UK: Adjudication Part 1 – A Formula For Success

Adjudication is a form of dispute resolution specific to construction contracts. Due to its time restrictions, speed, and unbiased third-party analysis, it is favoured as a commercial necessity amongst construction professionals. Its use in resolving contract breaches is intended to enable parties to continue working together towards completion. Administering a strict process, parties find themselves under the guide of an adjudicator, whose decision is temporarily binding.

Key terms:

Referring Party – individual/company who issues a Notice to Adjudicate and Referral Notice (the Referral).

Responding Party – individual/company who has received a Notice to Adjudicate from the Referring Party, and is required to respond accordingly.

Response – a first defence, and any counterclaim, from the Responding Party, in reference to the details in the Referral.

Reply – a first answer from the Referring Party, to the Response and any counterclaim.

Rejoinder – a second form of defence by the Responding Party, in reference to the details in the Reply.

Sur-Rejoinder – a further answer by the Referring Party, to the Rejoinder.

Pre-Adjudication Process:

It is essential to ensure the dispute has crystalised before proceeding to adjudication. This requires all parties to be aware of the dispute. Usually, some form of a written notice detailing the differences between the parties, defining the dispute, and setting out a resolution, will suffice.

Step 1:

Issue a Notice of Adjudication, which includes:

• Who the parties are – as defined in the contract, including addresses.
• What the contract is in relation to – include enough information about the terms of the contract, the Parties' reliance on the terms, and how they have been breached.
• What the dispute is, and how it has risen.
• What relief is sought from the Adjudicator.

This should be sent to the opposing party, or their representative(s).

Step 2:

Appoint an adjudicator

Review the contract and contact the relevant appointing authority (e.g. RICS, TeCSA, CiArb) to appoint an adjudicator. Instructions on how to complete the necessary paperwork can be found on their websites.

Following this, the selected authority will appoint an adjudicator, who will contact all parties named on the adjudication form.

Step 3:

Referral Notice

The Referral Notice is drafted by the Referring Party to submit its case, with the evidence relied upon. The Referring Party has 7 days, beginning from the day the Notice to Adjudicate was issued to the Respondent. It should include, inter alia:

• Introduction – details of when the Notice to Adjudicate was issued, and what attachments it included.
• Background – who the parties to the dispute are. If it's a company, include their company reference number (provided by Companies House) and details of the relevant people.
• Dispute – details of why and when a dispute arose; and what that dispute is by reference to contractual provisions, breaches, etc.
• Further information – various subheadings to detail the dispute, and the evidence you rely on.
• Additional Information – the Referring Party's overall stance, and any other relevant information the Adjudicator should consider when assessing the evidence and reaching a decision.
• Decision Sought – what the Referring Party is claiming and seeking out of this adjudication.
• Witness Statements – evidence of the facts from the understandings and direct knowledge of witnesses.
• Expert Reports – it is common in an adjudication which involves payment applications and/or valuations, to have an independent report from an expert quantity surveyor.
• Index – set out what each attached document is and where each document can be located.

The Referral Notice should be sent to the Adjudicator, and the Responding Party.

Step 4:

Response

The Responding Party answers the Referral, providing a detailed account of their version of events, and any counterclaim. The Responding Party will usually have 7 days to issue a Response from the date of the Referral, which is to be sent to the Adjudicator and Referring Party. The Response should include, inter alia:

• Introduction – details of when the Notice to Adjudicate and Referral Notice were issued to them.
• Background – who the parties to the dispute are.
• Referral Notice – details of the Referring Party's claims by way of clarification and their understanding.
• Defence – sub-headings so that the defence to individual sections of the Referral Notice is clearly set out. This might include the Responding Party's interpretation of contract clauses and other documents, putting forward their version of events. Set out whether any parts of the Referring Party's claims are accepted or denied.
• Counterclaim – set out details of any counterclaims, if there are any.
• Witness Statements – evidence of the facts from the understandings and direct knowledge of witnesses.
• Expert Reports – it is common in an adjudication which involves payment applications and/or valuations, to have an independent report from an expert quantity surveyor.
• Index – set out what each attached document is and where each document can be located.

Any jurisdictional challenges must be part of the Response. This will be covered in a separate article.

Step 5:

Reply

Here, the Referring Party answers the Response, providing a detailed account and explanation of their version of events. The Referring Party will have a limited period from the date of the Response to issue a Reply (at the discretion of the Adjudicator) which is to be sent to the Adjudicator and Responding Party.

Although the Scheme for Construction Contracts (England and Wales) 1998, does not specify details of how a Reply should be issued, submissions should follow a similar format to that of the Response. Therefore, the Reply should include, inter alia:

• Introduction – summary of the specific issues being addressed.
• Further Information – sub-headings clearly setting out the Referring Party's understanding of individual sections of the Response, to which the Reply is directed.
• Witness Statements – evidence of the facts from the understandings and direct knowledge of witnesses.
• Expert Reports – to add further credibility to the Referring Party's position, it is common in an adjudication which involves payment applications and/or valuations, to have an independent report from an expert quantity surveyor.
• Index – set out what each attached document is and where each document can be located.

Step 6:

Rejoinders and Sur-rejoinders

Both parties may issue a second form of defence and answer, using similar formats to the Response and Reply sections above, subject to the Adjudicator's permission to do so.

Step 7:

Decision

The Adjudicator's decision is temporarily binding, until it is overturned by arbitration or litigation, and must be issued within 28 days of the Referral. If additional time is required, this will be agreed by the parties. The Referring Party can agree to extend the time by 7 days without the consent of the Responding Party (subject to notifying all parties) but any further extensions must be agreed by both parties.

Step 8:

Post Decision

Payment will usually be required within 7 days of the Decision.

Parties can refer the dispute to arbitration or legal proceedings to overturn the decision. Note, you cannot adjudicate twice on the same matter, nor can you refer more than 1 dispute at a time. But you can refer a single dispute with a subset of questions.

Should a party refuse to pay, the Decision can be referred to the Court, to enforce proceedings, also known as a Part 8 claim.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.