Adjudication is a compulsory dispute resolution mechanism that applies to the UK's construction industry. It was introduced in 1996 and will applies to the majority of parties to a Construction Contract. It cannot be contracted out of. It used to only apply to construction contracts “in writing” but since 2011 applies to construction contract that are part or even completely oral.
It was designed to help protect cash flow within construction and is a time driven process (usually a 28-day procedure, although the parties can agree to extend this period).
Disputes may be referred "at any time", allowing companies the opportunity to speed up resolving issues that may otherwise have jeopardised or disrupted the completion of the contract. The tight timetables are designed to ensure that work can continue while the dispute is resolved. The disruption caused by insolvency is reduced by encouraging prompt payment. It is a pay first, argue later approach.
Adjudication is usually a cheaper alternative than litigation, although it has become more legally complex, and more expensive, than Parliament perhaps originally intended. In adjudication, each party usually bears its own costs and, in many cases, the cost of adjudicating a dispute will be lower than the cost of arbitrating or litigating the same dispute. It is however important to take legal advice as the specialist Technology and Construction division of the High Court can be more cost effective in some cases.
What is adjudication appropriate for?
Adjudication is appropriate for resolving claims relating to:
• Interim payments
• Delay and disruption of the works
• Extensions of time for completion of the works
• The final account
Although not originally designed for complex claims, an adjudication can also be used for:
• Breach of contract
• Termination of a contract
• Professional negligence
It also always wise to get full legal advice to make sure that adjudication is the best course of action for your dispute.
What is the effect of an adjudicator's decision?
Adjudicator's decisions are:
Interim-binding, that is, they are binding until the dispute is finally determined by legal proceedings, arbitration or by agreement. Often enforced by the successful party in the Technology and Construction Court (TCC) and Rarely successfully challenged by the losing party.
What should I consider before starting an adjudication?
Take legal advice. There are very clear timescales and requirements and the team at Altion Law will be able to guide you through these. The dispute must also have been crystallised between parties.
Also consider the size and complexity of your dispute. Adjudication may not be the best option, and if so the team at Altion Law will be able to advise you of your other options.
If you are looking to refer a complex matter to adjudication, remember that each adjudication should deal with a single dispute. If you have a large and complex dispute you may need to consider whether it is one dispute (consisting of separate elements) or is in fact separate disputes, in which case they can be separately referred to adjudication.
It is also very important to remember that a dispute cannot be adjudicated more than once. If a dispute has already been adjudicated and you want to open up that decision, then you will need to refer the dispute to the Court or arbitration, dependent on what the contract provides for. If you try and appoint an adjudicator and he is challenged by the other side on the basis that the dispute has already been adjudicated, you will most likely end up with the adjudicator resigning and sending you his bill.
Pay careful attention to what the contract says. If it requires that an adjudicator be nominated by a particular nominating body (for example the RICS) you cannot simply ignore that and ask the CIOB to appoint him. Remember that and adjudicator will most likely have to resign where he has not been correctly appointed.
What should I do if I receive a notice of adjudication?
If you have received a notice of adjudication, seek professional advice.
You may then consider if:
• There is a construction contract and if adjudication applies. Is there a dispute and if so has it crystallised? Is the dispute referred to in the notice the same as the dispute that has crystallised?
• Has this dispute been the subject of a previous adjudication and has the adjudicator been correctly appointed?
Altion Law has successfully undertaken and defended many adjudications for our clients. If you have a construction or building dispute that you believe may be referred to adjudication or if you want to take expert advice on your options to pursue or defend a construction related matter please call our team on 01908 414990 to book an appointment to discuss your situation.