The government restrictions brought in under the Health Act 1947 (Section 31A – Temporary Restrictions) (Covid-19) Amendment Regulations 2020 have caused the closure of all construction sites. Employers need to be aware of the fact that they are still required to comply with their payment obligations to contractors under the Construction Contracts Act 2013 (the “CCA”), in particular in relation to work carried out prior to the restrictions or work being carried out remotely during the restrictions. Failure by employers to make payments within the timeframes provided under the contract and the CCA may result in the contractor referring a payment dispute to adjudication and/or to suspending works.
Payment provisions are dealt with under Section 3 of the CCA. Under Section 3 (2) a construction contract shall provide “for a payment claim date or an adequate mechanism for determining the payment claim date for each amount under the contract and (b) the period between the payment claim date for each sum amount and the date on which payment is so due”. Where a construction contract is silent on such payment provisions, the default provisions under the CCA schedule will apply, i.e. payment claim dates are to be every 30 days from commencement of the contract and the amount claimed must be paid no later than 30 days.
If the employer fails to make payment by the due date, then the contractor is entitled to suspend all works under Section 5 of the CCA, which will have a knock effect on completing the project. The contractor can also refer the payment dispute to adjudication under Section 6. The works can be suspended further in the event that the employer fails to comply with the adjudicators’ decision under Section 7.
The adjudication procedures are set out in Section 6 of the CCA and under the Code of Practice Governing Conduct of Adjudications (the “COP”). The parties can agree to appoint an adjudicator of their own choice or from the panel appointed by the Minister. If agreement is not possible between the parties, the adjudicator will be appointed by the Chair of the panel selected by the Minister. The COP provides that the Chair will normally make an appointment within seven days of request. Panel members are experienced conciliators and arbitrators and the current members can be viewed on the site of the Department of Business, Enterprise and Employment (www.dbei.gov.ie./Contruction-Contracts-Adjudications-Services).
The adjudicator has 28 days to reach their decision and the parties will be bound by this decision unless and until an arbitrator or a Court finds otherwise. Each party must bear their own legal costs and the adjudicator can order the losing party to pay their fee. An adjudicator’s decision can also be enforced through the High Court.
As there are certain works that can still be carried out remotely by contractors during the Covid-19 restrictions, employers should continue to process and pay all payment claims in order to avoid unnecessary adjudication costs and/or further delays caused by suspension of works.
Written by Noelle McDonald, Solicitor