When the South Australian government held a briefing for stakeholders on the new Security of Payment regime, it announced a welcome Red card/Yellow card system. Adjudicators who have been found to have been wanting in good faith at least twice were to be disqualified, (red card) and adjudicators found wanting in other less serious respects (eg acting without jurisdiction) were to have to go back for retraining (yellow card).
Since then, there has been some back tracking. First the government put out its Code of Conduct for ANAs, where the red card criterion was watered down to 2 instances of want of good faith in the last 5 years (this is significant because the track record of Philip Davenport – chief adjudicator for Adjudicate Today – includes two such instances, one of which was 6 years ago (Holmwood Holdings Pty Ltd v Halkat Electrical Contractors Pty Ltd & Anor  NSWSC 1129 and Laing O’Rourke Australia Construction v H&M Engineering and Construction  NSWSC 818).
Secondly, the yellow card suspension only now applies unless and until “the ANA is satisfied that the cause of the error has been resolved” – the requirement for retraining has been dropped. That is a provision that looks certain to attract judicial attention, but it seems unlikely that the courts will treat this as a subjective test, and if an adjudicator has repeatedly got things wrong, it is unlikely that the courts will – absent some pretty compelling evidence of rehabilitation – regard further appointments of such adjudicator as properly or lawfully made.
Thirdly, the new Regulations make no mention of the red/yellow card provisions at all, so challenges to adjudications on this ground are likely to have to be made in court, instead of being dealt with administratively.
The text of the Code of Conduct is as follows:
Code of Conduct for Authorised Nominating Authorities
Building and Construction Industry Security of Payment Act 2009
The Building and Construction Industry Security of Payment Act 2009 (the Act) was created to improve payment practices and cash flow in the construction industry. It creates a right to progress payments and establishes a system of private adjudication of payment disputes.
Authorised Nominating Authorities (ANAs) and adjudicators play key roles in the security of payment scheme. Adjudication determinations are legally binding decisions that can significantly affect the financial position of businesses and so it is essential that they are made competently and fairly. This Code of Conduct sets some guidelines to assist ANAs in meeting their obligations.
ANAs receive their authorisation from the Minister for Business Services and Consumers under Section 29 of the Act. This may be reviewed at any time. Any breach of this Code of Conduct or other general failure to meet their obligations may lead to a review of authorisation for an ANA.
An ANA must:
• Comply with the requirements of the Building and Construction Industry Security of Payment Act 2009 and Regulations at all times;
• Maintain a physical address within Australia and facilities to receive documents by personal delivery, email, post or fax;
• Maintain a web site that includes:
o General information about the Act’s requirements and procedures, and o Information on the services offered by the ANA and how to access
these services, and o Information on the fees charged by the ANA and adjudicators, including
details of any fee charged by the ANA to adjudicators relating to the
appointment and handling of adjudication matters;
• Establish and maintain quality assurance systems;
• Establish and maintain an effective complaint handling system;
• Advise all applicants of the application and adjudication fees before accepting an application;
• Refund any application fee paid if a claimant withdraws their application under section 26 of the Act;
• Upon request and without fee, allow a staff member from Consumer and Business Services to attend any training provided to adjudicators, for the purposes of monitoring training quality.
An ANA must, at all times, act ethically and without favour to any party to an adjudication matter.
An ANA must not act in a matter where it will have an actual or apparent conflict of interest.
An ANA must not accept an application for adjudication involving one of its directors, managers, members, shareholders, staff or a close relation or business associate of one of these people, other than in the following circumstances:
• Where the applicant is a person who is not a member of the ANA, the respondent is a member and the applicant gives specific written acknowledgement that they are aware of the potential conflict of interest and wish for the application to proceed, or
• Where the applicant and respondent are both members of the ANA and both have given specific written acknowledgement that they are aware of the potential conflict of interest and wish for the application to proceed.
Appointment of Adjudicators
An ANA must maintain access to a pool of adjudicators who (combined) have the competence and experience to properly adjudicate the full range of adjudication applications covered by the Act. Any eligibility criteria prescribed in relation to section 18 of the Act must be considered a minimum level. It is the responsibility of the ANA to ensure that the adjudicators it nominates have suitable qualifications and experience for each particular application, as well as ensuring that they meet any eligibility criteria in the Regulations.
An ANA must not nominate a person to act as an adjudicator where it is aware, or reasonably should be aware, that a real or perceived conflict of interest exists between the adjudicator and the claimant or respondent. An example of such a circumstance is where the adjudicator would be nominated to perform adjudication in relation to a dispute:
• Involving a close relative, business associate or person that they have been in a contractual relationship with within the previous 12 months, or
• Referred to them by an ANA in which they have a financial interest (eg they own shares in the ANA or receive some share of the profits), or
• From an ANA that they are an employee of.
An ANA must not nominate an adjudicator that has been found, by a court in Australia, to have made technical errors in performing adjudications unless the ANA is satisfied that the cause of the error has been resolved.
The making of unbiased decisions is of utmost importance and so an ANA must not, without the written approval of the Minister for Business Services and Consumers, appoint a person as an adjudicator if that person has been found to have acted not in good faith, twice or more, by a Court in Australia within the last 5 years in relation to adjudication duties.
Provision of Information to the Regulator
If there is a change to any of the following details of the ANA, it must send notification within 7 days:
• Organisation name or business name
• Business address
• Director (or board member for an incorporated association)
• Fee levels or structure
The following events must also be notified within 7 days:
• If the ANA becomes insolvent or ceases to carry on business as an ANA
• If any director (or board member for an incorporated association) is charged with an offence involving dishonesty
• If the ANA becomes aware of the commencement of any court action in relation to or affecting an adjudication application made to that ANA
• If a complaint about the ANA or an adjudicator is received or finalised, including details of outcome of the complaint
An ANA must submit quarterly reports (within 1 month of the end of the quarter) in a form approved by the Minister for Business Services and Consumers. These reports will provide mainly statistical information and be in the form of a spreadsheet. The quarterly reports are for the periods ending:
• 30 September
• 31 December
• 31 March
• 30 June
A copy of all adjudication determinations made during the quarter must accompany the quarterly report. The copies should be in .pdf format.
An ANA must submit an annual report for the period up to 30 June each year. This must be submitted by 31 July and contain:
• The name and qualifications of each adjudicator nominated by the ANA,
• Details of any training provided to adjudicators,
• Details of any changes to policies and procedures with respect to:
o Administrative arrangements for processing and managing adjudication
applications, o Quality assurance,
o Complaint handling,
o Adjudicator training and selection,
o Nomination of adjudicators,
o Identifying and managing actual or perceived conflicts of interest,
o A summary of adjudication outcomes and trends.
Delivery of Reports
All reports and notifications must be sent via email to firstname.lastname@example.org.