Clare Mendelle and James Goldthorpe look at the start of the adjudication process and address the practicalities that are frequently stumbling blocks.
Introduction
Our first article in this series explained the background to the statutory right to adjudicate disputes arising under construction contracts. In this piece, we look at the start of the adjudication process and address the practicalities that are frequently stumbling blocks.
As is made clear by the typical adjudication timetable included at the end of the previous article, adjudication is fast-moving: once the process is commenced it will, in most cases, decisively resolve the dispute within 35 days. This means that it is imperative when a dispute begins to loom to plan for adjudication and take steps to gather the documentation and evidence (such as witness and expert evidence) that will be required. Indeed, to have more control over the timing of an adjudication it may be shrewd to be the referring party, although responding parties should not be caught out if they are sufficiently prepared when a dispute appears imminent.
Given the potential for mistakes at the start to have serious consequences, the need for both parties to be organised and pay close attention to detail cannot be overstated. This article provides guidance to navigating the stages immediately prior to, and during the first week of, a typical adjudication.
Are we in a position to adjudicate, and on what terms?
We previously explained that the Construction Act[ 1] confers a statutory right on the parties to a construction contract to refer a dispute to adjudication at any time. This comes from s108(1) which provides:
A party to a construction contract has the right to refer a dispute arising under the contract for adjudication under a procedure complying with this section.
While this seems straightforward enough there are a few elements to consider, as without “a dispute” there is no statutory right to adjudicate:
- s108(1) further provides that “for this purpose dispute means any difference”. The word ‘dispute’ should, therefore, be given its normal meaning;
- The lack of a plural (“a dispute”, not “disputes”) is important as only a single dispute can be referred to adjudication. If multiple disputes are referred, then jurisdiction may be challenged by the responding party;
- The dispute must have arisen under the construction contract; and
- The dispute must have ‘crystallised’. If it has not, then the adjudicator will not have jurisdiction to decide it. For a dispute to have crystallised, one party must have made a claim (saying what is being sought, and the basis for it) and it must have been not admitted by the other party. The circumstances in which a claim is not admitted are broad, ranging from express rejection to an inference from the respondent’s silence. Whether you have got to that stage is a judgement call, but if this is challenged the courts will look at “the reality of the parties’ positions… to consider whether in truth there [i]s a dispute or difference about the relevant matter before the adjudication” [2]. As such, it is preferable for any claim to be made in writing because a paper trail will help establish the fact that a claim has been made and has not been admitted.
As noted in our previous article, you will also need to consider whether the adjudication procedure in your contract is compliant with the Construction Act. If it is then those terms will govern your adjudication, but if it is not then the Scheme [3] will apply.
The Notice of Adjudication
The first step in starting the adjudication is for the referring party to issue the notice of adjudication. This notifies the responding party (or parties) that a dispute is being referred to adjudication and defines the scope of the dispute. Accordingly, it may be tactically wise to be the referring party in order to control the scope of the dispute.
As there are no opportunities to amend the notice at a later stage in the process, and the content will limit what the referring party is able to claim and what remedies they will be entitled to, great care should be taken when drafting the notice. Although the specific information which must be contained in the notice varies depending on the procedure followed, in general they will all include:
- The names and addresses of the parties to the contract (and care must be taken to ensure that the correct form of name is used – be careful of company names that are similar but different).
- A description of the dispute, including its legal and factual basis. Care should be taken when defining the dispute as if it’s defined too narrowly the adjudicator’s jurisdiction will be overly restricted, but too widely then additional issues may be brought in by the back door.
- Details of how the dispute has crystallised.
- The nature and (if applicable) the amount of the remedy being sought.
- Whether you require the adjudicator to make a decision regarding which party is liable for his or her fees.
In practice, the notice of adjudication is frequently drafted once the referral notice has been written, to ensure that it contains the correct information and is consistent.
The notice must then be served in accordance with the applicable adjudication procedure and any contractual requirements.
Appointing the Adjudicator
The identity of the adjudicator is a crucial consideration as they will need the experience and expertise to determine the dispute in question. For example, if the dispute concerns the interpretation of a clause or complex legal matters then it may be desirable to appoint Queen’s Counsel, but if it relates to issues of design or workmanship then adjudicators with architectural or structural engineering expertise are likely to be good candidates. If your dispute has been building for a while and both parties accept that adjudication is inevitable, then it may even be possible to agree the identity of the adjudicator (or a shortlist of nominees) in advance so that the choice is known to be suitable and acceptable to all parties.
Many adjudicators are appointed through an ‘adjudicator nominating body’ (ANB). There may be a specific ANB named in the contract or, if no ANB is named and the Scheme applies, an application can be made to any ANB (such as RICS, TeSCA or TECBAR) in accordance with their nomination criteria. It is possible to ask that the adjudicator has certain expertise, but the ANB is not bound to grant the request.
To guard against jurisdictional challenges, and unless the identity of the adjudicator has already been agreed, the appointment of the adjudicator must be in strict compliance with the relevant contractual provisions. Where the Scheme applies, this means that the referring party must request the adjudicator’s appointment after issuing their notice of adjudication [4].
Regardless of how an adjudicator is selected, it is essential that they have no conflict of interest which would prevent them from acting fairly and impartially as required by the Construction Act [5].
The Referral Notice
The Referral Notice (commonly referred to simply as the ‘Referral’) is the equivalent of the particulars of claim in litigation, providing the referring party (who has the burden of proof) the opportunity to argue and substantiate its claim. While most adjudications will have a timetable that allows the referring party to reply to the responding party’s submissions, in some rare adjudications the Referral could be the only chance for the referring party to make its case. It is also rare for adjudications to have a hearing. As such, it is important that the Referral is drafted carefully and clearly, that it is persuasive, and that it includes all the information required to support the claim. This includes:
- The legal basis for the claim, with reference to any relevant contractual provisions. A copy of the contract (or extracts) should be included;
- The factual basis for the claim, for which it may be helpful to include a chronology (especially if the factual background is complicated);
- Any witness or expert evidence in support;
- Any relevant legal authorities in support; and
- A detailed statement of the redress sought.
Many of these documents will be included as attachments to the Referral.
The Referral and accompanying documents must be served on both the adjudicator and responding party within seven days of the notice of adjudication [6] and this timetable will be strictly applied by the courts unless separate arrangements have been mutually agreed by the parties [7]. The parties must also comply with any directions for service issued by the adjudicator following service of the Notice of Adjudication.
Once the Referral is served and it is the responding party’s turn to make submissions, the referring party will get a little breathing room. However, there is seldom time for resting on your laurels in adjudication, so the time between submissions should be used carefully to prepare for the next stages.
Clare Mendelle is a Senior Professional Support Lawyer and James Goldthorpe is a Paralegal at Sharpe Pritchard LLP.
[1] The Housing Grants, Construction and Regeneration Act 1996
[2] CC Construction Ltd v Mincione [2021] EWHC 2502 (TCC)
[3] Scheme for Construction Contracts (England and Wales) Regulations 1998 (amended by 2011 Regulations and supplemented by Regulations specific to Scottish contracts)
[4] Vision Homes Ltd v Lancsville Construction Ltd [2009] EWHC 2042 (TCC)
[5] Section 108(2)(e)
[6] S108(2)(b) of the Construction Act
[7] William Verry Ltd v North West London Communal Mikvah [2004] EWHC 1300 (TCC)
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This article is for general awareness only and does not constitute legal or professional advice. The law may have changed since this page was first published. If you would like further advice and assistance in relation to any issue raised in this article, please contact us by telephone or email