CONSTRUCTION ADJUDICATION - A BRIEF GUIDE
Written by Francesca Holden
Approved by Adam Creasey
What is construction adjudication?
Construction adjudication is a form of alternative dispute resolution implemented to resolve disputes within the construction industry.
‘Adjudication’ as a form of dispute resolution was introduced via the Housing Grants, Construction and Regeneration Act 1996 (often referred to as “the Construction Act”). Its purpose is to support companies in resolving construction disputes in a quicker and more cost-effective way then traditional commercial litigation.
Prior to the introduction of adjudication, smaller companies were at a significant disadvantage due to having insufficient funds to prosecuted or defend claims through the court system, which can also be stressful and time-consuming.
The adjudication process can take only 28 days to reach a resolution unless a further extension is required and agreed by both parties. The adjudicator’s decision is legally binding and enforceable at court.
When might adjudication be suitable?
Typically, a party to a construction contract can refer a dispute to a qualified adjudicator at any time for one of the following reasons:
If there are defects arising from incompetently executed work.
If there are construction delays, or a need for time extensions to complete the works.
If there is a dispute between the parties relating to the making of interim payments.
How does the adjudication process work?
Prior to the first formal steps in the adjudication process, it is always worth confirming that you have a ‘construction contract’ (within the meaning of the Construction Act) and that you are aware of the terms.
Secondly, you should establish whether both parties are aware and in agreement that a dispute needs to be resolved - known as ‘crystallisation’ of the claim.
The five steps
The first formal step in the adjudication process is to issue a ‘Notice of Adjudication’. This is the first document which the party bringing the claim (the ‘referring party’) will issue and send to the other side (the ‘responding party’). The notice sets out the details of the dispute and the relief that the referring party is seeking. It also confirms to the responding party that the dispute has been formally referred to adjudication.
The second step is to appoint the adjudicator. This must be carried out within 7 days of the Notice of Adjudication. Your construction contract might state specific terms on who this should be. Usually, this is someone who holds specific knowledge within the construction industry or is a member of a professional body, such as the Royal Institute of Chartered Surveyors (‘RICS’).
The third step is for a ‘Referral Notice’ to be issued by the referring party. This must be done at the same time as the appointment of the adjudicator. The referral notice is a detailed document setting out the legal and factual basis of the referring party’s claim to enable the responding party to understanding the case against it. It also enables the adjudicator to understand the background to the dispute.
The fourth step is for the responding party to issue a ‘Response’ to be served on the referring party. This must be done within 7-14 days after receiving the Referral Notice. This is an opportunity for the responding party to set out its defence to the claim and to establish which issues they agree and/or disagree with in the Referral Notice.
The fifth step is for the adjudicators decision to be made. All documents that have been provided to the adjudicator will now be assessed. This can also include evidence, witness statements and, of course, the Notice of Adjudication, Referral Notice and Response. The adjudicator’s decision is binding, however, enforcement procedures are available through the court should one side not be willing to co-operate. The adjudicator must reach a decision within 28 days of the Referral Notice, and is usually issued in writing.
Can I challenge the adjudicator’s decision
Although the adjudicator’s decision is binding, it is always possible that the adjudicator may make a mistake in fact or in law. Accordingly, the party dissatisfied may take the dispute to litigation or arbitration, or seek settlement through alternative dispute resolution.
The only grounds on which an adjudicator’s decision will not be binding is if there has been a jurisdictional error or breach of the rules of natural justice.
The advantages and disadvantages of Adjudication
Although adjudication is a popular and effective route, it might not always be the most suitable method for every case. We have set out some advantages and disadvantages below:
Advantages
Overall, adjudication can be a quick process, taking only 5-7 weeks from start to finish.
The process aims to keep any form of disruption to a minimum, and may be decided on paper without the need for the parties to meet.
After the adjudication process, the aim for a quick payment reduces the chance of contractor insolvency.
A cheaper alternative method of dispute resolution, due to the low costs involved and the fact that each party is generally only liable for their own costs.
Allows both parties an equal opportunity.
The whole process is private, unlike a court hearing.
Disadvantages
Adjudication costs are not always recovered, even by the successful party.
28 days might not be long enough for more complex cases, meaning there might not be enough time to consider all the facts or legal argument.
There are only limited grounds on which the courts will refuse to enforce the adjudicator’s binding decision, which can lead to unsatisfactory outcomes.
The process can be intense, which means that a lot of preparation may need to be done in a small space of time to meet deadlines.
Summary
It is clear that adjudication plays an essential role in simplifying the dispute resolution process in the construction sector, and offering an alternative to what would otherwise be costly and prolonged litigation.
Adam Benedict’s solicitors have experience in dealing with construction disputes and work with experienced third parties, including expert witnesses, barristers, surveyors, engineers, architects and other professionals to help parties to resolve their disputes.
If you would like to contact us to arrange a no-obligation 30 minute appointment to discuss whether your case is suitable for adjudication or some other form of dispute resolution, please click here.
Francesca Holden is a Summer Intern at Adam Benedict.
