Practical steps to improve the outcome
Receiving a Notice of Adjudication is likely to be the unwelcome start to an intense and stressful period. This article will look at what Adjudication is and give practical advice and identify helpful things to consider when defending one. It also explains how we can assist to reduce the impact of it on you.
What is Adjudication?
Adjudication is a dispute resolution process that is widely used in the construction industry. It is intended to be a faster alternative to Court proceedings or Arbitration, with greater certainty and less risk over costs.
Adjudication can be commenced by either party to a construction contract and it can deal with a wide range of issues. An Adjudicator may be asked to decide a point of principle or an entire final account including extension of time issues (and everything in between).
A valid Adjudication Decision is binding and can be enforced by a Court if necessary, using a procedure that is much quicker than ‘normal’ court proceedings.
I have received a Notice of Adjudication. What happens next?
If you have received a Notice of Adjudication or are threatened with Adjudication you must not ignore it. Issuing a Notice sets into motion a series of events that have strict timescales so the earlier that action is taken to deal with an actual or potential adjudication the better.
The key stages of adjudication
The key stages are:
- Within 7 days of issuing the Notice of Adjudication, the Referring Party (who issued the Notice) must arrange for an Adjudicator to be appointed. This may be an individual:
- Within that 7 days the Referring Party must also serve its Referral to Adjudication. The Referral is served on both you (the Responding Party) and the Adjudicator, setting out the full details of the Referring Party’s claim and enclosing the documents which they rely on to support their claim.
- Almost immediately, there can be lots of technical legal arguments about the adjudication process and the jurisdiction of the adjudicator. As the Responding Party, it is important to consider whether the Adjudicator has been appointed correctly, and that they have jurisdiction to decide the dispute. If there are doubts over this then you should reserve your position right from the outset, as failure to do so may mean that you cannot rely on jurisdiction defences later on. Jurisdiction is complex and technical and it is vital to understand the issues.
- Taking part in the adjudication without the appropriate reservation of your position can be enough to mean that you have ‘waived’ any jurisdictional challenge and therefore cannot rely on it. Seeking professional advice on this point is essential.
- The Adjudicator will issue directions. They will direct you to serve a Response and supporting documents. This is your opportunity to comment on the Referral and put your own case across. You are only likely to have 7 to 14 days for this. There might then be further rounds of submissions, but the timeframes typically get shorter each time.
- The Adjudicator has to issue their decision within 28 days of the service of the Referral. This can be extended by up to 14 days by the Referring Party, or by however long both parties agree to.
- If an Adjudicator’s Decision is not complied with then the court can be asked to enforce it. You cannot appeal an Adjudicator’s Decision. If either party is unhappy with the outcome they have to refer the whole matter to Court or to Arbitration again, which involves more time and costs.
Immediate action to take
The time that you have to prepare a Response will rarely be as long as you would want. The Response is likely to require more work than you might anticipate.
Start taking advice and preparing your Response as soon as possible, even before the Adjudicator has been appointed or the Referral has been received. The Notice of Adjudication should contain enough basic information for you to get started.
The following points will often be a good starting point:
- What is the contract and what documents is it made up of? The contract sets out the obligations that the parties have to each other. The Referring Party will inevitably be claiming that you have not complied with some of those obligations. It is therefore essential to understand what those obligations are and how they fit in with the rest of the contract.
- What documents do you have available? Gather and organise anything that is relevant to your case or that might be helpful in disproving the Referring Party’s case. This could include photographs, emails, meeting agendas/notes/minutes, instructions, payment applications, payment certificates and time records.
- Where is the money? Because the available time is limited, first focus on the areas of the dispute that have the greatest value associated with them. In an adjudication over the value of a disputed account, there may be items where the difference in valuation is significantly more than others. Spend proportionately more time focusing on these.
- Do you need other expert support? The claim against you might require external expert support, such as a delay or programming expert, an expert quantity surveyor, or technical expertise such as a fire safety expert. It is best to make enquiries with third parties at the earliest possible opportunity so that they can get up to speed with the issues in time to assist you.
Practicalities and how to prepare a Response to the Notice of Adjudication
In practice, the Referring Party has a long time to prepare the Referral to Adjudication and likely will have done so before they even issue the Notice of Adjudication. This means the Referral may be very detailed and the time that you have to prepare a Response is comparatively short.
This results in a very intense period of activity that may require the input of multiple people who were responsible for different parts of the job. Consider who needs to be involved in the preparation of a defence and ensure that they have adequate time blocked out for them to do so.
If you need more time, ask the Adjudicator for it as early as possible, but note this is not always granted.
Preparing the Response – points to bear in mind
Bear in mind the following points when preparing the Response:
- The Response should clearly set out your position on the claims made in the Referral, and explain other relevant points not made in the Referral.
- The overall goal is to convince the Adjudicator of your position, not to convince the Referring Party. The Response should therefore be addressed to the Adjudicator and written with the Adjudicator in mind. The Adjudicator is unlikely to have specific knowledge of the job and may not be an expert in the particular area of construction that the dispute relates to. Take the time to fully explain your points in straightforward terms that can be easily understood by a non-expert.
- Keep your Response factual and relevant to the actual dispute. The Adjudicator’s decision will ultimately be based on their interpretation of what has happened, and how that interacts with what the contract and the law say. This is what you should also focus on.
- Provide documentary evidence of your points wherever you can. Organise your evidence in a way that makes it easy for the Adjudicator to see what evidence relates to what point. A good way to do this is to organise the various items into an appendix that can be easily referenced in your Response.
- Adjudications are often dealt with by documents only without any formal hearing or a site visit. Bear this in mind when explaining and evidencing your case. Is what you are saying sufficiently clear, given that the person you are trying to convince has never spoken to you and has never been to the site?
- There may be further opportunities to put forward evidence after the Response, but do not assume that this will be the case. Do not assume that the Adjudicator will ask further questions about your Response. If there is a point that you think is important, make it in your Response.
Should you start your own adjudication?
If you think a dispute is likely, consider whether it might be better to be the Referring Party instead, and get ahead by starting your own adjudication.
How much does construction adjudication cost?
A key distinguishing feature of Adjudication compared with other processes is that each party bears their own costs whether they win or lose.
Who pays the Adjudicator’s fees and expenses is decided by the Adjudicator and is likely to be based on the outcome of the Decision.
A report published by King’s College London and the Adjudication Society at the end of 2022 found that “The median of total fees charged by adjudicators falls between £12,001 and £14,000“.
How CCC can help
Adjudication can be complex and overwhelming. We have extensive experience in assisting parties in:
- Defending ongoing adjudications.
- Preparing and commencing adjudications.
- Providing advice on the prospects for success in adjudication.
- Dealing with jurisdictional issues.
- Settling disputes without the need for adjudication, which will ultimately save you time and money.
Adjudication is a complex specialist area and taking specialist advice, even if just by way of our free initial consultation, is likely to pay dividends.
