Construction Adjudication

The Construction Act gives a party to a construction contract the right to refer a dispute arising under the contract to adjudication.

What constitutes a ‘dispute’ can cover a single issue between the parties (such as a single disputed variation) or everything in dispute between them at the time. For example, there might be a dispute over all of the parties’ respective entitlements at interim application or final account stage, including arguments about the work in the original scope, variations, delay, extension of time, loss and expense, defects and contra-charges.

The wording of the adjudication clause can also affect what matters can be referred to adjudication.

It depends.

A referring party serves a notice of adjudication, then has 7 days to commence an adjudication by serving its referral. The adjudicator then has to reach a decision within 28 days from the date of the referral. This can be extended by up to 14 days by the referring party only, or longer if both parties agree.

Many adjudications take 5-8 weeks.

Subject to statutory limitation periods which bar claims (12 years for deeds and 6 years for other contracts), a party can take as long as it likes to prepare its adjudication documents before starting an adjudication.

Yes, but it is often not advisable to refuse to participate, as the adjudicator should proceed to make a decision anyway if they have jurisdiction.

Sometimes there might be good reason not to participate, for example if you are certain the Adjudicator does not have jurisdiction, but you should always seek specialist advice.

If a party refuses to comply with a decision they can be taken to court. As long as the decision was properly made it will be enforced by means of a court order for summary judgment. Many decisions do not require court enforcement at all.

The enforcement process takes place much more quickly than ‘normal’ court proceedings. The grounds for a party to resist enforcement are very limited. The court is very supportive of adjudication. The vast majority of decisions are enforced.

The court generally does not look at whether an adjudicator’s decision is right or wrong. The court will enforce a decision unless the adjudicator did not have the power (jurisdiction) to make it or there was some breach of the relevant rules (including breach of natural justice).

There is likely to be a short period, up to 5 days or less, for an adjudicator to correct any typographical or clerical errors in their decision only.

Case law has made clear that even incorrect adjudication decisions will be enforced.

If that period has passed, or the issue a party wishes to address is not an issue of that nature, then they have to go to court or arbitration to have the issue decided again.

The result of adjudication is binding, but a dispute can be re-decided by a court or arbitrator if one party wishes. If that happens, then the entire dispute is decided again from the very beginning. This is expensive and time-consuming and rarely occurs.

There is a tension between adjudication, which is intended to be temporary, and insolvency which is often final. If you have an adjudication decision against a party but they have gone into insolvency, then you may not be able to enforce the decision and, even if you do, your prospects of making a recovery are likely to be poor.

The statutory right to adjudication applies to most UK construction contracts, but there are some exclusions. For example, residential occupier contracts are excluded so adjudication will not apply unless they include an adjudication clause.

Yes, final account disputes, including those involving outstanding payments, variations, or extensions of time, can be referred to adjudication.

A party can resist enforcement of an adjudicator’s decision, but the grounds for challenge are limited, typically involving jurisdictional issues or breaches of natural justice rather than disagreements over the merits of the decision.

Because adjudication is binding but not final, a disgruntled party can refer the underlying dispute to court proceedings for a final determination (or arbitration, if there is an agreement to arbitrate).

An adjudicator has no freestanding right to award interest, but adjudicators can award interest on sums due if the contract allows for it or if the Late Payment of Commercial Debts (Interest) Act 1998 applies.

Adjudication is a quick, temporary dispute resolution method which results in a decision which is binding but not final, while arbitration is a more formal process that results in a decision (properly called an award) which is both binding and final.

The adjudicator’s deadline can be extended by 14 days with the Referring Party’s consent, or longer if both parties agree.

Yes, adjudication is specifically designed to be used even while construction is ongoing. Adjudication is intended to allow work to continue while resolving disputes, helping to maintain cash flow and avoid project delays.

A notice of adjudication is typically a short document. The Scheme for Construction Contracts requires it to set out:

• the nature and a brief description of the dispute and of the parties involved,
• details of where and when the dispute has arisen,
• the nature of the redress (remedies) which is sought, and
• the names and addresses of the parties to the contract (including, where appropriate, the addresses which the parties have specified for the giving of notices).

The contract may include other requirements.

It is important that the Notice of Adjudication is drafted so that it includes the scope of all of the issues required to be resolved in the Referral.

Once the Adjudicator has been agreed or appointed, the Referring Party sends a Referral to Adjudication. The Scheme for Construction Contracts requires this to be accompanied by copies of, or relevant extracts from, the construction contract and such other documents as the referring party intends to rely upon.

The Referral to Adjudication is the Referring Party’s opportunity to explain and demonstrate to the Adjudicator what it is claiming and why it is entitled to it. It is important to make the arguments very clearly and include all the documents that the Referring Party wishes to rely on, as most adjudications are ‘documents only’ procedures, so the parties and adjudicator do not meet.

Any specific requirements in the Contract must also be complied with.

After the initial Referral from the Referring Party and Response by the Responding Party there is likely to be a Reply from the Referring Party. In the longest adjudications, submissions can then go on through a number of rounds, such as a Rejoinder, Surrejoinder, Rebutter, Surrebutter, and even beyond.

Typically, the submissions become shorter as the adjudication continues.

Adjudicator decisions are not considered to be confidential unless the parties have entered into a confidentiality agreement. Some construction contracts include confidentiality provisions and some adjudication rules do as well. An adjudicator’s terms may also include provisions on confidentiality.

That being said, it is probably prudent to keep adjudication confidential.

If your adjudication goes to court for enforcement, then at least some of the details of your dispute are likely to be made public.

The Adjudicator must be an independent and impartial person. An Adjudicator is not allowed to give either party the perception of bias. Adjudicators will generally have many years of experience in the construction industry and disputes.

The role of the Adjudicator is to manage the adjudication and its timetable and produce a fair and enforceable decision.

Section 108(4) of the Construction Act requires a construction contract to provide that the adjudicator is not liable for anything done or omitted to be done unless the act or omission is in bad faith.

The Adjudicator might be named in the contract, appointed by the appropriate adjudicator nominating body, or be agreed by the parties.

The party that started the adjudication is typically referred to as the ‘Referring Party’.

They must draft and issue the notice of adjudication and referral to adjudication and appoint the adjudicator if the Responding Party will not agree to a particular person acting as adjudicator.

The ‘Responding Party’ is the party defending an adjudication. They may provide a Response to the Referral which sets out their position and includes all of the documents they rely on.

Adjudication has become increasingly legalistic.

The Referring Party and Responding Party are often represented by specialist consultants or lawyers.

Mandatory contractual adjudication was introduced by the Housing Grants, Construction and Regeneration Act 1996 (the Construction Act) which came into force in 1998. It was subsequently amended by the Local Democracy, Economic Development and Construction Act 2009.

Section 108 of the Construction Act requires construction contracts to include certain clauses regarding adjudication. If they do not, then the adjudication provisions of the Scheme for Construction Contracts apply.

It applies to all UK construction contracts, with some exceptions, such as contracts where the employer is a residential occupier. It is mandatory and parties cannot exclude it from their contracts. It applies to a wide range of contracts, even some which one might not traditionally think of as a construction contract.

The Scheme for Construction Contracts (the Scheme) is legislation which applies when construction contracts do not comply with certain requirements of the Construction Act.

Depending on the provisions in question, in some instances, the clauses of the construction contract will be supplemented by the provisions of the Scheme, but in other instances they will be replaced by the relevant parts of the Scheme:

• Part 1 of the Scheme replaces the provisions for adjudication where a construction contract does not comply with the requirements for adjudication in the Construction Act.
• Part 2 of the Scheme supplements provisions in relation to payment in a construction contract that do not comply with the Construction Act.

Both parties have rights under the principles of natural justice. These require that they must:

• Be informed of the allegations that have been made against them and be given an opportunity to answer those allegations.
• Be entitled to have their case heard by an unbiased and impartial tribunal.

The Referring Party:

• Has the right to unilaterally give the adjudicator a further 14 days to reach their decision.
• Has the right to withdraw an adjudication at any time.

The Responding Party

• Has the right to respond to the Referral.
• Has the right not to participate in the adjudication (although this is often not the best approach in practice).

Yes.

In recent years, to address concerns about the growing expense and complication of adjudication, low value adjudication procedures have been produced and are growing in popularity.

The Royal Institution of Chartered Surveyors (RICS) acts as an adjudicator nominating body and allows appointments of Adjudicators to out suitable adjudications subject to the Construction Industry Council (CIC) Low Value Disputes Model Adjudication Procedure.

The Technology and Construction Solicitors’ Association (TECSA) also acts as an adjudicator nominating body and has its own Low Value Disputes Service.

Each of these procedures are different from each other, but they are both intended to deal with more straightforward adjudications of a limited value and they both cap the fees of the adjudicator.

The contract might stipulate that certain people are to act as adjudicator, or that the adjudicator is to be appointed by an adjudicator nominating body.

The adjudicator nominating bodies each have their own processes, but generally they require submission of a completed application form, a copy of the notice of adjudication, and payment of a fee.

The parties can also agree to appoint a particular person as adjudicator.

It is important that any clauses in the contract that stipulate how an adjudicator is appointed (and how an adjudication is conducted) is carefully followed. For example, the contract might state that the president of a particular adjudication nominating body is to make an appointment. Failure to follow that procedure can invalidate the adjudication.

If an adjudicator resigns before making their decision, the adjudication ends. The Referring Party may begin a new adjudication by issuing another Notice. Whether any payment is due to the Adjudicator depends on their terms and the circumstances of their resignation.

Yes, the Referring Party may withdraw the adjudication at any time. While the adjudicator is likely to be able to recover their fees from either party (or both parties), it is common for them to order that the withdrawing Referring Party pays.

No, adjudicators do not have the power to reopen or reconsider their decision once issued, unless it is to correct a clerical or typographical error within a very short timeframe (typically up to 5 days).

Adjudicators are often experienced professionals such as quantity surveyors, engineers, architects, or construction lawyers. Many are accredited by relevant professional bodies and have undergone specific adjudication training.

The parties can agree to pause an adjudication. This may require them to agree to extend the deadline for the Adjudicator’s decision. Parties may wish to do this to give extra time for settlement negotiations.

If there are delays to the appointment of an adjudicator or the service of the Referral by the Referring party, then the Adjudicator may not have jurisdiction to act and may resign. If there are delays to other submissions, then the adjudicator might be entitled to consider them in less detail, or potentially even ignore them depending on the circumstances, as they have to comply with their overriding obligation to give a decision in time. However, if the process becomes unworkable, the adjudicator may also feel they need to resign.