In this analysis, we will take a closer look at Martinus Rail Pty Ltd v Qube RE Services (No 2) Pty Ltd (No 2) [2024] NSWSC 1223, a significant development to the Security of Payments regime.
When a builder or contractor turns to adjudication to resolve a payment dispute, they expect a fair hearing and clear reasoning. But what happens when an adjudicator overlooks key arguments? In Martinus Rail v Qube, the NSW Supreme Court sent a strong message: adjudicators must take their duties seriously – because if they don’t, their decisions can be overturned. This case has big implications for how payment disputes are handled under security of payment laws across Australia.
I Background
The New South Wales decision of Martinus Rail Pty Ltd v Qube RE Services (No 2) Pty Ltd (No 2)[1] (‘Martinus’) is the latest in-depth analytical reflection on the function of the Building and Construction Industry Security of Payment Act 1999 (NSW) (‘SOPA’). The New South Wales Supreme Court in Martinus considered in particular the adjudication processes under SOPA and identified the possibility of pitfalls and compliance issues on the part of adjudicators. As such, it behoves Australian construction law practitioners, builders, contractors, and landowners to consider the decision in Martinus and its implications for the statutory security of payments regimes in New South Wales and across Australia more broadly.
II Key Adjudication Issues Examined in Martinus
A Jurisdictional Error
The Court was compelled to consider whether the adjudicator had discharged his obligations correctly, or had engaged in jurisdictional error including, inter alia, by failing to incorporate submissions tendered by Qube in its decision-making. The Court cited the High Court’s 2024 ruling in LPTC v Minister for Immigration (‘LPTC’) which emphasised that a finding of jurisdictional error requires both an error and material implication. In other words, jurisdictional error on the part of the adjudicator requires error, and a reasonable possibility that, had the adjudicator not made the error, the outcome of the adjudication could have been different.
B Adjudicators’ General Obligation to Consider Submissions
Under section 22(2) of SOPA, adjudicators have a general obligation to consider submissions tendered by both parties to a payment dispute. The Court determined that the adjudicator had contravened their obligation in this regard by effectively failing to engage with Qube’s submitted detailed arguments with respect to specific payment claims. The Court further considered this failure was material as Qube’s submissions were sufficiently detailed to have influenced the adjudicator’s determination.
C Reasoning and Procedural Fairness
The Court further considered whether the adjudicator’s stated reasoning for determination was compliant under SOPA, citing section 22(3) which requires that reasons are provided. Relevantly, the Court noted that stated reasons must reflect a rational thought process tied to the statutory framework. Consequently, the Court considered that a failure on the part of the adjudicator to address substantive arguments, submissions, or evidence can further indicate jurisdictional error. The Court further considered whether determinations lacking ‘evidence and intelligible justification’ may constitute jurisdictional error. Notwithstanding the rarity of such inadequate adjudication, adjudications may raise such a concern should they ostensibly reflect capriciousness or irrationality relative to the statutory regime.
III A Consideration of Victorian Parallel
There is ample reason to assume that Victorian courts would follow suit on the following bases:
A Parity of Statutes
The Victorian security of payments regime, enshrined in the Building and Construction Industry Security of Payment Act 2002 (Vic), is broadly modelled upon the New South Wales SOPA with close-to-identical provisions pertaining to the subjects of adjudication, an adjudicator’s imperative to consider submissions, and the procedural requirement to provide reasons for determination.
B Cross-Judicial Influence
The Victorian courts considering questions of building disputes, including those assessing payments disputes within the security of payments regime, frequently cite and follow the logic of New South Wales appellate and High Court of Australia decisions particularly where, as stated above, the legislative language is comparable.
C Amplified Influence of the LPTC v Minister for Immigration Decision
The Court in Martinus relied extensively on the High Court’s decision in LPTC which, as the senior seat of Australia’s judicial bodies, has broad influence on the logic and reasoning applied in all Australian courts.
D The Decision in Martinus is Consistent with Victorian Precedent
The Victorian courts have previously applied similar logic with respect to the boundaries of judicial review as regarding security of payments adjudications, the threshold of ‘materiality’ as a means to seek adjudication reversal, and an emphasis on the need for adjudications and the broader security of payments regime to provide a ‘rough and ready’ avenue for dispute resolution in the sector.
IV Conclusions: Broader Implications for Australian Security
of Payments Regimes
The decision in Martinus highlighted the ongoing importance of adjudicators carefully attending to, and considering parties’ submissions in the decision-making process and consequently providing clear, rational reasoning for their determinations. Additionally, a failure to comply with these requirements can raise the risk of a jurisdictional error finding. Nevertheless, Martinus further reinforces caselaw indicating that error alone is not sufficient to invalidate an adjudication determination but, rather, requires implications of materiality for disqualification. This materiality threshold is necessary to ensure that security of payments regimes continue to provide a ‘rough and ready’ system through which parties may resolve payments disputes without the costly and time-consuming necessity of judicial intervention.
As experts in construction law and the Security of Payments regime, Warlows Legal is aptly equipped to help you with your dispute. Please get in contact with us today and we will personally assist you.
[1] [2024] NSWSC 1223.
Written by Caelan MacBeth, Law Clerk at Warlows Legal.
