ArticlePDF Available

Taking statutory adjudication to the next level: a proposal for review mechanism of erroneous determinations

Authors:

Abstract and Figures

Statutory adjudication was introduced in the security of payment legislation to quickly and fairly resolve payment disputes in the construction industry. One of the interesting features in some legislation is the availability of an express limited right of aggrieved parties to apply for review against erroneous adjudication decisions. In Singapore, the legislation has no equivalent elsewhere in that it provides for a full review mechanism of erroneous determinations considering the fact that adjudicators often have to grapple with complex issues and sheer volume of documents within a very tight timeframe. This paper discusses the various review mechanisms of erroneous adjudication determinations then asks the question as to whether an appropriately devised legislative review mechanism on the merits, should be an essential characteristic of any effective statutory adjudication scheme. The paper concludes by making the case that an appropriately designed review mechanism as proposed in the paper could be the most pragmatic and effective measure to improve the quality of adjudication outcome and increase the disputants' confi dence in statutory adjudication. This paper is based upon a paper by the author which received a High Commendation in the Student Division of the Society of Construction Law Australia Brooking Prize for 2016.
Content may be subject to copyright.
TAKING STATUTORY ADJUDICATION TO THE NEXT
LEVEL: A PROPOSAL FOR REVIEW MECHANISM OF
ERRONEOUS DETERMINATIONS
SAMER SKAIK
1
BEng, MSc CPM (W/D), MIEAust, PMP, ACIArb
ABSTRACT
Statutory adjudication was introduced in the security of payment legislation to
quickly and fairly resolve payment disputes in the construction industry. One of
the interesting features in some legislation is the availability of an express limited
right of aggrieved parties to apply for review against erroneous adjudication
decisions. In Singapore, the legislation has no equivalent elsewhere in that it
provides for a full review mechanism of erroneous determinations considering
the fact that adjudicators often have to grapple with complex issues and sheer
volume of documents within a very tight timeframe. This paper discusses the
various review mechanisms of erroneous adjudication determinations then
asks the question as to whether an appropriately devised legislative review
mechanism on the merits, should be an essential characteristic of any effective
statutory adjudication scheme. The paper concludes by making the case
that an appropriately designed review mechanism as proposed in the paper
could be the most pragmatic and effective measure to improve the quality of
adjudication outcome and increase the disputants’ confi dence in statutory
adjudication. This paper is based upon a paper by the author which received
a High Commendation in the Student Division of the Society of Construction
Law Australia Brooking Prize for 2016.
Keywords: ADR, Judicial review, Merits review, Review mechanism, Statutory
adjudication.
1. INTRODUCTION
Statutory adjudication is a fast-track payment dispute resolution process
established within the Security of Payment (“SOP”) legislation to resolve
payment disputes to keep the cash fl owing down the contract chain in
1
Lecturer and PhD Researcher, School of Architecture and Built Environment, Deakin University,
Locked Bag 20001, VIC 3220, Geelong, Australia; Founder and Director, Construction Management
Guide, Email: samer.skaik@deakin.edu.au or skaiknet@cmguide.org
© Informa UK plc. No copying or sharing of this document is permitted.
This article first appeared in the International Construction Law Review, Part 3 July 2016, [2016] ICLR 287
288 The International Construction Law Review [2016
construction projects. Its rapid, highly regulatory and temporarily binding
nature has led to it being often described as a “quick and dirty”
2
process
that delivers “rough and ready”
3
justice. In the context of small or simple
payment claims, it could be argued that the nature of such claims is both
appropriate and justifi ed in order to protect a vulnerable class of smaller
businesses within the construction sector. However, the eventuating “one
size fi ts all” coverage of the adjudication scheme has resulted in a mounting
swell of complaints and dissatisfaction with the adjudication outcome of
larger and/or more complex cases, particularly in Australia.
4
Adjudicators
of such cases often have to grapple with complex legal arguments and large
volumes of submissions within very limited timeframes. Such dissatisfaction
is manifest in the large number of judicial challenges to adjudicators’
determinations in recent years which has frustrated the object of the
SOP legislation and deterred many construction fi rms from using the
adjudication scheme to resolve their payment disputes.
5
In addition, parties to any payment dispute seek to have that dispute
resolved in a quick, inexpensive and informal manner. Not only does a
contractor seek to recover disputed progress payments from its employer
but that contractor also has a keen interest in having all its payment disputes
resolved with fi nality to ensure certainty in business. It is advantageous for
both parties to have a trustworthy opinion (albeit one that is made on an
interim basis) upon the merits of the payment dispute which would stand
as a reliable indicator of the likely fi nal outcome should the parties initiate
further legal proceedings on the same dispute. Accordingly, both parties
will be in a better position to deal with similar future disputes and plan their
nancial resources to mitigate the effect of the dispute resolution outcome.
As such, it is submitted that there is no valid reason to restrict the
operation of the statutory adjudication scheme in a way that keeps it too far
from operating as an effective alternative dispute resolution (“ADR”) for
most of the payment disputes cases. This could be achieved by optimising
the adjudication scheme to increase the confi dence of disputants in the
adjudication outcome. To optimise adjudication as an effective binding
dispute resolution, there are three key essential requirements: procedural
fairness, accessibility and fi nality.
6
To attain some (if not all) of the above essential requirements, a range of
different legislative review mechanisms of erroneous determinations have
2
Wallace, A, Discussion Paper – “Payment dispute resolution in the Queensland building and
construction industry – Final Report”, 2013, pp 68, 71, (hereafter: “Wallace Report”).
3
Watpac Construction (NSW) Pty Ltd v Austin Corp Pty Ltd [2010] NSWSC 168 paragraph 127 (McDougall J).
4
See, e.g., Society of Construction Law Australia, Australian Legislative Reform Subcommittee,
“Report on Security of Payment and Adjudication in the Australian Construction Industry”, February
2014, (hereafter: “SoCLA Report”); Moss, Alan, “Review of Building and Construction Industry Security
of Payment Act 2009”, May 2015, South Australia; Wallace Report, above fn 2.
5
SoCLA Report, above fn 4, p 37.
6
Gerber, P and Ong, B, Best Practice in Construction Disputes: Avoidance, Management and Resolution ,
LexisNexis, 2013.
© Informa UK plc. No copying or sharing of this document is permitted.
This article first appeared in the International Construction Law Review, Part 3 July 2016, [2016] ICLR 287
Pt 3] Taking Statutory Adjudication to the Next Level 289
been introduced in certain jurisdictions. The main purpose of having such
review schemes is to provide aggrieved parties with a convenient remedy
to appeal the decision of errant adjudicators in certain situations. Among
those, the Singaporean and the prospective Tasmanian review mechanisms
are the only schemes that allow for a full legislative review of the merits of
erroneous adjudication determinations.
This paper critically examines the various limited and full review
mechanisms of erroneous determination then asks the question as to whether
an appropriately devised review mechanism within the SOP legislation,
should be an essential characteristic of any effective statutory adjudication
scheme, or would it merely add an unnecessary and undesirable extra layer
of time, cost and complexity?
2. LIMITED REVIEW MECHANISMS
Many jurisdictions expressly grant aggrieved parties the right to challenge
adjudication decisions. Such right is typically limited, albeit to varying degrees.
The limited right for review is expressly provided for in the SOP legislation
in New Zealand, Malaysia, Ireland, the Australian Capital Territory, Western
Australia, Northern Territory and Victoria as discussed below.
2.1. New Zealand
The New Zealand’s Construction Contracts Act 2002 as amended in
December 2015 applies to both general and residential construction works.
An adjudicator’s determination is binding on the parties to the adjudication
and continues to be of full effect even though a party has applied for
judicial review of the determination; or any other proceeding relating to
the dispute between the parties has been commenced (section 60). In Rees v
Firth ,
7
the Court of Appeal noted that the ambit of judicial review should not
be restricted to jurisdictional errors as is the case in other jurisdictions. The
court went on to opine at paragraph 22 that a person who does not accept
an adjudicator’s determination should not seek relief by way of judicial
review but rather litigate, arbitrate or mediate the underlying dispute.
Furthermore, the NZ Act expressly gives the defendant the right to
oppose enforcement of the adjudication determination by the claimant in
the context of enforcement proceedings. The defendant must apply within
ve working days after receipt of a copy of the enforcement application
for an order that entry of the adjudicator’s determination as a judgment
be refused (section 74(1)). This time limit was originally set out as
15 working days but was reduced by virtue of 2015 Amendment Act to avoid
7
[2011] NZCA 668.
© Informa UK plc. No copying or sharing of this document is permitted.
This article first appeared in the International Construction Law Review, Part 3 July 2016, [2016] ICLR 287
290 The International Construction Law Review [2016
unnecessary delays in enforcement proceedings. The application for such
order may be made only on strictly limited grounds which include, mainly,
that: the contract to which the adjudicator’s determination relates is not a
construction contract; a condition imposed by the adjudicator in his or her
determination has not been met or that due to a change in circumstances,
which was not caused in any part by the defendant; or it is not possible
to comply with the adjudicator’s determination (section 74(2)). The High
Court of New Zealand further clarifi ed the ambit of judicial review in
statutory adjudication and held that:
“The jurisdiction of this Court in judicial review is discretionary. It is not exercised
to interfere with the conventional procedures of the District Court or of statutory
tribunals in relation to which there are statutory appeal processes permitting access to
this Court on appeal. This court exercise its judicial review jurisdiction unless there is
some residual risk of uncorrected illegality that cannot conveniently be dealt with by
the District Court or the tribunal.”
8
The Act, however, provides for a limited alternative avenue for review of an
adjudicator’s determination in respect of an owner/employer who was not
the respondent (section 71A). Such an owner may apply to the District Court
for a review of the adjudicator’s determination in circumstances where the
owner is jointly and severally liable with the respondent to make a payment
to the claimant. An application for review must be made by fi ling a notice in
the nearest District Court and the notice must be fi led within 20 working days
after the date of the determination or within any further time that the District
Court may allow (section 71B). The review must be conducted as a hearing
de novo and the court may quash the determination, and substitute for it any
other determination that the adjudicator could have made in respect of the
original proceedings or refuse the application (section 71C). An application
for review does not operate as a stay of the adjudicator’s determination unless
a District Court Judge, on application, so determines (section 71D).
2.2. Malaysia
The Malaysian Construction Industry Payment and Adjudication Act 2012
came into operation in April 2014. The legislation differs from other
commonwealth jurisdictions in that it specifi cally allows for aggrieved
parties in an adjudication to directly apply to the High Court to set aside a
decision on specifi c grounds (section 13(a)). The grounds include denial
of natural justice, bribery, fraud, lack of impartiality or independence and
excess of jurisdiction (section 15). Section 15, however, does not provide
any requirement for the time within which an application to set aside can be
made. However, the High Court clarifi ed this point by noting: “Presumably
and logically, this must be before the adjudication decision is enforced under
8
Concrete Structures (NZ) v Palmer , HC ROT, CIV-2004-463-825, 6 April 2006 at paragraph 15.
© Informa UK plc. No copying or sharing of this document is permitted.
This article first appeared in the International Construction Law Review, Part 3 July 2016, [2016] ICLR 287
Pt 3] Taking Statutory Adjudication to the Next Level 291
section 28”.
9
Judicially, it was explained that an application to set aside the
adjudication decision cannot be deemed as an appeal against the adjudication
decision.
10
Rather, the court exercises its jurisdiction as conferred by section
15, guided by the principles and purpose of the relevant legislation.
In ACFM Engineering & Construction v Esstar Vision ,
11
the court clarifi ed
the scope of judicial intervention and held at paragraph 65 that: “Section
15 provides for only four grounds upon which the adjudication decision
may be set aside. This court cannot rewrite that jurisdiction. The court
should not re-evaluate the adjudication decision”. The court went on to say
at paragraph 70:
“[T]he Adjudicator does not need to get the correct answer. All the Adjudicator needs
to do is to decide and give the parties an answer to their dispute. He has done precisely
that and he cannot be faulted. Further, he cannot be faulted for analysing each of
those issues, and perhaps getting any of them wrong, which we shall soon see, he in fact
did not, even if that, for any moment, is a relevant consideration.”
It could be argued then that section 15 is intended by Parliament to
act as an ouster (privative) clause so as to limit judicial intervention in
the operation of statutory adjudication. Although that section provides
for narrow or limited grounds, some of those grounds have an extensive
application, namely, the denial of natural justice.
12
On that basis, the door
may always be left ajar for aggrieved parties to challenge adjudication
decisions even if an adjudicator’s breach of natural justice has not necessarily
affected the outcome, which is in contrary to the settled law in Australia
that the adjudicator’s denial of natural justice must be substantial in order
for a challenge to be successful in court.
13
It is, therefore, submitted that
until the Malaysian case law upon the interpretation of the ambit of judicial
review reach some maturity over the next few years, the boundaries of the
grounds laid down in section 15 will remain blurred and uncertain.
Aggrieved parties of erroneous determinations on other grounds are,
by contrast, left without remedy but to bring curial proceedings to fi nally
resolve their payment disputes. Having said that, it is submitted that
adjudicators under the Malaysian scheme will be less prone to errors as
they enjoy extensive range of powers and much longer timeframes to reach
decisions (i.e. 45 working days) compared to other jurisdictions (e.g. 14
days in Australia and 28 days in the UK).
9
WRP Asia Pacifi c v NS Bluescope Lysaght Malaysia [2015], Kuala Lumpur High Court Originating
Summons No 24C-8-04/2015 at paragraph 36.
10
ACFM Engineering & Construction v Esstar Vision [2015], Kuala Lumpur High Court Originating
Summons No 24C-20-06/2015 at paragraph 34.
11
[2015], Kuala Lumpur High Court Originating Summons No 24C-20-06/2015.
12
WRP Asia Pacifi c v NS Bluescope Lysaght Malaysia [2015], Kuala Lumpur High Court Originating
Summons No 24C-8-04/2015 at paragraph 29.
13
See, e.g., Brodyn Pty Ltd (tia Time Cost and Quality) v Davenport (2004) 61 NSWLR 421 at 442
(Hodgson JA), Transgrid v Siemens Ltd (2004) 61 NSWLR 521 at 539 (Hodgson JA), Chase Oyster Bar v
Hamo Industries [2010] NSWCA 190 at 146 (McDougall J), John Holland Pty Ltd v Walz Marine Services Pty
Ltd [2011] QSC 39 at 40 (Wilson J).
© Informa UK plc. No copying or sharing of this document is permitted.
This article first appeared in the International Construction Law Review, Part 3 July 2016, [2016] ICLR 287
292 The International Construction Law Review [2016
2.3. Ireland
The Irish Construction Contracts Act 2013 is yet to commence operation.
The legislation, unlike its counterpart in the UK, is limited to dealing
with payment disputes (section 6(1)). Section 6(10) provides that: “The
decision of the adjudicator shall be binding until the payment dispute
is fi nally settled by the parties or a different decision is reached on the
reference of the payment dispute to arbitration or in proceedings initiated
in a court in relation to the adjudicator’s decision”. Accordingly, an
aggrieved party has an express right under the legislation to challenge an
adjudication determination in the High Court by way of judicial review,
but the legislation is silent upon the grounds that an aggrieved party may
rely upon to seek judicial review. Under Irish law, however, an aggrieved
party may rely (alongside jurisdictional errors) on other grounds such as
unreasonableness,
14
disproportionality,
15
and insuffi cient reasons by the
administrative decision-maker.
16
As such, it has been argued that whilst
the judicial review is primarily concerned with the procedural legality of the
decision, the doctrines of reasonableness, irrationality and proportionality
require a rigorous scrutiny of the merits of the decision itself and not simply
the decision-making process.
17
The increased “Europeanisation” of Irish
law may have infl uenced the Irish courts to widen the existing categories
of relief, which may be observed from recent judgments relating to the
obligation upon decision-makers to give reasons, the right of parties to an
oral hearing and a widened test of irrationality/unreasonableness .
18
According to the Rules of the Superior Courts (Judicial Review) 2011,
19
no application for judicial review shall be made unless the leave of the
court has been obtained (r 20(1)). This condition acts as a fi lter to exclude
trivial applications and limit judicial review to those applications which
have arguable cases in law. The applicant must precisely state and detail the
reasons and grounds on which relief is sought (amere assertion in general
terms will not suffi ce) (r 20(3)) accompanied by an affi davit which verifi es
the facts relied on (r 20(2)(b)). An application for leave shall be made
within three months from the date when grounds for the application fi rst
arose. The court, however, may on an application for that purpose, extend
14
See, e.g., Meadows v Minister for Justice, Equality and Law Reform [2010] IESC 3, The State (Keegan) v
Stardust Compensation Tribunal [1986] IR 642, O’Keeffe v An Bord Pleanala [1993] IR 39.
15
Meadows v Minister for Justice, Equality and Law Reform [2010] IESC 3.
16
See, e.g., Kelly v Commissioner of An Garda Siochana [2013] IESC 47, Flynn v Medical Council [2012]
IEHC 477.
17
See, e.g., Hogan, G, “Judicial Review, The Doctrine of Reasonableness and The Immigration
Process” [2001] 6 Bar Review 329, Biehler, H, “Curial difference in the context of judicial review of
administrative action post-Meadows”, Irish Jurist , 2013, 49, 29–48.
18
Gibbons, G, “Judicial Review: Procedural Drawbacks v Increased Substantive Rights”, The Galway
Solicitor’s Bar Association , 2013, p 3.
19
SI 2011 No 691. The rules replace the previous Rules 18 to 28 of Order 84 of the Rules of the
Superior Courts 1986.
© Informa UK plc. No copying or sharing of this document is permitted.
This article first appeared in the International Construction Law Review, Part 3 July 2016, [2016] ICLR 287
Pt 3] Taking Statutory Adjudication to the Next Level 293
that time in specifi c circumstances (r 21(3)). If leave to appeal is granted,
the applicant may then proceed with judicial review proceedings. The court
has jurisdiction, in addition to quashing an erroneous decision, to remit the
matter to the decision-maker with a direction to reconsider it and reach a
decision in accordance with the fi ndings of the court (r 27(4)).
Ireland would, therefore, at this early stage appear to allow a broader
right to review of adjudication decisions than its counterparts in the UK
and Australia. Aggrieved parties have a greater opportunity to challenge
unfavourable administrative decisions (e.g. adjudication decisions) in light
of recent case law developments.
20
The extent to which merits review of
erroneous adjudication determinations is permitted by the courts remains
however to be seen in time, after the Irish scheme comes into operation.
2.4. Australian Capital Territory (ACT)
The Building and Construction Industry (Security of Payment) Act 2009
(the “ACT Act”) provides that an appeal may be made to the ACT Supreme
Court on any question of law arising out of an adjudication decision subject
to certain conditions being satisfi ed.
21
Either party may appeal from an
adjudication decision with either the consent of the other party or leave of
the Supreme Court.
22
According to Court Procedural Rules (ACT) 2006,
23
an application for leave to appeal should be fi led not later than 28 days
after the day on which the order appealed from is made, or any further time
allowed by the court.
The Supreme Court must not grant such leave unless it considers that
having regard to all the circumstances, the determination of the question of
law concerned could substantially affect the rights of one or more parties to
the adjudication decision; and there is either a manifest error of law on the
face of the adjudication decision, or strong evidence that the adjudicator
made an error of law and that the determination of the question may add,
or may be likely to add, substantially to the certainty of the law.
24
These
restrictions on appeal are very similar to an appeal against an arbitral award
pursuant to section 38(5) of the Commercial Arbitration Act 1986 (ACT).
In its fi rst decision regarding a respondent’s appeal from an adjudicator’s
decision, the Supreme Court in Walton Construction Pty Ltd v Pines Living
Pty Ltd
25
held that since the ACT Act is very similar to the NSW Act, and
considering the fact that the NSW Act has been in force for a substantial
period of time and the subject of a very detailed consideration in the NSW
20
Gibbons, above fn 18, p 14.
21
Building and Construction Industry (Security of Payment) Act 2009 (ACT), section 43(2).
22
Building and Construction Industry (Security of Payment) Act 2009 (ACT), section 43(3).
23
Court Procedures Rules 2006 (ACT), rr 5072, Pt 5.2.
24
Building and Construction Industry (Security of Payment) Act 2009 (ACT), section 43(4).
25
[2013] ACTSC 114 at paragraph 18.
© Informa UK plc. No copying or sharing of this document is permitted.
This article first appeared in the International Construction Law Review, Part 3 July 2016, [2016] ICLR 287
294 The International Construction Law Review [2016
Supreme Court and Court of Appeal, the decisions of those courts will
be of signifi cant utility in interpreting the ACT Act. The court went on to
highlight the signifi cant difference of the ACT Act which provides for a
limited capacity to appeal from an adjudicator’s decision. The court held
that:
26
“The grounds sought to be agitated in the section 43 appeal and in the certiorari
proceedings are similar. The certiorari proceedings have been brought in order to
avoid the consequences of the fact that the application for leave to appeal is out
of time. There is even an argument that the certiorari proceedings are out of time
because they have been fi led later than 60 days after the date when the grounds for the
grant of the relief sought fi rst arose.”
The Supreme Court may confi rm, amend or set aside the adjudication
decision; or remit the adjudication decision, together with the Supreme
Court’s opinion on the concerned question of law to either the original
adjudicator for reconsideration; or a new adjudicator as may be appointed by
the Supreme Court.
27
If an adjudication decision is remitted, the adjudicator
must make the new adjudication decision within 10 business days after the
day the decision was remitted or within the time directed by the Supreme
Court.
28
The ACT Supreme court has exercised its remittal authority
for the fi rst time in Fulton Hogan Construction Pty Ltd v Brady Marine &
Civil Pty Ltd .
29
In that case, Mossop AsJ found that the adjudicator made a
manifest error of law that could substantially affect the legal rights of the
parties and held:
“In my view it is appropriate to remit the adjudication decision to the adjudicator who
made the original decision. That is because there will be cost and time effi ciencies
in having the original decision-maker reconsider the claim. I do not accept that the
fact that the adjudicator has been found to have made an error of law is a reason for
remitting the decision to a different adjudicator. The reasons given by the adjudicator
refl ect a diligent attempt to disentangle the complicated factual and legal arguments
put forward by the parties and there is nothing to suggest that it would not be
appropriate for the same adjudicator to complete the adjudication upon remittal from
this Court.”
In addition, the ACT Act provides that the Supreme Court has jurisdiction
to entertain any question of law if the adjudicator consents, or if the parties
agree, provided that the determination of the question “might produce
substantial savings in costs to the parties, and that the question of law is
one in respect of which leave to appeal would be likely to be granted.”
30
This section is modelled closely on the appeal provisions under section 39
of the Commercial Arbitration Act 1986 (ACT). As such, it was argued that
the right of appeal under the ACT legislation makes adjudication a judicial
26
[2013] ACTSC 114 at paragraph 12.
27
Building and Construction Industry (Security of Payment) Act 2009 (ACT), section 43(6).
28
Building and Construction Industry (Security of Payment) Act 2009 (ACT), section 43(7).
29
[2015] ACTSC 384 at paragraph 67 (Mossop AsJ).
30
Building and Construction Industry (Security of Payment) Act 2009 (ACT), section 44.
© Informa UK plc. No copying or sharing of this document is permitted.
This article first appeared in the International Construction Law Review, Part 3 July 2016, [2016] ICLR 287
Pt 3] Taking Statutory Adjudication to the Next Level 295
process and, further, that the inherently substantial cost of defending
Supreme Court proceedings will deter many small contractors from
pursuing progress claims.
31
2.5. Western Australia and Northern Territory
Under the Western Australian Construction Contracts Act 2004 (WA), 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. The 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 satisfi ed 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 suffi cient for any other reason (section 31(2)(a)). This review is
carried out by the State Administrative Tribunal (WASAT). Similarly, the
Northern Territory’s Construction Contracts (Security of Payments) Act
2004 (NT) allows a review of an adjudicator’s decision by a Local Court to
dismiss an adjudication application without making a determination of its
merits (section 48). The grounds for dismissing applications are similar to
those in Western Australia (section 33(1)(a)).
The WASAT has jurisdiction to review the adjudicator’s decision to dismiss
upon application by either party. The reviewed decision can be affi rmed,
varied, set aside, or sent back to the adjudicator for reconsideration in
accordance with any directions, or recommendations, which the WASAT
considers appropriate.
32
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 (section 46(2)).
A review by the WASAT involves a hearing de novo on the merits in which
material that was not before the decision-maker may be considered.
33
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 ,
34
strict limitations have been imposed on allowing
new submissions before the WASAT and it was held at paragraphs 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 originally before the adjudicator in accordance with section 32 of the CC Act.
Accordingly, to the extent that any of the material provided to me was not before the
31
Davenport, P, Adjudication in the Building Industry , Federation Press, 2010, 3rd Edition, p 24.
32
Under the State Administrative Tribunal Act 2004 (WA), section 29(3).
33
State Administrative Tribunal Act 2004 (WA), section 27.
34
[2005] WASAT 269.
© Informa UK plc. No copying or sharing of this document is permitted.
This article first appeared in the International Construction Law Review, Part 3 July 2016, [2016] ICLR 287
296 The International Construction Law Review [2016
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, section 46(3) of the WA Act 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 Court
35
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.
2.6. Victoria
The Victorian Building and Construction Industry (Security of Payment)
Act 2002 (Vic) was amended in 2006 to introduce, inter alia, a review
mechanism of adjudication determinations valued in excess of AUS$100,000
(accounting also for any “excluded amounts”, which are defi ned under
section 10B to encompass, inter alia, non-claimable variations, amounts
relating to latent conditions, time-related cost and breach of contract).
36
In
the second reading speech of the 2006 amendment Bill, it was confi rmed
that such limit is given in order not “ to disadvantage small sub-contractors who
rely on prompt payment to stay in business ”.
37
The respondent can only apply for review if he or she has identifi ed that
amount as an excluded amount in the payment schedule or the adjudication
response, has paid to the claimant the adjudicated amount other than the
amounts alleged to be excluded amounts and has paid the alleged excluded
amounts into a designated trust account (section 28B (4 to 6)). The review
is carried out by a second adjudicator appointed by the original appointing
ANA. The ANA must provide information to the review adjudicator (section
28H) which includes the original adjudication application and response
from the original adjudicator.
38
The features of the review system are further
summarised in the comparative table (1) below.
This legislative solution would therefore appear to facilitate enforcement
of the unaffected portion of a partial valid adjudication determination.
Having said that, both the adjudication determination and review
determination are susceptible to judicial review as demonstrated in Grocon
Constructors v Planit Cocciardi Joint Venture (No 2) .
39
In that case, the court
35
[2014] WASC 52 at paragraphs 72–76.
36
Building and Construction Industry (Security of Payment) Act 2002 (Vic), sections 28A(a)
and 10B.
37
Second Reading Speech, Building and Construction Industry SOP (Amendment) Bill 2006 (Vic),
Madden, J M, p 2419, (15 June 2006).
38
Davenport, P, Adjudication in the building industry , Federation Press, 2010, 3rd Edition, p 272.
39
VSC 426 at paragraphs 35 and 102.
© Informa UK plc. No copying or sharing of this document is permitted.
This article first appeared in the International Construction Law Review, Part 3 July 2016, [2016] ICLR 287
Pt 3] Taking Statutory Adjudication to the Next Level 297
upheld both the adjudicator’s determination and the review determination,
and dismissed the appellant’s application. Interestingly, the Victorian
Supreme Court has accepted at least two applications by respondents for
judicial review. In doing that, the court has bypassed the review scheme
which emphasises that parties have the discretion to use either the review
mechanism or the readily available judicial review avenue.
40
In one of
these applications, the respondent sought judicial review instead of review
under the available legislative mechanism, and the court quashed the
adjudicator’s determination remitting it back to the same adjudicator for
reconsideration.
41
A possible strategic reason for a respondent’s bypassing
the legislative mechanism and seeking judicial review would be to avoid
making payment to the claimant. In the context of judicial review, the
respondent will only be required under the Act to pay the unpaid adjudicated
amount (usually the full amount) in court as security (section 28R5(b)).
This contrasts with the more demanding requirement under the legislative
scheme to pay the claimant the adjudication award value, as well as to pay
the alleged excluded amounts into a designated trust account.
Interestingly, Victoria has very recently introduced the Building
Legislation Amendment (Consumer Protection) Act 2016 (Vic) which will
come into force on 1 July 2017. That Act introduced a new ground for
discipline of building practitioners who fail to pay the adjudicated amount
due to be paid under the Building and Construction Industry (Security
of Payment) Act 2002 (Vic) within the relevant adjudication review time
period (section 179(1)(n)). The form of disciplinary action includes, inter
alia, imposing a penalty, suspending registration, cancelling registration
and/or disqualifying the practitioner from being registered for a specifi ed
period of up to three years (section 178). Whilst this novel legislation is
deemed a step in the right direction to give the adjudication decision some
“teeth” it has long needed, it does not address the situation where the
practitioner bypasses the legislative review mechanism and seeks judicial
review as explained above.
In his fi nal report on improving the SOP legislation in Queensland,
Andrew Wallace noted receiving a suggestion to limit the number of
applications to the court by providing a mechanism for the review of an
adjudication decision by another adjudicator, in a way that is similar to the
mechanism established under the Victorian Act.
42
Wallace objected to this
concept of adjudication review on the grounds that it is neither consistent
with the object of the Queensland SOP legislation, nor supports its interim
and rapid nature. Regarding the popularity of the Victorian review scheme,
Wallace said:
40
See Maxstra Constructions Pty Ltd v Gilbert t/as AJ Gilbert Concrete [2013] VSC 243, Seabay Properties Pty
Ltd v Galvin Construction Pty Ltd [2011] VSC 183.
41
See Maxstra Constructions Pty Ltd v Gilbert t/as AJ Gilbert Concrete [2013] VSC 243.
42
Wallace, above fn 2, p 225.
© Informa UK plc. No copying or sharing of this document is permitted.
This article first appeared in the International Construction Law Review, Part 3 July 2016, [2016] ICLR 287
298 The International Construction Law Review [2016
“during my discussions with the responsible offi cer in charge of administering the
Amended Victorian Act, I was advised that the review adjudication process had only
been used on one occasion since the amendments commenced in 2006”.
3. FULL REVIEW MECHANISMS ON THE MERITS
Having examined the various limited avenues of review, this paper now
turns its attention to critically discuss the review mechanisms in Singaporean
and Tasmanian SOP legislation which uniquely provide for full review of
erroneous adjudication determinations on the merits. Since Singapore
has a long-established and much utilised merits review mechanism, it is
worthwhile to discuss the Singaporean scheme in some more detail before
addressing the question of whether a full review mechanism is needed.
3.1. Singapore
The Singapore Building and Construction Industry Security of Payment
Act 2004 (the “SG Act”) sought to establish a fast and low-cost adjudication
system to resolve payment disputes. It substantially followed the NSW
model with some key differences. The most signifi cant difference is the
introduction of an adjudication review mechanism allowing an aggrieved
respondent to have the adjudicator’s determination reviewed by another
adjudicator or a panel of adjudicators on its merits. This review mechanism
was judicially described as “a way of remedying injustice to any of the
parties infl icted by the rather hasty process of adjudication.”
43
In the
second reading speech, the Minister of State for National Development
justifi ed the introduction of the review mechanism as a novel feature within
the Singaporean legislation by stating: “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 suffi cient justice.”
44
It was
also argued that the time limits of adjudication determination prevent
adjudicators from conducting a proper analysis of the facts and law related
to the dispute.
45
In SEF Construction Pte Ltd v Skoy Connected Pte Ltd ,
46
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.”
43
SEF Construction Pte Ltd v Skoy Connected Pte Ltd [2009] SGHC 257 paragraph 24 (Prakash J).
44
See Singapore Parliamentary Debates, Offi cial Report (16 November 2004) vol 78 at col 1133,
(Cedric Foo Chee Keng, the second reading speech), (hereafter: “Singapore Parliamentary Debates”).
45
Fong, C K, Security of Payments and construction Adjudication , LexisNexis, 2nd Edition, 2013, p 804.
46
[2009] SGHC 257 paragraph 38.
© Informa UK plc. No copying or sharing of this document is permitted.
This article first appeared in the International Construction Law Review, Part 3 July 2016, [2016] ICLR 287
Pt 3] Taking Statutory Adjudication to the Next Level 299
The Singaporean review mechanism is only accessible to respondents
provided they have served a payment response and have paid the
unpaid adjudicated amount to the claimant. The respondent must pay
the adjudicated amount to the claimant in the fi rst place to be entitled
to apply for review (section 18(3)). This seeks to “fulfi l the legislation
mission and purpose of facilitating smooth and prompt cash fl ow.”
47
The review application must be lodged within seven days of obtaining
the adjudication determination (section 18(2)) provided that there
exists a disparity between the adjudicated amount and the relevant
response of SG$100,000 or more. This threshold requirement helps
prevent respondents from routinely exploiting the freely available review
mechanism and thereby frustrating the object of the legislation by adding
a tier of additional expense.
48
In this regard, Justice Prakash noted:
“The drafters of the [SG Act] must have considered that it would not be convenient
or economical to provide a review process for a dispute that did not have suffi cient
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.”
49
The respondent must apply for the review to the same authorised
nominating body with which the original application was served. As at the
time of writing, the Singapore Mediation Centre (“SMC”) is deemed the
only authorised nominating body in Singapore. The review application
must include a proof of payment of the adjudicated amount to the claimant
and a copy of adjudication determination (section 10(2)). The condition
precedent upon a respondent requiring it to pay the claimant fi rst, in order
to be granted access to review mechanism, can be considered a double-
edged sword. As such, whilst that precondition avoids an “abuse of process”
and safeguards the object of the legislation of timely and speedy recovery
of payment, there is an inherent risk of the claimant’s inability to repay
such payment if the original determination is quashed and substituted by a
review decision. Having said that, it was argued that since the adjudication
review is a fast track process, the respondent’s risk exposure will be limited.
50
Upon receipt of the review application, the SMC has seven days only
(section 18(6)) to appoint one adjudicator or a panel of three adjudicators
if the difference exceeds SG$1 million.
51
The review adjudicator must
only have regard to the matters referred to in section 17(3) and the
adjudication determination that is the subject of the adjudication review
(section 19(6a)). This could mean that new reasons and fresh evidence
from parties cannot be entertained in the review proceedings. In this
47
Singapore Parliamentary Debates, above fn 41, at col 1133.
48
Fong, above fn 42, p 805.
49
SEF Construction Pte Ltd v Skoy Connected Pte Ltd [2009] SGHC 257 paragraph 24.
50
Fong, above fn 42, p 804.
51
Building and Construction Industry Security of Payment Regulations 2005, Singapore,
section 10(1).
© Informa UK plc. No copying or sharing of this document is permitted.
This article first appeared in the International Construction Law Review, Part 3 July 2016, [2016] ICLR 287
300 The International Construction Law Review [2016
context, it was argued that adjudication review is not an appeal against the
rst 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 relating to the difference between the adjudicated amount and
the adjudication response.
52
Although the review application may include
reformulated arguments based on the facts previously canvassed, it must
exclude new facts, reasons or evidence, even if they have arisen after the
completion of the original adjudication.
53
In his review determination, a
review adjudicator opined that:
“[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 specifi c points
in the adjudication determination as part of its challenge. This must therefore include
new submissions to deal with such points.”
54
The review determination must be issued to the parties within 14 days
(section 19(3)). It may replace the original determination or reject the
review application. The cost of adjudication review will be proportionally
borne by the parties to the extent each party was successful (section 19(5d)).
Table (1) below demonstrates the key differences and features between the
review mechanisms in Victoria, Western Australia and Singapore.
The ambit of adjudication review was not clear until the Singaporean
Court of Appeal handed down its decision in Lee Wee Lick Terence v Chua
Say Eng .
55
In that case, the court held that adjudicators do not have the
competency to deal with jurisdictional issues apart from the basic function
required by the legislation.
56
The court also held that any jurisdictional
objection must be raised immediately with the court and not before the
adjudicator.
57
The court justifi ed this position by saying: “since 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.”
58
Hence, it could be interpreted that review adjudicators do
not have jurisdiction to consider jurisdictional objections as a basis for
review which means than the aggrieved party has no option but to challenge
the jurisdiction of original adjudicator by way of judicial review. Moreover,
Andrew J in RN & Associates Pte Ltd v TPX Builders Pte Ltd ,
59
provided some
useful guidance regarding the ambit of adjudication review by saying:
52
Fong, above fn 42, pp 803, 828.
53
Ibid , p 823.
54
Cited in Fong, above fn 42, p 830.
55
[2012] SGCA 63 (Chan Sek Keong CJ, Andrew Phang Boon Leong JA and V K Rajah JA).
56
[2012] SGCA 63 paragraph 64.
57
[2012] SGCA 63 paragraph 36.
58
[2012] SGCA 63 paragraph 36.
59
[2012] SGHC 225 paragraph 61.
© Informa UK plc. No copying or sharing of this document is permitted.
This article first appeared in the International Construction Law Review, Part 3 July 2016, [2016] ICLR 287
Pt 3] Taking Statutory Adjudication to the Next Level 301
“[The respondent] 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.”
table 1: the key differences of review mechanisms in singapore, wa and victoria
Description Victoria WA Singapore
Threshold for review. Adjudicated amount >
$100,000. Not applicable. Adjudicated amount –
adjudication response
> $100,000.
Authorised applicant. Either party. Either party. Respondent.
Application grounds. Inclusion or exclusion
of excluded amounts
in adjudicated amount.
1- Adjudicators
decision to dismiss
applications without
deciding its merits
on grounds related
to existence of
contract, valid
payment claim,
complexity of the
case, etc.
2- Disqualifi ed
adjudicator due to
confl ict of interest.
General review with
limited implied
exclusions as stated in
case law.
Precedent conditions
on respondents. 1- Adjudication
response to include
the grounds.
2- Payment of the
adjudicated amount
less the alleged
excluded amount.
3- Payment of the
alleged excluded
amount in to a trust
account.
Not applicable. Payment of the
adjudicated amount to
the claimant.
Application time
limits. Within 5 business
days from the receipt
of adjudication
determination.
Within 28 days
from the receipt
of adjudication
determination.
Within 7 days from the
receipt of adjudication
determination.
Rights to make
submissions. Allowed within 3
business days after
receiving of review
application.
Allowed. No express provision.
De novo Rehearing. Prohibited. Allowed. Prohibited.
Appointment of review
adjudicator by ANA. Within 5 business
day from receipt of
application.
Not applicable. Review
by SAT. Within 7 days from the
receipt of application.
Selection criteria of
review adjudicator. Same as the original
adjudicator. SAT may reverse and
remit the decision to
same adjudicator for
reconsideration.
Same as the original
adjudicator provided
the adjudicator has no
determination under
adjudication review.
(Continued)
© Informa UK plc. No copying or sharing of this document is permitted.
This article first appeared in the International Construction Law Review, Part 3 July 2016, [2016] ICLR 287
302 The International Construction Law Review [2016
table 1: Continued
Description Victoria WA Singapore
Notice to original
adjudicator by ANA. Required. Not required. Not required.
Number of
adjudicators. Single adjudicator. Single adjudicator as
might be remitted by
SAT.
Single adjudicator or A
panel of 3 adjudicators
if the threshold
exceeds $1 million.
Time limit of review
determination. Within 5 business after
appointment or within
max 10 days if agreed
by the applicant.
No express provision. Within 14 days or
any longer period as
agreed by claimant and
respondent.
Payment timeline. Within 5 business days
after receipt of review
determination or any
later time determined
by the adjudicator.
Not applicable. Within 7 days after
receipt of review
determination or any
later time determined
by the adjudicator.
Shortcomings of the Singaporean Review Mechanism
Whilst the Singaporean review mechanism is an effective platform to
achieve justice away from courts, it is infected with a number of restrictions
as well as ambiguities in the procedures. Aggrieved respondents are
deprived of using the review mechanism where the difference between
adjudicated amount and adjudication response is less than SG$100,000. As
well, aggrieved claimants are left with no alternative but to seek subsequent
nal proceedings in arbitration or litigation to have the case reviewed on
the merits. The option of judicial review seems readily available for both
parties on grounds relating to procedural injustice and adjudicator’s excess
of jurisdiction. Some respondents may use the option of judicial review as a
delaying tactic hoping that the claimant may become insolvent by the time
the case is judicially decided. Another incentive for respondents seeking
judicial review is to avoid paying the claimant directly as a precondition
to access the review mechanism since respondents would only be required
to pay the unpaid adjudicated amount in court. Having said that, some
aggrieved parties may not be able to afford judicial review. As well, aggrieved
claimants, who are often vulnerable, have no option but to seek expensive
and lengthy judicial review where adjudicators erred in their decisions to
dismiss applications without making determinations on the merits on the
basis of lack of jurisdiction.
On the other hand, the procedure of the review mechanism lacks clarity.
For instance, there is no express provision giving the claimant the entitlement
to serve a reply on the review application to conform to principles of
procedural fairness. The legislation provides that the adjudication review
application must contain such information or be accompanied by such
documents as may be prescribed, however, no regulations were ever made
© Informa UK plc. No copying or sharing of this document is permitted.
This article first appeared in the International Construction Law Review, Part 3 July 2016, [2016] ICLR 287
Pt 3] Taking Statutory Adjudication to the Next Level 303
to clarify whether new arguments or information can be raised in the review
application. There is no regulation governing the selection of the review
adjudicator, to ensure he or she holds a considerable relevant experience
and seniority compared to the original adjudicator. The size of the tribunal
is only decided by the monetary value rather than the complexity of the
dispute. However, it was observed that the appointments made so far in
Singapore have considered such matters.
60
The time limit of the 14 days
for adjudication review is fi xed, irrespective of whether the difference is
SG$100,000 or SG$10,000,000, which may be too tight in larger and/or more
complex cases. Moreover, since the identity of the original adjudicator is
disclosed, there is a possibility of perceived bias or confl ict of interest where
the review adjudicator might be infl uenced by the reputation of, or previous
dealings with the original adjudicator. It is also unclear whether the original
adjudicator can participate or provide input during the review process.
3.2. Tasmania
The Tasmanian Building and Construction Industry (Security of Payment)
Act 2009 (Tas) came into operation on 17 December 2009 and followed the
same pattern of the NSW Act. In October 2015, the Tasmanian Government
introduced the Building and Construction Industry Security of Payment
Amendment Bill 2015 (the “Bill”) which is yet to be assented. The Bill mainly
established a review mechanism for erroneous adjudication determinations
at no cost to either party. If the Bill is assented to and becomes an Act,
Tasmania will be the only Australian jurisdiction to have a review mechanism
on the merits of erroneous determinations.
Section 38(A) of the Bill provides that the SOP Offi cial has the discretion
to appoint an independent expert panel (the “Panel”) to review a decision
of an adjudicator. The SOP Offi cial may refer an adjudication decision to
the Panel if he or she believes the decision is “inappropriate or unfair”.
61
The authorised nominating authority (the “ANA”) is required to provide a
copy of adjudication decisions immediately instead of annually to facilitate
timely outcome of the review process. The SOP Offi cial will not be involved
in the review of the decision and the Panel will be drawn from practitioners
within the building and construction industry, following consultation
with major industry representative bodies. The Treasurer and Minister
for Planning and Local Government, explained the purpose of the review
mechanism by saying:
62
“Where a decision is prima facie out of step with the intent of the legislation then
this expert panel review will provide an alternative which does not involve costly
60
Fong, above fn 42, p 813.
61
Gutwein, P, Draft Second Reading Speech, Building and Construction Industry Security of Payment
Amendment Bill 2015 (Tas).
62
Ibid .
© Informa UK plc. No copying or sharing of this document is permitted.
This article first appeared in the International Construction Law Review, Part 3 July 2016, [2016] ICLR 287
304 The International Construction Law Review [2016
litigation. This new review will not be commonly used, but will be available for those
rare occasions where something goes wrong.”
If the SOP Offi cial makes a referral, he or she must inform the parties
to the dispute and the ANA. The adjudication decision will be suspended
until the Panel completes 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, confi rm the adjudicator’s decision or
quash it. The Panel may also substitute an alternative adjudication decision.
Any substituted decision will have the same status as the decision by the
adjudicator. The Bill also provides that the Panel is protected from liability
which is similar to the existing protection for adjudicators under the SOP
legislation.
Shortcomings of the Tasmanian Review Mechanism
Despite looking, on its face, a promising step towards improving the
nality of adjudication outcome away from courts, the Tasmanian review
mechanism lacks clarity and transparency in various aspects. The Bill does
not provide a mechanism for initiating the review process and whether it is
activated by the own initiative of the SOP Offi cial or by a formal complaint
from either party. The Bill does not address the criteria to be followed by
the SOP Offi cial to identify what would be an “inappropriate or unfair”
decision as a basis for review and whether the scope of review will cover any
determination regardless of the size or nature of the payment dispute. The
Bill does not defi ne the referral period within which a referral by the SOP
Offi cial can be made, which will add an unnecessary layer of uncertainty
to the parties. The Bill also does not include any details relating to the
selection criteria and powers of the Panel and whether the Panel will be
paid from the public fund or engaged on a voluntary basis. Offering a
review mechanism at no extra cost is a promising feature but may not be a
sustainable approach in the long term.
4. IS A REVIEW MECHANISM ON THE MERITS NEEDED?
Notwithstanding the interim and rapid nature of statutory adjudication,
it was judicially noted that there is “no proper basis to distinguish an
adjudication for the purpose of maintaining cash fl ow from an adjudication
to determine a party’s ultimate rights and entitlements.”
63
An optimal
adjudication process should maximise, within the legislative objective of
63
Hall Contracting Pty Ltd v Macmahon Contractors Pty Ltd (2014) 34 NTLR 17; NTSC 20 paragraph 45
(Barr J).
© Informa UK plc. No copying or sharing of this document is permitted.
This article first appeared in the International Construction Law Review, Part 3 July 2016, [2016] ICLR 287
Pt 3] Taking Statutory Adjudication to the Next Level 305
expediency, the opportunity that adjudicators’ determinations are made in
accordance with the correct and relevant law.
Typically, an aggrieved party in adjudication has no option but to initiate
lengthy and expensive proceedings such as arbitration or litigation but
the inherent cost of such proceedings may prevent the party from seeking
justice. The remedy by way of judicial review is available in very limited
situations. Therefore, many erroneous adjudication determinations have
become fi nal and binding decisions. In Uniting Church in Australia Property
Trust (Qld) v Davenport ,
64
the adjudicator, after releasing his original decision
and upon a request from the claimant, conceded that he had misinterpreted
the claimant’s submissions and made a miscalculation, so he attempted to
correct it. Daubney J 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 fi rst fl awed
decision, the claimant was underpaid by AUS$148,226 and left without any
effective remedy to obtain a revised and correct decision. In such cases,
the signifi cance of a legislative review mechanism on the merits is manifest
as a fair and convenient remedy which will avoid unnecessary expenses in
seeking subsequent curial proceedings on the same dispute.
In addition, with the availability of the review mechanism, courts are
likely to be more reluctant to exercise their discretionary powers to set aside
adjudication decisions.
65
In Singapore, Prakash J held in SEF Construction Pte
Ltd v Skoy Connected Pte Ltd
66
that the availability of a statutory merits review,
with other factors, impliedly restricted judicial review in the High Court. In
Re Graham Anstee-Brook, ex parte Mount Gibson Mining Ltd ,
67
Kenneth Martin J
also noted that:
“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.”
The SOP legislation grant claimants the right to suspend work
if respondents do not pay the adjudicated amounts. However, the
consequences of any work suspension may be devastating if the
adjudication determination is eventually quashed by way of judicial
review. Vickery J observed this dilemma in Hickory Developments Pty Ltd v
Schiavello (Vic) Pty Ltd and noted:
68
64
Uniting Church in Australia Property Trust (Qld) v Davenport [2009] QSC 134 (Daubney J).
65
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] HCA 36 paragraphs 29, 30
and 34, Re Baker ; Martin CJ in Re Carey, ex parte Exclude Holdings Pty Ltd [2006] WASCA 219 paragraphs
128 to 140.
66
[2009] SGHC 257.
67
[2011] WASC 172; 42 WAR 35 paragraph 64.
68
[2009] VSC 156; 26 VR 112 paragraph 47.
© Informa UK plc. No copying or sharing of this document is permitted.
This article first appeared in the International Construction Law Review, Part 3 July 2016, [2016] ICLR 287
306 The International Construction Law Review [2016
“A contractor would be seriously inhibited in the exercise of its statutor y 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.”
On the other hand, improving the quality of adjudicators may not be
a suffi cient measure to avoid erroneous determinations.
69
In Queensland,
major amendments have been made to its SOP legislation in December
2014 to increase the quality of adjudication outcome such as allowing longer
timeframes for complex claims and improving the selection and regulation
of adjudicators. Interestingly, seven judicial review court applications were
lodged after the amendment, (compared to 15 applications in the preceding
year), in which the Queensland Supreme Court found that adjudicators
committed jurisdictional errors in three cases.
70
Introducing an appropriate review mechanism would offer a pragmatic
and practical solution that acknowledges the existing variety of adjudicators’
qualities and competencies and the diffi culty of attaining quality adjudication
outcome due to the hasty adjudication process. Michael Christie, a well
experienced Senior Council in NSW, noted that the Singaporean review
mechanism is worth serious consideration by Australian legislatures
envisaging reform of their existing schemes.
71
The review mechanism may
act as an effective safety net to capture erroneous determinations away
from curial proceedings to help control the overall cost and improve the
nality and informality of statutory adjudication. As such, it is proposed that
a swift system of adjudication review within the SOP legislation is needed.
This paper now turns its attention to develop a proposal of an appropriate
review mechanism which is largely modelled on the Singaporean model
with signifi cant improvement.
5. A PROPOSAL FOR AN OPTIMISED REVIEW MECHANISM
5.1. The ambit of the proposed review mechanism
Drawing the distinction between errors of facts or errors of law, on the one
hand, and jurisdictional errors of law and non-jurisdictional errors of law,
on the other hand, has proven to be a complex and tricky legal exercise.
72
To avoid the burden of these complexities, it is submitted that the ambit of
the proposed review mechanism should include all types of errors whether
69
Skaik, S; C, Jeremy, Mills, A, “The Big Picture: Causes of Compromised Outcome of Complex
Statutory Adjudications in Australia” [2016] ICLR 123 .
70
Queensland Building and Construction Commission, monthly adjudication statistics, December
2015, p 8.
71
Christie, M, “The Singapore Security of Payment Act: Some lessons to be learned from Australia”,
26 BCL 228, 2010.
72
See, e.g., Musico v Davenport [2003] NSWSC 977 paragraph 46 (McDougall J); Perrinepod Pty Ltd v
Georgiou Group Building Pty Ltd [2011] WASCA 217; 43 WAR 319 paragraph 11 (McLure P).
© Informa UK plc. No copying or sharing of this document is permitted.
This article first appeared in the International Construction Law Review, Part 3 July 2016, [2016] ICLR 287
Pt 3] Taking Statutory Adjudication to the Next Level 307
errors of law or fact excluding errors related to the adjudicator’s jurisdiction
to decide the referred matter. Removing restrictions upon what could be a
reviewable decision will help avoid unnecessary jurisdictional challenges that
might frustrate the smooth and simple operation of the review mechanism.
Accordingly, any error of law or fact (other than jurisdictional facts) by
adjudicators during the decision making process should be reviewable.
Reviewable errors of law, it is proposed, may include jurisdictional errors
emerging from procedural injustice or non-jurisdictional errors such as
misinterpretation of the contract.
Having said that, legislatures in some jurisdictions may be concerned with
a considerable number of applications of judicial review challenging the
validity of adjudicators’ appointments. In such case, it may be appropriate
to expand the proposed scope to include errors by adjudicators in deciding
on their jurisdiction to hear the referred applications. As such, the
ambit of the proposed review mechanism may also include jurisdictional
objections, whether by a respondent challenging the valid appointment
of an adjudicator or a claimant challenging the adjudicator’s decision to
dismiss the application without making a determination on the merits. It is
incumbent that the review adjudicator of such cases should be appropriately
qualifi ed to increase the confi dence and satisfaction of the parties with the
review decision which could help avoid unnecessary judicial intervention.
It is also worthwhile to note that the procedure of reviewing this type of
error should be different to other errors since the challenge is usually made
where there is no adjudication determination. However, the scope of this
paper does not cover the likely procedures due to space limits.
5.2. Accessibility
Most of the applications challenging the determination of adjudicators in
courts are initiated by aggrieved respondents. Some claimants may also be
aggrieved by erroneous determinations but it is often the case that they
are too vulnerable to afford expensive and lengthy curial proceedings
to seek justice. As a result, vulnerable claimants usually stick with those
determinations. Therefore, the review mechanism should be available to
both parties as a matter of equity.
A respondent, seeking review, must pay the adjudicated amount to the
claimant in full within fi ve business days after the release of the adjudication
determination in order to access the review system. This requirement would
serve to maintain the object of the legislation for a quick cash fl ow recovery.
This precondition would satisfy many practitioners who vote against the
introduction of a review mechanism as an additional layer. However, this
condition may not be appropriate if the respondent provides reasonable
evidence to the governing authority that the claimant has a weak fi nancial
standing and there is a high risk of non-recovery of payment. In such
© Informa UK plc. No copying or sharing of this document is permitted.
This article first appeared in the International Construction Law Review, Part 3 July 2016, [2016] ICLR 287
308 The International Construction Law Review [2016
cases, the governing authority may request the claimant to provide a bank
guarantee in order for it to be paid, otherwise, the respondent must pay the
amount into a trust account.
To avoid an “abuse of process” by either party, a minimum monetary
threshold should be fi xed as a precondition to access the review mechanism.
Such limitation will help close the fl oodgates for lodging applications
without suffi cient substance in economic terms. The threshold limit
should consider the actual or real amount in dispute. The real amount in
dispute will appear from the review application. It may be the difference
between the amount in the payment claim and the adjudicated amount.
It may be that only part of the adjudicated amount is in dispute in the
review. The criteria of fi xing the threshold amount should consider
the minimum amount that either party would fi nd it feasible to challenge
the determination in court where a review mechanism is devised to stand as
a viable alternative. For example, 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 AUS$37,000.00 is unlikely to be a cost-effective
process”.
73
5.3. Selection and jurisdiction of review adjudicators
Where a nominating authority has appointed the original adjudicator, the
governing authority must solely have the jurisdiction to receive adjudication
applications and appoint review adjudicators. A review adjudicator will
ideally, and only where possible, be of greater seniority than the original
adjudicator and must in any event have competencies and expertise
relevant to the referred disputed matters. A panel of three adjudicators may
only be needed if the governing authority is of the opinion that the case
is very complex, the amount in dispute is very large or where the original
determination was issued by a senior and well experienced adjudicator
regardless of the value of the adjudicated amount to ensure a credible and
correct outcome. As such, a pool of accredited review adjudicators must be
arranged for that purpose. The review adjudicator must have jurisdiction to
answer questions of law as well as fact. The identity of the original adjudicator
must be kept confi dential and not disclosed to the review adjudicator to
ensure unbiased review process. The review adjudicator may affi rm, quash
or substitute the adjudicator’s determination with the “review decision” that
shall have the same legal effect of the original determination. The review
adjudicator must also have jurisdiction to decide on costs associated with
original and review adjudications.
73
Seabreeze Manly v Toposu [2014] NSWSC 1097 paragraph 51.
© Informa UK plc. No copying or sharing of this document is permitted.
This article first appeared in the International Construction Law Review, Part 3 July 2016, [2016] ICLR 287
Pt 3] Taking Statutory Adjudication to the Next Level 309
5.4. New submissions
In principle, the review must be conducted on records that were available
before the original adjudicator. However, the review adjudicator must
also consider the original determination, the “review application” and
any response to that application if any. The “review application” may
state the reasons for applying for review and identify the alleged errors.
Whilst the review adjudicator must enjoy the same inquisitorial powers
that were available to the original adjudicator, it would be diffi cult for a
review adjudicator to consider any information emerging from conducting
conferences or site inspection unless the legislation expressly allows
therefore.
5.5. Timeframes
The “review application” must be made to the governing authority within
ve business days from the receipt of the adjudication determination with a
copy to the other party. The other party must be allowed to serve a “review
reply” to the governing authority or to the review adjudicator if appointed
within two business days to afford it procedural fairness. The governing
authority must refer the “review application” to a review adjudicator within
four business days after the receipt of the application. 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, however, may
extend that period up to an additional fi ve business days in complex cases
by requesting the consent of the governing authority. This means that the
overall additional time will be between 16 to 21 business days only from
the time of serving a “review application” until a “review decision” is issued
depending on the complexity of the referred matter. Thus, it could be
argued that this additional period reinstates the pendulum to a position of
balance between effi ciency and fairness. That may be a little price to pay for
achieving this goal.
5.6. Costs
One of the main inhibiting factors in advocating a review mechanism is
the additional cost to the disputants. Therefore, the proposed review
mechanism should be devised to counter that factor. In principle, a review
adjudicator must be entitled for a fi xed fee per hour but that fee must not
exceed a certain defi ned amount to provide either party with certainty of
the likely costs of the review. Each party shall bear its own costs in the review.
The fee of the review adjudicator will be proportionally borne by the parties
to the extent each party was successful in the “review decision”. A “base fee
rate” for an errant original adjudicator should be introduced in regulations
made for that purpose in case the original determination is substantially
© Informa UK plc. No copying or sharing of this document is permitted.
This article first appeared in the International Construction Law Review, Part 3 July 2016, [2016] ICLR 287
310 The International Construction Law Review [2016
revised by the review adjudicator. Accordingly, the original adjudicator must
refund the difference to the party that paid the original adjudication fees.
This proposed approach may stand as not only an appropriate compensation
to parties affected by having the original determinations quashed but also
a reasonable discipline to errant adjudicators. In addition, the approach
would be more sensible and convenient to the tough approach in the UK,
where it was judicially held that errant adjudicators are not entitled for their
fees.
74
On the other hand, parties to adjudication review should have the
discretion to retain legal counsels. However, the associated legal fees should
not be recoverable even if the party is successful. This proposition will
help deter many parties from engaging counsel unnecessarily which will
help not only keep the review process informal and less legalistic, but also
confi ne the eventual costs borne by either party as a result of participating
in the review. Having said that, since parties may seek adjudication review
on unreasonable grounds where the other party may incur unnecessary
additional costs, it could be worthwhile to equip review adjudicators with
the discretion to make an order for legal costs to compensate a party for any
expenses, loss or inconvenience as a result of the other party’s conduct. This
would include situations when a party conducts itself unreasonably or where
a case is obviously frivolous, vexatious or unmeritorious.
75
Such measures
may stand as another safeguard against the abuse of review process.
Alternatively, the government may decide to establish a review
mechanism at no cost to the parties as currently proposed in Tasmania but
this approach may not be sustainable assuming a considerable number of
review applications that will be lodged annually. It could be argued then that
imposing a nominal fee on all adjudication applications may be suffi cient to
nance the review mechanism so the government can avoid extra fi nancial
burden.
6. CONCLUSION
This paper has examined the various review mechanisms associated with
statutory adjudication worldwide in order to answer the question whether
the SOP legislation may benefi t from adopting an appropriately designed
legislative review mechanism on the merits. The paper found that such
review mechanism would be the most pragmatic and effective measure to
increase certainty and confi dence in the adjudication outcome and reduce
the opportunity for subsequent litigation or arbitration. Features of the
proposed review mechanism were demonstrated in detail. The proposal
represents something of a “blunt instrument” which will require further
74
PC Harrington Contractors Ltd v Systech International Ltd (CA) [2012] EWCA Civ 1371.
75
See WA Act, section 34(2).
© Informa UK plc. No copying or sharing of this document is permitted.
This article first appeared in the International Construction Law Review, Part 3 July 2016, [2016] ICLR 287
Pt 3] Taking Statutory Adjudication to the Next Level 311
consultation with the industry’s stakeholders. The paper demonstrated
novel measures to counter the resulting additional time and cost. With the
proposed review scheme, it is anticipated that statutory adjudication will
rmly stand as an effective alternative platform and a fi nal resort for most
payment disputes which will help attain its very purpose to be a speedy,
inexpensive, fair and informal process.
© Informa UK plc. No copying or sharing of this document is permitted.
This article first appeared in the International Construction Law Review, Part 3 July 2016, [2016] ICLR 287
... Affordability in terms of cost and time (Coggins et al., 2010, Wallace, 2013, Australian Legislation Reform Sub-Committee, 2014, Economics References Committee, 2015, Marquet, 2015, Skaik et al., 2016a, Skaik et al., 2016b, Murray, 2017, Skaik, 2017d, Skaik, 2017b, Fiocco, 2018 Lack of industry confidence (Ali, 2006, Chan, 2006, Kennedy, 2008, Supardi et al., 2011, Wong et al., 2014, Marquet, 2015, Skaik et al., 2015c, Yung and Rafferty, 2015, Jayasinghe and Ramachandra, 2016, Skaik, 2016, Skaik et al., 2016a, Skaik, 2017b, Lopez and Amara, 2018, Tay and Kong, 2018, Hassan et al., 2019, Munaaim, 2019 Lack of knowledge and awareness (Brand and Uher, 2010, Coggins et al., 2010, Wallace, 2013, Economics References Committee, 2015, Evans, 2015, Murray, 2017, Skaik, 2017d, Steensma and Evans, 2020 Impact on the business relationship (Brand and Uher, 2010, Coggins et al., 2010, Australian Legislation Reform Sub-Committee, 2014, Economics References Committee, 2015, Murray, 2017, Skaik, 2017d, Coggins and Donohoe, 2018 limited right to access the legislation (Bell, 2011, Gerber and Ong, 2013, Wallace, 2013, Australian Legislation Reform Sub-Committee, 2014, Evans, 2015, Skaik et al., 2015a, Skaik et al., 2015b, Murray, 2017, Skaik, 2017b, Fiocco, 2018 3.1 Affordability in terms of cost and time Cheung (1999) investigated twelve attributes that motivate a party to use any dispute resolution process. Cheung found that the cost and time to be the most significant ones affecting the utilisation of any process. ...
... It also made subcontractors hesitant of using their right of suspending work when the adjudicated amount is not paid. This hesitation comes from the probable financial risks they might face if the determination is quashed by the court (Supardi et al., 2011, Skaik, 2016, Skaik et al., 2016a. Therefore, suspending or slowing work that should reduce subcontractors' costs and pressurise the respondent to pay the adjudicated amount became ineffective in protecting subcontractors. ...
Conference Paper
Full-text available
Within the Australian construction industry, small subcontractors are highly vulnerable to insolvency risk due to poor payment practices. The Security of Payment legislation was introduced to ensure that those subcontractors are timely paid for the work they do. However, since the enactment of the legislation in Australia, the utilisation rates of the legislation have been relatively low. Through a desktop study, this paper aims to identify and discuss the main causes of the legislation under-utilisation including affordability, lack of industry confidence, lack of knowledge and awareness, impact on business relationships and limited right to access the regime. Moving further, this paper will acquaint the lead author's PhD study, which aims to address the barriers and solutions to achieve an appropriate utilisation of the security of payment legislation.
... Interestingly, seven judicial review court applications were lodged after the amendment, (compared to 15 applications in the preceding year), in which the Queensland Supreme Court found that adjudicators committed jurisdictional errors in three cases. 7 Moreover, adjudication of complex payment disputes became very lengthy and costly which makes the scheme more similar to curial proceedings. ...
Chapter
The Construction Industry Payment and Adjudication Act 2012 (CIPAA 2012) has redefined how construction disputes are resolved in Malaysia. The Chartered Institute of Arbitrators (CIArb) in Kenya has long provided Adjudication Rules for the Construction Industry 2003. According Muigua and Muigua, it is not commonly used to resolve commercial disputes in Kenya. This research fills the gap to address curiosity. The chapter studies the trend of contractual adjudication in Kenya, and the potential challenges of implementing statutory adjudication in Kenya for construction payment disputes. The results revealed that QS in Kenya usually are involved in contractual disputes nevertheless commonly refer to negotiation and arbitration. The findings also indicate that adjudication is not a preferred choice of ADR due to cost, time and lack of provisions in the standard form of contract in Kenya. But the findings proved that most QS's will propose adjudication as the preferred method due to the structured manner the rules will be provided in backed by the parliament.
Article
Full-text available
Notes Western Australia's Building and Construction Industry (Security of Payment) Bill 2020, intended to improve subcontractor and supplier protection in the construction industry, and evaluates its adjudication review mechanism (ARM). Discusses the background to the reform, the Bill's provisions governing ARM, and their potential shortcomings, including the uncertain effects of suspension. Suggests how the existing proposals might be improved.
Article
Full-text available
Statutory adjudication has been enacted progressively throughout Australia on a state-by-state basis over a period of 10 years. The legislation with more emphasis on the Eastern States has come under much criticism recently for failing to facilitate decisions of suffi cient quality with respect to complex adjudications. This paper reviews this criticism and discusses the key causes of the unsatisfactory outcome of complex adjudications in Australia. The identifi ed causes are namely flawed appointment, relaxed eligibility and regulation, intimidation of adjudicators, fuzzy jurisdictional boundaries, abbreviated timeframes, limited inquisitorial powers and want of review mechanism. The implication of the research is a better understanding of the nature of the quality of complex adjudication outcome and the relevant worthwhile reform opportunities in Australia, especially with regard to introducing legislative review mechanisms.
The Singapore Security of Payment Act: Some lessons to be learned from Australia
  • M Christie
Christie, M, "The Singapore Security of Payment Act: Some lessons to be learned from Australia", 26 BCL 228, 2010.
  • E G See
  • Musico V Davenport
See, e.g., Musico v Davenport [2003] NSWSC 977 paragraph 46 (McDougall J);