Adjudication

Each state and territory has enacted security of payment legislation which provide for adjudication of progress construction claims, starting with New South Wales in 1999. There is very little harmony between the legislation in each jurisdiction regarding the scope of contract covered and the adjudication procedure. However, in all jurisdictions, adjudications are interim pending final resolution of the dispute under the relevant terms of the contract.

The Building and Construction Industry Security of Payment Act 1999 [4] came into effect in New South Wales on 26 March 2000 and applies to all construction contracts commenced on or after that date. It is not possible to contract out of the legislation. Amendments to the Act made in 2013 are not retrospective, however, earlier amendments are. The Act does not apply to mining work, however, construction work ancillary to the operation of a mine is covered. The Act also does not apply to work undertaken for a resident owner within the meaning of the Home Building Act 1989.[5]

In NSW, the 2016 case of Probuild Constructions (Aust) Pty Ltd v Shade Systems Pty Ltd[6] has allowed an adjudicator's determination for a non-jurisdictional error to be overturned through judicial review.[6] The case went against Brodyn Pty Ltd v Davenport (2004),[7] which had held that judicial intervention was limited to cases of a breach of essential and basic requirements.

The Building and Construction Industry Payments Act 2004 (BCIPA) came into effect in Queensland in October, 2004. Through a statutory-based adjudication process a claimant can seek to resolve payment on account disputes. The act covers construction, and related supply of goods and services, contracts, whether written or verbal. BCIPA is regulated by the Building and Construction Industry Payments Agency, a branch of the Queensland Building Services.

Adjudication is a relatively new process introduced by the government of Victoria, Australia, to allow for the rapid determination of progress claims under building contracts or sub-contracts and contracts for the supply of goods or services in the building industry. This process was designed to ensure cash flow to businesses in the building industry, without parties getting tied up in lengthy and expensive litigation or arbitration. It is regulated by the Building and Construction Industry Security of Payment Act 2002.

Builders, sub-contractors and suppliers need to carefully choose a nominating authority to which they make an adjudication application.

The relevant legislation in regard to construction in the United Kingdom is the Housing Grants, Construction and Regeneration Act 1996 (1996 Chapter 53),[8] later amended by Part 8 of the Local Democracy, Economic Development and Construction Act 2009.

Any party to a construction contract has the right to refer a dispute arising under the contract to a third party for adjudication, whose decision shall be binding unless the courts or an arbitrator have already made a determination on the referred issue. The Act does not define "adjudication" or an "adjudicator", but an adjudicator's obligation is to act "impartially" (section 108(2)(e)). The "Scheme for Construction Contracts" set up under the Scheme for Construction Contracts (England and Wales) Regulations 1998 contains a set of adjudication provisions which are to apply to a construction contract unless the contract itself includes arrangements for adjudication which comply with statutory requirements.[9] In Scotland, the Scheme for Construction Contracts (Scotland) Regulations 1998 apply.[10]

Section 108(3) of the 1996 Act and paragraph 23(2) of the Scheme for Construction Contracts state that "the decision of the adjudicator shall be binding on the parties, and they shall comply with it until the dispute is finally determined by legal proceedings, by arbitration ... or by agreement between the parties".[9] In the case of Aspect Contracts (Asbestos) Limited (Respondent) v Higgins Construction Plc (Appellant), heard in 2015, the Supreme Court of England and Wales argued that the wording would have been clearer if had said "unless and until" instead of merely "until".[3]

The phrase "true value adjudication" is sometimes used in relation to the role of an adjudicator, meaning that the adjudicator is asked to determine the true value of a completed construction where this may be different from the value claimed by the contractor and/or paid by the client.[11] The term "smash and grab" claim refers to the practice of submitting a large interim payment application at the end of the construction phase of a project, but before completion of the final account,[12] and the term "'smash and grab' adjudication" has been used in relation to several adjudication decisions regarding liability for interim payment of such claims.[13]

In a 2010 case involving two consecutive adjudications in relation to a construction contract for homeowner Charles Wishart, the High Court allowed the second adjudicator's ruling on an issue which the first adjudicator had commented on and purported to have resolved, but which was not part of, and "wholly unnecessary" to resolve as far as the initial adjudication was concerned. In other circumstances, an adjudicator's ruling is binding and a point which has been resolved cannot be raised again,[14] but where the adjudicator went outside the scope of the adjudication referred to them, their comments were not a binding part of the ruling.[15]

In relation to a 2012 case, Herbosh-Kiere Marine Contractors Ltd v Dover Harbour Board,[16] Matt Molloy notes that there can be a distinction between "statutory adjudication", applying the processes set out in legislation, and "contractual adjudication", where a complainant exercises a right provided for in their contract.[17] In this case, which related to a wreck-removal agreement requiring the contractor to remove the remains of a boat sunk to stop torpedoes being fired into Dover Harbour during World War I, the court determined that the adjudicator had exceeded his jurisdiction and the adjudicator's ruling was therefore not upheld.[16]^{: para. 35}

In the same case, reference is made to a 2006 Court of Appeal ruling, Carillion Construction v Devonport Royal Dockyard, in which Lord Justice Chadwick reminded litigants that in the UK context, "the majority of adjudicators are not chosen for their expertise as lawyers. Their skills are as likely (if not more likely) to lie in other disciplines. The task of the adjudicator is not to act as arbitrator or judge. The time constraints within which he is expected to operate are proof of that. The task of the adjudicator is to find an interim solution which meets the needs of the case."[16][18]

• Lecture by Sir Christopher Greenwood entitled International Law in the Age of Adjudication in the Lecture Series of the United Nations Audiovisual Library of International Law
• Lecture by Stephen M. Schwebel entitled The Merits (and Demerits) of International Adjudication and Arbitration in the Lecture Series of the United Nations Audiovisual Library of International Law