Could it be that the ‘macob moment’ for adjudication in Ireland is now close?
Following ‘Back to Work’ day on the 18th May, Ireland is starting on the journey of living with the continuing presence of Covid-19, which is unlikely to go away any time soon. We now have to face the reality of a construction industry that has been starved of cash flow, its lifeblood. With resources heavily depleted, supply chains severely disrupted and a significantly increased risk profile for continuing projects it is clear that the full impact of the pandemic has yet to be fully quantified.
Against this backdrop, there is now a realisation that for continuing projects the original programmes are no longer relevant, deadlines have been missed and there is now the certainty of substantial and increasing delay. Can forbearance from employers be relied upon in recognition of the difficulties that have and will continue to occur, in many cases it is hoped so. But it is likely that there will be some employers that cannot, or will not recognise the level of forbearance that is required. It is clear that there is now an increase in the latitude for disputes.
Conspicuously, since the Construction Contracts Act 2013 (the Act) came into force in July 2016, now nearly four years ago, there has not been a challenge to the enforcement of an adjudicator’s decision, despite the Act making provision for this possibility 1. Indeed there is no jurisprudence, in providing guidance to the construction industry, on the Act at all. This is in marked contrast to when the UK equivalent of the Act, the Housing Grants Construction and Regeneration Act 1996, came into force in May 1998. The first challenge was submitted to the courts only nine months later in February 1999 in Macob Civil Engineering Ltd v Morrison Construction Limited 2 from what was then a body of circa 73 3 reported adjudications across the UK.
With circa 52 reported adjudications in Ireland for the three year period to July 2019 4, current anecdotal evidence, gathered from discussion with dispute resolution practitioners, suggests that the total number of reported adjudications is likely to be well in excess of 100 in total by the end of July 2020. These statistics, which do not include party agreed appointments, suggest that a challenge to an adjudicator’s decision can be expected at some point soon.
However, these statistics are nothing more than indicative where the real issue is the state of the economy. The single priority for many contractors and sub-contractors is simply survival. It is likely that many will turn to adjudication for assistance. There has undoubtedly been a past reluctance to engage in adjudication. Some of the reasons for this are its adversarial nature, the success of other established methods such as mediation and conciliation, a perception of high cost and risk together with technical issues such as the ability to enforce a decision and the impact of the Constitution.
Compared to other forms of dispute resolution, adjudication offers the distinct advantages of speed and certainty of decision. Without doubt adjudication is intense, and requires meticulous preparation. But at least from the beginning the end date and the conclusion are within sight, which is not the case for mediation, conciliation or arbitration. It follows that for Finance Directors and Senior Managers of main contractors and sub-contractors in trying to limit exposure of time and resource in disputes, adjudication provides a practical approach to the recovery of cost, where representations in negotiation have failed. In straightened times where the potential for dispute has been significantly broadened, and recalcitrance is present, the advantages of adjudication in facilitating a quick and relatively certain decision in seeking recovery of cost appear to be becoming more attractive.
Given a priority for survival it is now increasingly likely that marginal cases will be contended through adjudication over the next twelve months. There will be a temptation to bring disputes that are less certain to adjudication, which in more favourable times may have been directed to mediation or conciliation, in order to seek quick resolution. Loyalties, particularly between main contractors and sub-contractors will be tested.
There have been moves towards the courts in the past, a case for enforcement of an adjudicators decision reached the court list in November 2018 5 but was withdrawn following settlement. There is now however an economic urgency that is likely to give rise to not only new points of dispute, but also new points of defence.
In recent weeks a dispute between an ICAV 6 managed by Hines and Stewart Construction, part of the JSL Group, has reached the courts. In this case the ICAV is seeking a Judicial Review in challenge of the statutory adjudication process, operated by the CCAS 7 on behalf of the Department of Business, Enterprise and Innovation. Twomey J granted leave to bring the review whilst imposing a freezing order, effectively halting the adjudication process whilst the court action is pending. Apart from challenging the jurisdiction of the adjudicator, the ICAV is contending that the adjudication process works to its disadvantage. It is being argued that should the adjudication decision be made against the ICAV and there is a following successful challenge to the decision it is has been suggested that the JSL Group may not have the resources to satisfy repayment of the principal or even the legal costs involved.
Although there is some way to go in this dispute, the wider implications of the severe negative economic impact of Covid-19 on main contractors and sub-contractors across the industry would suggest that the ‘macob moment’ for adjudication in Ireland may now be close.
1. Construction Contracts Act 2013 at Section 6.- (10).
2. Macob Civil Engineering Ltd v Morrison Construction Limited  EWHC Technology 254.
3. Adjudication Reporting Centre, Glasgow Caledonian University, Report No.3, March 2001, at p.4.
4. O’Malley, Peter. ‘The Irish ‘Construction Contracts Act 2013’: Adjudication – What Has Happened and Where Next?’ Arbitration: The International Journal of Arbitration, Mediation & Dispute Management 86, no. 2 (2020): at p.146.
5. The enforcement was sought under Section 6(11) of the Act through an action of law, namely by issue of a ‘winding- up-petition’ under Section 569(d) of the Companies Act 2014. Although the defendant submitted this was an ‘abuse of process’, a final settlement was reached prior to hearing.
6. ICAV – Irish Collective Asset-management Vehicle.
7. CCAS – Construction Contracts Adjudication Service, being the nominating body for Adjudicators under S6.-4 and S8. of the Act.