This article considers the various ways of challenging an adjudication decision in a construction dispute. An analysis of the courts’ recent judgments on challenges and enforcement of adjudication decisions in different jurisdictions will be discussed, with an aim to assist adjudicators adopting the proposed security of payment legislation in Hong Kong.
Introduction Statutory adjudication is widely regarded as an effective means for resolving construction disputes in many jurisdictions. In Hong Kong, it had long been recognized for its value over a decade ago1. In Tang’s report 2001, para 5.77, he recognized that: “Good cashflow management is essential to the success of contractors and subcontractors. Clients should recognize that contractors’ business viability depends more upon cashflow than profit margins. Subcontractors are likewise dependent on cashflow. The prospects of prompt payment for completed work offer a strong incentive to contractors and subcontractors to deliver quality service… There is much room for improvement in the area of security of payment to contractors and subcontractors.” Further, in para 5.80, he recommended “that further consideration should be given to the merits of, and the need for, enacting security of payment legislation having regard to local circumstances and in the light of overseas experience…” In the last decade, the security of payment legislation has been enacted in 6 countries and 12 jurisdictions. Case law has been established in relation to different areas of controversies. Amongst them, the enforcement and challenges of adjudication decisions are of the most importance. The UK is the pioneer of the security of payment legislation. The English legal system doctrine of natural justice that protects against arbitrary exercise of power by ensuring fair play, is based on two fundamental rules: (1) Audi alteram partem (hear the other side) – a person directly affected by a decision must be given a full opportunity to prepare and submit his or her case and comment on the opposing party’s case; and (2) Nemo judex in causa sua (no man shall be a judge in his own case) – no decision is valid if it was influenced by any financial consideration or other interest or bias of the decision maker. In April 2016, the Development Bureau of the Hong Kong Special Administrative Region Government published a report on public consultation on the proposed Security of Payment Legislation (SOPL) for the construction industry in Hong Kong2. The SOPL aims at regulating strategic and effective payment systems in the construction industry. In the public consultation exercise 3, the following question was put to the public: “The adjudicator shall be entitled to disregard any submission or evidence or part thereof submitted by the claiming party to the extent that the adjudicator considers the same comprises submissions or evidence which the responding party was unaware of at the time the notice of adjudication was served and which should reasonably have been served with a Payment Claim or otherwise in advance of the notice of adjudication and which cannot fairly be considered and responded to by the responding party in the adjudication.”