Caught in a bind

At relatively low cost, a party can commence an adjudication by virtue of the 1996 Construction Act when it wishes and expect the award to be swiftly administered. Moving on from disagreement is also imaginable since no dirty laundry has been aired in public. Remember those disputes on Crossrail? Thought not.

Adjudication flourishes but is often more admired than loved. The process increasingly appears punctilious and antagonistic, leading to elaboration and expense. Furthermore, while adjudication was never meant to be reserved for payment issues, the abridged procedure can fare worse in professional negligence and large final account claims. For better or worse, it’s rough and ready.

Nonetheless, attempts to limit its usage are invariably batted away by the courts. Adjudication serves the greater good so the view is that it should stop at nothing.

There are certain safeguards. Crucially, Section 108(3) of the act provides that adjudicators’ awards are only binding pending final determination of the dispute by legal proceedings, arbitration or the parties’ agreement. That last possibility tends to be forgotten.

When is it worthwhile to relinquish challenging a dud decision? Anjali and Mohit Khurana may well wonder.

These homeowners engaged Webster Construction Limited for work on their Cheshire home. The construction contract included a provision that if the amount to pay the contractor could not be settled, the parties should agree to abide by the deliberations of an agreed independent quantity surveyor. This was an “agreement to agree”.

The letter from Webster’s lawyers was no set of stock terms. It was a fair offer given in good faith and was deemed approved by the claimants

They fell out as to the extent of the project’s completion and, consequently, how much money was due. Webster’s solicitors asked their counterparts if their clients would agree for the quantity surveyor to perform his duties in accordance with the statutory Scheme for Construction Contracts and for his verdict to bind the parties. They would. Residential occupiers are exempt from the Construction Act but this arrangement created an adjudication agreement with the surveyor as adjudicator.

Dissatisfied with the surveyor’s decision, the Khuranas wanted the matter finally determined in court. However, judge Stephen Davies, sitting in the Technology and Construction Court, concluded that this was not possible. The proposal contained within the legal representatives’ correspondence had waived both sides’ rights to any final determination of the award.

The claimants’ other argument - that it fell foul of the Unfair Terms in Consumer Contracts Regulations 1999 because it had been drafted in advance as part of a standard form instead of being individually negotiated - was given short shrift. The letter from Webster’s lawyers was no set of stock terms. It was a fair offer given in good faith and was deemed approved by the claimants.

Besides the implication that parties should choose carefully when (and whether) to be constrained by an adjudicator’s decision, the case provides a useful chance to examine how disputes are dealt with in the standard form contracts often used by homeowners.

These individuals are excluded from the Construction Act because parliament correctly predicted that they would be less familiar with it, which could disadvantage them. The recent hike in court fees may make adjudication a more attractive option. Nonetheless, a market segment where problems often arise from dysfunctional relationships and where the issues in dispute can be blurry is one crying out for alternative dispute resolution (ADR), a method that should be better promoted.

It’s a message that the Federation of Master Builders and RIBA, with its new Domestic Building Contract, have heeded. Even so, the terms of some agreements frequently used for domestic works - the JCT’s 2011 Building Contracts and 2015 Home Owner Contracts and the CIOB’s - permit adjudication at any time, as if the Construction Act applies.

Research tells us of positive results for negotiation and mediation in the United States in homeowner construction disputes and, in the UK, in employment and family law matters. Being able to resolve differences by interacting with each other rather than with lawyers would be a preferable outcome for homeowners and their contractors alike. A nudge in the right direction wouldn’t hurt. Contractual obligations should force parties to engage in a straightforward ADR method, such as attending negotiations, to sort out differences. Only if those fail should they be allowed to resort to adjudication.

Francis Ho is head of construction at Olswang