WRITTEN SUBMISSION ON BCISPA 1999 (NSW): · PDF filethe Australian Statutory Adjudication with a ... construction law and statutory adjudication and I ... I was also selected by FIDIC

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

Samer Skaik’s Submission on NSW SOP Act

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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.

http://www.austlii.edu.au/cgi-bin/LawCite?cit=%282010%29%2078%20NSWLR%20393


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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.

http://www.austlii.edu.au/au/cases/wa/WASAT/2005/269.html


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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.


44 | P a g e

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


49 | P a g e

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.


55 | P a g e

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.


59 | P a g e

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.


61 | P a g e

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.


62 | P a g e

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].

http://www.austlii.edu.au/au/cases/cth/FCA/1995/1726.html

http://www.austlii.edu.au/au/cases/nsw/NSWSC/2010/1468.html



http://www.austlii.edu.au/au/cases/qld/QSC/2009/205.html


http://www.austlii.edu.au/au/cases/cth/FCA/1995/1726.html








63 | P a g e

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.


64 | P a g e

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).


65 | P a g e

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].


66 | P a g e

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.