An adjudicator’s Construction Act determination intended to settle a dispute over construction of a Northland house was quashed because of a conflict of interest; he had a close professional relationship with the builder’s law firm.
In a bid to keep legal delays and costs to a minimum, construction contracts often require disputes be put to an adjudicator. The Construction Contracts Act sets out a detailed process for appointment of adjudicators and consideration of claim and counter-claim.
Owners of a home under construction in Robert Hastie Drive, Mangawhai, agreed to adjudication after a stand-off with builder Bespoke Design and Build Ltd. Owners said they would not pay for cost overruns they allege arose from inefficiencies. Bespoke downed tools, saying work was suspended until the issue was resolved.
Surveyor Richard Maiden was appointed adjudicator. In October 2018, he decided the owners unlawfully cancelled the contract. He awarded Bespoke damages of $125,600, including lost profits assessed at $44,700.
The general Constructions Act rule is that parties agreeing to adjudication are stuck with the result; adjudicators’ determinations are a debt immediately payable. Argue in court later about the calculation. Courts have limited power to quash determinations. Judicial review looks at process; how the determination was made.
The owners complained Mr Maiden had a conflict of interest. The court was told Auckland law firm Martelli McKegg acted for Bespoke. Martelli McKegg had other building clients for whom Mr Maiden was acting, primarily giving expert industry evidence in leaky home claims. The owners said Mr Maiden might have failed to adjudicate its dispute purely on its merits given his ongoing professional relationship with Martelli McKegg. Favouring the law firm’s clients would maintain and enhance his relationship with the law firm, with further work to follow.
A fair minded lay observer might reasonably apprehend Mr Maiden might not bring an impartial mind to the adjudication, Justice Peters ruled. The adjudication was quashed. There is no suggestion that Mr Maiden in fact favoured Bespoke, Justice Peters emphasised. It is appearances that matter.
The court was told there is a relatively close-knit relationship between law firms specialising in construction law and the pool of adjudicators available in Auckland. Before appointment, adjudicators’ potential conflicts of interest should be disclosed and consent to continue obtained from all parties, Justice Peters said.
Youseff v. Maiden – High Court (20.12.19)
20.020