Anthony Hussey
INTRODUCTION
In this session we will look at:
1. The Adjudication provisions in the
Construction Contracts Bill 2010;
2. What is not in the Bill and perhaps should
be;
3. What remains to be done before the Bill is
implemented.
2
Section 6: “Right to Refer Payment Disputes to
Adjudication”
Section 6(1):
“A party to a construction contract has the right to refer for adjudication in
accordance with this section any dispute relating to payment arising under the
construction contract (in this Act referred to as a "payment dispute")”
Note 1: The corresponding section in the English Act relates to a “dispute” and
not a “payment dispute”
Note 2: Whilst the Courts initially in England put a very narrow definition on
dispute (Edmund Nutall v RG Carter [2002] EWHC 400 TCC), the Courts now
interpret that word very widely, and in accordance with common parlance.
3
Section 6(2):
“The party may exercise the right by serving on the other person who is party to
the construction contract at any time notice of intention to refer the payment
dispute for adjudication”.
Note 1: This provision, coupled with, presumably, a wide definition of the word
“dispute” opens the process to ambush.
Note 2: Ambush is no longer prevalent in the UK, being controlled by the
Adjudicators rather than the Courts.
4
Section 6(3):
“The parties may, within 5 days beginning with the day on which notice under
subsection (3) is served, agree to appoint an adjudicator of their own choice or
from the panel appointed by the Minister under section 8”.
Section 6(4):
“Failing agreement between the parties under subsection (4) the adjudicator
shall be appointed by the chair of the panel selected by the Minister under
section 8”.
Section 6(5):
“The party by whom the notice under subsection (3) was served–
(a) shall refer the payment dispute to the adjudicator within 7 days beginning
with the day on which the appointment is made, and
(b) shall at the same time provide a copy of the referral and all accompanying
documents to the person who is party to the construction contract”.
5
Section 6(6):
“The adjudicator shall reach a decision within 28 days beginning with the day on
which the referral is made or such longer period as is agreed by the parties after
the payment dispute has been referred”.
Note 1: This 28 day time limit is achieved in respect of about 45% of
determinations made by Adjudicators in the UK.
6
Section 6(7):
“The adjudicator may extend the period of 28 days by up to 14 days, with the
consent of the party by whom the payment dispute was referred”.
Note 1: In about 80% of adjudication disputes in the UK the determination is
given within 42 days.
Note 2: In larger or more complex disputes experienced adjudicators have ways
and means of persuading the parties to agree to extend the time as necessary.
7
Section 6(8):
“The adjudicator shall act impartially in the conduct of the adjudication and shall
comply with the code of practice published by the Minister under section 9,
whether or not the adjudicator is a person who is a member of the panel
selected by the Minister under section 8”.
Note 1: The code of practice has not yet been published or perhaps even been
drafted.
Note 2: The Irish legislation contains no sanction if the Adjudicator fails to act
impartially or indeed if he fails to adhere to the code of practice or meet the
deadline for issuing his determination.
Note 3: There is no process for challenging the appointment of the Adjudicator.
8
Section 6(9):
“The adjudicator may take the initiative in ascertaining the facts and the law in
relation to the payment dispute and may deal at the same time with several
payment disputes arising under the same construction contract or related
construction contracts”.
Note 1: This sub-section corresponds exactly with a sub-section in the UK
Legislation except the words “or related construction contracts” are added.
Note 2: The corresponding section in the UK (contained in the Scheme rather
than the Act) goes on to set out a large number of measures available to the
Adjudicator such as demanding that documents be supplied to him, issuing
directions etc.
9
Note 3: In practice 70% of disputes are decided on documents only in the UK. It
would be extremely difficult to fit a hearing as such into a 28 day period.
Note 4: Nonetheless the case law in England makes it clear that an Adjudicator
must comply with the requirements of natural justice. At the very least this
requires that both parties are given a reasonable opportunity to state their case,
within of course the time restraints of the legislation.
Note 5: Notwithstanding the very tight time restraints, the practice in the UK is
for Adjudicators to give reasoned determinations.
10
Section 6(10):
“The decision of the adjudicator shall be binding until the payment dispute is
finally settled by the parties or a different decision is reached on the reference
of the payment dispute to arbitration or in proceedings initiated in court in
relation to the adjudicator's decision”.
Note 1: Whether the matter goes to Arbitration or to Court for a final decision is
dependent on the terms of the contract.
Note 2: The advent of adjudication in the UK has annihilated the need for
arbitration. The number of construction related arbitrations in the construction
industry has been reduced by about 75% by reason of adjudication.
Note 3: Parties tend to accept the Adjudicators determination once they know
they are going to have to comply with it in any event.
11
Section 6(11):
“The decision of the Adjudicator if binding shall be enforced either by action or
by leave of the High Court in the same manner as a judgement or order of that
Court with the same effect and, where leave is given judgement may be entered
in terms of the decision”.
Note 1: Obtaining the leave of the Courts can take months even when there is
no objection.
Note 2: Adjudication works better in England than it does in Northern Ireland
because leave of the Court can be obtained very quickly in England.
Note 3: There is nothing sinister in the words “If binding”. The decision is
binding unless one of the events set out in sub-section 10 has occurred.
12
Section 6(12):
“The decision of the adjudicator, if binding, unless otherwise agreed by the
parties, shall be treated as binding on them for all purposes and may
accordingly be relied on by any of them, by way of defence, set off or otherwise,
in any legal proceedings”.
Note 1: It is tolerably clear that this does not entitle the parties to contract out of
the binding nature of the Adjudicator’s decision. Sub-section 2(5) prevents the
parties from purporting to limit or exclude the application of the Act and this subsection would be in conflict with sub-section (10) if it was read otherwise.
Note 2: The words underlined should be deleted.
13
Section 6(13):
“The adjudicator may correct his or her decision so as to remove a clerical or
typographical error arising by accident or omission but may not reconsider or reopen any aspect of the decision”.
Note 1: A similar provision was only introduced in England and Wales in 2009
by virtue of an amendment to the 1996 Act. As a result, in the Bouygues case
the Court enforced an Adjudicators decision in circumstances where it was clear
that instead of the Claimant paying the Respondent money, the Respondent
should have had to pay the Claimant money.
Dyson J observed that it is “……inherent in the scheme that injustices will occur,
because from time to time adjudicators will make mistakes. Sometimes those
mistakes will be glaringly obvious and disastrous in their consequences for the
losing party”.
Note 2: It is to be noted that there is no time limit on the Adjudicator to make
such a correction.
14
Section 6(14):
“The adjudicator is not liable for anything done or omitted in the discharge or
purported discharge of his or her functions as adjudicator unless the act or
omission is in bad faith, and any employee or agent of the adjudicator is
similarly protected from liability”.
Section 6(15):
“Each party shall bear his or her own legal and other costs incurred in
connection with the adjudication”.
15
Section 6(16):
“The parties shall pay the amount of the fees, costs and expenses of the
adjudicator in accordance with the decision of the adjudicator”.
Note 1: What if the Adjudicator fails to give his decision within the time
prescribed, or indeed at all?
Note 2: In the UK the parties can appoint another Adjudicator and are not
obliged to pay the first Adjudicator in these circumstances.
16
Section 6(17):
“An adjudicator may resign at any time on giving notice in writing to the parties
to the dispute and the parties shall be jointly and severally liable for the payment
of the reasonable fees, costs and expenses incurred by the adjudicator up to
the date of resignation”.
Note 1: Again, why should the parties be liable for the Adjudicators fees if he
simply resigns for his own convenience and does not give the parties value?
17
Section 6(18):
“The parties to a dispute may at any time agree to revoke the appointment of
the adjudicator and the parties shall be jointly and severally liable for the
payment of the reasonable fees, costs and expenses incurred by the
adjudicator up to the date of the revocation”.
Note 1: Similar issues arise.
18
Section 7: “Right to Suspend Work for Failure to
Comply with Adjudicator’s Decision”
This section provides that if the amount decided upon by the Adjudicator is not
paid in full within seven days a party may give seven days notice of his intention
to suspend the works. Curiously it would appear that the suspension must be
lifted “after the decision of the Adjudicator is referred to arbitration or
proceedings are otherwise initiated in relation to the decision”. (Sub-section
7(4)(b)).
This section provides that the period of suspension will be disregarded for the
purpose of assessing any delay on the part of the contractor under the contract.
It does not however provide for the contractor being compensated for any loss
sustained by reason of the suspension.
19
Section 8: “Selection of Panel of Adjudicators”
Under Section 8 the Minister for Public Expenditure & Reform is to appoint a
panel of adjudicators from which appointments will be made. The panel will
comprise experienced quantity surveyors, architects, chartered engineers,
barristers, solicitors and fellows of the Chartered Institute of Arbitrators.
20
What is Not Included?
1.
2.
3.
4.
There is no provision in the legislation that enables an Adjudicator to
award interest.
There is no provision which requires the Adjudicator to provide reasons
for his decision.
There is no provision dealing with a circumstance whereby the
Adjudicator fails to provide his decision.
There is no provision entitling the Adjudicator to withhold his decision
pending payment of his fees – nor is there any provision preventing the
Adjudicator from doing so.
21
What is Left to be Done?
1.
2.
3.
The Minister is to publish a code of practice. This could very well deal
with issues that have been omitted, albeit the issue of interest should be
dealt with in the legislation and not through a code of practice.
It is essential that Rules of Court be introduced specifically to ensure that
adjudicators decisions can be recorded as judgements without delay.
A panel of adjudicators will have to be set up by the Minister before the
legislation can be implemented.
22