Can I Refer a Dispute to Adjudication?

A stalled payment or a halted project can put your construction business under serious financial pressure, especially when a dispute drags on with no end in sight.

Adjudication is a form of dispute resolution process that was designed to resolve disputes quickly and cheaply thereby keeping construction contracts – and the building projects they are related to – moving. It delivers an interim-binding decision that both parties must comply with unless or until the adjudicator’s decision is successfully later challenged through arbitration or litigation.

We are specialist litigation solicitors who advise and represent parties across the construction industry, working nationally. Adjudication may be just one of your options, so if you want clear guidance on where you stand, contact our specialist construction litigation team and we will be happy to help you.

Many Construction Disputes Can Be Referred to Adjudication 

It’s a myth that adjudication is only reserved for major construction disputes. If specific criteria or circumstances apply, adjudication can be used as a dispute resolution process in anything from a small contract for domestic building works to a large-scale commercial or business to business industrial contract or even a contract that has nothing to do with construction (although this is far less common). As we explain below, there are three types of adjudication: statutory, contractual and ad hoc. 

Under the Housing Grants, Construction and Regeneration Act 1996 (HGCRA 1996 – ‘the Construction Act’) and its subsequent amendments, the right to adjudicate is automatically implied by statute (and cannot be contracted out) for what the Construction Act defines as qualifying “construction contracts”.

This includes most types of commercial construction contracts except for some very limited carve outs.

The Construction Act doesn’t explain specifically why these specialist contracts are excluded in the legislation. In practice though, many of these sectors rely on other contractual dispute mechanisms and the parties to the contract can include adjudication as a dispute resolution option in the contract if desired.

This is because a right to adjudicate can arise from express clauses in contracts, entirely separate from the legislation of the Construction Act. 

Where the right to adjudicate arises purely on account of statute, the adjudication is conducted in accordance with Part I of The Scheme for Construction Contracts – there is a separate form of The Scheme for England and Wales, Scotland and Northern Ireland.

A contract, however, can specify a different conduct or rule set for the adjudication from that set out in Part I of The Scheme. The contract can also stipulate which adjudication nominating body must be used by the parties and fix other requirements such as relating to the service of documents or extending/limiting timeframes for compliance of specific acts. 

Even where a contract is excepted by the legislation and there is no contractual term requiring or allowing the parties to adjudicate, the parties to any contract can still agree – expressly or by conduct – to participate in an adjudication. This is known as an ad hoc adjudication. 

Which Construction Contracts Are Covered by the Construction Act?

As mentioned, not all contracts that you may think of as construction contracts are covered by the Construction Act.

Section 104(1) of the HGCRA 1996 defines a construction contract as “an agreement with a person for any of the following—

(a)the carrying out of construction operations;

(b)arranging for the carrying out of construction operations by others, whether under sub-contract to him or otherwise;

(c)providing his own labour, or the labour of others, for the carrying out of construction operations.

(2)References in this Part to a construction contract include an agreement—

(a)to do architectural, design, or surveying work, or

(b)to provide advice on building, engineering, interior or exterior decoration or on the laying-out of landscape, in relation to construction operations.”

Section 105(1) of the Construction Act stipulates that 

““construction operations” means, subject as follows, operations of any of the following descriptions—

(a)construction, alteration, repair, maintenance, extension, demolition or dismantling of buildings, or structures forming, or to form, part of the land (whether permanent or not);

(b)construction, alteration, repair, maintenance, extension, demolition or dismantling of any works forming, or to form, part of the land, including (without prejudice to the foregoing) walls, roadworks, power-lines, [F1electronic communications apparatus], aircraft runways, docks and harbours, railways, inland waterways, pipe-lines, reservoirs, water-mains, wells, sewers, industrial plant and installations for purposes of land drainage, coast protection or defence;

(c)installation in any building or structure of fittings forming part of the land, including (without prejudice to the foregoing) systems of heating, lighting, air-conditioning, ventilation, power supply, drainage, sanitation, water supply or fire protection, or security or communications systems;

(d)external or internal cleaning of buildings and structures, so far as carried out in the course of their construction, alteration, repair, extension or restoration;

(e)operations which form an integral part of, or are preparatory to, or are for rendering complete, such operations as are previously described in this subsection, including site clearance, earth-moving, excavation, tunnelling and boring, laying of foundations, erection, maintenance or dismantling of scaffolding, site restoration, landscaping and the provision of roadways and other access works;”

(f)painting or decorating the internal or external surfaces of any building or structure. 

The Construction Act includes traditional construction contracts and consultancy agreements and contracts covered by the Construction Act may be oral or written

after The Local Democracy, Economic Development and Construction Act 2009 extended the original statutory provisions to include oral contracts to broaden access to adjudication.

Oral contracts, however, often provide inherent challenges in establishing terms and scope in adjudication proceedings because of the absence of a written record.

Which Contracts and Disputes Are Usually Excluded? 

Section 105(2) and Section 106 of the Construction Act specifically exclude certain types of contracts from the adjudication process. One of the main exclusions under Section 106 is contracts with residential occupiers.

Homeowners who appoint contractors for private construction work on a dwelling they occupy or intend to occupy cannot rely on statutory adjudication unless there is an express provision in their contract.

However, many builders’ contracts do provide an equivalent statutory right in this situation.

A contract for the manufacture and/or delivery of building materials without any associated installation doesn’t qualify as a construction contract. A construction contract which relates to both manufacture and installation will be eligible in part.

Under Section 105(2), the following fall outside the definition of qualifying contracts:

• Oil or natural gas extraction
• Mineral extraction and quarrying
• Water infrastructure
• Transport infrastructure
• Power generation

As mentioned, these industries tend to have specific commercial and legal frameworks and carry their own dispute resolution processes contained in contracts.

Large-scale infrastructure projects are often complex and involve public money. They are not always suitable candidates for adjudication which is generally quick-fire and aimed at resolving straightforward disputes.

If a contract is excluded under Section 105(2), the parties can only rely on contractual terms which may include options for mediation, arbitration, or litigation in the Technology and Construction Court (TCC).

The wording of Section 105(2) exclusions is often criticised as vague, leading to disputes over interpretation. Case law has shaped the scope and interpretation of these exclusions over the years since the Act was introduced.

Consequently, adjudication in construction, particularly in the interpretation of statutory exclusions, remains an evolving landscape.

Can The Parties Simply Agree to Adjudicate?

The short answer is yes. Even if a contract does not qualify or is excluded under the Contract Act and there is no pre-agreed contractual provision, the parties can simply agree to refer a dispute to an adjudicator. This is known as an ad hoc adjudication. 

Parties may decide to participate in an ad hoc adjudication because it provides a quicker and more cost effective resolution than traditional litigation. 

A party may expressly agree to participate or inadvertently agree to adjudicate by conduct by participating in the adjudication despite there being no contractual or statutory right for the other party to refer to adjudication. .

Can You Refer Any Dispute? 

You can refer any construction dispute to adjudication provided it arises from a qualifying contract under the Construction Act.

Adjudication is frequently used to resolve financial disputes such as interim payment applications and the assessment of final accounts. However, you can also refer disputes such as contractual interpretation, time extensions, and defective work claims.

Most matters that are referred to adjudication are single disputes although one dispute can be an umbrella for multiple issues or claims, providing they are all connected. Referring multiple disputes can defeat the adjudicator’s jurisdiction.

When Can a Dispute Be Referred? 

A dispute can be referred at any time under the provisions of the Construction Act, even when a project has finished.

However, a dispute must have crystallised; vague disagreements which are the normal stuff of commercial construction relationships cannot be referred to an adjudicator.

A dispute is deemed to have crystallised when the basis of the claim has been given to the opposing party and they have had an opportunity to consider it, a test established in Amec Civil Engineering Ltd v Secretary of State for Transport. Lack of crystallisation is a common ground to challenge an adjudicator’s decision.

Situations Where Adjudication May Not Be Available 

As above, adjudication is not available for non-qualifying construction contracts as defined by the Construction Act. The most prominent statutory exclusion is contracts with residential occupiers although most building contracts provide for it.

Whether contractual adjudication is available may be arguable; sometimes, only part of the contract is excluded, emphasising the importance of early specialist legal advice.

A statutory or contractual limitation period applies to adjudication which may be time-barred under the Limitation Act 1980. This is typically six years for a contract signed under hand (Section 5), or twelve years where the contract is executed as a deed (Section 8). Subject to any limitation period, you can refer a dispute to adjudication even after the project is completed.

What Gives You the Right to Refer a Dispute to Adjudication? 

Statutory adjudication is a valuable tool in the construction industry where project timelines are often critical. You must establish the right to adjudicate before commencing any action.

Parties may have either a statutory right to adjudicate under the Construction Act or a contractual right, sometimes both.

If a construction contract falls within a definition of the HGCRA 1996 as amended, then the parties to that contract have the right to refer a dispute to adjudication under Section 108; this is a statutory right.

The Act provides the right to refer disputes to an adjudicator at any time, with a decision typically made within a 28-day timeframe although this may be extended if the parties agree.

A decision is ‘interim binding’ unless it is superseded by arbitration or litigation. So, you can challenge an adjudicator’s ruling but are expected to comply with it before making such a challenge. This maintains momentum on construction projects and helps protect commercial objectives.

Most traditional form construction contracts provide the right to adjudicate. It appears in every standard form contract including the Joint Contracts Tribunal (JCT) and New Engineering Contract (NEC) agreements. These extend the statutory scope to include contracts that fall outside the Construction Act, such as those with a residential occupier.

Contractual provisions usually identify the process and include an appropriate body to appoint an adjudicator, usually the Royal Institution of Chartered Surveyors (RICS) or Royal Institute of British Architects (RIBA). While contractual provisions may vary in scope and procedure, in practice they often mirror the statutory framework.

Section 108 of the Construction Act sets out further minimum procedural requirements a contract’s adjudication clause must meet. It must:

• Provide a timetable for appointing the adjudicator and referring the dispute within 7 days of notice
• Allow the adjudicator to extend the 28-day decision period by up to 14 days, with the referring party’s consent
• Require the adjudicator to act impartially
• Allow the adjudicator to take the initiative in ascertaining the facts and the law

If a contract’s own adjudication clause doesn’t comply with these requirements, there is a set of statutory rules called the Scheme for Construction Contracts which fills in the gaps. The Scheme can also be implied into contracts with no adjudication clause.

A construction contract cannot exclude the statutory right to adjudication.

Why Early Legal Advice Can Save Time and Cost 

Construction contracts are typically complex with multiple parties and long timelines. Parties can be lucky to get through the process without a dispute.

Adjudication is there to provide a quick resolution, so the project doesn’t derail. However, adjudication is often only one piece of a complex construction jigsaw. Early legal advice will assess the strengths and weaknesses of your position and help to protect your rights.

Adjudication can provide a simple answer to a dispute within 28 days. However, what looks like a clear cut and straightforward process on paper is in fact often quite nuanced.

The original intention of the Construction Act was that adjudication should be quick and informal. However, adjudication has developed into a sophisticated process with detailed submissions, witness statements, and expert evidence.

A specialist construction solicitor can:

• Assess whether the Construction Act applies to your contract and whether any exclusions are relevant
• Assess whether there is any contractual right to adjudicate and if so what steps need to be taken to ensure that the referral is contractually valid
• Initiate the adjudication process on your behalf
• Or if on the receiving end of a referral to adjudicate confirm if there is any obligation to participate, whether the referral is valid and any defences that may be available to you
• Represent your interests throughout

However, the right to adjudication is just part of the picture; there are other forms of alternative dispute resolution including mediation and arbitration.

Early legal advice saves time and protects your position. Delay inevitably leads to an increase in cost and may erode your legal rights. If you think you might be in a position where you need to escalate your dispute to achieve a positive outcome, don’t hesitate to contact a member of our construction litigation team. We’d love to assist you.

Frequently Asked Questions 

What Is an Adjudication Referral?

An adjudication referral starts the adjudication process by one party formally giving notice to the other that they intend to refer a dispute; this is called the Notice of Adjudication. The Notice of Adjudication should describe the nature of the dispute, the parties involved, details of when and how the dispute arose, and the remedy sought.

Can You Appeal an Adjudication Decision?

An adjudication decision is described as ‘interim binding’ which means you must comply with it for the time being but can challenge it later via arbitration or litigation. The principle of adjudication is ‘pay now, argue later’. Essentially, you have the right of challenge but to keep the project on track, you must comply with the adjudicator’s decision in the interim.

What Are the Different Types of Adjudication?

There are two main types of adjudication. Statutory adjudication arises under the Construction Act while contractual adjudication is set out in the express terms of the construction contract. Some sources also refer to a third, less formal category called ad hoc adjudication, where parties agree to adjudicate a dispute only after it has arisen. This carries less formal legal standing than the other two.

Is Adjudication an Alternative Dispute Resolution?

Adjudication is a form of Alternative Dispute Resolution (ADR). ADR also includes negotiation, mediation, and arbitration all designed to avoid the courts and the time and costs associated with litigation. If you disagree with an adjudicator’s decision, you retain a right of challenge via arbitration or litigation although you must comply with the decision in the short term.

Adjudication Depends on Your Construction Dispute

Adjudication is a valuable statutory and contractual right for parties involved in construction disputes. However, adjudication is never the only option; it’s one facet of a landscape that involves other forms of ADR including negotiation. An adjudicator’s decision won’t always go in your favour, and it can still be challenged through arbitration or litigation, but it keeps a project moving while the underlying dispute is resolved.

How to handle a construction dispute depends on your situation, the provisions of the contract, and your commercial objectives. An early assessment of your position always ensures you have the most options.

As specialist construction adjudication solicitors, we provide strategic and commercially focused guidance on construction disputes ranging from financial disagreements to late payments and professional negligence claims. Our team can quickly assess whether adjudication is right for you, usually within the hour, with transparent fees throughout the process. No Win No Fee (CFA) funding may be available for qualifying construction disputes, subject to case assessment and our funding criteria, typically on disputes valued over £10,000 with strong prospects of success.

We offer cost-effective solutions tailored to your individual position and define all your options providing a clear framework whilst always protecting your legal rights. If you’re in a construction dispute and unsure what to do next, speak to our specialist litigation solicitors. Our construction team have decades of experience acting in a range of matters like yours and we will be happy to help you.