The developers of infrastructure and the owners of land through which the infrastructure is built may be surprised to find that the land in question can be the subject of a charging order if an adjudicator determines that the contractor is owed money for the infrastructure it has built and the owner is an "associate" of the developer.
For infrastructure utilities, much of the land that is traversed by the infrastructure is permitted through an easement or an encumbrance over the land. The definition of "construction site" is any estate or interest in land on which the contractor carries out the construction works. The developer's easements may be caught by this definition, and a charging order issued over those lands.
In order for a charging order to be issued under the Construction Contracts Act 2002 (the Act), the contractor's notice of adjudication must seek the adjudicator's approval for the issuing of a charging order over the construction site. It must be served on the developer, and if the owner of the land that forms part of the construction site is an "associate" of the developer, the owner must also be served and given the opportunity to participate in the defence of the contractor's claim as a party (although not necessarily as a respondent).
As part of its adjudication claim, the contractor should identify how each land parcel is part of the construction site and who the owners of those lands are. The Act defines "owner" as meaning the owner of the construction site. This captures the owners of any land across which the infrastructure is being laid or on which any non-residential buildings are being erected and any land that is being used as a staging place for storage or other operation that forms an integral part of the construction work.
Associations with the developer are defined in section 7 of the Act, which range from very close associations, such as where the developer is a company and the landowner is its director, to wider ones depending on the interrelationships and business dealings between the parties. Some of the associations potentially construed under section 7 might not have been contemplated by Parliament if it assumed the associated owner would always derive a benefit from the construction works. However, "associate" may also capture persons acting altruistically in allowing access on and across their land in a spirit of cooperation to provide a community with needed infrastructure. Such a situation may be assisted by the adjudicator as it is for the adjudicator to determine whether the owner of the land is jointly and severally liable to pay (along with the respondent/developer) the amount claimed in the adjudication.
The power to approve the issuing of a charging order is not lightly given. Where the contractor seeks a charging order, only an authorised nominating authority may nominate someone suitably qualified with appropriate experience and expertise to be the adjudicator. Clearly this mechanism is intended as a protection to ensure proper exercise of the power.
If the adjudicator's determination grants the charging order, the contractor may then apply to the District Court to have the determination entered as a judgment. This provides a further opportunity for the developer and any other party adversely affected by a charging order to defend its position, but the primary defence under the Act is for payment of the debt in full. The associated owner may appeal to the District Court for a review of the determination and the dispute would be re-heard but the adjudicator's determination remains binding in the meantime unless the District Court decides otherwise.
If the determination is entered as a judgment, the Registrar of the District Court must immediately issue a charging order in respect of the construction site, which is registered against the title of the land. Although the construction site may affect only a small part of the land, the charging order will apply to the whole title. The charging order restrains the owner of that estate or interest in land from dealing with that land pending payment of the contractor's debt in full. If any part of the debt remains unpaid, on the basis of the charging order the contractor could apply to the District Court for an order to sell the construction site to recover the amount owing to it (section 96A of the District Courts Act 1947).
This situation creates risks for an associated land owner whose relationship with the developer needs to be carefully evaluated if the land owner intends to permit use of its land for construction purposes. A facilitating owner would be wise to consider this risk and take measures to protect itself. For example, before granting approval an owner might require the developer to obtain agreement from the contractor and its subcontractors not to seek a charging order over certain titles.