A Guide to the Adjudication Process in Construction Disputes
Adjudication is a form of alternative dispute resolution that is used more frequently in the construction industry than in any other sector. The reason for this is that any party to a construction contract has a statutory right to place a dispute before an adjudicator, subject to certain exceptions.
This article examines adjudication, including its process, timeline, and associated costs.
What Is Adjudication in Construction?
Adjudication in construction is a form of alternative dispute resolution, which is a right imposed bythe Housing Grants, Construction and Regeneration Act 1996 (the Construction Act).
Statutory Right to Refer Disputes
Subject to certain exceptions, principally an exception in respect of “residential occupiers”, a party to a construction contract has the right to refer a dispute arising under the contract to adjudication.
The adjudicator’s decision is immediately binding until it is reviewed later via either arbitration or litigation, if necessary.
Key Stages and Time Limits in Adjudication
The adjudicator must reach their decision within 28 days of the referral notice being served. Although the referring party (the claimant) may extend the deadline for the decision to 42 days, or the parties may agree on an even longer period for the decision.
Notice of Adjudication and Referral Notice
The notice of adjudication starts the process and informs the other party that a dispute is being referred. The notice must set out the nature and a brief description of the dispute and the parties involved, details of when and where the dispute arose, the remedy sought, and contact details for the parties.
The referral notice must be sent to the adjudicator and responding party (the defendant) within 7 days of the notice of adjudication. The referral notice sets out the detail of the dispute and claim, and must be accompanied by copies of the contract.
Adjudicator Appointment
Once the notice of adjudication is issued, the referring party will usually need to contact an Adjudicator Nominating Body (‘ANB’) to appoint an adjudicator, although some contracts may specify the use of a specific ANB or even Adjudicator.
ANBs include RICS (the Royal Institute of Chartered Surveyors), the Construction Industry Council (CIC), or the Technology and Construction Solicitors Association (TeCSA).
After the adjudicator has been appointed, they will usually issue directions for part or all of the adjudication. This will often require the responding party to respond to the referral notice within 7 days of service, but can provide for a longer period. The adjudicator may also permit the referring party to make additional representations following the responding party’s response. It is customary (but not required) for the referring party to have the last submission, as they have to discharge the burden of proof.
Decision, Enforceability, Review and Challenges
Unless the timetable has been extended, the adjudicator will reach their decision by day 28. That decision is immediately binding until the matter goes to arbitration or litigation. An adjudicator’s decision is subject to immediate enforcement.
If one party fails to comply, then the decision may be enforced through the Technology and Construction Court (TCC).
Successful challenges at the enforcement stage are rare because adjudication is designed to be a quick, temporary fix. However, a party may challenge a decision on the grounds of a lack of jurisdiction. For instance, the dispute might not have crystallised or the wrong process might have been followed when the adjudicator was appointed.
It’s essential not to apply to appoint an adjudicator before issuing the notice of adjudication. If this happens, any subsequent decision reached may be invalid.
When Is Adjudication Most Effective?
Adjudication is more frequently used for simple and/or standalone issues that are relatively straightforward to resolve and require prompt attention to maintain project momentum and cash flow.
Unless otherwise agreed, you can only refer one dispute to an adjudicator at a time, so it’s vital to be able to isolate a dispute within defined parameters.
Typical Use Cases
Disputes on construction projects are commonplace. Adjudication is often used to resolve conflicts over late or non-payment of stage payments, delays, disputes over project scope, and faults and defects.
When Arbitration, Litigation or Other Routes Are Better
Adjudication isn’t right for every problem. Complicated problems may be better suited to arbitration or litigation. Adjudication has a 28-day timetable, which simply may not be enough time for complex disputes, and does not typically involve any form of disclosure.
Adjudication may also be unsuitable if a party favours recovering its legal costs over a speedy resolution as costs are not typically recoverable, although they can be in certain circumstances, for example, if the parties agree in writing after the notice of adjudication is served.
Evidence Fairness and Procedural Standards
One of the key differences between adjudication and litigation is that there are no formal rules surrounding evidence in adjudication. In litigation, the process is governed by the Civil Procedure Rules (CPR).
Legal advice is essential to present a clear and cogent case. Submissions must be easy to read, with documents cross-referenced so that accessing evidence, such as witness statements, financial accounts, and expert reports, is simple.
If the dispute concerns defects, a specialist report from a surveyor or an engineer should ideally be obtained in advance.
The nature of adjudication means that there often simply is not time for a comprehensive disclosure process and parties will often need to rely on those documents already in their possession to establish their case.
Fees and Practical Considerations in Adjudication
The adjudicator will normally write to both parties detailing their terms and conditions, including their fee rates.
Adjudicator Fees and Payment Responsibilities
The parties are jointly and severally liable for the adjudicator’s costs, which the adjudicator may apportion between the parties as they see fit.
Adjudicators usually charge an hourly rate of between £200 and £300 plus VAT. Hourly rates vary depending on the adjudicator’s level of experience and any specialist expertise.
Unfortunately, if the adjudication process has not been initiated by mutual consent, the responding party will often have little input in the choice of adjudicator and the level of their fees.
Where the referring party uses an ANB, they will normally also need to pay an application fee to the professional body for the appointment of an adjudicator.
Low-Value Adjudication Routes
The Construction Industry Council (CIC) has a Low Value Dispute Model Adjudication Procedure, which is a streamlined process that links the adjudicator’s fee to the amount claimed. This model provides certainty for both parties on the adjudicator’s final fee.
Frequently Asked Questions
Is Adjudication Mandatory in Every Construction Contract?
The use of adjudication is not mandatory (save that the Responding Party can be unwillingly co-opted into an adjudication started by the Referring Party).
Can an Adjudicator’s Decision Be Challenged?
Yes, an adjudicator’s decision is only temporarily binding on the parties and can be challenged through the use of arbitration (where applicable) and litigation. However, in certain circumstances, it may be necessary to comply with the decision and then seek to overturn its effect in subsequent proceedings.
How Quickly Must a Decision Be Issued?
An adjudicator has 28 days to issue a decision from the date of the Referral Notice. However, the referring party can extend the deadline for the decision to 42 days from the date of the referral notice, or the parties can agree an even longer extension.
What Happens if a Party Refuses to Comply with the Decision?
The party against whom the decision has been made must comply with it immediately. If they refuse, then the other party has the right to enforce it via a specialist procedure in the Technology and Construction Court. The case is presented by submitting a claim form with particulars of the dispute and details of the adjudication award, which are considered during an enforcement hearing.
Get Specialist Legal Support for Construction Disputes from Helix Law
Adjudication is a vital tool in the construction industry, a sector plagued with complex, long-running projects often involving multiple parties and contractors. Adjudication is a statutory right; however, many construction contracts already contain provisions for the right to adjudicate, including details on nominating an adjudicator. For expert guidance at the contract stage and help and support if you are already in dispute, the specialist team at Helix Law has extensive experience in the construction industry. Get in touch today.
