Good and Bad News for Construction Adjudication in Ireland

In Gravity Construction Limited v Total Highway Maintenance Limited [2021] IEHC 19 the Irish High Court delivered its first judgment concerning the enforcement of an adjudicator’s decision. An adjudicator made a relatively modest award in favour of the Applicant in April 2020. Like other jurisdictions the Adjudicator’s award is binding pending the resolution of the dispute between the parties by way of arbitration or litigation. Section 6(10) of the Construction Contracts Act 2013 provides that:

‘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.’

The Respondent did not comply with the Adjudicator’s decision. Thereafter, the Applicant commenced enforcement proceedings in the High Court. Initially the Respondent contended that the payment of the Adjudicator’s award should be stayed pending determination in arbitration. However, the Respondent changed its stance and conceded that it was prepared to comply with the Adjudicator’s decision. The primary issue that the Court had to grapple with was whether it should make an order against the Respondent in circumstances where the Respondent’s solicitor had given an undertaking to comply with the Adjudicator’s decision within two weeks.

In the circumstances Simons J made what was termed an ‘unless order.’ The order provided that:

‘8. … the applicant has leave to enforce the adjudicator’s decision in the same manner as a judgment or order of the High Court, and that judgment 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 (26 January 2021). This order is made pursuant to section 6(11) of the Construction Contracts Act 2013.

The reasoning for making such an order was stated as follows:

‘11. The framing of the order as an “unless” order represents an appropriate compromise in that it respects the statutory entitlement of the applicant to relief, while affording the respondent a very short period of time within which to make the payment without a judgment being formally entered against it (with all the negative implications thereof).’

The Good News:

Many will welcome the fact that the High Court has given its first judgment concerning the enforcement of an adjudicator’s decision under the Construction Contracts Act 2013. The compromise ‘unless order’ demonstrates that the High Court has shown a willingness to enforce adjudicator’s decisions while respecting the negative impacts a party may face when a judgment is entered against it.

The Bad News:

As in other jurisdictions, the primary purpose of Construction Contracts Act 2013 is to help contracting parties maintain cash flow. In this instance the Adjudicator’s decision was made in April 2020 with the enforcement proceedings taking place in January 2021. Judgment was not entered against the Respondent as it was given seven days to make payment. Some may view this as giving the Respondent an additional ‘lifeline’ to make payment. Perhaps more pressure would be put on Respondents if judgment was entered as then Respondents would have to consider the negative implications attached to having a judgment made against them. Consequently, Respondents may be tempted to renege on payments safe in the knowledge that the Court may allow one last chance to make payment before entering judgment.

Perhaps more worrying in the context of maintaining cash flow is that the judgment leaves open the possibility that the enforcement of an adjudicator’s award may be stayed pending arbitration. On the facts of the case the Respondent initially advanced this proposition but later withdrew this argument. Consequently, the Court did not make a finding in this regard. However, Simons J noted that such an argument was up for debate stating that:

‘32 … the propriety of the attempt to stay the enforcement of the adjudicator’s award under the Construction Contracts Act 2013 pending the determination of arbitration proceedings is something that is open for debate given the express wording of section 6(10) of the Act …’

It is likely that the argument of staying the enforcement of an adjudicator’s decision pending arbitration or litigation will surface in the future.

Sharpe Pritchard LLP has a dedicated contentious construction law team with vast experience of all aspects of construction disputes. Please contact us to discuss how we can help!