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Partial Invalidity of Adjudication Decision - Discretion Exercised Not to Make a Declaration

Newsletter Article 16 May 2013

In the case of BM Alliance Coal Operations Pty Ltd v BGC Contracting Pty Ltd (No.2) [2013] QSC 67, Justice Applegarth of the Supreme Court of Queensland exercised his discretion not to declare void a decision of the Adjudicator, even though part of the decision of the Adjudicator was clearly made outside his jurisdiction. As a consequence he makes it clear that it might not be necessarily fatal to the whole adjudication in circumstances where only a part of the decision which is clearly separate lacks jurisdiction.

Facts

In an earlier hearing, Justice Applegarth had determined that one of three jurisdictional errors had been established by the Applicant, BM Alliance Coal Operation Pty Ltd (BM Alliance Coal). The jurisdictional error of the Adjudicator involved a distinct sum of approximately $4.3 million. The balance of the claims, namely approximately $25 million, were untainted by any lack of jurisdiction or jurisdictional error by the Adjudicator. The Adjudicator had erroneously included within the adjudicated amount the $4.3 million, being a component claimed for termination costs.

His Honour adjourned previous proceedings, requesting the parties make submissions upon the consequential orders. His Honour at the previous hearing anticipated making a declaration that the decision of the Adjudicator was void and remitting the matter to the Adjudicator for reconsideration.

His Honour anticipated that reconsideration would have resulted in a new adjudication decision excluding the $4.3 million of termination costs, but including the balance of the claim.

As matters transpired, the parties could not agree concerning orders. The Applicant submitted that effectively, once any part of the adjudication decision is effected by jurisdictional error, the whole decision should be declared void.

On the other hand, the respondents suggested great harm be caused by such an order, and it was within the discretion of the Court not to make a declaration on condition of the offered undertaking of the respondent that it repay the offending part of the Adjudicator’s decision (ie $4.3 million plus interest).

Justice Applegarth carefully enumerated the various matters that would effect his discretion and in the end identified several which were relevant in this circumstance:-

  1. Where the particular jurisdictional error can be confined and does not otherwise effect other parts of the decision;
  2. There was some doubt as to whether an adjudicator could satisfactorily provide a review decision, as it was alleged the Act did not provide for such matters and required decisions within a certain set period.
  3. Should there be an inability to have an adjudicator reconsider the decision, it was alleged that there was some chance of an argument succeeding that no subsequent payment claim could be based on the same matters that had already been determined by adjudication.
  4. Absent the jurisdictional error, BGC would have obtained an adjudication decision for an ascertainable amount in the order of approximately $25 million. The error deprived the parties of an adjudication decision in accordance with the law. If the parties are correct in its contention that there is no scope to remit the matter to the Adjudicator to determine the adjudication, then BGC would have been deprived of their statutory entitlement to an adjudication according to law.

In the end His Honour decided on balance to decline to exercise the discretion to declare void the adjudication decision, on condition that the Applicant repay the amount found to have been erroneously included in the adjudication decision in the first place. His Honour referred to the authors of Aronson, Dyer and Groves with some favour and quotes them extensively, including:

‘Whilst nullity, with a declaration to such effect, is the usual consequence that flows from a finding of jurisdictional error, other factors, including discretionary considerations that prompt a court to refuse relief even if jurisdictional error is established, may lead to different legal consequences’

Implications

When various submissions are made concerning distinct parts of an adjudication decision seeking a declaration of invalidity of that decision, should there only be partial success issues raised by this helpful judgment of Justice Applegarth should be reviewed. It may well give an unsuccessful respondent scope for submission in relation to partial payments being made on condition of repayment of sums that relate to the offending part of the adjudication decision.


Tony Mylne, Partner
Brisbane

Newsletter Article 16 May 2013
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