Is adjudication living up to our hopes? Hardly, when it has increased disputes, failed to deal satisfactorily with complex cases and become prey to bully-boy tactics
It is testimony to the rude health of adjudication that these pages should have been so dominated by discussion of it since 1998. But, after our initial fascination, we have all got a bit blasé about the technicalities of recent adjudications and their outcomes. So why a piece about adjudication now when I have so far tended to avoid it? Because it is beginning to be possible to discern some patterns emerging in its use, and from these it is just possible to guess whether adjudication will finally achieve Latham's and the industry's aspirations for it.
On a "before" and "after" basis, I think the following trends are discernable:
There are a lot of adjudications for an industry that is in good economic health. The Latham argument that the mere presence of adjudication as a remedy would deter parties from initiating formal disputes since they would prefer to settle has been knocked on the head.Simple and uncontested non-payment, it is true, does not seem to be the principal subject of adjudications or at least the reported ones. So maybe adjudication is working at the level of debt collection. What are being referred to adjudication, though, are disputes that would have been sorted out informally before because there was no commercial alternative to so doing. These are the genuinely disputed entitlements of tens of thousands of pounds rather than hundreds of thousands.
Parties revert to adjudication on these because it is easily available, quick and cheap. This inevitably deters informal settlement. Perhaps this has prevented oppressive behaviour by those higher up the contractual chain, but it has increased the amount of formal dispute in the industry.
There are still very few adjudications against major clients. Either they do not act oppressively or the industry still avoids biting the hands that feed it. Although I know the nominating bodies would disagree, there is a lot of anecdotal evidence that raises concern about the quality of adjudicators. This might just be pique at losing. It might be exaggeration based on limited examples. And it seems to be more common where, instead of selecting their own adjudicator by agreement, the parties have relied on the nominating bodies. The lesson, undoubtedly, is to name the adjudicator in the contract.Does the industry have the strength to resist exploiting adjudication to secure short-term advantage?
But the gripes about adjudicators may also be because the disputes are just too complex to be sorted out satisfactorily within 28-days. This source of dissatisfaction is likely to increase as more difficult issues are referred to adjudication. In particular, disputes over defects have not yet surfaced in any great number as the subject matter for adjudications, because they haven't had time to emerge yet. The consultant lobby (and its insurers) has always expressed concern about the impact of adjudication on negligence claims against consultants.And is there evidence of abuse? Undoubtedly. The trick is to find a narrow issue on a disputed account and to refer it to adjudication. If you win (and, statistically, you're likely to) fine. If you lose, you move on to the next one. The costs are containable – particularly if in-house teams or claims consultants are used. The disruption and stress caused to the recipient of this barrage of notices is enormous, and the outcome in the round is usually unfair.
It is a repeat of the bully-boy tactics used by the industry so adeptly in the past.
And will we see more of this abuse? The prognosis is bad. If this is happening now, when the industry is flourishing, what can we expect during the next downturn?
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