Arbitration, a commonly used interim dispute resolution forum between parties to a construction contract, is available in different forms in different jurisdictions around the world. Arbitration provides a statutory right to a binding interim decision in a timely, efficient and cost-effective manner during the life of a project until a dispute can be finally resolved through litigation, arbitration or a settlement.
Following the passage of Building and Construction Industry (Payment Security) Act 2021 (WA) in Western Australia last year, the arbitration process took another step towards cohesion and alignment between the different Australian state and territory jurisdictions. With the exception of the Northern Territory, in this post we provide an overview of the most common adjudication process in Australia, which focuses on a request for progress payment (Payment request) submitted by an entrepreneur and the corresponding assessment by the party to which the request was submitted. We also look at how this compares to the process in the UK under the Housing, Building and Regeneration Grants Act 1998 (UK) (HGCR Law).
When can arbitration be used?
Under the HGCR Act, a “party to a construction contract has the right to submit a dispute arising under the contract to arbitration”. A “construction contract” is an agreement to:
- carry out construction operations;
- organize the execution of construction works;
- provide labour, or the labor of third parties, for the performance of construction operations;
- carry out architectural, design or surveying work; Where
- give advice in building, engineering, interior or exterior decoration.
The dispute to be submitted to adjudication includes any dispute between the parties to the construction contract and, therefore, is not limited to that concerning payment. Disputes that may be submitted to arbitration under the HGCR Act include whether certain works constitute a variation, a contractor’s right to an extension of time, and a party’s liability for delay. .
Under HGCR law, arbitration can be initiated “at any time” by a party providing the other party to the construction contract with notice of intent to submit a dispute to arbitration (Notice of intent). The notice will include a description of the nature of the dispute, the parties involved and the nature of the remedy sought by the referring party.
Although there are differences in the wording and applicability of the relevant legislation in each jurisdiction, adjudication can generally be used by the parties to a construction contract under which one party undertakes to carry out works of construction or to provide related goods and services for another party. . It is a precondition before the tendering procedure can be used by a contractor that he has submitted a request for payment to the party above him in the project chain, in accordance with the construction contract or the relevant payment security legislation where the construction contract is silent. on a particular subject.
Where a party fails to assess a claim for payment within a prescribed period or fails to pay by a payment due date, or the amount assessed is less than the amount claimed in the claim for payment, then the contractor is entitled to request a decision. A contractor can then apply for the award within the time limit prescribed by the law of the relevant Australian jurisdiction following the occurrence of one of these cases.
The adjudication process
Section 108 of the HGCR Act establishes a timetable for the conduct of an arbitration, with an arbitrator normally being appointed within seven days of service of the notice of intention. Where the relevant construction contract does not specify an arbitrator and the parties are unable to agree on an arbitrator to submit a dispute to, the referring party may request an arbitrator appointing body to select a person to act as a referee.
Once an Adjudicator has been appointed, the Referring Party will serve both the Adjudicator and the Responding Party with a Notice of Referral, which is usually served within seven days of service of the Notice of Intention. The notice of referral will set out in detail the dispute that the party has referred to arbitration and will be accompanied by the documents on which the referring party’s position is based, including witness statements and expert reports.
The Adjudicator has the power to decide on the procedure to be followed in the award, including requesting documents from either party to the construction contract to assist them in determining the award and providing guidelines as to the timing of the auction, including any deadlines for submission of documents. This includes the opportunity for the other party to respond and whether further submissions are permitted by way of reply or rejoinder.
Section 108 of the HGCR Act sets a 28-day time limit for the arbitrator to render his decision. However, the time for service of documents and the adjudicator’s decision may be extended for a longer period agreed upon by the parties. Subject to alternative agreement, the parties will bear their own legal costs in the UK.
The submission of an adjudication request by a claimant to an adjudication appointing authority initiates the adjudication process in Australia. The request for award sets out the position of the claimant regarding the validity of the claim for payment and the right to receive the amount claimed, and is accompanied by supporting documents, including witness statements and expert reports. Following the submission of a Request for Adjudication, the Appointing Authority appoints an Arbitrator, with the time for a Respondent to submit an Arbitration Response commencing upon service of the Request.
The time periods allowed for a respondent to serve a response and for an arbitrator to render its decision differ according to the relevant legislation of the various Australian jurisdictions. However, as a general rule, an arbitrator has the authority to request additional submissions from each party and to request that the parties agree to an extension of time for the arbitrator to make his decision. The adjudicator’s decision will include an allocation of the adjudicator’s cost responsibility, which normally reflects the success of the claimant’s application for adjudication.
Binding force of the arbitration decision
In the UK and Australia, an arbitrator’s decision is binding until the dispute is finally resolved by litigation, arbitration or settlement. However, there are limited grounds for appeal where a party can request that an arbitrator’s decision be reversed through a court proceeding. These include cases where an error of jurisdiction has been made, for example an arbitrator acting beyond his jurisdiction and rendering a finding outside the bounds of the dispute he has been asked to decide, or where he there was a breach of natural justice when an arbitrator failed to act impartially.
While both forms of arbitration in the UK and Australia aim to provide prompt resolution of disputes on the papers during the life of a project, the trigger point in Australia requires that a claim for payment has been made before any party can proceed to this forum. Somewhat reactively, this requires a party to have already performed and incurred costs for work, with a fight coming later on their right. This is compared to the process in the UK, where adjudication has developed into a mechanism where a third party decision can be sought for project issues not limited to payment and before certain works have been carried out.