Adjudication

Firstly, adjudication is not a money-printing machine as advertised by some individuals. While being a quick and effective dispute resolution method, it is nonetheless a step that 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. We strongly encourage you to read our Getting the Right Help page.

The only person who will boast a 90% to 100% ‘win rate’ is someone who never set 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 application 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 a few limited exceptions). Of course, court proceedings are very expensive, so it is quite rare unless the dispute deals with a large sum. The 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 a 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 simply, 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 an adjudication determination be “overruled” by a 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 that is related to a fact, for example, she or he believes your version of events over the other party’s in relation to a variation, such in most cases cannot be disputed in a 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 (due to the Court’s inherent jurisdiction) 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, and this is probably one of the most obvious ones. Let’s say your payment claim was served outside the time frame allowed by the Act, and the adjudicator makes a determination based on that claim. It is highly likely that the determination will be quashed.

Well, what does this mean for me?

The 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 fails 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 $70,000 and don’t forget about your legal costs as well.

How much?!

Going to court is very expensive (even prohibitively expensive for a lot of contractors). The Act is designed to provide for an affordable process, and in most cases, it does just that. Yet, if the adjudication determination is challenged, the legal costs may become overwhelming very quickly. You may avoid paying costs if you simply submit to the other party’s demands and do not challenge their arguments in court. So you will essentially have to agree that ‘yes, the 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. The important thing to note is that you usually do not get 100% of your legal costs back. A typical costs order will be on a party-and-party basis, which in effect, will cover you for about 70% of the actual costs.

Adjudicators are exempt from liability under the Act unless they were acting not in good faith. The purpose of immunity is to protect adjudicators from being sued so their decisions are not influenced by a potential liability for their determinations.

Don’t take that chance

Do not put yourself in a situation where your application raises a possible opportunity for the other party to take it to court. A properly drafted payment claim and application will minimise the chances of this happening. How? A solicitor who knows the current state of the law should be able to spot any potential issues with your claim early on and subsequently draft a payment claim or adjudication submission in a way that will not provide an opportunity for the other party to challenge it or at the very least a competent professional will make you aware of any potential issues. Get the Right Help.

99% success rate?

If you hear something like ‘we win 90-100% cases’, just walk away. Firstly, it is just not true. Secondly, how can you possibly verify such a claim?

Besides the obvious question of what is considered as a successful outcome, is it 50% of the claim, 20%, or 100%? Losing 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 ‘individuals’ won’t 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 complies with the requirements of the Act. This is where professional help is essential. After that, it is really not that hard to argue about the work and why you should 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 any way guaranteed. Your claim must be genuine.