To start the new year, I’ll review the very recent decision of Body Corporate 200012 v BP Keene QC & Others where a body corporate openly used judicial review proceedings to thwart the “pay now and argue later” philosophy of the Act.
The background factual matrix to this proceeding was a leaky building repair contract on a multi-unit complex that had gone well over budget.
Naylor Love was the contractor, and it had successfully taken the Body Corporate through two adjudication determinations. These two determinations left the Body Corporate owing near on $4 million.
Ultimately, the adjudication determinations were only interim decisions as the construction contract referred matters in dispute to arbitration for final determination.
In fact, despite the two determinations, the Body Corporate had issued arbitration proceedings as against Naylor Love.
The Body Corporate openly admitted to the court that its purpose in bringing the judicial review proceedings was to avoid paying the determinations whilst arbitration proceedings were pending.
Having been prepared to concede that point, the Body Corporate argued the court ought to intervene by way of judicial review for the following reasons:
• Aspects of the dispute ruled upon by the adjudicator were time barred by the contract such that they were no longer capable of dispute;
• The adjudicator had ruled on disputes that were not referred to him;
• The contract precluded the adjudicator from deciding upon rate escalation; and
• The subsequent adjudicator had wrongly considered issues decided in the earlier adjudication (res judicata), and was not prepared to reconsider these issues.
The thrust of this High Court judgment was that it would be reluctant to allow judicial review proceedings to upset the philosophy of the Act.
Its intervention ought to be rarely used. Early in the decision of Judge Brewer, he quotes this passage as setting out the difference between appeal and judicial review:
“Review is concerned with the legality of the decision, whether it was reached ‘in accordance with law, fairly and reasonably’. A reviewing court must address the process and procedures of decision-making and ask whether the decision should be allowed to stand. Appeal, in contrast, entails adjudication on the merits, and may involve the court substituting its own decision for that of the decision-maker.”
Whilst the court was willing to entertain judicial review of a determination, it was weary of the fact that the matters in dispute in this instance were to be resolved in another forum.
Accordingly, it ruled that the court would be sparing in the exercise of its discretion.
It then cited the Court of Appeal decision of Rees v Firth which said very much the same thing about not allowing the review process to cut across the regime of the Act.
The court quoted this telling segment from the Court of Appeal decision:
“[27} The courts must be vigilant to ensure that judicial review of adjudicators’ determinations does not cut across the scheme of the CCA and undermine its objectives. In principle, any ground of judicial review may be raised, but an applicant must demonstrate that the court should intervene in the particular circumstances, and that will not be easy given the purpose and scheme of the CCA. Indeed, we consider that it will be very difficult to satisfy a court that intervention is necessary.”
The court then turned its attention to each of the grounds put forward by the Body Corporate which it argued was reviewable by the court.
On every count, the High Court ruled that the proper process for the final determination of the point was in the concurrent arbitration proceedings. Or, put another way, these were arguments that were properly dealt with on appeal rather than by way of review.
In respect of the argument that the second adjudicator was wrong to consider the prior adjudication as having already decided arguments put (res judicata (in latin)), he ruled that it would make no procedural nor statutory sense for the same issue to be repeatedly determined by adjudication.
Accordingly, the judicial review proceedings failed on every ground, and this Body Corporate was left liable not only for the $4 million worth of adverse determinations, but also High Court costs.
This is an important decision to start the new year because it demonstrates the court’s unwillingness to fetter the pay now argue later philosophy of the Construction Contracts Act 2002.
Post note: This article should not be considered or relied upon as legal advice, and at all times specific legal advice ought to be sought. No responsibility or liability is accepted by Legal Vision or Building Today.