BuildLaw: In Brief 08.12.2009

In the recent High Court case of Kara Group Ltd (In Liquidation) v Gatley & North Holdings Developments Ltd, Justice Harrison granted an application for judicial review of an award made by an adjudicator under the Construction Contracts Act 2002.

The application for judicial review arose in unusual circumstances.  Kara Group and North Holdings were parties to a construction contract to remove and dispose of peat from a subdivision near Ruakaka.  A dispute arose regarding the payment of retentions of $33,099.00 and the parties referred the dispute to Dr David Gatley for adjudication.

During the adjudication process, Kara Group went into liquidation.  Shortly after that, Dr Gatley released his determination.  The covering letter that he sent with his determination said:

“I have released the determination not because of the threat of action from Kensington Swan…which I found to be extremely objectionable, but in an attempt to conclude the matter and to save all parties having to spend any further time and costs on what would, in my view, be expensive and pointless litigation.

I trust that it is obvious from the Determination that, after…North Holdings Developments have paid all of the outstanding balance of my fees (which are due by 5pm on Monday 11 May 2009) that there will be nothing for either [parties] to pay as a result of this adjudication.

I trust that all parties will agree that the outcome is both fair and just.”

The result of the adjudication and Dr Gatley’s determination with respect to his fees was such that Kara would receive nothing even though it was successful in the adjudication to the extent of $39,928.00.

Justice Harrison noted that it is unsurprising that neither party was satisfied with Dr Gatley’s notion of fairness or justice and that the parties had good reason to be dissatisfied.

Further, the coincidence of there being exact symmetry between the adjudicator’s determination of the amount of North’s liability and the amount of his fees, and the offsetting of each raises issues in relation to natural justice.

During the course of the hearing, counsel conferred and both agreed that the determination of Dr Gatley cannot stand.  Accordingly, as the Court has the power to set aside a decision where it is the result of an invalid or incorrect exercise of a statutory power, Justice Harrison held that the decision was invalid.
There was no order of costs between the parties and, despite an application for costs against Dr Gatley on the basis that he was a party to the proceedings, Justice Harrison declined to exercise his discretion.  He concluded that the result mandated by his judgment will be sufficient to meet the ends of justice.

An Authorised Nominating Authority
under section 65 of the Construction Contracts Act 2002