The scene is set for the “adjudication”: on one side is Bodgit, the allegedly incompetent builder; on the other is the client, accused of withholding payment. Between them resides Justice. So, what’s the verdict?
Imagine the following exchange between a contractor and his client: “I want my money,” says the contractor. “I owe you nothing,” retorts the client, “your work is defective and it will have to be replaced.” This is not an unusual situation. In the past, however, the warring parties would have taken the dispute to court or arbitration. Now there is a fast-track alternative: adjudication. So, how does it work? In a conference centre at Marble Arch, London, two weeks ago, about 40 construction industry players gathered to discover just that. The School of Business and Industrial Management put together a mock adjudication.

The scene is set on a makeshift stage; three men in suits sit around a desk, centre stage. In the middle is Mr Rough Justice, the adjudicator, played by Peter Talbot, a practising adjudicator and adjudication examiner at the Chartered Institute of Building. On one side of him is Mr Bodgit, played by Kelvin Holder, a commercial director of Amey Construction. On the other is Mr Crash – in reality, Geoff Wright, a director of Hammerson Properties. Chief executive of the Specialist Engineering Contractors Group Rudi Klein and Roger Button of solicitor Eversheds are commentating.

In the opening scene Justice chairs an early meeting in the process. The two warring parties are present: claimant Bodgit and defendant Crash. Bodgit has just completed a job for Crash but he has not been fully paid. Crash is withholding the balance. Bodgit is upset, accusing Crash of denying him his money, the lifeblood of his business, and lamenting his difficulties keeping the business afloat. “My Jaguar might be repossessed, Crash,” he wails.

Crash is equally irate. Bodgit had done an appalling job, which, claims Crash, does not merit any payment.

“You’re a cowboy, Mr Bodgit. You don’t deserve to practise in the industry,” says Crash, leaning across Justice towards his enemy.

“My name is pronounced Bojie,” sniffs Bodgit.

Holder and Wright are acting their parts so well that it seems that the two might actually come to blows. The audience is transfixed. Luckily, Justice is on hand to cool tempers, restore order and set the adjudication back on track. He finds that a dispute has arisen under a construction contract, as defined by the Construction Act, and that Bodgit had referred the matter to him. He decides that the Scheme for Construction Contracts applies, so he persuades Crash to accept his appointment and skilfully encourages both parties to sign his engagement terms.

Justice’s next task is to determine the procedure that will enable him to reach a decision within the statutory period of 28 days.

He asks both sides to produce documents, and he orders Crash to produce documentary proof of the damage that he has allegedly suffered, and to respond to Bodgit’s adjudication referral. Finally, Justice will interview the parties’ relevant witnesses.

Justice also decides to take expert advice from an independent specialist on the allegations of defective workmanship. In view of the statutory time limits, Justice decides to obtain this advice by telephone.

Act two of the improvisation takes place at the end of the 28-day period of the adjudication. Justice dispenses justice. He decides that Bodgit is liable for most of the defective workmanship alleged by Crash. Accordingly, Crash has to pay only a small proportion of Bodgit’s claim.

Justice also orders Bodgit to pay most of his adjudication fees. Crash declares himself victorious while a deflated Bodgit looks on, muttering: “I’m going to contact my lawyer.” At the end of the mock adjudication, conference chair Guy Cottam, an arbitrator and a panelist at adjudicator-nominating body the Institution of Civil Engineers, asked the audience for feedback. Most felt that Justice had conducted the proceedings in a pragmatic and sensible way and that his temporarily binding decision had assisted the parties; the consensus was that this mock adjudication had worked.

In his closing remarks, Cottam identified important points. On the basis of data from the institutions involved, the number of referrals to adjudication is increasing rapidly. But many recent adjudications have been affected by challenges to the jurisdiction of the adjudicator, making both parties and adjudicators uncertain of their respective positions. The general mood at the conference was that adjudicators should be empowered (in the same way that arbitrators are) to determine their own jurisdiction.

Most of the conference felt that adjudicators should not award costs, unless dealing with their own fees. Such awards, it was felt, would turn adjudication into quasi-litigation and defeat the object of the process: quick and cost-effective dispute resolution (pending subsequent litigation or arbitration).

But how happy was the party that called for an adjudication? Holder, who had played Bodgit, felt that, given the acrimony between the parties in this role-play, the arguments might well have continued, particularly over the enforcement of Justice’s decision. Consequently, says Holder, we should look out for the next round of this dispute, because Bodgit was not likely to take the decision lying down.

Beginners’ guide to adjudication

What is it? Adjudication is a fast-track, inexpensive way to get an interim solution to construction disputes. When did it start? It has been an option for settling disputes for some time. A single contracted party on a construction contract has had the statutory right to force an adjudication since the Construction Act became legislation in May 1998. How do you get the adjudication process off the ground? You start by telling the other side that you intend to refer a dispute to an adjudicator. You then have to have an adjudicator in place within seven days, including the weekend. Where do I get an adjudicator from? It depends on what is stated in the contract. Some contracts name an adjudicator in advance. Others name a body that can nominate an adjudicator like the RICS or the Institution of Civil Engineers. Or the party with the beef can choose its own adjudicator. Does he dress up in a wig and gown? Absolutely not. The adjudicator does not have to be a qualified legal eagle. He or she usually undergoes training to be accredited by one of the major institutions. In most cases, it is best to choose an adjudicator that understands the problem. So, if it is a dispute over quality on a plastering contract, for example, an experienced plasterer would be ideal. And once the adjudicator is appointed, what happens? He or she has 28 days to come to a decision. Just 28 days? Yes, but the adjudicator can extend it with the permission of both parties. But where does the actual adjudication take place? It can take place anywhere or nowhere. It is entirely up to the adjudicator. He or she may not want to meet either parties at all, or just one, or both. The idea is to be as informal as possible. Where do solicitors fit into all of this? They don’t. If you plan to take a dispute to an adjudicator, there is no need for a solicitor. In fact, in some cases solicitors have been known to refer disputes to the Construction Industry Council or other trade institution for adjudication. No need for solicitor or barrister fees, then, but does the adjudicator get paid? Of course. The usual rate is about £90 to £130 an hour. What happens if one party does not agree with the adjudicator’s decision? It can wait until the contract is completed and then take another route. But in the meantime the offending party must cough up. Do many firms look to change the verdict? It is early days yet. There have not been enough completed contracts since May 1998 for it to be an issue. But the signs are that most firms accept the adjudicator’s ruling. What if the party in the wrong refuses to pay? Once a decision is made, the offending party has seven days to make the payment. If it does not cough up, a court can enforce payment. How many adjudications have there been so far? It is difficult to say, but there are signs that it is becoming increasingly popular. The CIC, one of the nominating bodies for adjudicators, says things were slow to start with. Until August this year, it had a mere three adjudications registered with it, after which it had 10. A big factor in adjudication’s increased popularity is the courts’ willingness to enforce adjudicators’ decisions. A success story then? It would seem so. Certainly, Rudi Klein, chief executive of the Specialist Engineering Contractors Group, sees it as such. “The mere mention of adjudication can bring parties to the negotiating table.” For more information, the Specialist Engineering Contractors Group and Eversheds have published a straightforward handbook on tendering and contracting. Ring 01768-864771 for more details.