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Adjudication under new residential building legislation

The Residential Building Work Contracts and Dispute Resolution Act 2016 (the ‘Act) introduced adjudication provisions that allow owners to make ‘work completion’ claims against builders and have these adjudicated by an expert panel. The rationale for this is to enable disputes to be resolved quickly and by people with subject matter and industry knowledge. The process and time requirements for serving and responding to claims are strict and must be complied with by the parties.

Work completion claims 

An owner can serve a ‘work completion claim’ on a builder if they consider that the building work has not been completed within the time specified in the contract, or within a reasonable period (if no time was specified in the contract). 

Work completion claims must be served on the building contractor within 12 months of the last day of work, or longer if this was specified in the contract. The HIA contracts do not specify a longer period. 

The legislation outlines the requirements for making a valid work completion claim, including that it specify the work that is allegedly incomplete and a reasonable period within which the work must be completed.

Application for adjudication process

If the builder does not complete the works requested in the work completion claim to the satisfaction of the owner and within the time specified on the notice, the owner can lodge an adjudication application. This application must be lodged within 20 business days of the time period stated in the work completion claim. An application fee of 208 fee units will also need to be paid by the owner.

Within 10 days of receiving an adjudication application the Director of Building Control (the ‘Director’) must decide to accept or reject the application. Any action considered fit can be taken when deciding whether to reject or accept the application, including consulting with the applicant, and in certain circumstances the application must be rejected. This includes if the applicant did not serve a work completion claim, if the time specified in the claim has not elapsed, if the application is frivolous or vexatious, or if proceedings have already commenced in court. Applications can also be rejected if the Director

Requests for inspection 

Either party can request an inspection of the work to which the adjudication application relates, and the Director can then arrange for a suitably qualified person to conduct the inspection. Note that the Director is not obliged to organise the inspection. 

If an inspection is nominated, both parties must provide access to the site and any assistance required to enable the inspection to take place. The inspector must prepare a report and the parties are jointly responsible for the fees and charges associated with the inspection and report. 

The adjudication process 

The Director will appoint an expert panel of an odd number of people from its pool of experts – and who have relevant experience or expertise. The adjudication must then take place as soon as possible and with as little technicality and formality as is required while still giving proper consideration of the matter. Neither party is permitted to be represented by lawyers. 

The expert panel may request that either party provide written submissions and, if additional written submissions are requested from one party, the other party must have the opportunity to comment on these. 

The panel is able to obtain information required to make a decision in any way it sees fit and is not bound by the rules of evidence that apply to legal proceedings. Either the entire panel, one of its members, or a representative of the panel may conduct an inspection of anything related to the adjudication. The panel also has the power to ‘join’ other parties to the adjudication if it sees fit – for example, the panel may consider that another contractor should be held jointly responsible for works. 

Determination of the adjudication

The adjudication panel is only able to make particular decisions and in specific circumstances – it is not like a court and cannot make any decision or finding that it sees fit. Rather, the adjudication panel must decide either to issue a work completion order or to refuse to issue a work completion order.

Work completion orders can only be issued when the work has not been satisfactorily completed or in other circumstances which the regulations may permit (note that the regulations can be amended). To date no regulations have been made. 

When making its determination, the expert panel is to take into consideration the following factors:

  • Any legislation that applies (e.g. the Act and the Building Act 2016) 
  • The residential building contract 
  • The work completion claim and any submissions and responses 
  • Any inspections, either carried out as part of the adjudication process or otherwise 
  • Whether any work has not been satisfactorily completed 
  • Any other factors. 

Note that the panel can make a determination even if one party fails to attend one of the conferences. 

What can a work order include?

A word completion order can require the builder to complete work under a contract, rectify defective work and correct any damage caused by building work. It can require a builder to either take action or refrain from taking action in order to comply with the contract and can require either party to pay a sum of money to the other party. Work completion orders must include a date by which the order must be complied. 

The work completion order can also address incomplete work, regardless of whether it was specified in the claim or application. 

It can specify conditions that must be satisfied before work completion works are undertaken – for example, that money be paid or access be granted by the owner. 

Findings and orders 

The panel is also able to determine that one party must pay some or all costs incurred by the other party, if the complaint was vexatious, frivolous or contained unfounded submissions. 

The default position is that the parties are jointly liable in equal parts for the costs of the adjudication,. However the Director can alter the proportions that each party should pay and can waive the amount one party is required to pay (upon application). 

Appeals against a decision

There is no express provision in the Act for a builder or owner to appeal against a decision of the expert panel to make or not make a work completion order. While it is possible that the Judicial Review Act 2000 may be used this is not clear. It may be necessary for the aggrieved party to lodge a Supreme Court challenge to the work completion order on a question of law only. This is likely to be an expensive and uncertain process.

To find out more, contact HIA's Workplace Services team

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