Ruling ‘settles debate’ on construction act
Lawyers at Addleshaw Goddard say that a recent High Court judgment has settled a debate about the meaning of legislation aimed at resolving construction disputes quickly.
The judgment by Mr Justice Simons dealt with the question of so-called ‘smash-and-grab’ adjudications, which enable a contractor to claim payment when an employer does not respond to a payment-claim notice within the timeframe set out in legislation.
These are provided for in similar legislation in Britain.
In a note on the firm’s website, the Addleshaw Goddard lawyers say that the judge has determined that the Construction Contracts Act 2013 does not allow for automatic obligation to pay the full amount claimed where the paying party has failed to issue a response to that notice within the time prescribed in section 4 of the act.
Adjudicator ‘erred in law’
The judgment came in the case of Tenderbids Ltd t/a As Bastion v Electrical Waste Management Ltd. The dispute concerned had been the subject of a previous High Court ruling.
"The adjudicator erred in law in determining that the employer’s failure to deliver a response to the payment-claim notice triggered an entitlement, on the part of the contractor, to payment in full for the amount specified in the payment-claim notice,” Mr Justice Simons stated.
"The adoption of a default direction to pay has the practical effect that the paying party, who failed to respond to a payment claim-notice, will be precluded from defending a claim in adjudication on the merits.
“This is so notwithstanding that this preclusion is not provided for under the Construction Contracts Act 2013,” the judge said, adding that there was no “clear and specific language” on the matter in the act.
Issue ‘at core of procedure’
He found that the issue went to the very core of the adjudication procedure and that, notwithstanding the fact that this was a new argument raised by the respondent at enforcement stage, it was important that it be dealt with now, rather than have the error repeated in other adjudications.
The judge added, however, that employer’s volte-face should not be allowed to pass without any repercussions, saying that his provisional view was that the contractor should be entitled to recover at least part of the costs of the proceedings from the employer.
Addleshaw Goddard says that the issue has been the subject of “considerable debate”, with many dispute-resolvers arguing that the only logical consequence of a failure to respond within the period stipulated in the legislation is that the entire sum claimed falls due for payment.
“Others have disagreed and have argued that, had the legislature intended that consequence, the provision would have clearly set that out, as is the case in equivalent legislation in the UK,” the firm’s lawyers say.
They conclude that Mr Justice Simons has “resolutely confirmed” that the ‘smash-and-grab’ approach to adjudication is not available under Irish law.