Adjudication is a unique fast track statutory dispute resolution process for resolving building and construction disputes under the Construction Contracts Act 2002 (the Act). Adjudication is the most commonly used dispute resolution process for resolving building and construction disputes in New Zealand.
Adjudication is quick and cost effective. Most disputes are resolved in less than six weeks from the time the process is initiated. Adjudication can be used regardless of whether the construction contract is written or oral.
Under section 25 of the Act, any party to a construction contract is entitled to refer a dispute arising under that 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 ‘dispute’ is defined in section 5 of the Act as: a dispute or difference that arises under a construction contract
. An example of a dispute is a disagreement between the parties to a construction contract about whether an amount is payable under the contract, or whether there has been a breach of the contract, including a breach of any term/warranty implied into every construction contract by the Building Act 2004, or any other enactment.
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, tribunal 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.
The adjudicator must determine whether or not any of the parties to the construction contract 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.
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. This period may be extended by the adjudicator to 30 working days or any other period by agreement of 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 a court, or by an arbitral tribunal if the contract provides for arbitration, a determination is binding in the interim, and the empirical evidence to date overwhelmingly 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.
BDT has adjudicated more than 700 disputes to date. While one of those involved an amount in excess of $NZ100M and a number have involved amounts in excess of $10M, more than 50% of all disputes referred to adjudication by BDT are for amounts less than $50,000 including a number where the amount in dispute is less than $5,000. The majority of these smaller disputes are adjudicated under BDT’s highly successful fixed fee LVC adjudication service.
for more information on BDT’s fixed fee LVC adjudication service.
to view our adjudication process summary.
to view our summary explaining the relevant time periods for adjudication under the Act.