Adjudication

Our experience in the process of managing construction adjudication has developed since the enactment of the Scheme for construction contracts in 1998 and the subsequent ‘new Scheme’ changes made in October 2011.

Emphasis should be made between the statutory adjudication process defined by the Housing Grants, Construction and Regeneration Act 1996 (with subsequent amendments by the Local Democracy, Economic Development and Construction Act 2009) and contractual adjudication defined by clauses in a contract but in essence either route must adhere to some fundamental rules.

The crucial fact to note is that even if there is no contractual mechanism for adjudication statutory adjudication may still be an option and so however the construction contract was formed, even if by oral contract, it is worthwhile discussing the facts with us to define the options.

Adjudication comprises a sequence of Notices, Referral, Response and further exchanges of what are in effect claims and defences. The timing and content of each document is critical, mainly due to the powers given to an adjudicator.

Certain binding powers given to an adjudicator mean that a decision can only be based on the initial points raised in the Notice, a decision must be reached with strict time periods, often 28 days, and that a decision is binding on the parties.

By way of example extracts from the 1996 Act show the process which must be followed:

Notice of Intention to seek Adjudication

1. Any party to a construction contract (the “referring party”) may give written notice (the “notice of adjudication”) of his intention to refer any dispute arising under the contract, to adjudication.

2. The notice of adjudication shall be given to every other party to the contract.

3. The notice of adjudication shall set out briefly:

• 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 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).

Referral Notices must then state details of the dispute.

Powers of the adjudicator

12. The adjudicator shall:

• act impartially in carrying out his duties and shall do so in accordance with any relevant terms of the contract and shall reach his decision in accordance with the applicable law in relation to the contract; and
• avoid incurring unnecessary expense.

19. – (1) The adjudicator shall reach his decision not later than:

• twenty eight days after the date of the referral notice mentioned in paragraph 7(1), or
• forty two days after the date of the referral notice if the referring party so consents, or
• such period exceeding twenty eight days after the referral notice as the parties to the dispute may, after the giving of that notice, agree.

Adjudicator’s decision

20. The adjudicator shall decide the matters in dispute. He may take into account any other matters which the parties to the dispute agree should be within the scope of the adjudication or which are matters under the contract which he considers are necessarily connected with the dispute. In particular, he may:

• open up, revise and review any decision taken or any certificate given by any person referred to in the contract unless the contract states that the decision or certificate is final and conclusive,
• decide that any of the parties to the dispute is liable to make a payment under the contract (whether in sterling or some other currency) and, subject to section 111(4) of the Act, when that payment is due and the final date for payme
• having regard to any term of the contract relating to the payment of interest decide the circumstances in which, and the rates at which, and the periods for which simple or compound rates of interest shall be paid.

Effects of the decision

23. – (1) In his decision, the adjudicator may, if he thinks fit, order any of the parties to comply peremptorily with his decision or any part of it.

• (2) The decision of the adjudicator shall be binding on the parties, and they shall comply with it until the dispute is finally determined by legal proceedings, by arbitration (if the contract provides for arbitration or the parties otherwise agree to arbitration) or by agreement between the parties.

In summary, recent amendments to the 1996 Act mean that:

• Oral contracts may be adjudicated
• There is a statutory slip rule for adjudicators’ decisions
• Agreement as to which party pays the costs cannot be made prior to the Notices being issued
• The prohibition of certain payment clauses
• Changed rules for payment and withholding notices
• Requirements to pay certain sums due, and
• Rights to those who suspend due to non-payment
• We have the experience to handle all matters during an adjudication, which due to the private nature of the
• process, is not readily gained without actually handling adjudication claims personally.

Also it is essential to appreciate the strategic and somewhat tactical approach by others which potentially results in a missed opportunity to sufficiently present the facts, and for that to only be due to a procedural advantage gained by an opposing party.