Lets settle this

The Kid

Turns out the quickest draw is still the most popular

Gee, six years back The Adjudication Kid sure brought fast justice to our sleepy town...

Any look at construction dispute resolution still must begin with adjudication. Six years after riding into town the Adjudication Kid is still boss. But things may be changing. These days in the saloon he may want to sit with his back to the wall because the ‘rival’ techniques of arbitration and litigation have thrown back their ponchos and are preparing to draw.

But first, a brief history lesson. Sir Michael Latham first suggested adjudication in his report back in 1994. He saw it as a good way of providing temporarily binding decisions that would keep construction projects moving forward. ‘Temporarily binding’ seems like a contradiction in terms but it really means that the adjudicator’s decision is binding unless arbitration or litigation finds otherwise, later.

Adjudication was born in 1998 when Part II of the Housing Grants, Construction and Regeneration Act 1996 came into force. It said that contracts must allow the parties to refer a dispute to adjudication, and that the adjudicator must come to a decision within 28 days of the referral, or 42 if an extension is agreed.

Rough justice, some say, but immensely popular nonetheless.

At the time The Kid first sauntered down the dusty main street, arbitration and litigation each dealt with cases per year numbering in the low hundreds. The number of cases dealt with by adjudication each year went from zero before May 1998 to an estimated 2500 two years ago. Man, everybody loved The Kid.

David Richards, London director of Pickavance Consulting, was among the first to enrol on the RICS list of adjudicators and he says it was an exciting time because it gave one the sense of being able to do something about the injustice rife in the industry, typified by non-payment.

“To everybody the abuses in the system were anathema,” he said.

The adjudicator’s job was also seen to be more proactive than the arbitrator’s.

“As adjudicator you listen to the parties then roll up your sleeves and get stuck in. You can be inquisitorial, rather than just hearing the arguments.”

Gone to seed?

Adjudications peaked in the year to April 2002 but began to fall slightly after that, according to the Adjudication Reporting Centre at Glasgow Caledonia University (for details see www.adjudication.gcal.ac.uk). It would appear that the market for adjudication has matured. Indeed some (such as lawyers and arbitrators) would say that The Kid has gone to seed, that the disadvantages of the mechanism, and the inadequacy of the adjudicators, are encouraging a drift back to tried-and-tested methods.

There is some truth in this. The massive demand placed on adjudication has rather bent it slightly of shape. For instance, parties are taking claims to adjudication that are much bigger than the Act intended. In the early days a £300,000 claim would have been considered a big ‘un.

But now, practitioners say that multi-million pound claims are not uncommon. Where Latham saw adjudication as a way of keeping the cash flowing as a project unfolds, adjudicators are tackling bigger issues like final account and allegations of professional negligence. The result is that adjudications regularly burst the intended 42-day corral and become as drawn out as arbitration has been criticised for being.

“These days a long adjudication is like a short arbitration,” Richards said.

An adjudicator will listen to the parties, roll his sleeves up and get stuck in

David Richards

Another factor bringing adjudication down a peg or two could be a new readiness of judges in the Technology and Construction Court to refuse to enforce an adjudicator’s decision.

One of the key issues is jurisdiction, or what an adjudicator may or may not rule on. The Act doesn’t define the adjudicator’s jurisdiction and it used to be that the adjudicator could determine his own. But lately the courts have adopted the view that the adjudicator cannot decide what his or her jurisdiction is unless the disputing parties have agreed he or she could.

In practice this means that adjudications are being overturned more than they were in the beginning.

This was the most controversial issue to come before the adjudication task group, which reported in July to Latham’s review of the Housing Grants, Construction and Regeneration Act 1996. The task group comprised bodies representing the various parts of the construction chain and was chaired by Graham Watts, chief executive of the Construction Industry Council. Broadly, the bodies representing specialist and subcontractors were in favour of adjudicators being able to determine their own jurisdiction, at least to some extent, while main contractors and clients (represented by the Construction Confederation and the Construction Clients Group) were against the adjudicator having any power to rule on his or her jurisdiction. It’s possible to infer that those at the top of the construction food chain like, and want to reinforce, the interim nature of an adjudicator’s decision.

They argue that not all adjudicators have the requisite skills to determine complex legal matters and, while the same could be said of any profession (even solicitors!), it remains a significant perceived weakness in an adjudicator – the fact that just about anybody can be one. In practice designated bodies such as the CIOB or the RICS nominate most adjudicators, but how rigorous is the selection procedure?

In light of this question, it’s timely that the CIOB announced in December a formal accreditation process for its adjudicators, a move it says is the first in the industry.

“Adjudication is proving to be very complex and the consumers of the process need to know that those they are instructing are sufficiently experienced to handle what is involved,” said Neil Burton, chair of the CIOB’s Dispute Resolution Programme Committee. CIOB-accredited adjudicators will have to submit to a bi-annual review.

Despite these concerns, The Adjudication Kid ain’t goin’ nowhere in a hurry. In fact, if government adopts some of the recommendations put forward by Graham Watts’ task group, adjudication could be applied more broadly in construction and adjudicators might enjoy freer reign. For instance at the moment the Act exempts PFI projects from the adjudication option. Nor is adjudication specified for disputes arising with residential occupiers. The task group believes both these exclusions should be reconsidered. As for adjudicators themselves, the group recommended they be given statutory immunity as protection against third parties in the wake of a decision.

The group also urged government to outlaw the universally unpopular ability of adjudicators to award all legal costs to the referring party, whether they won or lost.

So, The Kid is still popular, still more or less effective, and his patch may get bigger. Rough justice perhaps, but when it comes to securing its fistful of dollars, the industry seems to like a bit of rough.

The Sheriff

look out, kid, the Sheriff’s got a...

Some say arbitration is like an old law man, stiff, ineffective and facing redundancy. But The Sheriff has a shiny new six shooter, as Chris Dancaster reveals

The 100 Day Arbitration Procedure could be the weapon to shift the balance of power. It aims to provide a speedy dispute resolution tool without the inherent disadvantages of adjudication. This natty new system was developed by the Society of Construction Arbitrators to complement its own Construction Industry Model Arbitration Rules, which first appeared in 1998.

The 100-day period starts once the defence (or the defence to counterclaim) is served. Time periods are set and the length of any hearing is limited so that the arbitrator produces his award within 100 days of the clock starting ticking.

So why is it so good? Well, partner, it buys you time. The principal advantage is that a defendant can develop its defence (and put together a counterclaim if it needs to) before the clock starts running. This enables the issues to be properly clarified and the dispute to crystallise. It also overcomes all the ‘no dispute’ arguments that have often proved fruitful in persuading the court to refuse enforcement of adjudicators’ decisions.

100 day arbitration avoids the costs of a double bite at the cherry

Chris Dancaster

The more liberal time scale will also prevent the arguments against enforcement that have arisen from ‘new evidence’ as the parties will have a proper, albeit limited, opportunity to consider and deal with such matters before the arbitration commences. There will also be time within the arbitration to make their own case and properly answer that of their opponent.

And there’s more. The 100-day procedure produces an award that is final and binding under the Arbitration Act 1996. As such, it avoids the costs of a double bite at the cherry that happens when adjudication does not settle the matter.

We developed the procedure as a direct result of feedback from within the industry. Disputing parties made comments to the effect that adjudication can so often be a lottery. ‘There must be a better way,’ some said.

Maybe this is it. The procedure is clearly tailored for the lower value disputes, say up to £1m, as it might be extremely difficult to shoehorn a really substantial dispute into the time frame. But, given the use of adjudication for multi-million pound disputes and the allowance for preparing cases before the clock starts ticking, who knows?

There are problems. Adjudication is still the flavour of the month, and there are very few arbitrations currently commencing in construction. My personal estimate would be that fewer than 50 construction arbitrations started in 2004. However, these things are kept pretty private. I have no knowledge of the take-up of the procedure, but on that basis I would anticipate that it is minimal.

The dark side for adjudication is that the courts are pushing it into more and more of a straightjacket. Costs are rising and some are questioning the sense of spending a lot of time and money in adjudication only to find a judge who refuses to enforce the decision. This may make the industry look elsewhere, and the 100 Day procedure could well be the answer.

Chris Dancaster is immediate past president of the Society of Construction Arbitrators, and helped draft the 100-day procedure

The Judge

The judge ain’t done yet

The Adjudication Kid took business away from the courts, but the wily old Judge has paid heed and may be calling a few shots of his own soon in Constructionville

Last November the new judge in charge of the Technology and Construction Court, Justice Rupert Jackson, told an audience of lawyers that court users had sent a message to the TCC and that message had been received.

“The TCC is committed not only to producing good quality judgements promptly, but also to managing every case along the way in a fair and cost efficient manner,” he said.

He listed a few things that the courts had already achieved, such as speeding up reserved judgements and getting cases to trial more quickly. He also laid out his intentions for streamlining procedures, including exploring ways of harmonizing case management, so that the differences in approach among the many TCC judges are not so sharp. TCC judges attended a conference on the subject in December.

Other changes could be afoot. At present the separation of county and high courts creates a confusing, two-tiered system. Michael Sergeant, a partner at solicitors Winward Fearon, says it gives parties a choice between a fast-track route with judges relatively inexperienced in construction and the High Court (TCC) where there is experience but the chance of severe bottlenecks. He believes however that a unification of the two tiers could be on the cards, or at least that it’s a subject that is starting to be discussed in the relevant circles. In his November speech, Jackson said it would be a “sensible” move.

The dynamics changed significantly after Adjudication Kid rode into town, and if Jackson’s words are anything to go by, litigation is stirring in its chambers and tooling up, if not to see off the potent stranger, then at least to stand by its historic role.

“TCC judges... have been pioneers in trial management,” he said. “These were, to the best of my recollection, the first judges to let written witness statements stand as evidence-in-chief... I hope that TCC judges will continue... to develop novel but fair methods of trial, with a view to saving the time and costs of litigants.”

Sounds like there may be room in this town for the three of them after all.