Disputes over construction projects remain all too common and increased to an all-time high average value in the UK during 2017 (Arcadis Global Construction Disputes Report). Disputes typically arise because the parties to a contract haven’t paid proper attention to it or have deliberately failed to follow its provisions. Parties may not fully understand what they are expected to do or they may seek to take advantage of a superior commercial position.
When things do come to a head it’s invariably due to missed payments, the quality of the work carried out or project delays. Whilst it’s best to keep lines of communication open and for both sides to try and work together to arrive at a mutually agreeable solution, this is not always possible. If the parties are sufficiently aggrieved the problem can quickly turn into a dispute.
At this point, so long as the two parties to a contract have tried to resolve the matter and the dispute can be said to have ‘crystallised’, one side may seek to formally remedy the situation and, more often than not, they will opt for adjudication.
Quick and low cost
An increasingly popular means of dispute resolution since it was introduced by the Housing Grants Construction and Regeneration Act 1996, adjudication is a quick and relatively low cost way of achieving resolution .
Thanks to a meticulous step-by-step process and rigid timetable, adjudication often delivers a result within 28 days from the date of referral:
- One party (Referring Party) to the construction contract serves a Notice of Adjudication on the other party; outlining details of the dispute.
- An adjudicator is appointed. If the choice of adjudicator is not set out in the terms of the contract, a qualified individual can be nominated following referral to an industry body such as the RIBA or RICS or the two parties can agree on someone.
- The appointment of an adjudicator must be confirmed.
- A Referral Notice with detailed information about the dispute, including supporting documentation, is served on the Responding Party.
- The Responding Party files its Response, addressing the points set out in the Notice of Adjudication and Referral.
- The Referring Party can file a Reply to the Response, if so advised.
- The adjudicator’s decision. This is binding on both parties with no right to appeal (although the enforcement of decisions can be challenged) and each side is liable for its own costs (although the losing party is usually liable to pay the adjudicator’s costs).
- If either or both of the parties are unhappy, they can still opt to go to the Technology and Construction Court (TCC), where a judge will decide the case afresh. However, in the absence of new information or a clear error, there is unlikely to be a materially different result.
- Subject to agreement by the parties there is some flexibility within the adjudication process to extend the timetable.
Dealing with a Notice of Adjudication
When faced with a Notice of Adjudication it can be tempting for a Responding Party to seek to deal with it in-house; in the belief that, because they understand the nature of the dispute, they will save time and money by doing so.
This can be a short-sighted and misguided approach. If the Responding Party doesn’t have a strong in-house legal team, the adjudication process can quickly become a very substantial drain on valuable resources and management time; because a large volume of detailed, technical information must be produced in a very short space of time. In certain situations feelings can run high, such that those who are close to the issue may not easily be able to take an objective and dispassionate view.
Drafting a Response is time-consuming and takes considerable effort and resources because the Responding Party needs to prepare legal submissions, provide applicable case law and key documents; including site records, correspondence between the parties and with third parties, witness submissions and photographs. Adjudication can quickly become a decidedly unwelcome distraction from the contractor’s day-to-day business operations.
If key personnel such as surveyors and site managers become overly involved in preparing an adjudication Response, it is inevitable that delays will result; either to the adjudication process itself or in respect of the completion of ongoing works. It is all too easy for productivity to be significantly harmed if senior members of the Responding Party’s team have to leave existing projects to provide their input.
Choosing the right advisor
Construction companies that receive a Notice of Adjudication would do well to seek expert legal advice at the earliest opportunity. Instructing solicitors experienced in construction law is a cost-effective way for contractors to handle adjudication because there is much less disruption to their day-to day operations – it is largely business as usual since key personnel are able to focus on their core competences.
When weighing up your options, the choice of advisor can be the key to success. It’s important to bear in mind the limitations of claims consultants who, typically, are not legal experts and are not therefore specialists in drafting legal argument. Account should also be taken of the potentially very high and disproportionate (when considered in the context of the dispute value) costs associated with appointing a large city firm of solicitors.
Knowing what you would like to achieve is important, but understanding what is realistically achievable, and at what cost, is vital; because adopting the wrong strategy or appointing the wrong adviser can massively increase the likelihood of losing a dispute, incurring disproportionate costs and / or suffering significant reputational damage, all of which are likely to prove very costly over time.
ORJ is one of only a handful of firms to provide partner-led construction law expertise from a regional office. We know the adjudication process inside out and will take charge of assembling the requisite evidence; so all key documents are submitted and there is no danger of missing any deadlines.
As Responding Party you have to go second and operate to the timetable imposed upon you; however, this doesn’t mean you have to come off second best. At ORJ, we take the time to really understand our client’s objectives; which means we’re able to steer them towards the best strategy, increasing the likelihood of them winning their case.
If you engage ORJ, our senior professionals will be hands-on throughout the adjudication process, working with you to give you the best possible chance of achieving your commercial goals within the confines of what the law allows.
Clients benefit from our approach in two ways. The partner dealing with the claim understands the commercial realities of the construction industry and works with clients, as an extension of their team, to deliver a commercial resolution that really makes sense. Readily available to liaise directly with the parties, he will carry out the bulk of the work involved himself – rather than it being delegated to much more junior and less experienced team members, which is often the case with big city law firms. Operating from a regional base also means that ORJ does not have to incur city overheads; a major cost saving which is passed to our clients.
If you have any questions or would like to find out more, call Mike Smyth on 01785 223440.