Security of Payments update: High Court affirms scope of review limited to jurisdictional error

The High Court has handed down its decisions in the second and third cases concerning Security of Payments legislation to come before it. In Probuild v Shade Systems and Maxcon v Vadasz, the High Court affirmed that in New South Wales and South Australia, review is available for jurisdictional error but not for error of law on the face of the record.

Probuild Constructions (Aust) Pty Ltd v Shade Systems Pty Ltd; Maxcon Constructions Pty Ltd v Vadasz [2018] HCA 4; [2018] HCA 5

Probuild v Shade Systems: the facts

Probuild sought judicial review of an adjudication determination in favour of Shade Systems. At first instance[1], Emmett AJA remitted the matter to the adjudicator on the basis that there had been errors of law on the face of the record, but found that there was no jurisdictional error.

On appeal[2], the NSW Court of Appeal affirmed the position that had previously been understood to apply in New South Wales for years until Emmett AJA’s decision – that in New South Wales, judicial review is available for jurisdictional error, but not error of law on the face of the record. The Court found that the Building and Construction Industry Security of Payment Act 1999 (NSW) (NSW Act) impliedly precludes review for error of law on the face of the record.

Maxcon v Vadasz: the facts

An adjudicator issued a determination in favour of Vadasz, rejecting Maxcon’s claim that it was entitled to withhold certain amounts for retention, on the basis that they were “pay when paid” provisions and contrary to s 12 of the Building and Construction Industry Security of Payment Act 2009 (SA) (SA Act). On Maxcon’s application for judicial review, the judge at first instance[3] found that the adjudicator had erred in construing the retention clause as a “pay when paid” provision and the Full Court[4] agreed with that finding. The Full Court was unconvinced by the argument that the SA Act impliedly excludes review for error of law on the face of the record. However, the Full Court considered itself bound to follow as the decision of an intermediate appellate court on a question of uniform national legislation, as the Court did not consider the decision to be “plainly wrong”.

The High Court decisions

In Probuild, the High Court unanimously agreed with the NSW Court of Appeal that the NSW Act impliedly ousts the jurisdiction of the Supreme Court to make an order in the nature of certiorari for non-jurisdictional error. In a joint judgment, Kiefel CJ, Bell, Keane, Nettle and Gordon JJ noted that an intention to alter the role of a superior court must be clearly expressed but is ultimately a matter of statutory construction: [34].

Their Honours discerned a clear legislative intention to oust the Supreme Court’s jurisdiction to review for error of law on the face of the record, which they located in:
•    the reason for enactment of the NSW Act, being to ensure prompt payment to builders;
•    the fact that the regime is not concerned with final determination of entitlements;
•    that underpinning the scheme is the understanding that “cash flow is the lifeblood of the construction industry”;
•    the regime’s allowance of informal procedures; and
•    other aspects of the scheme that reinforced that conclusion, for example the absence of a right of appeal from a determination, and the inability to raise a cross-claim or defence in seeking to set aside a judgment entered on the basis of an adjudication certificate: [35]-[44].

The operation of the NSW Act also gave rise to two further supporting propositions for the plurality’s conclusion. First, the absence of review for error of law would not entrench for all time the consequences of the error. Secondly, the operation of the scheme, including the preservation of contractual rights, affirmatively supported the conclusion that review for error of law is excluded: [45]-[47].

Justices Gageler and Edelman agreed with the outcome but gave separate reasons.

In Maxcon, the decision turned on the respondent’s notice of contention that the alleged error of law was not an error of law. All members of the Court agreed, contrary to the judge at first instance and the Court of Appeal, that the retention provisions in the contract were pay when paid provisions rendered ineffective by s 12: [16]-[29], [32], [41].

In view of that finding, the appeal grounds did not arise. However, Kiefel CJ, Bell, Keane, Nettle and Gordon JJ found that the provisions of the SA Act, like those of the NSW Act, ousted the Supreme Court’s jurisdiction to review for error of law on the face of the record: [5].

Justices Gageler and Edelman (giving separate reasons) considered that notwithstanding that it was not necessary to the outcome of the appeal, it was appropriate to address the appeal ground raised in relation to the scope of judicial review in South Australia: [32], [40]. Their Honours noted that the conclusion that there is no judicial review for error of law on the face of the record was a direct application of the High Court’s reasoning in Probuild ([34], [41]), with Gageler J noting that there was “no material difference” between the Supreme Court Acts or the Security of Payment Acts of New South Wales and South Australia: [34].
Conclusion

While the outcome of the High Court proceedings in Probuild and Maxcon Constructions is of relevance in other States and territories, all of which possess their own Security of Payment legislation, there is an important distinction to be drawn with the position in Victoria. That distinction lies in s 85 of the Constitution Act 1975 (Vic), which does not have a counterpart in NSW or South Australia. No other State or territory has the equivalent of s 85(5) procedural requirements in its Constitution[5].

In Grocon Constructors Pty Ltd v Planit Cocciardi Joint Venture (No. 2) (2009) 26 VR 172, Vickery J found that the right of judicial review for non-jurisdictional error of law is not ousted in Victoria by reference to s 85, which provides that a provision is not taken to oust the Court’s jurisdiction unless there is an express reference to s 85 and of the intention to do so and a statement by the member introducing the Bill to that effect.

Now that the High Court in Probuild and Maxcon has confirmed that judicial review is limited in New South Wales and South Australia to jurisdictional error, it appears that in the absence of legislative amendment, Victoria will continue to allow judicial review for error of law on the face of the record.

[1] Probuild Constructions (Aust) Pty Ltd v Shade Systems Pty Ltd [2016] NSWSC 770.

[2] Shade Systems Pty Ltd v Probuild Constructions (Aust) Pty Ltd [2016] NSWCA 379 (Bathurst CJ and Beazley P, Basten, McFarlan and Leeming JJA, 23 December 2016).

[3] Maxcon Constructions Pty Ltd v Vadasz (No 2) [2016] SASC 156.

[4] Maxcon Constructions Pty Ltd v Vadasz (No 2) (2017) 127 SASR 193.

[5] Section 43 of the Building and Construction Industry (Security of Payment) Act 2009 (ACT) allows review by leave of the court for error of law on the face of the record where certain criteria are satisfied.