Adjudication of disputes under the Construction Contracts Act

Wednesday, February 22, 2017

The Construction Contracts Act 2002 (Act) establishes a complete process for the speedy adjudication of a dispute between the parties to the construction contract.

Initiating adjudication proceedings

This process can be instigated by either party, and is an alternative to using the court system, mediation or arbitration. It can be run in parallel with other processes.

The party who initiates the adjudication (who will be known as the claimant) commences the adjudication by serving a “notice of adjudication” on the other party or parties (who will be known as a respondent), and, in some circumstances, on the owner of the property. The notice of adjudication must state:

  • the date of the 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;
  • whether approval for the issue of a charging order over the property is being sought;
  • whether a determination of an owner's liability is being sought; and
  • details sufficient to identify the construction contract to which the dispute relates, including the names and addresses of the parties to the contract and, if available, the addresses that the parties have specified for the service of notices.

The notice of adjudication must also set out a statement of the respondent's rights and obligations in the adjudication and an explanation of the adjudication process. The notice of adjudication determines the extent of the adjudicator’s jurisdiction; it is important to set out all of the disputes between the parties, as additional disputes cannot be added later.

An adjudicator to determine the claim must then be appointed within five working days. This can either be done by the parties agreeing who they would like to appoint, or by requesting a nominating body to appoint an adjudicator.

Once an adjudicator has been appointed, the claimant has a further five working days to provide an “adjudication claim” to the adjudicator and the respondent. The adjudication claim needs to specify the nature or the grounds of the dispute, and should be accompanied by the claimant’s evidence, in the form of affidavits of evidence and other supporting documents.

The respondent then has five working days to respond to the adjudication claim, and to provide their own evidence and documents in response. This time can be extended either by agreement with the claimant or by order of the adjudicator.

The claimant may reply to the respondent’s response to the adjudication claim within a further five working days. If permitted by the adjudicator, the respondent may be given two working days to file and serve a rejoinder to the reply. There is no ability for these time frames to be extended. There is also no ability for any further documents to be filed by either party after that time, unless requested by the adjudicator.

Conduct of the adjudication proceeding

The adjudicator may conduct the adjudication in any way that they choose. Usually, he or she will obtain written submissions from the claimant and the respondent, and then issue a written determination. However, the adjudicator may also decide to take a number of other steps, including:

  • requesting the parties to the adjudication to provide copies of any documents not already provided;
  • appointing an expert adviser to report on specific issues (as long as the parties are notified before the appointment is made);
  • calling a conference of the parties; or
  • carrying out an inspection of any construction work or any other thing to which the dispute relates.

The adjudicator’s determination

The Act requires the adjudicator to issue his or her written determination within 20 working days of receiving the respondent’s response to the claim. This time can be extended to 30 working days if the adjudicator considers that he or she needs a longer time but the parties do not agree, or for any longer period if the parties agree to extend the timeframe.

The adjudicator will usually advise the parties once the determination is ready, but will not release it until his or her fees are paid. Usually the fees are split equally between each party, although each party is jointly and severally liable for the fees, so if one party fails to pay then the other party can be required to pay the full amount.

There is a prescribed form that the adjudicator must use for the determination. This ensures that the determination is in writing, sets out the reasons for the determination (unless the parties have agreed that reasons are not required), and provides an explanation of the consequences of not complying with the determination.

Although usually each party bears their own costs for an adjudication, the adjudicator can also order that one party pays the other’s costs for the adjudication process.

Once the determination is made, any amount payable may be entered as a debt in the District Court, and can then be recovered as a debt, in the same way as any other court judgment.

Challenging the result of an adjudication

The adjudication decision is final, in that it cannot be appealed to the courts. A party who was unhappy with the process may apply for a judicial review of the process followed, however this will not revisit the merits of the adjudicator’s decision.

For more information, please contact a member of our Construction & Projects team.

 

Disclaimer: the content of this update is not intended as a substitute for specific professional advice on any matter and should not be relied upon for that purpose.