The validity of adjudicators' determinations containing errors of law
Author | Jeremy K. Coggins |
Position | University of Adelaide, Adelaide, Australia |
Over the past 15 years, several Commonwealth jurisdictions1 have enacted legislation which allows parties to a construction contract the right to a statutory adjudication procedure in the event of a payment dispute. Under such legislation the adjudication process is intended to provide a quick and cheap form of dispute resolution, unencumbered by the heavy procedural requirements of more formal dispute resolution methods such as arbitration and litigation. Under the legislation, adjudicators' determinations are provisional in nature, enforceable in the interim up until the time a court judgment or arbitration award is made concerning the relevant disputed matter arising under the construction contract.
Although there are differences between the various Acts with respect to scope of coverage, terminology, physical structure and procedural requirements, a common aim of all the legislation is to get cash flowing in as fair and expeditious a manner as possible down the hierarchical contractual chains that exist on most commercial construction projects.
The first jurisdiction to enact statutory adjudication2 was the UK in the form of Part II of The Housing Grants, Construction and Regeneration Act (the “UK Act”)3 enacted in 19964. The second jurisdiction to introduce statutory adjudication was NSW in the form of the Building and Construction Industry Security of Payment Act 1999 (hereafter, referred to as the “NSW Act”), which came into force on 26 March 2000. Following the commencement of statutory adjudication in the UK, the courts were very supportive ( Kennedy, 2007 ) of the new “quick and dirty” (as it is often described) interim dispute resolution process, recognising its primary objective to improve cash flow. As stated by Dyson J:
It is clear that Parliament intended that the adjudication should be conducted in a manner which those familiar with the grinding detail of the traditional approach to the resolution of construction disputes apparently find difficult to accept. But Parliament has not abolished arbitration and litigation construction disputes. It has merely introduced an intervening provisional stage in the dispute resolution process. Crucially, it has made it clear that decisions of adjudicators are binding and are to be complied with until the dispute is finally resolved5.
As such the English courts declined to invalidate adjudicators' determinations containing an error of law, as long as the adjudicator had answered the right questions put to him or her by the parties.
In contrast to the English position, the NSW courts' approach towards errors of law in adjudicators' determinations has taken several twists and turns. For the first four years after commencement of the legislation, under its supervisory jurisdiction6, the NSW Supreme Court viewed adjudicators' determinations to be susceptible to judicial review by way of relief in the nature of prerogative writs. As such, amongst other types of jurisdictional errors, judicial review was available in relation to error of law on the face of the record. This position changed in the NSW Court of Appeal's 2004 decision in
It may, therefore, be seen that the English and NSW courts have adopted different approaches to the judicial review, in general, of adjudicators' determinations. This article considers in detail these different approaches by reviewing the relevant English and NSW case law, and concludes by considering in which jurisdiction an adjudicator's determination containing an error of law is more likely to be enforced.
In
[…] if he has answered the right question in the wrong way, his decision will be binding. If he has answered the wrong question, his decision will be a nullity.
This is a position which accords with the contractual nature of adjudication. As noted by Forbes (2001) :
In legal terms the enforcement of an adjudication is based on the contractual proposition that, if the parties have agreed to leave a dispute to be resolved by a third party such as an adjudicator and be bound by that decision (which is, of course, the position in adjudication), the court will then hold the parties to their mutual promises.
Thus, as long as the adjudicator answers the questions put before him by the parties in a particular dispute, he is within his contractual authority and, hence, is acting within his jurisdiction. As the adjudicator is not a government appointed arbiter, he is not obliged to interpret points of law correctly. He may err on a point of law, as long as such error was committed in the course of attempting to answer a question he was authorised to consider. As Forbes (2001) observes, the relevant principle was expressed in
The powers of the architect or arbitrator [or adjudicator – Forbes' interpolation], whatever they may be, are conferred by the contract. It seems to me more accurate to say that the parties have agreed that their contractual obligations are to be whatever the architect or arbitrator [or adjudicator] interprets them to be. In such a case, the opinion of the court or anyone else as to what the contract requires is simply irrelevant. To enforce such an interpretation of the contract would be something different from what the parties had agreed.
In
On discovering the adjudicator's error, O'Donnell contacted the adjudicator and asked him to correct this error. Build Ability objected to the correction. The adjudicator considered that he had the power to correct the error and within two days of issuing the original decision issued a revised decision.
Build Ability contended that the adjudicator had no jurisdiction to make a revised decision.
The matter was referred to Mr Justice Ramsey in the Technology and Construction Court. Ramsey considered
[…] in deciding whether the adjudicator has decided the wrong question rather than given a wrong answer to the right question, the court should bear in mind that the speedy nature of the adjudication process means that mistakes will inevitably occur, and, in my view, it should guard against characterising a mistaken answer to an issue that lies within that scope of the reference as an excess of jurisdiction.
In
However, some doubt has been introduced as to the enforceability of adjudicators' determinations containing errors of law by the case of
To continue reading
Request your trial