This article addresses statutory adjudication under the Construction Contracts Act 2013 and the most recent adjudication enforcement decision in Ireland.
A quick overview of adjudication
Adjudication is a 28-day dispute resolution procedure. The adjudication process in Ireland can be used to resolve disputes relating to payment under construction contracts. Adjudication is designed to create a rapid solution to disputes with a view to protecting cash flow. It also avoids long and expensive arbitration or court proceedings
Statutory adjudication was introduced in Ireland by the Construction Contracts Act 2013 (“the Act”). The Act came into force in July 2016, nearly eighteen years after the Housing Grants, Construction Regeneration Act (“HGCRA”) which introduced statutory adjudication for construction contracts in the United Kingdom. Whilst England and Wales have developed a large body of case law on adjudication, the later introduction of adjudication in Ireland has meant that the first reported enforcement decision in Ireland was only in 2021. Thus, the Irish courts still have a lot of ground to cover.
Enforcing a decision under the Construction Contracts Act 2013
Under sections 6 (10) and 6 (11) of the Construction Contracts Act 2013, the decision of an adjudicator is not final and conclusive. Rather, the decision is open to be overturned by arbitral or court proceedings. The legal effect of an adjudicator’s decision is to impose an obligation to make a payment in the interim – the “pay now, argue later” mechanism. A party may be able resist the enforcement of an adjudicator’s award where they can demonstrate that there has been an obvious breach of fair procedures such that it would be unjust to enforce the decision, even on a temporary basis.
John Paul Construction Ltd v. Tipperary Co-operative Creamery Limited (2022)
On the 11 January 2022 the Irish High Court handed down their judgment for John Paul Construction Ltd. This was an enforcement decision where the paying party (the employer) sought to resist the enforcement on three grounds: (a) that the adjudicator failed to comply with the requirements of fair procedures and natural justice by ignoring a substantive defence; (b) that the adjudicator purported to reopen an issue which he had already decided in an earlier adjudication between the parties, effectively allowing a “new” claim to be made, and; (c) that the adjudicator exceeded his jurisdiction by purporting to determine issues which were already the subject of an earlier adjudication decision.
The employer also put forward a fourth ground which was subsequently withdrawn, claiming that the adjudicator had acted unfairly in not directing an oral hearing. This withdrawal was deemed sensible by the court as due to “the summary and expeditious nature of statutory adjudication, it will be rare, if ever, that an adjudicator is required to convene an oral hearing”. The Court considered the other three grounds, which are each addressed in turn below:
(a) Did the adjudicator fail to consider a line of defence?
Courts will adopt a pragmatic approach in assessing an allegation that there has been a breach of fair procedures due to a failure to properly consider a defence. The High Court in John Paul Construction made two important distinctions on this issue:
(i) The distinction between (a) the rejection of a defence as inadmissible, and (b) the failure to consider the defence; and
(ii) The distinction between (a) the dismissal of a defence on the merits of the argument put forward, and (b) the failure to consider the defence.
The above distinctions were discussed in Aakon Construction Services Ltd (2021) where it was held that an adjudicator had not ignored a defence, rather he had reached a decision as to why the paying party was not entitled to pursue the defence in question in that specific adjudication. In the present case, the employer claimed that the adjudicator had “ignored the relevant and pertinent material” which provided defences to ten delay events. The adjudicator approached these ten delay events in sequence and made determinations for each instance. The High Court held this was a “sensible approach to adopt” and that the adjudicator’s decision expressly referenced the complaints made by the paying party. The adjudicator assigned most, but not all, of the responsibility to the employer for the delays. It was held that these findings were within the jurisdiction of the adjudicator.
In addition, the employer sought to have the Court reconsider the underlying merits of the adjudicator’s decision. The Court highlighted that courts “will not be drawn into a detailed examination of the underlying merits of an adjudicator’s decision under the guise of identifying a breach of fair procedures”.
(b) Did the adjudicator allow a “new” claim to be made?
The employer claimed that the adjudicator permitted a “new” claim to be made and that this constituted a breach of fair procedures. The High Court however held that this complaint was a misunderstanding by the employer. Rather than allowing a new claim to be made, the adjudicator had actually sought to address a “better particularised version of the original claim” by refining the claim into three distinct sections to be addressed more clearly. Thus, the adjudicator did not breach fair procedures.
(c) Did the adjudicator exceed his jurisdiction?
The employer claimed that the adjudicator exceeded his jurisdiction by purporting to determine issues which were already the subject of an earlier adjudication decision (which the same adjudicator decided). The Court held that the issue addressed in the first adjudication was not the same as that in the present case. The present case involved a claim for an extension of time and prolongation costs were sought, neither of which were issues in the first adjudication. Thus, the adjudicator did not exceed his jurisdiction by trespassing on issues which had been the subject of the first adjudication.
Quigg Golden comment
The primary issue in this case was whether the adjudicator has failed to consider a line of defence put forward by the employer and thus whether there was a breach of fair procedures. The Court held that the adjudicator had adequately considered the line of defence. Notably, the Court wanted to make clear that
“it is wholly illegitimate for a defendant to comb through an adjudicator’s decision to try and find some aspect of the dispute which the adjudicator did not expressly address, and then argue on jurisdictional or natural justice grounds that the decision should not be enforced.”
The High Court called this “an attempt to judicially review the adjudicator’s decision through the back door” where the employer’s defence clearly failed on its merits. The key takeaways from this decision are as follows:
(i) Under the Construction Contracts Act 2013 it is sufficient that the substance of the defence has been addressed by the adjudicator in the decision.
(ii) If a paying party is not satisfied with the adjudicator’s decision it must “pay first, argue later”. The paying party has a right to refer the matter to arbitration where it will be considered afresh as the adjudicator’s decision has no legal effect on these proceedings.
This decision is another boost for adjudication in Ireland as it reinforces the legal effect of the above principles under the Construction Contracts Act 2013. The High Court also demonstrated a clear distaste for paying parties attempting to have the Court review the merits of an adjudicator’s decision where the substance of the defence has been addressed and likened this to seeking judicial review. It was not necessary for the High Court in this case to address the question of whether adjudication under the Construction Contracts Act 2013 is amenable to judicial review, so this is an issue that still needs to be decided in Ireland.
Quigg Golden is one on the market leaders in adjudication with over 20 years’ experience of acting for parties in adjudications. We can offer further advice and training on statutory adjudication for construction contracts (click here for more information).
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