Adjudication Practice and Procedure in Ireland

Construction Contracts Act 2013

Damien Keogh, Niall Lawless

• Publisher: Routledge
• Year: 2020
• ISBN:
  9781317381792
• Edition: 1
• Topic: Droit
• Subtopic: Droit de la construction

This adjudication textbook uniquely brings together a comprehensive analysis of, and commentary on, the Construction Contracts Act 2013 with a real-world perspective of adjudication, considering the knowledge, process and skills parties and adjudicators require in order to successfully participate in the adjudication process. Drawing on combined experience of 40 years in construction law, the authors provide invaluable guidance for all stakeholders in the adjudication process. The authors analyse and comment on the adjudication provisions of the Construction Contracts Act and describe prudent practice and procedure required to comply with Irish adjudication law, including case studies, case law and sample documentation for those to be involved as the parties, or those who want to act as adjudicators.

Aimed at contractors, sub-contractors, developers, employers, construction, engineering and legal professionals and students, all of whom are either involved, or have an interest, in dispute resolution and adjudication.

Part 1

Construction Contracts Act 2013

Damien Keogh

1 Introduction

1.1. Since the Construction Contracts Act 2013 (“the Act”) was given legal effect in Irish law on 25 July 2016 parties to a construction contract, governed by Irish law, are entitled by statute to refer to adjudication payment disputes arising under their contract.

1.2. The Act also prohibits “pay-when-paid” clauses and sets out a claims process for interim and final payment applications under construction contracts. This book focuses on and examines adjudication under the Act and does not deal with the payment provisions in detail other than in the context of adjudication where applicable.

1.3. The rationale for introducing statutory adjudication in Ireland is to create a fast-track (albeit perhaps interim) process for resolving construction contract payment disputes more economically. This underlying objective should be reflected in Irish Court judgments on cases requiring the interpretation of the Act. Strict interpretation of the Act is likely, as seen from English (and Scottish) courts’ interpretation of their adjudication legislation under the Housing Grants, Construction and Regeneration Act 1996 (the “UK Act”).¹ In broad terms, the adjudication process under the Act is similar to the process under the UK Act which incorporates the Scheme for Construction Contracts Regulations in England and Wales (1998) (“UK Scheme”).² The UK Scheme applies to adjudications where a construction contract does not contain the UK Act’s mandatory adjudication provisions. While the Act governs only construction payment disputes, the UK legislation (including the UK Act and Scheme) applies to all construction contract disputes and not only payment disputes.

1 As amended by the UK Local Democracy, Economic Development and Construction Act 2009.

2 While the Scheme for Construction Regulations in England & Wales (1998), Scheme for Construction Contracts Regulations in Scotland (1988) and the Scheme for Construction Contracts Regulations in Northern Ireland (1999) Scotland and Northern Ireland are similar but separate, for convenience we refer to these collectively (for the purposes of this Part 1) as the “UK Scheme”.

1.4. This book has two parts. The first part examines and discusses the adjudication procedure under the Act. It incorporates references to the UK Act and the vast body of English and Scottish case law from the last 20 years which, whilst not binding on Irish Courts, will undoubtedly provide guidance and invaluable assistance to Irish construction companies, practitioners and adjudicators on interpreting provisions of the Act which are similar to those in the UK legislation. The second part of this book provides a real-world perspective of adjudication, considering the knowledge, process and skills required to act as adjudicator and to assist adjudicating parties.

1.5. The objective of this book is to provide an understanding of the practice and procedure of adjudication under the Act. We hope we have achieved that objective.

2 Overview of the Construction Contracts Act 2013

2.1. The Act has 12 sections. Sections 1, 2 and 6 to 10 relate to adjudication. Section 6 is the most substantive on adjudication procedure. Its provisions relate to, inter alia, initiating the process, appointing the adjudicator, the adjudicator’s role and powers, adjudication procedure, the adjudicator’s decision and adjudication costs.

2.2. Sections 3, 4 and 5, not addressed in this book, govern construction payments. Sections 11 and 12 respectively relate to the Minister’s expenses in administering the Act and its short title and commencement.

2.3. Part 1 of this book deals with the adjudication procedure under the Act, with Chapters 3 to 13 addressing the following issues:

• What constitutes a construction contract under the Act? (Section 1).
• What construction contracts are exempted? (Section 2).
• The right to refer payment-related disputes to adjudication (Sections 6(1) and (2)).
• The adjudicator’s appointment (Sections 6(3), 6(4), 6(18) and Section 8).
• Referral to adjudicator (Section 6(5)).
• Timing of adjudicator decision (Sections 6(6) and (7)).
• The adjudicator’s role, responsibilities and powers (Sections 6(8), (9), 6(14) and 6(17)).
• The adjudicator’s decision (Sections 6(10) to 6(13) and Section 7).
• Adjudication costs (Sections 6(15) and 6(16)).
• Code of Practice Governing the Conduct of Adjudications (Section 9).
• Service of notices under the Act (Section 10).

2.4. The final chapter in Part 1 examines Order 56B of the Rules of the Superior Courts on court enforcement of adjudicator decisions.

2.5. Our views on how the Irish Courts may interpret the Act are informed from the experience of other statutory adjudication jurisdictions, and in particular, case law in those jurisdictions. In this regard, any case law cited herein relates to English cases unless otherwise indicated.

2.6. As at the date of publication of this book there have been no cases before the Irish Courts in respect of adjudication. The Irish Courts’ approach to adjudication and interpretation of the Act remains to be seen. It is anticipated, however, that the Irish Courts will fully support statutory adjudication as a dispute resolution mechanism.

3 What constitutes a construction contract?

Section 1 of the Act

3.1. The statutory right of a party to a construction contract to refer disputes relating to payments (“payment dispute”)¹ to adjudication only arises where there exists an enforceable construction contract as defined under the Act. In such circumstances either party may refer the payment dispute to adjudication regardless whether the other party agrees to adjudication. If there’s no enforceable construction contract, adjudication cannot be compelled unless otherwise agreed.

3.2. Section 1(1) defines a “construction contract” as

an agreement (whether or not in writing) between an executing party and another party, where the executing party is engaged for any one or more of the following activities:

1. carrying out construction operations by the executing party;
2. arranging for the carrying out of construction operations by one or more other persons, whether under subcontract to the executing party or otherwise;
3. providing the executing party’s own labour, or the labour of others, for the carrying out of construction operations.

Agreement entered into and commencement of the Act

3.3. While the Act was passed into law on 29 July 2013 its commencement was subject to a Ministerial Order which was not issued until 15 April 2016.² Pursuant to this Ministerial Order, under Statutory Instrument No. 165 of 2016 (“SI No. 165”), the Act only applies to construction contracts entered into after 25 July 2016.

3.4. SI No. 165 provides that 25 July 2016 is the date appointed pursuant to Section 12(2) of the Act and that the Act “shall apply in relation to construction contracts entered into after that date”. Section 12(2) similarly provides that “This Act applies in relation to construction contracts entered into after such day as the Minister may by Order appoint”. The critical phrase, in the Ministerial Order, SI No. 165 and Section 12(2), is “entered into”. The interpretation as to when a contract is “entered into”, as opposed to when it is executed or purports to take effect from, has been considered extensively by the UK Courts.

3.5. In Christiani v Lowry,³ His Honour Judge (HHJ) Thornton QC held that a contract entered into after, but taking effect before, the commencement of the UK Act was nevertheless governed by the UK Act. Work under the contract began on foot of an 11 August 1997 letter of intent, which incorporated the UK standard-form engineering contract, ICE Conditions. A formal contract was signed on, and dated, 1 December 1998. The formal contract superseded the letter of intent and specified that “Notwithstanding the date of execution of this Agreement, the Agreement shall take effect from 11 August 1997”. The UK Act provides that disputes under construction contracts entered into after 1 May 1998 may be referred to adjudication. A dispute arose when Lowry deducted liquidated damages from contractual sums due to Christiani. Lowry argued against the right to adjudicate the dispute because the contract was to take effect from 11 August 1997, thus predating the UK Act. The adjudicator disagreed, deciding that the dispute could be referred to adjudication, and he therefore had jurisdiction to decide the dispute. Judge Thornton agreed with the adjudicator, holding that the letter of intent was clearly intended to have a limited life and the contract aimed to ensure it covered work undertaken before its execution. The judge held that the “Notwithstanding” provision was an attempt to avoid the UK Act’s operation and was ineffective as the contract was actually entered into on 1 December 1998, after the operative date of the UK Act. Consequently, the judge held that either party was entitled to refer a dispute to adjudication. Lowry also argued that even if the UK Act applied, Christiani was estopped from referring the dispute to adjudication as it waived its entitlement to rely upon the Act by agreeing to the clause that the contract would take effect from 11 August 1997 which predated the UK Act’s operative date. However, this argument hadn’t been advanced before the adjudicator. Consequently, Judge Thornton held that it would be unfair to allow Lowry to rely upon the ground, who, by failing to raise this argument previously, waived the right to argue it before the court. Judge Thornton emphasised that, in any event, an estoppel was not raised because such a clause depriving Christiani of its statutory right to adjudicate would be invalid as parties cannot contract out of the UK Act.

3.6. The key date, therefore, is the date on which the contract is entered into and not the date on which it is actually executed. In the construction industry it is common for contracts to be executed on a date following the date on which the parties actually entered into agreement. Under the Act, the date on which the contract is entered into is the one which determines whether any payment dispute thereunder may be referred to adjudication. The date on which the contract was actually entered into may be evidenced by an exchange of emails or correspondence or by the contractor’s commencement of the works on site.

3.7. In Atlas v Crowngate,⁴ Crowngate issued a letter of intent to Atlas on 18 December 1997 authorising expenditure up to £1.3m. The letter stated that if a contract was signed it would have retrospective effect and include works executed under the letter. On 3 April 1998 the parties signed a UK standard-form subcontract. However, there were material matters unfinished between the parties when signing the contract, including the extent of the work scope and a finalised accurate bill of quantities. Thus, Crowngate issued a further letter of intent on 15 May 1998 increasing the authorised expenditure but dating it the same as the first letter despite its actual date. One year later, in final account discussions, the parties agreed to execute the subcontract without delay and a signed version was sent to Crowngate on 12 April 1999. Crowngate argued that the retrospective nature of the contract meant that the right to adjudicate could not be implied. However, Judge Thornton held that while a contract may include a provision so as to operate with retrospective effect, that provision does not affect the date on which the contract was entered into. The judge concluded that the activities, actions, expressions and statements in documentation emanating from Crowngate clearly pointed away from there being in the minds of the parties a concluded contract on or after 3 April 1998. The judge held that the second letter was inconsistent with Crowngate’s position for a contract being formed before 15 May 1998 and that the contract came into existence on 12 April 1999 and was therefore subject to adjudication.

3.8. Consequently, a distinction must be drawn between the date on which the parties enter into a contract and a provision within that contract which states that the contract is to have retrospective effect in respect of any work carried out prior to that date. Under the Act where a contract is entered into after the operative date of 25 July 2016, even if the contract purports to have retrospective effect, then (based on the Christiani and Atlas principles) either party may refer a payment dispute to adjudication.

3.9. In Earls v Waterloo,⁵ Judge Seymour QC held that where parties entered into a construction contract before the operative date, but varied the contract thereafter, the variation wouldn’t usually bring the contract within the scope of the UK Act unless the variation by itself can be construed as a construction contract. The parties entered into an agreement dated 4 December 1996 but agreed (solely for the purpose of the court application) that the agreement came within the definition of a construction contract under the UK Act. Both parties also agreed that the UK Act did not apply to the agreement as it predated the operative date. The agreement was subsequently amended by a deed of variation on 20 July 1998, after the operative date of the UK Act. Earls sought a court declaration that the agreement, amended by the subsequent deed, was not a construction contract within that definition under the UK Act but merely amended the fee payable to Waterloo and deleted a sub-clause in the principal agreement. Earls accepted that while the deed was signed after the operative date, the variation itself did not amount to a construction contract. The main issue before the court was whether the 20 July 1998 deed (not in itself a construction contract) which varied the terms of the 4 December 1996 contract had the effect to bring the entirety of the two agreements within the scope of the UK Act. Judge Seymour held that the deed simply modified the fee provisions and so did not bring the principal agreement within the UK Act. He commented, however, that it is possible that a variation (which post-dated the operative date) to a construction contract (which pre-dated the operative date) could constitute a construction contract where the entirety of the varied agreement came within the scope of the UK Act. As the deed in itself in this case did not amount to a construction contract, the judge held that the adjudicator’s decision related to a construction contract entered into before the operative date. Consequently, the adjudicator had no jurisdiction to act and accordingly his subsequent decision was a nullity.

3.10. In Yarm...