Adjudication will have more bite

By - , Build 144

Adjudicator decisions about construction contract issues will soon be enforceable, and the allowable period to appeal will be shorter.

THE CONSTRUCTION CONTRACTS AMENDMENT BILL 2013 proposes removing the current distinction between adjudicators’ decisions that are enforceable – payments – and those that are not – disputes about rights and obligations.

The adjudication process

As the adjudication process could be about to get more teeth, it is worthwhile looking at how adjudications under the Construction Contracts Act (CCA) work.

These begin with a claimant issuing a Notice of Adjudication to any other party to the construction contract. The timetable is then a tight one:

● Once the Notice of Adjudication is served, the parties have 5 working days to select an adjudicator.

● If parties cannot agree on an appointment, a nominating body may make the appointment. The person selected as the adjudicator must confirm acceptance within 2 working days.

● The claimant then has 5 working days to refer the dispute to the adjudicator – the adjudication claim. This must set out the nature and grounds of the dispute and be accompanied by the supporting documentation.

● The respondent has, in turn, 5 working days from receipt of the claim to serve a response on the adjudicator.

● The adjudicator must determine the dispute in 20–30 working days. The parties can, however, agree to an extension.

Under the CCA, an adjudicator’s decision as to whether or not any money is payable is enforceable. If a party is found liable to make a payment to the other party, the other party can enforce that decision as a judgment.

A successful party in an adjudication involving a payment dispute may also suspend work, providing that they comply with the notice requirements also set out in the CCA.

Less time to oppose

The Construction Contracts Amendment Bill is also proposing to reduce the timeframe in which a respondent can oppose the entry of an adjudication as a judgment from 15 working days down to 5 working days.

The adjudication process is therefore an effective, fast-track dispute resolution option for disputes about payments.

An adjudicator’s decision is not appealable, and the right to obtain a judicial review of an adjudicator’s decision is very limited. The Court of Appeal has confirmed that judicial review will rarely be an available option.

On the other hand, although parties may refer disputes about their rights and obligations under a construction contract to adjudication, an adjudicator’s determination on these matters is not currently enforceable.

This means that a successful party on a rights issue may need to seek a further binding determination from a Court, and a Court is not bound to abide by any adjudicator’s decision on these matters.

This process can be frustrating for a party who receives a favourable answer from an adjudicator on their rights but finds that the disgruntled party elects to ignore the adjudicator’s decision. This can lead to further unnecessary costs relitigating the same issue.

Decisions will be enforceable

The Construction Contracts Amendment Bill is going to change this state of affairs. Adjudicators’ decisions on rights and obligations will be enforceable. This could, in turn, lead to more applications for judicial review.

The Court of Appeal previously said that judicial review would be available only rarely after referring to the fact that an important purpose of the CCA is to provide a mechanism to enable money flows to be maintained and to give non-binding assessments of the merits.

Once merits assessments are binding, however, the landscape will change. High Court intervention could become urgent. This may be particularly so when a decision on a right or obligation affects a project that is under way and will not be easy to rectify once it is implemented.

Adjudication under the CCA can be expedient and economic in comparison to other dispute resolution options. Its short timeframes mean it works best for parties who are organised and well prepared.

It will be important for parties to construction contracts to recognise that, once the Construction Contracts Amendment Bill passes, the process will have greater scope for resolving all disputes.

Note

This article is not intended as legal advice. For further information, please contact the Harkness Henry Building and Construction team on (07) 838 2399 or email [email protected].

Download the PDF

More articles about these topics

Articles are correct at the time of publication but may have since become outdated.

Advertisement

Advertisement