By Samer Skaik

Many commentators have suggested that,[1] the “one size fits all” approach taken by the Australian security of payment legislation (save for Queensland) is no longer appropriate (if indeed it ever was) for producing quality outcomes in adjudications of complex payment claims, where larger and more difficult payment disputes are involved.

In the search for existing parameters to diagnose what might be a complex adjudication, the most obvious point of initial reference is the Wallace Report,[2] upon which the Queensland Parliament based its key reform to the Act, introducing a dual scheme of adjudication, that came into effect on 15 December 2014. For the purposes of its dual scheme, the amended Queensland Act classifies all claims greater than $750,000 as complex payment claims. Regarding his basis for choosing this amount Wallace, whilst acknowledging that such value was likely to be a source of great debate, decided to use the monetary limitto tie it in with that of the civil jurisdiction of the District Court of Queensland.[3]

Notably, however, Parliament adjusted the definition of complex payment claims recommended by Wallace Report, which originally classified complex payment claims as claims above $750,000 or any claims on the basis of time-related or latent condition cost. Upon further investigation, the Parliamentary Committee set up to examine and report on the relevant Bill advised against accepting the Wallace Report’s inclusion of claims on the basis of time-related or latent condition cost.[4] This advice was based upon concerns about the ambiguity and potential for confusion amongst contractors with respect to the meaning of latent condition and time-related costs, as well as the potential for these types of costs to have a broad scope of application meaning that even some simple claims (e.g., claims based on time sheet day work or discovery of hard rock during excavation) could be considered as a complex claims.

The eventual definition of complex payment claims ignores the fact that the claimed amount is no indication of the real amount and issues in dispute.[5] Indeed, the claim complexity would not be diagnosed properly unless the respondent has disputed the payment claim by the means of payment schedule and adjudication response. Also, it can be argued that the amendment fails to completely address the problem of ‘the one size fits all’ approach for large payment claims significantly above the $750,000 threshold, such that a $10 million claim follows the same timeframes and procedures as that of $1 million claim.

If the nature of the claim is excluded from any definition (as happened in Queensland), large and complex claims would be defined by a monetary amount alone. A large claim per se does not, of course, necessarily reflect complexity in the submission as some large claims are straightforward calculations of the quantity and amount of executed works. To counter this, Queensland has regulated the appointed process so only senior adjudicators are appointed in light of material issues in dispute regardless of the value of the payment claim.[6] Those issues include delay claims, latent condition, jurisdictional arguments and contractual interpretation.

Nonetheless, as Yung et al found, larger claims are more likely to involve complex legal issues.[7] Thus, it may be valid to diagnose complex adjudications for the purpose of a dual adjudication scheme according to solely amount of the disputed payment claim.

Looking elsewhere for indicators of claim complexity in relation to adjudication, section 10(b) of the Victorian Act excludes many types of payment claims with likely complexity from being adjudicated including claims for certain disputed variations, damages under or in connection with the contract, time-related costs, latent conditions or changes in regulatory requirements. Such exclusions indicate that the Victorian Parliament did not regard the ‘one size fits all’ adjudication scheme appropriate for complex claims. This raft of exclusions, however, has been blamed for adding to the complexity of the Victorian Act itself, resulting in a lower adjudication usage rate comparing to NSW and Queensland.[8]

Section 31(ii)(iv) of the Western Australian Act provides that an adjudicator must dismiss an adjudication application without making a determination of its merits if satisfied that it is not possible to fairly make a determination because of the complexity of the referred matter. The NT Act has a similar provision. Perhaps, this duty to dismiss must be exercised when legal complex arguments are raised before a non-legally trained adjudicator. Apparently, the legislatures in Western States are content to leave the decision about complexity of a payment dispute up to the adjudicator, although the judiciary has required that an adjudicator must provide adequate reasons for dismissal due to complexity and has commented “upon the need for adjudicators not to too readily form a view that a matter is too complex to be fairly determined.”[9] Notably, in the English High Court decision of CIB Properties Limited v Birse Construction,[10] the Court preferred that the suitability of a matter for adjudication not be assessed on whether it was too complicated, but whether the adjudicator was able to reach a fair decision within the timetable.

Conclusion

Apparently, there is a need for a better understanding of what would amount to complex adjudications in light of the above discussed proposals before any attempt is undertaken by legislatures to set out a separate scheme for dealing with complex adjudications. As such, it could be argued that the implemented scheme in Queensland in December 2014 may not be sustainable on the long term and it is the time for the criteria of complex adjudication to be revisited as part of the potential law reforms following the outcome of the discussion paper released in May this year where the Author has made a full submission proposing a range of issues for a better operation of security of payment legislation in Queensland.

End notes:

[1] See, eg, Coggins, J, “From disparity to harmonisation of construction industry payment legislation in Australia: A proposal for a dual process of adjudication based upon size of progress payment claim”, Australasian Journal of Construction Economics and Building, 2011, vol. 11, no. 2, pp. 34-59; Wallace, A, “Discussion Paper – Payment dispute resolution in the Queensland building and construction industry-Final Report”, 2013; The SoCLA Report as in fn 20 above.

[2] Wallace, A 2013, Discussion Paper – Payment dispute resolution in the Queensland building and construction industry-Final Report (hereafter “Wallace Report”).

[3] Wallace Report, n 32, p 183.

[4] Parliamentary Committee, “Report No. 52, Building and Construction Industry Payments Amendment Bill 2014”, 2014, page 20.

[5] Davenport, P, ‘An update on security of payment in the construction industry in Queensland’, paper presented to RICS Cobra 2015, Sydney.

[6] See Adjudicator Grading and Referral Policy 2015, Queensland Building and Construction Commission, p 8

[7] A survey of 22 adjudicators in Western Australia carried out by Yung et al found that while larger claims are not by virtue more complex, they have a greater potential to involve complex points of law– see Yung, P, Rafferty, K, McCaffer, R & Thomson, D, “Statutory Adjudication in Western Australia: Adjudicators’ Views”, Engineering, Construction and Architectural Management, 2015, (hereafter “Yung et al.”), vol. 22, no. 1,., p 61.

[8] Shnookal, T, “Building Adjudication in Victoria: The Building and Construction Industry Securty of Payment Act 2002”, 37 Building Dispute Practisioners Soceity, 2009, News 9, page 9.

[9]Silent Vector Pty Ltd T/as Sizer Builders and Squarcini [2008] WASAT 39.

[10] [2004] EWHC 2365.

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