Key cases that have affected building and construction – Part 1 NSW

June, 2014

The Building and Construction Industry (Security of Payment) Act 2009 (ACT) (“the Act”) has, to an extent, provided a simpler and more cost effective approach to resolving construction industry disputes arising from the non-payment of invoices. As most sections in the ACT legislation mirror the NSW legislation, which was created a decade prior to the Act, it is vital to have an understanding of both jurisdictions.

Brodyn Facts

Brodyn entered into a construction contract with Dasein. There were multiple disputes relating to this contract.

Dasein made an adjudication application pursuant to the Building and Construction Industry Security of Payment Act 1999 (NSW) (“SOP NSW”) in respect of its claim that moneys should be deducted for incomplete work and for rectifying defects. The adjudicator made his determination on 16 October 2003 giving reasons. An adjudicator’s certificate under that Act was issued on 17 October 2003 and was then filed in the District Court on the same day.

Brodyn subsequently applied to the Supreme Court for an order quashing the adjudicator’s determination. The primary judge did not quash the decision of the adjudicator and this was appealed.

After lodging the appeal, Brodyn for the first time became aware that Dasein did not have at relevant times a licence under the Home Building Act 1989 (NSW). Brodyn submitted on appeal that this caused the subcontract to become illegal (section 4) and unenforceable (section 10), and Dasein was not entitled to any progress payments.

Decision of the Case

The key points arising from the decision are:

Brodyn substantially limited the basis upon which adjudicator’s determinations were open to challenge. The Court in Brodyn, instead of analysing the question in terms of whether or not the adjudicator had jurisdiction, spoke of five “basic and essential requirements”. The court said that it is only if those requirements have not been met that the adjudicator’s decision can be questioned. This approach opened the door to the notion that the adjudicator could himself make a binding determination as to at least some aspects of whether or not he had jurisdiction.

The basic and essential requirements are:

  1. The existence of a construction contract between the claimant and the respondent, to which the Act applies;
  2. The service by the claimant on the respondent of a payment claim;
  3. The making of an adjudication application by the claimant to an authorised nominating authority;
  4. The reference of the application to an eligible adjudicator, who accepts the application; and
  5. The determination by the adjudicator of this application.

Implications of this decision for builders

A builder may only question an adjudicator’s decision if the above five requirements have not been met. However, the decision in Chase Oyster Bar widened the scope to challenge adjudication determinations than was previously determined in Brodyn. As discussed earlier, we shall review Chase Oyster Bar in Part 2 of this series.

 

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