21/04/2017
There is no doubt that adjudication can provide a swift, cost-effective solution to some construction disputes, preventing deadlocks and putting parties in a position where they can complete the project and make a return on their investment. But like every process, adjudication has its complications and disadvantages. Being aware of these can assist parties to a construction contract make the right decisions to resolve their disputes, quickly and in the most effective manner for the situation.
The right to adjudicate
A party has the right to adjudicate provided:
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the contract is a 'construction contract' under the Housing Grants, Construction and Regeneration Act
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a 'dispute' has crystallised
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for contracts entered before 1st October 2011, it is also necessary to consider whether the construction contract is in writing
The advantages and disadvantages of the adjudication process
Adjudication is quick
Adjudication procedures have a 28-day timetable and as such may not be suitable for complex, highly technical disputes. Parties can agree to extend the timeframe to 42 days, but even so, trying to resolve a large claim in six weeks is a tall order.
However, the short process can have tremendous advantages. Pre-action protocols and court proceedings can take between 12-24 months to complete. In addition, the construction contract may include certain steps which must be completed before litigation can begin. Adjudication can circumvent these steps and provide for a quick resolution, saving enormous amounts of time, stress and money, and limited disruption to the works.
No risk of having to pay the other side’s costs
Having a third party resolve a construction contract dispute without running the risk of paying the other sides costs if lost, will bring great comfort to any CFO. It also means that a party with limited cash-flow can pursue its claim in circumstances where it could not have risked an adverse cost order in litigation.
However, for a strong claim, the inability to recover legal costs can reduce the net total amount recovered. A party’s irrecoverable costs in a small claim could be a significant portion of the overall claim.
Privacy
Unlike court proceedings, adjudication is private unless the adjudicator’s decision is reviewed by the Technology and Construction Court. This allows commercially sensitive information to be more easily protected than in court proceedings, which are generally public. It can also help reduce the risk to a company’s reputation if its products, workmanship or design are found to be substandard.
The referring party has the element of surprise
Being able to swiftly issue a Notice of Adjudication is good news for the referrer, bad news for the respondent. The referring party has an enormous tactical advantage in that they can refer a matter for adjudication at an inconvenient time for the respondent. They can also prepare their case, gather their supporting documents and plan their strategy before serving notice of adjudication, putting the respondent on the back foot to defend their position.
The decision may be unenforceable
One major disadvantage with adjudication is that the decision may be unenforceable if the adjudicator acts outside their jurisdiction or breaches the laws of natural justice.
In summary
Like any disputes resolution procedure, adjudication has its advantages and disadvantages. To ensure it is the right process to resolve your construction contract dispute, it is imperative to seek experienced legal advice before launching proceedings.
Fisher Scoggins Waters are a London based law firm who are experts in construction, manufacturing and engineering law. If you would like more information about adjudication proceedings, please phone us on 0207 993 6960.
For a detailed look at each stage of the Adjudication process please read our series of Blogs:
Adjudication - The Essentials. Part 1: What is Adjudication?
Adjudication - The Essentials. Part 2 : Notice of Adjudication
Adjudication - The Essentials. Part 3 : How To Appoint An Adjudicator
Adjudication - The Essentials. Part 4 : The Referral Notice and Response
Adjudication - The Essentials. Part 5 : The Powers Of An Adjudicator
Adjudication - The Essentials. Part 6 : The Adjudicator’s Decision and Costs