Responding to an Adjudication Referral

Patrick Tedstone, Commercial Litigation Specialist

By Patrick Tedstone

Development site with cranesGoing second shouldn’t mean coming second.

The adjudication process is open for the parties to a Construction Contract to utilise ‘at any time’ and cannot be contracted out of. Timetables are very tight and do not allow any room for complacency on either side; particularly for the Responding Party.

A typical adjudication will adhere to the following schedule:

  1. Day 0 – Notice of Adjudication served on Responding Party;
  2. (Not later than) Day 7 – Referral Notice served on Responding Party;
  3. Day 14 – Response served on Referring Party;
  4. Day 28 – Adjudicator’s decision.

It can be seen from the above that the Responding Party will often only have a total of 14 days to consider the dispute referred against it and only 7 days to consider and respond to the detailed evidence supporting the Referral.

It is possible for the timetable to be varied and extensions of time to be granted; however, this usually requires the consent of the Referring Party and can therefore never be relied upon or guaranteed.

In light of the need to respond quickly and authoritatively to any adjudication Referral, it is critical that you and your team understand precisely what is required to produce an effective Response.

The Dispute

In order for there to be an adjudication, there must first be a qualifying Construction Contract and a crystallised dispute.

In order for a dispute to be crystallised, a claim must have been made to the Respondent setting out what is sought and the basis upon which it is claimed.

A single Referral cannot include more than one dispute, unless the parties expressly agree. What is meant by a single dispute can be somewhat confusing in respect of a single contract (for example, a single dispute about an unpaid payment application is likely to contain many distinct issues); however, it is very clear that disputes from different contracts cannot be referred in a single adjudication without a specific agreement between the parties.

The Construction Contract

Bespoke construction contracts and many standard forms (such as JCT, NEC, FIDIC, RIBA or ICC) often contain specific provisions dealing with the resolution of disputes and adjudication. The starting point for responding to any Referral is, therefore, the contract itself.

If the Referring Party has failed to adhere to the requirements of the contract, it may be possible for the Responding Party to challenge the adjudicator’s jurisdiction as a result.

Jurisdiction

If an adjudicator does not have jurisdiction to decide the dispute referred, any decision given will be null and void and the courts will not enforce it.

There are many potential issues that might allow a Responding Party to challenge the jurisdiction of an adjudicator to decide a dispute; including:

  1. There is no qualifying Construction Contract;
  2. The adjudicator’s appointment was invalid;
  3. No dispute has crystallised;
  4. The dispute has been decided in a previous adjudication (or is substantially the same as a previously decided dispute).

Every potential jurisdictional challenge will turn upon its own facts and may depend upon detailed and technical legal analysis of the relevant statute and case law.

The Referral

Once any potential issues of jurisdiction have been considered and dealt with, the Responding Party should consider what question the adjudicator has been asked to decide. This question is limited to those matters set out in the Notice of Adjudication. Any failure to include an issue within the Notice of Adjudication will prevent the Adjudicator from deciding that issue or, if a decision is made, will prevent the Courts from enforcing it.

The Responding Party must ensure that it is careful to focus upon and respond only to those matters included within the Notice of Adjudication. Even if other matters are in dispute between the parties in respect of the Construction Contract in question (which may well be the case), the Responding Party must resist the temptation to try and widen the ambit of the dispute by including matters that the adjudicator has no jurisdiction to deal with. Any such submissions will be a waste of time and effort and may well distract and detract from the remainder of the defence to the referred dispute.

The Response

The Responding Party must ensure that the Response carefully and clearly replies to all of the issues set out within the Notice of Adjudication.

All of the documentary evidence relied upon by the Responding Party should also be included with the Response document. This may include any or all of the following:

  1. Legal submissions;
  2. Applicable case law / legal authorities;
  3. Key documents;
  4. Site records (minutes, memos, notices, etc.);
  5. Correspondence (emails, letters, faxes, etc.) between the parties;
  6. Correspondence with third parties;
  7. Witness evidence from key players;
  8. Photographs.

The need to include all relevant evidence with any Response document also highlights the value of comprehensive and accurate record keeping; which should be maintained before, during and after any Construction Contract programme (and should include all contractual negotiations).

The Decision

An adjudicator’s decision is binding upon the parties; although they do have the right to go to court for a final determination of the dispute if they are unhappy with the decision.

Once the decision is received, it will usually require the losing party to make an immediate payment of any amount decided.

The adjudicator will also be able to determine which party pays his fees (or whether an apportionment is appropriate).

The adjudicator does not usually have jurisdiction to decide that the loser should pay the fees of the winner (although this can be agreed by the parties); therefore, costs incurred by either party in connection with an adjudication will usually remain their liability, regardless of the result.

If a party fails to pay any sums awarded by an adjudicator, the other party can make an application to the court to enforce the decision. This process has been specially developed by the TCC (Technology and Construction Court) for adjudication and is much quicker than normal court processes.

There are limited grounds upon which the enforcement of adjudication decisions can be challenged, including breaches of natural justice, adjudicator bias, procedural irregularities and jurisdictional matters. In some circumstances, the winning party’s inability to repay monies if the decision is later overturned may be sufficient to resist the enforcement of an adjudicator’s decision.

It should be noted, however, that successful challenges to the enforcement of adjudication decisions are rare and the vast majority of decisions that are challenged are subsequently upheld.

For more information about Adjudications, contact our Construction Law expert, Michael Smyth at michael.smyth@orj.co.uk or by telephone to 01785 223440.

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