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Druces for Business

Adjudication

Druces for Business

Adjudication

Adjudication is the most popular form of alternative dispute resolution in construction having been introduced into all construction contracts following the Housing Grants Construction and Regeneration Act 1996, often referred to as the Construction Act. 

Adjudication is a legal right that cannot be removed under contract and which can be relied upon at any time to resolve a dispute. While it is often described as a quick fix form of dispute resolution, adjudication is also a great way for parties  to resolve their differences. Adjudication is popular as it was designed to be completed quickly, within 28 days of the date of the Referral, and rarely lasts more than 42 days. The courts have supported adjudication and if you obtain, or already have, an adjudicator’s decision in your favour, the courts will most likely enforce it and compel the other side to pay.

Druces’ Construction team includes solicitors who are very experienced in conducting adjudications, both for those with claims and defending claims. The team has worked at some of the best known construction law firms in the UK and is well equipped to advise clients, (where appropriate, in conjunction with other experts) on the strength of your claim and/or defence.

Today there are essentially two different types of adjudication. The first is known as smash and grab adjudications which are technical claims where the employing party under the contract has failed to issue a valuation of the works for that particular month. The second is more common. These are contested issues of valuation or extension of time and loss and expense claims or similar issues.

The biggest drawback of adjudication is the cost: the adjudicator has power to award costs to the winning party or split them between the parties. However, your costs of bringing or defending a claim will not be recoverable. This makes the cost of adjudication all the more important where the claim is of a lower value. We understand this and that is why we offer a fixed fee adjudication service.

Below, we set out an outline of the adjudication process.

Getting Started – the Notice of Adjudication

The process begins when the party making the claim (the Referring Party) gives notice to the defendant (the responding Party) of its intention to refer a dispute to adjudication. The requirements for this notice are set out in The Scheme for Construction Contracts, as follows:

  • a description of the nature of the dispute and the parties involved;
  • details of where and when the dispute arose;
  • the nature of the remedy being sought; and
  • names and addresses of the parties to the contract, including addresses where documents may be served.

Although the Notice of Adjudication formally commences the process, there are no additional requirements for the document beyond those listed above.

Great care should be taken in the preparation of the Notice of Adjudication however, as this document frames the parameters of the dispute and creates the jurisdiction of the adjudicator to decide upon it.

Appointing your Adjudicator

After serving the Notice of Adjudication (and complying with the relevant service requirements of the underlying contract), the next step is to appoint an adjudicator within seven days.

The parties may have already agreed upon an adjudicator (either by way of specification in the underlying contract, or separately) failing which the Referring Party will apply to an Adjudicator Nominating Body (ANB) to make the selection. This process normally involves completing a short form identifying the parties and setting out the details of the dispute and the skills or experience required.

Care should be taken to ensure a suitable adjudicator is nominated and the form also provides for the exclusion of those adjudicators conflicted from nomination. A fee (generally less than £500) is payable by the Referring Party and the ANB must make a nomination within five days of the application being made (failing which the parties are obliged to recommence the entire process). 

Preparing and serving the Referral Notice

The deadline for service of the Referral Notice is seven days from the Notice of Adjudication. It is therefore advisable (however tempting it may be) to exercise restraint until the document is substantially ready before commencing the adjudication process. 

There will inevitably be some last-minute changes to the submissions or delays in the collation of evidence and failing to put your best foot forward as the Referring Party can be a costly (and often entirely avoidable) error.

The Referral Notice should be served on both the Responding Party and the nominated adjudicator within seven days of the Notice of Adjudication and should be a detailed record of the Referring Party’s case. It should include the background to the dispute and all material evidence associated to its position (including, where relevant, expert reports and/or witness evidence). That is not the say that the Referral Notice  should be lengthy simply for the sake of it; sifting through swathes of unorganised information is not the adjudicator’s role and  they will not thank you for it.

The Adjudicator’s directions

By default (and as specified by the Construction Act) the Adjudicator must render their decision within 28 days of receipt of the Referral Notice. Following receipt of this document, the Adjudicator will then direct the service of the Response by the Responding Party, normally within seven days. Provision may also be made for further submissions, as discussed below. This timetable may be extended, where necessary, by consent.

Preparing and serving the Response

The Response is effectively the Responding Party’s defence to the arguments made in the Referral Notice. The Responding Party may raise any defence available  and may even advance a counter-claim .  It is common practice to ask for 14 days.

This is essentially Responding Party’s defence to the referring party’s claim. The Construction Act does not specifically demand that the Responding Party issues any response, or indeed further submissions after the referral notice – the need for such submissions is a matter for the adjudicator. Invariably, however, the adjudicator will require the responding party to serve a response, typically within seven days of the referral notice. Requests for this to be extended to 14 days are usually agreed.

The Decision

The adjudicator is required to reach his decision within 28 days of service of the Referral Notice. This period can be extended by a further 14 days if the Referring Party agrees, or can be further extended if both parties agree.

The decision is final and binding, providing it is not challenged by subsequent arbitration or litigation. Even if the parties intend to pursue court or arbitration proceedings, they must in the meantime comply with the decision. In the majority of disputes, the parties will accept the decision, but if they choose to pursue subsequent proceedings then the dispute will be heard afresh (not as an ‘appeal’ of the adjudicator’s findings). It should be noted that once an adjudicator has made a decision on a particular issue, that same issue cannot be referred to a ‘second’ adjudicator.

Fixed fee adjudication service

The construction team at Druces is pleased to be able to offer its clients a fixed fee adjudication scheme based on the value of the dispute.  The fee includes an initial no obligation claim review and an in person meeting to discuss the claim. We will then work with you to prepare the Notice of Adjudication and Referral or the Response plus the supporting documentation.  Unlike some other fixed fees we also arrange the application for nomination and conduct all of the correspondence. The fee also includes drafting a Reply to Response or Rejoinder to Reply if required.  Finally, we also review the decision and advise you on the best course of action.

Work/Claim value (£) Fee excl. VAT and disbursements (£)
Smash and grab up to 500k and adjudications up to 100k 5,000
Claim value: 100-150k 7,500
Claim value: 150-200k 10,000
Claim value: 200-250k 15,000
Claim value: over 250k 10% of claim value

These fees exclude disbursements, expert fees and extension of time and loss and expense claims (unless a consultant is employed and has already prepared these, in which case we can consider offering a fixed fee). The fee also excludes the cost of enforcement, and anything post decision, (beyond the initial review and advice) and also assumes no extension of time beyond the 14 days under the statute.

The construction team will also consider conditional fees for smash and grab and some other claims based on value determined in the decision, as opposed to sums recovered. For larger claims we also have relationships with litigation funders who may be able to assist with financing the preparation of the claim.

Druces’ fixed fee service is subject to our discretion as to the taking on of the instruction. Our fees are payable in full and on account of our services.

Who to Contact

Richard Bailey

Partner

Laughlan Steer

Senior Associate

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