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Adjudication

Inside A guide for the referring party:

What is Adjudication? What do I have to do? What is the procedure? How long does it take? What is the effect? What about my costs? inbrief

Introduction Can I Adjudicate? Can the other party refuse? Adjudication is a mandatory procedure You have a right to adjudicate if you have a No, not if all the relevant pre-conditions are met. It for determining disputes, which dispute arising under a “construction contract”, is your right. was introduced in the construction whether in writing, partially in writing or oral. industry by the Housing Grants, A construction contract is not limited to the Construction & Regeneration Act building contract. It includes any contract which How do I start the process? provides or arranges for the carrying out of 1996 (the “Construction Act”). As the To begin with, you need a “dispute”. That is not most construction related operations. Examples Adjudicator should reach his decision always as easy as it sounds. The dispute must include not only the construction of, but also the within 28 days of the Referral to him, have crystallised: the process of discussion or maintenance and repair of buildings, including negotiation must have ended without a solution it is a very speedy process, and one architectural, engineering, design or surveying being found and, most likely, monies claimed that, today, is used in the vast majority work and professional advice. It also includes not being paid. A dispute is not the same thing demolition activities. of construction disputes. as having a claim. Merely notifying the other party of a claim does not instantly mean there is Where does the right come from? a dispute. In those circumstances, the dispute will Primarily, it is a right provided to you by statute. not emerge until it is apparent that the claim is not However, it is acknowledged that parties are free admitted. Whether there is a dispute will depend to agree and provide for their own adjudication on the facts in your particular case. procedure and so your contract may contain an express provision entitling you to adjudicate. If it does not, and you are a party to a construction OK, I have my dispute. What do I contract, your right will be implied into the do next? contract, as a result of the statute. You must look at the contract to see whether Are there any exceptions? the adjudication process is expressly set out or whether any particular set of rules are stated to Unless the contract otherwise provides, the statute apply. If there are no specific rules, or the process will not give you an implied right to adjudicate does not comply with the basic requirements laid if the construction contract is with a residential out in the Construction Act, then the adjudication occupier and relates to a property which that procedure in the Scheme for Construction person will occupy as his home. Contracts Regulations will apply.

Anything else?

Again, unless the contract otherwise provides, How do I start the Adjudication? you will not be able to adjudicate if the contract is really a development agreement. A development Given the speed of the process, tactics are clearly agreement provides for the grant or disposal of important in the adjudication procedure. The an interest in land as well as the carrying out of referring party has time to prepare his case and construction operations on that land. The same should only kick the process off once he is ready. applies to certain contracts entered into under the While, for the reasons set out below, the referring private finance initiative. party should not seek to ambush his opponent, he will be fully aware that the responding party will There are also a number of other specific only have a limited time in which to respond. exclusions, including the assembly, installation or demolition of plant or machinery where the As the referring party, you need to prepare a principal activity on the site is power generation or Notice of Intention. This Notice can be given “at the production of chemicals or pharmaceuticals; any time”, including after the contract works and drilling for oil and gas and extraction of have been completed, and even if the contract minerals. The manufacture and delivery to site of has been determined. It is important that the engineering components is included only if the Notice sets out a brief description of all the contract also provides for their installation. relevant matters which you want the Adjudicator to decide. It is this document which gives the Adjudicator jurisdiction and defines the scope of inbrief

the adjudication. You will not be able to include The Adjudicator may or may not want to hold a What is the effect of the Decision? anything later in the adjudication which is not meeting to ask the witnesses or experts questions. The Decision is binding on the parties and must referred to in this document. It is very much up to him. Any hearing is likely be complied with. to be far more informal than giving evidence in Court. How do I appoint an Adjudicator? What happens if the Decision is The contract may actually name the individual to not complied with? be appointed as the Adjudicator. Alternatively, Are there any rules which the You can enforce the Decision by court the contract may state that one of a number Adjudicator must observe? proceedings. The courts take a robust approach of so called appointing bodies shall appoint the Yes. In addition to any specific rules governing and generally enforce any decision made by an Adjudicator. Alternatively, you may be able to the adjudication, the Adjudicator must observe Adjudicator. Although a hearing will be required, agree the identity of the Adjudicator with the certain rules relating to natural justice. This you should be able to obtain summary judgment. other party. While this means you know what (or basically allows you an opportunity to state your There should not be much delay in doing this. who) you are getting, it also gives the other party case and comment on anything the other side advance notice of the adjudication. says, and vice versa. However, while the rules of natural justice must be adhered to, time is short Can the Decision be set aside? and the adjudication must be conducted in the The Referral time available. Accordingly, the cloth must be cut While the Decision is binding, the paying party (who believes that the Decision is wrong), can Within 7 days of giving the Notice of Intention, to suit. begin fresh proceedings (whether it be in court or you should have the Adjudicator appointed and The Adjudicator must also act impartially and, arbitration), and ask for the dispute to be heard have referred the dispute to him. To do this, you as a matter of good practice, ought not to have afresh. The court or arbitral tribunal is able to will need to serve your Referral. There are no dealings with one party in the absence of or come to a different decision from the Adjudicator. rules which govern the form or content of this without the knowledge of the other. document. However, it will need to contain all your evidence in respect of the dispute. In addition You mean I have to go all the to a full Statement of Case, depending on the When must the Adjudicator reach nature of the case, it may also contain a copy of way to trial to get the decision a Decision? the contract, contemporaneous correspondence overturned, even if it is obviously and other documents, witness statements and The basic rule is that the Adjudicator must reach wrong? expert reports (if necessary). his Decision within 28 days of the date of the Yes I am afraid so. Adjudication can be rough Referral. The Referring Party, can agree to extend justice. However, in limited circumstances, it may this by 14 days. After that, both parties must be possible to fast track this provided that there agree to any further extension. The Procedure are no disputed issues of fact. The only other way After the Adjudicator has been appointed and Depending on the nature of the Adjudication, you to overturn the Adjudicator’s Decision is to prove you have served your Referral, you are pretty may want to give some thought to allowing the to the court at the summary judgment stage that much in the hands of the Adjudicator. There is Adjudicator more time to reach his Decision. 28 one (or more) of a number of grounds entitling no prescribed procedure: the Adjudicator will days passes very quickly indeed. the paying party to resist enforcement apply. decide the relevant procedure and give directions These include: accordingly. Whether the adjudication is under • No construction contract; the contract or the Scheme, it must enable the The Decision Adjudicator to take the initiative in ascertaining While the Decision must be in writing, there is • No dispute capable of being referred to the facts and the law. In practice the parties adopt no prescribed form that it should take and the adjudication at the date of the referral; a fairly standard procedure. The Adjudicator will Adjudicator may not have to provide reasons • The Adjudicator strayed outside of his inevitably want to see what the other party, the for his Decision. It is often advisable to ask the jurisdiction; and Responding Party, has to say in response to your Adjudicator to provide reasons. It will help you and • A breach of the rules of natural justice claim and it will set this out in a document aptly the other party understand how the Decision was by the Adjudicator in his conduct of the named the “Response”. You may or may not reached. be able to persuade the Adjudicator to accept adjudication. a Reply. Even if he does not, you may wish to If so, the Decision can be set aside as a nullity. send him one in any event. He may still have to take it into account when reaching his decision. inbrief

• Are all the relevant people from your team going to be around for the next month What about a really small error, or so? They need to be. They will need say the Adjudicator added up the to comment on the Response and be damages wrongly? available to help prepare a Reply and the Well, in those limited circumstance, the Adjudicator may want to meet them if they Adjudicator has the power to amend his Decision are witnesses. under the slip rule, but the scope of the rule is • Consider extending the timetable if narrow and the time in which to do so is limited, necessary. At some point during the process, usually 5 days. you may also want a day or two extra to be able to respond. Remember 28 days passes very quickly. What about my costs? • Have you asked the Adjudicator for reasons? As a general rule, you will not be able to recover You should do so, otherwise you may get a your costs, even if successful, unless that is, both one word answer. parties give the Adjudicator express jurisdiction to decide whether one party should bear the other’s costs in whole or in part. However, the Adjudicator can, in any event, decide which party For further information should pay his fees and expenses. The Adjudicator on this subject please contact: usually decides that these should be borne by the “losing party”. Owen Williams Managing Associate Practical Tips Real Estate T + 44 (0) 20 7074 8218 • Is your dispute suitable for adjudication? Not [email protected] all are. If it is not, do not adjudicate.

• Are you sure you have a dispute? While ambush sounds a good idea, it may rebound on you. Make sure your dispute has crystallised.

• Does your Notice of Intention cover all of the issues? It must. Although it is a short document, it is very important.

• Is your house in order and the Referral completely ready? If it is not, do not serve your Notice of Intention. Only start when you are ready. When the clock starts, it ticks fast.

This publication provides general guidance only: expert advice should be sought in relation to particular circumstances. Please let us know by 5 Chancery Lane – Clifford’s Inn email ([email protected]) if you would prefer London EC4A 1BL not to receive this type of information or wish DX 182 Chancery Lane to alter the contact details we hold for you. T +44 (0)20 7074 8000 | F +44 (0)20 7864 1200 www.lewissilkin.com © March 2017 Lewis Silkin LLP