Adjudication is used more often in the construction industry than in any other commercial sector. This is largely because, if you are a party to a construction contract, you have a legal right to use adjudication to resolve your dispute. In this article, our experienced commercial property dispute solicitors will provide you with an overview of adjudication, when it’s used, what’s involved, and how it can help resolve your dispute.
If you are currently involved in a construction dispute and you need practical legal advice and support contact our commercial property dispute solicitors today. Our team of experienced lawyers will be able to guide you through the adjudication process and resolve your dispute quickly, limiting any disruption to your business.
We cover:
- Is adjudication mandatory in construction contracts?
- Is an adjudicator’s decision binding?
- When is adjudication appropriate?
- When is adjudication not appropriate?
- Advantages and disadvantages of adjudication
- What does adjudication cost?
- How do you know if you have a construction contract?
- Is it always obvious when a construction contract is in existence?
- Can you refer more than one dispute to the adjudicator?
- What documents and evidence do I need to submit during adjudication?
- Key steps in the adjudication process timeline
- How to appoint an adjudicator
- Enforcing an adjudicator’s decision
- Challenging the enforcement of an adjudicator’s decision
- Summary
Is adjudication mandatory in construction contracts?
Any party to a qualifying construction contract (which we discuss below) has a statutory right to refer a dispute to an adjudicator at any time. It is mandatory in construction in the sense that one cannot exclude this automatic right from the construction contract. Even if the contract makes no mention of it at all – the right to refer is still implied. Adjudication isn’t compulsory – you can choose another method of resolving disputes if you wish. If one party to a qualifying contract initiates the adjudication process, the other party has to participate.
Is an adjudicator’s decision binding?
Yes - an adjudicators decision is legally binding, but only in the interim. The decision settles the dispute for the time being, pending final determination by a court or arbitrator further down the line.
When is adjudication appropriate?
Common construction disputes that adjudication might be appropriate for resolving include those about:
- Non-payment of monies due for particular stages of a development
- Delays to construction
- Requests for extensions of time
- Poorly executed and defective work
- Clarification of the scope of a project
Even though adjudication was originally designed to address straightforward issues on an urgent basis, more complex contractual issues and negligence claims can also be resolved this way.
Very often, the matter referred to adjudication is a standalone issue. For example, a dispute might be holding up a particular building project or causing cashflow issues for one of the parties. By accepting the adjudicator’s jurisdiction and decision, the parties can keep the project moving without long delays. As mentioned earlier, the adjudicator’s decision is usually a temporary fix. It helps the development continue while the parties work toward a more permanent resolution.
When is adjudication not appropriate?
Not every disagreement is suitable for adjudication. It’s important for you to remember that the adjudication process in construction disputes has been developed to provide fast, practical solutions. If a dispute is particularly complex, court proceedings or arbitration may be the more appropriate method to employ.
It is also important to note that, for an adjudication to be valid, the dispute must have crystallised — meaning it is clearly defined and both parties have an understanding of the issue. This can be demonstrated through discussions, or when one party makes a claim and the other either rejects, ignores or does not admit to it. If you initiate arbitration too early before the dispute has fully formed, the other party may argue that no real dispute exists — leading to jurisdictional challenges.
Advantages and disadvantages of adjudication
As you now know by now, adjudication is a very popular way of resolving disputes in the construction industry – but it won’t necessarily be a suitable method of dispute resolution in every single case. We’ve set out some of the advantages and disadvantages of adjudication in the table below:
| Advantages | Disadvantages |
| Provides a basis for a quick resolution to the dispute. | The scheme is geared toward achieving a result quickly. Corners will on occasion be cut and crucial facts may be overlooked. |
| Minimises disruption to the overall construction project. | The successful party won’t necessarily recover the costs of the adjudication. |
| The focus on quick payment following adjudication reduces the chances of contractor insolvency. | The 28-day timetable does not give the parties time to examine all the facts in cases of any complexity. Even if the right to adjudicate has arisen because a claim has crystallised, it may simply be too complicated to be dealt with through the adjudication process. |
What does adjudication cost?
Adjudication is a short process, so exposure to costs is limited. Because each party usually pays its own legal fees, the cost of adjudication can be a significant consideration. It’s difficult to be precise about actual costs as each case will depend on its particular facts, but expenditure you should bear in mind includes:
- Adjudicator’s fee: Adjudicators charge an hourly rate, usually in the region of £200-£300 plus VAT. A responding party may well have little say over the appointment of an adjudicator or the level of fees. This is because the Referral Notice is issued before the responding party knows what fees the adjudicator is seeking. Each party will be jointly liable for the fees of the adjudicator, so if one side doesn’t pay, the adjudicator can claim all of his or her fees from the other.
- Fee to the professional body that nominates the adjudicator.
- Fees to your professional advisor: this constitutes payment to a specialist construction lawyer to advise you throughout the process. It’s unlikely that you will be able to recover these fees, even if you are successful in the adjudication.
How do you know if you have a construction contract?
The right to adjudication we are examining here only applies to ‘construction contracts’ that are in writing. The Construction Act describes a construction contract as an agreement to do any of the following:
- Carrying out construction operations
- Arranging for construction operations to be done by others; for example, by using a subcontractor
- Providing labour for construction operations
‘Construction operations’ is a broad term, which covers everything from building, maintenance, demolition or the repair of temporary or permanent buildings.
Is it always obvious when a construction contract is in existence?
In many cases, it’s obvious whether or not an agreement classes as a construction contract. If you’re uncertain, it’s smart to get specialist legal advice early on. This helps you understand your options for resolving disputes and avoids the risk of running up high legal costs later.
For example, in the case of Savoye and Savoye Ltd v Spicers Ltd [2015], the parties spent a huge £400,000 in legal fees just to determine that what didn’t initially seem like a construction contract actually was — meaning it could go through the adjudication process.
One last thing to keep in mind: even if your agreement isn’t legally classed as a construction contract, you and the other party can still agree between you to use adjudication.
Can you refer more than one dispute to the adjudicator?
The general rule is that only one dispute can be referred to the adjudicator at a time. That’s why it’s really important, before starting adjudication, to figure out whether you’re dealing with a single dispute or multiple disputes.
If there are multiple disputes, you’ll need to check the contract terms. Some contracts allow you to combine multiple disputes in one adjudication, while others require each dispute to be dealt with separately.
If it’s one dispute with several sub-issues, you’ll need to be extra careful when drafting the Notice of Adjudication and the Referral Notice. It’s important to show a clear connection between the sub-issues — otherwise, it could be seen as referring multiple disputes to the adjudicator.
What documents and evidence do I need to submit during adjudication?
Unlike litigation, there are no formal rules surrounding evidence and disclosure for adjudication. As we know, it is meant to be a quick solution with only 28 days for the adjudicator to issue his decision. Drowning the adjudicator in paperwork can make it harder to get to the bottom of the key issues. At the same time, you need to back up your argument with facts and evidence to demonstrate the merits of your case and secure a successful outcome. It’s all about striking the right balance and presenting a succinct but compelling case. It helps to organise your documents into a paginated bundle with tabs for easy reference and cross-refer to the relevant pages within your main statement.
In terms of what documents you need as a referring party, this includes:
Notices
Notice of Adjudication: this is the initial document that starts the adjudication process and informs the other party that you are referring a dispute. It sets out the nature of the dispute, the parties involved, and the remedy sought.
Referral Notice: this document serves as your detailed statement of case formally referred to the adjudicator once appointed. It should provide a full description of the dispute, your arguments and legal basis for the claim, and any evidence relied on.
Key Supporting Documents
This will depend on the nature of the dispute, but generally should include documents that are directly relevant to and clearly demonstrate the nature of the dispute, including things like:
- A copy of the construction contract itself, highlighting relevant parts
- Relevant correspondence exchanged between parties such as emails, phone logs, and letters, as well as any meeting minutes
- Project records such as the overall schedule of works, progress reports, change orders etc. especially if the dispute relates to delays
- Financial statements, payment notices, invoices, demands etc. which are particularly important for disputes over payment.
- Expert Reports: For technical or complex issues, like defects or negligence claims, you may wish to commission reports from independent, credible experts — like surveyors, engineers, or quantity surveyors. If you are relying on expert evidence, to be on the safe side, you should share a copy of the report– or at least its key findings– with the other party in advance. Introducing an expert report in the Referral Notice risks the other party arguing that it relates to a new dispute which has not crystallised when the Notice of Adjudication was issued (thus undermining jurisdiction).
- Witness Statements: Since adjudication is a fast-track process, the adjudicator may rely heavily on written submissions. It can really strengthen your case to provide first-hand accounts from individuals directly involved in the project, who can offer insight into what happened and corroborate documentary evidence. Witness statements should be clear, factual, and focused, confirming the witness’s role and involvement in the project and any observations or actions relevant to the dispute.
Key steps in the adjudication process timeline
The adjudication process is designed to be clear-cut and efficient. There are tight time limits to observe and conditions to satisfy before one party can start the process. You have the option to extend the process by agreement, but a summary of the adjudication process timeline is as follows:
| Stage | Details |
| Before you begin | Check that there is a right to adjudication: does the dispute definitely arise out of a construction contract? Ensure the details of the claim have been brought to the other side’s attention and that the claim has been rejected or ignored: this is known as ‘crystallisation’ of the claim. |
| Beginning the process | The party bringing the claim (the referrer) serves a Notice of Adjudication. This is followed by a Referral Notice that contains full details of the claim. |
| Within 7 days | Agree upon an adjudicator with the other side and settle the terms & conditions of the adjudication. Any dispute over the right to refer the dispute to adjudication should be raised now. |
| Between 7 and 14 days | The responding party serves a Response (effectively a Defence). |
| Within 7 days | The referrer replies and there is an opportunity for the responder to make further representations. |
| By day 28 | Adjudicator reaches a binding decision. |
Do you need to resolve a business dispute?
Speak to our business dispute solicitors and learn what legal options are available to you, the cost of those options and the steps you can take to resolve your dispute.
How to appoint an adjudicator
You should check the construction contract for any specific procedures about appointing an adjudicator. If the contract names a specific adjudicator, you can approach them directly to see if they are available and willing to act. If no one is named, or if they can’t take the case, you’ll usually apply to the Adjudicator Nominating Body (ANB) specified in your contract, This includes organisations like the Royal Institution of Chartered Surveyors (RICS), Technology and Construction Solicitors Association (TeCSA), and the Construction Industry Council (CIC). If the contract is silent on the matter, parties should attempt to agree on who to appoint. If the parties cannot agree on an adjudicator, the referring party can approach any ANB to make the appointment.
You must only apply for the nomination of an adjudicator after the Notice of Adjudication has been issued. If you apply before sending the notice, any decision made by the adjudicator is without jurisdiction and may be invalid. You will need to follow any specific nomination procedures for the particular ANB. This includes completing the application form and paying any nomination fee. You can include representations about the qualifications and expertise of the adjudicator relevant to the nature of the dispute for the ANB to take into consideration (although they aren’t obliged to). You can also request a particular adjudicator is nominated from their approved list, but again they are under no obligation to grant any requests. In any event, it is important that any particular individual named or nominated doesn’t have a conflict of interest that would rule them out of acting in the dispute. Once an adjudicator accepts the nomination, the ANB will notify you. The whole process takes a matter of days.
The adjudicator will typically write to both parties, outlining the terms and conditions under which they are willing to act, including their fees — known as the adjudicator's agreement.
Enforcing an adjudicator’s decision
The adjudicator’s decision is binding. If one side does not comply, enforcement procedures are available through the court. The Technology and Construction Court (TCC) – an arm of the High Court – is the correct forum to commence any enforcement actions.
Cumbersome enforcement procedures would clearly undermine the whole rationale behind adjudication, which is to provide a speedy way to resolve construction disputes. This is why a bespoke procedure has been developed, with the aim of fast-tracking cases of this nature.
Challenging the enforcement of an adjudicator’s decision
Challenging an adjudicator’s decision – and its enforcement – should only be done following specialist legal advice. A successful challenge is rare. That’s because – as we have previously mentioned – an adjudicator’s decision is binding only until the dispute is litigated or arbitrated fully. To ensure the adjudication scheme remains effective, courts will go to some length to ensure enforcement. Additionally, case law in this area demonstrates that enforcement will be sanctioned, even where the adjudicator has made a factual mistake or has applied the law incorrectly.
That said, it is possible for you to challenge a decision on the grounds that the adjudicator did not have jurisdiction or power to adjudicate; for example, if:
- There was no written construction contract
- The dispute had not crystallised
- The correct procedures weren’t followed in appointing the adjudicator
It’s also possible to argue that the adjudicator was biased in favour of one party or did not give sufficient reasons for their decision.
Summary
It’s clear that the adjudication process plays a vital role in dispute resolution in the construction sector. It provides a streamlined approach to solving problems that might otherwise be subject to lengthy and costly court litigation in its absence. It’s not always the most suitable mechanism for every disagreement. This is especially the case for complicated disputes, which may need more time and detail than an adjudicator can offer. Seeking advice from a commercial property dispute lawyer is essential before embarking on any course of action in this field. We can help ensure that you are adhering to your contractual obligations while protecting the interests of your business in the face of any challenges.
