REUTERS | Bob Strong

Behold the Celtic adjudication tiger (almost)

I was lucky enough to travel to Dublin a couple of weeks ago to talk at a conference about the Construction Contracts Act 2013, Ireland’s long awaited answer to the UK’s Construction Act 1996. My job was to talk about my experience of construction adjudication and how this might be relevant to adjudication in the Emerald Isle. I thought that it might be useful to set out some of the key features and issues that cropped up at the conference.

Construction Contracts Act 2013

As many of you will know, the Construction Contracts Act 2013 has been a long time in the offing, although it is still not yet in force. The time it has taken is surprising given the well-known benefits the UK construction industry has gained from the Construction Act 1996 (which also applies just over the border in Northern Ireland), and the fact that other commonwealth countries introduced similar legislation some years ago. The Irish certainly can’t be accused of rushing into it.

Like much of that legislation, the Construction Contracts Act 2013 starts by defining construction contracts and construction operations, before going on to set out the payment regime, right to suspend for non-payment and adjudication.

Construction contracts and construction operations

When it comes to defining construction contracts and construction operations, there are some minor differences between the Construction Contracts Act 2013 and the Construction Act 1996. Rather than go through them all, two things particularly caught my eye:

  • A financial minimum: contracts valued at less than €10,000 will not be a construction contract for the purposes of the Construction Contracts Act 2013.
  • Owner-occupied dwellings: the Construction Contracts Act 2013 will not apply where the contract relates to a dwelling and the floor area of the dwelling is not greater than 200 m2 and the employer does or intends to occupy the property.

I admit that I can’t see the justification for the financial minimum. Why should a party whose contract is worth less than €10,000 be deprived of its right to a statutory-backed structured payment regime and adjudication? Also, what will be the position if, as a result of variations and/or loss and expense, the final account value exceeds this sum – will it then be a construction contract?

However, I like the way the Act deals with dwellings, and lessons have clearly be learnt from the UK experience.

Payment

The substance of the payment section of the Construction Contracts Act 2013 is similar to other legislation and I won’t bore you with the details. One thing I would say though is that, while the Act’s drafters have sought to close the “pay-when-paid” loophole, they have not taken the opportunity to close the “pay-when-certified” loophole. This is a shame given UK contractors’ well-publicised problems up until the amendments to the Construction Act 1996 in autumn 2011.

Adjudication

The Construction Contracts Act 2013 includes an adjudication regime that is similar to the UK’s adjudication regime, and much of the questioning at the conference concerned our favourite subjects of jurisdiction and natural justice. I explained to the delegates that the concept of jurisdiction and jurisdictional challenges is something that they are going to have to familiarise themselves with pretty quickly. I talked about some of the issues that crop up in the UK, as well as issues that are likely to arise in Ireland.

The fundamental difference between the UK and Irish legislation is that the latter only permits payment disputes to be referred to adjudication, and I think that this difference is likely to be a fertile ground for jurisdictional challenges. Section 6(1) of the Construction Contracts Act 2013 states:

“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’).”

I know that some of you reading this will be saying, quite right too, that’s what it should be in the UK. While I acknowledge that we sometimes see unsuitable non-payment disputes being referred to adjudication in the UK, overall, I firmly believe that the fact that parties are free to refer extension of time claims, professional negligence cases, and so on is generally a good thing.

Notwithstanding these arguments, Irish practitioners are going to have to deal with jurisdictional challenges that the dispute referred is not a payment dispute. For example, an employer’s claim for damages for the cost of rectifying defects may well not be a payment dispute because the damages are not a “payment arising under the construction contract”, although I would anticipate that this could be raised as a set-off.

Given that some other jurisdictions have similarly restrictive adjudication provisions, Irish practitioners might be able to get some guidance from decided cases from the likes of New South Wales. They may well refer to Julian Bailey’s book, Construction Law, which covers these other jurisdictions in some detail. It is clear that there have been issues over what constitutes a payment claim. For example, damages do not constitute such a claim:

“But it may include increased costs for delay, if those costs may be said to represent the additional price of the work, even if not for physical construction work carried out” (paragraph 6.101).

As for natural justice, timetabling seemed to be a concern for much of the audience. One of the delegates seemed perturbed when I said that extensions for service of responses and replies are normally a matter of days, not weeks or months. However, it appears that the Irish judiciary might take a different line to that of their UK counterparts when it comes to ensuring that each party has had an opportunity to present its case. I was told that one of the Supreme Court judges had commented that, where any of the facts are in dispute, the parties will have to attend a meeting or oral hearing to ensure that the process is fair. Whether or not you agree with this, it’s certainly something Irish practitioners and adjudicators will need to be aware of.

When can we expect the Act in force?

As far as I am aware, there is no date for when the Construction Contracts Act 2013 will come into force because the adjudication panel (there will only be one panel) is yet to be set up. However, when it does come into effect, I would hope that it has the same beneficial impact on the Irish construction industry as it did in the UK, which is particularly important given the signs that the Irish economy is recovering.

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