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One of the features of construction projects are the different layers of contracts within the network, and of the levels, subcontractors usually find themselves at the bottom of the food chain. Therefore, security of payment (SOP) legislation plays a significant role in ensuring that all parties receive prompt payments throughout the project, especially those on the lower rungs such as subcontractors. However with that being said, there are a number of significant issues related to SOP regimes which those within the construction industry can attest to. It is hoped that with the commencement of the Building and Construction Industry Payments Amendment Act 2014 (BCIPA), and in particular, the introduction of a new adjudication process that some of the issues relating to SOP may be alleviated – especially in the area relating to adjudication decisions that are a result of jurisdictional error. Although a decision resulting from jurisdictional error is an area that is addressed within the amendment Act, the question of jurisdictional error is still worth exploring especially when considering the lack of clarity in the area traditionally.

Clarity and jurisdictional error

Concern within the construction industry in relation to jurisdictional error is understandable due to the wide latitude the notion is given by the courts. The High Court in Kirk v Industrial Relations Commission; Kirk Group Holdings Pty Ltd v WorkCover Authority of New South Wales (Inspector Childs) [2010] HCA 1, citing Professor Louis Jaffe’s article, “Judicial Review: Constitutional and Jurisdictional Fact”, noted that jurisdictional error can simply be an expression of the “gravity of error”.

Is the concept of jurisdictional error actually problematic?

Although some within the construction industry may be uneasy with some aspects of jurisdictional error, it should be highlighted that French CJ highlighted the limitations of jurisdictional error in administrative decisions is limited by statute and the Constitution. “The application of jurisdictional error in relation to administrative decisions today is concerned with the limits of executive power exercised under statute or directly under the Constitution.”[1]

Reviewing decisions of the arbitrator

Circumstances where SOP adjudications may be reviewable can include instances where the decision was “arbitrary, capricious or irrational” or not “open to a reasonable person correctly understanding the meaning of the law under which authority is conferred” (per Chase Oyster Bar Pty Ltd v Hamo Industries Pty Ltd (2010) 78 NSWLR 393).

Conclusion

With the BCIPA now in force, the Court now has the discretion to bind parties to the unaffected parts of the decision, while severing the areas affected by jurisdictional error. However, due to the lack of clarity in the area previously, it will be interesting to see what is in store for the area of jurisdictional error.

This article or the information contained therein does not purport to provide a full explanation of the law, give advice or any guidance to anyone in connection with BCIPA or any other issue and this article is not to be used by anyone to support their legal position or otherwise. This article is provided on the basis of particular facts and circumstances. This article is limited only to what is the generally accepted view in Australia. This firm cannot take responsibility for any action readers take based on this information. We would be happy to assist you with any construction and engineering related legal issues you may have, please get in touch via enquiries@usherlevi.com or telephone our Brisbane office on (07) 3087 3463, Sydney office on (02) 9293 2546 or Sunshine Coast office on (07) 5413 9270 and one of our experienced lawyers will respond to you.

 

[1] French R, The Executive Power, Speech delivered at the Inaugural George Winterton Lecture, The University of Sydney (Sydney, 18 February 2010) pp 13-14,http://www.hcourt.gov.au/assets/publications/speeches/current-justices/ frenchcj/frenchcj18feb10.pdf.