Adjudication and the Construction Contracts Act 2013 – WHAT YOU NEED TO KNOW

Background

The Construction Contracts Act was enacted in 2013. The Act has still not been commenced. The reason is primarily because industry stakeholders have been slow to agree on the Code of Practice for the Conduct of Adjudication.

The Code of Practice details how in practice: what information adjudication Notices should contain; how to appoint an adjudicator; and the steps the adjudicator has to take to conduct the adjudication properly.

The Code of Practice is still being finalised. That means that the Construction Contracts Act 2013 and Adjudication, as a mandatory form of resolving payment disputes, will become law this year. The exact date has not been set.  [Since the publication of this article, the ‘Construction Contracts Act 2013 (Appointed Day) Order 2016’ was signed into law by the Minister for Business and Employment on 13 April 2016. The Act will now apply to all construction contracts entered into from 25 July 2016]

What does it mean?

That means that no matter what your contract says about how payment disputes are to be resolved, it must be referred to adjudication. So expect lots of strike throughs in standard form contracts in the dispute resolution section.

Adjudication involves a decision (as opposed to a recommendation or facilitated negotiation) by an adjudicator based on representations made by either party either in writing or orally, with or without a hearing.

The decision must be made within 28 days of the adjudicator’s appointment.

That decision will be binding pending either the matter being referred to arbitration or challenged in litigation.

Adjudication means that decisions on payment disputes can be turned around within 28 days.

What are Adjudicators?

  • They are the impartial, fair and independent decision makers.
  • If you can’t agree who to appoint then apply to the chairman of the Adjudication Panel (Dr. Nael Bunni) who will appoint an adjudicator from a panel.
  • The adjudicator has an obligation to process the payment dispute quickly and cost effectively.
  • The adjudicator has to apply fair procedures during the adjudication.
  • The adjudicator decides if an oral hearing is necessary based on conflict of facts or if the claim value merits it.
  • The adjudicator issues directions, requests documentation, establishes facts, appoints experts or legal advisors, carries out site visits and invites submissions and evidence.
  • If you ignore the adjudicator’s directions, requests or timetables then the adjudicator can proceed in your absence, fix adjudicator’s costs against you or draw inferences against you.
  • The adjudicator has to give a reasoned written decision.

Top 10 Takeaways

What you need to know about the Construction Contracts Act and Adjudication:

  1. If your contract is not in writing then it’s still covered by the Act.
  2. If the contract value is less than €10,000 or if  it relates to a ‘dwelling’ with less than 200 square metres and it is intended to be a principal private dwelling then the Act does not apply.
  3. It’s illegal to say that the Act does not apply in a contract.
  4. It’s illegal to say that the contractor will only pay when they are paid.
  5. If you haven’t been paid then you are entitled to suspend work on site but you have to give 7 days notice. You cannot suspend works if you’ve started adjudication. If you haven’t been paid then you can serve Notice of Adjudication.
  6. If you cannot agree who to appoint then the chair of the government appointed Adjudication Panel will appoint one from a panel.
  7. On appointed, serve the adjudicator details of the claim and supporting documents and copy these to the other party. The other side will have a right of reply.
  8. The Adjudicator has 28 days from his appointment to reach a decision.  That time frame can be extended with agreement of the parties.
  9. The decision is binding until finally settled via arbitration or the High Court challenge.
  10. Even if you win the adjudication you still have to pay your own legal costs.

The reality

  • Initially there will be challenges before the High Court to adjudication decisions by losing sides, claiming their rights to ‘natural justice’, fair procedures and constitutional rights has been breached.
  • If the adjudicator’s decision is clearly wrong legally or factually, the Courts are unlikely to overturn the decision.
  • The party who starts the adjudication will have the advantage of preparation.   The Respondent will only have 7 days to reply.
  • The right to suspend works sounds good but few will do so lightly because they will still have to pay their team to lie idle and usually they are replaced on site.
  • Subcontractors and contractors will have to put money where their mouth is in prosecuting claims in adjudication because they cannot recover their legal costs even if they win.
  • Contractors may ignore adjudicator’s decisions, forcing subcontractors to enforce those decisions before the High Court – forcing more legal spend.

* Larry Fenelon is the managing partner of Leman Solicitors.  Leman Solicitors specialise in construction payment disputes.  Larry is the former chair of the Law Society’s Alternative Dispute Resolution committee and former committee member of the Chartered Institute of Arbitrators.