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How has Adjudication Developed in the Last 25 Years?

Adjudication is the process of resolving disputes usually termed as a ‘quick fix’ or ‘rough justice. The adjudication clauses have been in existence in standard form English construction subcontractors for some forty years. This has allowed subcontractors to challenge, within strict timeline, the amounts that the major contractors had deducted or set-off from the interim payment. Construction Act initially envisioned an objectively informal adjudication, but the process has increasingly become a formal process with parties serving comprehensive witness statements, submissions and expert reports.

The UK’s construction adjudication started in 1998, May 1 through enactment of the Housing Grants, Construction and Regeneration Act (HGCRA) 1996. Adjudication has broadly been utilized for parties to settle disputes linked to construction. Adjudication has significantly evolved since 1998. Several disputes were referred to the UK courts about the jurisdiction of adjudicator, whether the adjudicator had effectively upheld the perquisite of exercising natural justices and the questions regarding the bias or impartiality of adjudicator during the first few years of Construction Act. Recently, reforms have been made through LDEDC) Act 2009 which saw additional courts intervening on ‘smash and grab’ adjudications (ISG Construction Limited v. Seevic College [2014] EWHC 4007 (TCC) & Galliford Try Building Ltd v Estura Ltd [2015] EWHC 412 (TCC)) arising from issues with payment notices. Additional reforms have emerged from Glove Development Limited versus S&T (UK) decision that rejected past decisions of the court on ‘smash and grab’ adjudications.

Reforms have also been made relating to the types of adjudicators. The professional skill base of the adjudicators has changed over the period from mainly quantity surveyors (Sweet, 2012). The number of lawyer adjudicators has risen, followed by civil engineers, architects and professional builders.

Table 1: Primary professional discipline of adjudicators

Primary professional discipline of adjudicators

Source (Finn 2018)

Adjudicators have also adopted new procedural reforms (table 2) mainly a ‘documents only’ leading to safeguard from natural justice/ procedural tests. Adjudicators no longer prefer site visits   and legal debates.

Table 2: Procedure used by adjudicators

Procedure used by adjudicators

Appointments of ANBsSource (Finn 2018)

Number of Adjudicators

Source (Finn 2018)

Discipline of Adjudicators

Source (Finn 2018)

However, more reforms are needed in terms of the types of adjudicators to allow more people with legal background to be appointed. This is because historically, adjudicators have been mostly appointed from quantity surveying background with little knowledge on law and legal consideration which makes adjudication decisions to be overruled by courts.  By year 2016, Adjudicators with legal backgrounds appear to have surpassed quantity surveyors and since year 2010, lawyer-disciplined adjudicators have progressively surged. 

Legal and Commercial Considerations in Legislative Reforms

The legislation reforms consider the need to ensure proper, expeditious as well as professional processes for major business disputes ‘adjudication, enhancing corporate governance and elevating business surroundings thereby promoting economic development. This implies that the legislation reforms consider such commercial considerations like the need to have adjudicative processed that speeds up the resolution of commercial disputes and enhance their corporate governance to ensure that commercial business operate effectively ((Kennedy et al., 2010).

There are considerations relating to legal technicalities that need reform. For example, there is a strict interpretation of the adjudication rules which needs legislation reforms. Also, there is introduction of sophisticated issues that is applicable to arbitration and there are also adverse court decisions which also need legislative reforms. This is because the lawyers have always tended to approach the process of adjudication with a strict adjudication rule interpretation (Mewomo & Maritz, 2016). This has really led to several technical breaches hence giving space for rejection of applications. Furthermore, in certain instances, good claims have been dismissed because of technical breaches.  This has led to a waste of resources and time, and claimant’s technical failure to meet the claim justice when a good claim remains dismissed because of the Act’s technical breaches which must be considered for legislation reforms (Mewomo & Maritz, 2016). Moreover, adverse court decisions have had their corresponding share in defeating the adjudicative process legislation objective which calls for legislation reforms. The decisions of the courts nullifying the effect and efficiency of how adjudicative process remains intended to operate is capable of stultifying the importance of adjudication and further bring the system to a halt, which circumvents the legislation objective (Mewomo & Maritz, 2016). 

The legislation enacted by parliament has significantly met the aims of adjudication.  For example, the process of adjudication in terms of cost has been improved by the enactment of LDEDC Act 2009 that came to force on 01/10/2011. This is because whereas the Construction Act originally never mentioned how cost needed to be dealt with which was a challenge originally, the amendment of the Construction Act emerging from LDEDC Act 2009, provided that any provision on contracts that attempts the allocation of the adjudication cost between the parties shall not be valid, except if it is made following the appointment of the adjudicator (Keogh and Lawless 2020). This remains applicable to agreement both as to the adjudicators’ fees and expenses allocation and the agreement as to who will be bearing the own cost of the parties. Therefore, this provision has improved the aim of the adjudication since it has sought to deter parties from agreeing terms of contracts that place all the adjudication cost on a single party (Chen et al. 2010).

Has the Legislation Enacted by Parliament Met its Aims?

Furthermore, the Construction Act amendment through the introduction of part eight of the LDEDC Act significantly amended Construction Act. This is because it affected all ‘construction contracts in Scotland, Wales and England. Such amendments to the Construction Act have remained in force with respect to the construction contracts that were entered on or following 1/10/2011 in Wales and England, and 1/11/2011 in Scotland. This piece of legislation has improved the aim of the adjudication by increasing clarity to the construction contracts; ushering a ‘fairer’ regime of payment, and improving the contractors’ rights of suspending their respective work during non-payment conditions. It also improved the aims of adjudication by encouraging the use of adjudication for the dispute resolutions (Agapiou 2013). 

The legislation related to the slip rule amendments have also been able to help meet the aims of the adjudication following the decision of Judge Toulmin in the Bloor Construction case in the year 2000 by introducing an exception in the case of clear/obvious errors (slips), that have been corrected within an extremely short time after publishing the decision. The previous slip rule law has subsequently been amended thereby allowing the construction contracts to encompass a written provision hence permitting the adjudicator to rectify typographical or clerical errors; and errors emerging from omission or accident on the side of the adjudicator (Sinden et al. 2012).

Are there any problems with the adjudicative process? (This section discusses the problem and show that adjudication legislation is need of reforms)

Adjudicative process faces some problems that clearly show that adjudication legislation is need of reforms. The first problem is the lack of specific requirement as to the form of Notice of Adjudication document. This is because the notice is only required to give a description of nature of dispute and underlying parties, particulars of where and when the row emerged, nature of remedies sought, and names and addresses of underlying parties (Mewomo and Maritz 2017).

The other problem in the adjudicative process lies in the difficulty in appointing the adjudicator. The adjudication process might restart where the ANB fails to nominate the adjudicator within five days following the receipt of a nomination request from the party who referred the dispute.

Another problem lies with the referral notice which has to be served within 7 days of service of notice of adjudication (Hassan et al. 2019). This is because when the ANB delays the nomination of the adjudicator and only does so 24 hours before the expiration of this 7-day duration, the referring party will only be left with a single day to issue this referral notice to adjudicator and send a copy to the responding party simultaneously (Chamon 2014). 

Are there any problems with the Adjudicative Process?

Another problem in the adjudicative process relates to expenses and fees of the adjudicator. This is because it is left at the discretion of the adjudicator to decide what sum of fee and expense is reasonable and this might make adjudicator to charge expensively (Tanielian 2013). Thus, agreeing the fee and expenses of the adjudicator would be costly since it might bring forth another dispute which must go to court to be determined in case adjudication entails required adjudication provisions outlined in Construction Act (Gad et al. 2011).  

Another problem in the process is that the expert and legal fees are never usually recoverable with any slight mistake costing significantly hence little margin for error. The process also has a problem since a mistaken decision must always be honoured within the short-run, which could trigger cash flow issues. Moreover, the problem also arises in the process since the adjudicative process outcome must be decided within twenty-eight days of beginning the process. This makes adjudicative process merely a means of losing significant sums of funds within an extremely short timeframe for the party who is on the wrong end of unfavourable decision.

There is also a problem linked to the issues of process and procedure of adjudication. The procedural challenges are that the Act is only providing a general framework without giving a comprehensive procedure as to how as well as what to do. This makes the subcontractor and suppliers to be ignorant of the various provisions of the Act. Moreover, there are procedural complexities and the lower levels of accessibility (Mewomo & Maritz, 2016).  

There is also a challenge with adjudicative cost and the fees of adjudicator. This challenge can be seen from two viewpoints. On one side, an excessively high cost of adjudicative process limits its usage and hence affecting the legislation impact (Mewomo & Maritz, 2016). Accordingly, the excessive cost is a critical barrier to subcontractors when pursuing adjudication. Conversely, extremely low fees of adjudicators would discourage the experienced adjudicators hence leading to insufficient capacity since they might never need to practice adjudication (Mewomo & Maritz, 2016).

There is also a problem with jurisdictional challenges since the Act implementation has become extremely legalistic with several jurisdictional challenges alongside applications for setting or staying aside of decisions of adjudication (Mewomo & Maritz, 2016). Moreover, several grounds exist upon which a jurisdictional challenge could be brought into adjudicative process. Such grounds for challenging the decision of adjudicator encompass jurisdictional errors by adjudicator, or even natural justice breach (Mewomo & Maritz, 2016). Moreover, where the agreement to adjudicative is never in writing, or where a party is feeling that the adjudicator was never appointed validly, or when a party is feeling that he has never been accorded a fair hearing trigger challenges to jurisdiction.  Such a challenge hence defeats the very goal of the Act to make jurisdictional a summary, fast, simple and comparatively cheap process (Mewomo & Maritz, 2016).   

Appraise and apply administrative techniques and the contractual/legal requirements for the administration and control of construction projects;

Contract administration refers to the contract management between the client, employer and building contractor. It is a requirement to have a contract administrator/employer’s agent to manage, negotiate, support and execute the process of construction contract process. It is a legal requirement that the contract administration begins formally upon hiring a building contractor to deliver a construction project and related works. The technique for administration remains all-inclusive and is covering from construction, procurement, subcontracting, installation, engineering, commissioning, handovers rectification and final financial close of project. The contractual requirements include mutual assent, expressed by a valid offer alongside acceptance; sufficient consideration; capacity and legality for the construction contracts to be legally enforceable by the adjudication process. 

A number of key considerations to select appropriate dispute resolution technique exist. These considerations include the strength of one’s case, relationship between parties, the legal costs, the urgency of the matter, time to resolve the matter, keeping matter private, enforcing alternative dispute resolution and whether there is a precedent. If one wishes to evade creating a new precedent, it is imperative to resort to ADR methods. If a parties want to keep the mater private they need to avoid court litigation in case of dispute that revolve around confidential materials or intellectual property. It is easier to choose court where one prefers high likelihood of enforcement of ADR like negotiation or mediation. Parties should go for Adjudication if they want a short time to solve the issue rather going to courts. When the matter is urgent, it is better for a party to litigation if he wants to achieve court intervention. Litigation costs are higher alongside the hourly pay for lawyers in case of a prolonged litigation with a determined party thus it is appropriate to avoid litigating in court but resort to ADR like Adjudication which have strict deadlines. A less formal dispute resolution method like Adjudication or other ADR methods is appropriate in case parties have relationships between them, whether personal or commercial thus saving the relationship continuity. Upon the lawyer ascertaining the strength of the case, court option will only be appropriate if there is sufficient info to prove a range of elements of a claim, otherwise, it would be appropriate to go for a different dispute resolution method when the prospects of the case are very weak.     

Conclusion

Even though adjudication has significantly evolved in the United Kingdom since its inception in the construction industry in 1996, this paper has demonstrated that it is still in need of legislative reforms to reduce the likelihood of decisions being overruled by courts. Several problems with adjudicative process were identified which supports the conclusion that adjudication still needs reforms. These reforms should focus on procedure, costs (adjudicator fees and related process cost), recovery of expert and legal fees, jurisdiction, and timely appointment of adjudicators. 

References

Agapiou, A., 2013. The impact of legislative change on adjudication provisions and the requirement for written contracts under the new construction act. US-China L. Rev., 10, p.549.

Alexander, S., 2021. Is the industry using adjudication as Parliament intended?. DENTONS, 27 July .pp. 1-2.

Balogun, O.A., Anzari, N. and Thwala, W.D., 2017. Adjudication and arbitration as a technique in resolving construction industry disputes: A literature review. In Proceedings of the Sixth International Conference on Advances in Civil, Structural and Environmental Engineering. ACSEE.

Chamon, M., 2014. The empowerment of agencies under the Meroni doctrine and article 114 Tfeu: comment on United Kingdom v. Parliament and Council (short-selling) and the proposed single resolution mechanism. European Law Review, 39(3), pp.380-403.

Chen, W.T., Chang, P.Y., Chou, K. and Mortis, L.E., 2010. Developing a CBR-based adjudication system for fatal construction industry occupational accidents. Part I: Building the system framework. Expert Systems with Applications, 37(7), pp.4867-4880.

Finn, M., June 05, 2018. The Evolution of Adjudication in the UK. [online] Passle. Available at: <https://angle.ankura.com/post/102hb4r/the-evolution-of-adjudication-in-the-uk#:~:text=May%201%2C%201998%20saw%20the,to%20settle%20construction%2Drelated%20disputes.> [Accessed 29 March 2022].

Gad, G.M., Kalidindi, S.N., Shane, J. and Strong, K., 2011. Analytical framework for the choice of dispute resolution methods in international construction projects based on risk factors. Journal of legal affairs and dispute resolution in engineering and construction, 3(2), pp.79-85.

Grove Developments Limited v S&T (UK) Limited, Mr Justice Coulson.

Hassan, A.A., Adnan, H., Kamil, A.I.M. and Mahat, N.A.A., 2019, February. Challenges against adjudication decisions on payment disputes within the construction industry. In IOP Conference Series: Earth and Environmental Science (Vol. 233, No. 2, p. 022035). IOP Publishing.

ISG Construction Limited v. Seevic College [2014] EWHC 4007 (TCC) & Galliford Try Building Ltd v Estura Ltd [2015] EWHC 412 (TCC).

Kennedy, P., Milligan, J., Cattanach, L. and McCluskey, E., 2010. The development of Statutory Adjudication in the UK and its relationship with construction workload. In Conference proceedings of the Constructions and Building Research Conference of the Royal Institution of Chartered Surveyors Congress. Available online at: https://www. gcu. ac. uk/media/gcalwebv2/ebe/content/COBRA% 20Conference% 20Pape r (Vol. 202010).

Keogh, D. and Lawless, N., 2020. Adjudication Practice and Procedure in Ireland: Construction Contracts Act 2013. Routledge.

Local Democracy, Economic Development and Construction (LDEDC) Act 2009

Macob Civil Engineering v. Morrison Construction Limited [1999] EWHC Technology 254 (12th February 1999), Lord Justice Dyson at Para 14

Mewomo, M. and Maritz, M., 2017. The experts’ views on factors influencing the effective implementation of statutory adjudication. Journal of Construction Project Management and Innovation, 7(Supplement 1), pp.1877-1892.

Mewomo, M. C., & Maritz, M. J., 2016. A phenomenological study of critical challenges to effective statutory adjudication implementation.

Ndekugri, I., Gyoh, L. and Ankrah, N., 2022. An Analysis of the Demarcation of Construction Projects for Dispute Resolution by Adjudication. Journal of Legal Affairs and Dispute Resolution in Engineering and Construction, 14(2), p.04522010.

Sinden, G.F., Mason, J.R., Proverbs, D.G. and Booth, C.A., 2012. The new Construction Act: views and perceptions of construction industry stakeholders. Structural Survey.

Sweet, A.S., 2012. A cosmopolitan legal order: Constitutional pluralism and rights adjudication in Europe. Global Constitutionalism, 1(1), pp.53-90.

Tanielian, A., 2013. Arbitration still best road to binding dispute resolution. Journal of Legal Affairs and Dispute Resolution in Engineering and Construction, 5(2), pp.90-96.

Uff, J. 2009.  Construction Law. 10th Edition. Sweet & Maxwell. Pp 65.

UFF, J. 2021. Construction law law and practice relating to the construction industry.

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