Construction adjudication: paving the way for a sensible alternative dispute resolution

What is construction adjudication?

It is mandatory adjudication for disputes in construction contracts which was introduced by statute in 1996. This is significant, as a party to a construction contract has the right to refer a dispute to adjudication at any time. It is a 28-day procedure that navigates resolving disputes in the construction industry. The aim of the act is to provide the means by which the right to payment, also known as “the lifeblood of the construction industry” would be supported by the scheme to enforce due payment.

Initially this form of adjudication only allowed contracts in writing but due to the progressive nature of the scheme, in 2009 the Act was amended to extend its scope to all contracts.

What is adjudication appropriate for:

• Interim payments
• Delay and disruption of the works
• Extensions of time for completion of the works
• Defects in the works
• The final account
• Breach of contract
• Termination of contract
• Professional negligence.

The benefit of construction adjudication

Lord Briggs encapsulated the key benefits this brings to the construction industry, the scope of the jurisdiction highlights how every matter under a qualifying contract can be resolved with speed as the decision is made by an independent adjudicator with specialist knowledge without using court time and resources. The efficiency of this scheme is that it is grounded in statutory and contractual right, and it is conferred on all parties of a construction contract. It is also an enticing way to resolve a dispute for all involved when comparing costs to other methods of dispute, as it is less expensive than choosing litigation.

What is the effect of an Adjudicators decision?

It is interim binding, they are binding decisions until the dispute is finally determined by legal proceedings, by arbitration or by agreement.

The decision is enforced by the successful party in the Technology and Construction Court.

The decision is rarely challenged by the losing party.

How has adjudication evolved over time?

Those in the legal professional field have often voiced that adjudication was never intended to deal with complex claims that concerned fraud or professional negligence. However, in practice, adjudicators are specialised in those disputing areas. For example, most of the construction industry institutions rapidly registered as adjudicator nominating bodies and assembled panels of experienced professionals from the industry. Signifying adjudicators have become proficient in dealing with large complex disputes which often involve a vast amount of documents including expert reports and witness statements. Consequently, the process has received judicial approval as the accepted alternative dispute resolution mechanism of choice.

Lord Neuberger encapsulated the clear future of adjudication in light of the pandemic, as Covid related claims sored and the courts were at threat of being overwhelmed, it was emphasised that adjudication requires no infrastructure, no technology and no state resources and urged those with disputes to use this means of alternative dispute resolution.

But the success of adjudication rules in other fields is yet being explored, although pilot schemes have launched in sectors concerning computer science, professional indemnity insurers and even The Centre for Effective Dispute Resolution’s Rules for Commercial Adjudication. The significant issue in the success of these schemes may be that the very existence of these rules is not widely known in the legal community itself which may stagnate the growth of adjudication in other sectors.

However, it also shows on the horizon may be an adjudication scheme for commercial contracts, based on construction case law the commercial scheme would have to satisfy the requirement of the Unfair Contract Terms in Consumer Contracts Regulations 1999, where contracts are entered into with consumers. But the success of adjudication lies in those choosing to adopt existing adjudication rules. The driving force may come from lawyers who have a duty when drafting and advising on contracts to discuss and encourage dispute resolution provisions. The judicial approval of adjudication signifies that adjudication rules and schemes must be discussed and considered which could evolve different sectors to begin to introduce and develop their own sector specific adjudication scheme in the near future, as we are beginning to see already.

Although other sectors may not be quick to introduce their own rules, the judicial approval signifies adjudication ought to be considered as a sensible alternative dispute resolution nonetheless.