The Adjudication Process

Adjudication was introduced as a fast track ADR process with a binding decision usually delivered by the Adjudicator within 28 days.

The major commercial advantage of Adjudication is the speed and relatively low cost of the process when compared to litigation, with an enforceable decision being reached. The cost of Adjudication was discussed in the previous posting, but a word of caution as while the Adjudicators cost may be recoverable where successful generally the legal and expert fees are not normally recoverable, even by the successful party. This means there is no room for error, and mistakes can be expensive.

As an enforceable decision is reached so quickly, adjudication is now the most powerful, universally accepted ADR method to resolve disputes in the UK Construction Industry.

The Process

As discussed in the previous post all construction contracts are now able to set in motion Adjudication. However there is a caveat here in relation to domestic contracts. Under these form of contract you only have the right to Adjudication if the Adjudication clause has been included in the contract, or by subsequent written agreement. In this instance the rules for the Adjudication will be confined to those defined in the contract clause or agreement.

The reasoning for not including Householders / Consumers in Adjudication is to protect them from a process that can be onerous. However this should also be balanced against the potential cost for the same consumer to institute legal proceedings to assert a legal right under the contract. Therefore including this provision in a contract, should be beneficial in the event of a dispute. However even here this can be caveated as either party can commence the Adjudication an unscrupulous builder could take advantage of the relative naivety of the Householder. It is why if the contract is going to be a standard form, such as the Joint Contract Tribunal Minor Works form, then not only should the Adjudication clause be activated but also a Contract Administrator be appointed to act impartially between the two parties.

Householders / Consumers can use the Consumer Adjudication Scheme promoted by the JCT in its Homeowner Contract. The JCT Consumer Adjudication Scheme is capped at £100 (Exclusive of VAT) per hour with a maximum of 10 hours, which caps the cost of the Adjudicator at £1,000 (Exclusive of VAT)

To Adjudicate or Not

As the cost of preparation for Adjudication can be relatively expensive and is not generally recoverable whatever the result, the first route to resolution should be negotiation and discussion. However cases that end in Adjudication, particularly in relation to payment, are usually as a result of the Employer failing to make payment and refusing to engage further. This is usually after the practice of “Subby Bashing” has been employed to try to reach the best financial outcome for the Employer.

The only other real concern will be over any future works with the Employer and how the Adjudication will be received by the senior management of the company. Even here it could even be favourable as it may show practices that the Directors were unaware of.

The reality is that if there is sufficient distances between what the Employer is prepared to pay and what you need to continue to function as a going concern, then not only will future relationship not be a consideration but provided you case is strong then Adjudication will be the only option.

The First Step

The first step actually starts when you enter into contract and it’s the three R’s, Records, Records, Records. As Adjudication in its plainest form is two people telling a third a story and he will decide who is more likely to be telling the truth, record keeping is paramount.

Most parties to a contract seem to think it’s a document that is put in place and then never followed. The second step is to follow the contract, in particular around how to submit Interim Application for Payment, Employers Instructions and Variations. Additionally where a contract is entered into and quantities are fixed, ensure the basis of agreement is included as an Appendix, likewise the method of measure for a re-measurable contract. In short, put the effort in at the start so that is Adjudication is inevitable then you have a strong chance of success from the start.

Seeking Advice

It is quite possible for anyone to commence and manage an Adjudication, however the chance of success is greatly enhanced by using a company that specialises in ADR (I would say that I want your business). But it is also true that you will enhance your chance of success and if you are the Referring Party (the party that refers to Adjudication) it is often likely that the Responding Party will be represented by a specialist company.

Adjudication is often referred to a “rough justice” as its far less informal than litigation and an initial assessment of your case by a specialist can often be the deciding factor, as this is a results business and no-one wants to recommend a company commence the pre planning for Adjudication with little or no chance of success. £5,000, £10,000, £20,000 of turnover will be far out-weighed by the negative perception that will follow a badly advised Adjudication.

So we have received advice and have decided that Adjudication is the only route open to resolve the impasse and dispute, next is timing and a little bit of secrecy.

As the Adjudication is a fast tracked solution and is usually 28 days from start to finish, the secrecy bit is that it will place additional pressure on the Responding Party if the first they know of the Adjudication is when they received the Notice of Appointment. Although in reality when there has been a series of letters written and these contain the threat of Adjudication, these threats are often ignored.

The ideal process will then be to commence collating all the documents that you would be seeking to use as Exhibits to demonstrate your case for the writing of the Referral Notice (We will look at the Referral Notice in greater detail next time)

Once the Referral Notice is complete you will then seek to have an Adjudicator appointed, who must be a professionally qualified expert in their field, and the process will start with his appointment.

In some contracts it will have been pre agreed who the Adjudication Nominating Body (ANB) will be and even the Adjudicator named. In these instances these details will need to be included in the form that is completed.

Where a contract is silent on an ANB then you can use any of numerous ANB’s in the country. However there are a small number of real specialist bodies and it would be best to make the Referral to them.

The clock is ticking

The Nomination is complete, the Adjudicator has been appointed and has confirmed no conflict of interest exists that will preclude them taking the case, what next?

The Adjudicator will usually write to confirm his appointment together with the terms & conditions under which he is being appointed, in reality the important part will be the hourly rate he will charge and the terms for his payment.

As the legislation is relatively loosely worded to a certain extent, as the Adjudicator has been appointed there can be no real challenge to his terms and conditions.

As a result of some companies refusing to make payment of the fee’s when the Adjudicator provides his Determination there are instances when the Adjudicator may demand payment up front of a sum on account and then expect this to be replenished as and when it has been expended. This will usually need to be paid by the Referring Party. If the Referring Party is successful then this will form part of “The Award” and if not paid by the Responding Party can be enforced as a debt in the courts.

There are instances where the Adjudicator will undertake the Adjudication without the fee’s being paid up front but will require his fee’s to be settled before he provides his Determination. Again here it is usually incumbent on the Referring Party to make payment and the amount due from the Responding party becomes part of “the Award.” Again if not paid the party in breach can be subject to court action from Summary Judgement of the debt.

Also as part of the appointment the Adjudicator will set a date by which the Referral Notice must be served on the Responding Party with a copy to the Adjudicator. It is deemed that the documents are served at the same time. From this the Adjudicator will set a time table to allow a binding decision in 28 days.

Again this is a fluid timetable from Adjudicator to Adjudicator, but will have the following submissions generally:

• The Responding Party will make their formal response to the claim set out in the Referral Notice as well as its arguments against the specific remedies sought

• The Referring Party will have an opportunity to rebut or clarify the document submitted by the Responding Party and often have to dismiss effective counter claims made within the Responding Parties submission

• Some Adjudicators may allow a further response by the Referring Party although both parties may also then be allowed to make a final submission each, usually to be lodged on the same day.

Following this the Adjudicator will review the submissions (although he may have started this process already before the final submissions) and during the phase after the final documents are lodged and his proposed Determination the Adjudicator will pose questions to either or both parties where they require further information.

This is the period of worry and concern for the parties as they try to second guess the intensions and leanings of the Adjudicator prior to the Determination being delivered.

Adjudication is a relatively inexpensive form of dispute resolution, however an element that is missing is the formal structure of a court and it means that where there is ambiguity an unscrupulous party can bend the truth to suit the claim they are trying to portray, which is where the 3R’s come into play as if either party has all the records, then they are in the strongest position.

Is Adjudication a positive addition to the ADR frameworks?

Absolutely, as it allows the real small companies a voice to assert their right where formal ligation would be prohibitive on cost grounds and can result in a David defeating Goliath scenario.

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