Court) on the ground of jurisdictional error; or
    • at the point at which an application is made to enforce the determination by a court of competent jurisdiction (eg District Court) on the basis the determination exceeded the jurisdiction of the adjudicator and therefore was not a 'determination' at all.
  • While it was unnecessary in the appeal to resolve the question of the scope of judicial review in respect of determinations, Justice Murphy expressed the views that a determination is not amenable to judicial review for non-jurisdictional error of law and the scheme and purpose of the Act is more consistent with an appointed adjudicator being akin to an inferior court rather than an administrative tribunal for certiorari purposes. President McLure expressed the view that the adjudication procedure is subject to judicial supervision for jurisdictional and other reviewable errors of law.

Background

Georgiou Building Pty Ltd made an application for adjudication under the Act regarding a payment dispute with Perrinepod Pty Ltd. In its response, Perrinepod submitted that the application should be dismissed on the ground that it was 'not possible to fairly make a determination because of the complexity of the matter'. The adjudicator decided not to dismiss the application and proceeded to make his determination, which was that Perrinepod was liable to pay $1,575,912 to Georgiou. Perrinepod applied to the SAT seeking a review of the adjudicator's decision not to dismiss the adjudication application but the SAT dismissed this application. Perrinepod then appealed to the Court of Appeal of the Supreme Court of WA.

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The decision

The ultimate question for the Court of Appeal was whether section 46(1) of the Act provided a right to apply to the SAT for review of a decision by an adjudicator not to dismiss an adjudication application. The Court of Appeal found that there was no such right and dismissed the appeal.

Significantly, the decision of the Court of Appeal settled this important question, which is the subject of a line of earlier conflicting authorities.

The relevant sections of the Act that the Court of Appeal considered are s46(1) and s31(2)(a). Under s31(2) of the Act, an adjudicator must either dismiss an application under s31(2)(a) without making a determination of its merits if:

  • the contract concerned is not a construction contract;
  • the application was not prepared and served properly;
  • an arbitrator or other person or a court or other body dealing with a matter arising under the construction contract makes an order, judgment or other finding about the dispute; or
  • the adjudicator is satisfied that it is not possible to fairly make a determination because of the complexity of the matter or that the time given to resolve the dispute is not sufficient for any other reason.1

or, if it does not dismiss the application, it must otherwise proceed under s31(2)(b) to determine the application on its merits.

Section 46(1) of the Act provides that a person aggrieved by 'a decision made under section 31(2)(a)' may apply to the SAT for review of the decision. It has always been clear that, if an adjudicator dismissed an adjudication application under s31(2)(a), then an applicant could apply to the SAT to challenge this decision. But what if the adjudicator did not dismiss an application and proceeded to determine it under s31(2)(b)? Did a respondent have a right to challenge that decision under s46(1) of the Act?

The Court of Appeal held that no such right existed. In coming to this finding, the Court of Appeal found that s31(2)(a) and (b) are alternatives: there is either a decision to dismiss the application under sub-para (a); or, failing that, there is a determination of the merits under sub-para (b).2 As a result, the only type of decision that can be challenged under s46(1) of the Act is a decision to dismiss an application. There is no ability to use s46(1) of the Act to challenge an adjudicator's decision to hear an application.

Importantly, the court made (obiter dicta) comments that suggested that prerogative relief, such as writs of certiorari, would be available to challenge a decision not to dismiss an adjudication. In their separate judgments, both Justice Murphy and President McLure stated that the four limbs of s31(2)(a) – being the criteria which, if satisfied, compel an adjudicator to dismiss an application – were 'jurisdictional facts'. Chief Justice Martin agreed with Justice Murphy. The effect of this is that an adjudicator's assessment of whether or not any of those criteria had been satisfied, and therefore the decision on whether or not the application had to be dismissed, was subject to judicial review. Such review could be initiated by prerogative writ. President McLure even suggested that, if an adjudicator proceeded to hear an application, the written reasons of the determination should include reasons why the adjudicator had concluded that none of the criteria of s31(2)(a) had been met (but said 'that is a question for another day').

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Effect of the decision

The Court of Appeal's judgment resolves significant uncertainty that previously existed regarding the right to apply to the SAT for review of a decision by an adjudicator under the Act. Following the Court of Appeal's judgment, it is now clear that there is no right to apply under s46(1) of the Act to the SAT for review of a decision by an adjudicator not to dismiss an adjudication application.

Although effectively closing the door on a respondent's ability to challenge a decision not to dismiss an application via s46(1) of the Act, the Court of Appeal confirmed that another door is open through its (obiter) comments about the availability of judicial review of such decisions.

Footnotes
  1. See section 31(2)(a) Construction Contracts Act 2004 (WA).
  2. Perrinepod Pty Ltd v Georgiou Building Pty Ltd [2011] WASCA 217, [81].

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