Construction Law Update: Irish Court Comments on Adjudication as it enforces a Second Decision
As statutory adjudication becomes more widely used in Ireland, the High Court enforces a second adjudicator’s decision and, in so doing, emphasises that entitlement to adjudication derives from legislation, not contract, and confirms the Court’s willingness to benefit from the experience of the UK’s Technology and Construction Court in this area of construction law.
We wrote previously about the first case in which the Irish High Court enforced an adjudicator’s decision in our briefing on Gravity Construction v Total Highway Maintenance Ltd. The High Court has now ruled in support of another adjudicator’s decision, in the case of Principal Construction Ltd v Beneavin Contractors Ltd [2020 No.199 MCA].
The background was that Beneavin Contractors engaged Principal Construction to carry out construction works in Dublin. After practical completion of the works, Principal issued an adjusted final account of €989,730.91 in November 2019. Just over a year later, the contract administrator issued a final certificate notice summary which recommended payment to Principal of only €31,356. In even worse news for Principal, the contract administrator’s final certificate payment recommendation was that Principal was not due any sum but, instead, owed Beneavin €116,309. A final certificate was issued to this effect, but by an architect who was neither the architect nor contract administrator named in the contract.
Principal referred the dispute for adjudication and the adjudicator awarded Principal €643,635.98. When Principal applied to the High Court to enforce the adjudicator’s award, the High Court indicated it was prepared to grant the relief sought.
The reasons for the Court’s decision are helpful reminders about the nature of statutory adjudication. Here are key takeaways:
- The provisions of the Construction Contracts Act 2013, which provides for adjudication, apply irrespective of the terms of the contract between the parties. Under the Act, there is a statutory right to refer any dispute relating to payment arising under the construction contract (which includes professional appointments) to adjudication by serving on the other party at any time notice of intention to refer the payment dispute for adjudication. The decision of the adjudicator is binding until the payment dispute is finally settled by the parties, or until a different decision arises from arbitration or litigation. There is a summary procedure for enforcing a decision of the adjudicator.
- As in the UK, a Court may declare an adjudicator’s decision unenforceable only on the grounds of lack of jurisdiction or breach of natural justice. The Court rejected the argument by Beneavin that the words “if binding” in section 6(11) of the Act, which are not in UK adjudication legislation, mean it is easier in Ireland than in the UK to resist enforcement of an adjudicator’s award. The Court stated that, even without the words “if binding”, UK courts consider that adjudicator’s decisions are unenforceable only on limited grounds. Section 6(11) has to be read with section 6(10) (which provides that the decision is binding until the payment dispute is finally settled by the parties, or until a decision arises from arbitration or litigation) and the words “if binding” interpreted in that narrow context.
- There is a distinction between the jurisdiction an adjudicator has to hear a claim and the adjudicator’s decision on that claim. Beaneavin argued that the adjudicator lacked jurisdiction because Principal had not disputed the final certificate within the time stipulated in the (RIAI) contract (which provided that, unless the Architect received notice of arbitration within ten working days, he was required to issue the Final Certificate). The Court rejected this, reiterating that an adjudicator’s jurisdiction derives not from the contract, but from the Act, which confers a clear, unfettered right to refer a payment dispute for adjudication. Once the dispute is referred to the adjudicator, he/she, in determining the dispute, may have regard to the terms of the contract itself.
- The Court considered that, while the respondent was entitled to plead a full defence in the adjudication including abatement, set-off etc., it could not mount a counterclaim which in law was a separate claim (recovery of Liquidated Damages). During the adjudication Beneavin claimed €134,000 in Liquidated and Ascertained Damages under the contract. The adjudicator considered he did not have jurisdiction to determine this claim. While Beneavin was entitled to plead a full defence in the Response to Referral for Adjudication (including abatement, set-off etc.), it could not mount a counterclaim which in law was a separate action and would need to be pursued in a separate adjudication. The High Court agreed with this approach. The Court also commented that the adjudicator clearly considered the substance of this claim in some detail when considering the dispute that had been referred for adjudication (concluding that delay had been caused by Beneavin and that Principal was entitled to an award arising from it).
In delivering the judgment Mr Justice Meenan made the following introductory remarks, which serve again as a useful reminder of the rationale underpinning statutory adjudication.
“The purpose and aim of the Act of 2013 is to provide for a summary procedure to enforce the payment of moneys from one party to another … This ensures that moneys are paid without having to await the outcome of arbitration or litigation, which, more often than not, involves delay. The necessary timelines for payment in the building and construction industry are very different to the timelines in arbitration and litigation.”