Great changes in the system over the last few years have left many contractors confused about the adjudication procedure and what they have to contribute to it. Richard Hawkins, executive director for Knowles, unravels some of the mysteries behind the process.

THERE WAS a time when a claimant in a construction dispute had little or no choice; he either slogged it out with the other party or its representatives, or referred the matter to arbitration. Standard forms of construction contracts generally contained an arbitration agreement and, following the case of Northern Regional Health Authority vs Derek Crouch Construction [1984], it was accepted generally that the court did not have the same express powers as did an arbitrator to open up, review and revise previous opinions, decisions and certificates of the independent certifier: architect/contract administrator or engineer, as appropriate. Attitudes changed in the 1990s when the Joint Contracts Tribunal introduced court proceedings as an expressed alternative to arbitration.

In May 1998 along came the Housing Grants, Construction and Regeneration (HGCR) Act 1996. This Act was designed principally to provide a relatively inexpensive, effective and speedy method by which recalcitrant payers could be encouraged to part with monies which did not actually belong to them. Adjudication was reinvented, by which the claimant party could obtain a decision of an adjudicator, acting as an expert and not as an arbitrator, within 35 days of serving a notice of intention to refer the dispute.

Each party had to bear its own costs and one, or other, or both, had to pay the adjudicator, in which case it was presumed that the process ought to be pared to the bone.

Relatively quickly, however, disputing parties realised that the chances of an adjudicator’s decision being reviewed subsequently by an arbitrator or the court were slim and so, rather quickly, this method of resolving disputes was recognised as an effective substitute for arbitration. In many ways the development was inevitable. Arbitration had got itself a reputation for huge cost and time involvement, and litigation in suits was more than just a cliché. Why go to the trouble and expense of formal pleadings and other procedures which followed closely, and often slavishly a process which mirrored the Civil Procedure Rules, plus having to pay for the tribunal and the hearing venue, when you could get a rough and ready decision within 28 days of serving the referral notice? And both parties bore their own costs.

Of course, this state of affairs has led to more and more complex matters being referred to adjudication, and still the poor adjudicator has generally only 28 days within which to reach a decision on such complexities. Of course, the adjudicator may request more time, and which referring party would reasonably refuse it? That said, it might be reasoned that this increasingly common practice of referring complex disputes to adjudication, as a cut-price substitution for arbitration, could be said to be doing the procedure a disservice and is threatening its reputation.

In short, one might reasonably ask whether this kind of arbitration substitute, with a decision supplied within 28 days from referral, is really what Parliament and the drafters of the HGCR Act contemplated? Was the entitlement to adjudicate not designed, primarily, to provide an effective remedy against recalcitrant payers, parties who habitually withheld money or setoff from monies due and owing? Or to resolve effectively all those interminable arguments over whether workmanship or materials corresponded with those which were specified?

The beauty of these types of disputes, and their resolution by adjudication in 28 days was, the industry was led to believe, that such adjudication and resolution could and should take place during the currency of the contracted works. Thus, the old habit of saving up all the disputes until the end of the project, when practical completion had been certified and the contractor and its subcontractors had all left the site, and consolidating those separate disputes into one huge, lengthy and costly arbitration was reckoned to be a thing of the past.

That does appear to have happened, to some extent. The problem, however, is that interspersed with disputes over non or late payment, or quality of workmanship and materials, are disputes which have, and are becoming, more and more complex by their nature.

Adjudicators are doing their level best to reach a decision within the prescribed time period of 28 days, or short
extensions of time to such period but problems are bound to occur when such decisions are nothing short of a knee-jerk reaction, with little appreciation of the facts and evidence presented. Such decisions rarely do either of the disputing parties any favours.

In many ways, those representing disputing parties have to take much of the blame for this state of affairs. In its simplest form, a dispute ought to be encapsulated within the documents that led to its crystallisation, which will  include correspondence, notes of meetings between the parties, valuations, applications for payment and payment records. That being the case, the referral itself ought to comprise a copy of such evidence together with a simple narrative to assist the adjudicator to understand the background to the dispute. It was this simplicity which, presumably, caused the drafters of the HGCR Act 1996 to deliberately dispense with any express provision within section 108 for the nonreferring party (now commonly referred to as the responding party, or the respondent even) to make its own submissions following receipt of a copy of the referral notice.

Such a lack of provision has been extended in many standard form contracts, or by adjudicators following a common convention, which allows the nonreferring party seven days from the referral notice to submit its own version of the dispute to the adjudicator. Such a provision is commonly allowed under the generality of section 108(2)(e), which states: “The contract shall impose a duty on the adjudicator to act impartially.”

As the process of adjudication has developed over the last eight years or so, a typical referral these days appears to comprise not only a narrative and the evidential facts of the dispute but witness statements, experts’ reports and often a lengthy treatise on the law relating to the referring party’s perception of its case. It is almost as though parties’ representatives have decided that adjudication has become an effective, speedy and relatively cheap alternative to arbitration. What next one wonders? Discovery and disclosure, meetings of experts, and so on? As it is, it is not uncommon for the referring party to serve a reply to the nonreferring party’s response, almost inviting the non-referring party to serve a rejoinder to the reply, and so on, ad infinitum.

Many adjudicators will convene a meeting to be attended by the parties and/or their representatives. Such
meetings are intended to provide the adjudicator with first-hand additional information and background of the dispute to cater for any gaps in the adjudicator’s knowledge gleaned from the written submissions. Some parties or their representatives regard such meetings as an ideal opportunity for advocacy, legal submissions and even cross-examination of the other party, whether witness statements have been served or not. In fact, experience has demonstrated that some adjudicators have occasionally allowed such meetings to become akin to formal hearings, with evidence and crossexamination, experts’ reports, submissions and the whole panoply of a formal resolution process.

The discretion for the procedure of any adjudication lies generally with the adjudicator, so long as it is within the provisions of the Act. But many adjudicators would do well to remember that the parties have to bear their own costs of such a procedure and, more importantly perhaps, the adjudicator has generally only 28 days within which to reach a decision.