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Building and Construction Industry Payments Act

01 Oct 2009

A recent Supreme Court case has highlighted the need to exercise caution and to obtain expert legal advice and representation when dealing with disputes under the Building and Construction Industry Payments Act 2004 (BCIPA).

In Surfabear Pty Ltd v GJ Drainage and Concrete Construction Pty Ltd [2009] QSC 308, a builder was able to overturn a judgment entered against it by a drain layer under the provisions of BCIPA, due to a fundamental mistake on the part of the adjudicator in making his decision.

The builder defended the subcontractor’s claim on the basis that the drain layer had contracted directly with the building owner, and not the builder. The drain layer’s invoices were all issued directly to the building owner, and the building owner even gave sworn evidence that he had contracted directly with the drain layer and that the money was therefore owed by him and not the builder.

Despite this, the adjudicator found that a contract between the drain layer and the builder existed, and awarded the drain layer the sum of $13,823.71. The drain layer, content with the decision, duly registered the decision as a judgment in the Magistrates Court and began enforcement proceedings against the builder.

The builder, as equally discontent with the adjudicators decision in light of the circumstances, applied to the Supreme Court to have the decision and the Magistrates Court judgment set aside (the application had to be made to the Supreme Court because only it has the jurisdiction to make decisions in that regard).

Under the ‘pay now, argue later’ system of dispute resolution provided by BCIPA, an incorrect decision by an adjudicator does not normally give rise to a right to appeal the decision or to have it overturned. That is, given the strict time frames prescribed by the Act for adjudicating the disputes, it is recognised that adjudicators will not be able to get everything right all the time, but this is accepted as a ‘necessary evil’ to ensure the fast flow of money down the contractor-subcontractor chain. Accordingly, a party cannot normally challenge a decision based on a factual finding of the adjudicator.

However, adjudicator’s decisions can be challenged on ‘jurisdictional’ grounds – ie if the adjudicator did not have the power to make the decision or has not complied with a provision of the Act. In either case, the decision would not be a valid adjudicator’s decision and is therefore void.

The builder in this case challenged the decision on the basis that it is a pre-requisite of a valid adjudication decision that a construction contract exists between the claimant and the respondent, and no such contract existed here. In other words, the construction contract did not exist, the adjudicator therefore did not have the power to make a binding decision, and his decision was therefore void.

The drain layer opposed the application, but in light of the weight of evidence that showed that the contract was in fact between the drain layer and the building owner (and not the builder), the Supreme Court declared the adjudicator’s decision to be invalid and overturned it.

This case shows that the adjudication procedures provided for under BCIPA, while designed and lauded to be a fast and economical way of resolving construction disputes of all sizes, can often escalate low value and simple disputes into large scale and complex litigation involving arguments of jurisdiction, natural justice and other abstract legal concepts.

It is therefore crucial to obtain expert, specialised and up-to-date legal advice and representation when it comes to disputes under the Building and Construction Industry Payments Act 2004.