Adjudication is a dispute resolution method commonly used in the construction industry. Since the Housing Grants, Construction and Regeneration Act 1996 (as amended), which introduced statutory adjudication, was enacted in 1998 (and referred to as the ‘Construction Act’), it has been relied upon heavily by developers, employers, builders and contractors, and even professionals such as architects and surveyors, who are involved in construction disputes. Construction adjudication was introduced to address concerns about unfair payment practices with the intention of a third party coming to a very quick decision about who should take care of the monies ahead of the more traditional forms of dispute resolution, like, for example, arbitration or litigation, although many parties are using adjudication as the final method of resolving a dispute. The construction adjudication process Regardless of the written terms of a contract, the right to adjudicate is implied into every construction contract by virtue of the Construction Act. Therefore, even if the contract fails to mention adjudication, a party cannot escape or contract out of adjudication. For a party to start the adjudication process, a dispute must first have crystallised. Essentially, crystallisation occurs when a claim is made to the other party and they dispute it, or fail to respond. Following crystallisation, either party can serve a ‘Notice of Adjudication’ on the other party of its intention to refer the dispute to adjudication. This notice summarises the dispute and includes the questions an adjudicator will decide upon. Immediately after the Notice of Adjudication has been served, an application to an adjudicator nominating body is made to nominate a suitably qualified adjudicator. The Adjudicator must be appointed within seven days of the Notice of Adjudication being served and has a minimum of 28 days to decide the dispute. The decision is binding on the parties unless or until the dispute is finally determined by a permanent method of dispute resolution, for example litigation or arbitration.
When is construction adjudication appropriate?Adjudication was originally implemented as a way of (temporarily) resolving disputes over payment and to ensure that the monies would be held by the ‘innocent’ party. However, disputes are no longer limited to those concerning money. The process is now commonly used for disputes involving a whole range of differences including delay and standard of work. What’s more, construction adjudication is being more frequently used to handle complex claims like professional negligence and repudiatory breach of contract.
Benefits of using adjudicationAdjudication has become the most commonly used method for dispute resolution over the last two decades because of benefits such as:
- A quicker resolution, with a decision usually reached within 28 days;
- Generally inexpensive compared to litigation and arbitration;
- Both parties have to bear their own costs, meaning that the risk to the losing party is less compared to litigation; and
- The courts will usually enforce an adjudicator’s decision: around 95% of applications to enforce adjudication in the High Court succeed.