Adjudication Services

In order to meet the stated objective of providing speedy resolution of disputes arising under a construction contract, the Construction Contracts Act 2002 provided for a new and different dispute resolution process known as ‘Adjudication’.

Adjudication is a unique and relatively straightforward fast track statutory dispute resolution process for resolving building and construction disputes arising under construction contracts with the primary purpose of improving cashflow. Under section 25 of the Act ,any party to a construction contract is entitled to refer a dispute arising under a construction contract to adjudication except where the parties have agreed to refer disputes between them to arbitration and the arbitration is an international arbitration.

A party to a construction contract has the right to refer a dispute to adjudication whether or not that dispute is the subject of another dispute resolution procedure, for example, court or arbitral proceedings or mediation.

Section 26 of the Act provides that nothing in the Act prevents the parties from submitting a dispute to another dispute resolution procedure whether or not the proceedings for the other dispute resolution procedure take place concurrently with an adjudication. In essence, this is just another way of saying that the decision of the Adjudicator is provisional and will be binding on the parties until the dispute is finally determined by arbitration or by court proceedings, or resolved by agreement or mediation after the dispute is determined by the Adjudicator.

An adjudicator is empowered and required to determine whether or not any of the parties to the adjudication are liable, or will be liable if certain conditions are met, to make a payment under that contract and any questions in dispute about the rights and obligations of the parties under that contract (s48).

An adjudicator’s determination under section 48(1)(a) of the Act that an amount of money is payable under a construction contract is binding on the parties and is enforceable in the courts as a debt due or by entry as a judgment until or unless the dispute is finally determined by arbitration or by court proceedings, or resolved by agreement or mediation after the dispute is determined by the Adjudicator. The binding effect of an adjudicator’s determination under section 48(1)(a) is made clear in section 60 of the Act. Section 60 provides that an adjudicator’s determination is binding on the parties to the adjudication and continues to be of effect even though a party has applied for judicial review of the determination or any other proceeding relating to the dispute between the parties has been commenced. An adjudicator’s determination under section 48(1)(b) of the Act about the rights and obligations of the parties to a construction contract where payment of money is not claimed is not enforceable. However, if any party fails to comply fully with an adjudicator’s determination about the parties’ rights and obligations under the relevant construction contract, a party may bring proceedings in any court to enforce that party’s rights under the contract and the court is obliged to have regard to, but is not bound by, the adjudicator’s determination. The words “have regard to” mean just what they say and accordingly the court or tribunal is simply bound to give due consideration and weight to the determination, but having done so, the tribunal is entitled to reach a different conclusion to the adjudicator in relation to the disputed matter.

The Construction Contracts Act 2002 establishes the procedural requirements to be followed when referring a matter to adjudication and the process to be followed by the adjudicator who is generally required to make a decision on the disputed matters (known as a determination) within 20 working days of the dispute being referred by the parties.

Whilst it can be seen that adjudication does not necessarily achieve a final settlement of any dispute under a construction contract because any of the parties has the right to have the same dispute heard afresh and determined in Court, or in arbitration if the contract provides, the empirical evidence to date indicates that the majority of adjudication determinations are accepted by the parties as the final result.

Adjudication will almost certainly be quicker and less expensive than litigation through the courts and is now the most commonly used process for resolving building and construction disputes in New Zealand.

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