Over the past four years or so two acts have been passed in relation to the construction industry that provide alternative dispute resolution procedures for construction disputes. The fi rst of these was the Construction Contracts Act 2002 which provides an adjudication process for hearing construction disputes.
The second was the Weathertight Homes Resolution Services Act 2002, the “leaky building” legislation. However, despite these two acts having been passed, a claimant still has the right to use the court process to have a construction dispute resolved. If the claim is less than $7500 the disputes tribunal can be used, if less than $200,000 then the district court can be used and, finally, if more than $200,000 the high court can be used.
It needs to be remembered that the party initiating the dispute resolution procedure makes the decision as to what tribunal to bring the claim in. The purpose behind the Construction Contracts Act 2002 was to provide contractors with a mechanism to ensure progress claims were paid on time.
It also provides a fast-track adjudication procedure for disputes involving construction contracts. The first step in this procedure is for a Notice of Adjudication to be served upon the respondent. In the event that the parties to such a dispute cannot agree upon the appointment of an adjudicator then one must be appointed via AMINZ, the official body of arbitrators.
The cost involved in having an adjudicator appointed by AMINZ is a one-off fee of $500. Once the process is initiated, a strict timetable is imposed so that the adjudicator can make his decision within the time frame imposed by the Act.
The Act states that the adjudicator must make his decision within 20 days of the respondent’s reply being filed and served. I have now completed a number of these adjudications under the Act. Although I could not deny that a result has been achieved in a more timely manner than it would have been done had it been completed in court, the costs involved can escalate to a significant degree.
The point is that a party not only has to meet their solicitor’s costs, but also has to meet the costs of the adjudicator who, in most cases, appears to charge around the $200 plus GST mark per hour. Of course there are filing fees in the district and high courts, as well as hearing fees.
In the district court a hearing fee is capped at $750 for a half day, and you pay $750 for each half day that follows. Unlike the adjudication procedure, you are not paying for each hour that a district court judge spends on a matter. In the high court, the filing fee just to initiate proceedings is $1100.
It is a further $2600 per day for each day of a hearing. I suppose the other big advantage that an adjudication has over a court proceeding (apart from being more time efficient) is that you are getting construction experts/adjudicators to determine matters that relate purely to construction law.
Most of the matters I have argued in adjudications were really an exercise in quantity surveying as opposed to any complex questions of law, and so an adjudicator was a much better person to have determined these issues. If choosing to proceed down this route, one of the most important decisions you will need to make is which adjudicator to appoint. In this regard it is well worth asking around and identifying one with the requisite skills to determine your particular dispute.
Adjudications also can be brought under the Weathertight Homes Resolution Services Act 2002. This Act was brought in to deal with “leaky building” claims. As the readers of this magazine are most likely to be respondents to these types of claims, you will have no input into deciding whether an adjudication under the Act is brought for a leaky building claim. In my experience, these adjudications are managed in a way that makes it possible for a claimant to bring this proceeding without legal representation.
I suppose I would go so far as to say they are “claimant friendly”. Although they are set up to operate in a manner resembling a court, the strict obligations that a court will impose as to a claimant proving its case are not as onerous as the court process.
One advantage of this adjudication procedure being used is that legal costs are not necessarily recoverable by the successful party. They will only be recoverable in the event that bad faith is shown or an allegation is brought without substantial merit.