By Timothy Bates, Legal Vision
In this month’s article I wish to review the decision of Anderson & Another v Swindells & McDowall Renovations Ltd, 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.
• On February 7, 2016, Anderson and Volka (“the owners”) entered into a written construction contract with Epsom Renovations Ltd 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 February 15, 2016 and, as at May 31, 2016, it was only 50% complete. At this date, Epsom Renovations sold its business to McDowall Renovations Ltd, 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 November 16, 2017, an adjudicator was appointed, and by way of general summary these issues were referred to adjudication:
a) Was McDowall entitled to be paid its $56,930.22?
b) Had the owners established its counterclaim of $47,161?
c) Who was liable to pay the adjudicator’s fees and other legal expenses?
• The adjudication was determined on the papers, and was issued on January 31, 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.
They had also 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 $8000.
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 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 the adjudicator:
• had failed to take into account relevant considerations;
• had taken into account irrelevant considerations;
• had failed to give coherent and adequate reasons for his findings; and
• had 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 had to 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 go 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 or Building Today to anyone who relies on the information contained in this article.