Maxcon Constructions Pty Ltd v Vadasz

Case [2018] HCA 5


HIGH COURT OF AUSTRALIA

KIEFEL CJ,
BELL, GAGELER, KEANE, NETTLE, GORDON AND EDELMAN JJ

MAXCON CONSTRUCTIONS PTY LTD  APPELLANT

AND

MICHAEL CHRISTOPHER VADASZ (TRADING
AS AUSTRALASIAN PILING COMPANY) & ORS               RESPONDENTS

Maxcon Constructions Pty Ltd v Vadasz

[2018] HCA 5

14 February 2018

A17/2017

ORDER

Appeal dismissed.

On appeal from the Supreme Court of South Australia

Representation

R J Whitington QC with B J Doyle for the appellant (instructed by Diakou Faigen)

M Christie SC with D P Hume for the first respondent (instructed by CCS Legal Pty Ltd)

Submitting appearance for the second and third respondents

Notice:  This copy of the Court's Reasons for Judgment is subject to formal revision prior to publication in the Commonwealth Law Reports.

CATCHWORDS

Maxcon Constructions Pty Ltd v Vadasz

Administrative law – Judicial review – Building and Construction Industry Security of Payment Act 2009 (SA) – Where subcontract provided for sum to be paid to subcontractor after issue of certificate of occupancy – Where issue of certificate of occupancy required certification from builder that building work performed in accordance with head contract – Where adjudicator appointed to determine disputed payment claim – Where adjudicator determined provisions of subcontract ineffective because pay when paid provisions – Whether adjudicator's determination involved error of law – Whether adjudicator's determination should be quashed.

Administrative law – Judicial review – Availability of certiorari – Error of law on face of record – Whether Building and Construction Industry Security of Payment Act 2009 (SA) ousts jurisdiction of Supreme Court of South Australia to make order in nature of certiorari to quash adjudicator's determination for non-jurisdictional error of law on face of record.

Words and phrases – "contingent or dependent on the operation of", "error of law on the face of the record", "order in the nature of certiorari", "pay when paid provision", "retention provisions".

Building and Construction Industry Security of Payment Act 2009 (SA), Pts 2, 3.
Development Act 1993 (SA), s 67.
Development Regulations 2008 (SA), reg 83, Sched 19A.

  1. KIEFEL CJ, BELL, KEANE, NETTLE AND GORDON JJ.   This appeal, from the Full Court of the Supreme Court of South Australia[1], concerns the Building and Construction Industry Security of Payment Act 2009 (SA) ("the Security of Payment Act"), an Act based[2] on the Building and Construction Industry Security of Payment Act 1999 (NSW) ("the New South Wales Act"). The scheme and purposes of the New South Wales Act are described in the reasons in Probuild Constructions (Aust) Pty Ltd v Shade Systems Pty Ltd[3], which was heard at the same time as this appeal.  The relevant provisions of the two Acts are not materially different and what is said in the Probuild matter about the scheme and purposes of the New South Wales Act applies equally to the Act in issue here.

    [2]South Australia, House of Assembly, Parliamentary Debates (Hansard), 5 March 2009 at 1856.

  2. In…

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Details
AGLC
Maxcon Constructions Pty Ltd v Vadasz [2018] HCA 5
Case
[2018] HCA 5
Decision Date

CaseChat Overview and Summary

This case concerned an appeal to the High Court of Australia regarding a judicial review of an adjudicator's determination under the *Building and Construction Industry Security of Payment Act 2009* (SA). The dispute arose between Maxcon Constructions Pty Ltd, the head contractor, and Mr Vadasz, a subcontractor, concerning a payment claim made by Mr Vadasz. The core of the dispute involved the adjudicator's decision to disregard certain retention provisions within the subcontract, deeming them ineffective "pay when paid" provisions.

The High Court was required to determine two primary legal issues. Firstly, whether the adjudicator's determination that the subcontract's retention provisions were ineffective "pay when paid" provisions constituted an error of law. Secondly, whether the *Security of Payment Act* ousted the jurisdiction of the Supreme Court of South Australia to grant relief in the nature of certiorari for a non-jurisdictional error of law on the face of the record.

The Court reasoned that the retention provisions in the subcontract, which stipulated payment of retention monies after the achievement of a certificate of occupancy, were not "pay when paid" provisions as contemplated by the *Security of Payment Act*. Instead, they were considered to be genuine retention provisions designed to secure the subcontractor's performance. The Court held that the adjudicator had erred in law by mischaracterising these provisions and consequently exceeding their jurisdiction. However, the Court also affirmed that the *Security of Payment Act* does, in fact, oust the Supreme Court's jurisdiction to grant certiorari for such non-jurisdictional errors of law on the face of the record, although jurisdictional errors remain reviewable.

The appeal was dismissed.

Orders

Orders of the court

Appeal dismissed.

Background

Background to the litigation

However, it is important to add that, for the reasons explained in Probuild, the Supreme Court of South Australia may grant relief (whether in the nature of certiorari or otherwise) for jurisdictional error[5] by an adjudicator appointed under the Security of Payment Act; but the provisions of the Security of Payment Act, like the provisions of the New South Wales Act, oust the Supreme Court's jurisdiction to make an order in the nature of certiorari to quash an adjudicator's determination for error of law on the face of the record that is not a jurisdictional error. [5]ss 6 and 17 of the Supreme Court Act 1935 (SA); r 199 of the Supreme Court Civil Rules 2006 (SA); Kirk v Industrial Court (NSW) (2010) 239 CLR 531 at 580‑581 [96]-[100]; [2010] HCA 1.Facts Maxcon, a building contractor, and Mr Vadasz, a piling subcontractor trading under the name Australasian Piling Company, were parties to a subcontract under which Mr Vadasz agreed to design and construct piling for an apartment development. The subcontract required Mr Vadasz to provide security in the form of "cash retention" corresponding to five per cent of the contract sum "for the purpose of ensuring the due and proper performance of the [subcontract] and to allocate to [Mr Vadasz] the risk of being out of pocket for claimed entitlements of [Maxcon] under or in connection with the [subcontract] pending the resolution of any dispute" regarding those entitlements. Clause 11(e) of the subcontract provided:"Subject to [Maxcon's] rights to any deductions made or pending deductions which are likely to be made under the [subcontract], retention shall be released:(a)50% of retention within the time nominated in Schedule E(b)Remaining 50% within the time nominated in Schedule E".Schedule E to the subcontract provided for 50 per cent to be released "90 days after CFO is achieved", with the remaining 50 per cent to be released "365 days after date of CFO". Under the subcontract, "CFO" was defined to mean "the certificate of occupancy and any other Approval(s) required under Building Legislation which are required to enable the Works lawfully to be used for their respective purposes in accordance with [Maxcon's] Project Requirements". It will be necessary to consider this definition later in these reasons. On 25 February 2016, Mr Vadasz served on Maxcon a payment claim pursuant to s 13 of the Security of Payment Act stating that a progress payment of $204,864.55 (including GST) was due. On 8 March 2016, Maxcon provided a payment schedule pursuant to s 14 of the Security of Payment Act indicating that it proposed to pay $141,163.55 (including GST), deducting a retention sum and administration charges. Pursuant to s 17 of the Security of Payment Act, Mr Vadasz applied for adjudication of his payment claim. The adjudicator accepted Mr Vadasz's submission that Maxcon was not entitled to deduct the retention sum ($35,454.00 excluding GST) and determined the adjudicated amount to be equal to the claimed amount. In relation to the retention sum, the adjudicator concluded that cl 11(e) and Sched E to the subcontract ("the retention provisions") were pay when paid provisions which were ineffective by reason of s 12(1) and (2)(c) of the Security of Payment Act and Maxcon was not entitled to retain the retention sum.Section 12 and pay when paid provisions

Evidence

Evidence Before The Court

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Decision

Reasons for decision

KIEFEL CJ, BELL, KEANE, NETTLE AND GORDON JJ (dissent) GAGELER J (dissent) EDELMAN J

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Ratio Decidendi

Legal Principle Established

Established by: EDELMAN J

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