By Charlotte Fox
Senior associate, Simpson Grierson
In the recent judicial review decision of Canam Construction (1955) Limited v James Christopher LaHatte and Yun Corporation Limited (October 2009), the Court examined the requirement under the Construction Contracts Act 2002 (CCA) for an adjudicator to give reasons for his determination. In particular, did a failure to give reasons render an adjudicator’s determination void, or was it saved by the wording of section 47(2)?
If reasons were required, what standard did these reasons need to reach?
Yun Corporation issued adjudication proceedings against Canam Construction, and Christoper LaHatte was appointed as the adjudicator. In his determination LaHatte found against Yun in relation to two aspects of its claim. On the third head of claim LaHatte awarded Yun $345,395.
Canam applied for judicial review of the determination on several grounds including, that the adjudicator failed to give reasons for reaching the decision he did. In order to examine this issue the court first examined whether reasons were required, then the standard that the reasons must meet.
Were reasons required?
Section 47 of the CCA is entitled “form” and it sets out the requirements for an adjudicator’s determination. Section 47(1) states a determination must be in the form prescribed (if there is one). Where there is no form, is must be in writing and “contain the reasons for the determination” unless the parties have agreed to waive this requirement. Therefore this subsection is clear – a determination must contain reasons. However, section 47(2) goes on to say that a failure to comply with section 47(1) “does not affect the validity of an adjudicator’s determination”.
These two sections appear to be in conflict and the question examined by the Court was whether the provisions of section 47(2) related to the form of the decision only or also related to the substance.
Canam’s position was that section 47(2) did not dispense with the basic requirement that the determination be in writing and provide reasons. It related to the form only and not the substance of the decision. Canam relied upon the recent English decision of Thermal Energy Construction which found that an adjudicator’s failure to refer to a counterclaim or set-off rendered his decision unintelligible. The Thermal Energy Construction decision stated “an adjudicator is obliged to give reasons so as to make it clear that he has decided all of the essential issues which he must decide… and so that the parties can understand in the context of the adjudication procedure, what it is that the adjudicator has decided and why.”
Yun’s position was that the adjudicator did give reasons and therefore satisfied section 47(1) and to the extent that he did not, section 47(2) provided that the determination was still valid.
The Court noted that section 47(2) had no precedent in any statute in any other jurisdiction and there were no comments as to its intended purpose when it was drafted. The Court determined that section 47(2) could only be intended to excuse a departure in the form, such as a failure to provide a decision in an agreed form and it could not be intended to excuse a failure of substance such as a failure to provide reasons.
What standard of reasons was required?
Having determined reasons were required the Court then examined the extent of the duty to provide reasons. The Court noted that reasons serve three key purposes: they promote open justice, they enable any Court reviewing a decision ability to assess the lawfulness and they provide discipline for the judge.
In the current case the focus was primarily on whether a table annexed to the determination could be said to meet the criteria of “reasons”. The Court held that the duty to provide reasons did not preclude the use of a table as long as it was intelligible, either on its own, or when considered in conjunction with the written determination.
Canam submitted that the table provided no explanation of how the sums contained in it were determined, and as such it provided no reasons on its own. Canam further submitted, that even when the table was considered in conjunction with the determination, no reasons were clearly evident. It was Canam’s position that the fatal flaw was the failure to explain, in either the table or determination why the variations were awarded in Yun’s favour. Reasons were provided for the areas where the adjudicator found in Canam’s favour but not where it didn’t.
Yun’s position was that while the determination could have been more explicit it was sufficient. The adjudicator had identified the various categories within the table and when the table was considered in conjunction with the determination the table was intelligible and the reason the various sums were awarded was clear. While the reasons were not expressly stated within the table they could easily be interpreted in line with the evidence provided and the determination itself and therefore the determination contained intelligible reasons.
The Court agreed with Yun and held that the decision contained “broadly intelligible” reasons and therefore satisfied the requirements of section 47(1). In reaching this decision Justice Keane made the following observation:
“I agree with Canam that the decision is not explicit enough. If this were a rehearing I might well, in part at least, find it less than cogent. But this is not a review of that kind. This is an inquiry into validity. The adjudicator did, as he was obliged to do, review each of Yun’s claims and did so by a process, consistent with natural justice, which was broadly intelligible. His is not a decision so unintelligible or devoid of reasons as to amount to no decision at all.”
It is clear from these comments that Justice Keane agreed that the decision was not explicit enough and if the application were a rehearing and not a judicial review then the outcome may well be different. This decision appears to set the precedent that there is a lesser standard required in an adjudicator’s decision than in a Court decision. The Court noted that given the short timeframes prescribed in the CCA and the volume of documentation that the adjudicator had to consider all that could be reasonably expected was something “broadly intelligible”. It is unclear if the same decision would have been reached if the adjudicator had been provided with only 100 pages and produced the same determination.
The CCA has often been regarded as a “fast and dirty” resolution process and with this judicial review decision, it seems that has never been more true. As long as the determination is not “so unintelligible or devoid of reasons” it seems it will be a valid determination.
Contractor Vol.34 No.1 February 2010
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