In the decision of McNab Developments (Qld) Pty Ltd v MAK Construction Services Pty Ltd & Ors [2014] QCA 232, the Queensland Court of Appeal considered the principles of natural justice, and whether an adjudicator’s decision would be invalid by an error of law in an instances where an adjudicator also lacked good faith.

Facts of the case

The appellant, McNab Developments, entered into an agreement with the respondent, MAK Construction Services via subcontract to undertake work at James Cook University. The appellant argued that the subcontract had been terminated due to the default of the respondent.

McNab issued payment claims against the respondent that went to adjudication with the adjudicator making a determination that the amount of $241,441.20 would be payable in favour of MAK.

Upon the decision of the adjudicator, the appellant sought a declaration at first instance that the decision was void due to jurisdictional error, and the application was dismissed. McNab then filed an appeal on the following relevant grounds:

• McNab was not afforded the opportunity to make submissions in relation to the construction of the contract adopted by the adjudicator before a decision was made;
• The adjudicator had misapplied the Building and Construction Industry Payments Act 2004 (QLD)(BCIPA);
• the adjudicator’s preference of MAK’s interpretation of the contract was unreasonable.

The decision

The application was dismissed by the Queensland Court of Appeal on the basis that there was no failure to provide natural justice, and there was no jurisdictional error with Gotterson JA delivering the leading judgment.

The Court followed the authority of John Holland Pty Ltd v TAC Pacific Pty Ltd [2009] QSC 205 and Brodyn Pty Ltd v Davenport [2004] 61 NSWLR 421, citing the comments of Hodgson JA who said, “what is required of an adjudicator is that he or she make a genuine attempt to understand and apply the relevant contract and to exercise the power in accordance with the Act.”

Morrison JA and Jackson J did not agree with Gotterson JA in relation to the adjudicator’s failure to consider a backcharge for $11,727, however, this did not affect the outcome of the appeal.

Gotterson JA took the view that a failure to consider a matter properly raised in a payment schedule would only be deemed to be a jurisdictional error if there was a lack of good faith by an adjudicator. Jackson J rejected the approach of Gotterson JA, while Morrison JA did not consider the approach in this instance.

Jackson J noted that it would not be the intention of the legislature that failing to consider a backcharge should render the decision of the adjudicator entirely void. His Honour observed that the adjudicator had complied with all the statutory obligations found under s 26(2) and that an “accidental slip or omission does not invalidate the adjudicator’s decision for jurisdictional error.”

Key point

Although not the case in this instance, Jackson J did note that there may be circumstances where lack of good faith may be grounds for judicial review in the exercising of administrative power, and could be a jurisdictional error.

This article or the information contained therein does not purport to provide a full explanation of the law, give advice or any guidance to anyone in connection with adjudication or any other issue and this article is not to be used by anyone to support their legal position or otherwise. This article is provided on the basis of particular facts and circumstances. This article is limited only to what is the generally accepted view in Australia with regard natural justice and the role of an adjudicator. This firm cannot take responsibility for any action readers take based on this information. We would be happy to assist you with any construction and engineering legal issues you may have, please get in touch via [email protected] or telephone our Brisbane office on (07) 3087 3463, Sydney office on (02) 9293 2546 or Sunshine Coast office on (07) 5413 9270 and one of our experienced lawyers will respond to you.