The Construction Contracts Act 2002 has now been in force for almost 17 years. One of its key features is a process for the determination of construction disputes, called adjudication. Adjudication is designed to be a fast and effective way of determining construction disputes. It has become the process of choice for determining construction disputes which cannot be resolved by negotiation. Yet, many construction professionals (to their credit) have still not been involved in a full adjudication process.
There is a lot of information available about adjudication, including entire text books devoted to the subject. The purpose of this article is to outline the adjudication process in 12 steps (a 12 step programme for construction disputes, if you will):
1. Adjudication is a fast track dispute resolution process only available to parties to construction contracts (including quantity surveyors, engineers and designers). The process is governed by, and set out in, the Construction Contracts Act 2002.
2. The process is designed to be practical and fast. It has been described as "quick and dirty”. The entire process typically takes between 6 to 8 weeks from commencement to the date of receiving a decision (referred to as a determination). Once a determination has been delivered, it can be enforced (if necessary) in the same way as a court judgment.
3. The process is initiated by one party (the claimant) serving the other party with a document called a Notice of Adjudication. The Notice of Adjudication sets out the basic details of the dispute i.e. the parties, the construction contract, the date the dispute arose, a brief description of the nature of the dispute, and the remedies the claimant is seeking. It is usually no longer than 3-4 pages, and is very much a summary of the dispute.
4. Two working days after the Notice of Adjudication has been served, the claimant can apply for an adjudicator to be appointed. There is no need to agree with the other side about the appointment. The usual process is to apply to one of two Authorised Nominating Authorities (ANA's) for an adjudicator to be appointed. The two main ANA's in New Zealand are the Building Disputes Tribunal (BDT) and the Arbitrators’ & Mediators' Institute of New Zealand (AMINZ).
5. The appointment process usually takes no longer than 24-48 hours. A claimant can expect to receive notification of an adjudicator’s willingness to accept appointment within one or two working days of applying to an ANA. The notice of willingness will usually be conditional upon payment of an amount as security for the adjudicator's fees and expenses. In theory, each party is liable to contribute 50% of the amount required as security. In practice, the amount is invariably paid by the claimant in order to secure the appointment of the adjudicator without delay, and the allocation of the adjudicator’s fees and expenses is dealt with in the determination at the end of the process.
6. As soon as the ANA has received the amount required as security, the adjudicator will issue a document called a Notice of Acceptance. The issue of the Notice of Acceptance starts the 6 to 8 week period for the delivery of a determination running.
7. Within five working days of the issue of the Notice of Acceptance, the claimant must serve its Adjudication Claim. The five working day period cannot be extended, even by agreement. The Adjudication Claim usually consists of an adjudication claim document (incorporating an outline of the key facts, legal submissions, and the remedies sought), witness statements from all of the relevant witnesses, and a bundle of all relevant documents. It is essential that the Adjudication Claim contains all of the information a claimant wishes to rely upon, as there is no right to introduce any new information (other than strictly in reply, which I will refer to below) after the Adjudication Claim has been served.
8. As the five working day period cannot be extended, and there is usually a significant amount of work to prepare an Adjudication Claim, the usual practice is to prepare the Adjudication Claim before serving the Notice of Adjudication. The Adjudication Claim can then the served immediately after the issue of the Notice of Acceptance.
9. Once the Adjudication Claim has been served, the other party (the respondent) has five working days to serve an Adjudication Response. The five working days can be extended by a short period (an additional five working days is not uncommon) if the respondent can satisfy the adjudicator that further time to formulate a response is reasonably required.
10. Once the Adjudication Response has been served, the claimant has a limited right to serve an Adjudication Reply. Any Reply must be served within five working days of receiving the Adjudication Response. That time frame cannot be extended. Importantly, the reply must be limited to responding to new matters raised in the Adjudication Response. It cannot be used as an opportunity to present further evidence or patch up omissions in the Adjudication Claim.
11. If a Reply is served, the respondent can seek the permission of the adjudicator to serve a Rejoinder to the Reply. Any Rejoinder must be served within two working days of receipt of the Reply.
12. The Adjudicator must then deliver a Determination within 20 working days of service of the Adjudication Response. The 20 working day period can be extended by an additional 10 working days if the adjudicator requires further time. The time cannot be extended beyond 30 working days without the consent of the parties. As mentioned above, the determination can then be enforced (if necessary) in the same way as a court judgment.
For help with a construction adjudication, whether as counsel, or if you are looking to appoint an adjudicator, please contact me at markcolthart@fortyeightshortland.co.nz.