Allpro Building Services Pty Limited v Micos Architectural Division Pty Limited & Ors

LEGISLATION CITED : Building and Construction Industries Security of Payments Act 1999

CASES CITED : Commonwealth Coatings Corp v Continental Casualty Co (1968) 393 US 145 Reiby Street Apartments Pty Ltd v Winterton Constructions Pty Ltd [2005] NSWSC 545

Allpro Building Services Pty Limited (Plaintiff) PARTIES : Micos Architectural Division Pty Limited (First Defendant) Mr Ian Hillman (Second Defendant) Australian Solutions Centre (Third Defendant)

IN THE SUPREME COURT OF NEW SOUTH WALES EQUITY DIVISION TECHNOLOGY AND CONSTRUCTION LIST

Friday 14 May 2010 ex tempore Revised 17 May 2010

2010/117065 Allpro Building Services Pty Limited v Micos Architectural Division Pty Limited & Ors JUDGMENT 1 There is before the court a summons pursued by the plaintiff Allpro Building Services Pty Limited. 2 The issues raised by the plaintiff in pursuing the relief which it seeks today are of particular significance to the operation of the Act 3 The issues raised are of extreme significance to any adjudicators making decisions under the Act in terms of their being bound by the rules of natural justice which require that the person making the decision not be biased. 4 These reasons are also a salutary reminder of the critical significance that adjudicators determine the adjudications which come before them, without regard to extraneous circumstances as for example private communications with their colleagues about one or other of the parties. 5 The plaintiff claims:

i. a declaration that the determination of the second defendant of 4 May 2010 made under the Building and Construction Industries Security of Payments Act 1999 is void;

ii. an order quashing the determination of the second defendant;

iii. an order permanently restraining the first defendant from taking any steps to enforce the determination;

iv. An order permanently restraining the second defendant from issuing an adjudication certificate in respect of the determination;

v. costs. 6 The proceedings first came before the court on 11 May 2010. McDougall J inter alia restrained the first defendant from filing any adjudication certificate as a judgment for a debt in any court of competent jurisdiction under s 25(1) of the Act in respect of the adjudication determination made by the second defendant dated 4 May 2010. 7 Each of the defendants to the summons have determined to put on submitting appearances. 8 It is in those circumstances that the summons is pressed ex parte today. 9 The ground of the application against the second defendant who was the adjudicator was that he denied the plaintiff natural justice because there was at least an appearance of bias. That appearance was contended to arise because at the time the second defendant accepted the adjudication application, he was in dispute with the plaintiff over fees relating to another adjudication in which the plaintiff (but not the first defendant) had been involved. 10 In a 2005 decision Reiby Street Apartments Pty Ltd v Winterton Constructions Pty Ltd [2005] NSWSC 545 Macready AsJ, had occasion to examine the relevant principles. His Honour observed as follows:

"Adjudicators making decisions under the Act are bound by the rules of natural justice. Such rules require that the person making the decision should not be biased. There has been debate as to whether or not such a breach of the rules of natural justice would lead to a decision of the adjudicator being void not merely avoidable. At present the matter is settled in New South Wales by the decision of Broden. Hodgson JA who gave the decision of the Court concluded in respect of matters under the Act as follows: 'In my opinion in cases such as this where there is a disclosed legislative intention to make a particular measure of natural justice a precondition of validity, failure to afford that measure of natural justice does make the determination void.'" At 25 : "There was no dispute about the general principles in respect of apprehended bias. In Johnson at 11 Gleeson CJ, Gaudron, McHugh, Gummow and Hayne said:

'It has been established by a series of the decisions of this Court that the test to be applied in Australia in determining whether a judge is disqualified by reason of the appearance of bias...is whether a fair minded lay observer might reasonably apprehend that the judge might not bring an impartial and unprejudiced mind to the resolution of the question the judge is required to decide.'" At 26 after referring to that test the majority continued: "That test has been adopted, in preference to a differently expressed test that has been applied in England, for the reason that it gives due recognition to the fundamental principle that justice must be done and must be seen to be done. It is based upon a need for public confidence in the administration of justice.

If fair minded people reasonably apprehend or suspect that the Tribunal has prejudged the case they cannot have confidence in the decision."

The hypothetical reasonable observer of the judge's conduct is postulated in order to emphasise that the test is objective, is founded in the need for public confidence in the judiciary, and is not based purely upon the assessment by some judges of the capacity or performance of their colleagues. At the same time two things need to be remembered: The observers is taken to be reasonable, and the person being observed 'is a professional judge whose training, tradition and oath of affirmation require the judge to discard the irrelevant, the material and the prejudicial.'

At 28 Macready AsJ put the matter as follows: "The plaintiff's submission was that the principle relating to apprehended bias was to be applied with greater vigour in the context of adjudications under the Act compared with judicial proceedings. The first reason was said to be the fact that judges by their training are conscious of these matters and have taken a judicial oath and, secondly, that appeals do not lie from decisions of arbitrators under the Act." Reference was made to Commonwealth Coatings Corp v Continental Casualty Co (1968) 393 US 145 at 149 where the Court said: "We should, if anything, be even more scrupulous to safeguard the impartiality of arbitrators than judges, since the former have completely free reign to decide the law as well as the facts and are not subject to appellate review." At 29: "The force of the last proposition was said to have been negated by the provisions of s 32 of the Act which will allow the disputes resolution procedures in an ordinary building contract to be used as a medium for adjusting the parties rights following upon the interim determinations of the adjudicator during the course of the contract. The first proposition is certainly true and I feel that it is appropriate to be somewhat more particular in the case of an adjudicator rather than a judicial officer although this must depend upon the community's continued general acceptance of the role of judicial decisions in our society." At 33: "The views of the fair minded bystander as to what was alleged by the plaintiff to be the underlying dispute should not be considered as if that fair minded bystander was a judge. Also, it does not require me to decide the underlying dispute. This being so, the strength or otherwise of the parties contentions should not be subject to careful legal analysis but instead be directed to what a lay person may perceive from the extent of the correspondence and the circumstances given in this case." At 34: "In this context I do not think it appropriate to characterise the plaintiff's letter as a request but as I have indicated above it was a courteous demand for a refund of fees. The adjudicator did have an interest in the result because he was facing a demand to return his fees." 11 In the result Macready AsJ determined that there was a reasonable apprehension of bias. 12 The Court has been referred to a letter from Tress Cocks and Maddox, Solicitors for the plaintiffs to Mr Hillman of 20 April 2010 advising that they had been instructed to prepare a statement of claim and intended to do so. A draft copy of the statement of claim was enclosed 13 The effective response by the adjudicator of 27 April 2010 was to advise that he would be determining the adjudication and that the respondent's concerns would be addressed in his determination. 14 There was clearly a history of disputation between the plaintiff and the adjudicator concerning the plaintiff having refused to pay the adjudicator's fees dating back to May 2009. 15 The adjudication determination handed down on 3 May 2010 included the following under the heading, Jurisdiction and Document Issues.

"(A) the respondent's letter dated 21 April 2010 requests that I disqualify myself as adjudicator,

(B) the respondent's representative, NPL has a history of requesting disqualification of an adjudicator. My experience and I understand the experience of other adjudicators confirms this to be true ."..

"(F) Until I accepted the nomination as adjudicator on 29 March 2010 I had no knowledge of any claim made against me for the recovery of the adjudicator's fees associated with 2010-TASC-047J.

(H),This claim for the recovery of adjudicator's fees is a recent invention, is defective and is contrived to fit with NPL's standard process of challenging the adjudicator's right to determine the matter.

(J)Whilst I find the NPL tactics unusual I do not believe that there is any personal bias between the parties and I genuinely believe that challenging the adjudicator's right to determine the matter is simply part of the NPL process.

(K) I am convinced that had I not accepted the adjudication application 2010-TASC-039 and 2010-TASC-054 there would not have been a claim to recover adjudication fees associated with the matter that is nearly twelve months old.

At (L) I have considered my position at length and I am satisfied that my impartiality has not been compromised and that I can bring a fair and unprejudiced mind to the determination of this adjudication application." 16 There is absolutely no doubt from the materials to which I have referred that the adjudicator breached the rules of natural justice in terms of the tests already referred to. The views of a fair-minded bystander as to the adjudicator's conduct would clearly give rise to the fact that that conduct exhibited a reasonable apprehension of bias. 17 The reasons set forth above effectively charged NPL with having a history of requesting disqualification of an adjudicator and particularly setting out what he indicated was not only his own understanding but represented the experience of other adjudicators confirming that matter to be true. 18 I view with particular concern the approach taken by the adjudicator who seems to have been blind to the critical significance of complying with the rules of natural justice which require that the person making the decision bring an impartial and unprejudiced mind to the resolution of the question. 19 For those reasons will be make the following orders. The court makes orders 1, 3 and 4 as sought in the summons. The proceedings are adjourned to Friday 21 May 2010 for determination of issues concerning costs of the first defendant.

DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated.