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[2003] NSWSC 977
appellant. The adjudicator’s determination of 18 July 2003 was quashed; consequential or other relief and costs were reserved for further hearing.
The Court held that an adjudicator’s determination under the NSW Security of Payment Act could be reviewed, but not simply because the adjudicator made an ordinary legal error. Review was available where the adjudicator went beyond or failed to exercise the statutory task, or denied natural justice. Here, the adjudicator did not properly apply relevant contract provisions and relied on grounds that Musico had not been given a chance to address. The Court therefore quashed the determination.
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1,937 words · generated 01/10/2026
The dispute concerned additions and alterations to the Edensor Park Plaza Shopping Centre under a construction contract dated 19 December 2001. Grosvenor Constructions (NSW) Pty Ltd served a payment claim on 12 June 2003 for $1,544,181.30, including GST. The Musico plaintiffs responded with a payment schedule on 26 June 2003, asserting that nothing was payable and identifying, among other matters, disputed variations, incomplete and non-conforming work, and liquidated damages [2]-[4].
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Grosvenor applied for adjudication. Adjudicator Philip Davenport determined on 18 July 2003 that Grosvenor was entitled to $712,757, with interest from 26 June 2003. He also directed that Grosvenor pay his fees and the nominating authority’s fees [5]-[8]. After the amount was not paid, an adjudication certificate was issued and filed in Court. Under ss 24 and 25 of the Act, filing made the certificate a judgment for a debt [10]-[11].
The plaintiffs challenged the determination. Their grounds included errors of law, denial of natural justice, acting beyond jurisdiction, and failure to correct alleged mistakes under the statutory “slip rule” in s 22(5) [61]-[63], [112]. The Court ultimately quashed the determination. It found jurisdictional error and denial of natural justice, but rejected the separate argument that the adjudicator’s handling of the slip-rule request established jurisdictional error [109]-[110], [119], [123]-[124], [145].
The first question was whether the determination could be reviewed at all. The Court treated the adjudicator’s role as one that affected the parties’ rights: if the adjudicated amount was not paid, the statutory process could produce a judgment enforceable as a debt [26]-[27]. The determination was not final as to the ultimate contractual balance, because s 32 allowed later proceedings to take account of amounts paid and, where appropriate, order restitution. But it had immediate binding and enforcement consequences [27].
The Court concluded that the Act did not exclude judicial review. It read ss 25(4) and 30 in their statutory context. Section 25(4) restricted defences and challenges in proceedings to set aside a judgment arising from an adjudication certificate. The Court held that this restriction did not, in terms, extend to a separate application to quash a determination for jurisdictional error or denial of natural justice [35]-[39]. Section 30 protected adjudicators from personal liability for good-faith conduct; the Court did not read that protection as excluding prerogative relief [38]. Its conclusion was that review was available in principle under s 69 of the Supreme Court Act [39]-[40].
The Court then distinguished ordinary legal error from jurisdictional error. It accepted that an adjudicator might have to consider and form a view about questions of law, including the meaning and effect of contractual provisions. An incorrect answer to a legal question would not, by itself, necessarily invalidate the determination [51]-[55]. But an error could become jurisdictional if it caused the adjudicator to address the wrong issue, ask the wrong question, ignore relevant material, rely on irrelevant material, or otherwise fail to perform the statutory function [49]-[52].
That distinction was important here. Sections 9(a) and 10(1)(a) required assessment by reference to the contract where it made express provision for the relevant matter [77]. The Court found that the contract provided for the relevant progress claim process in cl 10.02. The adjudicator did not find that the contract had been terminated, yet concluded that cl 10.02 did not apply and resorted to s 9(b), which applies where the contract makes no express provision [72]-[78], [99]-[100]. The Court considered that failure to apply the contractual provisions meant the adjudicator had not carried out the task required by the Act [119].
Natural justice supplied a distinct ground. The Act called for speed and informality, but the Court held that those features did not remove the basic obligation to give each party a reasonable opportunity to address the case it had to meet [45], [57]-[60]. Where the adjudicator proposed to determine the matter on a ground neither party had raised or notified, the parties ordinarily had to be given an opportunity to make submissions on it [107]-[109]. The Court found that several material grounds in the determination had not been advanced or raised with Musico, and that the plaintiffs had been denied the opportunity to address them [105]-[110].
The judgment set out the legal position it applied, rather than undertaking a comprehensive account of the law before and after the decision. Its central statement was that an adjudicator under the Act was amenable to review in principle [40]. This followed from the adjudicator’s statutory authority to make a determination with immediate consequences for the parties, even though later proceedings could establish the final contractual balance [26]-[27].
The Court applied a distinction between jurisdictional and non-jurisdictional legal error. It relied on the reasoning in Craig v The State of South Australia and discussed the broader account of jurisdictional error associated with Anisminic [47]-[52]. The judgment did not treat every error of law as jurisdictional. Instead, it asked whether the error affected the adjudicator’s exercise or purported exercise of statutory power [50]-[55].
The decision also made clear that the Act’s procedural informality did not displace natural justice. The content of procedural fairness had to be fitted to the statutory scheme, including its short timeframes and limits on what an adjudicator could consider [57]-[60]. In particular, the adjudicator’s ability under s 21(4) to seek further submissions could serve the purpose of allowing parties to address a proposed ground that had not previously been raised [59], [107].
The judgment does not establish, from the material supplied, how later courts treated its conclusions. Nor does it report a later change to the law. Its discussion of English and Scottish decisions is limited to saying that those decisions concerned legislation with substantial differences, while generally supporting review in principle and caution against quick intervention [41]. That observation should not be mistaken for a finding about subsequent Australian precedent.
At [40], McDougall J concluded that the determination was “in principle susceptible to judicial review.” In plain English, the statutory process did not put an adjudicator beyond the supervisory jurisdiction of the Court. That did not mean every losing party could reopen the merits. The available grounds remained limited.
At [54], the Court said it did not consider relief available for “non-jurisdictional error.” This marks a significant limit. A party’s disagreement with an adjudicator’s legal reasoning was not enough by itself. The alleged error had to be of a kind that affected the statutory authority being exercised, or there had to be another recognised review ground, such as denial of natural justice.
At [107], the Court explained that if an adjudicator planned to decide the matter on a ground neither party had argued, the parties ordinarily had to be told and given an opportunity to make submissions. The point was not that an adjudicator could never raise an issue independently. It was that a party should not be confronted with an adverse basis for decision without a fair chance to address it.
At [119], the Court connected the contract and the statutory task. Because the Act required the adjudicator to assess the claim by reference to relevant contractual provisions, the failure to consider those provisions meant the adjudicator had not performed the task in the required manner. The Court characterised that failure as not exercising the jurisdiction conferred by the Act.
Finally, [145] contains the operative order: the adjudicator’s determination was quashed. The Court did not, in that paragraph, finally determine the parties’ underlying contractual entitlements. It separately reserved the question of consequential or other relief and costs for further consideration [146].
The reasoning is most directly relevant to a statutory adjudication where the decision has immediate payment or enforcement consequences, but does not finally determine the parties’ contractual rights. The judgment’s analysis depends on the particular structure of the NSW Act, including the adjudication process, certificate and judgment provisions, and the later accounting or restitution mechanism in s 32 [26]-[27], [32]-[40].
A potential jurisdictional issue arises where the statute directs an adjudicator to assess a claim by reference to express contractual terms, but the adjudicator fails to apply those terms or substitutes a different statutory basis that is available only when the contract makes no express provision [77], [99]-[100], [119]. The relevant inquiry is not simply whether the adjudicator’s interpretation was wrong. It is whether the error meant that the statutory task was not carried out [50]-[55], [119].
A natural justice issue may arise where an adjudicator relies on a material ground that neither party advanced and that the adjudicator did not raise for comment. The judgment treats the parties’ claim and response as defining the dispute in the statutory process, while recognising that an adjudicator may seek further submissions under s 21(4) [66], [107]-[109].
By contrast, a complaint that the adjudicator made an ordinary error of law, or should have exercised a discretionary slip-rule power differently, does not automatically fit the grounds that succeeded here [54]-[55], [121]-[124]. The judgment emphasises the distinction between review of legal authority and a rehearing of the merits.
The supplied judgment contains no account of later courts’ treatment of Musico v Davenport. Accordingly, whether it was later followed, distinguished, confined or reconsidered cannot be established from this text alone.
Within the judgment, McDougall J considered a number of authorities in explaining the governing principles. Craig and Anisminic informed the distinction between jurisdictional and non-jurisdictional error [47]-[53]. Darling Casino and Public Service Association supported the approach to statutory provisions said to limit access to judicial review [34]-[39]. The Court also treated Parist Holdings Pty Ltd v WT Partnership Australia Ltd as supporting an adjudicator’s ability to consider contractual questions when performing the statutory task [115]-[117].
The Court was cautious about importing English and Scottish decisions because the legislation considered there differed substantially from the NSW Act [41]. These are the authorities discussed within this judgment, not evidence of later treatment of Musico itself.
The judgment leaves the practical boundary between jurisdictional and non-jurisdictional legal error dependent on the particular statutory task and the effect of the alleged error. It expressly recognises that the distinction is easier to state than to apply [46]. The judgment’s test requires attention to whether the adjudicator addressed the right issue, considered relevant material and exercised the statutory function, but does not eliminate uncertainty in applying that test to other records and statutory provisions [49]-[55].
The content of natural justice is also fact-sensitive. The Court explained that it depends on the circumstances and the legislative scheme, including the time limits and the role of s 21(4) [45], [57]-[60]. The decision identifies circumstances where notice and an opportunity to respond were required, but does not prescribe an identical procedure for every adjudication.
The judgment discussed the record for certiorari purposes, suggesting it could include the application, response, some further submissions, and the determination. It also considered whether contractual clauses analysed by the adjudicator could be treated as incorporated into the determination [65]-[70]. The Court did not purport to settle every possible question about the record in future adjudications.
Finally, the decision quashed the determination but deferred consequential relief and costs [145]-[146]. It therefore did not resolve the underlying contractual balance between the parties. It also does not, on the supplied text, establish how the principles have subsequently been interpreted by other courts.
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Introduction and factual background 1 This case raises for consideration the following issues:
The Act was designed to ensure prompt payment and, for this purpose, the Act set up a unique form of adjudication of disputes over the amount due for payment. Parliament intended that a progress payment, on account, should be made promptly and that any disputes over the amount finally due should be decided separately. The final determination could be by a court or by an agreed alternative dispute resolution procedure. But meanwhile the claimant's entitlement, if in dispute, would be decided on an interim basis by an adjudicator, and that interim entitlement would be paid. However, some claimants have had difficulty enforcing payment of the debt due under the Act. To enforce payment, the claimant has had to obtain a judgment of a court. At present this involves taking out a summons in the appropriate court. The respondent has 28 days to lodge a defence or cross-claim. Then there is a hearing before a magistrate or judge, who has to decide whether to enter summary judgment for the statutory debt or set the matter down for a full hearing. By raising in court defences such as that the work does not have the value claimed or that the claimant has breached the contract by doing defective work, some respondents have been able to delay making a progress payment for a long time. Those respondents have forced claimants to incur considerable legal costs. They have effectively defeated the intention of the Act. To overcome the problem, the bill clarifies that in court proceedings by a claimant to enforce payment of the debt due under the Act, a respondent will not be able to bring any cross-claim against the claimant and will not be able to raise any defence in relation to matters arising under the contraction contract. A respondent who wants to raise these matters must do so in a payment schedule in response to a payment claim under the Act, or in separate proceedings. Cash flow is the lifeblood of the construction industry. Final determination of disputes is often very time consuming and costly. We are determined that, pending final determination of all disputes, contractors and subcontractors should be able to obtain a prompt interim payment on account, as always intended under the Act. To reinforce this determination, the bill provides that after an adjudication the respondent must pay the claimant the adjudicated amount. The existing legislation gives the respondent the options of paying the adjudicated amount or providing security for payment of the amount. Experience has shown that where respondents have taken the security option, they have then not taken steps to expedite the final resolution of the dispute. … "There will be some instances where a court may set aside the judgment. The respondent may be able to demonstrate to the court that the requirements of the Act have not been complied with; for example, that there has not been a valid adjudication. But in proceedings to set aside the judgment the respondent will not be entitled to bring a cross-claim or to raise any defence in relation to maters arising under the construction contract or to challenge the determination by the adjudicator. Adjudication is an expedited procedure. The adjudicator has only 10 business days in which to make a decision. There will be instances when the progress payment determined by the adjudicator will be more or less than the entitlement finally determined to be due under the contract. However, it is better that progress payments be made promptly on an interim basis, assessed by an independent party, rather than they be delayed indefinitely until all issues are finally determined. …" First issue: is relief in principle available? 21 The first issue really resolves into two questions. 22 The first question is whether, apart from any privative effect the Act might have, relief in the nature of prerogative relief would be in principle available, under s 69 of the Supreme Court Act 1970, against an adjudicator appointed under s 19 of the Act. (I do not think that it is relevant that the adjudicator is "taken to have been appointed", and shall use the simpler form "appointed" where necessary to describe what it is that happens when an adjudicator accepts, under s 19(2), an adjudication application.) In other words, is an adjudicator a "tribunal" against whom relief under s 69 of the Supreme Court Act might lie? 23 The second question is whether (assuming that the answer to the first question is "yes") the Act, on its proper construction, excludes judicial review in the nature of prerogative relief. 24 It is necessary to go into these matters at some length because it was by no means clear from the submissions for Grosvenor whether or not it conceded that judicial review was, in principle, available. Thus, in para 29 of Grosvenor's written submissions, it was said that: "… at the very broadest level, at the conceptual level so to speak, - beyond verbal ambiguity - the legislation is not immediately declarative of the right of the parties to judicial review. … The structure of the Act takes the allegedly public official, the Adjudicator, is to take away resort in the prerogative writs for ordinary errors of law by effectively providing that the only way in which the Adjudicator's Determination may be set aside is by the issue of traditional process in litigation or arbitration." 25 However, in paras 32-36 and following of those submissions, Grosvenor appeared to concede that judicial review may be available where there was "jurisdictional error" that went "to a fundamental matter of jurisdiction". Again, in para 41, Grosvenor appeared to concede that judicial review might be available where there was denial of natural justice, although it appeared to be submitted (and if it were, it was in my view correctly submitted) that the requirement of natural justice must be considered having regard to the legislative scheme. 26 As to the first question: an adjudicator who is appointed under the Act has the power to make a determination that is binding on the parties to the adjudication. The ultimate enforceability of that determination follows from the provisions of ss 24 and 25 of the Act whereby, if the adjudicated amount is not paid in accordance with s 23, the claimant may obtain an adjudication certificate and file it with the court "as a judgment for a debt" which is "enforceable accordingly". 27 Certainly, the adjudication is not final, in the sense that, if it later be found that the adjudicated amount was excessive, restitution may be ordered (s 32(3)(b)); and, in any event, the adjudicated amount must be taken into account in any proceedings that finally determine the balance due between the parties to the adjudication (s 32(3)(a)). However, subject to those provisions, the determination of the adjudicator is binding upon the parties. That is confirmed by s 25. An adjudication certificate has effect as a judgment when it is filed in a court of competent jurisdiction. That judgment may be set aside in some circumstances: see sub s (4). But it cannot be set aside by reason of any cross-claim or matter or defence, or any "challenge [to] the adjudicator's determination". 28 In Craig v The State of South Australia (1995) 184 CLR 163, the court at 174-5 considered the jurisdiction of a superior court to grant relief in the nature of prerogative relief. Their Honours said that relief in the nature of certiorari "went only to an inferior court or to certain tribunals exercising governmental powers" (citations omitted). Their Honours referred to R v Electricity Commissioners; ex parte London Electricity Joint Committee Co (1920) Ltd [1924] 1 KB 171, 205, Ridge v Baldwin [1964] AC 40, 74-9 and O'Reilly v Mackman [1983] 2 AC 237, 279, as indicating "the tribunals other than courts which are amenable to the writ". 29 In the first of those cases, Atkin LJ, at the reference given, said: "Wherever any body of persons having legal authority to determine questions affecting the rights of subjects, and having the duty to act judicially, act in excess of their legal authority, they are subject to the controlling jurisdiction of the Kings' Bench Division exercised in these writs." 30 In the second of those cases, at the reference given, Lord Reid considered a number of the earlier cases, including the judgment of Atkin LJ just referred to. His Lordship said, at 75, that the duty to act judicially could arise simply from the tribunal's duty to determine what the rights of an individual should be: it was not necessary that there should be something more to impose on it such a duty. 31 In the third of those cases, at the reference given, Lord Diplock referred to and, as he put it, "broadened" what Atkin LJ had said by omitting, as a separate requirement (in terms of Atkin LJ's formulation) the reference to "having the duty to act judicially". Having referred to what Lord Reid had said in Ridge, Lord Diplock said: "Wherever any person or body of persons has authority conferred by legislation to make decisions of the kind I have described [i.e., by reference to an earlier passage, determinations of questions affecting the common law or statutory rights or obligations of other persons as individuals] it is amenable to the remedy of an order to quash its decision either for error of law in reaching it or for failure to act fairly towards the person who will be adversely affected by the decision by failing to observe either one or other of the two fundamental rights accorded to him by the rules of natural justice or fairness, viz to have afforded to him a reasonable opportunity of learning what is alleged against him and of putting forward his own case in answer to it, and to the absence of any personal bias against him on the part of the person by whom the decision falls to be made." 32 I therefore conclude, in answer to the question posed in para 22 above, that, apart from any privative effect the Act might have, relief under s 69 of the Supreme Court Act would, in principle, lie against an adjudicator appointed under s 19 of the Act. 33 I turn now to the second question under this issue (see para 22 above). 34 Statutes that seek to limit or exclude the right of judicial review of administrative decisions are to be construed by reference to a presumption that the legislature does not intend to deprive citizens of their right of access to the courts, other than to the extent expressly stated or necessarily implied: Public Service Association (SA) v Federated Clerks Union of Australia, South Australian Branch (1991) 173 CLR 132, 160; Darling Casino Ltd v New South Wales Casino Control Authority (1997) 191 CLR 602, 633. Thus, a statement that a decision is final and conclusive is construed not to exclude certiorari for error of law on the face of the record; and a statement that a decision may not be called into question in a court of law is construed not to exclude review on the ground of jurisdictional error (at least, in the sense that it involved either a refusal to exercise jurisdiction, or an excess of jurisdiction): Darling Casino, loc. cit. 35 It is clear that Parliament has sought to limit challenges to the decisions of adjudicators: see, in particular, ss 25(4) and 30 of the Act. Those sections limit the right that a party to an adjudication might otherwise have to seek relief. However, consistent with what was said in Public Service Association and Darling Casino, they should not be taken to deprive parties of access to the courts other than to the extent that is expressly stated in them, or necessarily to be implied from them. 36 The relevant provisions of the Act - including principally, as I have indicated, ss 25(4) and 30 - do not approach, in their statement of privative intent, the language of the privative regulation considered by the High Court in R v Hickman: ex parte Fox and Clinton (1945) 70 CLR 598. In that case, the regulation provided that the decision of the relevant tribunal "shall not be challenged, appealed against, quashed or called into question, or be subject to prohibition, mandamus or injunction, in any court on any account whatever". That clause was held insufficient to protect either manifest jurisdictional errors or acts beyond power. See also Church of Scientology v Woodward (1982) 154 CLR 25, 55-56; Deputy Commissioner of Taxation v Richard Walter Pty Ltd (1995) 183 CLR 168, 180; Plaintiff S157/2002 v The Commonwealth (2003) 77 ALJR 454, 457, 459. 37 The limitations on the ability of a respondent to set aside a judgment flowing from the filing of an adjudication certificate cannot in terms apply where the respondent is seeking not to pursue that course but to quash the determination upon the ground that it is fatally vitiated by (for example) denial of natural justice, or manifest error of law. There is no basis for reading the prohibitions in s 25(4)(a) as extending beyond the context to which they are expressed to apply: namely, an application to set aside judgment. 38 Equally, there is nothing in s 30 to indicate that the legislature intended to exclude judicial review. On the contrary, in my view, the reference in sub s (1) to personal liability of an adjudicator is an indication that the legislature was seeking to protect adjudicators from civil liability for (by way of example) erroneous adjudications. It is not an apt use of language to describe an application for relief in the nature of certiorari or prohibition as one that seeks to enforce a personal liability against the person or body to whom the application is directed. 39 It must follow, I think, that the Act does not exclude the power of the Court to review, and where necessary grant relief, under s 69 of the Supreme Court Act, the determinations of adjudicators made under s 22 of the Act. 40 I therefore conclude that the determination of an adjudicator made pursuant to s 22 of the Act is in principle susceptible to judicial review. 41 I should say that both Musico and Grosvenor made extensive reference to English and Scottish decisions, dealing with the equivalents in England and Scotland of the Act. I have not referred to those decisions because there are substantial differences between the scheme and text of the Act and the scheme and text of the legislation considered in those English and Scottish decisions. Nonetheless, those decisions may be said to confirm two things. Firstly, in general, they confirm that judicial review is in principle available. Secondly (and this is particularly relevant to the second issue), they suggest that the courts should not be quick to intervene. Second issue: on what grounds may judicial review be available? 42 In general, as the authorities to which I have already referred establish, where judicial review is available, it may lie by reason of refusal to exercise jurisdiction, excess of jurisdiction (i.e., acting beyond power) or denial of natural justice. Further, Musico rely on s 69(3) of the Supreme Court Act for the proposition that relief in the nature of certiorari may lie to quash a determination made on the basis of an error of law that appears on the face of the record of the proceedings. 43 In principle, I think that review of adjudications made under the Act could be undertaken on jurisdictional grounds (i.e., refusing to exercise, or acting in excess of, jurisdiction) or denial of natural justice. Although Grosvenor's written submissions on this issue were unclear, it appears to be the case, from what was said in oral submissions, that Grosvenor accepted that review could be undertaken on jurisdictional grounds, although I think that Grosvenor took a narrower view than did Musico of what might fall under this general rubric. I deal below with the question of jurisdictional errors of law. 44 Grosvenor's position, in relation to the availability of judicial review on the ground of denial of natural justice, was even less clear. It noted in para 41 of its submissions that, in the context of the procedure for which the Act provided, there must be some "relaxation in our expectations of the requirements of natural justice". If, by that, Grosvenor intended to submit that the application, or content, must be analysed by reference to the statutory context, then I agree. If, however, Grosvenor were intending to submit that the two fundamental rights, summarised by Lord Diplock in O'Reilly at 279 (see para [31] above), did not apply at all (recognising that the first of them must be read in the context of the statutory scheme), then I disagree. It was submitted that "[t]he Act must limit the application of the familiar principles of natural justice where the decision is only an interim decision". Again, if by this it were intended to submit that the content and application of the principles must be read in the context of the statutory scheme, then I agree. But if it were intended to submit that the basic principles had no application, then I disagree. 45 In my opinion, an adjudicator under the Act is obliged to afford the parties to the adjudication natural justice, there being no indication of any legislative intention to exclude that fundamental right: see Haoucher v Minister for Immigration and Ethnic Affairs (1990) 169 CLR 648; see also O'Reilly. However, the content must depend upon the circumstances of the particular case and, of course, the legislative scheme. 46 In some cases, an error of law may lead to jurisdictional error, although the distinction between jurisdictional and non-jurisdictional errors of law is easier to state than to apply. 47 In Anisminic Ltd v Foreign Compensation Commission [1969] 2 AC 147, 171 Lord Reid said: "[T]here are many cases where, although the tribunal had jurisdiction to enter on the inquiry, it has done or failed to do something in the course of the inquiry which is of such a nature that its decision is a nullity. It may have given its decision in bad faith. It may have made a decision which it had no power to make. It may have failed in the course of the inquiry to comply with the requirements of natural justice. It may in perfect good faith have misconstrued the provisions giving it power to act so that it failed to deal with the question remitted to it and decided some other question which was not remitted to it. It may have refused to take into account something which it was required to take into account. Or it may have based its decision on some matter which, under the provisions setting it up, it had no right to take into account. I do not intend this list to be exhaustive. But if it decides a question remitted to it for decision without committing any of these errors it is as much entitled to decide that question wrongly as it is to decide it rightly". (emphasis supplied) 48 His Lordship's statement was cited with apparent approval, in relation to administrative tribunals, in Craig at 178. 49 The decision in Craig at 179 established that, in the absence of a contrary intention in the statute or other constituting instrument, an administrative tribunal lacks power either authoritatively to determine questions of law or to make an order or decision otherwise than in accordance with the law. 50 Accordingly, there will be cases where a decision otherwise than in accordance with the applicable law involves jurisdictional error. As the court said in Craig, after stating the principles referred to in the preceding paragraph: "If such an administrative tribunal [i.e., one lacking judicial power] falls into an error of law which causes it to identify a wrong issue, to ask itself a wrong question, to ignore relevant material, to rely on irrelevant material or, at least in some circumstances to make an erroneous finding or to reach a mistaken conclusion, and the tribunal's exercise or purported exercise of power is thereby affected, it exceeds its authority or powers. Such an error of law is jurisdictional error which will invalidate any order or decision of the tribunal which reflects it". (emphasis supplied) 51 The position of an adjudicator under the Act is not completely analogous to that of an administrative tribunal of the kind referred to by the court in Craig. Nor, of course, is it closely analogous to that of an inferior court (which, as the court pointed out in Craig at 179-180, has "authority to decide questions of law, as well as questions of fact", so that an error of law in the determination of issues before it will not ordinarily lead to jurisdictional error). The position is, in my view, closely analogous to that of an expert by whose determination the parties have agreed to be bound (see, for example, A Hudson Pty Ltd v Legal & General Life of Aust Ltd (1985) 1 NSWLR 701). This approach was confirmed by the English Court of Appeal in Bouygues (UK) Ltd v Dahl-Jensen (UK) Ltd [2000] BLR 522 (although, for the reasons given in para [41] above, care needs to be taken in seeking to apply decisions on a different legislative scheme). 52 I therefore conclude that, where the determination of a dispute submitted to an adjudicator under the Act requires the adjudicator to consider issues of law, the adjudicator will not fall into jurisdictional error simply because he or she makes an error of law in the consideration and determination of those issues. It would be otherwise, as the High Court pointed out in Craig (echoing, I think, what Lord Reid said in Anisminic), if the error of law causes the adjudicator to make one or other (or more) of the jurisdictional errors that the court identified: in such a case, relief would lie, subject to any relevant discretionary considerations. 53 Musico submitted, by reference to the statement in Craig at 179 referred to in para [49] above, that an adjudicator would commit jurisdictional error if he or she made an error of law in the course of reaching his or her determination. The submission in effect is that, contrary to what Lord Reid said in Anisminic (see para [47] above), an adjudicator is not entitled to decide a question wrongly as rightly. I do not think that the High Court in Craig intended that the proposition on which Musico rely for this submission was unqualified and absolute; this is clear, if from nothing else, from the passage that I have set out in para [50] above. Indeed, the proposition for which Musico contend would effectively negate the distinction between jurisdictional and non jurisdictional error of law. I do not think that the court in Craig intended to achieve this; that would be inconsistent with what appears to be their approval, in the case of administrative tribunals, of that passage of Lord Reid's speech in Anisminic that I have set out in para [47] above. 54 I therefore conclude that relief will lie where jurisdictional error, including jurisdictional error of law on the face of the record, is shown. However, I do not think that relief will lie to quash the determination of an adjudicator upon the basis of non-jurisdictional error. That is because, in my view, the legislative scheme set out in s 25(4) of the Act is inconsistent with the availability of this ground of review. 55 By s 25(4)(a)(iii), a respondent seeking to set aside a judgment based on an adjudication certificate cannot challenge the adjudicator's determination. That must mean that in any such proceedings, the judgment cannot be set aside upon the basis that the adjudicator (for example) erred in law in some step of his or her reasoning. It would be quite inconsistent with the legislative intention that is evident in s 25(4) to permit a challenge to be raised, by way of relief in the nature of prerogative relief, upon the ground of error of law. The legislature could hardly be taken to have intended that, having forbidden entry by the front door, it was nonetheless happy for access to be obtained from the rear. 56 Further, in my opinion, where review may in principle be available, the availability of the particular ground must depend, among other things, upon an analysis of the relevant provisions of the Act. 57 For example, in relation to natural justice, the extent of the adjudicator's obligation to afford to a respondent to the adjudication application an opportunity to be heard is limited by s 21(2) of the Act, which provides that an adjudicator is not to consider an adjudication response made outside the time for such response to be lodged. This is reinforced by s 21(5), which provides, relevantly, that the adjudicator's power to determine an application is not affected by the failure of either or both of the parties to make a submission. 58 Musico relied upon the statement of McHugh J in Muin v Refugee Review Tribunal (2002) 76 ALJR 966, 989 [123] as follows: "Natural justice requires that a person whose interests are likely to be affected by an exercise of power be given an opportunity to deal with matters adverse to his or her interests that the repository of the power proposes to take into account in exercising the power". 59 That requirement can, I think, be accommodated to the scheme of the Act. Section 21(4) enables an adjudicator to request further submissions from either party and to give the other party an opportunity to comment on those submissions. Where, after considering an adjudication application and an adjudication response, an adjudicator comes to the view that there was some matter, not traversed in them, that might cause him or her to deal with the application in a manner adverse to one or other party, the principle enunciated by McHugh J would ordinarily require that the adjudicator request further written submissions and comments thereon. But whether or not this principle is enlivened in a particular case must, necessarily, depend on an analysis of the "matter", and of its significance to the determination ultimately made by the adjudicator. 60 Further, and more generally, I think that the approach of the Court to an application for review of an adjudicator's determination should be guided by the evident legislative intention that such determinations are to be carried out informally and speedily, and in a manner that will enable erroneous determinations to be adjusted (i.e., in effect, corrected) upon a final hearing of the issues in dispute between the parties.
Third issue: are any grounds of review made out? 61 Musico put their case on the basis that the determination of Mr Davenport was vitiated by what I will call, for convenience, reviewable error, in three ways:
Patent error of law 63 Musico contended that Mr Davenport's determination was vitiated by error of law in some nine respects. The alleged errors were, it was said, plain on the face of the determination. The alleged errors were asserted in paras 2(a) to 2(g) of the summons. 64 It is necessary to consider Musico's complaints because some of them are capable of demonstrating and, as will be seen, in my opinion do demonstrate, jurisdictional error of law. Further, in case I am wrong in my conclusion that non jurisdictional error of law is not a ground for review, I would in any event set out Musico's complaints and my conclusions on them. What constitutes the record? 65 Section 69(4) of the Supreme Court Act makes it clear that, whatever may be the position at common law (cf Craig at 181), for the purposes of relief in the nature of certiorari, the face of the record includes the reasons expressed by the court or tribunal for its ultimate determination. Beyond that, as the High Court said in Craig at 182, "[t]he determination of the precise documents which constitute 'the record' of the inferior court for the purposes of a particular application for certiorari is ultimately a matter for the court hearing the application.". Ordinarily, the record would not include the transcript or exhibits (if any) before the inferior court or tribunal (Craig at 181), except to the extent that they are incorporated into the ultimate determination, or formal order, that was made. 66 In general terms, it seems to me that the record, in cases such as the present, would include the adjudication application, any adjudication response, perhaps any further written submissions and comment thereon requested or permitted pursuant to s 21(4)(a) and the determination itself. The adjudication application and adjudication response would form part of the record because, in substance, and in the absence of pleadings, they are the documents that define the dispute that the adjudicator is to determine. The incorporation into the record of any s 21(4)(a) written submissions or comment might depend on whether they served further to define the dispute. The determination (including reasons) would form part of the record because of s 69(4) of the Supreme Court Act. 67 Further, where the adjudicator was asked to exercise his or her power pursuant to the "slip rule" in s 22(5), it is likely that the record would include any application to the adjudicator from a party to exercise that power, any response thereto and the decision of the adjudicator thereon. Equally, where the power under the slip rule was exercised on the adjudicator's own initiative, the record would ordinarily include whatever it was that the adjudicator said or did in the exercise of that power. 68 In his determination, Mr Davenport referred to a number of the provisions of the contract, and expressed views as to their meaning and application. In my opinion, in determining whether there is error of law on the face of the record, it is open to me to have regard at least to those provisions of the contract to which Mr Davenport referred. Applying by analogy what was said in Craig at 181-2, I think that at least those clauses of the contract that are specifically referred to and analysed by Mr Davenport should be taken to be incorporated into his determination; and, as I have noted, his determination itself forms part of the record. In substance, it seems to me that the way Mr Davenport dealt with those particular contractual provisions makes them an integral part of his determination, as opposed to "a merely introductory or incidental reference". 69 Again, I have gone into this matter at what may appear to be excessive length because it is by no means clear from the submissions, in particular those for Grosvenor, what was agreed to constitute the record. 70 It should be noted that, whatever may be the precise constitution of the "record" in the present case, Musico tendered a folder of documents (exhibit PX 15) that included not only the adjudication application, the adjudication response, the determination and the documents relating to the application to Mr Davenport to exercise his power under the slip rule, but also the building works contract between Musico and Grosvenor, and documentation relevant thereto, including the subject payment claim by Grosvenor and Musico's payment schedule in response. Grosvenor did not oppose the tender of these documents and did not submit that I should not have regard to them in determining whether there had been error of law on the face of the record, although it was submitted for Grosvenor, in respect of every error that was alleged, that it was not "patent on the face of the record of the Adjudicator's determination". First asserted error of law (paragraph 2(a) of the summons) 71 Mr Davenport's determination shows that:
Paragraph 2(d) of the summons 94 Mr Davenport identified as a "serious flaw in the certificate", the fact that the Architect had calculated liquidated damages at 27 November 2002, being, it was said, "Termination Date of contract". Mr Davenport referred to other dates propounded by Musico and concluded "that the Architect's assessment of liquidated damages is not to be relied upon". 95 Even if the Architect erred in this calculation, that would not render the progress certificate void. It would be a matter for Mr Davenport as adjudicator to determine what (if any) was the appropriate amount to be allowed for liquidated damages and to take that into account in his determination. Paragraph 2(e) of the summons 96 In any event, Mr Davenport concluded that the liquidated damages clause was a penalty. The liquidated damages amount was $2,500 per day. There is no basis shown in the determination for concluding that this amount, in the context of a contract for $3,870,000 (exclusive of GST) for additions and alterations to a shopping centre, is "out of all proportion" or "extravagant, exorbitant or unconscionable": Amev-UDC Finance Ltd v Austin (1986) 162 CLR 170; Esanda Finance Corporation Ltd v Plessnig (1989) 166 CLR 131. Mr Davenport appears to have thought that the amount fixed was a penalty because "the contract makes no provision for reduction upon handing over of possession of parts of the works". As Wilson and Toohey JJ recognised in Esanda Finance at 142, there is a need "to allow for the latitude that necessarily attends the conception of a genuine pre estimate of damages". Mr Davenport seems not to have recognised this principle; but in any event, his reasoning gives no indication of why, having regard to the test established by the authorities to which I have referred, the specified sum was penal. Paragraph 2(f) of the summons 97 Mr Davenport concluded "that time is at large (because the Architect has failed to administer the time extension provisions as required by the contract)." His reasoning was that "[t]he Architect has not granted a single days [sic] extension of time notwithstanding that the Architect has acknowledged that the scope of work was increased by $187,000 and in addition, the Architect approved variations to the value of $357,017 … . I cannot imagine that that additional amount of work would not have justified so much as one day of extension of time". 98 Even if Mr Davenport's scepticism were well founded, it does not follow that, as he concluded "the Architect failed to administer the extension of time provisions in accordance with the terms of the contract", or that time was thereby rendered at large. If the appropriate material had been put before him, it might have been open to Mr Davenport to reach some assessment for himself of the amount (if any) that should be allowed for liquidated damages, having regard to the extensions (if any) that the Architect should have granted. It was not open to him to avoid this task and, instead, simply to conclude that time was at large.
Paragraph 2(g) of the summons 99 For the reasons that have been referred to, Mr Davenport's conclusion was that he was "not satisfied that the amount of the progress payment can be determined in accordance with the terms of the construction contract". In my view, that conclusion was wrong in law, because each of the elements that leads to it is wrong in law. 100 But, the approach that Mr Davenport thereupon took is wrong in law for another reason. He purported to "determine the amount of the progress payment in accordance with s 9(b) of the Act". However, as I have noted, that section only applies where "the contract makes no express provision". In the present case, the contract did make express provision. It followed that, even on his conclusions, Mr Davenport was obliged to assess the progress claim in accordance with the contract, and not under s 9(b). Second issue: denial of natural justice 101 Under this heading, Musico relied on the circumstance that, so they said, Mr Davenport reached a number of conclusions that had not been advanced by Grosvenor and of which Musico had not had notice. 102 Musico relied on six of the matters that have been referred to above, in relation to the question of error of law on the face of the record. They are the matters referred to in paras 2(a), (b), (c), (d), (e) and (g) of the summons, which are substantially repeated, in relation to denial of natural justice, in paras 3(a) to (f) of the summons. 103 The complaint as to denial of natural justice in relation to the proposition that the liquidated damages figure was penal (para 3(e) of the summons) has been withdrawn. 104 Three additional matters are raised: relating to the cost of rectification of defect; the amounts approved for variations and additional scope of works; and the amounts claimed in respect of liquidated damages and retention monies. As to the first and third of these, there was some concession by Grosvenor but, notwithstanding that concession, Mr Davenport did not take the matters into account. As to the second of those matters: it was said that the variations of $357,017 in fact included, and were not additional to, the amount of $187,000 for additional scope of works. 105 Not only is it difficult to understand Grosvenor's position as to whether, in principle, Mr Davenport was obliged to afford the parties natural justice (see para [44] above), it is also difficult to understand its position in relation to the specific breaches alleged by Musico. So far as it can be gleaned from the written submissions for Grosvenor, Grosvenor's position, in relation to the complaints advanced by paras 3(a), (b), (c) and (d), appears to concede that the specific reasons of Mr Davenport that are impugned in those paragraphs were not specifically raised, either by Musico in its adjudication application, or by Mr Davenport pursuant to s 21(4)(a) of the Act. 106 As to two of those matters - namely, those referred to in paras 3(a) and 3(d), Grosvenor's position appears to be that, although the matters were not explicitly raised, nonetheless, because, in effect, Mr Davenport was required to consider the provisions of the contract, the provisions of the payment schedule and the provisions of the Act, it was open to him to reach the view that he did, notwithstanding that Grosvenor had not advanced or contended for those views in its adjudication application. 107 If that be Grosvenor's position it is, in my opinion, wrong. It may readily be accepted that the Act provides for a somewhat rough and ready way of assessing a builder's entitlement to progress claims. It may also be accepted that the procedure is intended not only to be swift, but also to be carried out with the minimum amount of formality and expense. Nonetheless, what an adjudicator is required to do is to decide the dispute between the parties. Under the scheme of the Act, that dispute is advanced by the parties through their adjudication application and adjudication response (which, no doubt, will usually incorporate the antecedent payment claim and payment schedule). If an adjudicator is minded to come to a particular determination on a particular ground for which neither party has contended then, in my opinion, the requirements of natural justice require the adjudicator to give the parties notice of that intention so that they may put submissions on it. In my opinion, this is a purpose intended to be served by s 21(4) of the Act (although the functions of s 21(4) may not be limited to this). 108 It follows, in my opinion, that where an adjudicator determines an adjudication application upon a basis that neither party has notified to the other or contended for, and that the adjudicator has not notified to the parties, there is a breach of the fundamental requirement of natural justice that a party to a dispute have "a reasonable opportunity of learning what is alleged against him and of putting forward his own case in answer to it". (See Lord Diplock in O'Reilly at 279.) 109 In my opinion, therefore, the complaints of denial of natural justice asserted in paras 3(a), (b), (c) and (d) of the summons are made out. 110 It is apparent - and the submissions for Grosvenor appear to concede this - that the complaint advanced by para 3(f) stands or falls with the complaint advanced by para 3(a). Having regard to the view that I have just expressed, it stands. 111 The remaining complaints (bearing in mind that para 3(e) has been abandoned) seem to me to fall into a somewhat different category. The matters there complained of were the subject of articulation and debate (not, of course, in the process of any hearing but through the adjudication application and adjudication response). Mr Davenport may have erred in the conclusions to which he came in respect of these matters, but I do not think, in coming to them, he contravened the principles of natural justice as they are to be accommodated to the scheme of the Act. Third issue: acting in excess of jurisdiction/failure to exercise jurisdiction 112 As I understand Musico's complaints in this regard, they are that:
Discretionary defences 125 Grosvenor submitted that the grant of relief in the nature of prerogative relief is discretionary. Musico did not appear to challenge this proposition at the level of principle. In my opinion the proposition is, again at the level of principle, correct: see, for example, Hill v King (1993) 31 NSWLR 654, although there may be still some controversy as to the extent of the discretion. 126 It has been held on a number of occasions that the grant of certiorari is discretionary, and that it will ordinarily be refused where there is an effective alternative remedy. Specifically, relief will ordinarily be refused to a party who had a right of appeal against the order which it is sought to quash: Re McBain: ex parte Australian Catholic Bishops Conference (2002) 209 CLR 372, 472 [283] (Hayne J); see also Re Preston [1985] AC 835, 852 (Lord Scarman), 862 (Lord Templeman). However, as was emphasised in Meagher v Stephenson (1993) 30 NSWLR 736, 738, the question is what is the most effective and convenient remedy, not just for the applicant, but also in the public interest. 127 Grosvenor relied on some five discretionary considerations:
Last Modified: 11/03/2003 DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated.
Musico & Ors
Davenport & Ors
CITATION : Musico & Ors v Davenport & Ors [2003] NSWSC 977 HEARING DATE(S) : 26 September 2003 JUDGMENT DATE : 31 October 2003
CATCHWORDS : ADMINISTRATIVE LAW - whether the determination of an adjudicator under the Building and Construction Industry Security of Payment Act 1999 is open to judicial review and upon what grounds - whether there were errors of law, jurisdictional errors or denial of natural justice - whether discretionary reasons for refusal of relief Building and Construction Industry Security of Payment Act 1999 LEGISLATION CITED : Building and Construction Industry Security of Payment Amendment Act 2002 Corporations Act 2001 Supreme Court Act 1970 Administration of the Territory of Papua and New Guinea v Daera Guba (1973) 130 CLR 353 Amev-UDC Finance Ltd v Austin (1986) 162 CLR 170 Anisminic Ltd v Foreign Compensation Commission [1969] 2 AC 147, 171 Bouygues (UK) Ltd v Dahl-Jensen (UK) Ltd [2000] BLR 522 Church of Scientology v Woodward (1982) 154 CLR 25, 55-56 Codelfa Construction Pty Ltd v State Rail Authority of New South Wales (1982) 149 CLR 337 Craig v The State of South Australia (1995) 184 CLR 163, 174-5 Darling Casino Ltd v New South Wales Casino Control Authority (1997) 191 CLR 602, 633 Deputy Commissioner of Taxation v Richard Walter Pty Ltd (1995) 183 CLR 168, 180 Esanda Finance Corporation Ltd v Plessnig (1989) 166 CLR 131 Haoucher v Minister for Immigration and Ethnic Affairs (1990) 169 CLR 648 Heyman v Darwins Ltd [1942] AC 356 Hill v King (1993) 31 NSWLR 654 A Hudson Pty Ltd v Legal & General Life of Aust Ltd (1985) 1 NSWLR 701 CASES CITED : Meagher v Stephenson (1993) 30 NSWLR 736, 738 Muin v Refugee Review Tribunal (2002) 76 ALJR 966, 989 O'Reilly v Mackman [1983] 2 AC 237, 279 Parist Holdings Pty Ltd v WT Partnership Australia Ltd [2003] NSW SC 365 Plaintiff S157/2002 v The Commonwealth (2003) 77 ALJR 454, 457, 459 Port Jackson Stevedoring Pty Ltd v Salmond & Spraggon Pty Ltd (1980) 144 CLR 301 Public Service Association (SA) v Federated Clerks Union of Australia, South Australian Branch (1991) 173 CLR 132, 160 Randall v Council of the Town of Northcote (1910) 11 CLR 100, 105 R v Arndel, ex parte Freeman (1906) 3 CLR 557, 566-567 R v Electricity Commissioners; ex parte London Electricity Joint Committee Co (1920) Ltd [1924] 1 KB 171, 205 R v Hickman: ex parte Fox and Clinton (1945) 70 CLR 598 Re McBain: ex parte Australian Catholic Bishops Conference (2002) 209 CLR 372, 472 R v War Pensions Entitlement Appeal Tribunal; ex parte Bott (1933) 50 CLR 228, 243 Re Preston [1985] AC 835, 852, 862 Ridge v Baldwin [1964] AC 40, 74-9 Tickner v Chapman (1995) 57 FCR 451, 462, 476, 495 Joseph Musico (aka Giuseppe Musico), Rosemary Musico, Luigi Genua and Rose Genua PARTIES : v Philip Davenport and Grosvenor Constructions (NSW) Pty Ltd [Administrators appointed] FILE NUMBER(S) : SC 55034/03 M G Rudge SC/D A C Robertson (Plaintiffs) COUNSEL : Submitting appearance (Defendant 1) D A Doyle, Sol/J Cheung, Sol (Defendant 2) White Barnes (Plaintiffs) SOLICITORS : Philip Davenport (Defendant 1) The Builders' Lawyer (Defendant 2)
(1973) 130 CLR 353
(1986) 162 CLR 170
(1982) 154 CLR 25
(1982) 149 CLR 337
(1995) 184 CLR 163
(1997) 191 CLR 602
(1995) 183 CLR 168
(1989) 166 CLR 131
(1990) 169 CLR 648
(1993) 31 NSWLR 654
(1985) 1 NSWLR 701
(1993) 30 NSWLR 736
(2002) 76 ALJR 966
(2003) 77 ALJR 454
(1980) 144 CLR 301
(1991) 173 CLR 132
(1910) 11 CLR 100
(1906) 3 CLR 557
(1945) 70 CLR 598
(2002) 209 CLR 372
(1933) 50 CLR 228
(1995) 57 FCR 451
The adjudicator’s determination of 18 July 2003 was quashed; consequential or other relief and costs were reserved for further hearing.