Insight

Adjudication – Be Ready

Maybe it’s just us or the spirit of cooperation reigns supreme whilst the pandemic continues but we are surprised that we have not seen more disputes being resolved by adjudication since March 2020.

To recap, adjudication is the very quick (often 28 day), private and cost effective procedure of resolving disputes in construction contracts. You cannot contract out of it.

A “construction contract” is an agreement with a person for any of the following:

• The carrying out of “construction operations”.
• Arranging for construction operations to be carried out, whether under a sub-contract or otherwise.
• Providing labour (either his own labour or others’ labour) for the carrying out of construction operations.

It also includes contracts with construction professionals.

We generally see adjudication used to resolve disputes in respect of:

• The final account.
• Interim payments.
• Defects with works.
• Delay and disruption of works.
• Extensions of time for completion of works.

A party to a construction contract can refer a dispute to adjudication at any time before or after construction works or operations have been completed, so used mid contract, it may offer resolution to a dispute with limited disruption to an on-going project or relations.

Traditionally used by contractors, adjudication can also be a quick and much more cost effective solution for an employer or building owner to obtain payments to resolve defects with a building that the contractor cannot or does not want to rectify or resolve payments due to a contractor.

However, care needs to be taken by an employer or building owner with the ambit of any dispute referred to adjudication. For example, see Global Switch Estates 1 Ltd v Sudlows Ltd [2020] EWHC 3314 (3/12/20) https://www.bailii.org/ew/cases/EWHC/TCC/2020/3314.html

In this case, Global Switch (a very large data centre operator) had sought a determination of the true value of certain parts of an interim application. However it had explicitly excluded certain other parts from the scope of the adjudication. Sudlows thought this was a bid to prevent it from raising a defence based on its additional claims for loss, expense and extensions of time. Sudlows refused to pay the adjudication award made to Global Switch. Global Switch sought to enforce the adjudicator’s award in court.

The court held that the adjudicator’s decision was unenforceable. The judge found that Sudlows’ loss and expense claims were clearly relevant to the valuation of the interim application. The failure to consider Sudlows’ arguments in defence was a plain and obvious material breach of the rules of natural justice.

If you might have a claim in a construction contract or you might be on the receiving end of one, you should consider whether adjudication might apply to it and how it operates to either obtain a quick resolution of your claim or so you are not ambushed by an adjudication claim. Given the tight timescales, a referring party often takes a responding party by surprise.

Post pandemic and government support, when cash may become scarce for many businesses, we expect to see a rise in the number of adjudications being commenced.

HOW CAN CONEXUS LAW HELP?

For further advice on adjudication, please contact Ian Timlin via his contact details below. Ian has been a CEDR accredited mediator since 2000.

Ian Timlin
Main: +44 (0)20 7390 0280
Mobile: +44 (0)77 6742 7332
ian@conexuslaw.com

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