James Golden, Director, Quigg Golden, writes that if contractors are going to survive, they need to get rapid resolutions to disputes and get the money they are entitled to quickly.
Adjudication Decision- Enforced
The Courts signal support for adjudication
On 26 January 2021, the High Court handed down its judgement in Gravity Construction Limited v Total Highway Maintenance Limited, enforcing an adjudicator’s decision and awarding the Claimant all its costs.
The right to adjudicate a payment dispute has been a statutory right in construction contracts since 2016, mandated by the Construction Contracts Act 2013 (“Act”). Adjudication is designed to settle disputes speedily and economically. The process itself (once an Adjudicator is appointed) is restricted to 28 days, although it can be extended with the consent of the parties.
The process begins when a Claimant issues a payment claim that is not paid in the time allowed by the Payer. The Claimant can then issue a notice on the other party stating its intention to adjudicate. Both the payment notice and the notice to adjudicate have to comply with the very restrictive requirements of the statutory regime set up under the Act. If the parties cannot agree on an Adjudicator within the stipulated five days, the Adjudicator is appointed by the chairperson of a panel of adjudicators established under the Act. The parties then have to make their submissions as directed by the Adjudicator, and the Adjudicator decides the dispute. The loser must obey, or else!
It is the “or else” that has become something of a problem.
Although a decision of the Adjudicator is stipulated by the Act to be binding, it is not uncommon to see embittered losers either not complying with decisions promptly or ignoring them completely. In order to enforce the decision, the winner must go to Court. However, the process of enforcing a decision through the Court has been slow and (so far) uncertain since no one has enforced a decision under the statutory regime until Gravity blazed the trail. Respondents have run cases to try to stop the adjudication process before a decision has even been reached. A large international property developer managed to get the courts to halt an adjudication process last spring and summer by putting it into judicial review, albeit the case settled before the Court decided the matter. Between the backlog created by Covid-19 and the uncertainty about the correct process to be used, a number of adjudication enforcement cases have been languishing in the courts. This is a marked contrast with the very robust enforcement of adjudication decision we see in England and even north of the border here, where the courts have managed to continue to deal with adjudication enforcement despite the implications of the pandemic.
So, it comes as much-needed relief to many that the High Court signalled its support for the adjudication process in the Gravity judgment.
Back on 28 April 2020, the Adjudicator decided that Total Highway had to pay Gravity €135,458.92 + VAT for its claim, plus the Adjudicator’s costs of €13,168.75 +VAT, within 14 days of the decision. Total Highway did not comply, so Gravity went to the High Court to get the decision enforced. This finally happened on 26 January 2021.
Two interesting points strike me from this case:
- Gravity was awarded all its costs (despite there having been a botched attempt to settle the matter by Total Highway), so the overall cost to Total Highway of resisting the decision will be tens of thousands of euros more than simply complying; and,
- It took so long for Gravity to get to the result. Nine months from the Adjudicator’s decision and undoubtedly a lot longer from it was entitled to the money under the contract and first made its claim. Gravity will have been labouring with a hole in its cashflow of over €135,000 for over a year. That is not a “28-day process”. So, claimants who need the money need to get going as quickly as possible from they are entitled to make their claim.
This is an important decision, and it is very helpful. But there are some key lessons that everyone who wants to use adjudication should learn:
- Get started on the process, and keep going if you want to get to your money. It’s quite clear that the process is not as fast as it was designed to be, so procrastination could be fatal. The process starts with the claim, so you need to get your payment claim right, get it submitted, and don’t hang around once it is not paid;
- The statutory process is not easy. The forms are not user friendly, and errors can derail the process. It can be a difficult road, so getting good advice early is extremely important. Remember, Gravity’s claim started with a payment notice, which an adjudicator was convinced meant it should be paid €135,000. If it had got that notice wrong or failed to convince in the submissions to the Adjudicator, it would have lost. Therefore, kicking off the whole process is extremely important. The road to the decision and to eventual enforcement has pitfalls, and claimants need to be aware of those and get good advice to navigate past them. The flip side is also true; respondents need to know how to avoid vexatious claims; and,
- The court process so far does not really support a 28-day rapid dispute resolution process. That is frustrating (and claimants need to be ready for it). The Courts needs to become more attuned to the aims of the Construction Act. Even without Covid-19, the Courts would struggle to enforce quickly. However, there is now a clear indication that given the chance, the Courts are behind the process. That is something of a relief.
Between Covid-19 and Brexit, there are difficult times ahead for the whole construction industry. It will be extremely important to many businesses if they’re going to survive to be able to get a rapid and effective resolution to disputes and consequently be able to get the money to which they are entitled. This case is at least a step in the right direction.