A quick guide to adjudication

Adjudication is a compulsory dispute resolution mechanism that applies to the construction industry in the UK. This note explains what adjudication is, what types of construction disputes it is appropriate for and gives guidance on what to do if you receive a notice of adjudication.

What is adjudication?

• Adjudication is a “pay first, argue later” statutory mechanism for resolving disputes in the construction industry.
• Adjudication was introduced by the Housing Grants, Construction and Regeneration Act 1996 (Construction Act 1996).
• The parties cannot contract out of adjudication.
• Adjudication is designed to protect cash-flow during construction.
• Adjudication is a 28 day procedure.

What is adjudication appropriate for?

- For resolving claims relating to:

• interim payments;
• delay and disruption of the works;
• extensions of time for completion of the works; and
• the final account.

- Although not originally designed for complex claims, an adjudication can relate to:

• breach of contract;
• termination of a contract;
• professional negligence; or
• complex multi-party disputes.

What does the Construction Act 1996 do?

- It gives a party the right to refer a dispute to adjudication provided:

• they are a party to a construction contract; and
• if the contract was entered into before the effective date (www.practicallaw.com/6-204-4037) (that is 1 October 2011 in England and Wales, and 1 November 2011 in Scotland), the contract is an agreement in writing.

- The Construction Contracts (England and Wales) Exclusion Order 1998 (SI 1998/648) excludes specific types of work and contracts from statutory adjudication. After the effective date, further exclusions apply.

What is the effect of an adjudicator’s decision?

• Adjudicator’s decisions are interim-binding: they are binding until the dispute is finally determined by legal proceedings, arbitration or by agreement.
• The Technology and Construction Court (TCC) enforces adjudicator’s decisions.
• Successfully challenging an adjudicator’s decision is rare.

What should I consider before starting an adjudication?

• Ensure the dispute has been aired between the parties: ensure it has “crystallised”.
• Define the dispute in the notice. Unless the contract allows more, include only one dispute.
• Comply with the contract’s time limits.

What do I need to consider if I receive a notice of adjudication?

• Do I have a construction contract? Is it in writing? (Note, this only applies if the construction contract was entered into before the effective date.)
• Is there a dispute? Has it crystallised?
• Is the dispute referred to in the notice the same as the dispute that has crystallised?
• Has a single dispute been referred to adjudication?
• Has this dispute been the subject of a previous adjudication?
• Has the adjudicator been validly appointed?
• Should I challenge the adjudicator’s appointment or jurisdiction?

What do I need to consider once the adjudicator has issued the decision?

• Was it completed and communicated on time?
• Are there clerical errors or mistakes that the adjudicator can correct under the slip rule?
• Has the adjudicator followed the rules of natural justice, that is, avoided conflicts of interest, acted fairly and without bias, gone beyond his remit or taken secret soundings?
• Has the adjudicator answered the correct question, even if wrongly? An adjudicator can be wrong, but must answer the questions he was asked.