Overview

Our construction team advises clients in both the public and private sectors on all aspects of construction disputes. We use our knowledge and experience to help you resolve them in the quickest and most cost-effective way, whatever their type and size. Our construction adjudication experts have helped a range of clients avoid litigation, resolve disputes and successfully finish projects.

We have an approach to our work which we know our clients appreciate. Having the knowledge is one thing but applying it in a commercial and practical way is what we believe we do best.

What is adjudication?

Adjudication is a common way to resolve construction disputes. In fact, adjudication is not something that people working within the construction industry are able to opt out of and is a mandatory form of dispute resolution.

Generally, adjudication is a quick and efficient process lasting only 28 days. This was introduced by the Construction Act 1996. Before this it was considered that when disputes arose that smaller companies were at a disadvantage to larger companies as the latter could generally afford a lengthy legal process. Whereas a smaller business would suffer more from a lack of cash flow and therefore fail in proceedings to recover costs that are owed to them.

When is it best to use adjudication?

The main objective of adjudication is to protect cash-flow during construction projects by resolving disputes without resorting to lengthy and expensive court proceedings.

It is therefore best to use adjudication for resolving claims relating to:

interim payments
delay and disruption of the works
extensions of time for completion of the works
defects in the works; and
the final account.

In addition, adjudication may be considered for disputes relating to breach of contract, termination of a contract and professional negligence.

When is it not appropriate to use adjudication?

The adjudication process was created to resolve construction disputes in a fast and practical manner. It may therefore not be suitable for your dispute.

If you are unsure whether adjudication is appropriate for your dispute, then you should seek legal advice.

What is the process of adjudication?

Before beginning the process of adjudication, you will need to check that there is a right to make a claim and that the dispute arises out of a construction contract. You will then need to let the other side know the details of the dispute. If this is then rejected or ignored you can then proceed with the adjudication process. This is known as “crystallisation” of the dispute.

The first step is then for you, as the referrer, to serve a notice of adjudication. This is then followed by a referral notice. The referral notice sets out all the details of the claim.

Within the first 7 days you will agree an adjudicator with the other side. If you can’t agree, you will ask an adjudicator nominating body to nominate an adjudicator. It is important that if the responding party has any concerns or issues over the right to refer the dispute to adjudication, they must be made clear during this stage.

Then, within the next 7 to 14 days, you will receive a response to your referral notice from the other side which will set out their defence to your claim.

During the next 7 days, you as the referrer will reply to the other side’s defence and there may be a further opportunity for the other side to counter your reply.

By the end of the 28-day process the adjudicator will make a decision based on all the evidence that has been presented.

What are the advantages and disadvantages of adjudication in construction?

Advantages

It is a 28-day process (subject to any agreement to extend) which allows disputes to be resolved quickly and efficiently.
In normal circumstances the successful party will receive payment quickly which assists with cash flow.
The works under the construction contract can continue during adjudication proceedings
The costs incurred in adjudication are less than litigation and arbitration.
Adjudication allows parties to privately resolves disputes unlike court proceedings.
Adjudication rarely has lengthy oral arguments or submissions

Disadvantages

The 28-day process may result in “rough justice”, but the adjudicator has a duty to act impartially and to consider all information submitted to him/her by the parties.
The 28-day process may not be suitable for complex disputes.
Each party will bear its own costs it incurs in preparing, pursuing and defending an adjudication. These costs are not recoverable.
There is rarely cross examination of witnesses
The adjudicator’s decision must be “enforced” if the losing party refuses to pay

What does adjudication cost?

The costs of each adjudication will depend on the complexity of each dispute. It is important to note however that:

the responding party will be responsible for the fee to the professional body that appoints the adjudicator
each party will bear its own costs it incurs in preparing, pursuing and defending an adjudication. These costs are not recoverable
the costs of the adjudicator are usually dealt with as part of the adjudication decision (i.e. costs should follow the event and the loser pays). Despite this both parties are usually held jointly and severally liable to pay the adjudicator’s costs

How long does adjudication take?

The adjudicator’s decision must be made within 28 days of service of the referral notice although this can be extended by agreement. The tight timescale is designed to enable parties to obtain quick and cost-effective results.

How we can help

Our approach to any disputes is to work closely with the client and consultant teams. This close working relationship is a key element of any successful dispute resolution process.

We encourage early dialogue so that any issues can be addressed before they become a dispute. But should disputes arise we will work tirelessly with the client and wider team to reach a satisfactory conclusion, either through an alternative form of dispute resolution or formal proceedings. Throughout this process we will advise you of the costs/benefits involved.

Key contact

Matthew has specialised exclusively in construction and engineering law since qualification and has considerable experience in dealing with contentious, non-contentious and professional negligence issues.

Your questions answered

An adjudicator’s decision is “interim-binding” on the parties until the dispute is finally determined by litigation, arbitration or agreement between the parties.

A party may choose not to comply with an adjudicator’s decision. If this is the case, the successful party can seek to enforce the decision through enforcement proceedings where the court or tribunal will decide whether the decision should be enforced.

The starting point for determining if you have a “construction contract” is to look if your agreement falls within the definition contained in the Construction Act 1996. This includes an agreement with a person for any of the following:

carrying out construction operations
arranging for construction operations to be done by others; for example, using a subcontractor
providing labour for construction operations i.e., this could mean for maintenance, demolition and/or repairs to name a few

In many cases, it is usually clear whether an agreement is a construction contract or not. There are, however, a number of exclusions which can give rise to anomalies.

If you are unsure whether you have a construction contract, then it is worth seeking legal advice.

To enforce an adjudicator’s decision the successful party should apply to the Technology and Construction Court.

The type of court application is dependent on the nature of the decision. If a decision is ordered:

That requires the payment of money, the successful party should issue a claim under Part 7 Civil Procedure Rule, together with an application for summary judgement under Civil Procedure Rule 24
anything other than payment of money, such as an extension of time, the successful part should issue a claim under Civil Procedure Rule 8, seeking a declaration from the court.

Statutory adjudication was introduced by the Housing Grants, Construction and Regeneration Act 1996 (Construction Act 1996). This gives a party to a construction contract the right to refer a dispute to adjudication “at any time”.

The Scheme for Construction Contracts (England & Wales) Regulations 1998 (SI 1998/649) provides a fall-back position where a construction contract does not include all the adjudication provisions required under the Construction Act 1996.

A party may choose not to comply with an adjudicator’s decision and challenge it once the successful party commences enforcement proceedings. However, challenges to adjudicator’s decisions rarely succeed because of the court’s robust approach to enforcement.

The courts adopt this approach because the adjudicator’s decision does not finally determine the parties dispute and it is therefore upheld even if there is an error of fact or law.

There are very limited circumstances where summary judgment may be refused and the adjudicator’s decision not enforced. These include when an adjudicator has acted:

without or in excess of jurisdiction
in breach of natural justice

A stay of execution of the enforcement proceedings may be ordered but again this is only in limited circumstances.

In such circumstances, a party may be able to rely upon the ground established in the case of Gosvenor London Ltd v Aygun Aluminium UK Ltd [2018] EWHC 227 (TCC)) which was added to the long-established grounds set down in the case of Wimbledon Construction Company 2000 Limited v Derek Vago [2005] EWHC 1086 (TCC) [2005] BLR 374.an

The relevant ground is as follows:

“If the evidence demonstrates that there is a real risk that any judgment would go unsatisfied by reason of the claimant organising its financial affairs with the purpose of dissipating or disposing of the adjudication sum so that it would not be available to be repaid, then this would also justify the grant of a stay”.

Parties to a construction contract have the right to refer a dispute to adjudication at any time. This is a right implied by statue (Construction Act 1996) and cannot be fettered.

On the other hand, this right does not prevent the responding party, who receives a notice of adjudication, from challenging the adjudication process.

Adjudication

Timescales: 28 days from start to finish subject to any agreement to extend by the parties.
Review of issues: The adjudicator has a duty to act impartially and to consider all information submitted to him/her by the parties. However, this is limited by the short period of time that is available to him/her before he/she is required to make hi/her decision.
Legal fees: Adjudication costs are far lower than the cost of arbitrating due to limited procedural steps and period of time available.
Outcomes: Usually concerned with monetary awards but can involve specifying timescales to perform a contractual obligation.

Arbitration

Timescales: Depending on the complexity of the matter, and the arbitration rules applicable to the contract, the process can take months or even years.
Review of issues: The process may involve several meetings with the arbitrator and a hearing alongside the various submissions. This process is more suitable for complex disputes.
Legal fees: The cost of arbitrating are significantly higher than adjudicating as there are several procedural steps which could include meetings and hearings.
Outcomes: A wider range of remedies are available to an arbitrator.

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Construction adjudication