Challenging the validity of the BCIPA adjudicator’s certificate for lack of good faith

David & Gai Spankie & Northern Investment Holdings Pty Limited v James Trowse Constructions Pty Limited & Ors [2010] QSC 29

I refer to my recent posting re: good faith. His Honour McMurdo contrasted the broad approach and strict approach to “lack of good faith” as discussed by Holmes JA and P Lyons in Queensland Bulk Water Supply Authority t/a Seqwater v McDonald Keen Group Pty Ltd (in liq) & Anor [2010] QCA 007 and [2009] QSC 165 respectively:

[19] In Queensland Bulk Water Supply Authority v McDonald Keen Group Pty Ltd & Anor5, P Lyons J rejected a submission that to be valid, an adjudicator’s decision must also be reasonable.6 In his view, the statement of Giles JA in Downer Construction (Australia) Pty Ltd v Energy Australia (2007) 69 NSWLR 72 at [87] that “a reasonable but erroneous decision by the adjudicator does not invalidate the decision” is not authority for the proposition that reasonableness is required. In the view of P Lyons J, it may be correct to say that a decision which displays “an extreme degree of unreasonableness” in a Wednesbury sense would not be a decision for the purposes of s 26 of the Act. In the present matter, counsel for the applicants did not argue that there was any requirement of reasonableness. At times during his oral argument, counsel referred to the unreasonable conclusions of the adjudicator. But he made it clear that this was submitted as a basis for inferring a lack of good faith, in the sense of the absence of a genuine attempt to decide the questions according to the Act and the contract.

[20] In the same case, P Lyons J compared what was described as the broad test for good faith with the stricter approach argued there by the respondent. Under the broad test, what was required was a genuine attempt to exercise the power, and specifically in relation to a consideration of the contract, a genuine attempt to understand and apply that contract.7 Under the approach argued by that respondent, an absence of good faith would be established only by a conscious and wilful disregard of the adjudicator’s statutory duty. Under this approach mere recklessness in the exercise of the power might not be sufficient.8 His Honour found it unnecessary to resolve that debate although he favoured the former approach.9 In dismissing an appeal against this judgment, Holmes JA preferred the latter approach.10 In the present matter, the same argument was not made for this respondent. It is common ground here that the applicants must establish no more than that the adjudicator did not make a genuine attempt to apply the Act and to understand and apply the contract. I go then to the alleged errors of the adjudicator, which are said to demonstrate the absence of good faith in that sense.

5 [2009] QSC 165.

6 [2009] QSC 165 at [27]-[33]

7 [2009] QSC 165 at [33].

8 [2009] QSC 165 at [64]-[65]

9 [2009] QSC 165 at [75]

10 [2010] QCA 007 at [51]

Ultimately, his Honour was not satisfied, despite the apparent errors there was a lack of good faith:

[43] The first ground, which is that this was not a decision reached in all respects in good faith, is not established. The ground is not established by reference to the adjudication decision itself, which runs to some 47 pages and involves an apparently close analysis of what might be called the nuts and bolts issues of variations and the like. And there was no attempt to establish by other evidence that, in truth, this was not a genuine attempt by the adjudicator. Nor was theadjudicator required by the applicants to give oral evidence.

With respect to natural justice:

[46] In short, the applicants cannot say that any failure to revert to them on this subject had a practical consequence which was adverse to them. They had the protection of a decision which required them to make a progress payment only on the superintendent’s satisfaction with the evidence to be provided under cl 38. [47] In Re Minister for Immigration and Multicultural Affairs; Ex Parte Lam11, Gleeson CJ said that procedural fairness is not an abstract concept but is instead “essentially practical” and that “the concern of the law is to avoid practical injustice”. Accordingly, I am not persuaded that the adjudicator was bound to revert to the parties and ask for submissions concerning the declaration under cl 37.

(2003) 195 ALR 502 at [37]

Brisbane Barrister – David Cormack

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