Firstly, adjudication is not a money printing machine as advertised by some companies. While being a quick and effective dispute resolution method, it is nonetheless a step which may have very serious consequences if not done correctly. Blatantly irresponsible advertisement of so called “success rates” (anywhere from 90% to 100%) by so called “experts” is a major concern.
The only person who will boast 90% to 100% “win rate” is someone who never set a foot in the Supreme Court of NSW.
The SOP Act is by far the most litigated legislation in the Supreme Court. The obvious question is, what do people argue about if the legislation is so simple and the win is all but guaranteed? In our opinion there seems to be a lack of understanding of the whole process and what SOP adjudication actually is.
Adjudication, isn’t it a substitute for litigation (court)?
The answer is, yes and no.
No. An adjudication determination is an interim (temporary) decision. An adjudicator reviews the case and makes a decision on how much money to be paid (if any) for the work carried out. The other party can still start a separate court proceeding to recover the money they have overpaid (if they did). However, before doing so they must pay the money first (there are few limited exceptions). Of course, court proceedings are very expensive, so it is quite rare unless the dispute deals with a large sum. Important thing to understand is that the court action based on the above scenario will be completely independent of the adjudication. Think of it this way, it’s like adjudication never happened but you were paid for the work unjustly. Cases like that are normally very complex and can take years, hence why they are quite rare.
Yes. While the adjudication determination is an interim decision, it is nonetheless enforceable just like a court judgement (with few limited exceptions).
The main purpose of the Act is to move money from one party to the other quickly. Hence the well-known slogan ‘pay now, argue later’. To put it simple, pay for the work first and if you really believe that you have unjustly paid or overpaid for it, then by all means start a court case and try to recover the money.
Can adjudication determination be “overruled” by court?
Yes, but only in specific and somewhat limited circumstances (this is where the real danger lies).
Facts (evidence, testimonials and so on)
Generally, if an adjudicator makes a decision which is related to a fact, for example, he believes your version of events over the other party’s in relation to a variation, such in most cases cannot be disputed in court. This is true even if the adjudicator makes a mistake (of fact), unless such mistake amounts to a denial of natural justice. Courts have taken a very narrow approach and will only interfere in very exceptional circumstances.
Law (incorrect application of the Act)
This is where the Supreme Court will interfere. If the adjudicator incorrectly discharged his or her duties under the Act, the determination may be declared void by the court. There are many examples, this is one is probably one the most obvious ones. Let’s say your payment claim was served outside the time frame allowed by the Act and adjudicator makes a determination based on that claim. It will be highly likely that the determination will be declared void by the court.
Well, what does this mean for me?
Important thing to understand is that the court will not be concerned with the particulars of your claim, for example, was the claim fair or just? If the adjudicator failed to properly discharge a statutory duty then the determination will probably be void, it will not matter that you have carried out the work and should be paid for it. When the determination is declared void, that means you will not receive any money that the adjudicator awarded. It however does not mean that you cannot start another adjudication IF and ONLY IF you have the right under the Act to do so.
Also, on top of actually not getting any money you will usually be ordered to pay the legal costs of the other party, which by that stage will normally exceed $50,000 and don’t forget about your legal costs as well.
Why should I pay if the adjudicator made a mistake?
You may avoid paying costs if you simply submit to the other party’s demands and not challenge their arguments in court. So you will essentially may have to agree that ‘yes, adjudicator made a mistake and I agree not to enforce the determination’. Normally the other party will ask for an undertaking that you will not enforce the adjudication determination and if you agree you may avoid legal costs but this means you essentially will give up your right to enforce the determination. Should you insist that the determination is valid and attempt to argue that in court, this is when you will generally be liable for the other party’s costs. Should you be successful in court, then generally the other party will pay your costs.
Adjudicators are exempt from liability under the Act unless they were acting not in good faith. The purpose of the immunity is to protect adjudicators from being sued so their decisions are not influenced by a potential liability for their determinations.
99% success rate?
Few companies claim to have very high success rates, the truth is, it is not because they are good, it is only because of the Act and its objectives, that is, ‘pay now, argue later’. It is not that hard to get a good result from your adjudication as most (if not all) of our clients have genuine claims where their payment is denied for trivial reasons.
What essentially these companies are saying is that once an adjudicator accepts the application, the win rate is over 90%. Besides the obvious question of what is considered as a successful outcome, is it 50% of the claim, 20%, 100%? Loosing 100% of the claimed amount in the adjudication (if it complies with the Act) is extremely rare, so if you consider getting any money as a success then yes, you can claim you win nearly 100% of all matters. What these companies wont tell you is how many of their applications fail under the Act and don’t get determined at all, therefore they don’t count them as a loss.
The most difficult hurdle in our opinion is to make sure your application 100% complies with the requirements of the Act, this is where a professional help is essential (in our opinion), after that it is really not that hard to argue about the work and why should you be paid for it. Once you discharge all the statutory requirements, a positive outcome is very likely, but it does not mean that it is in anyway guaranteed, your claim must be genuine. There are a lot contractors who use the Act in predatory matter, the Act is there not to allow easy money grabbing but to guarantee quick payments for the work carried out.
Consequences of getting a good adjudication determination based on an invalid (under the Act) application can be disastrous. This can easily destroy your business and any prospect of getting paid for the work done.