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Submitted by:
Samer Skaik, BEng, MSc (W/D), PMP, MIEAust, ACIArb
Founder and Principle of construction Management Guide (cmguide.org)
PhD Scholar & Lecturer - Deakin University
Locked Bag 20001, Geelong, Victoria 3220 Australia
WRITTEN SUBMISSION ON BCISPA 1999 (NSW):
DISCUSSION PAPER - DECEMBER 2015
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1. CONTENTS
1. Contents............................................................................................................................... 1
1. Brief Biography of the Submitter ........................................................................................... 3
2. Purpose of the submission .................................................................................................... 3
3. Problem (1) Excessive court involvement (Judicial Review) in adjudication ............................. 4
3.1 Proposed roadmap 1:.............................................................................................................. 8
3.1.1 Separating jurisdictional issues from the merits in adjudication. ................................... 8
3.1.2 Generating an exhaustive list of basic and essential jurisdictional facts ...................... 10
3.1.3 Establish a legislative review mechanism for jurisdictional challenges. ....................... 11
3.1.1.1 The rationale ............................................................................................................. 11
3.1.1.2 The proposed review mechanism for challenging ‘no jurisdiction’ .......................... 15
3.1.1.3 The proposed review mechanism for challenging ‘excess of jurisdiction’ ............... 16
3.1.1.4 Benefits and Barriers of introducing review mechanism .......................................... 17
3.2 Proposed Roadmap (2): ........................................................................................................ 18
3.2.1 Appointing competent adjudicators after receipt of adjudication response. .............. 19
3.2.2 Deterring respondents from keeping silent on jurisdictional issues. ........................... 19
3.2.3 Guidelines on jurisdictional issues. ............................................................................... 19
3.2.4 Extension of Adjudicator’s Time Limits ......................................................................... 20
3.2.5 Adjudicator’s Entitlement of Fees upon Dismissal ....................................................... 20
4. Problem (2) Dissatisfaction with the quality of Adjudicators’ Decisions on the merits in large
cases: ........................................................................................................................................ 22
4.1 Effective Binding Dispute Resolution .................................................................................... 23
4.1.1 Procedural Fairness ....................................................................................................... 23
4.1.2 Accessibility (Speed and Cost Effectiveness) ................................................................ 24
4.1.3 Finality ........................................................................................................................... 24
4.1.4 Informality ..................................................................................................................... 24
4.2 Proposed Roadmap 1 ............................................................................................................ 24
4.2.1 Complex adjudications and timeframes ....................................................................... 25
4.2.2 Training and Regulation of Adjudicators ....................................................................... 27
4.2.3 Adjudicator's Powers .................................................................................................... 28
4.3 Proposed Roadmap 2: Review of adjudication decisions (One-stop shop) .......................... 29
4.3.1 Tasmanian Review Mechanism ..................................................................................... 30
4.3.2 Commentary on Tasmanian Review Mechanism .......................................................... 32
4.3.3 Singaporean Adjudication Review ................................................................................ 33
4.3.3.1 Overview of the Singaporean model ........................................................................ 33
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4.3.3.2 Drivers of Introducing Review mechanism ............................................................... 34
4.3.3.3 The Review procedures ............................................................................................. 35
4.3.3.4 Interface with Litigation ................................................................................................ 37
4.3.4 Commentary on the Singaporean Review Mechanism ................................................. 38
4.4 Is a review mechanism on the merits needed in australia? ................................................. 40
4.5 A proposed australian Review mechanism on the merits .................................................... 42
4.5.1 The ambit of review mechanism:.................................................................................. 42
4.5.2 Accessibility ................................................................................................................... 43
4.5.3 Selection and jurisdiction of Review Adjudicator(s) ..................................................... 44
4.5.4 New submissions ........................................................................................................... 44
4.5.5 Timeframes ................................................................................................................... 44
4.5.6 Costs .............................................................................................................................. 45
4.5.7 Challenging the review decision ................................................................................... 45
5. Conclusions ........................................................................................................................ 46
6. Appendix (Response to discussion paper specific quesitons) ................................................ 47
References ................................................................................................................................. 67
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1. BRIEF BIOGRAPHY OF THE SUBMITTER
I hold a UK master degree (with distinction) in construction management with civil engineering
background. Currently, I am finalising my PhD thesis aiming to propose effective reforms of
the Australian Statutory Adjudication with a ‘Scholarship Grant’ from Deakin University in
Victoria. I have an extensive experience in managing large projects, alongside lecturing,
advising and writing on construction management and law. I am the Founder and Principle of
Construction Management Guide (cmguide.org) and I am also working as a part time lecturer
teaching units relating to Construction Management at Deakin University.
I have published many peer reviewed papers related to construction management, construction
law and statutory adjudication and I usually appear as a regular speaker in international
conferences and seminars concerning construction Management, contract administration and
construction law. Recently, I was invited to as specialist contributor to write the four major
book chapters on the Australian Statutory Adjudication for the upcoming global book
"International Contractual and Statutory Adjudication" Edited by Andrew Burr and peer
reviewed by Philip Davenport. The book is expected to be available in Sept 2016 by Wiley
Blackwell Publisher. I was also selected by FIDIC to be a "friendly reviewer" of the upcoming
updated edition of the FIDIC Yellow Book (Design-Build).
2. PURPOSE OF THE SUBMISSION
As a PhD researcher in my final stage, I have been conducting extensive legal research on the
possible reforms of the Statutory Adjudication in Australia for the last 18 months on a full time
basis. It is the time, I think, to disseminate my findings so far which I hope that it will be
considered by NSW Fair Trading for potential application in NSW. To validate my findings
that are presented in this submission, I have interviewed 22 experts, lawyers and adjudicators
heavily involved in statutory adjudication in Australia and got very positive feedback on the
various aspects of my research findings. Tasmania has already followed one of my research
findings in its Building and Construction industry Amendment Bill 2015 (Tas) to improve the
effectiveness of its security of payment scheme by introducing a review mechanism which is
yet to be assented. I am also liaising with the Governmental Officials to improve the Bill and/or
make some regulations to ensure effective operation of the Bill upon enactment.
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There are many problems, of course, that hinders the Security of Payment Scheme to operate
effectively. This submission, apart from the appendix, mainly deals with two main and specific
problems, namely, the excessive court involvement (Judicial review) in adjudication and the
industry’s dissatisfaction with the quality of adjudicators’ determinations. This submission
provides evidence and rationale of dealing with the two problems as well as pragmatic and
effective options and solutions to address each problem.
On the other hand, the submission also includes an Appendix of submitter’s comments and
responses to various questions raised in the NSW SOP discussion paper released in
December 2015.
3. PROBLEM (1) EXCESSIVE COURT INVOLVEMENT (JUDICIAL REVIEW)
IN ADJUDICATION
Many construction firms are discouraged to use the dispute resolution mechanism, especially
for large amounts exceeding $100,000 because the paying party usually frustrate the
adjudication process by challenging the jurisdiction of adjudicators. It is a frequent problem
that a claimant, who got a favourable adjudicator’s determination is disadvantaged from the
benefits and certainty of that determination if the respondent opts to challenge the
determination by invoking lengthy judicial review proceedings. The uncertainty issue was
judicially explained by Basten JA as follows:
“[b]etween the date of a purported determination and an order of the court setting it
aside, no-one could be sure whether the adjudicator had failed to validly determine the
application and it was only the order of the court which would resolve that question.”1
Further, Macfarlan JA observed that:
“A long period of time might elapse between a purported determination and a court
declaring it void. In the present case that period was seven months, but in others the
period might be much longer”.2
1 Cardinal Project Services Pty Ltd v Hanave Pty Ltd [2011] NSWCA 399 at [50] (Basten JA). 2 Cardinal Project Services Pty Ltd v Hanave Pty Ltd [2011] NSWCA 399 at [99] (Macfarlan JA).
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As a result, the claimant would be under a considerable risk of not only becoming insolvent
but also exercising its statutory right to suspend in case of non-payment.3 Also, the claimant
will be more hesitant and reluctant to apply for further adjudications on other payment claims
until certainty materialises upon the outcome of judicial review. The claimant may also
compromise its right and be compelled to settle the issue with the respondent to avoid the huge
expenses and delays in going to court to defend the validity of the determination.
Respondents (paying parties) strive to retain the due amounts as long as possible adopting
delaying tactic such as invoking judicial review proceedings to quash the adjudicator’s
decision. In practice, some aggrieved respondents seek judicial review by exhausting all appeal
measures to the end, with the hope, that the claimant may become insolvent by the time the
case is eventually decided, so the respondent may not be obliged to pay. The challenges are
typically related to lack of adjudicator’s jurisdiction to hear the matter and/or an adjudication
exceeding their jurisdiction during the adjudication making process.
Notwithstanding the fact that legislatures had attempted to insert privative clauses4 to exclude
adjudication determinations from judicial review in order that the object of the legislation could
be attained, those clauses became redundant following the authority of the High Court in Kirk
v Industrial Relations Commission of New South Wales [2010] HCA 1 which held at [100]:
“Legislation which would take from a State Supreme Court power to grant relief on account of
jurisdictional error is beyond State legislative power”.
Consequently, the mission of the legislation has drifted away from its original intent.
Apparently, aggrieved respondents are left with no constraints (save for the high legal cost and
the potential cost of interest accumulating upon the adjudicator’s determination if upheld by
judicial review) of seeking judicial review to frustrate adjudication process. It is submitted that
these cost factors are often ignored by respondents when balanced against the benefits of
retaining the large amounts in dispute as long as possible and use it in the business by seeking
juridical review as a delaying tactic. In practice, some aggrieved respondents seek judicial
review by exhausting all appeal measures to the end, with the hope, that the claimant may
3 The risk of such suspension was well noted in Brodyn v Davenport [2005] NSWCA 394 at [51] (Hodgson JA);
Hickory Developments Pty Ltd v Schiavello (Vic) Pty Ltd [2009] VSC 156 at [46]-[47] (Vickery J). 4 See, eg, Amasya Enterprises Pty Ltd v Asta Developments (Aust) Pty Ltd [2015] VSC 233 [58], [66], [68];
sections 90 and 91 of the Justice and Other Legislation Amendment Act 2007 which amended Schedule 1, part 2
of the Judicial Review Act to exclude the operation of that Act to decisions made under part 3, division 2 of the
Building and Construction Industry Payments Act 2004.
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become insolvent by the time the case is eventually decided, so the respondent may not be
obliged to pay.
There have been numerous judicial review applications in Australia with respect to
adjudicators’ determinations eroding the original object of the Security of Payment legislation.
Thus, the legislation mission has been drifted, particularly in ensuring that subcontractors are
paid quickly for the work they do on an interim basis.
Table 1 demonstrates the proportion of determined adjudication applications which were the
subject of judicial review applications before the Supreme Courts in New South Wales between
2012 and 2014.5 The average figures would give a more representative figures for two reasons.
First, many judicial review applications are usually decided by court way after the release of
adjudication determination. Second, it is so difficult and time consuming to marry the judicial
review applications with those reported in the financial year for the sake of comparison to
derive representative proportions.
As shown in the Table, disputed payment claims below $25,000 do not reach the Supreme
Court. Even those claims between $25,000 and $40,000 are rarely dealt with by the Supreme
Court. As such, McDougall J noted that: “considerations of proportionality and, equally,
considerations of common sense must suggest that the conduct of litigation involving numerous
volumes of documents over less than $37,000.00 is unlikely to be a cost-effective process”.6
That observation is well demonstrated in the table which shows that the proportions of juridical
review applications from the relevant adjudicated claims are much higher as the amount in
dispute increases. For example, the average percentage of judicial review applications of
disputed amounts between 40,000 and 99,999 was only 3% and it steadily increases till it
reaches 11% for disputed amounts between 500,000 and 999,999. The average percentages
tentatively represent those claimants who struggle a lot to get their due payments as
adjudicated.
Table 1 Proportion of Judicial review from Adjudicated Applications in NSW
5 Until the time of writing, the 2015 annual report of NSW has not been issued. Figures of lodged applications
are extracted from the formal annual reports in each State as being published by the Office of Finance &
Services. Figures of Judicial review applications are derived from Supreme Court judgements extracted from the
databases of Australasian Legal Information Institute (Austlii). There were a few judicial review applications
which did not mention the amount in dispute, hence they were not considered. 6 Seabreeze Manly v Toposu [2014] NSWSC 1097 at [51].
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Claimed
Amount /
Amount in
Dispute ($)
Determination released
Financial year)
Judicial Review Challenges
(Calendar Year)
% Judicial Review
applications
2012 2013 2014 Average 2012 2013 2014 average 2012 2013 2014 Average
0-24,999 341 357 234 311 0 0 0 0 0% 0% 0% 0%
25,000-39,999 102 69 53 75 2 2 2 2 2% 3% 4% 3%
40,000-99,999 130 97 98 108 3 3 3 3 2% 3% 3% 3%
100,000-
249,999 106 83 70 86 4 5 2 4 4% 6% 3% 4%
250,000-
499,999 46 26 46 39 1 2 4 2 2% 8% 9% 6%
500,000-
999,999 25 13 18 19 2 2 2 2 8% 15% 11% 11%
≥ 1,000,000 29 27 37 31 2 0 3 2 7% 0% 8% 5%
Total 438 315 322 358 14 14 16 15 3% 4% 5% 4%
Such higher percentages of judicial review with respect to larger adjudication determinations
are destructive to the statutory object to provide rapid and affordable means by which
contractors (and especially subcontractors) may get paid for work carried out and/or goods and
services supplied. 7 As such, they present a significant problem for the efficacy of the building
and construction industry ‘Security of Payment’ legislation.
In his Second Reading Speech for the NSW Building and Construction Industry Security of
Payment Bill 1999, the Minister (the Right Honourable Morris Iemma made it clear that the
“further adjudication appeal process between the adjudicator's interim decision and the final
decision would be unnecessarily burdensome and costly for parties to construction contracts.
It can also be a source of abuse by a desperate respondent seeking to delay payment”.8 This
led the Honourable Justice Robert McDougall to comment that “parliament specifically wished
for the courts not to be too readily involved”.9 In Western Australia (WA), the Minister (the
Right Honourable Alannah MacTiernan) stated in her second reading speech:
The rapid adjudication process is a trade-off between speed and efficiency on the one
hand, and contractual and legal precision on the other. Its primary aim is to keep the
7 See Grocon Constructors Pty Ltd v Planit Cocciardi Joint Venture [2009] VSC 426 at [33]. 8 Iemma, M 1999, NSW Parliamentary Debates, Legislative Assembly, 29 June 1999, p1598.
9 McDougall, R. “An examination of the role and content of natural justice in adjudications under construction
industry payment legislation”, 2009, page 9, retrieved 04 Dec 2015, from
‘http://www.supremecourt.justice.nsw.gov.au/Documents/mcdougall110909.pdf ’.
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money flowing in the contracting chain by enforcing timely payment and sidelining
protracted or complex disputes.10
Furthermore, the tension between the object of the statutory adjudication legislation and
excessive involvement of the courts has often been the subject of comment by the judiciary. In
Brodyn Pty Ltd v Davenport,11 Hodgson JA considered the availability of a stay of a judgment
obtained under section 25 of NSW Act and noted at [87]:
[t]he intention of the legislature that progress payments be made with a minimum of
delay and court involvement, and the possibility that [the claimant]'s financial
difficulties have been caused by failure to make this progress payment, could militate
strongly against the granting of such a stay.
3.1 PROPOSED ROADMAP 1:
The roadmap starts from the position that there is a need for a better legal framework to
reinstate the SOP mission that has drifted due to judicial review. This position has been
established by the case law, academic commentaries, and the shortcomings of the existing
approaches identified and discussed above.
The roadmap aims to adopt a pragmatic and attainable approach by identifying three novel pit
stops, namely:
1. separating jurisdictional issues from merits in adjudication;
2. generating an exhaustive list of basic and essential requirements for a valid
adjudication determination; and
3. establishing an internal adjudication review mechanism with respect to jurisdictional
issues.
3.1.1 Separating jurisdictional issues from the merits in adjudication.
Since the majority of adjudicators do not possess formal legal qualifications, many of them
lack the training to deal with jurisdictional matters, especially those which are related to valid
appointment. In Singapore, which has modelled its legislation on the NSW Act, it was
judicially held that adjudicators do not have the competency to deal with jurisdictional issues
10 MacTiernan, A J, WA Parliamentary Debates, Legislative Assembly, 3 March 2004, at 275. 11 [2004] NSWCA 394.
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apart from the basic function required by the legislation.12 It was also decided that any
jurisdictional objection must be raised immediately before court not the adjudicator. The
rationale behind that approach was explained as:
[s]ince the objection is against the adjudicator’s jurisdiction as an adjudicator, he has
no power to decide if he has jurisdiction or not. He cannot decide his own competency
to act as an adjudicator when such competency is being challenged by the respondent.13
Accordingly, the former Chief Justice, Chan Sek Keong, suggested reform to the Singaporean
legislation to separate jurisdictional issues from the merits of dispute, so the adjudicator’s duty
is only confined to deal with the merits.14 This measure would enable both parties to
adjudication to have certainty about the likely outcome of the real issues in dispute and plan
their further actions as well as financial resources accordingly. It is proposed that the
Singaporean approach may ‘kill many birds with one stone’. Adjudicators (acting as certifiers)
can proceed comfortably with the determination on the merits only and any jurisdictional
objection must be dealt with by a review tribunal as explained in pit stop 3 below. As such,
there would be no crucial need to educate and train adjudicators on legal matters such as
administrative law principles. Further, with adjudicators focusing on the merits only, they
would have more chance of abiding by the set time limits, which promotes the legislative object
to quickly and inexpensively resolve payment disputes on the merits.
It is worthwhile to note that, sometimes, it is incumbent upon an adjudicator to consider a
question of mixed fact and law relating to payment claim, therefore, he or she should have an
express jurisdiction to decide on such question as long as that jurisdiction is necessary so that
the adjudicator can perform the basic statutory functions. Therefore, any error in considering
the question would be deemed an error within jurisdiction rather than an error going to
jurisdiction. In Brodyn Pty Ltd v Davenport,15 Hodgson JA, with whom Mason P and Giles JA
agreed, mentioned obiter dicta:
If there is a document served by a claimant on a respondent that purports to be a
payment claim under the Act, questions as to whether the document complies in
12 Lee Wee Lick Terence v Chua Say Eng [2012] SGCA 63 at [64]. 13 Lee Wee Lick Terence v Chua Say Eng [2012] SGCA 63 at [36]. 14 Keong, C. S., "Foreword", Security of Payments and Construction Adjudication, Fong, C, second edition,
2012, LexisNexis. 15 Brodyn Pty. Ltd. t/as Time Cost and Quality v. Davenport [2004] NSWCA 394 at [66].
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all respects with the requirements of the Act are generally, in my opinion, for the
adjudicator to decide. Many of these questions can involve doubtful questions of
fact and law; and as I have indicated earlier, in my opinion the legislature has
manifested an intention that the existence of a determination should not turn on
answers to questions of this kind.
3.1.2 Generating an exhaustive list of basic and essential jurisdictional facts
As discussed above, the courts in NSW have followed a consistent approach that the reference
date is an essential jurisdictional fact within the context of the legislation until the Court of
Appeal eventually held it is not. In Singapore, the Court of Appeal (faced with similar situation)
acknowledged that the existing different judicial approaches in Singapore about what could
amount to jurisdictional error to invalidate adjudication “have created difficulties among
adjudicators on the proper approach to adopt, and for this reason it is desirable for this court
to express its views on the state of the law.”16
Accordingly, there is no reason why Australian courts could not adopt a similar initiative. An
exhaustive list of basic and essential requirements becomes crucially needed on a State-by-
State basis in Australia in order to fill a significant lacuna in the legislation. Otherwise, the
door will be always open for aggrieved parties to seek judicial review on any of the non-listed
items creating unnecessary dilemma. For example, in Rothnere v Quasar [2004] NSWSC 1151,
the respondent challenged an adjudicator’s determination for his failure to comply with section
22 (4),17claiming that it should be included in the non-exhaustive list of Brodyn. McDougall
rejected the respondent’s submission providing lengthy reasoning. In Bauen Constructions Pty
Ltd v Sky General Services Pty Ltd [2012] NSWSC 1123, Sackar J held that the adjudicator
committed jurisdictional error for, inter alia, failure to consider compliance with s 13(4). That
decision was further challenged for costs order only.
Accordingly, in NSW, there is an excellent opportunity to have such a list based on the
identified non-exhaustive list in Brodyn, and following authorities including Chase18 and
Lewence.19 However, it is yet to be judicially decided whether the compliance of all other
16 Lee Wee Lick Terence v Chua Say Eng [2012] SGCA 63 at [18]. 17 Section 22(4) provides that the adjudicator, in any subsequent adjudication application must give the work the
same value as that previously determined unless the claimant or respondent satisfies the adjudicator concerned
that the value of the work has changed since the previous determination. 18 Chase Oyster Bar v Hamo Industries (2010) 78 NSWLR 393. 19 Lewence Construction Pty Ltd v Southern Han Breakfast Point Pty Ltd [2015] NSWCA 288.
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statutory requirements would or would not be essential so the exhaustive list can be completed.
Perhaps, it is a duty of legislatures in the first place or the Court of Appeal as an alternative to
provide such an exhaustive list. This is, not only to mitigate the evolving uncertainty about the
boundaries of adjudicator’s jurisdiction, but also to assist all parties to adjudication as well as
any review tribunals or even first instance judges, to take the right decision if further review is
sought to challenge adjudicator’s jurisdiction. Otherwise, the door of judicial review will
always be left ajar for smart lawyers to identify any non-compliant issue in adjudication and
make a persuasive legal submission to prove it is an essential requirement to frustrate
adjudication. This pit stop could be too ambitious to be considered due to legal complexities
generated after Kirk’s Authority and further legal assessment may be required.
3.1.3 Establish a legislative review mechanism for jurisdictional challenges.
3.1.1.1 The rationale
Under the West Coast model, unlike all other jurisdictions, there is an express right of review
by application in respect of an adjudicator’s decision to dismiss without a consideration of the
merits of the application on certain grounds.20 In WA, this review is carried out by the State
Administrative Tribunal (WASAT) and in Northern Territory by the local court. The WASAT
has jurisdiction to review the adjudicator’s decision to dismiss upon application by either party.
The reviewed decision can be affirmed, varied, set aside, or sent back to the adjudicator for
reconsideration in accordance with any directions, or recommendations, which the WASAT
considers appropriate21. If the decision is reversed and remitted, the adjudicator is to make a
determination within 14 days after the date on which the decision was reversed, or any
extension of that time consented to by the parties: see section 46 (2) of the WA Act.
Judicially, it was decided that all those grounds are jurisdictional facts.22 In O’Donnell Griffin
Pty Ltd v John Holland Pty Ltd,23 Beech J held that the review tribunal also has jurisdiction to
review the adjudicator’s decision not to dismiss. To reach to this proposition, Beech J examined
the object of the WA Act and found that the review by the Tribunal of an adjudicator’s decision
20 These grounds include that the contract concerned is not a construction contract, the application has not been
prepared and served in accordance with the requirements of the Act, and the adjudicator is satisfied that it is not
possible to fairly make a determination because of the complexity of the matter or the prescribed time or any
extension of it is not sufficient for any other reason – see WA Act, s 31(2)(a). 21 Under the State Administrative Tribunal Act 2004 [WA], section 29 (3). 22 See Perrinepod Pty Ltd v Georgiou Group Building Pty Ltd [2011] WASCA 217 at [16]. 23 [2009] WASC 19 (Beech J).
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not to dismiss was “more expeditious”24 and more consistent with the scheme of the Act than
the “slower and more cumbersome prerogative relief'.25 In Thiess Pty Ltd v MCC Mining (WA)
Pty Ltd,26 Corboy J noted: “There is much force in the proposition that a decision to refuse to
dismiss an adjudication application is a decision made under s 31(2)(a) within the meaning of
s 46(1)”27.These propositions were eventually overturned by the Court of Appeal in Perrinepod
Pty Ltd v Georgiou Group Building Pty Ltd,28 where the Court held that the scope of limited
review does not allow review of determinations on grounds related to the failure of the
adjudicator to dismiss. The Court held at [129]:
[a]lthough it might be thought to be more efficient or convenient for a 'decision' 'not to
dismiss' to be equally amenable to Tribunal review under s 46(1) as a decision to
dismiss under s 31(2)(a), rather than be amenable to judicial review, I am not
persuaded that those considerations properly affect the proper construction of s 46(1).
First, and fundamentally, for the reasons given earlier, the text of s 46(1) is inconsistent
with such an approach. Secondly, insofar as the Tribunal would provide a quicker
avenue for relief, a right of review to the Tribunal where an application is dismissed is
conducive to the statutory purpose of 'keeping the money flowing'. On the other hand,
no evident statutory purpose is served by expediting a review of a 'decision' 'not to
dismiss', with a view to rendering inapplicable the adjudication process facilitated by
the Act.
A review by WASAT involves a hearing de novo on the merits in which material that was not
before the decision-maker may be considered.29 Apparently, there is an inconsistency between
the Construction Contracts Act and a hearing de novo. In Marine & Civil Bauer Joint Venture
and Leighton Kumagai Joint Venture [2005] WASAT 269, strict limitations have been imposed
on allowing new submissions before the WASAT and it was held at [70-71]:
In my view, no new material should be permitted because, if the decision under review
is reversed, and the matter referred back to the adjudicator, I consider that the
adjudicator must remain bound to decide the matter on the material which was
24 [2009] WASC 19 [122]. 25 [2009] WASC 19 [131]. 26 [2011] WASC 80 at [44]. 27 Section 46(1) of WA Act provides that a person who is aggrieved by a decision made under section 31(2)(a)
may apply to the State Administrative Tribunal for a review of the decision. 28 [2011] WASCA 217. 29 The State Administrative Tribunal Act 2004, s 27.
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originally before the adjudicator in accordance with s 32 of the CC Act. Accordingly,
to the extent that any of the material provided to me was not before the adjudicator, I
have had no regard to it. Of course, that does not include submissions on the law based
on the material which was before the adjudicator.
Interestingly, The WA Act, section 46 (3) provides that except as provided as grounds for the
limited review, a decision or determination of an adjudicator on an adjudication cannot be
appealed or reviewed. The WA Supreme Court interpreted this section in Red Ink Homes Pty
Ltd v Court30 stating that the provision only limits the appealing before the Tribunal, while
judicial review will still be open for the aggrieved party. Also, section 105 of the WASAT Act
provides for an appeal to the Supreme Court from a decision of the WASAT provided the Court
gives leave to appeal which is limited only on a question of law.
Since the commencement of the WA Act in 2005 until end of June 2015, WASAT has reviewed
37 decisions of adjudicators dismissing applications without considering the merits. In 25
cases, the adjudicators’ decisions were confirmed while 12 cases (amounting to 37%) were set
aside or remitted to the original adjudicator to revisit the original decision to dismiss. Notably,
the review applications before WASAT have been constantly increasing over years. The
existence of review mechanism has helped to drastically reduce the caseload of the Supreme
Court in its supervisory role over adjudication process. Table (2) below demonstrates an extract
from the relevant annual reports on the operation of the review mechanism from 2008 until
2015.
Table (2) The operation of the review mechanism of adjudicator’s decision to dismiss in WA31
Description Annual Review Applications by WASAT
Financial Year 2008-
2009
2009-
2010
2010-
2011
2011-
2012
2012-
2013
2013-
2014
2014-
2015
No. of Lodged
applications 105 172 197 178 208 175 235
No of dismissed
application by
Adjudicators for no
jurisdiction.
25 57 57 40 74 47 52
No. of review
applications by the
WASAT
4 4 3 5 5 7 8
30 [2014] WASC 52 at [72]-[76]. 31 Figures are extracted from the relevant annual reports on construction contracts Act 2004 as released by the
Building Commissioner.
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No. of Remittal/Set
Aside cases by the
WASAT
0 0 0 2 1 3 2
The review mechanism by the WASAT was capable of taking substantial caseload of judicial
review applications out of the Supreme Court. Since the commencement of the legislation until
June 2015, the WA Supreme Court had only reviewed 32 cases in connection with adjudication
decisions while WASAT had reviewed 37 cases.32 In other words, the 37 cases before WASAT
could have been an extra burden doubling the caseload of the Supreme Court, in the case that
the legislative review mechanism had not been existing. Since the commencement of
legislation until the end of 2015, four Supreme Court cases out of the 37 cases were identified
where WASAT’s decisions were challenged.33 In the four cases, the WA Supreme Court
affirmed the WASAT’s decisions and dismissed the cases. This is somewhat a good indication
of an ongoing satisfactory quality of the WASAT’s decisions and/or reluctance of the Supreme
Court to interfere with the WASAT’s decisions.
As such, there is no reason to believe that an intermediate platform between adjudication and
judicial review should not sound as a worthwhile option, save for the main two barriers of extra
time and cost. Those barriers can be managed by deliberately devising an effective review
scheme as proposed next. The alternative review remedy would have the potential to help
diminish the scope of judicial review drastically by capturing and correcting unlawful
adjudications internally. In BM Alliance Coal Operations Pty Ltd v BGC Contracting Pty Ltd
(No 2), Applegarth J referred to various authorities and noted the impact of existing alternative
remedies in the use of discretionary power to grant certiorari:
Prerogative remedies and similar statutory remedies for jurisdictional error are
discretionary, and the discretion is to be exercised judicially. In a clear case of want
or excess of jurisdiction a prerogative writ will issue “almost as of right, although the
court retains its discretion to refuse relief if in all the circumstances that seems the
proper course...One discretionary ground to decline to order certiorari is where there
are “alternative and adequate remedies for the wrong of which complaint is made”.34
32 See Building commissioner, Annual Report 2014-2015, construction Contract Act 2004 (WA). 33 The identified cases are: Field Deployment Solutions Pty Ltd v SC Projects Australia Pty Ltd [2015] WASC
60; Hire Access Pty Ltd v Michael Ebbott t/a South Coast Scaffolding and Rigging [2012] WASC 108;
Perrinepod Pty Ltd v Georgiou Group Building Pty Ltd [2011] WASCA 217; Thiess Pty Ltd v MCC Mining
(Western Australia) Pty Ltd [2011] WASC 80, as extracted from searching in the database of Australasian Legal
Information Institute (Austlii). 34 [2013] QSC 67 at [8].
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Applegarth J went on reviewing other recent authorities and said that:
Where relief is sought in the form of an order quashing or setting aside an adjudication
decision, or an order is sought declaring the decision to be void, an aggrieved applicant
who has established a jurisdictional error ordinarily will be entitled to such a remedy,
but the remedy may be withheld as a matter of discretion if the circumstances make it
just to do so. One example is if a more convenient and satisfactory remedy exists.35
In Field Deployment Solutions Pty v Jones,36 the Court considered a juridical review
application against two adjudicator’s decisions to dismiss (bypassing the available review
mechanism by the WASAT) and held that: “The fact that an alternative remedy was available
but not engaged is ordinarily a powerful factor against the grant of a discretionary remedy by
way of judicial review”. Furthermore, as to the use of the discretion to deny certiorari where
there lies another review option, the WA Supreme Court in Re Graham Anstee-Brook; Ex Parte
Mount Gibson Mining Ltd37 referred to various authorities and held that:
[a]vailability of prerogative relief will be undermined by circumstances where parties
could avail themselves of alternative remedies by way of rehearing, appeal or review.
Circumstances where parties have been granted and hold alternative review options bear
upon the availability of prerogative relief as a matter of discretion.38
3.1.1.2 The proposed review mechanism for challenging ‘no jurisdiction’
As such, it is proposed to introduce an alternative review mechanism to judicial review by
establishing a ‘Review Tribunal’ funded by the government where parties bear their own cost.
The members of the ‘Review Tribunal’ should be selected from well experienced practitioners
such as retired judges, arbitrators or legally qualified senior adjudicators. The Tribunal should
enjoy similar powers and functions to that of the WASAT, particularly, in its capacity to
determine questions of law and the limited appeal from the tribunal’s decision provided that a
leave to appeal is granted by court. The tribunal scope should be limited to review jurisdictional
issues emerging from adjudication including those errors due to alleged denial of natural
35 [2013] QSC 67 at [9]. 36 [2015] WASC 136 at [18]. 37 [2011] WASC 172 at [64]. 38 See for instance, the High Court's decision in The Queen v Cook; Ex parte Twigg [1980] HCA 36 [29], [30]
and [34]; Re Baker; Ex parte Johnston (1981) 55 ALJR 191 and Martin CJ in Re Carey; Ex parte Exclude
Holdings Pty Ltd [2006] WASCA 219 at [128] - [140].
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justice. The tribunal should be heavily guided with the exhaustive list of essential requirements,
so more certainty and finality could be attained with its decisions.
According to pit stop (1), an adjudicator should assume he or she has jurisdiction and proceeds
with the determination on the merits straightaway. However, the adjudicator may still dismiss
an application if it obviously appears on the face of the adjudication application or response
that he or she does not have jurisdiction and may charge a reasonable fee. A good example is
where there is an arguable case before the adjudicator that the claimant does not hold a requisite
license to be eligible to use the legislation as the case in Queensland.39 In those circumstance,
the claimant should not be allowed to lodge a new adjudication application or further appeal
the adjudicator’s ‘decision to dismiss’ to avoid abuse of process by claimants. This would of
course save the time and efforts of both parties.
If the respondent opts to argue the jurisdiction of adjudicator due to non-existence of certain
jurisdictional facts, the respondent may lodge a ‘Review Application’ within the same time
allowed by the legislation to lodge the adjudication response on the merits with a copy to the
claimant. If such an application is not made, the respondent shall lose its right to invoke tribunal
or judicial review as long as those facts could have been reasonably known to the respondent
at the time when an adjudication application is made. The claimant must be allowed to serve a
reply ‘the Review Reply’ to the ‘the Review Application’ within three business days to afford
it procedural fairness. The ‘Review Decision’ must be released as soon as possible but not later
than 12 business days from receipt of the ‘Review Reply’. This review period is justified as it
theoretically considers when the respondent would have to pay the adjudicated amount
following the determination of the adjudicator.
3.1.1.3 The proposed review mechanism for challenging ‘excess of jurisdiction’
On the other hand, and upon the release of adjudicator’s determination, there could be further
allegations by either party about jurisdictional errors or breach of natural justice by the
adjudicator during the decision making process. Therefore, if either party opts to challenge
adjudicator’s determination, the applicant should invoke the review process by lodging a
‘Review Application’ no later than five business days from the release of adjudication
determination with a copy to the other party ‘the Responding Party’. The ‘Responding Party’
should be allowed to lodge a ‘Review Reply’ within two business days from receipt of a copy
39 See Cant Contracting Pty Ltd v Casella [2006] QCA 538.
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of the ‘Review Application’. The ‘Review Tribunal’ is not to decide on the application until
after the end of the period within which the ‘Responding Party’ may lodge a ‘Review Reply’.
The Review should be conducted de novo rehearing but no new submission should be permitted
except, of course, for those submissions on the law based on the material provided to the
adjudicator. The ‘Review Tribunal’ must complete the review with seven business days and
can reasonably extend it by making a request to the relevant Governmental Official to extend
the time up to additional five business days depending on the complexity of the matter. During
that time, the adjudicator’s determination will be suspended and will not take any legal effect
until the decision is issued. The ‘Review Tribunal’ should have the jurisdiction to substitute,
set aside, severe or remit the determination to the original adjudicator for correction within a
specific timeframe depending on the case but not exceeding seven business days from remittal.
The remittal should only be construed if the identified error will require complex or lengthy re-
consideration of relevant matters. If remitted, the adjudicator should only charge a discounted
fee rate (say $100 per hour) to release the amended determination as a reasonable compensation
to the parties affected by the consequences of the first erroneous determination.
To avoid the abuse of process where there is a determination on the merits, some conditions
may be imposed on respondents such as fixing a minimum monetary threshold and paying the
unpaid adjudicated amount into a trust account.
3.1.1.4 Benefits and Barriers of introducing review mechanism
In the case of ‘no jurisdiction’ review, where the ‘Review tribunal’ dismisses a review
application, the respondent would be faced with a further strong reason to release the due
payment rather than seeking other options to further challenge the determination. In this case,
there will be no cost (other than the party’s own cost) or time implications on the adjudication
process which would be consistent with the object of the Act. It is submitted that even in the
case the determination is set aside by the tribunal and as such the determination is deemed as
it never exists, both parties have, at least, gained an important benefit of recognising the likely
outcome of the underlying dispute if they seek negotiation or other curial proceedings to finally
settle their dispute later on.
In the case of ‘excess of jurisdiction’ review, where the ‘Review Tribunal’ dismisses a review
application, some delay of around one month may be resulting from respondents invoking the
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review process until a successful claimant actually gets paid. Having said that, the review
mechanism will still stand as a much faster and inexpensive option than judicial review route
especially in large cases, where either party, particularly the claimant, may not afford going to
court to defend a favourable adjudicator’s determination.
Moreover, both parties will enjoy an increasing level of certainty with the ‘Tribunal’s Decision’
even if an aggrieved party seeks further challenges in court where the opportunity of success
may be very limited. This is because, not only the room of jurisdictional errors would be
drastically narrowed down, but also the Supreme Court in excising its discretionary power
would be more reluctant to grant relief with the availability of an appropriate alterative remedy
as demonstrated above.
It is worthwhile mentioning that such pit stop may stand alone as an effective and alternative
remedy to be adopted in all legislation. The first two pit stops are deemed additional crucial
success factors that would further strengthen the proposal in a novel attempt to diminish
judicial review to counter the effect of Kirk’s authority40 on the operation of Security f payment
legislation as originally intended.
3.2 PROPOSED ROADMAP (2):
Adjudicators are commonly faced with complex legal arguments related to jurisdiction which
stand as a difficult task, especially for non-legally trained adjudicators. Unhealthy practices
have been observed by adjudicators and respondents as a result of lack of legislative directions
on dealing with jurisdictional issues. My research found that the inevitable drift of legislation
intent as well as the inconsistent case law are the main sources of emerging complexities
As such, the roadmap identifies five the following key areas (or pit stops):
1- Appointing adjudicators after receipt of adjudication response.
2- Deterring respondents from keeping silent on known jurisdictional issues.
3- Providing Guidelines for adjudicators on jurisdiction.
4- Empowering adjudicators if jurisdictional issues are raised in adjudication.
5- Adjudicator’s Entitlement of Fees upon Dismissal.
40 Kirk v Industrial Relations Commission of New South Wales [2010] HCA 1 at [100]. The court held it is not
permissible for a State legislature to enact a privative clause which prevents the exercise by the Supreme Court
of its supervisory jurisdiction with respect to jurisdictional error.
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The discussion below includes a brief justification of each issue, and an exploration of the
various options available to address the issues.
3.2.1 Appointing competent adjudicators after receipt of adjudication
response.
As set out by current legislation, the adjudicator accepts the appointment before the
adjudication response is lodged. As such, neither the ANA nor the adjudicator would have
certainty whether jurisdictional issues will be raised in the adjudication response. To avoid this
dilemma, a legislative amendment is necessary so the ANA upon the receipt of adjudication
response refers the matter to a competent adjudicator who must have legal qualifications as a
minimum requirements if jurisdictional issues are raised. The impact would only add a few
days before the effective commencement of adjudication process but would ensure that the
right horse is picked up for the right course.
3.2.2 Deterring respondents from keeping silent on jurisdictional issues.
Notwithstanding the significance of the above pit stop, it would be redundant if respondents
continue to play the game of keeping silent on known jurisdictional issues until the
determination is issued so they only challenge it in court if dissatisfied with the determination
on the merits. There is no reason not to introduce an express provision within the legislation
deterring such tactics. Hence, if the respondent participates in adjudication process, it is
deemed that it accepts that adjudicator’s has jurisdiction and no appeal for injunction,
declaration or by way of certiorari would be entertained by Supreme Court unless the
jurisdictional objections are raised in payment schedule and or adjudication response. This
arrangement will not only diminish the scope of judicial review but also make the whole
process more transparent and cost and time effective.
3.2.3 Guidelines on jurisdictional issues.
Until the time of writing, there is no guidelines or handbooks whatsoever in Australia that spell
out the can assist adjudicators as well as parties to adjudication to deal with key jurisdictional
matters such as the threshold jurisdiction and maintaining jurisdiction. In contrary, an excellent
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guidance notes on jurisdiction (the Notes) has been made available to UK construction
adjudicators in May 2011.41 The purpose of The Notes was explained in the Introduction:
The Guidance Notes do not debate all of the legal issues in an attempt to find a
philosophical answer to the many problems that could be encountered. Instead,
the Guidance tries to identify a sensible or practical approach to some of the
everyday problems encountered in adjudication. It is an attempt to establish best
practice, so that Guidance Notes will be provided from time to time.
The proposed guidelines should cater for the differences in each State and updated from time
to time to include any legislative reform or further interpretation of the legislation by court. It
is suggested that concerned law institutes such as Society of Construction Law and Resolution
Institute (formerly IAMA) may jointly take the initiative in this regard.
3.2.4 Extension of Adjudicator’s Time Limits
Adjudicators should be entitled to extend the time limits (say up to additional 7 days) by
requesting approval from the registrar or the governing authority to allow for a proper
consideration of whether he or she has jurisdiction before proceeding with the determination
of the merits of the payment dispute. The adjudicator must allow the claimant at least two
business days to reply to adjudication response if new jurisdictional issues are raised to comply
with procedural fairness requirements. Should the adjudicator find a strong evidence of lack of
jurisdiction, he or she must dismiss the case without making deamination on the merits as soon
as possible but not later than seven days after accepting the appointment or receipt of claimant’s
reply on adjudication response whatever is latter. It is also recommended that legislation further
allows both parties to accept that the adjudicator to extend his or her jurisdiction and release a
determination on the merits.
3.2.5 Adjudicator’s Entitlement of Fees upon Dismissal
To cater for some adjudicators’ practices assuming jurisdiction for commercial interest,
adjudicators must always be entitled for reasonable fees whether or not an application is
eventually dismissed for lack of jurisdiction. Such entitlement, however, should be made clear
in the legislation. Having said that, the adjudicator must have a duty to avoid unnecessary
41 Society of Adjudicators and Chartered Institute of Arbitrators, Guidance Notes: Jurisdiction of the UK
construction adjudicators, 2nd edition, December 2012 (further revision is underway).
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expenses, so an adjudicator who is satisfied that no jurisdiction materialises on the face of the
submissions must dismiss immediately without analysing the case further. There is an open
question in Australia whether an adjudicator who has acted in good faith and delivered a
decision to dismiss or a determination on the merits within the time limits, is still entitled for
his or her fees even though the adjudicator’s determination is set aside on jurisdictional
grounds. In the UK, the court in PC Harrington Contractors v Systech International [2012]
EWCA Civ 1371, held there was nothing in the contract or in the governing legislation to
provide that the parties are obliged to pay for an unenforceable decision or for the preliminary
functions of the adjudicator. Hence, the unenforceable decision was of no value to the parties.
Till the time of writing, no such authority suggests similar propositions in Australia.
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4. PROBLEM (2) DISSATISFACTION WITH THE QUALITY OF
ADJUDICATORS’ DECISIONS ON THE MERITS IN LARGE CASES:
Statutory construction adjudication is a fast-track payment dispute resolution process designed
to keep the cash flowing down the hierarchical contractual chain on construction projects. Its
rapid, highly regulatory and temporarily binding nature have led to it being often described as
a ‘quick and dirty’ process that delivers ‘rough and ready’ justice. In the context of disputed
payment claims for relatively small amounts of money for construction work carried out, it
may be argued that such a nature is both appropriate as well as justified in order to protect a
vulnerable class of smaller businesses within the construction industry. However, the
eventuating ‘one size fits all’ coverage of the adjudication scheme has, anecdotally, resulted in
a mounting swell of complaints and dissatisfaction with adjudication outcome of large and/or
more complex cases.
Adjudicators of such cases often have to grapple with complex legal issues and large volumes
of submissions from the parties within very limited timeframes (typically two weeks) with
limited investigative powers. Such dissatisfaction is manifest in the large amount of judicial
challenges to adjudicators’ determinations in recent years on grounds related to errors of law
erred by the adjudicator. Despite the fact that some jurisdictions, namely Queensland amended
its legislation in December 2014 to better deal with complex claims, it was unable to put enough
pragmatic and practical solutions to avoid errors in the first place.
According to the Society of Construction Law Australia, the courts have lost confidence in the
adjudication process after seeing “more and more cases where the quality of the adjudication
decision making process has been so poor that the courts have been increasingly willing to
intervene.”42 In 2014, courts in the East Coast model jurisdictions dealt with around 50
applications in relation to adjudication decisions.43 This, it is contended, is representative of
the evolving dissatisfaction of respondents with the adjudication process. As an indication of
unsatisfactory quality, Under the East Coast model, as at the end of 2013 there had been a total
of 197 cases challenging the adjudicator’s determinations in the NSW, Queensland and
42 Society of Construction Law Australia, n 22, p 38. 43 The figures are deemed approximate, although being extracted with care from searching in reliable databases, namely,
Australasian Legal Information Institute (Austlii) and Judgments and Decisions Enhanced (Jade). Deliberate key words were
used such as “name of the legislation” and “adjudication determination/decision.”
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Victorian courts, 48% of which were successful.44 In 2014, six out of 14 determinations
(amounting to 43%) have been quashed by the NSW Supreme Court.
Notwithstanding the object of legislation that adjudication is not a final resort, there is no
reason not to take adjudication to another level and get advantage from it as an effective
alternative dispute resolution platform to deal with payment disputes so it can replace
arbitration and litigation in most of such cases except for extremely complex ones. As such,
the determination on the payment dispute should be of a reasonable quality that both parties
can be satisfied with. This will of course help better cash flow within the contractual hierarchy
where the payment disputes are effectively resolved as they arise as quickly as possible.
4.1 EFFECTIVE BINDING DISPUTE RESOLUTION
Parties to any construction dispute seek to have their dispute fully sorted out in a quick,
inexpensive and informal manner. Not only does a builder seek to recover disputed progress
payments from his employer but he is also desperate to have all current disputes resolved to
ensure certainty in business. Gerber and Ong (2013) determined three key essential
requirements for an effective binding dispute resolution, namely, procedural fairness,
accessibility and finality. Yung et al. (2015) set four measures of the effectiveness stemmed
from the object of the WA Act: fairness, speed, cost effectiveness and informality. These
measures are discussed briefly below.
4.1.1 Procedural Fairness
Procedural fairness may include the impartiality and independence of the decision maker as
well as affording both parties the right to present their defensive arguments and be fairly heard.
The parties should feel that their arguments have been considered and should receive a
reasonable reasoned conclusion to understand the grounds on why they have won or lost. The
selection and appointment of a qualified decision maker and the assurance that he is properly
equipped with the necessary powers to perform his functions are key integrated features for the
parties to believe that prospective justice will be achieved. Nevertheless, the more procedural
fairness is considered in dispute resolution, the more expensive and lengthy it becomes (Gerber
44 Society of Construction Law Australia, Australian Legislative Reform Subcommittee, “Report on Security of Payment and
Adjudication in the Australian Construction Industry”, Feb 2014, (hereafter “the SoCLA Report”) p 37.
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and Ong 2013). The challenge for any decision maker is how to strike the balance of allowing
fair hearing while upholding economic and speedy dispute resolution processes.
4.1.2 Accessibility (Speed and Cost Effectiveness)
According to Gerber and Ong (2013), the speed and affordability of a dispute resolution process
are the main characteristics of any accessible justice system. The inherent cost in the lengthy
process, including legal fees and case administration, is a major barrier that may force desperate
disputants to seek alternative ways to get their dispute settled. Some parties cannot afford
lengthy proceedings of dispute resolution as it may lead to injustice where a crucial evidence,
that a party relies on, may be no longer available.
4.1.3 Finality
Finality embraces not only the extent in which a disputant can appeal a binding decision but
also the limitations on his rights to commence a second proceeding on the same dispute after
obtaining the decision on the first dispute (Gerber and Ong 2013). Arbitration provides a
greater certainty on the finality of the outcome due to the very limited grounds of appeal.
Although Statutory Adjudication is an interim process that does not prevent any party to
commence other legal proceedings, it offers a “temporary final” and binding determination
with very limited grounds of appeal. However, the strict limitations to challenge some
decisions, that contain an error of law or technical errors, may leave the aggrieved party without
a quick remedy against unjust decision.
4.1.4 Informality
Yung et al. (2015) mentioned three factors that compromise informality: standardized structure
of proceedings, abidance by rules of evidence and engagement of expert witness and lawyers.
They also found that informality does not generally have an impact on accuracy of
determination under the West Coast model. Since they help understand the tenets behind the
evolvement of statutory adjudication, the above measures stand as good criteria to evaluate and
improve existing SOP legislation as follows in the next sections.
4.2 PROPOSED ROADMAP 1
Rather than retracing the need for an improved adjudication scheme, this roadmap suggests
that the improvement made to Qld model recently by virtue of the amendment Act 2014 worth
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serious consideration by the WA legislatures with some necessary amendments as detailed in
the roadmap. It does not make sense to reinvent the wheel and leave the efforts of other
legislatures and scholars behind. As a start point of the roadmap, The Qld model is deemed the
most available appropriate guide to other jurisdictions to deal with complex payment disputes
for many reasons including the improvement of appointment process of adjudicators and the
new mechanism to deal with complex claims. The statistics show a drastic decrease in judicial
review applications in the year following the reform. As reported, there have been seven
judicial review court applications between December 2014 and November 2015, (comparing
to 15 applications in the preceding year). However, there is still a great opportunity to build
upon the current features of Qld model and enhance certain areas relating to complex claims
by considering the remaining pit stops down the road as follows next. The roadmap pits stops
are:
1- Complex adjudications and timeframes.
2- Training and Regulation of adjudicators.
3- Powers of adjudicators.
4.2.1 Complex adjudications and timeframes
Complex claims should have a different process within the legislation as the current one size
fits all approach is inappropriate. Table (3) below shows the distribution of large claims in
major Australian States. As part of the proposed measures in this study, the cap of complex
claims should be reduced to $500,000 instead of $750,000 which will capture a bit more
applications of likely complex nature and tie it with the claims categorizing of annual reports
for accessible data monitoring. This monetary value is distilled from the NSW Home Building
Act, which limits the jurisdiction of Tribunal to review building disputes up to $500,000,45
otherwise, the claim should be dealt with by a district court or a supreme court. This limitation
of jurisdiction reflects the nature of complexity and substantial economic substance of claims
exceeding this amount. Also, a sliding scale of time limits should be developed for claims
larger than $500,000, so the larger the claim, the longer the timeframe of adjudication decision
to avoid the pitfall of "one size fits all" approach. A nice proposal of such sliding scale has
been already developed by ALRS (2014: 65) and deemed a good start point of research to
establish reliable and deliberate time limits.
45 See s 48K of Home Building Act 1989 - NSW
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Table 3: Distribution of large adjudicated claims in Australia 46
Claim amount NSW QLD WA
Years 2012 2013 2014 2012 2013 2014 2012 2013 2014
< 100,000 73% 78% 74% 78% 71% 73% 49% 44% 29%
100-499,000 20% 16% 22% 11% 16% 14% 32% 25% 35%
≥ 500,000 7% 6% 4% 11% 13% 13% 19% 31% 36%
Furthermore, complex claims should include smaller claims with a defined cap between
$100,000 and $500,000 but this consideration should be only decided by the Registrar
following the complexity criteria explained below. The minimum proposed threshold of
$100,000 ensures that more than 75% of applications will be adjudicated under the original
scheme. Also, Department of Services Technology and Administration (2010) considers simple
claims lower than $100,000. This threshold replicates the same limits in Victoria for having
adjudication determination reviewed.47 According to his second reading speech, his Honour
Madden (2006) confirmed that such limit is given in order not “to disadvantage small
subcontractors who rely on prompt payment to stay in business”. This proposal will ensure that
considerable percentage of subcontractors’ claims of complex nature against head contractors
will be likely dealt with, in similar fairer proceedings to the corresponding claims served by
head contractors against their own principals. The complexity criteria for claims ranging from
$ 100,000 to $500,000 should include the volume and nature of documents, inclusion of expert
reports, the nature of disputed matters such as damages, breach of contract, prolongation
claims, legal matters, latent conditions, changes in regulations etc. Ultimately, the above
proposed thresholds and criteria of complex claims will be subject to further consultation with
the industry stakeholders.
46 Note: In the annual reports, WA adopts calendar year while NSW and Qld adopts financial year. Also, for
2013, the table considered the first two quarters to work out the NSW percentage which might change upon the
release of the annual report. 47 See s 28A (a) of Vic Act.
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4.2.2 Training and Regulation of Adjudicators
The Qld Policy for selecting and grading adjudicators48 is an excellent tool but needs further
pragmatic improvement to increase the quality standards of adjudicators dealing with complex
claims. For instance, the appointer, once receives both adjudication application and relevant
response, should decide the time limits of adjudication decision based on the size and/or
complexity of claim in accordance with the above criteria as soon as possible. Then, the
appointer can refer the case to a prospective adjudicator with a copy to both parties stating
whether the claim is simple or complex and fix the relevant time limits in the referral notice.
The appointer should take all possible measure to ensure that the nominated adjudicator is
competent enough to reach just outcome within the stated time limits. The prospective
adjudicator must adhere to a specific code of conduct developed by the Registrar replicating
its counterpart of Singapore Mediation Centre (SMC) such as raising any actual or apprehended
conflict of interest before accepting nomination and undertaking to adhere to the time limits49.
To have some flexibility, the adjudicator may formally request additional specific time from
the party referring the claim to the appointer in order to accept nomination. The adjudicator
must notify the appointer and both parties of his acceptance or decline within four days of
receiving the referral notice.
On the other hand, adjudication training should include a compulsory legal training for
adjudicators who do not possess appropriate legal qualifications, while lawyers with no proven
construction experience should have another compulsory training in construction technology,
programming and quantity surveying. Yung et al. (2015) addressed the necessity of legal
training due to the fact that many submissions for complex claims are prepared by lawyers. To
be eligible to adjudicate complex claims, minimum years of experience should be expressly
stated but not less than 10 years in dispute resolution and local construction experience. Also,
a system for compulsory Continuous Professional Development (CPD) for active adjudicators
should be established as recommended by the Wallace (2014:236). It is argued that imposing
CPD will ensure that adjudicators are well informed and up to date with the relevant
development in case law.
48 Ibid no. 7 49 See (clauses 1,2 & 10), Adjudicator Code of Conduct, Adjudication under the Building and Construction
industry Security of Payment Act (Cap 30B) (Rev Ed 2006), Singapore Mediation Centre
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Unsatisfactory adjudicator’s performance should be closely monitored and formally recorded.
A complaints system similar to that of SMC50 should be established and serious investigation
should be carried out by the appointer or Building commissioner which may result in imposing
a disciplinary action on non-performing adjudicators including formal warning or suspension
of registration. Any voided adjudicator’s decision under any Australian Act should be seriously
scrutinized. Where the reasons for voiding the decision include lack of good faith or substantial
errors, the registration of the concerned adjudicator should be temporarily suspended till he
undertakes an ad-hoc compulsory training with examination. Should the same adjudicator got
another decision voided within five years of the first voided decision, the Building
commissioner may cease renewal of registration or cancel it.51 The Qld model uniquely states
that the adjudicator would NOT be entitled to recover his adjudication fees if his decision was
overturned by a competent court on grounds of lack of good faith52. However, it will be
advantageous to include quashed decisions for other substantial errors to limit the influence of
legislator’s support and give adjudicators more incentives to turn their minds intellectually into
the cases before them. However, it may be too irrational to waive the whole fees, so
proportionate fee deduction may be decided by the Building commissioner in favour of the
aggrieved party.
4.2.3 Adjudicator's Powers
Complex claims commonly involve various sophisticated technical or legal issues, whereas
most of eligible adjudicators can’t practically possess such collective expertise to turn their
minds reasonably into all presented arguments. Therefore, in any complex claim, the
adjudicator should be equipped with inquisitorial powers similar to adjudicator's powers under
the UK model such as taking the initiative to ascertain facts and law, engaging experts and
receiving and considering oral evidence in conferences.53 To clarify and refine the proposed
powers further, the adjudicator should be expressly allowed to use his own knowledge and
experience but should request further submissions from the parties on such opinion or any other
issue to ensure fairness. However, he should be empowered to give deadlines and limit the
length of submissions. He should allow legal representation in conferences but should be
50 See (clause 9) of Adjudicators Code of Conduct, Singapore Mediation Centre 51 This approach adapted from 'Code of Conduct for Authorised Nominating Authorities', Building and
Construction Industry Security of Payment Act 2009, South Australia. 52 S 35(6) Qld Act. 53 See (s13, part 1), Scheme for Construction Contracts Regulations, UK.
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limited as the adjudicator finds appropriate for efficient conduct of proceedings and avoiding
unnecessary expenses54. To avoid the shortcoming of dealing with expert reports as mentioned
by Skaik et al (2015) or where the differences between experts are enormous, the adjudicator
should call for a conference with experts and conduct hot tubing, in which both experts are
examined concurrently and allowed to cross examine each other. Atkinson and Wright (2014)
argued there is no reason why such arrangement is not implemented in adjudication where the
adjudicator can receive live expert evidence. If the adjudicator found it necessary to request
further submissions, engage experts, arrange testing or conduct conference, he may request an
additional time (up to 5 business days) from the referring disputant only to avoid potential
tactics of some respondents who may not have the same claimant’s incentive to reach reliable
and robust outcome. Sheridan and Gold (2014) noted that when that party does not approve
such additional time, the adjudicator should resign if it is unfeasible for him to reach sound
outcome and he should warn the applicant about this possibility when requesting the additional
time. These provisions will not only improve the procedural fairness but also help adjudicators
understand complex legal or technical matters, so the soundness and reliability of the
adjudication outcome will be definitely improved.
4.3 Proposed Roadmap 2: Review of adjudication decisions (One-stop shop)
The eventuating ‘one size fits all’ coverage of the adjudication scheme has resulted in a mounting swell
of complaints and dissatisfaction with adjudication outcome of large and/or more complex cases.
Adjudicators of such cases often have to grapple with complex legal issues and large volumes of
submissions from the parties within very limited timeframes (typically two weeks) with limited
investigative powers. Such dissatisfaction is manifest in the large amount of judicial challenges to
adjudicators’ determinations in recent years.
Many approaches have been implemented or at least proposed, to diminish judicial review to protect
the object of the legislation such as, remitting the erroneous determination to the adjudicator for
reconsideration rather than setting his or her decision aside; enforcing partial validity of determinations
and considering jurisdictional facts in the broad sense. Whilst these approaches are deemed pragmatic
measures to diminish the judicial review impact upon the operation of the legislation, they eventually
fail to address the very problem that undermines the confidence of the industry in the legislation
concerning the avoidance of errors in the first place. In contrary, these measures are adding another
54 See s 67, Construction Contracts Act 2002, New Zealand
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compromising layer on the quality of adjudication, and surrendering to an assumption that errors
encountered in the process are unavoidable.
On the other hand, parties to any construction dispute seek to have their dispute fully sorted out in a
quick, inexpensive and informal manner. Not only does a builder seek to recover disputed progress
payments from his employer but he is also desperate to have all current disputes resolved to ensure
certainty in business. There is no valid reason to restrict the attempts to improve adjudication scheme
so it can be deemed as an effective alternative dispute resolution in most of the payment disputes cases.
This can only be achieved by increasing the confidence of the industry in adjudication outcome. There
are three key essential requirements for an effective binding dispute resolution, namely, procedural
fairness, accessibility and finality.55 Accordingly, notwithstanding its quick and interim nature, an
internal review mechanism as an alternative convenient remedy to curial proceedings should be made
available to cater for those three requirements.
Various review mechanisms have been introduced within the SOP legislation in Victoria, Western
Australia, Northern Territory, Australian Capital Territory, New Zealand, Singapore and Singapore to
serve specific purposes. Among those, the Tasnamian and Singaporean review mechanism are the only
two legislation that allow for a full review of the merits of erroneous adjudication determinations as
detailed next.
4.3.1 Tasmanian Review Mechanism
In October 2015, a package of relevant legislation was introduced into Parliament as a result
of the Building Regulatory Framework Review initiated in July 201456 including:
a. Residential Building Work Contracts and Dispute Resolution Bill 2015.
b. Building and Construction Industry Security of Payment Amendment Bill 2015.
Till the time of writing, Both Bills were not yet assented pending the second reading
and further proceedings. Therefore, it is unclear what modifications could be made to
the two Bills before enactment in 2016.57
The Residential Building Work Contracts and Dispute Resolution Bill 2015 includes inter alia,
a free, optional, mediation process for settling residential building disputes and a more formal
55 Gerber, P & Ong, B 2013, 'Best Practice in Construction Disputes: Avoidance, Management and Resolution'. 56 See Review of the Tasmanian Building Regulatory Framework, Issues Paper, VERSION 1.0, July 2014. 57 For details of the Bill, refer to http://www.parliament.tas.gov.au/bills/55_of_2015.htm.
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adjudication process by expert panel for residential building disputes that cannot be resolved
by other means.58
The Building and Construction Industry Security of Payment Amendment Bill 2015 (the Bill)
introduced a review mechanism for decisions made by the adjudicator at no cost to either party.
If assented, the Tas Act will substantially drift away from the current approach adopted by all
other Australian jurisdictions that do not have any avenue to review adjudication decisions in
terms of the merits of payment dispute.59
The Bill repealed section 38 of the Tas Act and substituted it with a new section. The new
section provides that an adjudicator is to provide a copy of his or her adjudication decision to
the ANA. The ANA must forward a copy of the decision to the Security of Payments Official
(the Official) within 3 working days instead of annual reporting as the case in the current Act.
The ANA is also required to include information of any fees required by the adjudicator or
ANA in relation to that adjudication decision.
Most importantly, the Bill introduced a merit review scheme of adjudication determinations by
the means of giving the Official the discretion to appoint an independent expert panel (the
Panel) to review a decision of an adjudicator.60 As explained in the relevant second reading
speech. The Official may refer an adjudication decision to the Panel if he or she believes the
decision is “inappropriate or unfair”.61 The ANA is required to provide a copy of adjudication
decisions immediately instead of annually to facilitate timely outcome of the review process.
The Official will not be involved in the review of the decision and the expert panel will be
drawn from practitioners within the building and construction industry, following consultation
with major industry representative bodies. The Minister explained the purpose of this provision
in his second reading speech:62
I believe this will provide an additional safeguard for the industry which is at no
additional cost to the owner or building contractor. Where a decision is prima facie out
58 See http://www.justice.tas.gov.au/building/regulation/building_regulatory_framework_review 59 Having said that, WA and NT do have a legislative review scheme to review the decision of adjudicator to
dismiss a case on grounds related mainly to lack of jurisdiction and complexity of the case. In Victoria, the
review scheme is limited to ‘excluded amounts’. Refer to relevant sections within the book for more details. 60 Building and Construction Industry Security of Payment Amendment Bill 2015 (Tas), Section 38A. 61 Hon. Peter Gutwein MP (2015) Draft Second Reading Speech, Building and Construction Industry Security of
Payment Amendment Bill 2015 (Tas). 62 Hon. Peter Gutwein MP (2015) Draft Second Reading Speech, Building and Construction Industry Security of
Payment Amendment Bill 2015 (Tas).
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of step with the intent of the legislation then this expert panel review will provide an
alternative which does not involve costly litigation. This new review will not be
commonly used, but will be available for those rare occasions where something goes
wrong.
If the Official makes a referral, he or she must inform the parties to the dispute, and the ANA
and the adjudication decision is suspended until the Panel has completed its review. The Panel
must complete the review with seven working days after the referral. If the Panel fails to make
a decision within the given timeframe, that adjudication decision ceases to be suspended and
the decision of the adjudicator appointed by the ANA takes effect.
The Panel may, in turn, confirm an adjudicator’s decision or quash it. Any substituted decision
will have the same status as the decision by the adjudicator. The Panel may also substitute an
alternative adjudication decision. The Bill also provided that the Panel is protected from
liability similar to the current case of adjudicators.
4.3.2 Commentary on Tasmanian Review Mechanism
Despite looking, on its face, a promising step towards improving the quality of adjudication
outcome as well as finality away from courts,63 the proposed review scheme lacks clarity and
transparency in various aspects. For instance, the Bill does not explain a mechanism of
initiating the review process and whether it is something that is done by the own initiative of
the Official or it is ignited by a complaint of either party. The Bill does not address the criteria
to be followed by the Official to identify what could be an “inappropriate or unfair” decision
that would be susceptible to the Panel review and whether the scope of review will cover any
determination regardless of the size or the nature of dispute. The Bill is also silent upon the
referral period if it is to be made, adding a layer of uncertainty regarding the finality of the
adjudication decision since the parties would have uncertainty upon the receipt of adjudication
decision for a while before realizing whether the review will take place or not. Moreover, no
63 For details on the need and features of an appropriate review scheme, refer to the author’s papers: Skaik, S,
Coggins, J and Mills, A (2015) A proposed roadmap to optimise the adjudication of complex payment disputes
in Australia In: Raidén, A B and Aboagye-Nimo, E (Eds) Procs 31st Annual ARCOM Conference, 7-9
September 2015, Lincoln, UK, Association of Researchers in Construction Management, 93-102; Skaik, S,
Coggins, J and Mills, A (2015) Investigating the factors influencing the quality of adjudication of complex
payment disputes in Australia In: Raidén, A B and Aboagye-Nimo, E (Eds) Procs 31st Annual ARCOM
Conference, 7-9 September 2015, Lincoln, UK, Association of Researchers in Construction Management, 83-
92.
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details are given upon the selection criteria and powers of the Panel and whether the experts
will be paid by the government or the review will be done on a voluntary basis.
If assented as proposed, it is submitted that further regulations must be released to clarify such
ambiguities and reinstate the confidence of the building and construction industry which is
desperate to have a better quality and certainty of the adjudication outcome. In addition, it can
be argued that a more focused review upon the effectiveness of the Tas Act is needed, at least
to identify the appropriate features of the review mechanism in Tasmania and to consider
whether the recent changes adopted in Queensland and NSW would benefit and suit the local
needs within the Tasmanian building and construction industry.
4.3.3 Singaporean Adjudication Review
4.3.3.1 Overview of the Singaporean model
The Singapore Building and Construction Industry Security of Payment Act 2004 (the SG Act),
which came into operation in April 2005, sought to establish a fast and law cost adjudication
system to resolve payment disputes.64 Mr Keong, the former Chief Justice in Singapore, noted
that the Singapore regime was successful in acting as a filter to mainly adjudicate
straightforward disputes whereas complex disputes can be better resolved in arbitration or
court. Though, Keong further suggested that it is sensible and interest of both parties to give
adjudicators more time to deal with large or complex claims without having to seek the consent
of the parties. According to statistics from the enactment till December 2013, there was 999
adjudication applications, in which 202 were invalid and 240 were withdrawn.65 The total
disputed amounts were SG$909,999,862 the maximum disputed amount for a case was
SG$116,251,934 and the minimum disputed amount was SG$4,900. Moreover, there was 30
adjudication review applications, in which nine were invalid and four were withdrawn, while
adjudication review fees, in each case, ranges from minimum $3,563 to maximum $32,313.66
64 Keong, C. S. "Foreword", Security of Payments and Construction Adjudication, Fong, C, second
edition, 2012, LexisNexis. 65 See Singapore Adjudication Statistics, 2013, available online:
http://www.bca.gov.sg/SecurityPayment/adjudication_statistics.html 66 See Singapore Adjudication Statistics, available online:
http://www.bca.gov.sg/SecurityPayment/adjudication_review_statistics.html
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The object of the SG Act is no different than that of its counterparts in Australia to improve
cash flow by expediting payment in the building and construction industry. 67 The SG Act
substantially followed the NSW model with some key differences. For example, The SG Act
requires a “dispute settlement period” of 7 days after the date on which or the period within
which the payment response is required to be provided precedent to the commencement of
adjudication process to allow parties exchange relevant clarification and to provide respondents
another opportunity to serve payment response or to revise the submitted one (s 12 (4&5)). The
SG Act has an express section requires the adjudicator to act independently and impartially,
avoid unnecessary expenses and comply with the principles of natural justice (s 16(3)).
Adjudicators enjoys relatively more powers than those adjudicators practicing under the East
Coast model such as conducting adjudication in such manner as he thinks fit, allowing legal
representation in conferences and appointing experts by notifying the parties (s 16(4)).
Most importantly, the SG Act introduced adjudication review allowing an aggrieved
respondent to have the adjudicator’s determination reviewed by another adjudicator or a panel
of adjudicators on its merits. Michael Christie, a well reputed Senior Council in NSW, noted
that such review mechanism is worth serious consideration by Australian legislatures
envisaging reform of their existing schemes.68 For the purpose of this paper, it is quite
incumbent to demonstrate the detailed features of the Singaporean review scheme then ask the
question whether a similar scheme with certain improvements might be required in Australia.
4.3.3.2 Drivers of Introducing Review mechanism
In the second reading speech, the Minister Keng justified the introduction of this unique feature
stating: “The majority of the disputes that arise would concern monetary or financial matters
related to works done or goods and services supplied, which would be technical in nature and
best settled by the adjudicators, with the relevant professional competence”69 His Honour went
on to say:
67 See explanatory Statement of the Building and Construction industry Security of Payment Bill
2004. 68 Christie, M.,The Singapore Security of Payment Act: Some lessons to be learned from Australia. 26
BCL 228, 2010. 69 See Singapore Parliamentary Debates, Official Report (16 November 2004) vol 78 at col 1125
(Cedric Foo Chee Keng, the second reading speech. (Hereafter “Keng”).
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“The industry practitioners have told us that sometimes amounts can be very large, and a single
arbitrator sitting in determination of the case may not do sufficient justice.”70
It was also argued that the time limits of adjudication determination prevents adjudicators to
conduct a proper analysis of the facts and law related to the dispute.71 In SEF Construction Pte
Ltd v Skoy Connected Pte Ltd,72 Justice Prakash commented:
This must have been why the legislature decided in our case to introduce the
adjudication review procedure. The adjudication review procedure provides the parties
with an opportunity to re-argue their respective cases with regard both to the facts and
the law. The review adjudicator is able to go into the substantive merits of the original
adjudicator’s decision. The adjudication review procedure is therefore a species of
appeal albeit limited to cases in which a particular monetary qualification is reached.
4.3.3.3 The Review procedures
Adjudication review was described as ‘a way of remedying injustice to any of the parties
inflicted by the rather hasty process of adjudication’73. It was also noted that the review is not
an appeal against the first instance adjudication determination nor should it be considered as a
completely de novo adjudication of the original dispute as it is limited to the issues related to
the difference between adjudicated amount and adjudication response.74 The respondent must
pay the adjudicated amount to the claimant in the first place to be entitled to apply for review
(s 18(3)). This is to ‘fulfil the legislation mission and purpose of facilitating smooth and prompt
cash flow.’75 The review is only accessible to respondents provided they have served a payment
response and have paid the unpaid adjudicated amount to the claimant. The review application
must include a proof of payment of the adjudicated amount to the claimant and a copy of
adjudication determination (s 10(2)). This condition may not be that significant considering
that the adjudication review is much faster than subsequent court or arbitration avenues, which
will limit the respondent’s risk exposure to insolvency or inability to recover the paid payments
70 Keng, fn 9 above, at col 1133. 71 Fong, C. K., Security of Payments and construction Adjudication, second edition, 2013, LexisNexis,
p 804, (Hereafter: “Fong”). 72 [2009] SGHC 257 at [38]. 73 SEF Construction Pte Ltd v Skoy Connected Pte Ltd [2009] SGHC 257 at [24] (Prakash J). 74 Fong, fn 12 above, pp 803, 828. 75 Keng, fn 9 above, at col 1133.
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from the claimant upon receipt of a favourable review decision.76 Having said that, some
respondents may prefer to resist the enforcement of adjudication determination in court on
grounds related to jurisdictional errors or breach of natural justice.77 In this case, respondents
seeking judicial review will avoid paying the claimant as they will be only required to pay the
adjudicated amount into court.
The respondent must apply for the review to the same authorized nominating body with which
the original application was served. Until the time of writing, Singapore Mediation Centre (the
SMC) is the only authorized nominating body in Singapore. The review application must be
lodged within seven days of obtaining the adjudication determination (s 18(2)) provided that
the adjudicated amount exceeds the relevant response by $100,000 or more. Such limit helps
prevent respondents’ tactics to use the freely available review to frustrate the object of the
legislation adding a tier of additional expense.78 In this regard, Justice Prakash noted:
The drafters of the SOP Act must have considered that it would not be convenient or
economical to provide a review process for a dispute that did not have sufficient
substance in economic terms. In those cases, the respondent’s arguments on principle
or facts would have to be taken up subsequently in court or in arbitration proceedings.79
The SMC has only seven days (s 18(6)) to appoint one adjudicator or a panel of three
adjudicators if the difference exceeds $1 Million.80 The review adjudicator(s) shall only have
regard to the matters referred to in section 17 (3) and the Adjudication determination that
is the subject of the adjudication review (s 19 (6a)). This would mean that new reasons and
fresh evidence from parties cannot be entertained in the review proceedings. However, the
review application is allowed to include reformulated arguments based on the facts previously
canvassed but must exclude new facts, reasons or evidence even if they have arisen after the
completion of original adjudication.81 The review decision must be issued to the parties within
14 days (s 19(3)).
76 Fong, fn 12 above, p 804. 77 Fong, fn 12 above, p 810. 78 Fong, fn 12 above, p 805. 79 SEF Construction Pte Ltd v Skoy Connected Pte Ltd [2009] SGHC 257 at [24]. 80 The Building and Construction Industry Security of Payment Regulations 2005, Singapore, S 10(1). 81 Fong, fn 12 above, p 823.
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4.3.3.4 Interface with Litigation
The Singaporean Case Law broadly follows a similar approach to that of Brodyn v Davenport
[2004] NSWCA 394 with regard to upholding adjudication determinations as well as review
determinations unless there has been a manifest jurisdictional error or substantial breach of
natural justice.82 The SG Act gives parties express right to challenge an adjudication
determination or an adjudication review determination in any proceeding before a court or
tribunal or in any other dispute resolution proceeding (s 21 (3)). Where any party to an
adjudication commences proceedings to set aside the adjudication determination, it must
pay into the court as security the unpaid portion of the adjudicated amount that he is required
to pay (s 27 (5)). In the second reading speech,83 the Minister explained the rationale of such
express provisions:
The very cost associated with litigation is a deterrent for anyone to bring about
frivolous or vexatious appeals to the courts. The costs and the time needed are
sufficient to deter people from doing so unless they have a genuine case which they feel
strongly about and which they think they will prevail in a court of law.
His Honour further stated:
The respondent may feel aggrieved and opined that the adjudication determination is
unfair. Therefore, we have stipulated that for amounts where the difference is larger
than $100,000, a right of review by the respondent is covered in the Bill, and this is
really to be fair to all parties. Beyond this review, I think the right of appeal to a court
or to an arbitrator is always available to anyone, and it is not correct for this Bill, while
trying to solve one aspect of the problem faced by the industry, to deny that right of
appeal to a court of law itself. There may be other issues under Tort Law that needs to
be addressed.
The ambit of adjudication review was not clear until the Singaporean Court of Appeal in Lee
Wee Lick Terence v Chua Say Eng84 held that adjudicators do not have the competency to deal
with jurisdictional issues apart from the basic function required by the legislation. It was also
decided that any jurisdictional objection must be raised immediately before court not the
82 See, eg, RN & Associates Pte Ltd v TPX Builders Pte Ltd [2012] SGHC 225 at [74]. 83 Keng, fn 9 above, at col 1137. 84 [2012] SGCA 63 at [64].
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adjudicator. The rationale behind that approach was explained as: “[s]ince the objection is
against the adjudicator’s jurisdiction as an adjudicator, he has no power to decide if he has
jurisdiction or not. He cannot decide his own competency to act as an adjudicator when such
competency is being challenged by the respondent.”85 This would mean that neither
adjudicators nor reviewed adjudicators in Singapore are entitled to consider and review any
relevant objection on the jurisdiction of the adjudicator and any aggrieved party must raise such
objection in court only.
Apparently, adjudication review has helped limit the court’s appetite to set aside adjudication
determination on grounds which are more appropriate to be raised before a review adjudicator
such as fundamental analysis and reasoning of the adjudicator. In RN & Associates Pte Ltd v
TPX Builders Pte Ltd,86 his Justice Andrew Ang held:
The balance of justice has already been decided statutorily. RN could have appealed
on the merits by asking for an adjudication review under s 18 of the SOP Act, but it had
first to pay TPX the Adjudicated Sum pursuant to s 18(3). This would simultaneously
promote prompt payment, which is the intention of the SOP Act, and also provide a
safety net against errant adjudicators who make mistakes of law and fact within their
jurisdiction. RN having chosen not to apply for an adjudication review, it is not for me
to set aside the Adjudication Determination on grounds which properly belong to an
adjudication review. Any mistake as to validity requires an examination of the evidence
and an application of the law and is a substantive issue going to the merits, which the
Adjudicator has the right to decide and which I cannot interfere with.
4.3.4 Commentary on the Singaporean Review Mechanism
Since adjudication review is only accessible by respondents, aggrieved claimants are left with
no alternative but to seek subsequent arbitration or court avenues to have the case reviewed on
merits. Also, aggrieved respondents, where the difference is less than SG$100,000, are left
with no convenient remedy. Also, many respondents may not be able to afford going to court
to challenge adjudicator’s jurisdiction. The option of judicial review seems readily available
for either parties on grounds relating to or procedural justice and jurisdictional errors of law
during the decision making process. This will of course may be abused by many respondents
85 Lee Wee Lick Terence v Chua Say Eng [2012] SGCA 63 at [36]. 86 [2012] SGHC 225 at [61].
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as delaying tactics hoping that the claimant get insolvent by the time the case is judicially
decided. In addition, respondents would only be required to pay the unpaid adjudicated amount
in court rather than paying the claimant as a precondition to access the review mechanism.
There is no express provision giving the claimant the entitlement to serve a reply on the review
application to conform to principles of natural justice. The same applies to the original
adjudicator whose input might be useful to the review adjudicator(s) to reach sound outcome.
Allowing the same nominating body to appoint the second adjudicator is questionable as the
process may be infected by conflict of interest in some cases. Also, there is no regulation
governing the selection of the review adjudicator(s), to ensure he or she hold(s) a considerable
experience and seniority comparing with the original adjudicator. The size of the tribunal is
only decided by the monetary value of the difference rather than complexity of the dispute.
Though, it was noted that the Singapore Mediation Centre appears to have considered such
matter in the appointment made so far.87 Since the identity of the original adjudicator will be
known to review adjudicator, there is a possibility of perceived bias or conflict of interest where
the review adjudicator might be somehow influenced by the reputation or previous relation
with the original adjudicator.
The time limit of the 14 days for adjudication review is fixed whether the difference is
SG$100,000 or SG$10 million which may be too tight in complex and large cases. The SG Act
does not provide a clear approach if new submissions can be requested by review adjudicators
or entertained from parties in response to the specific arguments raised in the adjudication
review application. A review adjudicator has noted the ambiguity of legislation in his review
decision: [I]t appears to me that I am entitled to consider new submissions that may be made
especially since in a review process, the Respondent will need to address specific points in the
adjudication determination as part of its challenge. This must therefore include new
submissions to deal with such points.88
87 Fong, fn 12 above, p 813 88 Cited in Fong, fn 12 above, p 830.
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4.4 IS A REVIEW MECHANISM ON THE MERITS NEEDED IN
AUSTRALIA?
The aggrieve party of adjudicator’s determination has no option but to initiate lengthy and
expensive writ proceedings such as arbitration or adjudication on a hearing de novo basis. The
judicial review is readily available as a remedy in very limited situation where adjudicators
made errors infecting their jurisdiction. The inherent cost of commencing civil final
proceedings or judicial review is the most inhibitive reason for an aggrieved party to seek
justice. As such, many erroneous adjudication determinations rendered as final and binding
decisions. In Uniting Church in Australia Property Trust (Qld) v Davenport [2009] QSC 134,
the adjudicator, after releasing his original decision and upon a request from the claimant,
attempted to correct it using completely different methodology of calculating prolongation
cost. The Court held that the Adjudicator committed a jurisdictional error as this type of error
is not a Slip Error that can be corrected within the jurisdiction of the Adjudicator. As a result
of upholding the first flawed decision, the claimant was underpaid by AU$148,226 and left
without any effective remedy to obtain a revised and enforceable decision. In such cases, the
significance of the availability of an internal review scheme on the merits crystalizes as a decent
option.
With the availability of adjudication review scheme, courts will be reluctant to exercise their
discretionary powers to set aside adjudication decisions unless the applicant sought such
alternative remedy first.89 In Singapore, Prakash J held in SEF Construction Pte Ltd v Skoy
Connected Pte Ltd90 that the availability of a statutory merits review, with other factors,
impliedly restricted judicial review in the High Court. In Field Deployment Solutions Pty v
Jones [2015] WASC 136 at [18], the Court held that: ‘The fact that an alternative remedy was
available but not engaged is ordinarily a powerful factor against the grant of a discretionary
remedy by way of judicial review.’ In Re Graham Anstee-Brook; Ex Parte Mount Gibson
Mining Ltd,91 it was noted that:
89 As to the use of the discretion to deny certiorari where there lies another review option, see for
instance, See for instance, the High Court's decision in The Queen v Cook; Ex parte Twigg [1980]
HCA 36 [29], [30] and [34]; Re Baker; Ex parte Johnston (1981) 55 ALJR 191 and Martin CJ in Re
Carey; Ex parte Exclude Holdings Pty Ltd [2006] WASCA 219 at [128] - [140]. 90 [2009] SGHC 257. 91 [2011] WASC 172 at [64].
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As to discretion, the availability of prerogative relief will be undermined by
circumstances where parties could avail themselves of alternative remedies by way of
rehearing, appeal or review. Circumstances where parties have been granted and hold
alternative review options bear upon the availability of prerogative relief as a matter
of discretion. That is particularly so, in this overall statutory context, bearing in mind
the remedial character of the problems this legislation was intended to reform.
On the other hand, subcontractors who may use suspension as an effective weapon following
successful adjudication will have relatively more certainty and confidence with the availability
of a quick review mechanism where the respondent is likely to apply for the internal review
rather than judicial review as applicable. Accordingly, the consequences of any work
suspension (in the case the original determination is eventually overturned in the review
process) will be much limited. In Hickory Developments Pty Ltd v Schiavello (Vic) Pty Ltd,92
Vickery J stated:
A contractor would be seriously inhibited in the exercise of its statutory right to
suspend works if it suspected that its payment claim and the adjudicator’s
determination made upon it could be vulnerable to attack on technical legal grounds.
If the contractor made the wrong call, the consequences of suspending work could be
prohibitive.
Any taken measures to enhance the appointment and regulation of adjudicators may improve
the adjudication outcome but will never warrant that determinations are made in accordance
with the law. In Queensland, where major amendments were introduced to increase the quality
of adjudication outcome such as allowing longer time frames and improving the selection and
regulations of adjudicators, there have been seven judicial review court applications between
December 2014 and November 2015, (comparing to 15 applications in the preceding year), in
which the Queensland Supreme Court found that adjudicators committed jurisdictional errors
in three cases.93 Most of practicing adjudicators are not legally qualified or trained and they are
frequently required to deal with questions of law where they are more susceptible to make
mistakes. Further training may not be sufficient unless it is solid enough to enable a party to
practice law. An optimal adjudication process should maximise, within the legislative objective
of expediency, the opportunity that adjudicators’ determinations are made in accordance with
92
[2009] VSC 156 at [47]. 93 Queensland Building and Construction Commission, November 2015 monthly adjudication statistics, p8.
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the correct and relevant law. Also, it was judicially held that there is ‘no proper basis to
distinguish an adjudication for the purpose of maintaining cash flow from an adjudication to
determine a party’s ultimate rights and entitlements’.94
In light of the above, it can be argued with confidence that introducing an appropriate review
scheme would offer a pragmatic and practical solution that acknowledges the existing variety
of adjudicator’s qualities and competencies and the difficulty of attaining quality adjudication
outcome due to the tight timeframes. The review scheme is deemed to act as an effective safety
net to capture adjudicators’ errors away from curial proceedings to help control the overall cost
and improve the finality and informality of statutory adjudication. In other words, it is proposed
that a swift system of review within the legislation is needed.
4.5 A PROPOSED AUSTRALIAN REVIEW MECHANISM ON THE MERITS
The success story Singapore experience in running adjudication review for more than a decade
should be persuasive to be considered in Australian States and Territories. Next section
demonstrate the key features of a proposed review mechanism. Most of the demonstrated
features have been discussed and and endorsed by many industry practitioners including
adjudicators and lawyers through a series of semi-structured interviews with the author.
4.5.1 The ambit of review mechanism:
The Singaporean model does not extend to review erroneous determinations on grounds related
to the valid appointment of adjudicator where the respondent may challenge his or he
jurisdiction to hear the matter. The reason for that exemption as discussed above is the lack of
competency of both adjudicators and review adjudicator(s). Under the West Coast model,
unlike all other jurisdictions, there is an express right of review by application in respect of an
adjudicator’s decision to dismiss without a consideration of the merits of the application on
certain grounds.95 That right also extends to cover of applications objecting the appointment
of an adjudicator for conflict of interest.96 This would mean that if the legislature, for such
cases, warrants to appoint review adjudicators of a high caliber such as retired judges or
94 Hall Contracting Pty Ltd v Macmahon Contractors Pty Ltd [2014] NTSC 20 at [45]. 95 These grounds include that the contract concerned is not a construction contract, the application has
not been prepared and served in accordance with the requirements of the Act, and the adjudicator is
satisfied that it is not possible to fairly make a determination because of the complexity of the matter
or the prescribed time or any extension of it is not sufficient for any other reason – see WA Act, s
31(2)(a). 96 See WA Act, s 29(3); NT Act 31(3).
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experienced arbitrators with legal qualifications, there will be no valid reason for that
exemption to stand. This would keep as a more convenient remedy available for many
aggrieved respondents that can’t afford commencing curial proceedings.
Notwithstanding the above qualification, it is quite important that all other errors of law and/or
fact should be reviewable by the proposed mechanism. The distinction between errors of facts
or errors of law in one hand and jurisdictional errors of law and non-jurisdictional error of law
is proven to be a complex and tricky legal process.97 The ambit of the proposed review system
should not put any restriction on what would be a reviewable decision to shut the door for smart
lawyers to debate the issue. It is submitted that the inherent difficulty in the distinction between
errors is deemed to be another advantage for the parties to favour the review mechanism rather
than judicial review since the uncertainty of the likely court action would significantly increase.
4.5.2 Accessibility
In 2010, Philip Davenport noted that all of the hundreds of challenges in NSW Supreme Court
except two were made by respondents.98 This observation is justified that many the aggrieved
claimants are too vulnerable to afford expensive and lengthy court proceedings to seek remedy
through judicial review and they would live with the adjudication determination. Hence, there
is no valid reason to limit the access of review mechanism to respondents only. A respondent,
seeking review, must pay the adjudicated amount to the claimant in full within seven days after
the release of adjudication determination in order to access the review system to maintain the
object of the legislation for a quick cash flow recovery. This condition would satisfy many
practitioners who vote against the introduction of review mechanism as an intermediate and
additional layer. However, such condition may not be appropriate if the respondent provides
reasonable evidence that the claimant may not be able to repay. In such case, the claimant
should provide a bank guarantee to get paid, otherwise, the respondent must pay the amount in
a trust account.
Fixing a minimum threshold is essential to avoid any abuse of process by either party and close
the floodgates of many applications without sufficient substance in economic terms. As such,
the review should be limited to actual amount in dispute being the difference between
adjudication determination and adjudication response. However, the $100,000 threshold
97 See, eg, Musico v Davenport [2003] NSWSC 977 at [46]; Perrinepod Pty Ltd v Georgiou Group
Building Pty Ltd [2011] WASCA 217 at [11]. 98 Davenport, P., Adjudication in the building industry, Federation Press, 2010, 3rd edition.
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amount (in the Singaporean model) should be further reduced to $25,000 as the statistics show
that no judicial review was sought for amount below $25,000 in the last three years in NSW.
4.5.3 Selection and jurisdiction of Review Adjudicator(s)
Where a nominating authority has appointed the original adjudicator, the governing authority
should appoint the review adjudicator. The review adjudicator must have more experience and
seniority than the original adjudicator with competencies relevant to the referred disputed
matter(s). A panel of three adjudicators may only be needed if the case is very complex or
where the original decision was issued by a senior and well experienced adjudicator regardless
of the value of the adjudicated amount to ensure a credible and correct outcome. The review
adjudicator(s) should have jurisdiction to answer questions of law as well as fact, and may set
aside or replace the adjudicator’s determination with the review decision that will have the
same legal effect of the original determination. The review adjudicator(s) must be empowered
to decide on costs as well as detailed further in costs section.
4.5.4 New submissions
The review adjudicator should only consider: the submissions made to the original adjudicator,
the determination itself, the review application and any response to that that application. The
review application may state the reasons for applying for review and identify the alleged errors
in the adjudication determination. Whilst the review adjudicator should theoretically enjoy the
same investigative powers that were available to the original adjudicator, it would be difficult
for a review adjudicator to consider any information emerging from conducting conferences or
site inspection unless the legislation expressly allows for. There is no need for the original
adjudicator to have the opportunity to put a submission defending his or her decision. Also, the
identity of the original adjudicator should not be disclosed to the review adjudicator(s) to
ensure unbiased review process.
4.5.5 Timeframes
The ‘Review Application’ must be made within five business days from the receipt of
adjudication determination. The claimant must be allowed to serve a ‘Review Reply’ within
two business days to afford it procedural fairness. The ‘Review Decision’ must be released as
soon as possible but not later than 10 business days from receipt of the ‘Review Reply’. The
Review Adjudicator(s), however, may extend that period up to an additional five business days
in complex cases by requesting the consent of the governmental appointer.
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4.5.6 Costs
The review adjudicator(s) should be entitled for a fixed fee per hour but not exceed certain
amount to provide either party with certainty of the likely costs of the review. In principle, each
party will bear its own cost and the fee of review adjudicators will be proportionally borne by
parties to the extent each party was successful in the review decision. A base fee rate for errant
adjudicators should be introduced in case their determination is overturned or substantially
revised by the review adjudicator. Accordingly, the difference should be refunded to the paying
party. This measure could stand as an appropriate compensation to parties as well as a
reasonable discipline to errant adjudicators which would be a more sensible and convenient
approach to that in the UK, where it was judicially held that errant adjudicators are not entitled
for their fees.99
The parties always have the choice to retain legal counsels in adjudication as well as review
adjudication proceedings. The associated legal fees are not recoverable even if the party was
successful. However, some parties may seek review on unreasonable grounds where the other
party may incur unnecessary additional cost in retaining legal counsels. As such, the review
adjudicator(s) should have the jurisdiction to make an order of legal costs to compensate a party
for any expenses, loss, inconvenience or embarrassment as a result of the other party’s conduct.
This would include situations when a party conducts itself unreasonably; where a case is
obviously unmeritorious; and when a party embarks on the proceeding to vindicate its clear
entitlements.100
4.5.7 Challenging the review decision
Challenging a review decision on the merits is not possible and the decision will be temporally
final until it is decided otherwise in further binding proceeding such as arbitration or litigation.
However, an aggrieved party may still seek judicial review on the basis of jurisdictional error
or procedural injustice can’t be legislatively prohibited following the authority of Kirk v
Industrial Court (NSW) (2010) 239 CLR 531. However, it is argued that ensuring a careful
selection of review adjudicator(s) and reasonable review period would limit those types of
99 PC Harrington Contractors v Systech International [2012] EWCA Civ 1371. 100 See de Villiers, Bertus. "Experimenting in Federal Systems–The Case of the State Administrative Tribunal of Western
Australia and Accessibility to Justice." Heidelberg Journal of International Law, HJIL 73.3 (2013): 448.
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errors and therefore lessen the opportunities of judicial review applications where parties will
have more satisfaction and confidence in the review outcome.
5. CONCLUSIONS
This submission attempts to demonstrate various novel proposals to improve the SOP Scheme
in NSW as well as other jurisdictions by addressing two key problems. Therefore, the options
within the proposed roadmaps stand as handy and pragmatic solutions, where there is either a
concern about the number of judicial review to challenge adjudicator’s determinations or a
dissatisfaction with the quality of adjudicator’s determination on the merits in large or complex
cases. It could be the case that certain options may better suit the local circumstances comparing
to others. Therefore, any proposed option within the demonstrated roadmaps could stand as an
independent proposal for potential implementation to address certain concerns about the
operation and effectiveness of the regime to achieve the intended object. Most importantly,
either option of review mechanism on the merits or on jurisdictional issues could be the one-
stop shop solution rather than going into different pit stops within the demonstrated roadmaps
to optimise the regime in the context of the raised two problems.
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6. APPENDIX (RESPONSE TO DISCUSSION PAPER SPECIFIC QUESITONS)
Note: It is much preferable that the comments and responses to the discussion paper
questions as below are examined in conjunction with my submission above as they both
integrate one way or another.
Questions Samer Skaik’s Comments
4.1 Is the Act still
meeting its objectives?
Not really. Until now, claimants don’t get paid on
time even when having a favorable adjudicator’s
determination, especially when large amounts are
involved (more than $50,000).
4.2 Are there additional
terms that need to be
included in the definitions?
Adjudicator’s jurisdiction and essential jurisdictional
facts within the meaning of the Act.
Defining construction work as any work that the
adjudicator reasonably believes that it has connection
with the construction and building industry rather
than the objective current definition which frustrates
the operation of the Act.
4.3 Does the Act assist
in getting prompt payment
for completed work?
Somehow, namely for small payment claims.
4.4 Have industry
payment practices improved
to the extent that these laws
are no longer necessary?
Not at all.
4.5 If the Act was not in
operation, would
subcontractors experience
greater difficulty in
obtaining payment?
For sure.
4.6 Are ‘handshake’
agreements commonplace in
the industry?
Not sure
4.7 Are the processes
under the security of
payment laws used for
payments involving
‘handshake’ agreements?
It should be.
4.8 Are contract terms
or other agreements used to
specifically hinder parties
from using the processes
under security of payment
laws?
Sometimes
4.9 Are contract terms
or other agreements used to
specifically hinder parties
from using the processes
under security of payment
laws?
4.10 Is the threat of loss Yes
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of further contracts used to
stop subcontractors from
using the processes under
security of payment laws?
4.11 Should specific
penalties be introduced for
any attempts to obstruct
lawful use of security of
payment laws?
Yes but should be carefully drafted.
4.12 Are the current
exemptions appropriate?
Not at all.
4.13 Should any of the
exemptions be deleted or
expanded?
Construction work should be read in a broad sense so
it should be left to the adjudicator to reasonably
consider whether the work has economical
relationship with the construction industry and his
decision should not be reviewed so any error could
be an error within jurisdiction. This will stop many
adjudications from being challenged in court and
help the inter-discipline industries to benefit from the
Act. As a result, the whole economy of the State can
improve.
4.14 Should the Act be
extended to cover contracts
between builders and
owner/occupiers?
Yes, but relaxed timeframes to be provided and
different arrangement for small payment disputes to
be established similar to the recent changes underway
in Tasmania.
4.15 Should such an
extension only cover
projects worth $1 million or
more?
Yes, provided less value projects have faster and
cheaper platform to deal with payment disputes.
4.16 Does the
involvement of a
superintendent interfere
with prompt payment?
Definitely in most of the cases since he is being paid
by the client and bound by certain provisions under
consultancy agreement regarding limitations on
certifications and approvals without prior approval of
the client.
4.17 Is there a need for
specific provisions to cover
projects where a
superintendent is engaged?
Yes, superintendent must act fairly and impartially
and penalty regardless of any privative clause in the
consultancy or construction contract agreement. This
means that superintendent can be sued under the Act
for acting partially.
4.18 Should the time
limits for taking Action
under the Act or Regulation
be extended?
4.19 Should investigative
powers be specifically
clarified in the Act to cover
all matters?
4.20 Should powers to
obtain information be
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broadened to capture parties
other than head contractors
and their employees?
4.21 Should a prohibition
on aiding and abetting be
introduced?
4.22 Should limited
liability be imposed on
employers for Actions of
their employees?
4.23 Should general
liability for directors be
introduced?
4.24 Should offence
provisions or other
measures be introduced to
address unconscionable
conduct and predatory
claims?
4.25 Is the current
process for lodging
complaints with Fair
Trading adequate?
It should be facilitated by proper procedures and
follow up so claimants get timely feedback on the
outcome of the complaint.
Progress Payments
5.1 Is clarification of
reference dates warranted?
Detailed provisions are required to calculate
reference dates in light of the case law in case of
termination, repeated claims, dismissed adjudication
applications, final payment, etc. Notably, in Lewence
Construction Pty Ltd v Southern Han Breakfast Point
Pty Ltd [2015] NSWCA 288, the NSW Court of
Appeal overturned the trial judge’s finding that the
adjudicator’s determination of a reference date was a
finding of jurisdictional fact. The Court held that the
question of whether a ‘reference date’ has occurred,
which gives rise to an entitlement to a progress
payment under the SOP Act, is not a matter that the
court can quash an adjudication determination over if
the adjudicator gets it wrong. 101 This means that the
existence of a reference date is not an essential pre-
condition for having a valid payment claim, thus it is
not considered as a jurisdictional fact. Interestingly,
this significant decision is completely inconsistent
with the approach previously taken in NSW Supreme
Court judgments.102 This means that express detailed
provisions are now needed to deal with reference
101 [2015] NSWCA 288 per Ward JA at [60], [93]; Emmett JA at [119]; Sackville AJA at [133]. 102 See, eg, Patrick Stevedores Operations No 2 Pty Ltd v McConnell Dowell Constructors (Aust) Pty Ltd [2014] NSWSC
1413; Omega House Pty Ltd v Khouzame [2014] NSWSC 1837.
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dates as there no remedy for erroneous decisions.
5.2 Is the 12 month limit
for serving claims adequate?
Is it too long or too short?
Too long. It should be 3 months for progress
payments and 6 months for final payments to allow
for settlement and negotiations attempts and ensure
that both parties are likely to be involved in
adjudication with fresh memories.
5.3 Are the rights to
payment claims clearly set
out?
5.4 Are the provisions
about valuation of work,
goods and services
adequate?
5.5 Are the interest rates
appropriate?
5.6 Should payment
claims be able to be made
both up and down the
contracting chain?
Yes, unless ANAs are abolished completely so no
claimant friendly environment remains.
5.7 Should payment
claims carry warnings
regarding time allowed to
respond and potential
consequences?
It should remind respondent of its obligations under
the Act always. Not all respondents are educated.
5.8 Should all payment
claims state that they are
being made under the Act?
Yes, otherwise, any progress claim would be dealt
with as a claim under the Act where respondents
have to allocate major resources incurring too much
unnecessary cost to provide detailed schedules on a
short period basis. Parties’ intention must be always
clear.
5.9 Would this reduce
the number of claims that
end up going to
adjudication?
Yes.
5.10 Should payment
claims provide any
additional information?
Yes, that this payment claim has never been claimed
before or claimed but not paid in part or in full.
5.11 Are the due dates for
payment appropriate and
workable?
5.12 Should the previous
minimum of 10 business
days for payment of
subcontractors be
reintroduced?
5.13 Should all seven
days of the week be used
instead of just business
days?
No
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5.14 Do due dates need
to better account for the
Christmas/New Year period
when much of the industry
closes down?
Yes like Qld.
5.15 Are the interest
rates appropriate?
5.16 Are the
consequences for failing to
provide a payment schedule
appropriate?
With regard to claimant’s intention of commencing
adjudication, the respondent is given two chances
granted by the legislation to provide payment
schedule which is fairly enough. However, such
second chance is not granted when claimant files
judgment for a debt. To sort this out, another chance
should be offered to respondents as well.
5.17 Is the deadline for
providing payment
schedules generally
appropriate?
It ca be increased a bit, especially when dealing with
large payment claims, so respondents can have
sufficient time to prepare well.
5.18 Should the deadline
for providing payment
schedules be extended for
more complex claims?
A second chance with a further notice should be
given rather than an extended time.
5.19 Are the deadlines
for suspension of work
appropriate?
5.20 Do claimants have
adequate protection against
losses when work is
suspended?
No. The claimant once receiving favorable
determination and suspend work is under major risk
as he and end up with overturned adjudication
termination. Protection should be made that if
suspension is made following determination, the
client will manage the whole risk even if the
determination was set aside later on. Careful legal
examination is required for the proper drafting. The
risk of such suspension was well noted in Brodyn v
Davenport [2005] NSWCA 394 at [51] (Hodgson
JA); Hickory Developments Pty Ltd v Schiavello
(Vic) Pty Ltd [2009] VSC 156 at [46]-[47] (Vickery
J).
5.21 Is suspension of
work an effective means to
obtain payment?
5.22 Are the pay when
paid provisions effective?
Yes
5.23 Do head contractors
still try to delay payments
on the grounds that they are
Yes
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awaiting payment from
another party?
5.24 Should the retention
money trust account
requirements be expanded
to cover the entire
contracting chain?
5.25 Is retention money
the primary means to obtain
performance security?
No
5.26 Are bank guarantees
or insurance bonds
frequently used?
5.27 Do certain sectors
of the industry use one form
of these securities more than
another?
5.28 Of retention money,
bank guarantees and
insurance bonds, is one of
these the preferred means to
obtain performance
security? If so, why?
5.29 Is the choice of
retention money, bank
guarantees and insurance
bonds related to the type of
contract and/or amount of
money involved?
5.30 Should
subcontractors have the
right of first call to rectify
any problems?
5.31 Should
subcontractors be held liable
to rectify any problems?
5.32 Have you been
involved with projects that
used PBAs?
5.33 Were payments
made promptly?
5.34 Would the PBA
system be appropriate for
private sector projects?
5.35 Are there equivalent
PBA systems available from
the private sector?
5.36 Is the use of offsets
common industry practice?
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5.37 Should offsets be
allowed or prohibited?
5.38 Are there advantages
specific to the West Coast
Model or the East Coast
Model?
Yes, WCM has a review mechanism of erroneous
adjudicator’s decision to dismiss adjudication
without making a decision on the merits. Also, WCM
has simpler legislation with less complexity which
makes adjudicator less susceptible to errors.
Currently, the WCM does not work effectively as it
is not suitable for simple claims and it adopts one
size fits all approach, so very large claims have to be
decided in only 14 days. This has resulted in many
challenges applications.
As reported, the advantages are mainly stemmed
from the abolishment of the concept of payment
schedule, and the fact that adjudicators are not bound
by rules of evidence and have more investigative
powers, namely appointing experts and conduct
testing. A study of Yung et al (2015) proved that the
investigative powers are rarely used. This is because
adjudicators only have 14 days to issue
determinations. Adjudicators are still required not to
use their own knowledge or determine the case on a
basis not raised by either party.
With regard of effectiveness of WA as a good
example of evaluative model, it was not proven to be
better by any means and statistics speak for
themselves.
In WA, since the commencement of the WA Act in
2005 until end of June 2015, the WA State
Administrative Tribunal (WASAT) has reviewed 37
decisions of adjudicators dismissing applications
without considering the merits. In 25 cases, the
adjudicators’ decisions were confirmed while 12 cases
(amounting to 37%) were set aside or remitted to the
original adjudicator to revisit the original decision to
dismiss.
On the other hand, there have been 32 out of 1421
cases referred to the WA Supreme Court to review
appointed adjudicator determinations. 13 out 32 of the
matters heard (amounting to 40%) have been
considered and the adjudicator's determination was
quashed. [See 2014-2015 annual report, Construction
Contracts Act 2004 (WA), page 10.] In Northern
Territory (NT), there have been a total of 137
adjudication applications since the commencement of
the Act in August 2006 up until June 2015, and 15
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judicial challenges of adjudication determinations,
five of which (amounting to 33%) resulted in the
adjudication determinations being quashed.[ See
Annual report (2014-2015), Department of the
Attorney-General and Justice, Northern Territory
Government.]
These statistics suggest that there is also scope for
improvement of adjudication quality under the West
Coast model, with the proportion, although not the
sheer number, of judicial reviews and quashings as
compared to total number of adjudication
determinations not being too dissimilar to that in the
East Coast model jurisdictions. Further, this is the case
despite the existence of the unique review mechanism
within the West Coast model legislation that allows an
aggrieved adjudication party to apply for a review1 of
an adjudicator’s decision to dismiss an adjudication
application on the basis of certain grounds1 and,
therefore, acts as a filtering system to keep challenges
away from the Supreme Court as mentioned above.
5.39 Should the Act allow
or prohibit the selection of
ANAs being covered by
contract terms?
If abolishing ANS is not possible, The alternative
that the Act should allow selecting one of three ANA
in the contract as the case in Victoria to reduce the
influence of claimant-friendly environment.
Under the East Coast model (save for Victoria)103, the
claimant is solely allowed to choose its preferred
ANA. Thus, the appointment of adjudicators by ANAs
has been criticized for its leading to: perceptions that
profit-driven ANAs are biased towards claimants,104
allegations of adjudicator shopping whereby a
claimant or its representative demand that an ANA
either appoint or not appoint certain adjudicators,
otherwise the claimant would refer its adjudication
application to another ANA,105 and accusations that
some ANAs maintain an unhealthy relationship with
claims preparers, whereby preparers are
recommended to claimants by an ANA with the
expectation that the preparer will direct the
adjudication application to the ANA106 or in
expectation of receiving future appointments as an
adjudicator from the ANA.107 Such matters clearly
103 The Vic Act, section 18(4) provides: If the construction contract to which the payment claim relates lists 3 or more
authorised nominating authorities, the application must be made to one of those authorities chosen by the claimant. 104 Wallace Report, above fn 32, pp 131-145; Collins, B., “Inquiry into Construction Industry Insolvency in NSW”, 2012,
NSW Government, p72. 105 Wallace Report, above fn 32, p 140. 106 Wallace Report, above fn 32, pp 134, 148-150. 107 Wallace Report, above fn 32, p 145.
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contravene one of the fundamental tenets of natural
justice, that the decision-maker conducts themselves
in a manner free from actual or apprehended bias.
Accordingly, the recent reform of the Queensland Act
abolished appointment by ANAs replacing that with
appointment by a single government registry within
the Queensland Building and Construction
Commission.
Adjudication of Disputes
6.1 Should there be
more detailed disciplinary
provisions for ANAs?
Yes. In practice, therefore, it is left to ANAs as part of
their obligations to ensure adjudicators are suitably
qualified, trained and experienced. Uniquely, the
legislation in South Australia requires that an ANA
must not nominate an adjudicator that has been found
by an Australian court to have made technical errors
in performing adjudications unless the ANA is
satisfied that the cause of the error has been resolved.
An ANA must not appoint a person as an adjudicator
if that person has been found to have not acted in good
faith twice or more within the last five years in relation
to adjudication duties.108 In Victoria, the legislation
provides that adjudicators must not accept an
adjudication application or undertake an adjudication
review if doing so would create any actual or likely
conflict of interest, or any perception of conflict of
interest or bias on their part. Adjudicators must accept
nominations only if they consider they are competent
in view of the nature and complexity of the matter.109
In the absence of strict criteria governing adjudicator
appointment and disciplinary arrangement for non-
compliance, it is also possible for ANAs to select an
adjudicator based upon availability rather than
experience and qualifications in order to meet the
strict time limits. Anecdotally, it is not uncommon for
unqualified adjudicators to accept nominations, no
matter how complex the cases are as long as they are
enjoying the current judicial and legislature’s support.
Accordingly, Wallace notes that: “Adjudicators
accept appointment by an ANA at a time when they
have little or no knowledge of the issues in dispute”.110
6.2 Should ANAs be
required to renew their
authorisation annually?
Yes.
6.3 Should ANAs have No
108 See Code of Conduct for Authorised Nominating Authorities, Small Business Commissioner, SA, p3. 109 See ‘Authorised Nominating Authorities Conditions of Authorisation’, the Vic Act, 2013 110 Wallace Report, above fn 32, p 230.
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to pay fees to obtain or
renew their authorisations?
6.4 Should the Minister
have greater scope for
withdrawing authorisations?
Yes
6.5 Should adjudicators’
qualifications be specified
in the Code of Practice?
Yes together with expertise and minimum local
experience in dealing with the legislation. Legal
training on jurisdiction, administrative law, la of
evidence, contract law should be a must as well.
6.6 Should adjudicators’
qualifications be prescribed
in the Act?
Yes in full details. Please review my upcoming paper
in ICLJ p2 in April titled (the Big Picture: causes of
compromised outcome of complex payment disputes
in Australia.)
6.7 What would be
appropriate qualifications
for adjudicators?
Regulation of adjudicators has an impact upon
adjudication quality both in terms of eligibility and
training of adjudicators as well as the ongoing
monitoring of their performance. The importance of
setting appropriate criteria for eligibility and training
is clear, directly impacting upon the ability of an
adjudicator to both run the adjudication process in a
procedurally fair manner as well as having the
requisite knowledge and experience to arrive at an
appropriately just and accurate outcome. The risk of
injustice in rapid adjudication requires a high standard
of adjudicator’s expertise.111 The regulation of
adjudicators varies widely from State to State, with
regulations being generally quite relaxed. With the
exception of Queensland112, Victoria113 and SA114, the
regulations governing the eligibility and conduct of
adjudicators under the East Coast model appear to be
wanting. The NSW and Tasmanian legislation, for
instance, requires adjudicators to have such
qualifications, expertise and experience to be eligible
to perform adjudication but no relevant regulations
listing such have ever been made.
The Victorian legislation sets out minimum years of
experience and qualifications of adjudicators to be
eligible.115 However, it was also judicially observed
that “there is no statutory requirement that they have
formal legal qualifications or practical legal
training”.116 This observation also applies to all other
States. In WA, although the regulations prescribe
detailed eligibility criteria, legal qualifications are not
111 Zhang, T, “Why national legislation is required for the effective operation of the security of payment scheme”, Building
and Construction Law Journal, 2009, vol. 25, no. 6, p. 376. 112See: Building and Construction Industry Payments Regulations 2004 (Queensland), section 2A (3). 113 See Authorised Nominating Authorities Conditions of Authorisation, Building and Construction Industry Security of
Payment Act 2002 (Vic), 2013. 114 Building and Construction Industry Security of Payment Regulations 2011 (SA), section 6. 115 See ANAs Conditions of authorisation, above fn 56. 116 Grocon Constructors v Planit Cocciardi Joint Venture [No 2] [2009] VSC 426) at [38].
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mandatory. A recent empirical research has found
that “73 per cent of adjudicators in Western
Australia are not legally trained but quite a number
of claims has been prepared by lawyers and included
detailed legal submissions.”117 This may somewhat
explain the considerable number of successful
challenges to adjudication decisions before WASAT
and WASC as explained before.
Empirical research conducted by interviewing 12
highly experienced lawyers in NSW found that there
was dissatisfaction with the quality of adjudicators.118
The research found that ANAs in NSW do not have
consistency in their quality control over adjudicators
and their training courses significantly vary. It also
mentioned that some ANAs provide training for
months whilst others provide only a few days. It was
observed that “adjudicators are often called upon to
consider complex areas of building and contract law,
yet they are not required to be legally qualified.”119 It
is likely that one of the reasons for the recent high rate
of adjudication determinations that have been quashed
by the courts under the East Coast model as addressed
in the submission above is linked to shortcomings in
the way adjudicators are regulated.
Perhaps, it could be argued that the formalisation of
the adjudication process in Australia puts the majority
of adjudicators in a situation where any adjudication
case could be a complex one if jurisdictional issues are
to be addressed by the adjudicator. The duty of an
adjudicator to decide upon his or her jurisdiction to
hear the matter before proceeding with the merits
seems very challenging unless that adjudicator is
competent enough (presumably by virtue of legal
qualifications and/or proper legal training). In
Singapore which has modelled its legislation on NSW
Act, it was judicially held that adjudicators are not
competent to deal with jurisdictional issues apart from
the basic function required by the legislation.120 Thus
it was suggested that reform be made to separate
jurisdictional issues from the merits of dispute, so the
adjudicator’s duty is only confined to deal with the
merits121 in order that either party can have certainty
117 Yung et al., above 37, p 71. 118 Munaaim, ME, 'Developing a framework for the effective operation of a security of payment regime in common law
jurisdictions', Doctor of Philosophy thesis, 2012, King's College London. 119 Wallace Report, above fn 32, p 230. 120 Lee Wee Lick Terence v Chua Say Eng [2012] SGCA 63 at [64]
121 Keong, C. S. (2012). "Foreword", Security of Payments and Construction Adjudication, Fong, C, second edition,
LexisNexis.
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about the likely outcome of the real issues in dispute.
6.8 Should there be
disciplinary provision for
adjudicators?
Yes, especially if they accept the referral without
having the proper expertise or time to complete
review within time limits. This also include lack of
bona fide attempt or bad faith during adjudication.
Effective complaint system is necessary to help
monitor the performance of adjudicators.
6.9 Should adjudicators
be registered with a
government agency?
Yes. In addition, the SoP legislation in Eastern States
allows the adjudication response to be lodged after the
adjudicator’s acceptance of the referral.122 Where this
occurs, it will meant that the adjudicator will likely not
have sufficient information to properly assess whether
he or she possess the required competencies to deal
with the case since, in practice, most of legal or
technical submissions such as jurisdictional arguments
and expert reports are only included in the
adjudication response to support the reasons identified
in the payment schedule.
6.10 Is the current
adjudication process
appropriate and effective?
Not at all. Appointment should only be made after
the receipt of adjudication response. Adjudicators
must dismiss applications where they lack
jurisdiction and should be paid for the work they do
to reach that decision as implemented in Qld. Qld
model should be followed in terms of dual scheme.
However, timeframes for allowing new reasons must
be reduced drastically. Qld recent Amendments in
Dec 2014 have received a great support from the
industry stakeholders. Also, judicial review has
reduced drastically comparing to previous years.
Refer to Alan Moss Report - May 2015 at p8 where
he stated: “The processes in other jurisdictions,
including Western Australia and the Northern
Territory were supported, but most submissions
favoured the model recently introduced in
Queensland.”
Both East and West Coast models give the adjudicator
the authority to conduct informal conferences
although they are silent on how such conferences
should be conducted and whether the conference
122 As per the NSW Act, the respondent can submit the response within 2 business days after the adjudicator’s acceptance.
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outcome must be considered. Unlike the East Coast
model (save for Victoria as permitted by adjudicators),
the West Coast model allows legal representation in
conferences and allows an adjudicator to engage an
expert (presumably to assist in assessing complex
technical or legal matters) or arrange for testing unless
all parties object. In WA, however, a research
involving interviews with 22 adjudicators found that
the interviewees have a neutral position regarding the
necessity of experts or the connection between legal
representations and winning the case.123
Having said this, the strict time limits imposed by the
legislation in all States deters adjudicators from using
any of the investigative powers allowed by the
legislation which jeopardise the validity of the
outcome. In Hall Contracting Pty Ltd v Macmahon
Contractors Pty Ltd,124 the adjudicator’s
determination was set aside for lack of procedural
fairness where the adjudicator failed to seek additional
documents from the parties as the submissions about
the dispute lack proper evidence. In Ku-Ring-Gai
Council v Ichor Constructions Pty Ltd,125 the Court
rejected the claimant’s argument that the adjudicator
should have sought further submissions from the
parties to overcome the shortcomings of an expert
report submitted by the claimant on the basis the
adjudicator had only 10 business days to complete the
complex task of adjudicating the issues in question.
As such, some adjudicators, nowadays, accept
nominations provided they will be granted any
reasonable request for extension of time, so they
become more comfortable in seeking further
submissions or conduct conferences. This tactic,
although being a pragmatic tool to overcome the strict
time limits, would provide some uncertainty for the
parties on the period an adjudication should take till a
valid determinations is issued. It could be useful then
if the legislatures give adjudicators the jurisdiction to
extend the time up to a certain limit in complex cases
as the case in Queensland so they will be encouraged
to use the available investigative powers.126 It is
argued that empowering adjudicators in the Eastern
States with additional powers similar to that in the
western States may not be a feasible option unless they
are also given longer time or at least empowered to
reasonably extend the time limits in complex
123 Yung et al, above fn 37, p 67. 124 [2014] NTSC 20. 125 [2014] NSWSC 1534. 126 The Queensland Act, above fn 4, section 25B(2).
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adjudications.
6.11 Should adjudicators
have the power to extend
time frames without the
agreement of the parties to
the dispute?
Yes, in complex cases especially involving
jurisdictional challenges with the approval of the
registrar only up to additional 5 business days.
6.12 Should an
adjudicator be able to take
other matters into
consideration when
reaching determination?
He should only consider the Act provisions as a
statutory certifier and should not be expected to be up
to date with common law or case law evolvement.
6.13 Is five days enough
time to make payment?
Yes
6.14 Should claimants be
able to withdraw
applications at any time and
for any reason?
Yes
6.15 Should the fees
charged by ANAs and/or
adjudicators be regulated?
Yes like Qld with details on apportionment of fees.
6.16 Should the fees use a
sliding scale based on the
amount of the claim to be
adjudicated?
Yes as well as experience f adjudicators with max.
cap for certainty.
6.17 Are payment
withholding requests used
by subcontractors?
6.18 Do principals
comply with payment
withholding requests?
6.19 Are payment
withholding requests an
effective tool to ensure
payment of amounts owed?
6.20 Do claimants serve
adjudication determinations
promptly?
6.21 Should both parties
to a dispute be required to
agree on the choice of
ANA?
The mutual agreement between the parties on the
adjudicator, especially on complex payment disputes,
is more likely to increase not only their satisfaction
that a suitable adjudicator has been appointed for
their dispute but also their confidence in the outcome
(and, hence, their ability to abide by the adjudicator’s
determination).127 Having said that, the statistics in
relation to adjudication under the Western Australian
127 Coggins, J, Elliott, R & Bell, M, “Towards harmonisation of construction industry payment legislation: a consideration
of the success afforded by the East and West Coast models in Australia', Australasian Journal of Construction Economics
and Building, 2010, (heareafter “Coggins et al.”), vol. 10, no. 3, pp. 14-35.
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Act, where mutually agreed adjudicator appointment
is provided for, show that mutual agreement on the
identity of adjudicator has been very rarely used
(3.4% of applications in 2014-2015).128 Rather, it has
been left to the prescribed appointers (the WA Act’s
equivalent of ANAs), but it was not clear from the
reports whether such appointers were mutually
agreed or chosen by the applicants. It should also be
noted that, unlike in NSW, none of the prescribed
appointers in WA are for-profit companies and either
party may commence adjudication and choose the
appointer if not stated in the contract.
6.22 Could a more
independent process for
appointment of an
adjudicator address
concerns regarding
impartiality?
Yes, please see above. Abolishment of ANAs is
required unless for-profit ANAs are regulated
strictly.
6.23 Should mediation be
introduced for disputes
under the Act?
No need. It will delay payment and it usually takes
place while adjudication is underway. Review
scheme should be the correct alternative for those
dissatisfied with the first outcome under certain
conditions to cater for time and cost parameters.
6.24 Should it be
mandatory for parties to a
dispute to attempt mediation
before an adjudication
application can be made?
No. This is already taken care of in the form of
negotiation when an intention to commence
adjudication is raised. Having another up front
process will delay recovery of payment.
6.25 Is the NSW ANA
system or the Queensland
Registrar of Adjudicators
system preferable and if so,
why?
Having the Registrar as the case in Qld is much more
effective. There is a huge evidence that for profit
ANAs were not impartial. Other ANAs are ok to
practice under close supervision on their
performance.
7.1 Should the NSW Act
introduce different
processes for different sized
claims?
Yes for sure. There is no doubt that the ‘one size fits
all’ timeframes in Australia, allowing 2 weeks only
for an adjudicator to make their determination (save
for adjudications of complex claims in Queensland)
are expeditious when compared with the international
legislation. Adjudicators in Malaysia have 45
working days to make their decision, and
adjudicators in Ireland and the UK have 28 days to
do so. Marcus Jacobs comments that "[u]nfairness
may arise, where large complex claims are submitted
to the lay adjudicator for determination within the
"pressure-cooker" time limits set by the relevant
[Australian] Acts".129
128 2014-2015 annual Report, Construction contract Act 2004 (WA). 129 Jacobs, M, “Security of Payment in the Australian Building and Construction Industry”, fifth edition, Thomson Reuters,
2014, p xi.
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Whilst the East Coast model timeframes may be
appropriate for smaller straightforward payment
claims, there is mounting evidence – in the form of
adjudicators’ determinations being quashed by the
courts for substantial denial of natural justice130 and/or
failure to exercise their power in good faith131 to
suggest they are inadequate to afford adjudicators
enough time to meet the key requirements for a fair
determination.
The entire adjudicator’s task has been made more
difficult by the formalisation of the adjudication
process that has occurred for complex adjudications
with parties typically engaging lawyers to prepare
their adjudication applications and responses, and
often submitting copious amounts of documentation –
including statutory declarations, legal submissions,
delay analyses, site inspections, photographs and
technical expert reports – to support their cases. Given
the East Coast model’s requirement for an adjudicator
to ‘consider’ (interpreted by the courts in Tickner v
Chapman [1995] FCA 1726 at [39] to mean an “active
process of intellectual engagement”) all duly made
submissions and to make this apparent in their
reasoning132, the adjudicator is faced with a very
challenging task. This was acknowledged by
McDougall J as follows,
“I accept, too, that the adjudicator was
required to assimilate a huge mass of material
and to deal with it, to the extent of producing a
reasoned conclusion, in a very short space of
time. But even allowing for those matters, it is
in my view clear, when this aspect of the
determination is considered as a whole ..., that
the adjudicator did not turn his mind to, and
thus did not consider, those features of
[plaintiff]’s defence that I have mentioned”. 133
There is a limit to how much material a single
adjudicator can intellectually engage within just 10
business days. Presumably, the current practice of
overwhelming adjudicators by sheer volume of
130 See, eg, Metacorp Australia Pty Ltd v Andeco Construction Group Pty Ltd & Ors (No 2) [2010] VSC 255; St Hilliers
Contracting Pty Limited v Dualcorp Civil Pty Ltd [2010] NSWSC 1468; Watpac Constructions v Austin Corp [2010]
NSWSC 168; John Holland Pty Ltd v TAC Pacific Pty Ltd & Ors [2009] QSC 205; John Goss Projects v Leighton
Contractors & Anor [2006] NSWSC 798; Rail Corporation of NSW v Nebax Constructions [2012] NSWSC 6; Tickner v
Chapman[1995] FCA 1726 at [39]). 131 See, eg, Laing O'Rourke Australia Construction v H&M Engineering & Construction [2010] NSWSC 818; Lanskey v
Noxequin [2005] NSWSC 963; Holmwood Holdings Pty Ltd v Halkat Electrical Contractors Pty Ltd & Anor [2005]
NSWSC 1129; Timwin Construction v Facade Innovations [2005] NSWSC 548). 132 See Laing O’Rourke Australia Construction v H&M Engineering & Construction [2010] NSWSC 818 at [73]. 133 Laing O'Rourke Australia Construction v H&M Engineering & Construction [2010] NSWSC 818 at [112].
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paperwork may always leave the door ajar for a
potential judicial challenge on the grounds of breach
of natural justice and/or want of good faith.
Notably, in the recent reform of the Queensland Act
these timeframes have been extended for complex
claims to 15 business days for both delivery of
payment schedule and adjudication response. The
timeframe for serving a payment schedule is further
extended to 30 business days if the claim is submitted
more than 90 days after the relevant reference date.134
Under the West coast model, ambush claims are not a
concern as there is a 28-day timeline for starting an
adjudication.135
On the other hand, Adjudication, with its abbreviated
timeframes, has always been acknowledged as a
somewhat “rough and ready” dispute resolution
process. As such, Australian courts (as well as their
English counterparts) have generally been happy to
uphold adjudicator’s decisions containing non-
jurisdictional errors of law, only quashing those where
adjudicators have strayed outside the boundaries of
their jurisdiction. Consequently, as long as an
adjudicator has been duly appointed in accordance
with the Act’s mechanisms and has addressed the
correct issues in dispute, it will be very difficult for a
disgruntled party to have the adjudicator’s
determination quashed in court even where the
adjudicator has determined the issues in the wrong
way. Thus, there are several instances where
adjudicators’ determinations containing errors of law
on the face of the record that materially and
substantially affect the adjudication outcome have
been upheld by the courts.136
However, this doesn’t mean that such errors are not an
indicator of adjudication quality. Indeed, it is argued
that an optimal adjudication scheme should strive to
encourage as much legal accuracy as is possible in
adjudication decisions within the designated
timeframes. The minimisation of errors of law and
even errors of fact has a direct bearing on
stakeholders’ confidence in the adjudication process.
The more legally accurate an adjudicator’s decision,
the less likely it is for a losing party to either search
for grounds upon which to challenge the
determination, or to subsequently pursue the claim for
134 The Queensland Act, above fn 4, s 18A. 135 Yung et al, above fn 37, p 64. 136 See, eg, Clyde Bergemann v Varley Power [2011] NSWSC 1039; New South Wales Land and Housing v Clarendon
Homes [2012] NSWSC 333; Uniting Church in Australia Property Trust (Queensland) v Davenport & Anor [2009] QSC
134.
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a final binding decision in arbitration or litigation. The
potential for adjudication to reduce overall disputing
costs to the construction industry should not be
understated, and the failure of parties to accept an
adjudicator’s decision as a final resolution should be
seen as a lost opportunity to reduce disputing costs.
Aside from judicial review, there are limited rights to
review expressly provided for in the Victorian and
West Coast model Acts. In the Victorian Act (s 28(b)),
adjudication determinations may be subject to review
on the basis that the determination exceeds $100,000
and includes ‘excluded amounts’. The review is
carried out by a second adjudicator appointed by the
original appointing ANA. The WA (s 46) and NT (s
48) Acts allow a review of an adjudicator’s decision
by the State Administrative Tribunal (WA) or Local
Court (NT) to dismiss an adjudication application
without making a determination of its merits.
Notably, Tasmania is in process of enacting an
Amendment Bill to its SoP legislation by introducing
a review mechanism on the merits of poor
adjudication determinations by an expert panel
appointed by the government at no cost to parties.137
However, the proposed review mechanism lacks
clarity and transparency in various aspects. For
instance, the Bill does not explain a mechanism of
initiating the review process and does not address the
criteria to be followed by the SoP Official to identify
what could be an “inappropriate or unfair”138 decision
that would be susceptible to review by the expert
panel. The Bill is also silent upon the referral period if
it is to be made, adding a layer of uncertainty
regarding the finality of the adjudication decision
since the parties would have uncertainty upon the
receipt of adjudication decision for a while before
realizing whether the review will take place or not.
Notwithstanding these limited avenues of review, it is
argued that the general absence of any sufficient and
effective mechanism by which to review the merits of
an adjudicator’s decision made within jurisdiction, as
well as adjudicator’s decision to dismiss or not to
dismiss applications on ground of lack of jurisdiction,
directly impacts upon the quality of adjudication
outcome. An optimal adjudication process should
maximise, within the legislative objective of
expediency, the opportunity that adjudication
decisions are made in accordance with the correct and
137 Building and construction Industry Security of Payment Amendment Bill (2015) (Tas). 138 See Hon. Peter Gutwein MP (2015) Draft Second Reading Speech, Building and Construction Industry Security of
Payment Amendment Bill 2015 (Tas).
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relevant law away from court’s involvement.
In the immediate wake of Brodyn v Davenport [2004]
NSWCA 394, it was argued that the challenge to
uphold the integrity of the adjudication regime now
fell to government and industry by implementing the
necessary systems and procedures to ensure that
adjudication determinations are of the highest possible
standard.139 In order to achieve such quality control, it
is proposed that a swift system of review within the
legislation is needed. WASAT in reviewing
adjudications ‘decision to dismiss’ was successful in
keeping around 50% the caseload away from WASC
achieving the four objects of the Act (ie, informality,
cost and time effectiveness and fairness). Notably, the
Singaporean Act (s 18) provides a wider merits review
system which is “worthy of serious consideration by
Australian Parliaments contemplating review of their
security of payment statutes”.140 This review system,
however, does not generally entertain the review of
jurisdictional challenges which is best dealt with by
courts to decide upon.
Apparently, a deliberate hybrid review scheme for
complex adjudications, it is proposed, may be a relief
to capture erroneous decisions of complex
adjudications which may eventually minimise the
court and lawyer’s involvement in statutory
adjudication.141
7.2 What would be the
appropriate threshold to
differentiate between simple
and complex claims?
Monetary threshold. With three sliding scales for
adjudicator’s determination.
Less than $100K in 14 days. (10 business days)
$100K to 1 M in 28 days.
More than 1 M in 42 days. (in line with FIDIC Red
book 1999 for Engineer’s determination)
7.3 Could contracts
involving small amounts of
money still be complex to
adjudicate?
That is rarely happening where legal and expert
involvement is minimal except in cases where
adjudicator’s jurisdiction is challenged.
7.4 Should there be two
or more categories for
claims? For example:
simple, standard and
complex, or just standard
and complex.
Simple for less than $100 k
Standard for $100 k to 1 M
Complex for more than 1M
139 Murray, J, “The application of administrative law standards to the Security of Payment Act', 2006, 22 BCL 162. 140 Christie, M, “The Singapore Security of Payment Act: Some lessons to be learned from Australia”, 2010, 26 BCL 228, p
231. 141 As to the use of the discretion to deny certiorari where there lies another review option, see for instance, the High Court's
decision in The Queen v Cook; Ex parte Twigg (1980) 147 CLR 15; [1980] HCA 36 [29], [30] and [34] (rights of appeal
held by way of rehearing to the Family Court in that case against a judge of the Family Court); Re Baker; Ex parte Johnston
(1981) 55 ALJR 191 and Martin CJ in Re Carey; Ex parte Exclude Holdings Pty Ltd [2006] WASCA 219; (2006) 32 WAR
501 [128] - [140]. Cited in Re Graham Anstee-Brook; Ex Parte Mount Gibson Mining Ltd [2011] WASC 172 at [64].
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7.5 What would be
appropriate time frames for
complex contracts?
42 days as above without any further EOT to
adjudicators to make a determination.
7.6 Should claims above
a certain threshold be
removed from the Act and
dealt with solely by the
court system? If so, what
should this threshold be?
No need as long as a review scheme is established to
capture erroneous determinations resulting from
hasty adjudication process.
8.1 Are supporting
statements effective in
helping subcontractors to
get paid?
8.2 Do head contractors
provide accurate
information in supporting
statements?
8.3 Should there be an
exemption for the
supporting statement
requirement where the head
contractor is insolvent/in
receivership/in
liquidation/in
administration?
8.4 Should retention
money trust accounts be
required for contracts worth
less than $20 million?
8.5 Should the retention
money trust accounts be
required for all contracts
regardless of value?
8.5 Should there be a
lower threshold for retention
money trust accounts? If so,
what should it be?
8.7 Should contracts under
the lower threshold have
simpler retention money
trust account reporting
requirements?
8.8 Should the maximum
amount of retention money
for a contract be prescribed?
For example, as a
percentage of the contract’s
total value.
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REFERENCES
1. Australian Legislation Reform Sub-Committee 2014, Report on Security of Payment
and Adjudication in the Australian Construction Industry.
2. Christie, M. (2010). The Singapore Security of Payment Act: Some lessons to be
learned from Australia. 26 BCL 228.
3. Davenport, P. (2015). An update on security of payment in the construction industry in
Queensland. RICS Cobra 2015-Sydney.
4. Fong, C. K. (2013). Security of Payments and construction Adjudication, second
edition, LexisNexis.
5. Gerber, P & Ong, B 2013, 'Best Practice in Construction Disputes: Avoidance,
Management and Resolution'.
6. Jacobs, M 2014, Security of Payment in the Australian Building and Construction
Industry., fifth edition, Thomson Reuters.
7. Keong, C. S. (2012). "Foreword", Security of Payments and Construction Adjudication,
Fong, C, second edition, LexisNexis.
8. Madden, J. M. (2006). Building and construction Industry SOP (amendment) Bill 2006
(Vic), Second speech, p2419, (15 June 2006).
9. Marquet, P 2015, 'Judicial review of security of payment adjudications: Key doctrinal
uncertainties and proposals for reform', 31 BCL 4.
10. Parliamentary Committee (2014). Report No. 52, Building and Construction Industry
Payments Amendment Bill 2014.
11. Wallace, A 2013, Discussion Paper – Payment dispute resolution in the Queensland
building and construction industry-Final Report.
12. Yung, P, Rafferty, K, McCaffer, R & Thomson, D 2015, 'Statutory Adjudication in
Western Australia: Adjudicators’ Views', Engineering, Construction and Architectural
Management, vol. 22, no. 1.
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