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MinterEllisonRuddWatts partners Janine Stewart, Mark Crosbie, Sarah Sinclair, and Stephen Price discuss the recent High Court case of Anderson v Swindells which is an important reminder that adjudicators determining disputes must only decide matters put before them.
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The recent High Court case of Anderson v Swindells [2018] NZHC 1803 has reminded us that adjudicators determining disputes have to conform to the principles of natural justice – specifically, the requirement that a decision-maker must only decide matters put before them.
Principles of pay now argue later
The case was decided in the context of the Construction Contracts Act 2002 (CCA). The CCA is broadly in place to facilitate progressing projects without undue delays being caused by disputes between parties. One of the key features is the “pay now – argue later regime” in which a contractor issues a payment claim to a principal for works done. If the Principal disputes the amounts in the payment claim, it can issue a payment schedule in response and pay this amount rather than the claimed amount. The parties can then refer disputes over payment (and other matters) to adjudication which is a fast-tracked dispute resolution mechanism available under the CCA.
What was the question and what was the answer?
In this case, the Contractor, McDowall Renovations Limited (McDowall) claimed that Anderson, the Principal, owed it money under a building contract. Anderson denied that it owed any money to McDowall claiming that it was entitled to withhold payment for a number of reasons:
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- The amounts claimed related to work that was unnecessary
- Incorrect materials had been provided
- It had been charged twice for the same materials
- It was entitled to damages for delays
Unconvinced, McDowall referred the matter to adjudication to decide whether it was entitled to monies claimed. The adjudicator decided for McDowall, holding that Anderson was liable to pay the full amount to McDowall by reason that Anderson failed to pay when a payment claim was served on them, and no payment schedule was provided in response.
Anderson applied to the High Court seeking judicial review of the adjudicator’s decision. The principal ground for review raised by Anderson was that the adjudicator’s determination was made without jurisdiction. Anderson argued that the adjudicator failed to address and determine the matter which had been referred to adjudication – that is, to determine the correct amounts payable to McDowall (if any). The adjudicator instead based the determination on an entirely different matter which was not the subject of the dispute or raised by either party.
Natural justice and jurisdiction
Justice Paul Davison found in favour of Anderson holding that the adjudicator acted without jurisdiction as the issue of the parties’ compliance with the “pay-now argue later regime” was not at issue in the dispute. It is a fundamental requirement of natural justice that parties be given the opportunity to be heard in relation to the matter that a decision-maker is to decide. Because the adjudicator had decided on a different issue, the parties were not given this opportunity and not given what they were entitled to under the principles of natural justice.
There is a high legal threshold to be met before the judiciary will interfere with, or judicially review, adjudication determinations given that the objective of the CCA is to provide a fast-track means of enabling contractors to secure payments due under construction contracts. However, the case confirms that judicial review will be available for cases where an adjudication has been undertaken in a manner that significantly breaches the principles of natural justice, or where there is an error of law.
Adjudications open to appeal
This judgment serves as a reminder that it is necessary that adjudicators ensure they are deciding the issues before them because, despite the adjudicator in this case correctly applying the “pay now-argue later regime”, the adjudicator was not asked to decide this matter. This case can provide assurance that parties will still have recourse to another forum in the event that an adjudicator erred in law or did not observe natural justice principles.
Janine Stewart is a specialist construction, property and projects lawyer who acts on the full spectrum of construction projects and property disputes. She has particular experience in claims under the Public Works Act 1981 (for land acquisition relating to development) and mid-project and post-project phases of construction. Janine is known for her pragmatic approach, adopting either litigation and/or dispute resolution to achieve a commercially-effective outcome for her clients. Janine also has significant experience in landlord and tenant obligations and contentious rent review disputes. She regularly appears in various dispute forums. Named Young Private Practice Lawyer of the Year at the 2015 New Zealand Law Awards and up and coming in 2016 Chambers directory, Janine is actively engaged in thought leadership on issues impacting the property and construction industry. Contact Janine at janine.stewart@minterellison.co.nz
Mark Crosbie is highly-regarded for his specialist legal work in all aspects of property, construction and development projects. His legal experience spans more than 20 years and includes high-end strategic advice about commercial and construction issues, including funding, procurement, development, legislative and regulatory compliance, and construction of large infrastructure projects. He has extensive industry experience in construction, health and aging, ports and agriculture. Mark has a formidable track record of achievement in infrastructure and development projects that include roading arrangements, hospital and medical premises and associated amenities, airport and port developments, quarries, regional parks, utilities – electricity schemes, water treatment and waste water projects, education assets, and social housing projects. Contact Mark at mark.crosbie@minterellison.co.nz
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Sarah Sinclair is a highly-regarded construction and infrastructure specialist. She has extensive experience acting for both Government and private sector clients in large-scale, complex infrastructure projects. She is known for providing commercially pragmatic, strategic advice on infrastructure funding models, procurement strategies and contracting structures. Sarah has extensive experience in combining the commercial components of a project with a deep understanding of procurement processes, particularly in pathfinder projects. Sarah leads MinterEllisonRuddWatts’ roles on the City Rail Link project (CRL) and the Anchor Projects in Christchurch. She is also a Board member of MinterEllisonRuddWatts. Contact Sarah at sarah.sinclair@minterellison.co.nz
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Stephen Price is a highly-regarded construction disputes lawyer, and leads MinterEllisonRuddWatts Construction Division in New Zealand. Stephen’s expertise is in resolving large scale construction contract disputes particularly regarding claims for variations, delays/disruption, and the like, as well as defective works claims. He is very experienced in bringing and defending adjudications under the Construction Contracts Act 2002. He appears regularly in the New Zealand Courts at all levels and arbitrations, as well as in dispute resolution processes such as mediation and Dispute Resolution Boards. Stephen’s team is also one of the largest “leaky building” specialist teams in the country. He now lectures on Construction Law for the AUT Law School Masters of Laws degree. Contact Stephen at stephen.price@minterellison.co.nz
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