Our team of construction adjudication solicitors are experts in their field and advise individuals, employers, contractors, sub-contractors, and other members of the construction sector on all aspects of construction disputes including adjudication matters.
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What is construction adjudication?
Adjudication is a form of alternative dispute resolution specific to the construction industry.
It was introduced by the Housing Grants, Construction and Regeneration Act 1996 (Construction Act 1996) to improve cash flow through the supply chain.
It was recognized that conventional methods of dispute resolution such as litigation were slow and expensive, and adjudication was introduced as an alternative way of resolving disputes in a much quicker time frame than litigation.
What is adjudication used for?
The main aim of adjudication is to improve cash flow and as such, it is frequently used for resolving financial disputes such as interim payment applications, delay and disruption claims, extension of time claims and the assessment of final accounts.
That said, the Construction Act allows a party to refer any dispute or difference to adjudication so this could include defective works claims, matters of contractual interpretation, termination or professional negligence claims.
Can I avoid or opt out of adjudication?
The right to adjudicate is enshrined in law and applies to any construction contract as defined by the Construction Act. As such, if a dispute has been properly referred to adjudication by the Referring Party, the Responding party will be unable to opt out of the process.
Whilst this might come as a surprise to an aggrieved Responding Party who may well consider that it has been unfairly dragged into an adjudication, the right to adjudicate is consistent with the overarching purpose of improving cash flow throughout the construction industry.
Whilst there is no way of opting out of adjudication, it is important to note that there are strict procedures that must be adhered to when referring a dispute to adjudication, which if not complied with, may mean that the adjudication cannot proceed. It is therefore important that the Responding Party takes early steps to consider and if necessary, protect its position.
If the Responding Party ignores the adjudication and decides to take no part, it runs the risk that the adjudication will proceed in any event and quite possibly, the Responding Party may receive an adverse decision against it.
It is therefore important that any Referring Party is familiar with the procedural steps which must be complied with when commencing an adjudication, and any Responding Party acts quickly in raising any procedural challenges that may apply.
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How long does the adjudication process take?
The process begins with the Referring Party serving its Notice of Adjudication upon the Responding Party.
Once the Notice of Adjudication has been served, the Referring Party must then serve its Referral within 7 days of serving the notice.
Once the Referral has been served by the Referring Party, the adjudicator has 28 days to give their decision, although this period can be extended by 14 days if the Referring Party agrees.
The timescale for reaching a decision in adjudication is significantly shorter than in court proceedings, which is again consistent with the overarching objective of improving cash flow.
Whereas a party referring a dispute to adjudication may receive an adjudicator’s decision within 4-6 weeks, if that same dispute was referred to the courts the referring party might reasonably expect the courts to give their decision in 9 to 12 months, or possibly longer.
How much does adjudication cost?
There are 3 main aspects to the costs of construction adjudication.
- A party’s own costs
- The other party’s costs
- The costs of the adjudicator
Own costs and the other party’s costs
Regardless of whether a party is successful in adjudication, the adjudicator has no power to order that one party pay the other party’s costs of adjudication unless the parties agree otherwise, as the Construction Act intended that both parties would bear their own costs.
The position is quite different in court proceedings where generally speaking, the unsuccessful party will generally pay the successful party’s costs which is often a barrier to the would be claimant bringing a claim.
At Aaron & Partners, we believe in offering our clients a flexible approach to fees, and we offer a range of alternative approaches such as a no win no fee, fixed fee or traditional hourly rates. We are always happy to discuss these options with you at the outset of your case.
The costs of the adjudicator
Most adjudicators will issue their rates and conditions at the outset of an adjudication. The adjudicator generally has the power to decide which party is liable to pay the adjudicator’s fees (as opposed to the party’s costs).
Usually, an adjudicator will order that the unsuccessful party pay the adjudicator’s fees of the adjudication but should an unsuccessful party refuse to pay the adjudicator’s fee, the adjudicator will usually direct that both parties are jointly and severally liable for their fees so that the adjudicator can claim their fee from the successful party if necessary.
According to research published by the Adjudication Society in October 2022, the median cost of an adjudicator’s fee was between £12,001 and £14,000.
What should I do if I receive a notice of adjudication?
Act promptly
If you are unfamiliar with the adjudication process, it is essential that you seek professional advice early on.
Respond to the notice
Do not ignore the notice of adjudication or assume that the dispute can be resolved later down the line. In doing so, you risk that an adjudicator will simply proceed with the adjudication without considering your case.
Collect records
Start collecting documentation relevant to the dispute at the earliest opportunity. Early information gathering is critical given the short timescales involved in adjudication. The sort of records that we might typically see used in an adjudication might include site records, emails, statements from key personnel, project programs, applications for payment, payment certificates, pay less notices, notices of default and most importantly, the construction contract itself!
Review your contract
Refamiliarize yourself with the contract and the key clauses relevant to the disputes. If the contract is a standard form of contract such as JCT or NEC3 / NEC4, consider whether the contract has been amended by a schedule of amendments. Also consider whether the contract has been subsequently amended since it was originally signed.
Consider resource allocation
Defending an adjudication can require a significant amount of company resources and management time. Consider who is best placed within the company to assist with the adjudication, along with any holidays and other commitments that might divert staff/ resources away from dealing with an adjudication.
Phil Caton
Construction Law Partner
Phil is a Partner at the firm who specialises in both transactional and contentious construction matters.
