Monthly Archives: February 2018

Back to the past for dodgy construction payment adjudications: Probuild and Maxcon

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By Owen Hayford
Senior Fellow in the Melbourne Law Masters and Partner, PwC Legal

Probuild and Maxcon Case Page

Construction lawyers were very excited last week, when Australia’s highest court handed down two decisions on the rights of principals to construction contracts to seek judicial review of adjudications made under security of payment legislation — Probuild Constructions (Aust) Pty Ltd v Shade Systems Pty Ltd [2018] HCA 4, and Maxcon Constructions Pty Ltd v Vadasz [2018] HCA 5.

Security of payment legislation has been enacted in every Australian state and territory to ensure that that construction contractors and sub-contractors are promptly paid for the work that they have performed. Although different in each state and territory, the legislation establishes a fast-track process for the interim resolution of progress payment disputes under construction contracts by an adjudicator. The two cases arose when decisions by adjudicators in relation to progress payments were sought to be challenged by principals for alleged errors of law.

The High Court answered the question of when an error by an adjudicator will entitle the principal to apply to the court to have the adjudication declared void and set aside. Numerous judges have provided different answers to this question since it was first considered in detail in the 2003 decision of Musico v Davenport [2003] NSWSC 977. The sad news, for those who have funded the intervening litigation, is that the High Court has basically taken us back to the position that was espoused in Musico almost 15 years ago.

Sadder still, the High Court hasn’t exhaustively determined when a court will be allowed to set aside a determination because the requirements of the security of payment legislation have not been satisfied. As such, further litigation on the grey areas can be expected. Continue reading →

News: Secret men’s evidence in the High Court

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At the start of Friday’s hearing of an application for leave to appeal Australia’s first contested determination of compensation for loss of native title, Nettle J made it clear that he and Gordon J saw the topic as clearly deserving attention from the High Court:

Ladies and gentlemen, our present inclination, which is plainly tentative, is to think that the matter raises questions of principles of general importance which would warrant the grant of special leave.

Not only did Western Australia’s Solicitor-General Peter Quinlan fail to convince the Court that the case was a poor one for testing those principles (because the Northern Territory didn’t rely on a statutory rule limiting compensation), but he seemingly opened up a major new issue for the Court to consider: whether extinguishing native title is a deprivation of property for the purposes of the Constitution’s requirement of just terms compensation. The Commonwealth’s counsel Stephen Lloyd cited that issue (which he said would likely attract interventions from every state and territory) as well as the twenty regular appeal grounds now before the Court as reasons why the usual limit of twenty pages per party for submissions on appeal should be lifted to eighty or more, and why the full court hearing would take some four or five days. Calling the latter estimate ‘a little alarming’, Nettle J raised the page limit to fifty and told the parties to find a way to limit the hearing to three days.

Buried in the transcript is a further, relatively minor, but quite unusual issue the High Court will now encounter. Lloyd drew the Court’s attention to:

some secret men’s evidence that was confidential before Justice Mansfield. Different orders were made in relation to that to go to the Full Court which only allowed female judicial officers to see it – no other females have been allowed to see it so, no other court staff or the like.

Continue reading →

News: Court may lose Nauru appellate role

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Last Wednesday, the High Court conducted an unusual sitting, where two ‘full court’ (two or more judge) benches heard final appeals simultaneously in separate Canberra courtrooms. This joint sitting is the product of two oddities: first, the High Court’s rare role hearing appeals from a single judge court, the Supreme Court of Nauru (allowing the Court to sit unusual three judge benches); and second, a recent uptick in such appeals. However, these may be amongst the last such sittings. Three weeks ago, at Nauru’s 50th anniversary of its independence in 1968, Nauru’s President Baron Waqa reportedly told the national parliament of a plan to terminate the High Court’s role:

Severance of ties to Australia’s highest court is a logical step towards full nationhood and an expression of confidence in Nauru’s ability to determine its own destiny.

Continue reading →

Maxcon Constructions Pty Ltd v Vadasz; Probuild Constructions (Aust) Pty Ltd v Shade Systems Pty Ltd

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Owen Hayford, ‘Back to the past for dodgy construction payment adjudications: Probuild and Maxcon‘ (23 February 2018)

Owen Hayford and Hannah Stewart-Weeks, ‘Construction contractors beware – common clauses may now be unenforceable after Maxcon Constructions v Vadasz (1 March 2018)

The High Court has dismissed two appeals against decisions of the South Australian Supreme Court (Maxcon) and the New South Wales Court of Appeal (Probuild) on when a court can review an adjudication decision about security of payments legislation. In both of these matters, the primary courts held that an adjudicator had made an error of law in adjudicating disputes over progress payments for construction projects. The NSWCA held that the security of payment legislation removed any judicial power to quash an arbitral decision for that error of law, and the SASCFC held that it was bound to follow the NSWCA ruling. These rulings were upheld by the High Court.

Continue reading →

Australian Building and Construction Commissioner v Construction, Forestry, Mining and Energy Union

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The High Court has remitted a proceeding concerning a civil breach of federal industrial relations law to the Full Court of the Federal Court of Australia to consider whether to order an individual defendant to pay the penalty personally. The defendants, a building industry union and an employee of that union, admitted to breaching s346 of the Fair Work Act 2009, which prohibits coercing someone into taking industrial activity, by organising a blockade of cement supplies to a government building site in order to put pressure on the builders to hire a representative of the union. In proceedings brought by the predecessor to the Australian Building and Construction Commission, the Federal Court imposed a civil penalty of $60,000 for the union and $18,000 for the employee. The amount of penalty was not disputed before the High Court.

The issue that went to the High Court was the ‘non-indemnification’ order that accompanied the civil penalty on the employee. Continue reading →

News: Major commercial implications in latest leave grants

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After rejecting twenty–seven special leave applications on the papers in recent weeks, the High Court granted over half of the applications in today’s oral hearings. Several of the cases raise major points of principle with significant commercial implications: compensation for loss of life, arrangements for near bankrupt companies, compensation for native title and the tax valuation of mining companies. In some instances at least, these are balanced by human elements. Notably, in one sad matter – involving the question of compensation for a shortened life expectancy – the transcript reveals that the defendant volunteered to pay the plaintiff’s High Court costs (on both appeal and cross-appeal) and that that the High Court offered to hear the matter speedily this April in light of the plaintiff’s deteriorating condition.

The six new matters that will proceed to the High Court’s appellate jurisdiction are: Continue reading →

News: State of play in the Court of Disputed Returns

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The High Court entered its summer holiday having fully resolved nine matters in the Court of Disputed Returns concerning the 2016 federal election in four full court judgments, one each concerning one of the five disqualifications for federal MPs set out in s44 of the Constitution:

Any person who:

(i) is under any acknowledgment of allegiance, obedience, or adherence to a foreign power, or is a subject or a citizen or entitled to the rights or privileges of a subject or a citizen of a foreign power; or

(ii) is attainted of treason, or has been convicted and is under sentence, or subject to be sentenced, for any offence punishable under the law of the Commonwealth or of a State by imprisonment for one year or longer; or

(iii) is an undischarged bankrupt or insolvent; or

(iv) holds any office of profit under the Crown, or any pension payable during the pleasure of the Crown out of any of the revenues of the Commonwealth; or

(v) has any direct or indirect pecuniary interest in any agreement with the Public Service of the Commonwealth otherwise than as a member and in common with the other members of an incorporated company consisting of more than twenty-five persons;

shall be incapable of being chosen or of sitting as a senator or a member of the House of Representatives.

Re Canavan resolved seven challenges under ground (i) (dual citizenship), Re Culleton No 2 a challenge under ground (ii) (criminality), Re Nash No 2 a follow-up challenge to one of the successors of one of the Citizenship 7 under ground (iv) (office of profit under the Crown) and Re Day No 2, a challenge under ground (v) (pecuniary interest.) (Ground (iii) on bankruptcy has only been considered once by the High Court, three decades ago.)

However, the Court began this year with six more election challenges on its books. While no major judgments have since been published, there has been a lot of activity and plenty of diversions in these matters in recent weeks. So, where are they now? Continue reading →

Falzon v Minister for Immigration and Border Protection

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The High Court has dismissed an application challenging the validity of s 501(3A) of the Migration Act 1958 (Cth). Section 501(3A) provides that the Minister of Immigration and Border Protection must cancel a visa held by a person if the Minister is satisfied that person does not pass the character test due to a substantial criminal record, which includes being sentenced to a term of imprisonment of at least 12 months. The plaintiff is a Maltese national who has lived in Australia since the age of three, but never became an Australian citizen, and instead held an Absorbed Person Visa and a Class BF Transitional (Permanent) Visa as a ‘lawful non-citizen’. In 2008, he was convicted of drug trafficking and sentenced to 11 years in prison. In March 2016 the Minister cancelled his Absorbed Person Visa, which meant that the Minister was taken to have cancelled the other visa. The plaintiff was taken into immigration detention, and sought revocation of the decision to cancel his visa. The Assistant Minister refused, and the plaintiff commenced proceedings in the High Court’s original jurisdiction. The plaintiff contended that s 501(3A) is invalid for conferring federal judicial power on the Minister, contrary to Ch III of the Constitution, because it empowers the Minister to punish him for offences he has committed.

The High Court unanimously dismissed the application. The joint judges (Kiefel CJ, Bell, Keane and Edelman JJ) held that s 501(3A) does not authorise or require detention, but merely requires that his visa be cancelled because of his criminal convictions: it changed his legal status from lawful non-citizen to unlawful non-citizen, and this change meant he was liable to removal from Australia, and detention to facilitate that removal.

After summarising the facts (at [1]ff) and the statutory scheme (at [9]ff), the joint judges turned to each of the plaintiff’s four propositions. The first, that the power to punish an offence against a Commonwealth law is exclusive to ch III courts was uncontroversial (at [14]–[17]). Continue reading →

Commissioner of the Australian Federal Police v Hart; Commonwealth of Australia v Yak 3 Investments Pty Ltd; Commonwealth of Australia v Flying Fighters Pty Ltd

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The High Court has allowed an appeal against a decision of the Court of Appeal of Queensland on the meaning and application of federal proceeds of crime legislation. The proceeds of crime proceedings follow a successful criminal prosecution of Steven Irvine Hart, the respondent in the one of the three High Court appeals, for his involvement in tax minimisation schemes. During that prosecution, the Commonwealth Director of Public Prosecutions obtained a restraining order on property under Hart’s ‘effective control’. When Hart was convicted in 2006, the restrained property became subject to automatic forfeiture under s 92 of the Proceeds of Crimes Act 2002 (Cth). The present proceedings involve two subsequent actions: first, an action by companies against the Commonwealth under s 102 of the Act claiming an interest in some of the forfeited properties (respondents in two of the three High Court Appeals) for their interests (or an equivalent value) to be transferred to them; second, an action by the Commonwealth DPP under s 141 of the Act seeking a declaration that any property the companies recover in this way be made available to pay any pecuniary penalty Hart was liable to pay. The companies generally succeeded in both actions at the trial in Queensland’s District Court in 2013 and following the Commonwealth’s appeal to Queensland’s Court of Appeal, with the Commonwealth ordered to pay the companies the value of their interests and denied the ability to use that money to pay a nearly $15M pecuniary penalty that Hart was ordered to pay to the Commonwealth in 2010.

The High Court (Kiefel CJ, Bell, Gageler and Edelman JJ, and Gordon J) unanimously allowed the Commonwealth’s appeal against the orders to pay the companies, but dismissed the Commonwealth’s appeal against the refusal to allow it to use the interests the company’s retained to pay off Hart’s pecuniary penalty. Justice Gordon’s judgment sets out the facts, background and orders. The plurality agreed with Gordon J (at [2]) on the facts, the orders and the dismissal of the Commonwealth’s appeal relating to offsetting the pecuniary penalty, but provided alternative reasons for allowing the Commonwealth’s appeal relating to order to restore the companies’ interests. Continue reading →