Covid-19 – The important role of the Construction Contracts Adjudication Service

This note is part of a series that the lawyers of Reddy Charlton will issue on the major legal, personal and business issues that will confront us all during the Covid-19 crisis.

Without warning or advance notice, the Construction Contracts Adjudication Service (CCAS) suspended its services with effect from 1 April.  Whilst the date of the announcement was unfortunate, the decision taken by the CCAS to suspend its services was not a joke.

The CCAS closure caused serious concerns throughout the construction sector and if the service continued to be unavailable for a prolonged period of time it may have led to a significant number of contractors and construction sector related firms having severe cash flow issues.  Thankfully, the CCAS reversed its closure decision and as of 14 April it reopened its services, albeit on a limited scale.

In this article we discuss the role of the CCAS, we highlight how important it is within the construction sector and we also identify the key provisions of the Construction Contracts Act 2013.

What does the CCAS do?

The CCAS is responsible for the implementation of the Construction Contracts Act 2013 (the “Act”) which in short sets out how payments and payment related disputes within the construction industry are dealt with.  The Act imposes requirements that certain construction contracts must expressly provide for the amounts of all interim and final payments or sufficient mechanisms to determine them and also gives parties the right to refer any payment dispute under a relevant construction contract to adjudication.  Where parties are in a payment dispute, they may request of the CCAS that an independent adjudicator be appointed to consider the issue at hand.   The creation of the service led to less disputes arising and also a greater efficiency in the management of those disputes that were referred to arbitration.

What ‘construction contracts’ are subject to the Construction Contracts Act 2013?

The Act defines the term ‘construction contract’ and identifies contracts that are exempt from the legislation including:-

• if the value of the contract is not more than €10,000; or
• if the contract relates only to a dwelling and it has a floor area not greater than 200 square metres and one of the parties to the contract is a person who occupies , or intends to occupy, the dwelling as his or her residence; or
• if it is a contract between a State Authority and its partner in a Public Private Partnership arrangement; or
• if it is a contract of employment.

What are the key terms of the Construction Contracts Act 2013?

Payment Provisions

A construction contract covered by the Act shall provide for:-

• the amount of each interim and final payment or an adequate mechanism for determining those amounts;
• the payment claim date for each amount due or an adequate mechanism for determining it; and
• the period between the payment claim date and the date on which the amount is due.

If a main construction contract does not provide for the above matters, the following payment claim dates will apply to the contract:-

• 30 days after the commencement date of the construction contract;
• 30 days after the payment claim date referred to above and every 30 days thereafter up to the date of substantial completion; and
• 30 days after the date of final completion.

In addition, the date on which payment is due in relation to an amount claimed under the contract shall be no later than 30 days after the payment claim date.

Valid Payment Claim

• An executing party is required to serve a Payment Claim Notice on the other party no later than 5 days after the payment claim date.
• If the other party contests that the amount claimed, they are required to respond in writing to the executing party, no later than 21 days after the payment claim date.
• It is important to know that these notices are required to be served in respect of each individual payment dispute.

Payment Dispute and Adjudication

• Section 6 of the Act provides a right for a party to a construction contract to refer a payment dispute for adjudication. A payment dispute for the purposes of the Act is any dispute relating to payment arising under the construction contract.
• Adjudication provides a mechanism for the resolution of a payment dispute where the dispute is referred by one of the parties to an independent third party, an Adjudicator, who will make a decision on the dispute.
• If the parties cannot agree on whom to appoint as Adjudicator, a party may apply to the Chairperson of the Construction Contracts Adjudication Panel, to appoint an Adjudicator to the dispute from the Ministerial panel of Adjudicators.

What would be the impact of a prolonged closure of the CCAS be?

The impact of the CCAS not operating on a prolonged basis would be stark as its primary purpose is to adjudicate on payment issues within the construction sector. In this Covid-19 crisis there will undoubtedly be many instances of payment dispute, ranging from legitimate cash flow issues through a contractor’s refusal to pay sub contractors to payment disputes over crisis related delays and arguments over ‘force majeure’.  Where there is a payment dispute, there are inevitably delayed or withheld payments and these delays may cause severe financial impact on construction firms and their employees.  The role of the CCAS is to provide timely and independent adjudication on these matters, enabling matters be resolved and payments to flow.  At such a time as this when the need for the service is high, it is very important that the CCAS remain available.

What lessons can the CCAS take from this crisis?

Like all service providers and businesses, the CCAS can take a number of learnings from the challenges presented by this Covid-19 crisis.  Whilst there are likely to be some practical obstacles, it is a worthwhile goal of the CCAS to be functioning fully through digital and remote working means and the current situation we are in presents an opportunity for the CCAS and others to be innovative and flexible. In that context, this week (commencing 20 April) has seen a very welcome and progressive move by the Courts Service when it began remote hearings at both the Supreme Court and the Court of Appeal.  Reddy Charlton Solicitors are proud to be one of the legal firms involved in these initial hearings.

How can Reddy Charlton help?

During this Covid 19 crisis, Reddy Charlton Solicitors are eager to support, encourage and guide your business.  If you have any queries or seek further information on the CCAS or any other area of construction or commercial law, please contact Peter Kearney at pkearney@reddycharlton.ie