Adjudication - The Essentials. Part 2 Notice of Adjudication

12/03/2015

Serving Notice of Adjudication

The first step in the Adjudication Procedure is the serving of a Notice of Adjudication.  The referring party can serve notice both during the construction and after the work has been completed. 

A Notice of Adjudication provides an opportunity for the referring party to outline the details of the dispute and for both parties to resolve the dispute before resorting to adjudication.  It must be in writing (unless the construction contract states otherwise, but even then it is advisable to have the notice documented) and set out the following facts:

• the nature and a brief description of the dispute and of the parties involved

• details of where and when the dispute has arisen

• the nature of the redress which is sought

• the names and addresses of the parties to the contract including, where appropriate, the addresses which the parties have specified for the giving of notices

The notice must contain a timetable detailing the appointment of the Adjudicator and the referral of the dispute to him or her within seven days from the date of the serving of the notice.

What is a Dispute for the purposes of Adjudication?

Identifying a clear dispute for the purposes of adjudication is not as clear cut as it may first appear.  The vast amount of case law surrounding the issue of ‘what is a dispute’ has not set out any hard and fast rules, however the courts have stated unequivocally that,

 “It has to be borne in mind that ‘dispute’ is an ordinary English word which should be given its ordinary English meaning” ( Beck Peppiatt Ltd-v Norwest Holst Construction Ltd). 

Further guidance was given in Sindall v Solland where HHJ LLoyd QC stated that:

“For there to be a dispute for the purposes of exercising the statutory right to adjudication it must be clear that a point has emerged from the process of discussion or negotiation that has ended and that there is something which needs to be decided”.

A dispute must therefore have crystallised in order for a Notice of Arbitration to be served.  This requires that:

• The issue must have been brought to the responding party’s attention prior to the notice being served

• The responding party must have been given reasonable time and opportunity to give consideration as to whether or not they would accept or reject the claim brought by the referring party

• The claim must be rejected by the respondent

• The two parties to the dispute will be the actual parties involved in the adjudication procedure 

Inaction on behalf of the respondent can amount to a rejection of a claim, a point that was clearly articulated in the recent case of St Austell&;Printing Company Ltd v Dawnus Construction Holdings Ltd ; The facts surrounding the crystallisation of the dispute were as follows:

• In November 2011, St Austell Printing Company Ltd engaged Dawnus Construction Holdings Ltd (Dawnus) to design and construct two warehouse/industrial units in St Austell, Cornwall. The contract sum was £5.5million.

• The contract administrator was a company called AECOM. When work was finally completed, it came to just over £6million.

• In December 2013, Dawnus issued an interim application for payment in which it sought the gross sum of £8million and the net sum of £2.3million.

• AECOM informed Dawnus that the sum so far paid to Dawnus (around £8million) was the correct sum and no further sum was due to it. It promised to write to Dawnus to detail outstanding defects with the work but, in the event, did not do so.

• In August 2014, Dawnus commenced adjudication proceedings.

St Austell Printing Company argued that no dispute had in fact crystallised at the time the notice of adjudication was sent.  Coulson J stated that he had no doubt whatsoever that the dispute had crystallised long before the notice of adjudication.  He went on to add:

It is very rare for the assertion that a claim has failed to crystallise to be upheld by the Courts.  One example of where it was upheld is found in the recent case of Beck Interiors Ltd v UK Flooring Contractors Ltd.  In this particular decision the claim was first detailed in a letter sent after close of business on the last working day before Easter, and the notice of adjudication was entered the following Tuesday (following a four day close of business due to the Easter holiday).  It was held that the fact there had been no response to the claim over the Easter break did not amount to a rejection and therefore no dispute could have crystallised.

Delivery of an Adjudication Notice 

Unless the construction contract sets out a mode of delivery, then under the scheme a Notice of Adjudication can be served “by any effective means”. 

Once the Notice of Adjudication has been issued an Adjudicator must be appointed.  

As to how this is done and the law surrounding the appointment.....stay tuned for part three of this series entitled How to Appoint an Adjudicator.

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To find out more about the adjudication process please call our London office on +44 (0) 207 993 6960 to talk to one of our team.  See our for more information on Adjudication & Arbitration pages for more information. 

Fisher Scoggins Waters is a leading construction, engineering and manufacturing litigation firm, specialising in disputes and disasters. For further information on this article or any of our litigation services, please contact us on: +44 (0) 207 993 6960.