Posted: Monday, 1 March 2010 @ 14:42
There are a variety of alternative dispute resolution (ADR) methods available, adjudication is one only used in the construction industry. It was born in 1996 and came into play for written construction contracts entered into on or after 1 May 1998. It was a statutory cure for long running disputes which became bogged down in litigation and blighted the completion of projects. Something had to be done so adjudication was created to provide a quick and temporary solution to construction contract disputes.
When is adjudication used?
Adjudication as a means of dispute resolution is compulsory in any contract for construction works to be carried out in England, Scotland or Wales. It only applies to contracts in writing, and it does not apply to contracts with a house owner for domestic works. It covers agreements for architectural, surveying or design work, for provision of labour for construction operations, and advice on building, landscaping, engineering, and interior and exterior decoration.
The adjudication does not cover disputes over the terms of the contract itself, or works involving the manufacture or delivery to site of building materials, machinery, or plant.
Most adjudications involve payment disputes, but can also involve issues of delay and disruption, defective works, extension of time, declarations, and orders directing a party to do some act.
How does adjudication work?
The process is started by serving a Notice of Intention to Refer to Adjudication. There is a very short timetable for adjudications to be completed, usually 28 days, so things do move quickly. Either an adjudicator is appointed who is identified by the contract, or in the absence of agreement between the parties by a professional body known as an Adjudicator Nominating Body (ANB), who for a fee arrange for a suitable adjudicator to be appointed. The adjudicator is the decision maker in the process, who will have experience in dispute resolution and will usually be a professional such as a surveyor, architect or engineer.
There are no formal rules to deal with, and this type of quick dispute resolution allows for the works to continue and hopefully prevents relationships between contractors souring to the point where it affects on site performance.
Normally the party giving the Notice of Intention must prepare a detailed statement of their case, prepare a bundle of the core documents, and where necessary produce witness statements. It may be necessary to get an expert’s report. Given the short time period for completion of the adjudication, it is strongly advised that all these steps are taken before the Notice of Intention is served.
Once the statement of case has been provided, the adjudicator will normally allow the other party between 7 and 14 days to respond, and then a further 7 days for a reply to the response. The adjudicator may call for meetings and arrange hearings, give directions, ask questions of the parties, call for additional documents or witness statements, carry out site inspections or tests, and appoint experts, assessors or legal advisors. Remember that the adjudicator’s decision must be given within 28 days. It is clear that the adjudication period will be a very intense period of work for all involved.
The costs of adjudication
Parties to the adjudication are jointly and severally liable for the costs and fees of the adjudicator. What this means is that if one party does not pay their share the other party must pay. The contract itself can say who will be responsible, for example the winning party, or an equal share, but the adjudicator can recover in full from any party. Otherwise the adjudicator can order that their costs and fees or a part of them are paid by for example a losing party.
As far as the costs of a party to the adjudication are concerned, the adjudicator cannot award these against another say losing party unless the contract allows it or the parties to the adjudication have agreed
The adjudicator’s decision is binding on the parties to the adjudication during the construction period. It is a sort of interim decision, but the parties can challenge the decision by arbitration or court action once the contract is over. However, not many parties bother to challenge the point after the contract has been completed. An adjudicator’s decision can be enforced through the courts.
Adjudication has proved a very successful means of resolving construction disputes. It is not cheap, involves a very intensive period of work, but it does provide a quick method of resolving a dispute, and avoids the damaging, long drawn out, and often fatal effect of court action.
As with any business deal it’s essential to ensure the written contract covers all aspects of the project. In the case of construction contracts there’s also the opportunity to determine the details of the arbitration clause. Do take advice from a suitably qualified solicitor.
For advice on solving your construction dispute contact Cousins Business Law.
Blog by Nigel Musgrove
Nigel has been providing dispute resolution advice as a solicitor for over 35 years. As well as advising SMEs and business owners on disputes he also offers a specialist licensing law service. View profile
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