Resolving disputes

In previous articles we have discussed the common causes of construction disputes and suggested steps to avoid those disputes. Unfortunately, sometimes a dispute cannot be resolved and further action needs to be taken

The Construction Contracts Act 2002 (Act), which covers both commercial and residential construction contracts, provides a process for dealing with payments and disputes.

The Construction Contracts Amendment Act 2015 was passed in December last year and amended the Act in three areas in a staged process. The first amendment removed the differences between residential and commercial contracts, allowing parties to residential construction contracts full access to the Act’s dispute resolution process.

One of these dispute resolution methods is adjudication, designed to provide a fast and cost-effective method of determining the dispute. It is a legal process in which an adjudicator reviews evidence (including relevant documents and written statements) and written legal arguments, as set forth by opposing parties.

It is the method favoured by the Act, on the basis that it is intended to provide a fast and cost-effective process that allows the parties to maintain their cash flow while the dispute is resolved.

When should it be used?

Adjudication should only be used if the dispute cannot be resolved by discussing the issue with the other party. For example, adjudication may be the best next step if the parties to a construction contract disagree on the following:

• Whether an amount is payable under the contract (for example a progress payment).
• The reasons given for non-payment of an amount due.
• Whether there has been a breach of a term of the contract.

Nothing in the Act prevents the parties to a construction contract from submitting a dispute to another dispute resolution procedure – eg, to court, to a tribunal or to mediation.

However, an adjudicator must terminate the adjudication proceedings if, before the adjudicator determines a dispute, that dispute is determined under any other resolution procedure.

The adjudication process

Although adjudication may be daunting to the uninitiated, the key steps under the Act are relatively straightforward and easily understood.

However, the timeframes are short. If you are making a claim (the claimant), you should ensure that you are well prepared before submitting the claim to adjudication.

If you are responding to a claim (the respondent), it is essential that you get advice straight away. If you delay, you will risk not being able to comply with the required timeframes.

The key steps in an adjudication process under the Act are:

1. The claimant will serve written notice of their intention to refer a dispute for adjudication (the Notice of Adjudication) on the respondent.
2. Within five working days of serving the notice, the claimant should request an agreed adjudicator. If an adjudicator cannot be agreed upon, then a nominating body (as may be set out in the contract between the parties) will select an adjudicator. If a nominating body is not set out in the contract, an Authorised Nominating Authority (ANA) can be requested to select an adjudicator.
3. Once selected, the adjudicator must indicate their ability within two working days of the request that they are willing to act. The adjudicator’s acceptance must be confirmed to the claimant and the respondent.
4. The claimant then has five working days after the adjudicator’s notice of acceptance to submit their dispute in writing, specifying what the dispute is over and any other documents supporting the claimant’s claim.
5. Within five working days of the claimant putting the dispute in writing, the respondent must submit a written response. If they do not file a response, the adjudication will continue anyway. The respondent may request an extension of time to file their response.
6. Once the response has been filed and served, a claimant may serve a written reply to the response within five working days. An adjudicator can refuse to consider any new material or issues raised in the reply, or they can allow the respondent up to two working days to serve a ‘rejoinder’ (a reply to the claimant’s reply).
7. The adjudicator will then investigate the matter and may request further details from the parties and/or call a conference if required. Often an adjudicator will decide that they are going to determine the dispute on the papers (without a hearing). However, they could also decide that a hearing should be held. The parties must cooperate with this process. 
8. After the investigation is finished, the adjudicator will issue a written determination outlining their reasons.This is normally within 20 days of when the respondent’s response was due, but can be extended to 30 days if the contract parties agree.

Appeals

Adjudicator determinations are interim decisions – the dispute can still be pursued through the court or arbitration. However, anecdotal evidence suggests that adjudication is often the final step in many disputes.

Another key advantage of adjudication is that, unlike a court decision, it can remain confidential between the parties.

There are strict timeframes to comply with under the Act. These timeframes are there for a reason, but as a result a respondent needs to get advice as soon as possible if they are served with a Notice of Adjudication.

Claimants should make sure that they are well prepared before submitting a claim to adjudication.