Ace Structural Limited v John Green - Case summary

The recent High Court case of Ace Structural Limited v John Green [2019] NZHC 1558 serves a timely reminder that determinations of an adjudicator are subject to judicial review.

The dispute

Frima, head contractor, and Ace, sub-contractor, were party to a contract for the construction of commercial units in Albany. Both Firma and Ace served notices of adjudication under the Construction Contracts Act (CCA). The claims were consolidated under s 40 of the CCA. The issues for determination by the adjudicator, John Green, included:

  • whether Firma lawfully cancelled the subcontract,
  • whether Ace was entitled to unpaid progress claims and variations,
  • the amount of interest to be paid, and
  • whether costs should be awarded.

Mr Green held that Firma had unlawfully cancelled the subcontract, and therefore Ace was not liable for the costs of completion and rectification. Firma was also liable to pay Ace for unpaid progress claims and variations.

Mr Green’s determination on costs provides the basis for Ace’s judicial review proceeding. An adjudicator, under s56 of the CCA has direction to award costs. In this case, Mr Green held that Firma and Ace were to bear their own costs and expenses, as there had been no bad faith on the part of Firma and it could not be shown that Firma’s allegations were without substantial merit.

Ace, through judicial review, sought an order quashing the finding that Ace and Firma should bear their own costs and expenses. In failing to take into account evidence / dismissing allegations of bad faith and “without substantial merit”, Ace claimed that Mr Green’s determination did not comply with the principles of natural justice. Further, Ace claimed Mr Green failed to give reasons, and make a decision consistent with other costs awards.

 Judicial review finding

On review, Gordon J held that an adjudicator’s decision as to costs following a determination are, in principle, reviewable. Though, the Judge stressed that the threshold for judicial review is a high one.

Overall Gordon J concluded that Mr Green’s finding was reviewable because he had failed to give reasons. Absent any reasons, it was not apparent that Mr Green considered all relevant information. Gordon J held that any finding of bad faith or “without substantial merit”, only triggers the adjudicator’s discretion, it does not mandate the awarding of costs. The Court held an adjudicator must:

  • firstly, consider whether there has been bad faith or “without substantial merit”;
  • secondly, if so, decide whether to exercise his discretion to award costs;
  • and thirdly, determine the quantum and type of costs.

In this case, Gordon J made an order quashing Mr Green’s finding as to costs, and remitted the matter back to Mr Green for re-determination, with reasons to be given.

 Conclusion

This case highlights the ability of the High Court to judicially review the decisions of adjudicators under the CCA.

Whilst the threshold for intervention is high, it is important that parties to adjudication proceedings understand that judicial review is available in certain circumstances, particularly as in this case, where the decision maker failed to give reasons.

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