The Construction Contracts Act 2013 finally come into effect and applies to all relevant projects which commenced after 25 July 2016. We review amendments made to dispute resolution procedures for building projects and consider the impact these changes are likely to have.
Adjudication is now available as a means of resolving payment disputes in construction contracts. A statutory panel of adjudicators has been appointed, a code of practice has been published and new rules of court have been introduced, providing a means of enforcement of adjudication descisions.
Construction contracts with a value in excess of €10,000 must set out a regime for payment and, in the event one is not provided in the contract, the payment regime set out in the legislation will apply to the contract. It also applies where there is no written contract. The default regime in the legislation provides for the first payment 30 days after commencement of the works and every 30 days thereafter, with the final payment due 30 days after final completion. Where the contract duration is less than 45 days, the payment date will be 14 days after completion of the works.
The party carrying out the work can submit a payment claim within 5 days of the payment date setting out the amount claimed, the subject matter of the claim and the basis on which the claim has been calculated. The other party must deliver a response within 21 days, specifying the amount proposed to be paid, the reason for any difference between that and the amount claimed and the basis for calculation. If the matter is not settled by the date the payment is due, the amount specified for payment in the response must be paid. Where any amount due is not paid, the works can be suspended with no effect on the time for completion under the contract.
If a dispute arises in relation to payment, either party may refer the dispute to adjudication. The adjudication process will be completed within 28 days, unless the parties agree to an extension for a maximum of 14 days. The decision of the adjudicator will be binding even if the dispute is referred to arbitration, conciliation or the courts. This means that a party against whom an award is made will be obligated to pay the amount awarded immediately. If payment is not made, the works can be suspended without any bearing on the time for completion provided for in the contract.
The new rules of court provide a process for enforcement of adjudicators' awards through the High Court. The process is similar to the current rules of court for enforcing arbitrators' decisions, which is by way of originating notice of motion and affidavit. This will be better than having to seek enforcement through the Masters Court. However, it will not offer the quick and cost effective method of enforcement which is required for adjudication to function as it is intended to, ie as a fast and cost-effective method of resolving payment disputes.
Given that the vast majority of awards will be for relatively small amounts, it will be difficult to justify the costs involved in an application for enforcement in the High Court. However, costs tend to follow the event in the High Court, so this may discourage non-payment of adjudication awards. The new court rules provide discretion to the judges to make orders expediting the process. If the judges avail of this discretion, we may get the fast and efficient process of enforcement which adjudication requires. We will have to wait and see what the approach of the judiciary will be.
For further information, please contact a member of our Construction & Engineering team.
The content of this article is provided for information purposes only and does not constitute legal or other advice.