A Brief Guide to UK Construction Adjudication
This brief guide provides a general introduction to Adjudication within the UK construction industry.
Please do not hesitate to contact Coniston with any questions you may have. Coniston do not recommend that you attempt to take part in Adjudication without professional advice.
What is Adjudication?
Adjudication is a “fast track” binding interim method of dispute resolution introduced by section 108 of the Housing Grants, Construction and Regeneration Act 1996. It is available under all relevant construction contracts, where the dispute is decided by an independent and impartial Adjudicator.
Adjudication can be a very inexpensive method of resolving payment disputes on construction projects, avoiding having to resort to lengthy and expensive court procedures.
Adjudication is available “at any time” and a binding decision is usually provided within 28 days from the date the Referring Party (the claimant) delivers its initial claim submission. The entire Adjudication procedure, from commencement up to receiving the Adjudicator’s decision and any associated payment, often takes between 6 and 8 weeks.
What Type of Disputes is Adjudication Used For?
Typical disputes referred to Adjudication include:
- Payment disputes e.g., the value of interim payments or the final account
- The valuation of variations
- Delay and disruption of the works
- Extensions of time
- Liquidated damages
- Defects and associated rectification works
- Professional negligence
- Wrongful termination
Contractual or Statutory Adjudication?
There are two types of Adjudication, contractual or statutory. The type depends on what is in the contract, as explained below:
(i) Contractual Adjudication
If the contract has (compliant) Adjudication clauses (such as contained in JCT and NEC standard forms of contract), the parties are bound to follow the procedures in the contract. This is known as a contractual Adjudication.
If the contract does not contain (compliant) Adjudication provisions, the statutory Adjudication provisions apply.
If a construction contract does not comply with the requirements of the Construction Act, a statutory default scheme, called the Scheme for Construction Contracts (England and Wales) Regulations (referred to as the ‘Scheme’) will apply (see below).
(ii) Statutory Adjudication
The right to statutory Adjudication:
- was introduced by the Housing Grants, Construction and Regeneration Act 1996; and
- amended in October 2011, by the Local Democracy, Economic Development and Construction Act 2009
(“the Construction Act”)
Sometimes the right to Adjudicate is set out expressly in the contract but if not, it will be implied into the contract as a matter of law by the Construction Act.
Parties to a construction contract that does not contain (compliant) Adjudication clauses have the right to a statutory Adjudication. The parties to the contract will be bound by the rules and procedures of the Construction Act and the Scheme (see below). There are however criteria that must be met to qualify for a statutory Adjudication, such as:
- It must involve a “construction contract” (as defined at s.104 of the Construction Act).
- The construction contract must include an agreement in relation to “construction operations” (as defined at s.105 of the Construction Act).
- Statutory Adjudication is not applicable to contracts involving a “residential occupier” (as defined at s.106 of the Construction Act).
- If the contract was formed prior to 01 October 2011, then the contract must be a “contract in writing” (section 107 of the Construction Act). However, this section was repealed in 2011.
For all contracts entered into after 01 October 2011, section 107 is repealed. Consequently, there is no impediment to the right to Adjudicate under statute if a contract is verbal.
If the relevant criteria are met, a right to Adjudicate arises once a dispute has crystallised.
The 2011 amendments to the Act also banned any contract clauses in respect of Adjudication costs. Hence, if a contractor has included a contract amendment where one of the parties is liable for all of the Adjudicator’s fees and / or the other party’s legal costs, regardless of the Adjudication result, such clause is void.
Section108 (2) (a) of the Construction Act states:
“The contract shall enable a party to give notice at any time of his intention to refer a dispute to adjudication” [Emphasis added].
What if the contract does not include Adjudication provisions?
Where a contract does not include an Adjudication procedure, the Construction Act provides a fall-back procedure, in the form of ‘the Scheme’, which is a Statutory Instrument that provides implied contract terms to make any Adjudication work.
The Scheme is:
- the Scheme for Construction Contracts (England and Wales) Regulations 1998, which came in to force on 01 May 1998
as amended by
- the Scheme for Construction Contracts (England and Wales) Regulations 1998 (Amendment) (England) Regulations 2011, which came in to force on 01 October 2011.
The Scheme is a Statutory Instrument to provide implied contract terms, in order to make any Adjudication work.
The JCT standard forms of contract (which is the most common standard form of construction contract) incorporate the Scheme as its rules for Adjudication.
The Schemes for Scotland and Northern Ireland are subject to a slightly different Schemes.
How to Commence an Adjudication
The adjudication process begins when the party referring the dispute to Adjudication issues a written notice of its intention to do so. The Scheme says that this ‘Notice of Adjudication’ should briefly set out:
- a description of the nature of the dispute and the parties involved;
- details of where and when the dispute arose;
- the nature of the remedy being sought; and
- names and addresses of the parties to the contract, including addresses where documents may be served.
Appointing the Adjudicator
The ‘Notice of Adjudication’ must be issued prior to appointing an adjudicator.
The Adjudicator must be appointed within seven days of issuing the Notice of Adjudication.
The parties can agree on an individual to act as the Adjudicator or, if agreement cannot be reached, the party who referred the dispute to Adjudication may make an application to an Adjudicator Nominating Body (“ANB”) (such as the Royal Institution of Chartered Surveyors).
When agreeing most large construction contracts, the parties usually identify the ANB.
If the contract does not identify the Adjudicator and the parties are unable to agree on the appointment of the Adjudicator, then the Referring Party can ask the ANB identified in the contract to select an Adjudicator.
Using the services of an ANB is usually done by completing a form and paying the required fee. Depending on which ANB is used, the cost is often in the region of £300 – £500 (+ VAT).
If there is no ANB named in the contract, the Referring Party may choose any ANB.
The ANB then select an experienced Adjudicator from its approved list and notify their selection to the party who referred the dispute. If the Adjudicator is not appointed with seven days of the submission of the Notice of Adjudication to the other party, the whole process must begin again.
Adjudicator Nominating Bodies
As the name suggests, ANBs are organisations that nominate adjudicators. Examples include as follows:
- The Royal Institution of Chartered Surveyors (RICS)
- the Chartered Institute of Building (CIOB)
- Technology and Construction Solicitors Association (TECSA)
- Royal Institute of British Architects (RIBA)
- Institution of Civil Engineers (ICE)
- Institution of Chemical Engineers (IChemE)
- Centre for Effective Dispute Resolution (CEDR)
- Construction Industry Council (CIC)
- Chartered Institute of Arbitrators (CIArb)
- Technology and Construction Bar Association (TECBAR)
The Referral Notice
Within seven days of issuing the Notice of Adjudication, the Referring Party must issue its ‘Referral Notice’ (i.e., claim), to both the other party and the Adjudicator.
This sets out the Referring Party’s case and includes all evidence / documents on which it relies.
The responding party is given the opportunity to issue a ‘Response’ (i.e., a defence) to the Referral Notice, providing all evidence / documents on which it relies.
After issue of the Referral Notice and Response, there might be further submissions by the parties. By convention, such further submissions are often given specific names, such as the Reply, Rejoinder and Surrejoinder.
The Adjudicator’s Decision
The Adjudicator’s ‘Decision’ is usually issued within 28 days from the date of Referral Notice. However, upon request from the Adjudicator, the Referring Party can agree that the Decision can be issued up to a statutory maximum of 42 days after the Referral Notice.
A key characteristic of Adjudication is that the Adjudicator’s Decision is binding and enforceable, unless and until the dispute is resolved by litigation / arbitration, or by agreement of the parties.
If the losing party does not comply with the Adjudicator’s Decision, there is a fast-track procedure in the High Court to enforce it.
Adjudicator’s Fees and Expenses
The costs of the Adjudicator are usually dealt with as part of the Adjudication decision.
When appointed, the Adjudicator will normally advise the parties of his rates, normally an hourly rate (plus any expenses). Currently hourly rates for adjudicators are often between between £200 and £350 per hour (+ VAT).
Within the Decision, the Adjudicator will advise the parties of his total fee and who has to pay it. The apportionment of his fee is entirely at the Adjudicator’s discretion.
It is important to understand the principle of ‘joint and several liability’ for the Adjudicator’s fees. If the ‘loser’ is ordered to pay all or part of the fees, but fails to pay the Adjudicator, the Adjudicator can recover them from the ‘winner’. The winner could then sue the loser for them as part of the Decision.
Costs of Adjudication
Each party will bear its own costs in preparing, pursuing and defending an Adjudication, including in respect of any representation it appoints. These costs are not recoverable.
Coniston as Adjudication Advocates
Coniston is experienced in assisting parties with Adjudication, which often includes a mixture of construction contract law and quantity surveying.
If you require Coniston to represent you, we can guide you and prepare your case. This can include examining your contractual entitlement, assessing the quantum, articulating the scope of the dispute, preparing appropriate Referral documents and managing the process from start to finish, or preparing defences to Adjudication submissions.
Coniston can tell you if you have a case or not. We can prepare your case to the necessary Adjudication standard. This is crucial, as if you pursue a claim without providing the required evidence you will fail.
The Adjudicator will not help you make your case. If your arguments are not clear and/or backed up with evidence, you risk failure. All Adjudications prosecuted or defended by Coniston have been successful.