Birketts’ construction team has provided an invaluable lesson on the issues surrounding adjudication in their latest interactive webinar, now available to watch in full on YouTube.
Led by Birketts’ Partner Ruth Sunaway, Senior Associates Carolyn Porter and Hanna McNab discussed the adjudication process before opening up the webinar to a panel discussion, where they were joined by Jonathan Cope, a director of MCMS, Simon Hargreaves QC, and Duncan Hughes-Phillips, founder and CEO of Base Quantum.
The adjudication process and applying for an adjudicator
Carolyn started the webinar with a reminder that, while initially intended to be handled informally, adjudication is governed by a strict process set out in Section 108 of the Construction Act and the statutory rules state it must start with a notice of adjudication. The process must be followed to ensure that any decision issued is enforceable by the Technology and Construction Court (TCC). It is also important to consider any additional contractual terms that may apply alongside those contained within the Act.
Laying out the common pitfalls that lead to unenforceable decisions and adjudicators resigning, Carolyn said: “The first thing to note is that there must be a ‘crystallised dispute’ between the parties before any adjudication is commenced. The court’s position is that in order for there to be a crystallised dispute, a claim must have been made.
Thereafter a dispute does not arise unless or until it emerges that claim is not admitted, either by express rejection or implied by silence over a reasonable period of time.
We sometimes see referring parties seeking to rely on expert evidence that is disclosed for the first time in an adjudication as part of a referral. We also see parties making a claim for money for the first time during a notice of adjudication. Both of these scenarios may result in an adjudicator resigning.”
Despite the numerous pitfalls, Carolyn explained it is very difficult to prove a dispute has not crystallised. For example if an amount claimed in a notice of adjudication is different to an amount previously claimed, there will still be a crystallised dispute, as the principle of the claim is the dispute and not the value of the claim.
Carolyn added that it is important to remember that adjudication can be commenced at any time, with the TCC making it clear that COVID-19 should not prevent the process continuing as usual. As well as this, it is important to check your contract to see if an adjudicator has already been named, and further that the notice of adjudication is served before applying to a nominating body for the appointment of an adjudicator.
The Act also states a decision must be made within 28 days, however in practice this is very rare and the parties can agree to extend the period.
Enforcement of adjudication and the ‘slip rule’
Before talking through the enforcement of adjudications, Hanna explained the ‘slip rule’ in the Construction Act, which states that “the contract shall include provision in writing permitting the adjudicator to correct his decision so as to remove a clerical or typographical error arising by accident or omission”.
Hanna said: “If the adjudication is run under the Scheme for Construction Contracts then the adjudicator must make any correction under the slip rule within five days of the date of the decision and then deliver the decision to the parties as soon as possible.
This is a really tight time frame, so errors must be pointed out by parties involved as soon as possible.
A word of warning however, if you ask for the adjudicator to correct a slip, a court will likely take that as acceptance that the decision is valid and you won’t be able to rely on any jurisdictional challenges made previously. Therefore, if you are going to ask for a slip to be correct but wish to maintain your position on jurisdiction, you must expressly reserve that position first. The TCC have been quite clear on this.”
Hanna went on to explain how to enforce an adjudicator’s decision. Proceedings should be issued in the TCC to enforce the decision and the court takes the default position that the adjudication will be enforced, unless the defendant can convince the court the adjudicator did not have jurisdiction or there was a breach of the rules of natural justice (the right to a fair hearing by an impartial adjudicator). Unless in exceptional circumstances, winding-up petitions should not be issued.
Hanna added: “The defendant will not be able to resist enforcement simply because they believe the adjudicator made an error in fact or in law. This is because the decision is binding on the parties. The dispute can be finally determined by a court tribunal.”
Common challenges regarding a breach of natural justice include an adjudicator:
- going off on a frolic of their own,
- failing to consult with both parties
- failing to give a party sufficient time to respond
- having separate communications with the parties.
You can view the full webinar and panel discussion on Birketts’ YouTube channel.
If you would like to learn how Birketts can help you with adjudication, or any construction related matters, speak to our construction specialists.
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