A recently published decision of the Irish High Court, Connaughton v Timber Frame Projects Ltd t/a Timber Frame, in which William Fry LLP acted for the successful contractor, considered an important issue of principle relating to adjudications under the Construction Contracts Act 2013 (the Act).
In refusing an application to enforce an adjudicator's decision, the Court held that the right to refer a dispute to statutory adjudication is confined to circumstances where the dispute relates to a payment provided for under the construction contract.
The Background to the Dispute
A construction contract (the Contract) was entered into between the parties for the design, supply and erection of a timber frame structure at the site of an existing dwelling house. The terms and conditions of the Contract were were described by Simons J as "remarkably spare" and in contrast with standard form construction contracts. The terms made no provision for termination payments.
In accordance with the Contract's terms, the applicant paid a booking deposit and two further payments during 2023 and 2024. The applicant employer (the Employer) purported to terminate the Contract for repudiatory breach because of the respondent contractor's (the Contractor's) failure to erect the timber frame house by an agreed deadline. The applicant was successful in the adjudication and was awarded monetary compensation including the purchase price paid, compensation for alleged consequential losses, and sums of purported reliance loss and loss of bargain. In other words, it extended beyond a claim for the return of the purchase price.
The Employer applied to the High Court to enforce the adjudicator's decision under section 6(11) of the Act.
Payment Dispute
The Court considered the proper interpretation of section 6(1) of the Act, which confers the right to refer a payment dispute to statutory adjudication. It held that the right is strictly limited to disputes about payments expressly provided for in the construction contract. The Court held that the term "payment" must be interpreted narrowly to mean contractual payments only and does not include common law damages for breach of contract. The judgement noted that whilst the statutory adjudication process is intended to protect contractors and subcontractors by ensuring prompt resolution of payment disputes, it does not extend to broader financial claims outside a contract's express terms.
The crucial point in the case was that the claim did not relate to a payment provided for under the Contract. There was no clause dealing with payment to the Employer in the event of wrongful termination by the Contractor. The Employer purported to exercise a common law right to terminate the Contract for repudiatory breach and seek damages. The Court held that as the dispute related to a claim for compensation at common law, it was not amenable to statutory adjudication. It followed that the adjudicator did not have jurisdiction under the Act to hear the claim, which meant the adjudicator's decision was a nullity and could not be enforced by the High Court.
Additional grounds of opposition to enforcement
The Contractor unsuccessfully advanced two additional grounds of opposition to the application for enforcement. Those grounds related to an alleged breach of fair procedures on the adjudicator's part, and that the Contract was void or unenforceable because its performance might have been other than in accordance with a grant of planning permission.
Conclusion
The decision to refuse the application for enforcement is significant. It clarifies the scope of section 6 of the 2013 Act, and the types of payment disputes that can be referred to statutory arbitration. The decision comes shortly after a previous High Court judgment refusing to enforce an arbitrator's decision. In March 2025, the Court's decision in Tenderbids Ltd (Trading as Bastion) v Electrical Waste Management Ltd. refused enforcement under section 6(11) of the Act, due to the failure to serve a notice of intention to refer a payment dispute to adjudication by the contractually agreed method.
Both the decision in Tenderbids and Timberframe has seen the Court apply a strict interpretation to the Act. The judgment highlighted that it goes no further than establishing that there must be a payment dispute before there can be a referral to adjudication. Questions about whether a payment claim notice must always be served as a prerequisite to a referral to adjudication, or the extent to which the paying party under a construction contract can pursue an independent claim for monetary award against the contractor/ sub-contractor, were not addressed. It again emphasises how all parties to a construction contract within any sector, must carefully adhere to the statutory requirements of the Act in preparing their constructions contracts and participating in adjudication.
For further information, or to discuss any aspect of this article in more detail, please contact Jarleth Heneghan, Gerard James, Cassandra Byrne or your usual William Fry contact.
Contributed by Gail Nohilly
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