When Things Go Wrong
Construction disputes — about payment, scope, quality, delays, and defects — are common in the construction industry, and knowing what to do when a dispute arises is important business knowledge for every construction contractor. New Zealand’s legal framework provides several pathways for resolving construction disputes, each with different costs, timelines, and appropriate uses.
The first rule of construction disputes is to act early. Disputes that are managed when they first emerge — with clear documentation, open communication, and a willingness to negotiate — are far cheaper and less damaging than those that are allowed to escalate into entrenched positions. But acting early requires recognising the signs of a developing dispute and having the systems (contract documentation, site records, written communications) that allow you to articulate your position clearly.
Adjudication Under the Construction Contracts Act
The Construction Contracts Act 2002 provides a rapid adjudication process specifically for payment disputes. Adjudication under the CCA is designed to be fast (adjudicators typically issue determinations within 20 working days) and relatively inexpensive compared to court proceedings. The CCA’s pay-now-argue-later philosophy means that an adjudicator’s determination requires payment promptly, even if the underlying dispute is later resolved differently through litigation.
For contractors with unpaid payment claims, CCA adjudication is often the most effective first step — it provides a fast determination without the cost of litigation, and the payment pressure it creates often resolves disputes before the adjudication reaches its conclusion.
Mediation and Arbitration
For disputes that go beyond payment — quality disputes, defect claims, delay claims — mediation and arbitration provide pathways that are less expensive and more flexible than litigation. Mediation (a facilitated negotiation with a neutral mediator) resolves many disputes with an agreed outcome that both parties accept. Arbitration produces a binding determination by an arbitrator whose decision can be enforced as a court judgment.