The Construction Contracts Act 2013 was enacted by the Oireachtas in July 2013 but is not yet in effect and a commencement order is still awaited by the construction industry.
This article was featured in the February 2015 edition of Construction Magazine.
Once fully commenced, parties to a construction contract will be entitled to avail of the new fast track statutory dispute resolution mechanism of Adjudication as a means of resolving disputes arising under the relevant contract. The following is a summary of the key considerations for those wishing to avail of this new mechanism.
As soon as a dispute has crystallised, parties should first consider the terms of the contract and whether the dispute comes within the scope of the Act.
The right to adjudicate under the Act (which contracting parties cannot limit or contract out of) will apply in respect of all construction contracts entered into after commencement of the Act. Construction contract is broadly defined for the purposes of the Act and includes not only traditional building contracts but also agreements in relation to ancillary services, such as maintenance, architectural, design or surveying work and interior and exterior decorating appointments. Certain contracts are excluded, for example those of a value less than €10,000 and contracts for works on residential dwellings (unless the property has a floor area in excess of 200m²).
It is important to note also that the right to adjudicate applies only in respect of payment related disputes.
Once established that the dispute is within the scope of the Act, the process is as follows:
Initiating the process
A party seeking to exercise the right to refer the dispute to Adjudication must do so by way of notice in writing to the other party in accordance with the relevant notice provisions contained in the contract or if no such provisions are contained in the contract by way of post or any other effective means. Note that the Act entitles a party to refer any dispute relating to payment to Adjudication at any time. This means that even where the parties have agreed to a multi-tiered dispute resolution process (eg. 1. conciliation, 2. mediation, 3. adjudication and then 4. arbitration) either party may still proceed to adjudication regardless of the fact for example that a mediation process in respect of the dispute may already be ongoing.
Appointment of the Adjudicator
The parties may within 5 days of the date on which notice is served, agree to appoint an adjudicator of their own choice or from the Panel of Adjudicators to be established under the Act. Failing agreement the adjudicator shall be appointed by the Chair of the Panel.
Referral of dispute
The party serving the notice to adjudicate must refer the payment dispute to the adjudicator within 7 days of the date of appointment of the adjudicator, providing a copy of the referral and all accompanying documents to the other party.
The process is intended as a fast-track means of payment disputes resolution and so the adjudicator must decide on the matter within 28 days of the date of their appointment, which period may be extended by up to 14 days with the consent of the referring party.
The adjudicator is required to act impartially in adjudicating the dispute and in compliance with the code of practice which is yet to be published in accordance with the Act.
The Act entitles the adjudicator to "take the initiative in ascertaining the facts and the law". This gives the adjudicator the power to investigate the issue in whatever manner he or she deems appropriate given the short time scale available.
The adjudicator's decision is binding and becomes immediately enforceable. The decision can only be avoided if the paying party is successful in overturning the decision.
The Act provides that each party shall bear their own legal and other costs in connection with the adjudication. The parties shall pay the costs and expenses of the adjudicator in accordance with the adjudicator's decision.
It remains to be seen how the provisions of the Act regarding adjudication will work practically and the new legislation is not without its flaws. While adjudication will be a new dispute resolution procedure for practitioners in Ireland once the Act commences, it has existed in England in relation to construction disputes since the enactment of the Housing Grants, Construction and Regeneration Act 1996. Practitioners in Ireland will not have the benefit of an established body of case law to refer to when interpreting the provisions of the Act. It is likely therefore that the extensive jurisprudence which has developed in England in respect of adjudication will be of persuasive authority in Ireland, particularly at the outset.
A number of key tasks have yet to be completed by the Department of Jobs, Enterprise and Innovation before the Act can be brought into force. This includes the publication of a Code of Practice for Adjudicators and the establishment of a Panel of Adjudicators. It is currently expected that the Act will be commenced by Spring 2015.
Contractors and sub-contractors would be well advised to review their existing contract administration practices and establish and implement early warning systems for contract disputes as well as effective document control systems in preparation for the commencement of the Act and the introduction of the new dispute resolution regime.