Adjudication: what it is, what it costs, when it's worth it

What it is

Any party to a construction contract has the right to refer a dispute to adjudication, even while the same dispute is before a court or tribunal. Disputes about whether an amount is payable, or the reasons given for not paying it, are examples.

building.govt.nz describes it as "a fast-track adjudication process for disputes under your construction contract", and says the adjudicator's decision is binding and enforceable in court: "You must comply with the adjudicator's decision, even if you are intending to contest that decision in court."

You can still use other ways to settle the dispute, such as a court, a tribunal or mediation, at the same time.

The steps and the time limits

1. Notice of adjudication. The claimant serves written notice on the other party, stating the dispute, the parties, where and when it arose, the remedy sought and the contract details, with Form 2 setting out the respondent's rights and the process. s28(1) to (3); building.govt.nz (Form 2).
2. Choosing the adjudicator. The claimant asks an agreed adjudicator as soon as practicable after the notice, an agreed nominating body within 5 working days, or, if neither applies, an authorised nominating authority within 2 to 5 working days. An agreement about who adjudicates, made before the dispute arose, isn't binding. s33(1) to (3).
3. Acceptance. The person asked has 2 working days to say whether they're willing and able, and is appointed when they serve a notice of acceptance. s35(1), (2) and (6).
4. The claim. Within 5 working days of the notice of acceptance, the claimant refers the dispute in writing to the adjudicator and serves a copy on the other party. s36.
5. The response and reply. The respondent may respond within 5 working days (or longer if agreed or allowed). The claimant may reply within 5 working days of the response. s37(1), s37A(2).
6. The determination. The adjudicator must decide within 20 working days after the response period ends, or 30 if they consider more time is reasonably required, or longer if the parties agree. Where money is claimed, they decide whether it's payable, how much, and when. s46(2), s48(1) and (3).

Working days leave out weekends, public holidays and the anniversary day. For many adjudication steps, including choosing and appointing the adjudicator, the claim, the response and the determination, 24 December to 5 January doesn't count either.

What it costs

The adjudicator's fees

The adjudicator is paid the fees and expenses agreed with the parties or, if there's no agreement, a reasonable amount for the work done. The parties are jointly and severally liable for them, and share them equally unless the adjudicator decides otherwise because a claim or response was without substantial merit or a party acted improperly. The adjudicator can ask for payment before releasing the decision, and isn't paid if they miss the deadline in s46(2).

As one example of published fees, the Building Disputes Tribunal, a nominating body, lists fixed fees for its low-value claim scheme (claims under $250,000 including GST, with three or fewer issues) starting at $1,500 plus GST for the smallest claims and rising to $19,750 plus GST for claims of $200,000 to $250,000. Other adjudicators and bodies set their own fees.

Your own costs

Each party meets its own costs and expenses, unless the adjudicator decides a party caused costs unnecessarily through bad faith or allegations or objections without substantial merit. An agreement made before the dispute about who pays the costs isn't binding.

If the other side doesn't comply

If a party doesn't pay an amount the adjudicator has determined by 2 working days after the decision is given (or a later date the adjudicator sets), the party owed may recover it as a debt due in any court, with costs; if they carry out construction work, serve notice of intention to suspend work; and apply to have the determination enforced by entry as a judgment.

The application to enter the determination as a judgment may be made to the District Court.

When it's worth it: questions to weigh

Whether adjudication is worth it depends on your dispute, and that's a question for a lawyer. These are the facts from the Act and the published fees that bear on it:

• The size of the claim against the fees. The adjudicator's fees are usually shared equally, and each side normally pays its own costs (ss 56 and 57). Compare those with the amount in dispute.
• Whether you need adjudication at all. If no payment schedule was given in time, the Act already makes the payer liable for the claimed amount, and you can recover it as a debt in court (ss 22 and 23). See the guide to a missing payment schedule.
• The time you have. The steps run in working days and move fast once started (ss 33 to 46). Have your claim, the contract and your evidence ready before you serve notice.
• The decision binds you both. You must comply with it even while contesting it in court (building.govt.nz).