Construction contracts adjudication

By and - , Build 189

While it has been around for nearly 20 years, not everyone knows of or uses the adjudication process under the Construction Contracts Act 2002 (CCA). Here, we provide an Adjudication 101.

ADJUDICATION IS a speedy resolution process for disputes under construction contracts – whether they are written or oral. It is often used as a tool where there has been a dispute that is unable to be resolved between the parties but they do not want to proceed to arbitration or court (if available).

The claimant party refers its dispute to an independent adjudicator on the papers – that is, there is no hearing or witness examination. The other party puts its response in writing to the adjudicator, and within a matter of 4–6 weeks, the adjudicator issues their written determination.

Who can use adjudication?

Anyone who is a party to a construction contract for the performance of construction work can bring an adjudication. While this is defined quite broadly under the CCA, it does not include drilling for or extracting oil or natural gas or extracting minerals whether under or above ground operations.

Since the 2015 amendments, design, engineering and quantity surveying work have been included so that disputes under a consultant’s agreement covering this type of work can also be referred to adjudication.

Why go through adjudication?

Adjudication offers a cost-effective, fast-track process that can obtain an outcome within 6–8 weeks from the beginning of the process. That timeframe can be extended for a short period.

Steps in an adjudication

There are several steps in the adjudication resolution process from the first notice of adjudication through to the determination.

Notice of adjudication

For the adjudication process to begin, written notice needs to be served by the claimant outlining their intention to begin an adjudication.

The notice must state:

  • the date of notice
  • the nature and a brief description of the dispute and of the parties involved
  • details of where and when the dispute arose
  • the relief or remedy that is sought
  • other details relating to charging orders over the site, liability of associated parties and details sufficient to identify the construction contract and the parties.

Importantly, when supplying this notice, the claimant must also include a statement of the respondent’s rights and obligations and an explanation of the adjudication process.

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Appointing the adjudicator

The parties should consider agreeing the adjudicator to be appointed. In the absence of agreement, the CCA requires the claimant to select an authorised nominating authority (authorised by the Minister for Building and Construction) to appoint the adjudicator.

An adjudicator will often require parties to pay security for their costs in advance of accepting appointment. Once security is received and if there are no other issues – for example, a conflict of interest – the adjudicator will issue a notice accepting appointment.

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Adjudication claim

The claimant’s claim must be provided in writing within 5 working days of receiving the adjudicator’s notice of acceptance of appointment. This cannot be extended.

The claim must set out the nature or grounds of the dispute and be accompanied by any witness statements and all other relevant supporting documents. The claimant does not get another chance to put its case.

There is no limit on the quantum of the claimant’s claim. It could involve a dispute on a residential build of a few thousand dollars or involve a major infrastructure project with a dispute of hundreds of millions of dollars.

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Responding to the adjudication claim

The respondent may serve a written response to the claimant’s claim within 5 working days of receiving that claim. An extension may be available if the parties agree.

If there is no agreement, the respondent must apply for an extension of time from the adjudicator. There are several factors to consider, including the urgency of the claim and availability of witnesses, but the test is essentially what is reasonably required for the respondent to answer the claim. Extensions can be granted for a few days or a few weeks.

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Right of reply by the claimant

Not surprisingly, the claimant is allowed to reply to the response where a respondent refers to new or different grounds opposing the claim. This must be served within 5 working days of receiving the response, but it is for the adjudicator to decide whether to allow the reply in whole or in part.

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Right of rejoinder by the respondent

The final exchange between the parties, subject to the approval of the adjudicator, is for the respondent to answer the reply – this is in writing and is called a rejoinder.

Adjudicators will often signal early whether they will allow a rejoinder, given the respondent only has 2 working days to serve one. Otherwise, the respondent will need to request permission to file a rejoinder.

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Adjudicator’s determination

The adjudicator’s determination must decide the disputes referred, including whether a sum of money is payable, resolving questions of the rights and obligations under the contract and any other matters ancillary or consequential to those disputes. If a sum of money is found to be payable, the adjudicator must also determine when it is payable and whether any conditions must first be met.

The adjudicator’s determination must be made within 20 working days of the service of the response. This may be extended to 30 days unilaterally by the adjudicator. If, however, the adjudicator requires additional time beyond 30 working days, it can only be with the agreement of the parties.

The determination made by the adjudicator is binding and enforceable on the parties but is referred to as ‘temporary finality’. This is because it is open to the parties to reargue their disputes again in an arbitration or court proceedings, depending on the terms of their contract. Anecdotally, only 5% of disputes having gone through adjudication go on to any further litigation.

Preferred method of dispute resolution

Adjudication is a speedy and cost-effective method for resolving construction contract disputes. It is overwhelmingly the preferred method of dispute resolution in the construction sector.

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Note

For specific advice on any construction legal queries, contact your legal advisor or Dentons Kensington Swan on (09) 379 4196.

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

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