Construction Contracts Amendment Bill (No 97-1) Submission from Building Disputes Tribunal (NZ) Limited 25 July 2013

Transcription

1 Committee Secretariat Commerce Parliament Buildings Wellington Construction Contracts Amendment Bill (No 97-1) Submission from Building Disputes Tribunal (NZ) Limited 25 July 2013 Submission prepared for: The Commerce Committee Submission prepared by: John Green, Director - Building Disputes Tribunal (NZ) Limited Submissions to the Commerce Committee - Construction Contracts Amendment Bill Building Disputes Tribunal (NZ) Ltd 1

2 Index INTRODUCTION 3 BACKGROUND 5 SUBMISSIONS 11 Executive Summary 12 Detailed Submissions 13 Key Issues 13 Other Important Issues 26 Sundry Issues 37 Minor Drafting Amendments 39 Security of Payment 40 APPENDIX A Notice of Acceptance Template 43 Submissions to the Commerce Committee - Construction Contracts Amendment Bill Building Disputes Tribunal (NZ) Ltd 2

3 I Introduction The Building Disputes Tribunal (NZ) Limited (Building Disputes Tribunal or BDT) 1 is recognised and respected as an independent, nationwide specialist dispute resolution service provider to the building and construction industry in New Zealand. 2 The Building Disputes Tribunal is an Authorised Nominating Authority (ANA) under the Construction Contracts Act 2002 for the purpose of nominating Adjudicators to determine building and construction disputes and provides fully administered adjudication services through the offices of its experienced Registrars. The Building Disputes Tribunal has assisted parties to resolve disputes ranging in value from a few thousand dollars to over $100 million. A large proportion of disputes involve claims for $50,000 or less 3 and those disputes are adjudicated by the Building Disputes Tribunal on a fixed fee basis to ensure a proportionate response to the value and complexity of the dispute. The Building Disputes Tribunal maintains panels of highly skilled Adjudicators who are respected and recognised as the leaders in the resolution of building and construction disputes in New Zealand. All BDT Adjudicators have been carefully selected because of their extensive knowledge of construction law and building and construction science and practice. Building Disputes Tribunal Adjudicators have undertaken 467 adjudications since BDT was appointed as an ANA in The Building Disputes Tribunal currently undertakes approximately 85% of all adjudications each year in New Zealand. The Building Disputes Tribunal provides education and guidance to lawyers, the construction industry, and the community generally. It maintains a comprehensive 1 Building Disputes Tribunal (NZ) Limited, a company incorporated in 1996 under the Companies Act 1993 (company number ). 2 BDT s Directors have provided these specialist dispute resolution services for the past 23 years. When the new Arbitration Act came into force in 1996, BDT was established to reflect the specialist arbitral tribunals appointed under its aegis and Rules. 3 55% of all adjudication claims involve amounts in dispute of less than $50,

4 website ; it publishes BuildLaw, a well regarded free of charge quarterly publication with a large domestic and international readership; it collects and publishes extensive statistics from the dispute resolution procedures that are referred through the Tribunal; and it works closely with the industry and the legal profession in relation to dispute resolution process design, development, and practice. Contact details: PO Box Takapuna 0740 P: E: registrar@buildingdisputestribunal.co.nz W: I wish to appear before the Committee to speak to our submission John Green F.AMINZ, F.C.IArb(UK), A.IAMA 4

5 II Background To assist the Committee understand the context in which the Bill is intended to improve the adjudication process and make adjudication a faster, more costeffective, and efficient option for people with disputes under construction contracts 4, we have set out below what we believe to be the relevant facts and statistics 5. The Construction Contracts Act 2002 The Construction Contracts Act 2002 (the Act) came into force on 1 April 2003 and in doing so, reformed the law relating to construction contracts, ushered in a new payment morality, and dramatically changed the face of dispute resolution in the construction industry in New Zealand. Purpose and focus of the Act The purpose of the Act 6 was to reform the law relating to construction contracts and, in particular, to: i. facilitate regular and timely payments between the parties to a construction contract; and ii. provide for the speedy resolution of disputes arising under a construction contract; and iii. provide remedies for the recovery of payments under a construction contract. The focus of the Act is on cashflow and payment 7, rather than security of payment. Adjudication is intended to provide a prompt and binding, but interim decision, in respect of disputes arising under construction contracts for the purpose of achieving cashflow. 4 Explanatory note General policy statement 5 BDT records comprehensive statistics in relation to each adjudication undertaken under its aegis 6 Section 3 of the Act 7 See General Policy Statement at the beginning of the Explanatory Note which accompanied the Bill when it was first introduced to the House of Representatives on 15 May

6 Performance/results to date There is general consensus that the Act has worked reasonably well for the past ten years. Broadly, the Act has resulted in: Improved payment procedures through the widespread use of payment claims and payment schedules which comply with the Act, including amendment of payment provisions in the main standard forms; Pay if/when paid practices have largely ceased; The Courts have generally supported the policy of the Act in enforcement proceedings; The Courts have taken on board the underlying pay now, argue later philosophy of the CCA 8 ; Adjudication under the Act is now the primary form of dispute resolution in the industry 9. Adjudication Adjudication has become the process of choice for parties to construction contracts. The key advantages of adjudication over all other formal dispute resolution processes are that it is: Mandatory Adjudication is a dispute resolution process governed by statute, not contract, and accordingly, a claimant may refer a dispute to adjudication at any time without requiring the agreement of the respondent and the respondent cannot delay, obfuscate or avert the adjudication process 10 ; Fast Adjudication is extremely fast compared to any other determinative dispute resolution process % of all adjudications undertaken by BDT are 8 Ian Laywood and Gary Rees v Holmes Construction Wellington Limited CA 83/2008, 25 February 2009 at [52] 9 97% of all building and construction disputes dealt with by BDT are now determined by adjudication. Previously, arbitration was the process of choice for the construction industry but the process is beset with difficulties, not least in commencing the process and securing the appointment of an arbitrator. See our comment on the proposed pre adjudication conference later in this submission. 10 Sections 12 and 25 of the Act 11 Litigation or arbitration 6

7 determined in less than 47 days from service of the Notice of Adjudication initiating the process. The average period of time between submission of the response to the adjudication claim and the determination is 19.7 days the shortest period has been 1 day, the longest period to date has been 42 days by agreement of the parties 12. The speed and efficiency of adjudication is best measured when considered in the context that construction contracts under which the disputes arise are often complex contracts involving substantial amounts of money, they are carried out over long periods of time, expectations and understandings of rights and obligations are often unreasonable and misconceived, and as a consequence, the contracts involve significant risk for the contracting parties. The position is rendered more complex in relation to the construction and alteration of many residential dwellings which involve the owner s personal and family interests and sensibilities. When disputes arise, they almost invariably involve a number of complex issues of fact and law and substantial volumes of documentation. Relatively straightforward the process is simple and easy to follow with few steps or formalities to be followed 13, legal representation is not considered necessary by the parties in many cases 14, and there is no formal hearing of submissions and testing of evidence to prepare for and attend. The dispute is determined on the basis of the written argument and evidence submitted by the parties. 15 Cost effective because the period within which the adjudication is required to be undertaken is so short, legal costs for attendances, if any, are vastly 12 The statutory default period for determining a dispute from receipt of the response by the adjudicator is 30 working days (see section 46(2)(b)) 13 Initiation by notice and application to ANA for appointment of adjudicator by claimant, acceptance of appointment by adjudicator, then: service of claim by claimant, service of response by respondent, possible further round of reply submissions, and determination by adjudicator all within 47 days (BDT statistics) 14 Only 51% of claimants are legally represented for the purpose of adjudications and 42% of respondents 15 Inspections of construction work and conferences of the parties are permitted under s42(1)(f)&(g) but the experience to date has been that they are generally not considered necessary a conference or inspection has been utilised in less than 3% of all cases to date 7

8 reduced, disruption to business is minimised for the parties, and there are no hearing related costs which in other processes can be substantial 16. There are however a number of issues that have repeatedly presented in adjudication proceedings over the past 10 years that detract from the efficiency and efficacy of the process and add to the cost for the parties. These issues could readily be eliminated by minor drafting amendments that would result in significant improvements. Enforcement Some of the anticipated results of the Act have not been achieved. In particular, it was envisaged that the Act s provisions which provide for the enforcement of an adjudicator s determination would significantly improve the successful party s ability to be paid (at least in the interim). Unfortunately, and all too often, this is not the case. Among other things, a resistant payer can use the enforcement process to delay and/or avoid payment altogether, including disposing of construction site land 17. Effective enforcement procedures and short timeframes promote and encourage settlement without adjudicator intervention 18. Security of payment While at present there are no security of payment provisions in the Act or the Bill, we understand that such measures may be contemplated and therefore, we have taken the additional step of discussing the issue and making recommendations. Following the collapse of Mainzeal earlier this year 19 with the loss of subcontractor retentions of $11.3M there has been a renewed focus on security of payment and to 16 Generally, other dispute resolution processes that involve meetings or formal hearings i.e. litigation and arbitration will by their nature cause parties to incur additional costs associated with each attendance for: legal representation; expert witnesses; venue costs and charges; arbitrator fees and expenses or court fees; and travel time and expenses % of claimants seek consent for a charging order over the respondent s land and on average 47.2% are successful. 11.1% of claimants seek consent for the issue of a charging order over an owner s land and on average 23.1% are successful 18 30% of all adjudication cases in which a claim is filed actually settle before a determination is made. Many more simply settle on service of a Notice of Adjudication without any external intervention or cost 8

9 what extent, if any, there should be legislative or other policy responses taken to minimise the incidence and effect of insolvency on subcontractors. The flow on effect for subcontractors and suppliers from the Mainzeal collapse and others 20 will be significant and the consequences devastating for the owners of these businesses, their families, their employees, and their creditors with the present retentions regime at the root of much of the carnage. Under the present retentions regime, retentions are not required to be held in trust for the benefit of the party for whom they are ultimately intended, and disparate rates of retentions are applied by employers and head contractors. This provides the head contractor with interest free unsecured working capital. This misappropriation of funds means the rights of subcontractors to be paid are compromised and is unconscionable by any reasonable standards. Subcontractors should no longer be drafted into service as unwilling bankers for the head contractor, and indirectly for the Principal. Project funding should not be made to rest on their shoulders. For the most part, they are inadequate for the task in any event. While bad debts are not unique to the building and construction industry, the industry is particularly vulnerable to payment problems because it generally operates under a hierarchical structure whereby the failure of one party higher up in the contractual chain can cause a domino effect on others resulting in cashflow problems and in some cases, insolvency where the subcontractor is indebted to other subcontractors and suppliers. The underlying proposition is that it is unconscionable when work has been done and materials supplied to a project that the community should stand by and tolerate what has been repeatedly demonstrated to be the inability of the existing legal 19 This year on Waitangi Day we saw arguably the largest single failure of any construction enterprise in New Zealand with a loss tipped to be in the order of $100M 20 Alliance Construction is another recent case of construction company failure - Alliance was holding M in retentions according to the liquidator s report 9

10 system to protect subcontractors against default and financial mismanagement by others who would not, but for the efforts of the subcontractors, be paid the money in the first place. In our respectful view there is a great deal that can be done to prevent and reduce insolvencies at all levels of the industry as well as reducing the effects of insolvency in the industry and we address the issue further in our detailed submissions. 10

11 III SUBMISSIONS The Building Disputes Tribunal broadly supports the measures proposed in the Bill. We have consulted with our Adjudicators and our Registrars. Our Adjudicators are the most experienced and respected Adjudicators in New Zealand 21. Our Registrars administer each adjudication proceeding and liaise with and support the parties throughout the adjudication process from the issue of a Notice of Adjudication to the Determination. Our Registrars maintain our comprehensive and informative website and regularly answer telephone and inquiries from parties and intending parties to adjudication and their lay and legal advisers, about the processes and procedures under the Act. We have reviewed and considered similar legislation and experiences in other jurisdictions. We have canvassed the readership of BuildLaw 22 as to experience of the procedures under the Act and for recommendations as to improving the efficiency and efficacy of the Act. BDT s primary focus is on making adjudication a fair, speedy, effective and cost efficient dispute resolution process under the Act. Due to BDT s unique position, 23 we have developed a comprehensive understanding of the industry s and community s expectations and requirements in respect of the legislation that enables us to identify those aspects of the Act that repeatedly cause 21 Each year BDT Adjudicators undertake approximately 85% of all adjudications in New Zealand 22 BDT s quarterly journal which has a large domestic and international readership 23 As the leading nationwide, independent, specialist dispute resolution service provider to the building and construction industry for 23 years. Year on year, BDT s adjudicators undertake approximately 75% of all adjudications and those proceedings are fully administered and closely managed, monitored and analysed by its Registrars. 11

12 confusion, or do not operate successfully causing unnecessary time to be wasted and additional cost to be incurred by parties, without any benefit. In particular, we have developed extensive knowledge of the causes, nature and subject matter of disputes commonly arising under construction contracts and referred to adjudication. We have also been able to identify those procedural issues and technical arguments 24 that commonly arise in the course of adjudications that ought to be, and could readily be eliminated by minor drafting amendments that would result in significant improvements. Our submission begins with an executive summary identifying the key issues as we see them. We also draw attention to matters not covered by the Bill and make recommendations in relation to those matters that we think will help achieve the purpose of the Bill. EXECUTIVE SUMMARY In our submission the Act, and in particular adjudication under the Act, works very well but needs some relatively minor changes to improve the efficiency and effectiveness of the procedures governed by the Act. This submission broadly supports the Bill. However, we consider the following matters require provisions to be deleted, amended or added to the Bill as part of the current review of the Act: Key Issues 1. the meaning of construction work ; 2. definition of dispute; 3. the requirement for a pre-adjudication conference; 4. the unavailability of charging orders for residential properties; 5. enforcement; 24 Legally technical arguments in respect of jurisdiction and procedure 12

13 Other Important Issues 6. payment claims; 7. interest; 8. appointment of adjudicators; 9. the right to reply to a response to an adjudication claim; 10. jurisdiction; 11. claimant s right of reply; Sundry Issues Minor Drafting amendments that would result in significant improvements Security for Payment DETAILED SUBMISSIONS Key Issues Section 6 - The meaning of construction work Related Services The Bill proposes amending the definition of construction work in section 6 by inserting a new section 6(1)(A) extending the definition of construction work to include design, engineering or quantity surveying work related services 25. There is no definition of design, engineering or quantity surveying work in the Bill potentially giving it wide and uncertain application if it is intended to strictly limit any further reach of the Act. Many construction contracts are now administered by a Project Manager either acting as an agent of the Owner or as a separate head contractor. Building Consultants are frequently engaged by owners in relation to building projects and construction contracts. Land surveyors, interior design consultants, landscape architects, and various other building professionals all provide professional services in relation to building projects. 25 Section 5 13

14 The distinction between design, engineering or quantity surveying work, and other work carried out by building professionals in relation to construction contracts is selective and artificial. It is not apparent why the distinction has been made. BDT regularly receive inquiries from professionals seeking to recover fees in respect of services rendered, and from builders, developers and residential property owners disputing professional fee charges or the nature, scope or standard of professional services rendered in relation to building and construction projects. BDT strongly supports extending the reach of the Act to cover all professional services provided in relation to construction contracts, save for those providing legal and financing advice 26 which does not directly affect the nature or quality of construction work or the assessment of the scope and value of building work carried out in New Zealand. (1A) BDT SUBMITS: Amend section 6(1)(a) as follows: a) The provision of professional and consulting services related to construction work in New Zealand b) Related services do not include legal and financial advisory services Landscaping Landscaping as a separate item (not as part of a larger contract) is not currently covered. This type of work can be of a substantial value and often involves residential property owners. It can also have significant risks with regard to land stability, surface water control, drainage and water ingress (ground level separation) to homes. 26 Accountants, Lawyers, Mortgage brokers, Financiers, Bankers etc 14

15 (1B) BDT SUBMITS: Amend section 6(1)(b) by adding a new subsection: (vi) any landscaping. 2 Definition of dispute There has been uncertainty about whether more than one dispute can be referred to adjudication and whether a claim for damages for breach of contract may be brought under the Act 27. Having to refer individual disputes to separate adjudications is costly and time consuming. In addition, there is uncertainty about whether a dispute involving a claim for damages for breach of contract can be referred to adjudication. It is significant to note that to date 10% of all adjudication claims have been brought by owners of residential properties seeking damages for breach of contract by building contractors. To effectively deny the owners of residential properties the right to refer disputes to adjudication would be to disenfranchise a large sector of consumers of the industry s services and deny them access to a prompt, speedy and cost effective dispute resolution process. (2) BDT SUBMITS: Amend the definition of dispute in section 5 by deleting the existing definition of dispute and adding: dispute means one or more disputes or differences that arise under or in connection with a construction contract. And 27 See Van der Wal Builders & Contractors v Walker & Dunphy, HC Auckland, CIV August 2011, Associate Judge Christiansen. There is a further case in the High Court at present which raises the same issue, viz whether a claimant can bring a claim for damages under s48(1)(a) no judgment has been given in that case as at the date of this Submission and depending on the outcome of the adjudicator s determination which will be published in or around mid August 2013, the matter may be withdrawn 15

16 Delete Section 25(2) and replace with: Examples of a dispute include a disagreement between the parties to a construction contract about whether or not an amount is payable under the contract (for example, a progress payment) or the reasons given for nonpayment of that amount, a claim for damages for breach of contract, and disputes in relation to retentions or bonds. 3 The requirement for a pre-adjudication conference The Bill proposes a new section 36A which provides that: An adjudicator must make arrangements for a preadjudication conference to be held within 2 working days after serving the notice of acceptance on the parties. The purpose of the conference is expressed as being: to answer the parties questions about the adjudication process. The conference does not need to be held if the parties consent. It is not clear whether the arrangements only must be made within the mandated period or whether the arrangements must be made and the preadjudication conference must be held within that period. BDT strongly opposes the introduction of a pre-adjudication conference. We accept that there is considerable benefit from ensuring the parties are well-informed about the adjudication process but we submit that a preadjudication conference is neither necessary nor the appropriate mechanism to best achieve that outcome or the stated purpose of the Bill, namely to make the existing adjudication process a faster, more cost effective, and efficient option for people with disputes under construction contracts. Our reasons follow. 16

17 Based on our considerable experience with arbitration 28 in which preliminary conferences have long featured as part of that process, we are acutely aware of the practical difficulties in trying to convene such a conference where the respondent has no interest in participating and seeks to delay, obfuscate or avert the process, and the respondent and/or their legal advisor maintain they are unavailable or unwilling to attend the conference at a time convenient to every other party and the arbitrator, whether or not such a conference is convened by telephone or face to face. The practical difficulties and the time required to be expended in pursuit of convening a preliminary conference should not be underestimated. It is important to note in this regard that the arbitration process closely mimics litigation in the Courts with complex rules and procedures, and it is these rules and procedures that will govern the process by agreement of the parties 29, or in the absence of agreement at the direction of the arbitral tribunal, and the rules and the timetable for the various steps in the arbitration process must be determined prior to the parties embarking on the arbitration. That is the primary purpose of the preliminary conference. There is no such requirement for adjudication. Adjudication is a simple statutory process governed by procedural rules and a timetable that is fixed by statute. There is no agreement to be reached as to procedure or timetabling. Moreover, adjudication in most cases will only involve one procedural step to be undertaken by each party in any event after the notice of acceptance. Our experience is that such a process would inevitably militate against making the existing adjudication process faster and contrary to the intended purpose, would certainly slow the existing adjudication process down, or potentially derail it completely, with no benefit that could not be achieved by simpler and more cost effective means. It is also our experience that the cost of convening a preliminary conference would add at least another $1, to the cost of the adjudication process. 28 Over a period of 23 years involving hundreds of arbitration proceedings 29 Arbitration is a consensual statutory process 17

18 It is not simply a matter of picking up the phone and having a chat with the parties at an agreed time or at least it certainly should not be. An agenda would need to be prepared, practical arrangements would need to be made for the conference and the details and attendances confirmed, the meeting would need to be convened and minutes prepared and circulated confirming the details of the meeting including what was discussed and what information or advice was provided by the adjudicator. BDT already heavily subsidises the cost of providing adjudication in relation to low value claims 30 to ensure the cost is proportionate to the amount in dispute. For example the cost of providing a determination for a dispute involving $5, or less is $1, $ for each party. To add a pre-adjudication conference into the mix as another step in the process would add another $1, to the cost and make the cost of adjudication for such claims disproportionate to the benefit and commercially unrealistic for the parties. For high value claims the parties would likely be legally represented and therefore less likely to require a pre-adjudication conference. Introducing the requirement for a pre-adjudication conference would inevitably result in increased judicial review challenges to determinations based on procedural misconduct and breach of natural justice by parties aggrieved or dissatisfied with the outcome. Less experienced adjudicators 31 are also likely to be confused about their role and be drawn into discussing the substantive matters relating to the dispute at the conference and trespass into mediation or some other facilitative process to help the parties resolve their dispute. Such a role is completely incompatible with the role of an adjudicator under the Act 32. The information necessary to enable parties to understand the adjudication process and their rights and obligations under that process can be, and is 30 Claims under $50, Over whom BDT has no control as we would not appoint them to our panels 32 There is anecdotal evidence of such procedures being adopted by well intentioned but otherwise misconceived adjudicators in the absence of a statutory requirement to convene a pre-adjudication conference. BDT would not countenance such procedures being adopted by its appointee adjudicators. 18

19 already, provided in writing with every Notice of Acceptance that BDT issues on behalf of its adjudicators. This means that exactly the same information is given to every party in every adjudication 33 resulting in consistency and certainty. That is not something that would be achieved if each adjudicator were required to provide that advice orally during the course of a preadjudication conference. It is important to note that there are only two steps to be taken by the parties after the Notice of Acceptance is issued: referral of the claim in writing by the claimant, and service of a written response to the adjudication claim by the respondent. The claimant will almost certainly know what its obligations and responsibilities are having initiated the process. The respondent is easily informed as to what is required or expected in a response and the date by which it must be served. In the result, BDT submits that the proposal to introduce a pre-adjudication conference is misconceived and has the potential to emasculate the adjudication process by adding, cost, delay and uncertainty to what is presently a very fast, streamlined and efficient dispute resolution process. Any concern about educating or informing parties about adjudication is in our judgment, better addressed by less costly and more efficient means viz. written and web-based material. BDT s comprehensive website provides all the information about adjudication that anyone would ever need and it is available 24/7. In addition, our experienced professional Registrars are available to provide information and advice to parties or intending parties at no cost to the parties during business hours. 33 See Appendix A 19

20 (3) BDT SUBMITS: Delete the requirement to convene a pre-adjudication conference by deleting section 36A from the Bill And Make it a requirement that certain information explaining the adjudication process is provided to the parties in every Notice of Adjudication 4 The unavailability of charging orders for residential properties The Bill removes the distinction between residential and commercial construction contracts except for charging orders. Section 31 prevents a claimant seeking an adjudicator s approval for the issue of a charging order against an owner of a residential dwellinghouse or a trustee of a family trust where the premises that are the subject of the adjudication are owned by the trust and occupied, or intended to be occupied as a dwellinghouse by any beneficiary. The underlying reason for the initial distinction was consumer protection. When considering the Construction Contracts Bill, the Select Committee 34 stated that the power imbalance that existed in the construction industry between payers and payees may actually be reversed in residential construction contracts. Therefore, the Committee amended the Bill and added that residential occupiers should only be constrained by express provisions in their contracts rather than by an Act which they may know very little about. BDT submits that the distinction is artificial and unfair to contractors who work directly for owners of residential dwellings who fail, neglect or refuse to pay amounts properly due and owing under the contract, not once, but twice. First when a claim for payment is made and second, when they fail to pay an amount that they are determined liable to pay by an adjudicator it is only at that stage that a charging order could be sought from the Court. 34 Finance and Expenditure Committee, Report on Construction Contracts Bill,

21 Contrary to the underlying premise that is said to support the distinction, owners of residential property are not unsophisticated persons without means or without access to proper legal advice. They own property which in many cases is held in complex trusts for the express purpose of protecting assets from creditors. Residential property owners feature significantly in adjudications as respondents 35 against whom contractors are forced to initiate adjudication proceedings to recover monies properly due and owing under construction contracts. In real terms, the power imbalance is generally in favour of the residential owner over the contractor. Most contractors engaged in residential work are small one man operators who do not have the benefit of income from multiple sources to tide them over while disputes are resolved and, in the result, many tend to accept less than they are owed to achieve cashflow. The ability to obtain a charging order over the owner s land would greatly assist these contractors to achieve cashflow and resolve disputes promptly thus achieving the stated object of the Act. It is important to bear in mind that a charging order may only be sought if the owner fails, neglects or refuses to pay monies that an adjudicator has determined they are liable to pay to a contractor. There can be no disadvantage or prejudice to the owner in those circumstances in providing the contractor with the means to secure an interest over the property until such time as payment is made. Without that leverage the contractor is effectively powerless. The charging order only becomes an issue for the owner if the owner decides to sell the subject property or if it interferes with any financing agreement % of all respondents are owners of residential properties 21

22 There are other considerations that equally support removing the distinction. In practical terms, a contractor will seldom be able to distinguish between a commercial construction contract and a residential construction contract particularly where the property is held by a trust. In many cases such properties are in fact occupied by a trustee rather than a beneficiary treating the property as if it were their own. BDT submits that contractors engaged on residential building work are just as entitled to cashflow and charging orders as mechanisms to enforce their just rights under a construction contract in the same way as any contractor engaged in commercial building work. Arguably even more so because of the nature and vulnerability of the contracting entities in this sector in the event of non-payment for work properly undertaken under a construction contract. (4) BDT SUBMITS: Amend section 5 by deleting the definition of dwellinghouse And Delete section 31 5 Enforcement BDT has no involvement in enforcement of determinations made by its adjudicators. However, enforcement of adjudicators determinations through the courts has regularly been identified as a failing of the Act since the Act came into force. This is not intended as a criticism of the courts they have been very supportive of adjudication and of giving effect to the Act. It was envisaged that the Act s provisions which provide for the enforcement of an adjudicator s determination would significantly improve the successful party s ability to be paid (at least in the interim). Unfortunately, and all too 22

23 often, this is not the case. Among other things, a resistant payer can use the enforcement process to delay and/or avoid payment altogether, including disposing of construction site land before a charging order can be registered against the property. Similar problems were recognised in the equivalent New South Wales legislation 36 and, in 2003, significant amendments came into force which were designed to improve the rights of payees to recover amounts owing. 37 One commentator described the amendments as changing the focus of the legislation from Security to Payment. 38 The Bill reduces the time for opposing entry of a determination as a judgment under s74 from 15 working days to 5 working days which is welcomed. However, the issue is a broader one and in our view and requires a different approach. We propose amendments to the Act aimed at improving the recovery of payments for claimants both in the payment claim process as well as provisions for enforcement of adjudicators determinations in the following areas: An adjudicator s determination need only be registered in Court as a judgment no grounds for opposition Narrowing the grounds for judicial review Limiting grounds for opposing debt due action Increasing adjudicator s powers 36 Building and Construction Industry Security of Payment Act 1999 (NSW). 37 Building and Construction Industry Security of Payment Amendment Act 2002 (NSW). 38 Dawson P Security of payment in the building and construction industry: from security to payment (2003) 19 BCL

24 Adjudicator s determination is registered immediately no grounds for opposition A successful party in an adjudication should be paid immediately. The Act provides that payment of an amount determined by adjudicator is due within two working days of the determination unless the adjudicator determines otherwise. Another amendment made in New South Wales in 2003 was to provide for the issue of an adjudication certificate setting out the adjudicator s determination which can be immediately entered as a judgment. 39 We do not consider that there is any need to have a process of opposing the entry of adjudicator s determination as a judgment. There are three grounds of opposition in section 74(2). With respect to each: That the amount payable has been paid - Section 74(2)(a). First, it is unlikely that a party would apply for the adjudicator s determination to be entered as a judgment if the amount had been paid. Second, the process recommended below would require a certificate or statutory declaration about whether the amount has been paid. That the contract is not a construction contract under the Act. With the adjudicator able to rule on his or her own jurisdiction (see above), this would no longer be an issue. That a condition imposed by the adjudicator has not been met. Again, this is dealt with under the process below. (5) BDT SUBMITS: We recommend that section 74 be deleted in its entirety We recommend the following process for entry of judgment where full payment is not made within two working days of the determination: The payee submits to the adjudicator a solicitor s certificate or statutory declaration that the amount has not been paid and any 39 Building and Construction Industry Security of Payment Amendment Act 2002 (NSW) the Act 24

25 conditions imposed by the adjudicator have been met. The adjudicator completes and submits to the parties a statutory form certifying: he or she was the adjudicator in the matter; that no payment has been made; that there is no unsatisfied conditions; that judgment is to be entered by the Court; that charging orders (if any) are to be issued; and attaching the signed adjudication determination. Receipt of the form is sufficient for the Registrar of the District Court to immediately issue a sealed judgment, and to immediately issue a charging order where relevant. Alternatively, having reduced the time for opposing the entry of an adjudicator s determination as a judgment to 5 working days we recommend: Allow for an interim charging order to be issued with the approval of the adjudicator which becomes final (or is removed) on the adjudicator s determination (see proposal for statutory form above). We have observed a number of cases where the party against whom the determination is made uses this time to dispose of assets, place the company into receivership and/or liquidation, complete sales of the construction site, and otherwise make the possibility of achieving payment impossible. There are numerous examples of abuses by respondents where the payer (most commonly a private developer) has failed to pay an adjudication determination, and then put the company into liquidation during the period of opposition 40. Once a company is in liquidation, no judgment can be entered, and no charging orders can be registered. 40 See for example: Willis Trust Company Ltd v Green, 25 May 2006, Harrison J, High Court Auckland; CIV Redhill Development (NZ) Ltd v Green 5/8/09, Lang J, HC Auckland CIV ; 25

26 We recommend that the party opposing the entry can only file an opposition if the determination amount (in full) is paid into Court. Other Important Issues 6 Payment claims There are two issues in relation to payment claims where legislative clarification and certainty is required. The first relates to cumulative payment claims and the second relates to the time for making a payment claim after the subject construction work is undertaken. There is a further issue, namely the payee s entitlement to interest on unpaid monies. Cumulative payment claims It is common practice in the industry for payees to submit cumulative payment claims viz. progress payment claims that include the value of work carried out in one or more previous payment periods. Under s22 of the Act, if a payer does not provide a payment schedule in response to a payment claim, the payer becomes liable to pay the whole of the claimed amount on the due date for payment colloquially known as default liability. The consequences of failing to comply with s22 are, understandably, severe. Under s23 of the Act, the payer becomes liable to pay the whole of the claimed amount in the interim, whatever the merits. Redhill Development (NZ) Ltd v Green 22/10/09, White J, HC Auckland CIV ; Construct Interiors NZ Ltd v Jones (HC, 23/08/10) Cooper J CIV

27 The difficulty comes about where a payment schedule is not provided by a payer in response to a payment claim and then, in the subsequent payment period, a further payment claim is served including a claim for payment for work carried out in the previous period and that payment claim is met by a valid payment schedule. The question that arises is whether or not the subsequent payment schedule supersedes the earlier payment claim and discharges the payee s statutory right to payment in respect of the earlier unanswered payment claim on the basis of default liability under ss 22 & 23. The issue has arisen in several adjudications and the cost of argument has been significant for the parties involved in each case because it presents a novel point of law in respect of which there is no legislative provision governing the situation and no legal precedent. In each case that has gone to adjudication, it has been determined that the payer s liability to pay the claimed amount in the earlier payment claim(s) is not discharged by the payer providing a valid payment schedule in response to a subsequent cumulative payment claim. Aside from the obvious uncertainty as to the parties rights under the Act, 41 the situation in respect of payment that results can be even more confusing. In many cases it can lead to the absurd situation where the payee is entitled to commence an adjudication or court proceedings for recovery of the debt on the basis of default liability under the Act in respect of the earlier unanswered payment claim, whereas the construction contract has moved forward and the disputed payment claim has subsequently been answered on the merits under the relevant contract in a subsequent payment schedule indicating that the whole or part of the amount claimed in the earlier payment claim is not due for payment and the payer s reasons for withholding payment. 41 There has been no High Court decision on this point to date 27

28 The situation is clearly untenable. Parties require, and are entitled to consistency and certainty in relation to this issue. (6A) BDT SUBMITS: Amend section 22 by adding a new subsection (22(2)): (2) the payer s liability under section 22(1) to pay the claimed amount in respect of a payment claim is discharged if the payee subsequently serves a further payment claim that includes a claimed amount for construction work carried out in the period to which the earlier unanswered payment claim relates, and the payer provides a payment schedule to the payee within- (i) the time required by the relevant construction contract; or (ii) if the contract does not provide for the matter, 20 working days after the payment claim is served. The time for making a progress claim At present there is no default statutory period of time in the Act within which a payment claim may be served on a payer following completion of the relevant construction work. A payee can therefore serve a payment claim at any time following completion of the relevant construction work demanding payment for construction work undertaken and the payee must respond by following the correct procedure within the mandatory time. As discussed above, as far as the payer is concerned, the regime set up under the Act is sudden death 42. Should the payer not respond to a payment claim following the correct procedure within the mandatory time, the payer can be obliged to pay in the interim, the whole of the claimed amount, whatever the merits. 42 Marsden Villas Ltd v Wooding Construction Ltd [2007] 1 NZLR

29 Accordingly we suggest that payers should be afforded statutory protection against service of an unexpected payment claim. Put another way, payers should be entitled to know the date beyond which they will no longer be exposed to the draconian consequences of failing to properly respond to a payment claim. Other jurisdictions 43 have identified the mischief and taken steps to mitigate the problem and the risk for payers, many of whom are owners of residential properties and who are more likely to be affected by the unexpected service of a payment claim. (6B) BDT SUBMITS: Amend section 20 by adding a new subsection (20(5)): (5) A payment claim may be served only within: (a) the period determined by or in accordance with the terms of the relevant construction contract; or (b) the period of 12 months after the construction work to which the claim relates was last carried out 7 Interest There is no statutory entitlement under the Act to interest on unpaid amounts due and owing in respect of progress payments. Many smaller construction contracts are oral or partly written and partly oral and therefore provide no contractual entitlement on the part of the payee to interest on the unpaid amount of any payment claim that has become due and payable. 43 New South Wales Building and Construction Industry Security of Payment Act 1999, s13(4); Also Victoria, Tasmania, Australian Capital Territory, Queensland, and South Australia (6 months) 29

30 (7) BDT SUBMITS: Amend section 22 by adding a new subsection (22(3)): (3) Interest is payable on the unpaid amount of a progress payment that has become due and payable at the rate: (a) specified under the construction contract, or (b) prescribed under section (XX) of the Construction Contracts Regulations Appointment of adjudicators Selection of adjudicator There is still uncertainty around the provisions of section 33 and as to whether the stated options for selection act as conditions precedent. The simple solution would be to amend section 33 to expressly state that a claimant may go straight to an authorised nominating authority for the appointment of an adjudicator without first having to consider reaching agreement with the respondent. While not mandatory to do so, rarely will a respondent agree to a proposed adjudicator, preferring to delay the process for its benefit. No nominating bodies have been established since the Act came into force. It is sufficient to have an adjudicator either chosen by agreement or appointed by an authorised nominating authority on the application of the claimant. (8) BDT SUBMITS: Amend section 33 by deleting section 33 and adding a new section (33): (1) The claimant must within the time required under subsection (2), select a person to act as adjudicator by either (a) requesting any person chosen by agreement between the relevant parties to act as adjudicator; or (b) requesting an authorised nominating authority chosen by the claimant to select a person to act as adjudicator. (2) The time required is, 30

31 (a) for the purposes of subsection (1)(a), as soon as practicable after the notice of adjudication has been served; and (b) for the purposes of subsection (1)(b), 5 working days after the notice of adjudication has been served or any further period that the parties may agree. (3) An agreement about the choice of an adjudicator or an authorised nominating authority is not binding on the parties to the adjudication if that agreement was made (whether under the relevant construction contract or otherwise) before the dispute between them arose. (4) It is the duty of an authorised nominating authority to select a person and to request that person to act as adjudicator as soon as practicable. (5) A request made under this section must (a) be in writing; and (b) be accompanied by a copy of the notice of adjudication; and (c) state that it is made under this Act. 9 Response to an adjudication claim Section 37(1) of the Act that deals with the response to the adjudication claim is amended by s16 of the Bill. The Bill provides for a response to be served within 5 working days of receipt of the adjudication claim or such other period as may be extended by agreement of the parties or must be allowed by the adjudicator where the adjudicator considers it necessary to complete the response having regard to the size or complexity of the claim, or as may be allowed for any other reason. In regards to the latter, there is uncertainty (and differing practices) as to when a respondent may seek such an extension before the period has expired or after retrospectively. To provide certainty, the recommendation is to simply amend section 37(1) to prohibit retrospective extensions. 31

32 (9) BDT SUBMITS: Amend section 37(1) by adding a new subsection (37)(1)(c): (1)(c) Provided that any request for further time shall be made to the adjudicator prior to the expiry of the period under section 37(1)(a). 10 Jurisdiction There is commonly a challenge to the adjudicator s jurisdiction made at the outset of an adjudication. While the Courts have said that an adjudicator can rule on his or her own jurisdiction 44, there is often unnecessary debate and delay. BDT considers that the Act should contain an express right in section 38 in similar terms to Article 16 of the Arbitration Act The meaning of determination in s5 should be amended to include a decision on jurisdiction and ss 56 & 57 should be amended to provide the right for a party to recover costs in relation to a jurisdictional challenge. The right to recover costs should also expressly be made available to a respondent in circumstances where the claimant withdraws the claim pursuant to s39(a) before a determination is made. (10A) BDT SUBMITS: Amend section 38 by adding a new subsections 38(4), (5), (6) & (7): (4) The adjudicator may rule on his or her jurisdiction, including whether there is a construction contract to which the Act applies, whether there is a dispute capable of determination under the Act, and whether the adjudicator has been validly appointed. (5) Any challenge as to jurisdiction must be raised as soon as practicable following appointment of the adjudicator, and in any event, before the 44 See: Patel v Pearson CIV , HC WN, 24 April 2009, Miller J at [36] to [45]; Origin Energy Resources (Kupe) Ltd v Tenix Alliance NZ Ltd CIV , HC AK, 19 January 2010, Potter J 32

33 end of the period in which the response to the adjudication claim must be served under section 37. (6) The adjudicator may deal with the challenge as to jurisdiction as a preliminary question or in the determination of the claim on the merits. (7) If the adjudicator determines that he or she has jurisdiction to determine the claim, whether in whole or in part, the adjudicator may continue the proceedings and make a determination And Amend section 5 by adding: Determination means a decision by the adjudicator under this Act and includes any decision on his or her jurisdiction under section 38, the costs of the adjudication proceedings under s56, or the Adjudicator s fees under s57. And Amend section 56 by adding new sub-clauses 56(4) and 56(5): 56(4) In the event the adjudicator in determining his or her jurisdiction declines the claim, the adjudicator may nevertheless make a determination as to liability for the costs of the adjudication proceedings under this section. 56(5) In the event that the adjudication claim is withdrawn before a determination is made, the adjudicator may nevertheless make a determination as to liability for the costs of the adjudication proceedings under this section. And Amend section 57 by adding new sub-clauses 57(8) and 57(9): 57(8) In the event the adjudicator in determining his or her jurisdiction declines the claim, the adjudicator may nevertheless make a determination as to liability for the Adjudicator s fees under this section. 57(9) In the event that the adjudication claim is withdrawn before a 33

34 determination is made, the adjudicator may nevertheless make a determination as to liability for the Adjudicator s fees under this section. Unlike the Arbitration Act 45, the Act does not presently confer jurisdiction on an adjudicator to award interest on any sum determined to be paid by a respondent or owner. Such a provision simply recognises the common law position and enshrines it in the statute creating certainty for the parties. (10B) BDT SUBMITS: Amend section 38 by adding a new subsection 38(3): 38(3) An adjudicator may award interest on the whole or any part of any sum which: (i) is determined as being due to any party for the whole or any part of the period up to the date of the determination; or (ii) is in issue in the adjudication proceedings but is paid before the date of the determination, for the whole or any part of the period up to the date of payment. And Amend section 48 by adding a new subsection 48(4): 48(4) Any sum directed to be paid by an adjudicator in a determination shall carry interest as from the relevant date for payment at the same rate as a judgment debt. 11 Claimant s right of reply The Act does not presently provide for the right of reply by a claimant to a response to the adjudication claim. It would appear this situation arose as a result of the misconceived expectation and understanding that all matters relating to a dispute would 45 Section 12(1)(b) 34

35 have been advanced and thoroughly articulated before the claimant was entitled to refer the dispute to adjudication often referred to as the crystallisation of a dispute. However that is seldom the case in practice and the true position has been made clear by the Courts in the UK which have held that the ambit of the adjudication may be unavoidably widened by the nature of the defence or defences raised by a respondent or owner. The Courts have made it clear that it is open to a respondent or owner to raise any ground which would amount in law or in fact to an arguable defence of the claim whether propounded before the adjudication or not. 46 This is a natural justice issue because the claimant is not entitled as of right to respond to the respondent s allegations and claims. As a matter of natural justice and process, this should be the default position. The reply to the response serves to put the claimant in the same position as the respondent in terms of procedural fairness. It provides a mechanism that allows the claimant to defend the claims and allegations made against it and to respond to any affirmative defences raised by the respondent 47. BDT considers that a right of reply to a response should be provided for in section 37 without the requirement for the claimant to make an application to file further submissions under s42(1)(b). Such an application invariably results in a memorandum of opposition to the application by the respondent and the requirement for the adjudicator to then decide the application. All of these procedures require the intervention of the adjudicator and as such add to the time and cost of the adjudication. With the decision of Cooper J in Construct Interiors such a reply presently falls under section 42(1)(b) - request for further submissions, thereby requiring 46 See Cantillon Limited v Urvasco Limited (EWHC 282, 8 th February 2008 [TCC]); Quartzelec Limited v Honeywell Control Systems Limited (EWHC 3315, 7 th November 2008 [TCC]); Pilon Limited v Breyer Group Plc (EWHC 837, 30 th March 2012 [TCC]) 47 claims for set-off or abatement 35

36 comment from the respondent in reply. This arguably gives the respondent another bite of the cherry and the process could go on and on. It is proposed that section 37 be amended to include a right of reply within a short timeframe consistent with the related procedural requirements laid down under the Act. (11) BDT SUBMITS: Amend the Act by changing the heading of section 37 to read: Response to adjudication claim and reply to response And Add a new section (37)(4): The claimant may, within 3 working days of receipt of the response, serve on the adjudicator and the respondent a statement and any accompanying documents strictly in reply to the response. And (as a consequence of adding a right of reply): Delete section 46(1)(a) and replace with a new subsection: (a) must not determine a dispute until after the end of the period referred to in section 37(4) within which a claimant may serve on the adjudicator a written reply to an adjudication response. And Amend section 45 Add after subsection (d) a new subsection (e) and renumber the existing subsections, to read: (e) the claimant s reply (if any) referred to in section 37(4) together with all submissions (including relevant documentation) that have been made by the claimant. And Amend section 46 In s46(1)(a) delete the reference to section 37(1) and replace it with section 37(4) 36

37 And Replace section 46(2)(a) with: (a) Within 20 working days of the end of the period referred to in section 37(4) during which the claimant may serve on the adjudicator a written reply to an adjudication response; or Sundry Issues Working day The current definition of working day provides for different periods over the Christmas break and needs clarification regarding anniversary dates. (12) BDT SUBMITS: Only the due dates for payment should be to 5 January as this is consistent with most construction contracts. For all other purposes (i.e. adjudication, enforcement), the period should be to 15 January. Payment schedules Section 21(1) should be consistent with 20(1) in that a payment schedule may be served rather than provided (see Service below). (13) BDT SUBMITS: Amend section 21(1) by: Replace the word providing with serving Service There are differing court decisions on the interpretation of the service provisions in section 80 (i.e. Donovan Drainage, Hawkins v Ecosse and Arnold Jensen v Bills). These include whether subsection (d) refers to prescribed by regulations to the Act or prescribed by the construction contract. If the latter, there is further confusion as to whether this overrides the balance of section 80, notwithstanding you cannot contract out of the Act (s 12). 37

38 Finally, subsection (c) differs in that all other provisions (including the regulations) refer to receipt. Subsection (c) invites a return to the postal rule (an undesirable result in the recent Whangarei case in Donovan Drainage) The following amendments make receipt the trigger for service: (14) BDT SUBMITS: Amend section 80 so that after the words is sufficiently served if add the following: is received by that person on or before the relevant due date by any of the following means: And Amend section 80(c): Add after or business the words or usual mailing address. Determination (15) BDT SUBMITS: Amend section 47(1)(b) by adding a new subsection: (iv) must be signed and dated by the adjudicator. Exclusion of liability BDT submits that an ANA should have the same statutory immunity as an adjudicator when exercising its functions, duties or powers under the Act. (16) BDT SUBMITS: Amend section 70 by: After the word adjudicator, add nor an authorised nominating authority AND 38

39 Amend section 70(1) by: After exercise of add their functions, duties, or powers under this Act. Delete subsections (a) and (b) AND Amend section 70(2) by: Add after adjudicator the words or authorised nominating authority. Minor Drafting Amendments Section 50(2)(a) delete the words in brackets and then delete amount claimed and replace with amount determined. Section 50(3) delete. Section 52(1)(a) add after is the words an associate of the respondent and therefore. Section 54(1)(a) delete of the relevant dispute. Section 58(1) delete (1)(a). Delete Section 58(2) and (3). Section 60 add after effect the words and paid by the relevant date. Remove section 61. Remove section 62. Section 65 add to heading authorised. 39

40 Section 73, delete subsection (1) and in subsection (2) delete if this section applies and in respect of the matters referred to in subsection (1). Section 79 add after effect to any the word defence. Security for Payment The present retentions regime whereby first, retentions are not required to be held in trust for the benefit of the party for whom they are ultimately intended and second, whereby disparate rates of retentions are applied by employers and head contractors which provides the head contractor with interest free unsecured working capital, is unconscionable by any reasonable standards. The recent collapses of Alliance Construction and Mainzeal highlight the scale of abuse and failure of the present retention regime. The liquidators reports significantly disclose that: Alliance had $600,000 in retentions owing to it when it was placed in receivership yet it was holding $1,532,500 in retentions from subcontractors; and Mainzeal had $11.3M owing to it in retentions yet it was holding $18.3M in retentions from its subcontractors. The problem is obvious. The present regime enables head contractors to operate in an artificial financial nirvana because of back to back contractual arrangements between Principal and head contractor on one hand, and head contractor and subcontractor on the other. Given the widespread abuse of the present retentions regime and the damage and hardship caused to subcontractors as a consequence of insolvency of head contractors, it is surely time for a close examination of lasting reform that works to protect the interests of subcontractors. 40

41 The evidence to warrant legislative intervention is overwhelming. If anyone remained in doubt about the otherwise incontestable conclusion, then the collapse of Mainzeal this year leaving subcontractors out of pocket to the extent of some $18.3M for retentions alone ought to have well and truly put those doubts to rest. BDT submits that the solution to the issue of retentions is in fact quite straightforward. Retentions should be required to be held in an independent trust account selected by the payee until they are due to be released in terms of the contract. While this option is provided for in some standard form contracts, contractors and subcontractors are either unaware of their entitlement or they simply do not assert their rights. Accordingly, the shocking regime that allows head contractors to hold retentions from subcontractors and to use those monies as working capital, treating the retentions as though they are an unsecured interest free loan, is allowed to continue unabated. (17) BDT SUBMITS: Add a provision in the Construction Contracts Act 2002 that provides as follows: ( ) If a payer withholds payment from a payment claim for the purpose of ensuring future performance of the payee s obligations under the construction contract (the retention), the retention must be paid by the payer, on or before the due date for payment of the relevant progress payment, into an independent trust account administered by a trustee nominated for that purpose by the payee (the trustee). AND (To ensure procedural certainty and cashflow in accordance with the purpose of the Act) The following clause should also be added: ( ) The trustee must: (1) hold the retention on trust for the parties on such terms as may be agreed in writing with the payee; and (2) release the retention to the parties in terms of: (a) the written agreement of the parties; or (b) a determination of an adjudicator; or (c) the award of an arbitrator; or (d) an order of any court or tribunal of competent jurisdiction. 41

42 AND A further amendment to section 72 of the Act is required such that a contractor has the right to suspend work under the contract if the retention is not paid to the trustee in full by the due date for payment AND The definition of dispute under section 5 of the Act should also expressly include claims in relation to retentions, bonds, securities, warranties, guarantees, and damages claims. 42

43 Appendix A 25 July 2013 Claimant Respondent C/- Claimant s Lawyers Respondent Company PO Box Level 2 Auckland Respondent Road Attn: Claimant s Lawyer East Tamaki Auckland Attn: Respondent claimant@claimantlawyers.co.nz respondent@respondent.co.nz Dear Mmes/Sirs, Our Ref: BDT Adjudication: Claimant v Respondent NOTICE OF ACCEPTANCE OF APPOINTMENT AS ADJUDICATOR This is a notice under section 35 (2) of the Construction Contracts Act 2002 of the Adjudicator s acceptance of the appointment as Adjudicator in this matter; and, confirmation that the Adjudicator meets the eligibility requirements under section 34 of the Construction Contracts Act 2002 I confirm that I am authorised to issue this Notice of Acceptance by the Adjudicator, Mr John Green. Further to the Notice of Willingness to Act dated 23 July 2013, I confirm that the claimant and the respondent have each now paid the sum of $x, being an aggregate amount of $x required as security for the Adjudicator s fees and expenses in this matter. Mr Green has confirmed that to the best of his knowledge there are no circumstances past or present likely to give rise to justifiable doubts as to his impartiality or independence in the eyes of any of the parties. Mr Green undertakes to assume a continuing duty to disclose forthwith to the parties any circumstances arising in the future likely to give rise to justifiable 43