What is adjudication?
Adjudication is a 28-day dispute resolution process which can be used to resolve disputes relating to payment under construction contracts. The key steps involved are:
- A payment dispute crystallises (for example, a contractor refusing to pay a sub-contractor),
- The aggrieved party gives the other a “notice of intention” to refer the payment dispute to adjudication,
- An adjudicator is appointed (this is normally a construction or legal professional),
- The aggrieved party “refers” the dispute to the adjudicator within seven days of the adjudicator’s appointment (this means giving them a copy of the contract and any other relevant documents),
- Once the dispute has been referred, the adjudicator must reach a decision within 28 days,
- During that period, the adjudicator will consider all documents, and will likely ask for further submissions from both parties,
- The adjudicator’s decision is “binding” until the dispute is finally settled by the parties or a different decision is reached in arbitration or court.
Adjudication is designed to be rapid.
It is designed to promote cashflow in the construction industry by giving aggrieved parties a mechanism to get cash in the bank quickly without spending years (and lots of money) in arbitration or court.
This rapid mechanism only works, however, if the courts are willing to enforce decisions made by adjudicators; otherwise, unsuccessful parties would simply ignore decisions made against them.
The case
The adjudicator’s decision at the centre of this case concerned a payment dispute between Gravity Construction Limited and Total Highway Maintenance Limited (TMS).
In short, TMS lost and was ordered to pay Gravity €135,458.92.
TMS did not comply with the decision, and Gravity then issued court proceedings to enforce the decision in the High Court. Gravity relied upon section 6(11) of the 2013 act which states:
“The decision of the adjudicator, if binding, shall be enforceable either by action or, by leave of the High Court, in the same manner as a judgement or order of that Court with the same effect and, where leave is given, judgement may be entered in the terms of the decision".
Just before the High Court hearing date, TMS indicated that it was prepared to comply with the adjudicator’s decision.
The decision
The High Court enforced the adjudicator’s decision by giving an “unless order”. Paragraph 37 of the judgement summarises it:
“An order that the applicant has leave to enforce the adjudicator’s decision in the same manner as a judgement or order of the High Court, and that judgement is to be entered against the respondent in favour of the applicant in the sum claimed unless the said sum is paid to the solicitors acting on behalf of the applicant within seven days of today’s date…”
In other words, the High Court ordered TMS to comply with the adjudicator’s decision.
Significance
This is the first reported case in which the High Court has put its shoulder behind adjudication by enforcing an adjudicator’s decision under section 6(11) of the 2013 act.
Without support from the High Court, adjudication awards would not be worth the paper they are written on. The decision is therefore very significant indeed.
That said, the whole point of adjudication is speed. Adjudication is about getting aggrieved parties paid quickly. In this regard, the timelines in Gravity give cause for concern.
The adjudicator’s decision at the heart of the proceedings was dated 28 April 2020. It took almost nine months to enforce. So, does this protracted timeframe defeat the purpose of adjudication entirely? Well… yes, it probably does.
There were a number of reasons why it took so long to enforce the adjudicator’s decision in Gravity:
- Firstly, TMS opposed the enforcement proceedings on a number of legal points, apparently delaying the proceedings by six months,
- Secondly, TMS also successfully objected to the fixing of an earlier hearing date on 17 September 2020 (the decision does not say why),
- Thirdly, there is the possibility of inertia within the High Court system itself. It can often take months to get a hearing date at the best of times.
The points summarised above might sound familiar to adjudication practitioners who have experience in the UK, where there were similar teething problems.
Summary judgment
Ultimately, these were resolved by reforms within the court system. In the UK, the courts now enforce adjudication decisions by way of summary judgment, with enforcement hearings taking place roughly 28 days after a procedural application.
If adjudication is going to become a mainstay in Irish construction, we will need reform within the court system to facilitate this. The courts need to rapidly enforce adjudication awards if the process is to have a long-term future in Ireland.
Another barrier to the uptake of adjudication in Ireland was also touched upon in Gravity. At paragraph 32 of the decision, the High Court briefly touched upon one of the legal arguments raised by TMS to resist enforcement.
In short, TMS put forward an argument that the enforcement proceedings should be “stayed” (put on hold) pending determination of arbitration proceedings.
In this regard the High Court noted that the propriety of this attempt was “open for debate”, given the wording of section 6(10) of the act, which says: “The decision of the adjudicator shall be binding until the payment dispute is finally settled by the parties or a different decision is reached on the reference of the payment dispute to arbitration or in proceedings initiated in a court in relation to the adjudicator’s decision.”
Pay first, argue later
The UK regime has a similar provision, but, in that jurisdiction, there is no debate as to what it means. It means pay first, argue later. Do what the adjudicator says in the first instance, and if you are unhappy about it, start from afresh in arbitration or court.
For constitutional reasons however, the position might not be as clear-cut in Ireland, so that debate still needs to be had.
I have no doubt that we will see the debate above unfold in the Irish courts in the very near future.