Adjudication shopping must not be allowed to make a comeback in QLD
Opinion by Michael Chesterman
While adjudication is an interim means of resolving payment disputes, the decisions handed down have real commercial consequences for those involved. In my opinion, given these consequences, it is much better to avoid any apprehension of bias in the decisions made than to turn a blind eye. I continue to hold this view today. I am the first to admit that this does not leave a perfect system, but my personal view is that adjudication shopping should not be allowed to make a comeback in Queensland.
Given the recent BIFA reforms, it appears that this is something that both sides of politics presently agree on but there are always calls for the return of the old system which gave rise to the adjudication shopping.
In an article entitled Is Adjudication Shopping about to make a comeback in Qld?, I stated that:
“In his final report of a review of Security of Payment Laws (Mr Murray’s report) dated 21 May 2018, Mr John Murray AM, defined ‘adjudication shopping’ as (page 171):
“the claimant chooses an ANA whose panel of adjudicators is perceived to be ‘claimant friendly.”
An ‘ANA’ is an ‘Authorised Nominating Authority’ in Victoria, NSW, South Australia, ACT and Tasmania for the purpose of receiving adjudication applications and then referring them to adjudicators to decide payment disputes.
ANA’s used to operate in Queensland and perform these functions until they were abolished in 2014. The Adjudication Registrar, a statutory appointee attached to the Queensland Building and Construction Commission (QBCC) now performs these functions.
However Mr Murray’s report raises the possibility of ANA’s making a comeback in Queensland and replacing the role of the Adjudication Registrar at some point in time in the future.
This is due to the fact that the Commonwealth government is exploring the possibility of harmonising security of payment laws in Australia.”
I am not a supporter of the ANA model
Initially, I was a supporter of the ANA model. I am on record many occasions saying as much. I provided the drafting instructions for the development of the Building and Construction Industry Payments Act 2004 (BCIPA) which created ANAs in Queensland.
However, adjudication quickly became a very divisive issue in the industry and commentary started getting published where phrases like “claimant friendly adjudicators” and “adjudication shopping” gained prominence. If you were involved in the construction industry in Queensland in this period and are reading this, I challenge you to recall if you had personal experience or were told of a circumstance which raised apprehension of bias concerns.
I am unable to comment on any aspect of my role as the Adjudication Registrar unless it is a matter of public record. What is a matter of public record is that in 2011, under the existing legislative powers available to me at the time, I took action to bolster the regulatory environment in which ANA’s were operating in Queensland.
These actions involved me prescribing conditions on the registration of ANA’s which sought to address the need for independence in the referral of adjudication applications that prescribed amongst other things:
- A key person (as defined) in an ANA could not:
- have any involvement in the referral of an adjudication application if they had provided any advice, information or assistance in relation to the construction contract the subject of the application; and
- have any form of connection or relationship with a company or business that as part of its business operations, provided advice, assistance or information to any entity on the adjudication of payment disputes under the Act. In other words, no key personnel in an ANA could have any involvement (very broadly defined) with a claim’s preparer.
These steps taken by me are documented at pages 153–154 in a report commissioned by the government, which made recommendations 17 and 18 at page 165 reflecting the fact that industry concerns were not being satisfied by the actions I had taken under existing legislation. Ultimately, the abolition of ANA’s in 2014 was the result of the recommendations made to government in this report compiled by Andrew Wallace, then Barrister at Law.
Mr Murray’s recommendations
On page 181 of his report Mr Murray comments:
“First and foremost, whilst the legislation should continue to empower ANAs to receive adjudication applications from claimants, ANAs should no longer be involved in the actual appointment of an adjudicator. As the description of their title indicates, ANAs should be confined to nominating suitable adjudicators for consideration by the Regulator.
Accordingly, whenever an ANA receives an adjudication application it should be required to put forward the names of three persons from its panel of adjudicators which the ANA considers would be suitable and available to adjudicate on the matter. The actual appointment of the adjudicator should, however, be made by the Regulator.”
It should be noted that Mr Murray’s actual recommendations in this regard are more general in nature, namely:
Recommendation 36: The legislation should provide that a function of the Regulator is to appoint adjudicators (whether nominated by the authorised nominating authority, or otherwise) to determine an adjudication application.
Recommendation 37: The legislation should provide for authorised nominating authorities to make nominations of accredited adjudicators to the Regulator for appointment to determine an adjudication application.
I disagree with Mr Murray’s recommendations
- A claimant will have the entitlement to select an ANA to lodge an adjudication application with.
- The selected ANA will enjoy total independence in the compiling of a short list of suitable (in view of the ANA) adjudicators from their panel of adjudicators for the consideration of the Regulator. It should be noted that there are various commercial relationships between all ANA’s and their adjudicators.
- While I note that Mr Murray proposes to afford the Regulator the opportunity to reject all suggested adjudicators (if the Regulator decides all are unsuitable) and request that another adjudicator from their panel of adjudicators be submitted for consideration, it should be pointed out that this step is again at complete arm’s length to the Regulator.
Another way of looking at Mr Murray’s proposed hybrid model (part private, part government) is that a statutory appointee (Adjudication Registrar) is totally reliant on front end work done by a private organisation in making a crucial statutory decision as to who should resolve a payment dispute that may be worth millions of dollars and have vast commercial consequences.
As I pointed out in my article entitled Is Adjudication Shopping about to make a comeback in Qld?:
“The Queensland Civil and Administrative Tribunal (QCAT) handles minor civil and debt disputes up to and including $25,000. I can imagine the outcry if there was a proposal to allow for Tribunal applications to be lodged with private organisations and these organisations submit a short list of three members from their panel of members to the Registrar for their consideration as to who to appoint to decide such matters.”
In another article Adjudication is in the right hands, I stated:
“The effectiveness and speedy dispute resolution nature of adjudication means in my opinion that it should remain in the hands of the government to administer all key functions.
The current Queensland position in respect of the Adjudication Registrar receiving adjudication applications and then having the obligation to refer them to adjudicators, is essential because of public sector accountability, transparency and crime and corruption requirements and obligations that apply to the registrar and registry staff.”
The possible harmonising of SOP laws in Australia is being undertaken through the Building Ministers’ Forum (BMF), which is made up of Australian government and state and territory government ministers with responsibility for building and construction. The most recent BMF communique which mentions this work is dated 8 February 2019, where it is stated:
“Ministers also discussed the National Review of Security of Payment Laws, and agreed the Senior Officers’ Group will develop model legislation for deemed statutory trusts, for jurisdictions to draw upon”.
I do not want to see the return of the possibility of ‘adjudication shopping’ in Queensland. Others may disagree and as always, I welcome a respectful and informed discussion.
Not intended as legal advice. Read full disclaimer.