Victorian Court of Appeal considers adjudication time limits under Security of Payment legislation

A recent decision of the Victorian Court of Appeal has confirmed that an adjudicator’s non-compliance with the time limit specified in the Building and Construction Industry Security of Payment Act 2002 (Vic) (the Act) for providing an adjudication determination will not render it invalid.

In Ian Street Developer v Arrow International [2018] VSCA 294, Arrow entered into a contract with Ian Street to construct a number of apartments. A dispute arose between the parties in relation to a progress claim issued by Arrow. Arrow issued an adjudication application and an adjudicator was appointed to determine the matter.

Section 22 of the Act provides that, subject to adhering to timing requirements in relation to the respondent lodging an adjudication response, an adjudicator is to determine an adjudication application as expeditiously as possible and, in any case:

(a) within 10 business days after the date on which the acceptance by the adjudicator of the application takes effect in accordance with section 20(2); or

(b) within any further time, not exceeding 15 business days after that date, to which the claimant agrees.

In this case, however, the adjudicator provided its adjudication determination outside the prescribed time limit. Given this, Ian Street argued that the Act, when properly construed, demonstrated an intention that an adjudication determination delivered after the expiration of the time limit should be rendered invalid and that on expiry of the time limit, the adjudicator no longer had jurisdiction to determine the relevant adjudication application. The Supreme Court of Victoria, at first instance, rejected this argument. Ian Street appealed.

The Court of Appeal upheld the decision at first instance. In reaching its finding, the Court of Appeal stated that if non-compliance with the time limit invalidated the adjudication decision, this would be “inconsistent both with the express provisions of the Act governing the adjudication process and with the objects of the statutory scheme as a whole”. That is, the Court did not consider it appropriate to read additional words into the Act.

The Court of Appeal found that the overall effectiveness of the Act “and the maintenance of the confidence of participants in the building industry, would be… detrimentally affected if an adjudicator’s delay – involving no fault on the part of the claimant – operated to nullify the process of adjudication.”

Specifically, the Court stated that the Act contained indications contrary to Ian Street’s argument that an adjudication determination provided after the expiration of the time limit was invalid, including that:

(a) the Act identified the circumstances in which an adjudicator’s determination will be considered void which should be seen to be the exhaustive set of circumstances in which non-compliance would render an adjudication invalid; and

(b) the Act specifically covered the consequences of an adjudicator not complying with the time limit in section 28(2)(a) by permitting (but not requiring) a claimant to withdraw an application. The Court stated that this demonstrated that, where a claimant did not exercise its option to withdraw an application, it was implicitly choosing to wait for an adjudication decision, notwithstanding the expiry of the time limit.

This case provides some reassurance to claimants under the Act that an adjudicator’s failure to comply with the specified time limit to provide its determination will not render it invalid.

A full copy of the decision can be found here.