Demex Pty Ltd v McNab Building Services Pty Ltd

Demex Pty Ltd (the respondent) sought to set aside an adjudication determination made under the *Building and Construction Industry Security of Payment Act 1999* (NSW) (the Act) on the grounds of jurisdictional error, alleging a denial of procedural fairness by the adjudicator. McNab Building Services Pty Ltd (the appellant) was the claimant in the adjudication. The appeal concerned whether the adjudicator had afforded the parties procedural fairness in the context of the Act.

The primary legal issues before the Court of Appeal were whether the adjudicator had denied Demex procedural fairness by relying on a conversion factor from weight to volume that was not explicitly explained by McNab, and by relying on a contractual document and industry standards that had not been foreshadowed by either party. The court was required to consider whether these actions constituted a substantial departure from the general requirements of procedural fairness, thereby amounting to jurisdictional error.

The Court of Appeal held that while the Act does not require the full panoply of procedural fairness, a substantial departure from its requirements can constitute jurisdictional error. However, in this instance, the court found that the adjudicator's reliance on the conversion factor, which was readily calculable and of which Demex was aware, did not amount to a substantial denial of procedural fairness. Similarly, the reliance on a contractual document and industry standards, even if not explicitly foreshadowed, did not constitute a substantial denial of procedural fairness in the specific context of the Act. The court reasoned that the adjudicator's approach did not prevent Demex from presenting its case or understanding the basis of the determination to a degree that would vitiate the process.

Consequently, the appeal was allowed with costs. The orders of the Supreme Court were set aside, and in their place, the prayers for relief sought by Demex were dismissed, with Demex ordered to pay the defendants' costs.