There is a Statutory Right to Adjudicate Commercial Construction Contracts.
S.108 (2) (a) HGCR Act 1996:
"The contract shall enable a party to give notice at any time of his intention to refer a dispute to adjudication"
Irrespective of whether contracts are written or oral (after 1st October 2011) there is an absolute right to Adjudicate.
There is no legal process that can stop Adjudication in commercial cases.
If there are contract conditions demanding mediation, meetings, Court, Arbitration to be explored first, these types of clauses are void.
The Adjudicators decision is legally binding on the parties and unless otherwise agreed to a later time, is made within 28 days of the referral.
All Commercial Construction Contracts must comply with the Construction Act, which primarily focus on Payment Rights and Adjudication Rights. The contract adjudication clause must comply or it will be void. If the Adjudication clause is void, deleted or non-existent the Statutory "Scheme" applies. The Scheme referred to in this guide is part of the Construction Act Legislation and provides implied contract terms for governing the Adjudication.
Arbicon have prepared a guide to the commercial adjudication process, if you are new to Adjudication please feel free to print this section for your records. Please do not hesitate to call Arbicon or email us with any questions you may have. Arbicon do not recommend that you attempt to take part in Adjudication without professional advice from Arbicon.
On 1st May 1998, the Housing, Grants, Construction and Regeneration Act 1996 (Part II), (The Construction Act) came into force and changed the UK Construction Industry forever. Adjudication became a statutory right, as defined by the HGCR Act 1996, for parties to contracts operating in the construction industry, to Adjudicate their issues. The HGCR Act 1996 was then updated and amended by the Local, Democracy, Economic Development and Construction Act 2009 (Part 8) (The New Construction Act), which came into force for all contracts formed on or after 1st October 2011. (See our Guide on Construction Acts.)
In association with the Construction Acts, as noted above there is a Statutory Instrument known in the industry as "the Scheme" to provide implied contract terms to make any Adjudication work.
The Scheme is the Scheme for Construction Contracts (England and Wales) Regulations 1998, coming in to force on 1st May 1998; and the amended Scheme, the Scheme for Construction Contracts (England and Wales) Regulations 1998 (Amendment) (England) Regulations 2011, which came in to force on 1st October 2011. Contracts after 1st October 2011 in Wales and Northern Ireland are subject to a slightly different amended Scheme.
Many standard forms of Construction Contract such as the JCT Construction Contract suites incorporate the Scheme as the rules for Adjudication, thus making things simple avoiding bespoke rules that may prove to be void as such may not be Construction Act compliant. In such an instance the Scheme would apply so applying it as the default clears all doubts in procedure.
The Construction industry due to its complex nature, has always suffered major problems with disputes. Deliberate non-payment and slow payment for all manner of excuses were normal characteristics, the problem was rife. As a result the Industry always suffered the highest rate of bankruptcies as traditional legal processes such as court and arbitration proceedings are commonly slow, complex, difficult, costly and thus often impractical to use.
The speed of judgement of any dispute by Adjudication is normally around 35 days it can be thus a practical and relatively inexpensive option.
Adjudication is contractual process which provides an interim "quick fix" solution to disagreements between two contracting parties. It involves the appointment of an Adjudicator, normally takes around 35 days to complete and the resulting Adjudicators decision is binding between the parties.
The Adjudicator is rather like a football referee, he makes an assessment of the facts and the rules, then makes a decision that cannot be argued with and must be immediately complied with. The aggrieved party can only appeal by taking the matter to court or arbitration.
Adjudications are commenced when there is a dispute between the parties. This can be for almost anything, however most Adjudications relate to payment disputes. In such cases the decision will reflect whether or not an immediate transfer of assets should take place between the parties.
By default, the process of Adjudication is officially an interim measure as fresh court or arbitration proceedings can follow or be run at the same time, however in practical terms such proceedings rarely occur and it normally means the end of the dispute between parties.
The process is straightforward, however for any party involved it is necessary to carefully operate within the Adjudication procedural rules that exist; research and identify the law and prudently execute arguments to persuade the Adjudicator to favour your case. If this is not done, the case may easily be lost resulting in payment liability to the other party and having to pay the costs of the Adjudicator.
Payment of an Adjudicator's award usually must be made forthwith, failure to comply with such an award will allow the winning party to swiftly enforce the award in court by applying for summary judgement in the High Court (TCC).
If you are in construction contract and you are served with a Notice of Adjudication the time constraints are seriously short. You need to act immediately by calling ARBICON for advice. It is not recommended that you attempt to tackle the Adjudication process without our assistance. ARBICON are specialists in the conduct of Adjudication and Construction Legal Matters.
There are two types of adjudication these are: (1) Contractual Adjudication; (2) Statutory Adjudication. The type depends on what is in the contract.
• (1) Contractual Adjudication
If you have a contract with adjudication clauses, for example JCT standard forms usually have these, the parties are bound to follow the rules and procedures as laid down in your contract this is known as a Contractual Adjudication. Where any clauses or rules do not exist the statutory provisions as noted in (2) below apply.
• (2) Statutory Adjudication
If you have no clauses in your contract in respect of adjudication, you have the right to a statutory adjudication and you, the parties, are bound by the rules and procedures of the Construction Acts and the Scheme as defined above. There are however criteria that must be met to qualify for a Statutory Adjudication.
For example, pursuant to the HGCR Act 1996
In a "construction contract" (section 104) carrying out "construction operations", (section 105) which do not involve a "residential occupier" (section 106). Having met these criteria a right to Adjudication arises if there is a "dispute" that can be referred to Adjudication "at any time" (Section 108).
If your contract was formed prior to 1st October 2011, then the contract must be a "contract in writing" (section 107). This section was repealed in the New Construction Act.
As you might expect the definitions of "construction contract", "construction operations", "residential occupier", "contract in writing" and "dispute" have now been well tested in enforcement hearings, thus there are now established legal precedents for these terms. It is therefore essential to ensure that you fall within these qualifications, otherwise the Adjudication will not get past "first base".
The New Construction Act (LDEDC 2009) for all contracts entered into after 1st October 2011, repealed section 107 of the HGCR Act 1996, so that there is no impediment to the right to Adjudicate under statute if a contract is oral, written or both. The new Act also outlawed any cost clauses, for example one that makes one of the parties (normally the payee party) liable for all Adjudicator fees and legal costs whatever the outcome! Such clauses are void.
There are two types of adjudication, Contractual and Statutory. The Construction Acts that apply, depend on whether the contract was formed before or after 1st October 2011. If the Statutory adjudication is used there are criteria for it to be valid. If any adjudication terms are missing the Scheme applies in all cases and fill in the gaps.
No, if you meet the criteria of Construction Act and there is a Commercial contract you have the right over all dispute resolution processes in a contract Adjudicate. The statute overrides any express or implied provisions to exclude Adjudication and allows Adjudication "at any time".
If you have been forced into an adjudication and the Construction Act applies, YOU HAVE NO CHOICE you are in the adjudication whether you want it or not. If you choose to ignore it, this will be at your peril as the result is likely to be against you plus the Adjudicator's costs.
Adjudication is a contractual process, thus it is possible to agree the procedure as to costs of the Adjudication. However under the New Construction Act any agreement in the contract as to party costs prior to the execution of the contract are void, thus in contracts after 1st October 2011, costs can only be agreed after the contract has been agreed and started. Prior to the New Act there is common law in place that deals with pre-contract cost agreements, which is not dealt with here.
There is also and not in all cases the possibility of Cost recovery under the Late Payment Act which we deal with below.
The costs that arise in an Adjudication typically are; (1) The Adjudicators fees and expenses; (2) The Party Representative(s) fees and expenses; (3) The Adjudicator Nominating Body appointment fee.
(1) The Adjudicators fees and expenses
The Adjudicator will normally at the outset advise the parties of his rates for charging, normally an hourly rate plus disbursements. At the end of the Adjudication he will advise the parties of his total fee and who has to pay it. The apportionment of his fee is totally at his discretion, but it is usual for the loser to pay. There are no real yardsticks for the typical values of these fees as it depends on the complexity of the case, nut currently one might expect hourly rates between £210 and £350 per hour plus VAT and disbursements.
In the Statutes, "the Scheme" states (part l, section 25) that :-
"The adjudicator shall be entitled to the payment… of fees and expenses… The parties shall be jointly and severally liable for any sum which remains outstanding following the making of any determination on how payment shall be apportioned".
The "loser" normally pays the Adjudicator's fees and expenses, but that is not set in stone. The Adjudicator may make each party liable for a portion of his fees at his discretion. It is also not usual for the Adjudicator to order the Referring party to pay his fees in any event, which the Referring then has to recover from the Respondent if the Respondent is liable for the Adjudicator's fees.
Joint and several liability for the Adjudicator's fees should also be importantly noted. If the "loser" is ordered to pay all or part of the fees then fails to pay the Adjudicator; the Adjudicator can recover all from the "winner" leaving the "winner" to sue the "loser" for them as part of the Decision.
(2) The Party Representative Fees and Expenses
This is the cost of employing a professional specialist to act on your behalf such as ARBICON.
The Scheme is silent on the issue of party costs, thus Adjudicators normally hold that unless there is a valid agreement between the parties on how the Adjudicator should deal with party costs he is unable to deal with them. In such an instance no award will be made and the cost of the party representative is treated on an each side pays its own costs basis.
Where no cost award can be made, it has been our experience that the value of interest awarded can cover the cost of our fees.
If the contract includes a provision for Debt Recovery Costs pursuant to the Late Payment of Commercial Debts (Interest) Act 1998 and the Late Payment of Commercial Debts Regulations 2013 or terms that reflect these statues, there maybe a case for recovery of costs and interest for Late Payment. These Statues apply where there is no provision in the contract for interest for late payment or the interest rate is deemed to be inadequate. The 2013 regulations have introduced a "reasonable costs" entitlement for pursuing a debt that is paid late. The Act allows recovery of simple interest of 8% over the Base Rate.
If there is a provision in the contract for interest, all JCT forms include 5% simple interest as an example, this is deemed to include debt recovery costs and the Late Payment Acts will not apply.
TIP: If you are a Payee, make sure there is no provision at all or incorporate the Late Payment Act. If you are a Payer make sure you include a provision such as the JCT one.
Arbicon have successfully prosecuted claims for costs in adjudication otherwise precluded using the Late Payment Legislation, recovering interest and all of ARBICON's costs following the success Arbicon achieved for Lulu Construction Ltd (Lulu Construction Ltd v Mulalley & Co Ltd  EWHC 1852 (TCC)) in prosecuting and enforcing the payment of legal costs. However in late 2017, in the unreported case of Enviroflow Management Ltd v Redhill Works (Nottingham) Ltd TCC  the Court held that costs in adjudication claimed under the Late Payment Act could not be recovered, reversing the established practice. Arbicon will now have to claim your costs incurred outside of the adjudication process until the Enviroflow case is overturned or legislated against. Arbicon have produced an article on Adjudication Costs explaining further see "Adjudication Costs - Can You Claim Your Costs in Adjudication?"
(3) The Adjudicator Nominating Body Appointment Fee
The right to Adjudicate allows unilateral commencement of proceedings by either party. The contract Adjudication clause may either name an Adjudicator or an Adjudicator Nominating Body (ANB), who either party may engage in the commencement process of Adjudication. If you do not have a named Adjudicator in your contract and you cannot agree on the appointment of the Adjudicator, then you can ask the named ANB to appoint an Adjudicator for you. There is a fee for doing this depending on who the ANB is normally around £300 to £500 plus VAT. However, if there is no named ANB, you may choose any ANB to make the appointment which can be free.
Any ANB costs are considered as a party cost (as in (2) above) and not an Adjudicator cost, thus in the absence of an agreement to deal with it, the Adjudicator will not make an award for its recovery. TIP: The simple answer is to delete all named Adjudicator's and nominating bodies in the contract. The "Scheme" will apply and a Free ANB can then be used such as CEDR.
ARBICON are the first people to consult in order to proceed with an Adjudication. Whether we are to act as Adjudicator or Adjudication Advocates (your representatives), it is important that you speak to us first so that you make the appropriate decision and preparation.
Adjudication can be started "at any time" according to section 108 (2)(a) of the HGCR Act 1996, thus having established that you qualify for the Adjudication process, you can start immediately.
ARBICON appointed as Adjudicator
If you wish us to Act as Adjudicator or one of our Adjudicator's is named in your contract, please contact us from here:
alternatively send email or post to our Peterborough office. Your request will be dealt with and one of our consultants will be in contact with you promptly within 24 hours.
ARBICON appointed as Adjudication Advocates
If you wish us to fight your case for you essential preparation is required first. We will guide you, by preparing your case by identifying the scope of the dispute, analysis of the contractual rights, conducting an investigation into the law and assessing the quantum. A narrative and evidence is collated which is then argued to a desired successful conclusion ARBICON provide a FREE initial consultation at their offices in Peterborough, this is on the condition that you supply us with the contract and all other relevant documents so that your case can be properly evaluated into a proposal. We will tell you if you have a case or not. Our team works together on each case, so that law and remedies to issues are cross checked and no stone is left unturned. We will then build the case to "Adjudication Standard". This is important as if you pursue a claim without the evidence you will fail. Do not assume the Adjudicator will help you or read your mind, if your points are not clear or set out properly with evidence, you risk failure. Nearly all Adjudications prosecuted or defended by ARBICON have been successful, this is due to a methodical approach, experience from many years of practice handling hundreds of cases.
Once the subject matter of the claim is identified and valued, it is important to identify if the other party has been served with all the details of the claim. Any missing detail should be served prior to the issue of proceedings so that it is possible for a "dispute" to exist or crystallise.
If the claim is then subsequently denied or ignored after a reasonable deadline has expired, you have your "dispute" and you are ready to proceed to the starting line of the Adjudication.
A "Notice of Adjudication" is served on the other party. An essential document, which gives only brief details of the Adjudication, naming the parties, the dispute and what exactly the Adjudicator will be asked to decide and it legally gives the Adjudicator the scope of "jurisdiction". The adjudication starts here.
Within seven days of the start, the Adjudicator is appointed and the case in detail is presented or "Referred" to him. On receipt of this detail, known as the "Referral Notice", the Adjudicator's timetable begins, he has 28 days to make his Decision. During this period the Responding Party will make their case and there may be a meeting with the Adjudicator, plus often a flurry of written arguments and further submissions. If necessary, this time may be extended by agreement to accommodate submissions and the making of the Decision.
If you would like a Consultant to call you back to discuss ARBICON helping you with your dispute please submit our form here:
alternatively contact us by email or post to our Peterborough Office for processing. One of our consultants will call you promptly within 24 hours.
If the Adjudicator has been validly appointed in accordance with the contract or the Construction Acts, you will not be able to remove the Adjudicator. However, as stated before, Adjudication is a contractual process, thus it is possible to dispense with the Adjudicator by agreement with the other party, although this is highly unlikely. The only other option is to persuade the Adjudicator to resign. This might be on the basis that he has an interest in one of the parties and cannot deliver a balanced unbiased decision. It is more likely that any resignation request that has any chance of success will come from a jurisdictional challenge on a technical or procedural point not on the person.
The jurisdiction of the Adjudicator, is the power or right to decide within the limits of the scope of a dispute referred to the Adjudicator in the Notice of Adjudication.
When Adjudication starts, you can often expect a jurisdictional challenge to be made. This will be a demand that the Adjudicator bring the matter to a close by resigning his position. Typical examples of where an Adjudicator may lack jurisdiction are; where the appointment is invalid due to non-compliance with the contract or the Construction Acts; the contract itself may not comply with the Construction Acts thus Adjudication may not apply; there is no dispute to decide (there are numerous reasons for this); a defective notice or incorrect service of documents; the matter has been adjudicated before; there is a conflict of interest.
A successful jurisdictional challenge can be fatal and expensive for the party seeking enforcement, but such success is only likely to come about by a procedural failure by the Adjudicator. ARBICON have a thorough knowledge of the specialist Adjudication Enforcement Law and experience in Adjudication Practice and Procedure, which is essential when acting as an Advocate, which many law firms do not understand. The management of Jurisdictional challenges is of pursuant importance.
Adjudication definitely does work, take it from us, it is now the accepted established leader of all construction dispute resolution methods in the UK. There are over 500 enforcement cases over the past two decades to test it, where parties have attempted to resist the process and made the rules. Most defences fail, in instances where parties have succeeded in resisting enforcement it has been mainly because of jurisdictional issues. What has arisen from all of these cases is a more powerful process with a set of legal rules. It is a process that requires careful management which ARBICON can guide you through.
We have been able as advocates to obtain money due to Clients that were written off as bad debts from 6 to 12 years ago, obtain retention funds, damages for breaches of contract and payment of sums incorrectly certified. Whilst maintaining relationship politics as appropriate ARBICON are the answer to reversing cash flow problems and losses sustained in Commercial Construction Contracts. The mere threat of using us in adjudication invokes at least half the disputes we have been appointed on to settle immediately.
Construction Adjudication is the most practical, least expensive and best way for commercial parties to solve disputes quickly compared to Court proceedings. It has developed into the most powerful means to achieve justice in the Construction Industry. However, professional help from ARBICON is essential to conduct the process and achieve a resolution.
Construction Adjudication is a combination of Law and Quantity Surveying and to execute it properly and successfully it requires specialist skill and knowledge. Adjudication in most cases can be described as a battle developed over a short period of one to two months involving intense and strategic arguments. We have identified in the foregoing that as well as having to prepare properly for Adjudication, there is a need to appreciate and navigate the established procedures, case precedents and common complications associated with Adjudication.
It is thus essential that when appointing an Adjudicator or when seeking Representation, that professional help available from a firm specialising in Adjudication, who are Legally Qualified Chartered Quantity Surveyors with Expertise in the Practice and Procedure of Adjudication such as ARBICON be consulted.