Adjudication

An adjudicator is an impartial, qualified third party who holds considerable authority over how the process is conducted. Their powers, set out under the Scheme for Construction Contracts, include requesting documents and further written statements from either party, making site visits, deciding whether to hold a hearing and how formal it should be, appointing experts or legal advisers, and issuing directions on the timetable. The adjudicator must reach a decision within 28 days of the referral notice, and that decision may include an order for payment together with the timing of that payment and any interest due. However, the adjudicator can only decide on matters specifically referred to in the notice of adjudication and has no jurisdiction over issues falling outside the contract in question.

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An adjudication report is the written record of an adjudicator’s investigation and decision. It sets out the nature of the dispute and the adjudicator’s findings, and may include expert witness testimony or other evidence submitted during the process. Although parties often deliver detailed written submissions, the decision can in some circumstances be delivered orally, particularly where it is accepted without further challenge. If the dispute is likely to continue to court, a written report is advisable as it provides an audit trail and allows a later litigator to pick up where the adjudicator left off. The adjudicator’s decision is binding on both parties unless and until overturned by a court or resolved through another form of dispute resolution.

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The most likely outcome for the losing party is that they must comply with the adjudicator’s decision promptly, including paying any sum ordered, even if they believe the decision is wrong. Because adjudication runs to a 28-day timetable, significant sums can become due very quickly, with potentially serious consequences for cash flow. Courts are generally supportive of the process and will uphold adjudicators’ decisions in most circumstances. A decision can only be resisted if the adjudicator is shown to have acted outside their jurisdiction, for example where no qualifying contract exists between the parties, or to have breached the rules of natural justice through demonstrated bias. The losing party does retain the right to seek a final determination through court proceedings within six years of compliance, but must comply with the adjudicator’s decision in the meantime.

Read the full article: The Consequences of Losing an Adjudication

An adjudicator can be accused of bias if they hold private discussions with one party without disclosing those communications to the other, if they have an existing relationship or financial connection with one of the parties, or if they treat the parties unequally during proceedings, for example by accepting late evidence from one side or behaving with hostility towards a witness. The legal test is not simply whether a biased act occurred, but whether a fair-minded observer would conclude there was a real possibility of bias. If bias or a breach of natural justice is established, the courts may refuse to enforce the adjudicator’s decision. It is therefore important to establish the adjudicator’s independence from the outset and to ensure the process is as transparent as possible, with any potential conflicts disclosed upfront.

Read the full article: Adjudicator Guilty of Bias – In what Circumstances might that happen

The Housing Grants, Construction and Regeneration Act 1996, commonly known as the Construction Act, introduced mandatory adjudication for all qualifying construction contracts in the UK. It gives any party to such a contract the right to refer a dispute to adjudication at any time, and sets minimum procedural requirements including the 28-day limit for a decision, protection of cash flow during a project, and the right to suspend work in the event of non-payment. Where a contract does not include the required adjudication provisions, the Scheme for Construction Contracts fills the gap. The Act was significantly amended in 2011 to strengthen payment notice requirements, introduce greater sanctions for failure to issue notices, and extend the regime to oral contracts. The UK legislation has since served as a model for similar laws in Australia, Singapore, New Zealand and Malaysia.

Read the full article: The Adjudication Construction Act 1996

Adjudication’s primary advantage is speed: the entire process runs to a 28-day timetable, making it far quicker than litigation or arbitration and allowing construction projects to continue with minimal disruption. It is also relatively cost effective, avoids lengthy oral hearings and cross-examination, and produces a decision that is immediately binding and enforceable. Parties can also have input into the selection of the adjudicator. On the other hand, the tight timescale leaves little margin for error, and legal and expert costs are generally not recoverable between the parties, meaning mistakes can prove expensive. A decision that turns out to be wrong still has to be honoured in the short term, which can create cash flow difficulties. Neither party is prevented from taking the same dispute to court afterwards, so adjudication does not always deliver finality.

Read the full article: Adjudication Advantages and Disadvantages

A Pay Less Notice is the formal mechanism by which a paying party in a construction contract notifies the other side that they intend to pay less than the sum claimed, typically citing reasons such as delayed damages, defects, or work not completed. For contracts entered into after 1 October 2011, it replaced the older Withholding Notice under the amended Construction Act, and must specify the amount considered to be due and explain the basis for that calculation. It must also be served within the timeframe set out in the contract or, where the contract is silent, no later than seven days before the final date for payment under the Scheme for Construction Contracts. If a valid Pay Less Notice is not served in time, the receiving party is entitled to the full amount claimed and may suspend work or refer the matter to adjudication. Even where a notice has been properly served, if an adjudicator subsequently decides that some or all of the withheld amount should be paid, the paying party must comply.

Read the full article: Withholding Notice in Adjudication – When is it Necessary?

Ad hoc adjudication arises when parties voluntarily agree to submit a dispute to adjudication in circumstances where the Construction Act 1996 does not apply and where there is no pre-existing contractual agreement to adjudicate. This differs from statutory adjudication, which applies automatically to qualifying construction contracts, and from contractual adjudication, where parties have built an adjudication procedure into a contract that falls outside the Act’s scope. In ad hoc adjudication the parties themselves define the terms and are not bound by the constraints of the Act or the Scheme. Whether a court will enforce an ad hoc adjudication decision depends on the nature of the agreement and any reservations attached to it.

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Choosing the right adjudicator is one of the most consequential decisions in the adjudication process, and also one of the most difficult. Adjudicators are typically construction professionals or construction lawyers, but the breadth of experience and specialist knowledge they bring can vary considerably. The specifics of the dispute should guide the selection: factors such as the technical nature of the claim, its value, and any specialist industry context are all relevant. If both parties cannot agree on a nominee, an adjudicator will be appointed by a nominating panel without input from either side. Given that the adjudicator’s decision is final and binding from the outset, and that the 28-day timetable leaves limited scope to correct errors, investing time in identifying a suitably qualified adjudicator at the start of the process is essential.

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One of adjudication’s most significant practical benefits is that it resolves disputes quickly enough to keep construction projects moving. Where a dispute might otherwise bring an entire project to a standstill for months through the court system, adjudication forces a resolution within 28 days, allowing work to resume. Crucially, both parties must comply with the adjudicator’s decision immediately, even where one intends to challenge it later. This “pay now, argue later” principle means interim solutions are implemented promptly and working relationships can be re-established without prolonged delay. A dissatisfied party retains the right to seek a final determination through litigation or arbitration, but the project does not have to wait for that process to conclude.

Read the full article: Effect of an Earlier Adjudication

“Open up, revise and review” is a power that allows an adjudicator to examine and if necessary amend a certificate issued under a construction contract. Certificates, whether interim or final, can be challenged by a party who disputes the value of work completed or disagrees on a technical or factual point. While the courts have an inherent jurisdiction to open up, revise and review certificates, an adjudicator’s ability to do so is not automatically granted by the Construction Act 1996 and depends on whether the contract expressly confers that power. Most standard modern construction contracts do so, and the Scheme for Construction Contracts also recognises these powers. The adjudication process remains subject to overall court supervision, meaning it is still the courts that will ultimately enforce decisions where required.

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The main cost in adjudication is the adjudicator’s fee, which is typically charged at an agreed hourly rate established upfront with the parties. The adjudicator may also appoint experts or legal advisers where necessary, and these are incorporated into the overall fee. Each party will additionally incur its own legal and professional costs in preparing and presenting their case, and there may be a nomination fee payable to the appointing body. Under the Scheme for Construction Contracts, both parties are jointly and severally liable for the adjudicator’s reasonable fees and expenses, though in practice costs often fall on the unsuccessful party. Legal costs are not routinely recoverable between the parties. The total will depend on the size and complexity of the dispute, but adjudication remains significantly cheaper than litigation or arbitration, which is one of the principal reasons it is the preferred route for resolving construction disputes in the UK.

Read the full article: Adjudication Costs and Fees, What to Expect