Natural justice strikes again for adjudicator

A recent High Court decision of Chappell v Swindells has reiterated the high threshold for judicial review over adjudicator determinations in construction disputes. The case emphasises that adjudicators must:

  • be impartial and independent in their decision-making process;
  • consider all information put to them; and
  • provide adequate reasons for their determination.

If not, their determination may be subject to judicial review.

The Dispute

The Chappells had contracted Annex Construction Limited (Annex) for renovations to their home when disputes arose that soured the parties’ relationship, involving considerable time delays and issues regarding quality of work undertaken. After a series of unpaid invoices by the Chappells, Annex gave its notice of suspension and removed materials from the site, to which the Chappells responded by denying Annex all access to the site without express permission.

Following unsuccessful settlement negotiations, Annex gave a notice of adjudication under s 36 of the Act, claiming a total of over $72,000 owing, plus a further $26,000 sought in incurred legal fees. The Chappells themselves sought $140,000 from Annex. The adjudicator, Swindells, awarded just over $50,000 to Annex.

The Chappells applied to the High Court for judicial review of Swindells’s determination and process of determining such adjudication, alleging several defects that amounted to ‘procedural impropriety’ and ‘apparent or actual bias’, and a failure to take into account relevant information into his determination.

High hurdle for judicial review

The Court referred to a recent judicial review case also involving Swindells (see our article on Anderson v Swindellshere) and the Court of Appeal case of Rees v Firth, which established that the threshold for judicial review is high. This case made it clear that the main courses of action for parties seeking relief over an adjudicator’s determination should be through litigation, arbitration, or mediation of the underlying dispute, rather than judicial review because an important purpose of the Act is “to provide a mechanism to enable money flows to be maintained on the basis of preliminary and non-binding assessments of the merits”.

An example of an application for judicial review being dismissed was in Body Corporate 200012 v Keene QC where, according to this court, it was clear that the applicant’s objective was to:

“avoid the ‘pay now, argue later’ policy of the CCA … [hoping] to avoid payment until the arbitration is concluded, with the goal of succeeding at arbitration and thus eliminating or reducing the requirement to pay.”

Where did the adjudicator go wrong?

Independence and Impartiality

Under the Act, an adjudicator may conduct an adjudication in any manner that they see fit, subject to acting ‘independently, impartially, and in a timely manner’ as well as complying with the principles of natural justice. Swindells and Annex had had conversations over the disputed amounts invoiced, to which the Chappells and the Chappell’s solicitor were not a party. This correspondence was not sent to the Chappells’ solicitor until the day before the determination was issued, which gave him no reasonable chance to comment on the amounts Annex was claiming from the Chappells.

Basis of decision unclear

Under s 47 and 48 of the Act, the form and substance of an adjudicator’s determination must be in writing and dated, containing reasons for their determination. Swindells gave no reasons as to why he concluded upon the total invoice amount asserted by Annex, rather than the Chappells.

Failure to take account of relevant considerations

Several issues fairly raised by the Chappells in the adjudication were not addressed by Swindells – all of which he was clearly required to do so under these provisions of the Act. No determinations were given on the credit claimed by Annex, alleged quality issues, damage and rectification costs, and whether Annex was liable for any loss of rental to the Chappells.

As such, Powell J took no hesitation in finding the adjudication determination “manifestly flawed”, constituting a substantial error of law. Swindells’s analysis fell short of what was required under the Act and he “fundamentally failed in his role as adjudicator.”

Natural Justice the benchmark

While the Court has been quick to stress that the threshold of judicial reviews of adjudications under the CCA is high, it is nevertheless clear that a decision made in an adjudication may be set aside if the adjudicator has not correctly observed the principles of natural justice.

Contributor: Jade Yu, Summer Clerk

Who can help

Related Articles