Very much enjoyed my interview today on the topic of Mediation with Gerry Kelly on LMFM radio alongside my colleague Bill Holohan. Many thanks to Gerry for directing us through a great overview of the process.

Shortly after the official start of the collapse of Carillion Plc on 15th January 2018, when the main company and five group companies were placed into liquidation by the company directors, the phone started ringing and questions were being asked by concerned subcontractors about the impact of this move on projects in Ireland. A review of one subcontractors file and the usual gaps that exist have raised some interesting questions about the impact of the now enacted and commenced Construction Contracts Act on any outstanding payments to subcontractors in this type of scenario.

Background 

On the 22nd July 2016, the InspiredSpaces Consortium was awarded a Contract by the National Development Finance Agency for the construction of a 5 school PPP bundle. InspiredSpaces is a joint venture (50/50) between Carillion and an investment company called Dutch Infrastructure Fund. InspiredSpaces was originally set up in 2004, as a Carillion joint venture consortium vehicle to carry out collaboration projects across a number of industry sectors. InspiredSpaces is described on its website as a Carillion company but is itself a limited company registered in England and Wales.
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Sammon Contracting Limited, a Kildare based contractor, were subsequently appointed by the consortium to facilitate the construction of the schools bundle. What is not clear yet forms an important aspect of consideration from the Acts perspective, is the contractual relationship between InspiredSpaces and Sammon Contracting and if there is any intermediary between the two entities. It has been noted in one article available online that Carillion Construction Limited were contracted by the InspiredSpaces consortium with Sammon Contracting subcontracting from Carillion Construction Limited. This relationship quandary in itself would appear to have an important and interesting ramification under the Construction Contracts Act particularly when it comes to any paid when paid provisions.
    
Paid When Paid

I have previously written about the ineffective nature of paid when paid clauses in Irish construction contracts arising out of a provision in the Construction Contracts Act under Section 3(5). There are however some exclusions as outlined under Section 3(6). Were a party to a construction contract relies upon the payment of another party who is not a party to the contract and that party has a receiver appointed then the contracting party are entitled to rely upon a paid when paid clause down the supply chain. There is one main requirement in that the reliance upon a paid when paid clause in itself requires that there is a paid when paid clause in the contract between the parties in the first instance. To use the present scenario as an example, for Sammon Contracting to rely upon a paid when paid clause with their subcontractors, InspiredSpaces or Carillion Construction Limited would have to have a receiver appointed and Sammon Contracting would need to have a paid when paid provision within their subcontracts with their subcontractors.

Where further questions arise is in respect to the current legal standing of InspiredSpaces and Carillion Construction Limited. Carillion Construction Limited are listed as one of the, now sixteen, Carillion group companies that were placed into compulsory liquidation with a further company currently placed in voluntary liquidation. In respect to this company, the reliance upon a paid with paid clause in any subcontract would therefore appear to have a basis for effect. InspiredSpaces however is not a company listed as having had a receiver appointed and therefore any paid when paid clause would still appear to be ineffective under the Construction Contracts Act.

Given the origins of the Construction Contracts Act in Ireland, the Carillion collapse has provided the Irish Construction industry with a first real glimpse into the available options and protections that are offered and available under the Act in its truest sense. It has clearly highlighted the necessity and importance for all contractors to have knowledge and sight of those involved in the full contractual chain both above and below their heads as it goes to the heart of their risk and ability to recoup through the payment and adjudication provisions of the Construction Contracts Act.            
 
Keith Kelliher is an Accredited Adjudicator, who has completed the Diploma in Adjudication in University College Dublin, specifically on the Construction Contracts Act 2013, and has represented Main Contractors and Sub-Contractors in payment disputes for over 19 years in the Irish construction industry. Contact Keith at kkelliher@adjudicator.ie for any assistance with the requirements of the ACT. This article is a commentary piece and does not constitute nor should it be relied upon as legal or professional advice.
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I have just completed my first foray into the Adjudication process in Ireland. 

I, today, managed to settle a dispute for a client, a main contractor with their client. We had commenced the adjudication process under the Construction Contracts Act and for the first time in Ireland, we applied to and had an adjudicator appointed from the Minister's panel. 

The Responding party had buried their head in the sand and refused to engage on the dispute for over 10 months. Adjudication provided the necessary tool to bring the other side to the table and to find a resolution. The duration of time from my application to the minister's panel for an adjudicator appointment to the actual receipt of disputed funds into my client's bank account was 15 days in total. A very welcome change from the past in this regard.

The system is far from perfect but it certainly worked in this instance as the alternative litigation route (no arbitration agreement) would have taken many years and involved substantial legal costs. With adjudication I was in a position to manage the entire process directly for my Client and produce all the necessary notices, reports and submissions that were required. The speed of the process provided a real benefit to the parties in terms of dealing with issues and simply finding a way of moving on. I look forward to assisting more clients through this process (and of course where possible in avoiding the necessity to go down this route)  

Please do not hesitate to contact for further information or for assistance with getting disputed payments on construction contracts dealt with. 

My next seminar on the Payment Process under the Act is on the 8th December in the Red Cow hotel.

Full details on the half day seminar available by clicking the below.....

The Department of Jobs, Enterprise and Innovation have on the 5th July 2016, issued the final version of the Code of conduct for Adjudications in Ireland under the Construction Contracts Act 2013.

The final published version of the Code of Practice does in its content include a number of new additions from previous drafts. In respect to the notice of Intention to refer, the code now places a direct requirement on the party that they must attach a copy of a written construct contract should same exit. The inclusion of the “must” in the requirement would imply non-compliance and therefore a defunct Notice should this not be complied with.

The new code also includes a new section (6) which is aimed at outlining the responsibilities of the prospective Adjudicator to the parties to a payment dispute.  In particular there is the inclusion of the requirement under section 6(ii), that an Adjudicator should only accept an appointment if they believe they are competent to determine the issues in dispute. Does this add a new dimension to the question over the definition of competency of say an Architect taking on a payment dispute centred around measurement or a Surveyor taking on a dispute centred on quality?

The code has for the first time includes, under section 8, a note in respect to the possibility of inclusion within the construction contract of a named person to perform the role of Adjudicator should the need arise under the Contract. This addition would appear to go towards assisting the parties in the maintaining control and agreement over the appointment of their own Adjudicator within the five day window allowed by the Act. The code also allows under section 9 and 10, for a further breakdown in a process of agreement of the Adjudicator within the five day window.

In addition to the general control of the Adjudication process, the code has also included under section 12, and further at section 42, that an Adjudicator, no matter how appointed, must notify the Construction Contracts Adjudication Service and supply them with some information both at the outset of appointment and on completion for the purpose of compiling statistical information relating to the Act.

The revised code has, correctly, under section 24, extended the list of information that should be provided under cover of the Notice of Referral from the previous draft. The need to include the contentions on which the Referring Party intends to rely upon will be a necessary addition in order to allow for a fair and reasonable response from the Responding party on the issues raised.

The full version of the published Code of Practice for Adjudications in Ireland is available on the Departments website here. https://www.djei.ie/en/Publications/Code-of-Practice-on-the-Conduct-of-Adjudications.html

Keith Kelliher is an Accredited Adjudicator, who has completed the Diploma in Adjudication in University College Dublin, specifically on the Construction Contracts Act 2013, and has represented Main Contractors and Sub-Contractors in payment disputes for over 15 years in the Irish construction industry. Contact Keith at kkelliher@adjudicator.ie for any assistance with the requirements of the ACT.
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​The Code of Practice on the Conduct of Adjudications has been published in accordance with section 9 of the Construction Contracts Act, 2013 by the Minister of State for Employment and Small Business, Mr Pat Breen TD.The Code of Practice is binding on all adjudicators operating under the Act regardless of whether the Adjudicator is appointed to a payment dispute under section 6(3) or 6(4) of the Act.
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The introduction of the Construction Contracts Act 2013, which commences for all Construction Contracts entered into after the 25th July 2016, has for the first time, removed the ability for a party to a Construction Contract, to make a payment conditional on the making of a payment by a third party.

Section 3 (5) of the Act, has been introduced to remove this element from Construction Contracts.

Long the bane of sub-contractors, the pay when paid clause of many current Contracts, has effectively resulted in sub-contractors acting as part financiers of projects long after their works are completed. Coupled with the inability of parties to contract out of the provisions of the Construction Contracts Act, under section 2(5), these charges will mark a significant shift in the movement of cash-flow in Construction Projects.

The Act, under section 4 (3) also for the first time places a requirement on the paying party, who disagrees with an amount claimed in a payment claim notice, to provide a response not later than 21 days after the payment claim date specifying, the amount they propose to pay, the reason for the difference and the method of calculation of their proposed value. This differs greatly from the current Contract provisions where, like the RIAI articles of agreement 2012 edition, under section 35, an explanation for any difference must be requested. In addition the inclusion of clause 4 (3b), means that even where an agreement has not been reached in respect to the difference between the parties, the amount that the paying party has agreed to in their payment response, must be paid by the payment due date. This again goes to the heart of the purpose of the Construction Contracts Act, which was to facilitate the positive flow of cash in a project.

Section 4(4) of the Act, is an attempt to formalise the issue of contra charges, which are regularly a form of contention in the current final account process. This section allows for the paying party to formally identify contra charges for breach of contractual or other obligations within a contract and to make adjustment for same from a payment claim notice. They place a requirement on the paying party to detail the contra charge in terms of when and how the claim arose, the particulars of the loss, damage or claim and the apportionment of any claim. The wording of the Act, has however, not placed an obligation on the timing of the contra charge adjustment, and it is therefore likely, and unfortunate, that the issue of contra charges arriving late in the final account process is still very much alive.

Keith Kelliher is an Accredited Adjudicator, who has completed the Diploma in Adjudication in University College Dublin, specifically on the Construction Contracts Act 2013, and has represented Main Contractors and Sub-Contractors in payment disputes for over 15 years in the Irish construction industry. Contact Keith at kkelliher@adjudicator.ie for any assistance with the requirements of the ACT.
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