In the realm of construction disputes, expert evidence plays a pivotal role in shaping the outcomes of litigation and arbitration. Traditionally, expert witnesses are engaged by parties to analyze facts, form opinions, and present conclusions that can influence the decision-making process of a tribunal. However, the growing use of expert witnesses in statutory construction adjudications, especially for large and complex payment claims, has introduced new challenges. Unlike the more extended timelines in litigation and arbitration, adjudicators in construction disputes often operate under severe time constraints—typically just 10 business days. This accelerated process leaves little room for the thorough examination of expert evidence, such as cross-examinations or detailed meetings with experts, which can complicate the adjudication process.
The pressure of time constraints raises questions about the appropriateness of relying on expert evidence in adjudications. Critics argue that such evidence may not be fully considered in the adjudicator’s determinations, which can undermine the fairness and accuracy of the outcome. Additionally, the burden placed on respondents to prepare comprehensive payment schedules, sometimes with expert input, adds to the complexity and cost of the process. The situation has prompted legislative amendments in some jurisdictions, such as Queensland, to address these concerns by allowing respondents more flexibility in raising new reasons for withholding payment in complex cases. This blog post explores the challenges and considerations surrounding the use of expert evidence in adjudications and the implications for parties involved in construction disputes.
In Owners Strata Plan 61172 v Stratabuild Ltd [2011] NSWSC 1000, the court evaluated the respondent’s reliance on expert evidence in the context of adjudication under the New South Wales Security of Payment Act. The respondent had issued a payment schedule, citing defects in painting work as the basis for withholding payment. The schedule referenced both the existence of testing that indicated substantial defects in the painting and a quotation for rectification costs from Skillco Design & Construct Pty Ltd.
However, in its adjudication response, the respondent introduced a more detailed technical report (the Bayliss Report) and an updated quotation from Skillco. The adjudicator refused to consider these documents, citing Section 20(2B) of the NSW Act, which restricts the inclusion of new reasons for withholding payment in the adjudication response unless they were already included in the payment schedule. The adjudicator concluded that the respondent should have included the Bayliss Report in the payment schedule, thus limiting the respondent’s arguments to the thickness of the paint as initially described.
The court disagreed with the adjudicator’s interpretation, ruling that the payment schedule had provided sufficient detail to communicate the reasons for withholding payment. The court found that the adjudicator had misunderstood the distinction between reasons and submissions within the context of the Act, leading to a jurisdictional error. The court further ruled that the adjudicator’s failure to consider the Bayliss Report and other relevant evidence amounted to a denial of procedural fairness, rendering the adjudicator’s determination void.
This case represents a pivotal development in judicial interpretation of Section 20(2B) post-Chase Oyster Bar Pty Ltd v Hamo Industries Pty Ltd [2010] NSWCA 190. The comparison between Stratabuild and earlier decisions, such as Broad Construction Services (NSW) Pty Ltd v Michael Vadasz [2008] NSWSC 1057, highlights a shift in the courts’ approach to adjudicators’ discretion in handling expert evidence.
In Patrick Stevedores Operations No. 2 Pty Ltd v McConnell Dowell Constructors (Aust) Pty Ltd [2014] NSWSC 1413, the court addressed the claimant’s reliance on an expert report that was partly disputed by the respondent. The respondent argued that the adjudicator should have adhered to the expert’s findings and claimed a denial of natural justice when the adjudicator accepted the claimant’s submissions over the expert’s report. However, the court upheld the adjudicator’s discretion, stating that the adjudicator was not obligated to justify the acceptance of a claim over expert advice unless it directly contradicted the evidence presented.
Similarly, in Laing O’Rourke Australia Construction v H&M Engineering & Construction [2010] NSWSC 818, the adjudicator’s handling of an expert report was scrutinized. The adjudicator questioned the independence of the expert’s findings, which were based heavily on instructions rather than independent analysis. Despite spending considerable effort analyzing the report, the court quashed the adjudicator’s determination due to what it deemed a lack of proper consideration, illustrating the importance of adjudicators not dismissing expert opinions based on perceived biases without thorough analysis.
In Ku-Ring-Gai Council v Ichor Constructions Pty Ltd [2014] NSWSC 1534, the claimant sought to rectify deficiencies in an initial expert report through a supplementary report submitted in a subsequent adjudication application. The court found this to be an abuse of process, as it allowed the claimant to attempt to correct and resubmit evidence that should have been sufficient in the first instance.
Summary of the Law
From these cases, the following principles can be drawn regarding how adjudicators should handle expert evidence:
- Expert Witness Reports: Adjudicators must consider expert witness reports submitted with an adjudication response if they elaborate on reasons for withholding payment stated in the payment schedule. The reasons in the payment schedule need only be expressed with sufficient clarity to inform the parties of the real issues in dispute. Confusing supporting content in expert reports with new reasons can lead to a breach of natural justice and jurisdictional error.
- Claim Amount vs. Expert Recommendations: Adjudicators are not obligated to award an amount that matches the claimant’s expert recommendation, and they do not deny natural justice by awarding a higher amount, provided the adjudicator’s reasoning is sound.
- Independence of Experts: Adjudicators must tread carefully when questioning an expert’s independence. Any dismissal of an expert report without just cause may lead to the quashing of the adjudicator’s determination for breach of natural justice.
- Engagement with Expert Reports: Adjudicators are required to engage intellectually with expert reports, providing clear reasons for accepting or rejecting the expert’s opinions.
- Submission of Updated Expert Reports: The submission of updated expert reports in subsequent adjudication applications, especially after shortcomings have been identified in the initial report, can be seen as an abuse of process.
- Time Constraints and Fairness: The time pressure under which adjudicators operate may excuse the failure to call for further submissions on an expert report, but it does not absolve the adjudicator from the duty to engage thoroughly with the evidence presented.
Conclusion and Further Research
The increasing complexity of adjudication, particularly concerning large claims, underscores the tension between the need for swift resolution and the requirement for procedural fairness. The courts have made it clear that adjudicators must engage meaningfully with expert evidence, even within tight timeframes. Future research could explore the development of dual adjudication schemes tailored to complex disputes, potentially drawing on models from other jurisdictions such as the UK’s Scheme for Construction Contracts. These insights could contribute to optimizing the adjudication process in Australia, particularly for large and complex claims.