Can Construction Adjudication be a panacea for our ailing justice system?

Mike Smyth Construction Adjudication specialist

Mike Smyth – Partner ORJ Solicitors LLP 01785 223440 mike.smyth@orj.co.uk

In 2015, court issue fees in England and Wales were raised substantially; some by more than 600%.  The highest issue fee is now £10,000, which is applicable to all cases valued at £200,000 or more.  Coupled with earlier changes eliminating the recoverability of Conditional Fee Agreement (“CFA”), success fees and After the Event (“ATE”) insurance premiums; the costs to begin proceedings within the courts system have never been higher.  In addition to significantly increased costs for claimants, substantial cuts in budgets and staff numbers have left many parts of the justice system reeling and struggling to cope with basic requirements; including opening correspondence promptly and listing court hearings.

Construction adjudication, in contrast to the courts system, does not require an issue fee (save for a modest nomination fee around £500 if a nominating body is used) to select a suitable adjudicator.  Overall, the costs of adjudications are likely to be a fraction of those that would be expended determining the matter through the courts.  In addition to significantly reduced costs, adjudications offer a far quicker solution than could ever hope to be achieved through the courts.  Adjudicators are required to reach a decision within 28 days of receiving a dispute referral.  The length of the entire adjudication process is likely to be measured in weeks; rather than the many months or even years that will be taken in obtaining judgment through the courts.

Adjudicators are usually selected for their particular expertise and suitability in connection with the specific dispute.  Practical knowledge and experience relating directly to relevant issues is commonplace amongst adjudicators.  These qualities are not usually found within the judiciary and there is no ability to pick and choose a suitable judge for a particular claim; save for deciding where to issue.

Adjudications also give the parties a much wider scope to set the rules and procedures that will govern any dispute that might arise between them.  Whilst the ‘Scheme for Construction Contracts’ will automatically apply to all ‘Construction Contracts’ by virtue of the operation of the ‘Housing Grants, Construction and Regeneration Act’ and the ‘Local Democracy, Economic Development and Construction Act’ (“the Construction Acts”); it is possible for parties to agree to a bespoke procedure in substitution of the default position.

There are a number of model adjudication procedures (prepared by relevant bodies including the Construction Industry Council (“CIC”)) and most standard form contracts expressly provide for a compliant adjudication process.  Alternatively, the parties are free to determine their own processes, provided that they remain compliant with the Construction Acts.  This can include agreeing that legal costs incurred in relation to adjudication will be recoverable by the successful party as part of the adjudicator’s decision (the default position being that each party pays their own).  The time to insert suitable provisions concerning adjudication is at contract formation, not when the dispute arises; therefore, it is imperative that the issue is not ignored during contract negotiations.  Some things can be settled when the parties are actually in dispute; but agreement it is much more problematic at this stage for obvious reasons.

Although Construction Adjudication undoubtedly has a number of advantages in comparison to the Technology and Construction Court, it also has limitations; which must always be taken into consideration before making a referral.  Whilst speed is definitely an attractive feature of adjudication, it can make complex disputes difficult to deal with.  Thorough expert preparation prior to any referral being issued is an essential pre-requisite; failing which important issues can be covered with insufficient detail and prevent the adjudicator from undertaking a proper, robust analysis and reaching the correct decision.

Finally, an adjudication decision is not necessarily the last word, as the parties remain free to take the dispute through the courts for a final decision.  This means that even though an adjudicator’s decision is binding and must be paid by the losing party, there is no guarantee that the result won’t be reversed if the matter proceeds to trial (although in practice decisions often goes unchallenged and are accepted by the parties as the final word).  In order to deter the losing party from taking the dispute through the courts, it is very important to ensure that relevant issues and evidence are carefully analysed and presented; thereby reducing the risk that an adjudicator will make the wrong decision or that his reasons will be insufficiently clear to convince the parties.

For any enquiries or more information, please send an email to mike.smyth@orj.co.uk or call 01785 223440.