There has been lots of coverage of the new Construction Act for England and Wales but what about similar legislation in other jurisdictions? Here’s a guide to the antipodes
The amendments to the Construction Act came into force on 1 October. This is therefore an appropriate moment to compare the experience of statutory payment and dispute resolution in other jurisdictions.
Three years after the UK, the state of New South Wales (NSW) in Australia introduced adjudication via the Building and Construction Industry Security of Payment Act 1999. Later, other Australian states and territories, New Zealand (2002) and Singapore (2004) also adopted statutory adjudication. Here we will focus on comparing the NSW adjudication regime with that of the UK and New Zealand (NZ).
Subject matter of the dispute
The UK and NZ adjudication models allow for all types of construction disputes to be resolved by adjudication. The NSW model makes provision for the resolution of payment disputes only.
The NZ regime expressly provides that a dispute cannot, without the consent of the parties to the dispute, be referred to adjudication where the parties have agreed to refer disputes between them to international arbitration. Statutory or contractual adjudication has all but supplanted domestic arbitration as the construction industry’s preferred form of dispute resolution in the UK and NZ. This is the case in NSW, too, but here there is a significant amount of animosity towards adjudication from the employer and main contractor communities who see adjudication as pro-contractor/subcontractor.
Many NSW main contractors regard adjudication as heavily pro subcontractor
The UK and NZ regimes afford both parties to the construction contract the right to adjudicate whereas the NSW regime allows only the party making a payment claim to refer a payment dispute to adjudication. In fact, one commentator suggests the NSW regime is less to do with resolving disputes than setting up a default payment mechanism. A main contractor, or more often a subcontractor, can make an interim payment claim. If the employer wishes to challenge it, it must respond with a payment schedule. If the paying party neither pays nor responds with a payment schedule, then the claimant can either enter judgment or proceed to adjudication.
Nomination of the adjudicator
In the NSW regime the parties are not allowed to agree on the identity of the adjudicator. Instead the claimant must obtain a nomination from one of the adjudicator nominating authorities (ANA). There is some evidence that claimants tend to choose ANAs with the most pro-claimant reputation.
The NSW regime provides significantly shorter periods for resolution by adjudication than the UK and NZ regimes.
The UK adjudication model resolves disputes within 28 days of the referral. In NZ, disputes referred to adjudication are resolved within 20 working days from the expiry of the respondent’s responding period.
In NSW, however, there is only a 10 business-day resolution period running from the date that the adjudicator is notified of his appointment to the date of his decision. Within that period, the respondent is allowed only five business days to prepare and submit its response to the adjudication claim. However, the respondent is not allowed in its adjudication response to raise matters that have not been identified in a payment schedule. The legislation effectively discourages the adjudicator from having hearings or allowing legal representation. The adjudicator is required by the legislation to confine his considerations to the content of the payment claim, payment schedule, adjudication notice and adjudication response. The effect is to encourage the paying party to raise in its payment schedule every conceivable defence in fact or in law that it might want to use in a subsequent adjudication.
The short time-frame given to the respondent to respond to an adjudication claim gives the claimant a significant advantage over the respondent. In complex cases this can give rise to a severe imbalance in favour of the claimant. Many employers and main contractors regard the procedure as one sided and heavily pro-contractor or subcontractor.