Transcript Document

Siobhan Kenny
ADJUDICATION UNDER THE
CONSTRUCTION CONTRACTS ACT
2013
INTRODUCTION
Adjudication has been described as a fast track dispute resolution process
designed to produce a binding decision enforceable immediately, pending full
determination of the dispute in Court, at Arbitration or by Agreement between
the Parties.
Statutory Adjudication - Available in the UK since 1998 – statistics
demonstrate that it is effective, speedy and that, in the vast majority of cases
the adjudicator’s award, and payments which follow, bring the underlying
dispute to an end.
Benefit of the UK experience - extensive body of law and authority from which
we can draw.
Important differences between UK system and the system now introduced.
2
INTRODUCTION
•
In 2010 Senator Quinn introduced the proposed legislation the intention
behind the legislation – stated purpose of it – to improve cash flow in
construction.
•
How do they propose to do that ?
•
2 mechanisms – payment provisions and speedy dispute resolution aka –
adjudication.
•
Act has been passed but not yet commenced
3
Construction Contracts Act 2013
12 Sections
1
2
3
4
5
6
7
8
9
10
11
12
Definitions
Exclusions
Payment provisions – mechanism and default provisions; no pay
when paid
Payment provisions – payment claim notices – claims procedure
Payment provisions – failure to pay – right to suspend
Adjudication – the procedure.
Adjudication – the remedy - suspension
Adjudication – the panel
Adjudication - Code of Practice
Notice
Expenses
Commencement
4
Construction Contract Act 2013
Section 1 – Definitions
‘construction contract’ – written or oral
carrying out ‘construction operations’
arranging for the carrying out of ‘construction operations’
providing labour for the carrying ‘out of construction operations’
‘construction operations’ – intentionally broad definition
building and civils contracts;
specialist works contracts;
cleaning operations;
preparatory works;
decoration works;
craftsmen contracts
‘payment dispute’- meaning assigned to it by Section 6 which is
“any dispute relating to payment arising under the construction contract”
5
Construction Contract Act 2013
Section 1
Section 1(2)
Section 1(3)
Section 1(4)
consultants contracts covered
supply only contracts not covered
supply and install contracts covered.
Section 2 – Excluded contracts:
Value less than €10,000
Dwellinghouses (less than 200 m2)
Contract of employment
PPP contracts
Mixed contracts provision
Section 2(5)
No contracting out.
Sections 3- 5 – Payment provisions
Section 10 – Notice provisions and time limits – care required
Sections 11 & 12 - procedural sections
6
Construction Contract Act 2013
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.
7
Construction Contract Act 2013
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.
8
Construction Contract Act 2013
Section 6(3):
“The parties may, within 5 days beginning with the day on which notice under
subsection (2) 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 (3) 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”.
9
Construction Contract Act 2013
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.
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 the UK in larger or more complex disputes experienced
adjudicators have ways and means of persuading the parties to agree
to extend the time as necessary.
10
Construction Contract Act 2013
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
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.
Statutory Scheme for Construction Contracts UK – allows for
revocation of appointment in circumstances including default or
misconduct.
Note 3: There is no process for challenging the appointment of the
Adjudicator.
11
Construction Contract Act 2013
FAIR PROCEDURES – NATURAL JUSTICE
Note 4: In the UK, challenge to the award of an adjudicator is very difficult.
Allegations of failure to apply principles of natural justice will not succeed
unless the behaviour complained of is substantive.
In Herbosh – Kiene Marine Contractors v Dover Harbour Board (2012)) Mr
Justice Akenhead determined that the adjudicator had gone off “on a frolic of
his own” in using an assessment method that had not been advanced by either
party and in respect of which he had not entertained submissions from the
parties. The challenge was successful.
12
Construction Contract Act 2013
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. This must be considered to be a significant addition. What
exactly are “related construction contracts?
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. It must be assumed that similar
issues will be dealt with in the code of practice.
13
Construction Contract Act 2013
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.
14
Construction Contract Act 2013
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.
15
Construction Contract Act 2013
Binding as between parties: Not binding on subsequent Arbitrator or Judge
hearing the dispute proper.
Sequential adjudications – same project - is decision binding on a subsequent
adjudicator?
Issue tested Arcadis v Mary Burke 2013 – where second adjudicator reviewed
the decision of the first adjudicator.
The judge upheld the decision and rejected the challenge – the second
adjudicator agreed with the conclusions of the first – he was not bound by
them.
The distinction is important.
16
Construction Contract Act 2013
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.
Note 4: “by action” or “by leave” of the High Court. Reference to
“action” not understood.
17
Construction Contract Act 2013
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: 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 sub-section would be in conflict with
sub-section (10) if it was read otherwise.
Note 2: The words underlined should have been deleted. They add nothing but
confusion
Note 3: Substantive debate in the UK about the right of set-off of counterclaims as
against adjudication awards. Appears to be the position at present that by virtue of
the fact that the award is a binding determination that a debt is due by one party to
another, the right to set-off a counterclaim as against that obligation to pay, does not
arise unless the counterclaim has been considered by the adjudicator.
18
Construction Contract Act 2013
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
[1999] the Court enforced an Adjudicator’s 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.
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”.
19
Construction Contract Act 2013
Section 6(15):
“Each party shall bear his or her own legal and other costs incurred in
connection with the adjudication”.
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”.
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”.
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”.
20
Construction Contract Act 2013
Note 1: What if the Adjudicator fails to give his decision within the time
prescribed, or indeed at all? In the UK the parties can appoint another
Adjudicator and are not obliged to pay the first Adjudicator in these
circumstances.
Note 2: Adjudicator decides which party pays his costs – but the parties must
discharge their own costs.
Note 3: Scheme in the UK deals with circumstances in which the adjudicator
fails, for some reason, to deliver the decision. Where that failure is due to
misconduct – there is no obligation to pay fees.
Note 4: 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?
21
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. 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)).
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.
Very important relief – however – the fact that it can /must be lifted in
the event of a referral undermines its strength.
22
Sections 8 & 9
Section 8: Selection of Panel of Adjudicators
Minister for Public Expenditure & Reform is to appoint a panel of
adjudicators. Panel will comprise experienced quantity surveyors,
architects, chartered engineers, barristers, solicitors and fellows of the
Chartered Institute of Arbitrators.
Experience and expertise of the candidates in the field of dispute
resolution procedures under construction contracts – relevant factor.
Section 9: Code of Practice
To be introduced as a Statutory Instrument.
The Scheme for Construction Contracts in the UK is a comprehensive
and detailed document.
Assume: the Code, when issued will provide a clear framework for the
conduct of adjudications.
Draft awaited.
23
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.
24
What is Left to be Done?
1.
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.
2.
It is essential that Rules of Court be introduced specifically to
ensure that adjudicators decisions can be recorded as
judgements without delay.
3.
A panel of adjudicators will have to be set up by the Minister
before the legislation can be implemented.
4.
Commencement
25