Construction disputes: Adjudication
At the outset of any project, it’s rare that anyone is focusing on possible disputes along the way. But that possibility is factored into most construction contracts. A statutory dispute resolution procedure is implied into all “construction contracts” by the Housing Grants, Construction and Regeneration Act 1996. Under the Act, all parties to a “construction contract” can refer a dispute to adjudication at any time. Adjudication is intended to be a cheap and efficient – at least compared with comparable court proceedings – and a method of resolving disputes relating to construction projects.
Parties cannot opt out of the process. If the contract fails to provide for adjudication in accordance with the Act, the adjudication provisions contained in Part I of the Scheme for Construction Contracts Regulations will apply. Even express provision in the contract purporting to exclude adjudication will not prevent the Scheme from applying.
Launching the adjudication submission
The process begins when the “referring party” serves a notice of adjudication. The notice of adjudication is particularly important as it sets the parameters of the dispute, and the question(s) that the adjudicator is being asked to determine.
So, for instance, if there are multiple applications for payment where disputes have arisen, the adjudicator can only determine them if they are specifically included in the notice of adjudication. If the notice only refers to specific applications, the adjudicator can only determine the issues that relate to those payments, not to all of them.
The adjudicator’s jurisdiction will be limited to the matters identified in the notice. There is no opportunity to amend the notice during the course of the adjudication, so it is important to make sure that it contains all of the issues in dispute. If it does not, the only alternative would be to serve a fresh notice and start the process all over again, costing more time and money.
Appointing an adjudicator
At the same time as serving the notice to adjudicate, or very shortly afterwards, the referring party must apply to an “adjudicator nominating body” to appoint an adjudicator. If there is a contract, this will usually provide details of the relevant adjudicator nominating body. If it does not make provision, or there is no contract, the Scheme allows an application to be made to any of the authorised nominating bodies, such as the Royal Institute of Chartered Surveyors.
Within 7 days of service of the notice of adjudication, the referring party must serve its referral notice. This sets out the details of its case and the documents on which it intends to rely.
The adjudicator should be an independent third party who will decide the dispute. Once appointed, the adjudicator will set an initial timetable for the process. This is the responding party’s opportunity to respond to the allegations made against it in the referral and to provide its own documents and evidence.
Requesting additional submissions
The adjudicator may allow the parties to make further submissions, including a reply and rejoinder. It is important to note that this is at the adjudicator’s discretion and there is no automatic right to do so – it will only be permitted if the adjudicator believes that some useful purpose will be served by doing so.
Can I challenge the adjudicator’s decision?
Once the referral has been served, the adjudicator must reach their decision within 28 days. If the referring party agrees, this period can be extended by up to 14 days, and a further 14 days thereafter if both parties consent.
The adjudicator’s decision is binding, unless one of the parties seeks to challenge it by issuing court or arbitration proceedings. In other words, the parties must comply with it but either party can subsequently ask a court or arbitrator to review the decision, once it has been complied with.
As a policy decision, courts are generally reluctant to overturn adjudication decisions – even when the adjudicator has clearly got it wrong, on the facts, procedure or law – unless there has been a clear breach of the principles of natural justice. To do so would tend to undermine the whole point of adjudication as a swift and relatively cheap means of dispute resolution.
One of the key differences between litigation and adjudication is that in adjudication the general position is that a successful party will not be able to recover any of its costs from the losing party. The adjudicator’s power to apportion costs is limited to determining how their costs should be apportioned between the parties.
However, regardless of which way the adjudicator decides, and their order as to who should pay their costs, both parties will remain jointly and severally liable.
Mark is a Partner at the Firm and can be contacted on 01606 334309 or emailed at mturner@butcher-barlow.co.uk