The Most Comprehensive Decision on Adjudication Enforcement in Ireland To Date - Delivered 13 September 2021

In Ireland the enforcement of an adjudicator’s decision is dealt with pursuant to s6(11) of the Construction Contracts Act 2013 (the ‘Act’) and Order 56B, Rule 2 of the Rules of the Superior Courts. The Act permits the referral of a ‘payment dispute’ to adjudication. On 13 September 2021, the High Court delivered its decision in Aakon Construction Services Ltd v Pure Fitout Associated Limited [2021] IEHC 562, which is probably the most comprehensive judgment to date on adjudication under the Act. The judgment reviews the procedure for the appointment of an adjudicator, the test for determining whether a notice of intention to refer a dispute is valid, the issue of multiple disputes and the alleged failure of the adjudicator to address a defence. The judgment also sets out the primary differences between the Act and similar legislation in the United Kingdom. Interestingly, one of the differences suggests that in Ireland there may be scope to challenge the merits of the adjudicator’s decision head on (rather than initiating independent proceedings seeking declaratory relief) where some weight may be given to the adjudicator’s decision.

In Aakon a dispute was referred to adjudication whereby the applicant (sub-contractor) sought payment from the respondent (main contractor). In the adjudication, the applicant argued that the respondent failed to issue a response to a payment claim notice within the mandated timeframe. In the alternative the applicant claimed that the measured works and variations should be valued in accordance with the contract. In response, the respondent contended that the purported payment claim notice was invalid and therefore no payment was due. In the alternative, the respondent asserted that the applicant had not established entitlement to the sums for variations and measured works. The adjudicator engaged fully with the respondent’s submissions and found that the payment claim notice was valid. Ultimately, the adjudicator accepted that the failure to respond to the payment claim notice had the consequence of triggering a default requirement to pay the amount claimed. The adjudicator held, in effect, that the failure of the respondent to deliver a response to the payment claim notice made by the applicant had the legal consequence that the former was required to discharge same. The adjudicator then indicated that there was no need to evaluate the sums ‘properly’ payable by evaluating the measured work and variations.

The respondent sought to resist the adjudicator’s decision on the grounds that, first, the adjudicator was not conferred with jurisdiction to make the decision as it was contented that the decision went beyond the terms of a payment dispute. Second, it was argued that the adjudicator breached fair procedures and constitutional justice by failing to address a substantive defence. Simons J enforced the adjudicator’s decision.

The Adjudicator’s Jurisdiction

In relation to whether a valid payment dispute was referred to adjudication, the respondent contended that the notice of intention to refer was invalid on several grounds including that the notice did not set out the relief sought, multiple claims were advanced in one notice and the fact that two attempts were made to the Chairperson of the Construction Contracts Adjudication Panel for the appointment of an adjudicator.

In finding that the dispute fell within the ambit of a payment dispute and the adjudicator addressed the principal issue described in the notice of intention, Simons J noted that it was unnecessary to decide whether the precise parameters of the adjudicator's jurisdiction were forever fixed by the summary of the details of the payment dispute as set out in the notice of intention to refer. This was because the terms of the notice of intention to refer in this case were comprehensive enough to clothe the adjudicator with jurisdiction to make the decision reached. Therefore, it should not automatically be assumed that a notice of intention to refer has the same canonical status as a ‘notice of adjudication’ under the United Kingdom legislation. Ultimately, the overarching principle is that an adjudicator must comply with fair procedures. An essential element of this is that the responding party be aware of the case which it has to meet and afforded a meaningful opportunity to respond to that case. An elaboration upon the detail of the dispute in the subsequent referral is not inimical to fair procedures. It is noteworthy that the Act or statutory code of practice does not say that the details of the dispute are confined to those set out in the notice. Simons J considered that:

81 ... [The Act] is largely silent on the status of the notice, it is at least arguable that the detail of the dispute can be further refined by the content of the subsequent referral. To hold that the adjudicator's jurisdiction is rigidly defined by what will, of necessity, be a brief description set out in the notice of intention to refer would appear to be inconsistent with the statutory provision that the adjudicator may take the initiative in ascertaining the facts and the law in relation to the payment dispute.’

Simons J considered that provided the notice of intention to refer identifies the gravamen of the payment dispute, and, in particular, identifies the construction contract; the parties; the site address; the payment claim notice; the response, if any, made to the payment claim notice; and the sum claimed, then the refinement of legal argument in the referral will normally be permissible.

Like litigation, the Referring Party in an adjudication is permitted to advance legal arguments in the alternative. The factual basis for the applicant’s claim was adequately identified in the notice, therefore it was a matter for legal argument as to how the respective positions of the parties were characterised under the contract and the legislation. Simons J outlined that:

‘94 The litmus test in assessing the adequacy of a notice of intention to refer must be whether the alleged defects [in the notice] impinged upon the responding party's ability to defend the claim against it.’

Identifying the Relief Sought in the Notice

Simons J found that failing to indicate the relief sought in the notice of intention to refer a dispute was not fatal as unlike the position in respect of a notice of intention to refer under the United Kingdom legislation, there was no express requirement under the statutory code of conduct that a notice of intention to refer must specify the ‘relief’ sought.

Multiple Disputes

The respondent’s contention that multiple disputes cannot be referred to adjudication was also rejected. Section 6(9) of the Act expressly provides that an adjudicator may deal at the same time with several payment disputes arising under the same construction contract or related construction contracts. By contrast, under the United Kingdom legislation, the consent of all the parties is required before an adjudicator can adjudicate at the same time on more than one dispute under the same contract. There was nothing which precluded the applicant from arguing that its entitlement to payment can be analysed as triggering a default payment, or, in the alternative as capable of being measured as a variation or dayworks. These are properly characterised as specific issues arising in the context of a single ‘dispute.’

Two Attempts to Appoint the Adjudicator

On the first attempt to appoint the adjudicator, the Construction Contracts Adjudication Service (the ‘Service’) directed that the applicant reapply. The form and content of an application for the appointment of an adjudicator is not prescribed under the Act, however, as a matter of practical convenience, appointment forms are available from the Service but have no legal status. One of the fields in the form requires a ‘brief summary of the dispute.’ The respondent alleged that there were material differences between the description of the dispute outlined in the applicant’s form submitted in its first attempt to appoint the adjudicator when compared to the form submitted in the second attempt. Simons J held that any differences between the two forms were legally irrelevant. The first application was superseded by the second. Similarly, any difference between the appointment form and the notice of intention to refer a dispute to adjudication was irrelevant as the application form had no legal status. If there was a contradiction between the two, the notice of intention to refer would prevail given its enhanced legal status.

Failure to Consider a Defence

The respondent alleged that the adjudicator openly acknowledged that the ‘true’ value of the works was not considered. Simons J considered that the respondent had a contradictory and self-serving approach. The respondent sought to resist the application for leave to enforce on the ground that the adjudicator did not have jurisdiction to make the decision, yet, in the next breath, criticised the adjudicator for failing to exhaust the jurisdiction. It was incorrect to characterise the adjudicator as having breached fair procedures by failing to consider a line of defence advanced by the respondent. The adjudicator considered that the principles in Grove Developments Ltd v S&T (UK) Ltd [2018] EWCA Civ 2448 precluded the making of any determination on the true value of the works in the payment claim notice until such time as the respondent had complied with the decision. The adjudicator made a reasoned decision that a valuation could not be commenced until the amount had been paid. This was more properly characterised as a finding on the part of the adjudicator that the line of defence was inadmissible at that time, than as the adjudicator having disregarded or ignored the defence.

Other Points of Note in the Judgment

In the previous decision of Principal Construction Limited v Beneavin Contractors it was argued that the words ‘if binding’ in s6(11) of the Act made it easier to resist enforcement in Ireland when compared to the United Kingdom as those words are not contained in the corresponding United Kingdom legislation. Simons J brought additional clarity to the words ‘if binding’ stating that:

‘13 The qualifying words “if binding”, as used in section 6(11) of the Act, are merely intended to address the contingency of the adjudicator's decision having been superseded by a subsequent decision of an arbitrator or a court. A party will not be allowed to enforce an adjudicator's decision which has already been overtaken by events: such a decision will no longer be binding. The words “if binding” are not intended to suggest that the binding status conferred on an adjudicator's decision is qualified or uncertain. Nor are the words intended as an invitation to parties to question the binding nature of the adjudicator's decision in enforcement proceedings.’

Simons J acknowledged that case law from England and Wales is of great assistance when interpreting the Act but warned that it cannot simply be ‘read across’ to Ireland as the legislation differs in a number of respects. Simons J stated that:

’40 There is an understandable temptation for practitioners and judges in this jurisdiction to borrow from this extensive learning when interpreting and applying the Construction Contracts Act 2013. The case law from England and Wales must, however, be approached with a degree of caution. This is because there are significant differences between the legislative approaches adopted in the two jurisdictions. There are also significant differences in the procedure governing the enforcement of an adjudicator's decision. These distinctions are all too easy to miss in that many of the concepts underlying the UK legislation seem familiar to us.’

In this regard, Simons J identified several key differences between the Act and similar legislation in the United Kingdom, including:

1.????????In Ireland an adjudicator's decision is enforced as if it were an order of court. An adjudicator's decision thus has an enhanced status under the domestic legislation. By contrast, the normal procedure for enforcing an adjudicator's decision under the United Kingdom legislation is to apply for summary judgment.

2.????????The adjudication process under the Act is statutory in origin. By contrast, the United Kingdom legislation gives effect to a right to adjudication by implying terms into construction contracts. One practical consequence of this distinction is that an adjudicator's decision in Ireland might, in principle, be amenable to judicial review.

3.????????The provisions in respect of payment claim notices under the Act are materially different to those under the United Kingdom legislation. In particular, there is no express statutory provision under the Act which stipulates what the consequences of a failure to respond to a payment claim notice are to be. The Act does not state that, in the absence of a response, the amount claimed in the payment claim notice is payable by default.

4.????????The status of a notice of intention to refer under the Act is different to that of an notice of intention to refer a dispute to adjudication under the United Kingdom legislation.

5.????????There may be a potential difference in the role of the Court under the Act when compared to the Courts in the United Kingdom. In the United Kingdom an adjudicator's decision is binding until the dispute is finally determined by legal proceedings, by arbitration or by agreement. However, the Act refers to court proceedings initiated ‘in relation to’ the adjudicator's decision. This might be taken as suggesting that it is necessary to challenge an adjudicator's decision head on - rather than simply initiate independent proceedings seeking declaratory relief de nova as to the rights of the parties - and that some weight may have to be given to the adjudicator's decision.

Simons J indicated that the precise contours of the High Court's discretion to refuse to enforce an adjudicator’s decision should be developed incrementally. It was also noted that the Act envisages that the High Court might grant leave to enforce an adjudicator's decision, only to rule in subsequent proceedings that the adjudicator's decision was incorrect and that the paying party has an entitlement to recover any overpayment.

Finally, practitioners are advised that the timescales in Order 56B are prescribed and not merely aspirational and should be complied with unless there is good and sufficient reason for not doing so.