In this month’s article I wish to review the decision above, which concerned an adjudication determination under the Construction Contracts Act 2002. Judicial review is rarely available in the context of Construction Contracts Act 2002 adjudications, because if freely available, it could thwart the fast track payment provisions contained therein.
7 February 2016 Anderson and Volka (“the Owners”) entered into a written construction contract with Epsom Renovations Limited for work to be done to their Logan Terrace property.
The nature of the work was rear site excavations, construction of retaining walls, internal works including installing a new stairwell, creating storage area, replacement windows and deck. The estimated cost of these works was $453,200 subject to adjustments.
The work commenced on 15 February 2016 and as at 31 May 2016 it was only 50% complete. At this date, Epsom Renovations sold its business to McDowall Renovations Limited, absent any documents novating or assigning the building contract.
Building work thereafter progressed for a short time before a dispute arose between the parties. Anderson and Volka disputed their liability to pay the outstanding invoices and McDowall suspended work on the site until its outstanding invoices were paid. The six invoices submitted by McDowall but not paid amounted to a total of $56,930.32.
Anderson and Volka initially maintained that not only were they not liable to meet the invoices but that they were entitled to a counterclaim in excess of $100,000.
On 16 November 2017 an Adjudicator was appointed, and by way of general summary these issues were referred to adjudication:-
i) Was McDowall entitled to be paid its $56,930.22?
ii) Had the Owners established its counterclaim of $47,161?
iii) Who was liable to pay the Adjudicator’s fees and other legal expenses?
The adjudication was determined on the papers and was issued on 31 January 2018. The key finding was that the invoices rendered by McDowall were not responded to by method of compliant payment schedules, and these became payable by operation of the deeming provisions of the Construction Contracts Act 2002. As regards the counterclaim brought by the Owners for delay, he denied this claim on the basis that delay had been raised late in the contract, and that they had allowed the contract to be extended by allowing the interior works to be started at or around the same time (I take it he meant at the time the delay was raised by them.) The Adjudicator did find in favour of the Owners in terms of two minor defective works and ultimately ordered that they pay to McDowall the sum of $37,728.97 (less the deposit held) plus legal fees and interest of approximately $8,000.
The Owners sought judicial review of this decision primarily upon the basis that the Adjudicator had acted outside of his jurisdiction by deciding the McDowall claim on the basis of a non-responded payment claims. The Owners argued that this aspect was never part of the matters that were referred to him for determination. The Owners argued that they had never been afforded the opportunity to put submissions to the Adjudicator on this point nor the corollary point of whether in fact the invoices were in fact compliant payment claims for the purposes of section 20 of the Act. In addition the Owners argued that:-
he had failed to take into account relevant considerations;
had taken into account irrelevant considerations;
failed to give coherent and adequate reasons for his findings; and
failed to make findings on the important issues that were raised for determination.
High Court findings.
As a preliminary point, Justice Davison noted that the Owners faced a high legal hurdle and must demonstrate that the adjudicator had made a significant and substantial error of law or that there had been a fundamental and substantial breach of natural justice to warrant the Court exercising its discretion to grant judicial review relief.
He then found that the Adjudicator had never been asked to determine whether in fact the Owners had ever responded to the invoices in the form of compliant payment schedules, which was outside of his reference. He noted further that the principles of natural justice had been seriously breached, in that neither party had been given the opportunity to prepare submissions on this aspect. Furthermore, this had a compounding effect in that he then did not gone on to decide on whether in fact McDowall had completed the work represented by the invoices and was entitled to payment.
In addition he found that the Adjudicator’s reasons were inadequate and, in some instances, cryptic, and that he had in fact taken irrelevant considerations into account in making his decision. In addition he had failed to take into account relevant evidence of a building expert as to time delays and building costs on this project.
The Adjudicator’s determination was quashed and the Owners were entitled to an award of costs.
NOTE: This article is not intended to be legal advice (nor a substitute for legal advice). No responsibility or liability is accepted by Legal Vision to anyone who relies on the information contained in this article.