Adjudicator fails to afford natural justice to parties when determining jurisdiction

15 February 2012 

In Rail Corporation of NSW v Nebax Constructions [2012] NSWSC 6, the New South Wales Supreme Court considered a challenge to an adjudicator’s determination on the basis that the parties had been denied natural justice.

The NSW Rail Corporation (RailCorp) issued a tender for construction work at 25 of its railway stations. Although each station was effectively a separable portion which was to be valued individually for the purpose of the tender, the contract expressly stated that the tender was for a single, lump-sum contract.

Nebax submitted a payment claim that included five tax invoices relating to certain separable portions. However, each invoice was stated to be a claim under the Building and Construction Industry Security of Payment Act 1999 (NSW) (Act). RailCorp issued separate payment schedules which disputed the amounts owing and Nebax applied for separate adjudications in relation to each invoice. A single adjudicator was appointed in relation to all of the applications.

RailCorp argued that the adjudicator did not have jurisdiction because the Act prohibited Nebax from submitting more than one payment claim for each reference date. The adjudicator acknowledged that the work was pursuant to a single head contract, but held that the reference to separable portions meant that there were in effect 25 separate contracts. As a result, he decided that he was authorised to proceed to hear the adjudication applications. However, neither party had taken this view of the contract.

McDougall J held that there was a single contract and that the adjudicator erred. Further, his Honour held that as neither party was given notice of the adjudicator’s intention to determine the jurisdiction point in the way that he did, nor offered an opportunity to be heard on the point, the parties were denied natural justice in a material way. His Honour concluded that, had the parties been given prior notice of the adjudicator’s reasoning, submissions from RailCorp may have persuaded the adjudicator to change his mind. Accordingly, the adjudication determination was void.

The case can be read in full here.