By Samer Skaik

Quality of adjudication decisions under the Security of Payment legislation may mean different things to different people. The ultimate yardstick by which adjudication quality can be measured is to be found in the legal accuracy – both in terms of procedural and substantive fairness – of adjudication decisions whether such decisions involve a determination on the merits or dismissal for want of jurisdiction. However, recognising that there is a trade-off between fairness and efficiency in dispute resolution,[1] this criterion needs to be calibrated in the light of the legislative objective, being to provide a rapid dispute resolution procedure in order to expedite cash flow on construction contracts. Thus, it would clearly be absurd to hold adjudication decisions up to as higher level of scrutiny as in arbitration or litigation.

On the other hand, there surely must be a quality ‘floor’ below which quality of adjudication decision must not fall otherwise the overemphasis on efficiency in lieu of justice would result in a process that the parties would perceive as unfair with the consequence that they are more likely to seek to undermine it.[2] In the context of adjudication, it is proposed, an adequate level of quality be defined in terms of adjudication decision that meets the basic and substantial requirements of a satisfactory dispute resolution system. The criteria of that definition may be sought as follows:

  • Adjudicators act within their legislative jurisdiction.
  • The key elements of natural justice or procedural fairness are afforded.
  • Adjudicators make a good faith attempt to exercise their powers under the legislation.
  • Adjudication decisions are free from gross non-jurisdictional errors of law that materially and substantially affect the decision.

A review of the relevant literature identifies the following seven key causes of poor quality of complex adjudication outcome as below. It is noted, however, that such list is not exhaustive and there may exist some other causes. This article only examines the first cause.

  1. Flawed adjudicator appointment.
  2. Relaxed eligibility criteria for, and regulation of, adjudicators.
  3. Intimidation of adjudicators.
  4. Fuzzy jurisdictional boundaries of adjudicators.
  5. Abbreviated adjudication timeframes.
  6. Limited Inquisitorial Powers.
  7. Want of merits review mechanism.

Flawed adjudicator appointment:

The way in which an adjudicator is appointed may have a direct bearing on the quality of the outcome. Under the East Coast model (save for Victoria)[3], the claimant is solely allowed to choose its preferred ANA. Thus, the appointment of adjudicators by ANAs has been criticised for its leading to: perceptions that profit-driven ANAs are biased towards claimants,[4] 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,[5] 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 ANA[6] or in expectation of receiving future appointments as an adjudicator from the ANA.[7] Such matters clearly contravene one of the fundamental tenets of natural justice, that the decision-makers conduct 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.

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).[8] Having said that, the statistics in relation to adjudication under the Western Australian 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).[9] 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. The Table below demonstrates the difference in the appointment regulation of adjudicators across States.
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.[10] 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.[11]

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”.[12]

In addition, the SoP legislation in Eastern States allow the adjudication response to be lodged after the adjudicator’s acceptance of the referral.[13] 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.

Conclusion:

There is a great scope for improving the mechanism of adjudicator’s appointment in all Australian States and Territories in order to improve the satisfaction of the industry with the quality of the adjudication outcome. Confining the appointment process with non for profit nominating authorities and/or allowing both parties to agree on prescribed appointers in their contract or by further agreement may hold as worthwhile options.

End notes:

[1] Cruikshank, J and Susskind, L “Breaking the impasse: Consensual approaches to resolving public disputes”, Basic Books, 1987, pp 21-33.

[2] Gerber, P and Ong, B, “Best Practice in Construction Disputes: Avoidance, Management and Resolution”, 2013, p 332; Cruikshank and Susskind, pp 21-33.

[3] The Victorian SOP 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.

[4] Wallace, A 2013, Discussion Paper – Payment dispute resolution in the Queensland building and construction industry-Final Report “Wallace Report”, pp 131-145; Collins, B., “Inquiry into Construction Industry Insolvency in NSW”, 2012, NSW Government, p72.

[5] See Wallace Report, p 140.

[6] See Wallace Report, pp 134, 148-150.

[7] See Wallace Report, p 145.

[8] 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.

[9] 2014-2015 annual Report, Construction contract Act 2004 (WA).

[10] See Code of Conduct for Authorised Nominating Authorities, Small Business Commissioner, SA, p3.

[11] See ‘Authorised Nominating Authorities Conditions of Authorisation’, the Vic Act, 2013

[12] See Wallace Report, p 230.

[13] As per the NSW Act, the respondent can submit the response within 2 business days after the adjudicator’s acceptance.

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