Everything you wanted to know about adjudication but were too afraid to ask

What is adjudication?

Adjudication is the process of obtaining a quick and temporarily binding decision in relation to a dispute. It is temporary because if the parties are still unhappy after they have received the adjudicator's decision, they can at a later date seek a final and binding resolution to their dispute, either by going to arbitration or to court. However, until the final determination of the dispute, the adjudicator's decision is binding and must be complied with.

Where did it come from?

It arrived in 1998 when the Housing Grants, Construction and Regeneration Act 1996 (usually called the Construction Act) came into force. The Act gave effect to Sir Michael Latham's reports to government. In particular, the parts aimed at cutting down on payment abuse and the right for either party to give notice of an adjudication.

When do you appoint an adjudicator?

You can call in an adjudicator once there is a dispute. Put simply, that means when one side has made a claim and the other side has not paid up, or has not paid up in full.

It is not that simple though. In legal terms, the dispute must have "crystallised", which means in short that the claim must have been put to the other party and looked at objectively and that the other party must have, by its words or conduct, rejected the dispute.

Between 1998 and early 2005 there were plenty of arguments in court about whether a dispute is a dispute or not. The courts have recognised that this was becoming an area by which the process was being frustrated and simplified matters in 2005.

What causes a dispute?

The most common cause is poor information flow with respect to payment. The Act sets out how payments should be made, including the requirement that the paying party should give notice to the party due to be paid of what and when they are going to pay. And if they are not going to pay all that is due, they have to say so and give good reasons why. It is surprising how many people do not bother with that last point and think that it is OK to withhold payment.

Can I pick an adjudicator I know and trust?

Well, you could try. But the opposing side may object, suspecting that they were your tame, friendly adjudicator. Having said that, if the adjudicator is one that is known and respected by both parties it will help as both parties are more likely to accept the decision.

What do we do if we cannot agree on an adjudicator?

Some contracts name an adjudicator. But that can be unhelpful as they may be on holiday or, as in one case, they may even be long dead!More common is the naming of a nominating body in the contract, which is obliged to provide any party who requests it with the nomination of an adjudicator. You contact the body and it has seven days (including weekends) to find an adjudicator that can handle your dispute. In practice, this requires the body to appoint someone within five days so that the adjudicator is in place by the seventh day. The CIOB is an adjudicator nominating body.

How long does it take?

Once you have referred a dispute to an adjudicator they have to come to a decision within 28 days. They can extend this to 42 days if the referring party agrees and longer still if both parties are in agreement.

My shortest adjudication took five hours to resolve. My longest took six months full time, with a quantity surveyor assisting me.

How long do I have to prepare my case?

Well, if you are the one referring the dispute, you can take all the time you need before you call the adjudicator in. If you are the other party, you will receive a notice of adjudication and have just seven days to gather all your evidence together.

What should I do if I receive a notice?

Do not leave it festering in a draw for a couple of days while you work out what to do. As there is so little time, you should get it to your commercial director ASAP so that they can organise the necessary resources to gather information together. Sometimes a few well chosen words from the commercial director may sort things out.

Who should gather evidence?

It could be a senior QS, an external claims consultant or even a lawyer. That sounds expensive but the result of not getting a good case together can be considerably more expensive because the decision will be binding.

What does an adjudicator do?

They examine all the evidence they have received from both parties. They can ask questions, either by phone or with face-to-face interviews. They can visit a site and can employ an expert witness if they require one.

However, the amount of time and money they spend should be appropriate to the amount in dispute.

Should I get a solicitor to prepare witnesses prior to meeting with the adjudicator?

Maybe. But the best thing is for the witnesses to be courteous to the adjudicator and remember that they are there to assist the adjudicator by answering their questions.

What can I do if I think the adjudicator is poor?

Not much as they set the procedures. All you can do is suggest alternative procedures. However, if both parties think the adjudicator is poor they can sack them.

How do they decide?

The adjudicator should be looking at what the parties have said to them in their submissions and decide on the basis of these submissions. So if, for example, the dispute is over the non-payment of a certified sum, then they should be considering the excuses for not paying and whether these are valid. They should not be asking themself how much the work was in their opinion worth and how much should have been certified.

What if I disagree with the decision?

Most people are happy with the decision. There have been circa 15,000 to 16,000 adjudications since 1998 and only 1 or 2% of those have gone to court. However, if you wish to dispute the decision it will be very difficult. On the whole the courts will say "pay now, argue later". So it is usual to pay and if you are really dissatisfied commence arbitration or litigation to determine the dispute. This is the case even if you think the adjudicator got it wrong. There was one case where the adjudicator made a £250,000 mathematical error and the judge still said "pay up".

Who pays the adjudicator?

Both parties are liable to pay the fees but the adjudicator decides in what proportions they are to be paid. It is usual that the successful party will not have to pay the adjudicator. I do consider apportioning the cost as it is rarely a black and white case. For example, one party may have inflated its claim, the other may have inflated the set-off.

How can I avoid getting involved in adjudication?

Being familiar with the Construction Act and what it says about paying people is important.

How can I be prepared for an adjudication?

It is really a case of good record-keeping, good management and good contract administration.