Adjudication made simple

Since the introduction of the Housing Grants and Regeneration Act 1996 and the consequent changes in most of the standard form construction contracts, adjudication has become a dispute resolution procedure available to the majority of the industry. It is a quick method of dispute resolution in the event that negotiations do not succeed.

Adjudication is a statutory form of interim dispute procedure enabling parties to a building contract to refer matters to an independent third party for resolution until such time as matters are finally settled or, alternatively, one of the parties chooses to pursue a further form of dispute resolution, either through the courts or by arbitration.

Exclusions
There are a number of exclusions within the legislation, which needless to say have led to a line of case law as to what constitutes a qualifying contract for purposes of the legislation. Two key areas of difficulty are building works for residential occupiers and supply-only contracts.

Subject to compliance with the legislation, if adjudication provisions are incorporated within a building contract as part of the terms and conditions, then they will apply. For example, if you are under a current JCT Minor Works Contract with a residential occupier then adjudication will apply, although it would not have applied under the legislation.

A notice of adjudication served on one party initiates the process. This notice contains basic information such as the identity of the parties involved and a brief summary of the dispute. Then, unless there is agreement as to the appropriate adjudicator, an application should be made to one of the appointing bodies approved under the legislation, such as the RICS or RIBA, which will then appoint an adjudicator. Whereas the notice of adjudication is brief, the referral is in effect the claim and should contain all the information an adjudicator will need to make a decision. This document or set of documents needs to be well thought out and concisely assembled.

The adjudicator will have a limited amount of time to consider the papers and therefore all appended documentation needs to be well presented, indexed and limited to that which is relevant to the elements of dispute. If there are contractual and legal issues, these should be addressed correctly. The adjudicator should be more than capable of either requesting further information or making enquiries of his or her own accord.

Adjudicators are virtually untouchable when it comes to making wrong decisions

Adjudicators have an inquisitorial role as opposed to the more traditional adversarial position of the courts. In other words, they are entitled to make appropriate enquiries to reach their decision. These may include a meeting, and although an adjudicator should adopt a fair approach that involves both parties, there is nothing to prevent the adjudicator from contacting one party, or indeed a witness, during the course of the adjudication to request a view. It is therefore helpful, if you are going to refer to such an individual, to be certain as to what that person is likely to say.

Adjudicators are virtually untouchable when it comes to making wrong decisions. As long as they have made a wrong decision honestly, it will be binding, however ridiculous it may appear, unless and until a judge or an arbitrator reaches a contrary decision. It is now established case law that an adjudication award of money is enforceable regardless of its interim nature.

In summary, you should be aware of areas in adjudication where things may go wrong or cause difficulty later, when enforcement becomes an issue. Some points to keep in mind are the following:

Keys to the scheme

Is adjudication incorporated into the contract documents?

Is the adjudicator specifically identified?

What nominating body do you wish to use to appoint the adjudicator?

When serving notice of adjudication, see that you are as prepared as possible to serve a referral document seven days later.

Has there been a previous adjudication on the same contract? If so, does it preclude a further adjudication on the basis that the second one covers substantially the same ground as the first one?

Comply with the adjudicator's requests and be prepared for the adjudicator to carry out his or her own enquiries.

The adjudicator may well have a meeting. Prepare thoroughly and bear in mind that it is not a formal hearing, although you will need to be flexible with regard to the adjudicator's own requirements.

If the adjudicator has his or her own terms and conditions, check them carefully, particularly in relation to costs.

Do the terms applicable to the adjudication permit the adjudicator to make decisions about costs and/or interest?

If you receive a notice, act immediately.