STATUTORY ADJUDICATION IS IT FIT FOR PURPOSE?

By Philip Adams MAIQS, CQS

Introduction

Adjudication is intended to be a nonbinding determination of a progress payment dispute, but unfortunately, that intent has not translated well into the various Security of Payment (SOP) Acts and the statutory adjudication regime as a whole.

The SOP Acts are reasonably consistent in describing the object of the legislation. The primary objective is to provide an effective and fair process for securing payments, to help people working in building and construction be paid for the work they do, and to ensure they receive, and can recover, progress payments.

Complexity

If the process was genuinely straightforward, effective, and fair; then, of all the professions, it is the quantity surveyor who would be best suited to carry out the role of adjudicator. However, that is not the case, and effectiveness and fairness have been overtaken by increasingly onerous legal and administrative complexities which may serve the purposes of the adjudication industry, but not the small subcontractor trying to get paid.

On a general note, adjudication is just an example of how legal-based complexity has infiltrated the otherwise very straightforward quantity surveying/ commercial function, to the point where the complex now seems to be preferred to the simple and straightforward.

Jurisdiction

Getting back to adjudication, let’s consider for a moment the adjudicator’s jurisdiction, i.e., the adjudicator’s power and authority. Over the years, the individual SOP Acts have been augmented by numerous case decisions and clarifications, to the point now where it places quite arduous constraints on what an adjudicator can and can't do.

To overcome this problem, some legislators have granted the adjudicator the power to rule on their own jurisdiction. But, whilst well-meaning, it has unfortunately made the situation worse. Most adjudicators will say that more than 50% of their time is taken up dealing with jurisdictional matters because of the numerous and varied issues that have developed. This can result in the failure of an otherwise meritorious payment claim, because the small subcontractor claimant has no knowledge of this, and why should they? The failure rate because of jurisdictional issues is very high.

Way Forward

In my humble opinion, the whole sorry mess needs to be scrapped and started again with a blank canvas. Alternatively, a regime for small disputes should be considered (based on a value ceiling), which would strip away all this overly complex legal/administrative jargon, to reengage the small subcontractor.

Unfortunately, the realist (some call cynic) in me knows the chances of that are very remote because there’s too much vested interest in maintaining the status quo. I often liken myself to the small child in the fable of 'The Emperor’s New Clothes', but with a different ending!

In the meantime, all that we as a profession can do is try to assist the small subcontractor to first manage their commercial/contractual issues to hopefully avoid escalation to dispute, and secondly, if unavoidable, assist them to navigate the adjudication process.

Adjudication Guide

In preparing this guide, I’ve tried to condense and simplify the numerous issues. But, due to their very nature, that’s not an easy task, especially as each dispute is unique when considering the contractual and factual issues and their interface.

Adjudication Application

• Prior to an adjudication application, either of the following must occur:

a) the due date for payment has passed with no payment, or

b) the payment schedule indicates a lesser amount.

• If the payment claim or adjudication application is deficient, or the calculation of dates is flawed, the application risks failure regardless of its merits.

• If in doubt, I recommend to:

a) wait until after the due date for payment

b) utilise SOP Act time periods to calculate dates

c) base calculations on business days, not calendar days.

• The application must be consistent with the payment claim, do not add additional items.

• An adjudicator decides a payment dispute based only on the parties’ submissions.

• An adjudicator is not required to enquire, nor consider what may or may not be fair.

• If there is no valid payment schedule, do not assume that an adjudicator will determine that the payment claim will be paid in full.

Payment Claim

• There is no such thing as too much information.

• Demonstrate with evidence that the work has been completed (e.g., photographs).

• Provide details of how each figure has been calculated, keeping in mind any original quotes, and provide all applicable receipts/timesheets.

• For changes/variations, describe the date and manner by which it was requested/instructed (e.g., verbally, email).

• Some states require the applicable SOP Act to be written on the claim.

Reference Date

• This is a prime example of unnecessary complexity.

• It marks the day when one is allowed to claim payment and is usually the end of the month.

• Once a reference date has been ‘used’ on a previous claim, it ‘expires’, and any subsequent claim based on the same date is likely void for the purposes of adjudication.

Rejecting a Payment Claim

• Respond quickly, do not delay.

• State how much one is prepared to pay on an itemised basis and detail the reasons why it is less than claimed.

The above merely scratches the surface and therefore I reluctantly recommend that one should seek specialist advice if one is contemplating adjudication. However, this information may aid the small subcontractor in posing more focused questions about their dispute, and thereby retain some control over the costs of such advice.

This article was written by Philip Adams MAIQS, CQS