Adjudication: Why, What, How, When & What’s New?
You might have heard of adjudication before. However, something that surprises the Overford team is how often we meet people who don’t know all about the popular method of dispute resolution.
Introduced in the 1996 Construction Act (the actual act has a very complicated name, but generally people refer to the Construction Act), Adjudication shot to popularity within a year of its introduction. A lot of construction disputes in the UK are resolved using the method. But how does it work and why is it so popular?
The purpose of the system was to help deal with cashflow issues. This should reduce the likelihood of bankruptcy as a result of withheld payments in the event of a construction dispute.
Key features:
- It takes a short period of time – officially 28 days, but that can be extended by agreement.
- Only one dispute can be referred to adjudication at a time.
- The statutory (ie the one set out in law) process is governed by ‘The Scheme’. This applies to any agreement for construction work, whether in writing or otherwise.
- The Scheme (perhaps surprisingly) doesn’t apply to contracts between householders and their contractors.
- You can rely on the statutory scheme, but most contracts will include an adjudication provision.
- An adjudicator is normally appointed through an appointing body named in the contract, but they can be selected by agreement between the parties to the contract.
- The decision of the adjudicator is binding and must be settled until such time as the decision is finally decided in court or at arbitration.
Because adjudication is generally seen as being quicker, more economical and more efficient than its big brother and sister, arbitration and litigation, it is used in all manner of projects. We’ve seen it used on anything from a kitchen to a power station. It’s been so successful in the UK that it has been replicated in places as far away as Australia, Singapore and is about to make an appearance in Hong Kong.
Who gets involved?
There will always be an independent adjudicator. This individual will usually be appointed by the nominating body noted in the contract. There may be a process to undertake to ensure the adjudicator has no conflicts of interest. Occasionally they may be appointed for their knowledge of the subject area at the heart of the dispute. For example, an architect may be appointed for a dispute concerning architectural defects.
There will usually be a representing party. This is usually a solicitor but may be a consultant such as Overford. This party should be familiar with the process of adjudication and will help to ensure written submissions comply with the various processes. They will help put together those submissions and effectively ‘project manage’ the process.
As consultants, we are sometimes asked to provide ‘expert advice’ – or expert evidence. This will involve providing an impartial expert opinion on a dispute. We will usually be asked to look at discrete matters relating to amounts invoiced or issues of cost escalation. This helps identify what should properly have been paid under the contract. We will work independently with the party and their representatives to identify and forensically assess the issues.
There will of course be the ‘referring’ and ‘responding’ parties – who will be the parties named in the construction contract which sits at the heart of the dispute.
Occasionally, a barrister will be instructed to help represent the parties at the adjudication and to provide advice and support.
How much does it cost?
This is a commonly asked question. From the above list, it can be seen there are potentially a lot of people involved in the process. With hourly rates for those people often sitting in the £100s, it can quickly become expensive. Albeit not perhaps as expensive as the other forms of dispute resolution.
It can be like the old adage, “how long is a piece of string”. There are a number of things that can be calculated and some places are now providing ‘fixed fee’ services. A number of law firms provide fixed-fee services for their representation. As do those sitting as adjudicators and experts. So if you wish, it should be possible to control the costs involved in the dispute.
Ideally, you’ll be able to avoid too much cost, and a good advisor will always work to minimise your costs. Nobody wants to get involved in an expensive and time-consuming dispute!
Conclusions and What’s New?
The above is a very brief overview of the adjudication process. There have been many developments and adjustments to the process of adjudication over the years. These include all manner of things such as smash and grab adjudications, ‘ambushes’, the use of adjudication in cladding disputes, and many other things we will aim to discuss in future articles.
If you need help with anything related to adjudication or claim preparation, contact one of the team today. We’ll be delighted to help.
