The Construction Contracts Bill was introduced by Senator Feargal Quinn in the Seanad in May 2010 and has been making its way slowly through the legislative process ever since then. The final draft of the Bill has now been published and will go to committee stage on Wednesday 15 May. It will presumably be enacted shortly after that. The Industry has been eagerly awaiting this much needed legislation and thankfully the wait has been worthwhile. Many of the comments and concerns expressed by the industry have been taken on board.
In a nutshell the Bill aims to do the following:
- Introduce a statutory right to payment of specified amounts at specified times during the course of a construction contract;
- Prohibit “pay when paid” provisions in construction contracts;
- Provide a fast track adjudication process for the resolution of payment disputes; and
- Allow a right to suspend the works in circumstances where payment is not made when due.
Similar legislation has been in effect in the UK since 1996 and since its introduction has dramatically reduced the amount of construction litigation in the UK. The legislation introduced in the Seanad originally was almost identical to the legislation in the UK. However, changes were made to the Bill as it made its way through the legislative process. Much of the concerns expressed in relation to those changes have been incorporated into the final draft of the Bill, which now more closely resembles the UK legislation.
The main changes are as follows:
The previous draft of the Bill provided that the legislation would apply only to private contracts with a value in excess of €200,000 and public contracts with a value in excess of €50,000. These thresholds were considered too high as the experience in the UK was that most adjudications concerned contracts with a value of between £10,000 and £50,000.
The final draft of the Bill applies to all construction contracts with a value in excess of €10,000.
The legislation will not apply to contracts for works to residential dwellings unless the dwelling is over 200 square meters.
The Bill in its previous form excluded supply contracts unless installation forms part of the contract. There has been no change to this in the final draft.
The previous version of the Bill provided that the works could be suspended for a maximum of 14 days where payment is not received by the due date.
The 14 day limit has been removed from the final draft. However, the final draft provides that the works cannot be suspended if a dispute has been referred to adjudication. This will undoubtedly dilute the effect of a threatened suspension of works and will also mean that a contractor will have to continue the works while the adjudication is in being.
This was the issue of greatest concern to the industry. The previous draft of the Bill provided that the award of the adjudicator was not binding in the event that the dispute was referred to arbitration or other legal proceedings.
The final draft provides that the award of the adjudicator shall be binding until the dispute is finally settled by the parties or a different decision is reached in arbitration or other proceedings. It also provides that the decision of the adjudicator can be relied on by way of defence or set off in any legal proceedings. This is a welcome development.
Enforceability – Still an Issue
If adjudication is to be successful in Ireland there must be a fast and cost effective means of enforcing the decision of the adjudicator. That does not yet exist. A party who receives an adjudicator’s award will still have to go to the High Court to seek leave to enforce the award. This takes time and is expensive. The success of adjudication in the UK has been largely due to the fact that parties have access to the Technology and Construction Court to enforce a decision of an adjudicator and such an application will be heard within a couple of weeks.
Arguably, it was not within the remit of this legislation to resolve this problem but nonetheless a solution must be found in order for there to be a genuinely speedy and cost effective means of resolving disputes in construction contracts in Ireland.