What is Adjudication in dispute resolution?

When a dispute arises between parties, there are several methods of resolution available, including arbitration, mediation, negotiation and litigation.  Another option is adjudication, in which a third party will review the case put by either side and make an enforceable decision.   Andrew Cullyer, Litigation Executive specialising in construction disputes, reviews this method of resolution and how it could assist you should a dispute arise in your project.

Adjudication tends to be a more favourable approach in construction projects not only because of the relative speed and financial savings that can be made in comparison to other forms of resolution, but also as Adjudicators tend to be persons with direct experience in construction matters.  They can be, for example, quantity surveyors, architects or lawyers with specific construction knowledge and experience.

What is the process of Adjudication?

Adjudication is begun, by either party, by issuing a Notice of Adjudication which sets out the brief details of the dispute and the remedies requested by the referring party.  The referring party then must arrange for the appointment of an Adjudicator, which can be, an Adjudicator named in the Contract, can be chosen by agreement or by independent nomination, and it must serve the referral on that Adjudicator within 7 days of the Notice of Adjudication.

The responding party will usually provide their response within 1-2 weeks of the referral.  There would generally then be further submissions in the form of a reply, rejoinder and surrejoinder.  At this stage, there may be a meeting between the parties and the Adjudicator; there may also be a site visit either as part of that meeting or otherwise.

Adjudication is designed to be a 28 day process from when the matter is referred to when a decision is made.  The referring party may unilaterally extend this period by 14 days to 42 days and the parties may also agree extensions of any length.

The decision of an Adjudicator is said to be partially binding, meaning that it is binding until the matter is finally decided by a court or, where applicable, by arbitration. 

The effect of this is that an Adjudicator’s decision can and will, more often than not, be enforced by the courts.  Enforcing an Adjudicator’s decision is done by a special express summary procedure in the Technology and Construction Court (part of the High Court, based in London).  It can take as little as 8 weeks from issuing a claim form to getting a court order.

If a party wishes to challenge an Adjudicator’s decision, by way of litigation or arbitration, they will be expected to comply with it first before they may challenge it.  A common example of this would be if an Adjudicator orders a sum of money to be paid, the court will expect that it is paid before it will finally determine the matter.  The ethos of Adjudication and the law generally in relation to construction disputes is often summarised as “Pay now, argue later”.

It is important to note that Adjudication is a costs neutral form of dispute resolution.  This means that each party must pay their own legal costs; it is extremely rare for these to be payable by the other side.

The Adjudicator’s costs are however usually apportioned on the normal basis, which is that the losing party will pay them.  This is not always the case, and is fact and issue specific.

How does Adjudication compare to other forms of dispute resolution?

Adjudication is to a certain extent a non-consensual process in that if there is right to adjudicate a party may do it at any time by notice.  As Adjudication provides a certain and partially binding determination made by a third party, it is most similar to Arbitration and Litigation.  The similarities and differences between these three methods are summarised below:

Adjudication

• Implied or express term in most construction contracts, or it can be agreed to.
• Can adjudicate at any time.
• Certain result arrived at by impartial third party.
• Confidential process.
• Quick resolution within 28-42 days for most disputes.
• Binding results that can be enforced.
• Can be re-decided by the court or an Arbitrator.
• Costs are rarely recoverable but likely to be lower overall than either Arbitration or Litigation.
• Costs of the Adjudicator are usually paid by the ‘losing’ party.

Arbitration

• Must be expressly agreed to either in the contract or at a later date.
• Certain result arrived at by impartial third party.
• Can take a significant amount of time, generally between 12 months and 18 months.
• Confidential process.
• Binding result that can be enforced and can only be challenged under limited circumstances.
• Costs can be recoverable from the other side.  These are usually much higher than Adjudication but generally less than Litigation.
• Cost of the Arbitrator usually paid by the ‘losing’ party.

Litigation

• Always available, subject to limitation.
• Certain result arrived at by impartial third party.
• Can take a significant amount of time, generally between 12 months and 24 months.
• Public process.
• Binding decision which can only be appealed in limited circumstances.
• Costs can be recoverable from the other side with these usually much higher than Arbitration or Adjudication.
• Court fees will be payable, which may or may not be recoverable.

When faced with a dispute in your construction project, the right methods of resolution will be determined by your own situation, the contract at play and the nature of the dispute.  To discuss your construction contract or the various options open to you, you can contact Andrew on 023 8071 7482 or email andrewcullyer@warnergoodman.co.uk.

For general Litigation or Dispute Resolution enquiries, contact Laura Blakemore on 023 8071 7412 or email laurablakemore@warnergoodman.co.uk.

ENDS

This is for information purposes only and is no substitute for, and should not be interpreted as, legal advice.  All content was correct at the time of publishing and we cannot be held responsible for any changes that may invalidate this article.