Adjudication

Question 1

Pre-Statutory Adjudication & Policy Background

Answer 1

• Before statutory adjudication, other dispute resolution forms were available, such as contractual adjudication (NEC/ECC contracts, DOM sub-contracts) and mediation.
• Adoption of new procedures was slow, leading to arbitration and court dominating construction disputes.
• The 1994 “Constructing the Team” report by Sir Michael Latham recommended adjudication for speedier, cheaper dispute resolution and cash-flow remedy during contracts.
• The legislation uniquely imposed a dispute resolution form on the construction industry due to concerns about its inability to resolve disputes quickly and cheaply affecting overall performance.

Question 2

Key Legislation, Features & Dates in Construction Adjudication

Answer 2

• Key legislation includes the 1996 Act, the 2009 Act, and the Schemes for Construction Contracts.
• Legislation introduced mandatory requirements for “construction contracts”, payment provisions, and the right to adjudicate.
• The right to adjudicate, imposed upon parties’ contracts, was a revolutionary innovation.
• The 1996 Act applies to contracts made on or after 1 May 1998, and 2009 Act amendments apply to contracts after 1 October 2011 (England & Wales) or 1 November 2011 (Scotland).

Question 3

Contracts in Writing (S.107)

Answer 3

• The 1996 Act required construction contracts to be in writing or evidenced in writing for adjudication.
• Oral contracts were not subject to adjudication under the Act.
• Section 107 provided a complex definition of “agreement in writing” and included various scenarios.
• Determining compliance with the “in writing” requirement caused difficulties and led to numerous enforcement actions

Question 4

Satisfying Section 107 & Adjudication Jurisdiction

Answer 4

• RJT Consulting Engineers v DM Engineering settled the debate on what’s needed to satisfy Section 107, requiring the whole agreement to be evidenced in writing.
• Glendalough Associated v Harris Calnan Construction clarified that a minimum agreement must include parties, scope of work, price, and time.
• Numerous cases explored the effect of oral terms, oral amendments, and variations on adjudication jurisdiction under the Act.
• Challenges related to Section 107 and adjudication jurisdiction remain a significant area of debate and legal development.

Question 5

Contracts in Writing and Confusion in Case Law

Answer 5

• T & T Fabrications v Hubbard: Decision not enforced due to certain terms not being in writing, causing a dispute about whether the terms were agreed upon.
• Allen Wilson Joinery v Privetgrange: Implied terms and budget prices don’t prevent a contract from being in writing.
• Rok Building v Bestwood Carpentry: A construction contract in writing with no agreed price can still be a written contract, using implied terms for price determination.
• All Metal Roofing v Kamm Properties: A flexible approach, considering exchanges of correspondence and purchase orders as evidence of a contract in writing.

Question 6

Legislation - Contracts in Writing (s.107)

Answer 6

• Section 107 removed by the 2009 Act; ‘in writing’ requirement no longer applies to construction contracts entered after the effective dates.
• Old contracts still need to be ‘in writing’ for the 1996 Act to apply; relevant cases still apply to these contracts.
• 2009 Act requires all provisions on adjudication procedures to be in writing.
• Change introduced to reduce barriers in referring disputes to adjudication and to support smaller companies.
• Practical implications: establishing whether the Act applies, right to adjudicate, and adjudicator jurisdiction; potential challenges in determining contract existence and provisions.

Question 7

Legislation - Construction Contract (s.104)

Answer 7

• Construction contract defined in Section 104 of the 1996 Act.
• Includes carrying out construction operations, arranging subcontract work, providing labor, architectural/design/surveying work, and advice on building-related matters.
• Collateral warranties can be considered construction contracts depending on wording and ongoing future performance (Abbey Healthcare case).
• Warranties that provide simple fixed promises or guarantees for past state of affairs may not be construction contracts.
• Warranty’s execution date or work completion doesn’t affect its classification as a construction contract; key is the promise to both past and future work and the standard of that work.

Question 8

Legislation - Construction Operations (s.105) and Exclusions/Exemptions

Answer 8

• Construction operations broadly include building, civil engineering, mechanical/electrical works, cleaning during construction, preparatory work, and painting/decorating.
• 1996 Act exclusions: oil/gas drilling, mineral extraction, specific industrial plant/machinery works, and manufacturing/delivery of components (unless installation included).
• Exclusion Orders: PFI contracts, finance contracts, development agreements with land transfer, and specific statutory agreements.
• PFI arrangements generally subject to the 1996 Act, but top-tier PFI contracts excluded.
• LDEDC Act 2009 extends power to exclude certain construction contracts.
• Residential occupiers and primary activity on site important for determining if operations are construction operations (Engie Fabricom case).

Question 9

s.108 of 1996 Act - Construction Contracts Adjudication

Answer 9

1. Applies to construction contracts as defined in Section 104.
2. Parties have a right to refer disputes for adjudication.
3. “Dispute” includes any difference.
4. No restrictions on type, timing, value, or issues of disputes.
5. Covers time, money, quality, and workmanship issues.
6. “Under the contract” - no statutory right for misrepresentation claims.
7. AMEC v. Secretary of State: 7 propositions to define a dispute.

Question 10

s.108(2) - Procedure Complying with Adjudication

Answer 10

1. Applies to construction contracts with disputes.
2. Mandatory requirements in the Act can’t be contracted out.
3. Non-compliant contracts default to Scheme for Construction Contracts.
4. Procedure must:
   a. Allow dispute referral notice anytime.
   b. Secure adjudicator appointment within 7 days.
   c. Adjudicator to decide within 28 days (or longer if agreed).
   d. Adjudicator can extend 28 days by up to 14 days with consent.
   e. Adjudicator must act impartially (not necessarily independent).
   f. Adjudicator can take initiative in ascertaining facts and law.

Question 11

s.108(3) - Other Key Provisions

Answer 11

1. Adjudicator’s decision binding in the interim.
2. Adjudicator can correct clerical/typographical errors (slip rule).
3. Pre-2009 Act: slip rule governed by case law (e.g., Bloor, YCMS, Rok).
4. Post-2009 Act: slip rule in Scheme for Construction Contracts.
5. Adjudicator may correct slips within 5 days of decision delivery.
6. Unclear scope of typographical/clerical errors.
7. Caution: Invoking slip rule may abandon right to challenge enforcement (Dawnus case).

Question 12

s.108(4) & s.108(5) - Adjudicator Immunity and Schemes

Answer 12

1. Adjudicator immune from suit, except in bad faith (s.108(4)).
2. Non-compliant contracts default to Schemes for Construction Contracts (s.108(5)).
3. Schemes: default rules for England/Wales, Scotland, Northern Ireland.
4. Adjudication has become more formal, with detailed submissions.
5. Common adjudication issues: payment, EOT, scope, defective/incomplete works.
6. Disputes typically adjudicated during contract works, not at the end.

Question 13

Risks of Adjudication

Answer 13

1. Ambush: unexpected detailed claims/defenses.
2. Quality of adjudicator: competence varies, may lead to poor decisions.
3. Poor/bad decision: parties stuck with it, recourse to arbitration/litigation.
4. Complex disputes: might be better suited for litigation or arbitration.
5. Parties often adjudicate during contract, rather than waiting for the end.

Question 14

Adjudication Process

Answer 14

1. Notice of Adjudication: states dispute, parties, redress sought.
2. Appointment of Adjudicator: within 7 days of Notice, agreed or by ANB.
3. Referral Notice: detailed case, served within 7 days of Notice of Adjudication.
4. Responding Party’s Response: defense to claims, usually within 7-14 days.
5. Further Submissions: Reply, Rejoinder, etc., if needed.
6. Decision: reached within 28 days, extendable with consent.

Question 15

Adjudicator’s Fees and Parties’ Costs

Answer 15

1. Losing party generally pays adjudicator’s fees; may be apportioned for mixed results.
2. Adjudicator can determine reasonable fees, disputed amounts can be taken to court.
3. Parties jointly and severally liable for adjudicator’s fees.
4. Each party usually bears its own costs in adjudication.
5. “Tolent Clauses” invalidated by 2009 Act; adjudicator can allocate fees and expenses with specific provisions.
6. Late Payment of Commercial Debts Act claims for adjudication costs largely disallowed.

Question 16

Smash ‘n’ Grab Adjudications

Answer 16

1. Broseley London Ltd v Prime Asset Management: Pay awarded sum in first adjudication before starting true value adjudication.
2. True value adjudication may depend on the interim payment in question.
3. Bexheat Ltd v Essex Services Group: Two separate disputes - true value of Interim Application 22 and valid Pay Less Notice for Interim Application 23.
4. Second adjudicator not bound by earlier decision; reinforces “pay now, argue later” principle.

Question 17

Adjudication Society 2022 Report Overview

Answer 17

1. Disputes: Mostly related to money; extension of time (73%), final account (51%), and interim payment (49%).
2. Adjudicators: Diverse professions (32% quantity surveyors); poor gender diversity (8% women).
3. Quality of decision-making: 47 complaints (12 upheld); 3% of disputes with formal complaints.
4. Complaint categories: Conflict of interest, ethical breach, fees (18% each); lack of jurisdiction most common.
5. Rare progression to litigation/arbitration: 42% experienced less than 5% of the time; positive reception to adjudicator’s decision.

Question 18

Courts - General Approach to Adjudication

Answer 18

1. Parliament enacted a speedy mechanism for settling construction disputes provisionally and interim, with final determination through arbitration, litigation, or agreement.
2. Adjudication has a tight timetable, and the adjudicator has flexibility in procedure.
3. Adjudicators must act impartially and can take the initiative to ascertain facts and law.
4. Adjudicators’ decisions are binding and must be complied with until disputes are finally resolved.
5. Parties may resort to court proceedings to enforce an adjudicator’s decision, and the unsuccessful party may resist enforcement on various grounds.

Question 19

Key Enforcement Principles:

Answer 19

1. Administrative Issues: Follow the contract to avoid mistakes in admin issues.
2. Dispute Requirement: Only a “dispute” can be referred to adjudication under Section 108 of the 1996 Act.
3. Preliminary Objections: Responding parties may challenge the adjudicator’s jurisdiction if they believe no dispute existed at the time of the Notice of Adjudication.
4. Dispute Definition: A dispute is a disagreement with opposing views held strongly.
5. Approaches to Determine Disputes: There are two schools of thought - a narrower approach and a wider approach.

Question 20

Key Enforcement Principles - Dispute Crystallization

Answer 20

1. Courts give the word “dispute” its normal meaning, without a special legal interpretation (Amec Civil Engineering Limited v Secretary of State for Transport; Collins (Contractors) Limited v Baltic Quay Management Limited (1984) Limited).
2. A dispute arises when a claim is not admitted, which can be inferred from various circumstances (Amec Civil Engineering Limited v Secretary of State for Transport).
3. Reasonable time to respond to a claim varies depending on case specifics and contractual structure (Amec Civil Engineering Limited v Secretary of State for Transport).
4. Imposing a deadline for response doesn’t automatically curtail the reasonable time for responding (Amec Civil Engineering Limited v Secretary of State for Transport).
5. A nebulous or ill-defined claim is unlikely to give rise to a dispute for arbitration or adjudication (Amec Civil Engineering Limited v Secretary of State for Transport).
6. Parties can refer discrete issues to adjudication without submitting all disputes and can “pick and choose” issues (Barr Limited v Klin Investment UK Limited; Bell Building Projects Ltd v Carfin Developments Ltd).
7. Courts acknowledge that a claimant can prune their original claim for reference to adjudication (St Austell Printing Co v Dawnus Construction Holdings; CSK Electrical Contractors Ltd –v- Kingwood Electrical Services Ltd; LJH Paving Limited V Meers Civil Engineering Limited).

Question 21

Dispute Crystallization - New Claim

Answer 21

1. Case: MW High Tech Projects UK Ltd v Balfour Beatty Kilpatrick Ltd [2020] EWHC 1413 (TCC).
2. Issue: Determining if there was a crystallized dispute for matters referred to adjudication.
3. Questions:
   a) Did the delay report constitute a new notification or further particulars of the notified claim?
   b) Was MW entitled to a further 16-week period (or other reasonable period) to respond before a dispute could be inferred?
4. Findings:
   a) The report did not amount to a fresh notification, as it was not materially different from the earlier delay claim.
   b) MW’s silence gave rise to an inference that the delay claim set out in the notices had not been admitted.
5. Conclusion: The adjudicator had jurisdiction to determine the dispute as it related to BBK’s disputed claim for an extension of time.

Question 22

Natural Justice and Adjudication - Breach

Answer 22

1. Natural justice: the right to a fair hearing (fair tribunal and fair process).
2. Adjudicators must “hear” the whole party’s case.
3. Principles of natural justice apply to adjudication.

Case examples of breaches:

4. Glencot Development and Design Co Ltd v Ben Barrett and Son Contractors Ltd [2001] BLR 207 - breach when adjudicator acts as a mediator.
5. Costain v Strathclyde Builders 2004 SLT 102 - breach when adjudicator seeks legal advice but doesn’t disclose it to parties.
6. Balfour Beatty Construction Ltd v Lambeth LBC [2002] BLR 288 - breach when adjudicator conducts own delay analysis without party input.
7. RSL (South West) Ltd v Stansell Ltd [2003] EWHC 1390 (TCC) - breach when adjudicator relies on unseen expert report.
8. Van Oord UK Ltd v Dragados UK Ltd [2022] CSOH 30 - breach when adjudicator decides on a basis not presented by parties.
9. Liverpool City Council v Vital Infrastructure Asset Management [2022] EWHC 1235 (TCC) - breach when adjudicator decides on an issue not identified or addressed by parties.

Question 23

Natural Justice and Adjudication - No Breach

Answer 23

1. Dawnus Construction Holdings v Marsh Life [2017] EWHC 1066 (TCC) - no breach when adjudicator didn’t understand a defense.
2. Bell Building Projects Limited v Arnold Clark Automobiles Limited [2017] CSOH 55 - no breach when adjudicator approached complex case correctly.
3. Dickie & Moore Ltd v Trustees of Lauren McLeish Discretionary Trust [2019] CSOH 87 - no breach when adjudicator involved a pupil in proceedings, but should have informed parties of the pupil’s role.
4. Field Systems Designs Limited v MW High Tech Projects UK Limited [2020] CSOH 17 - no breach when adjudicator’s failure to consider a line of defense was inadvertent; court may sever the affected part of the decision and enforce the remainder.

Question 24

Bias in Adjudication

Answer 24

1. Definition: Bias is an attitude of mind preventing objective determination of issues (Director of Fair Trading v Proprietary Association of Great Britain [2001] 1 WLR 700).
2. Test: Objective; would a fair-minded and informed observer conclude a real possibility of bias?
3. Consequence: If bias (actual or apparent) is established, adjudication proceedings are null.

Case law:
1. Paice and Springall v MJ Harding [2015] EWHC 661 (TCC) - Adjudicator’s deliberate non-disclosure of a unilateral conversation led to the possibility of bias.
2. Beumer Group UK v Vinci Construction UK [2016] EWHC 2283 (TCC) - Adjudicator’s failure to disclose involvement in a simultaneous adjudication created an appearance of bias.
3. The Edinburgh Schools Partnership Ltd v Galliford Try Construction (UK) Ltd [2017] CSOH 133 - Adjudicator’s involvement in related cases didn’t necessarily disqualify them or create bias if the issues were different and had no overlap.

Question 25

Equality of Treatment in Adjudication

Answer 25

1. Principle: Both sides must be given a fair opportunity to present their case (audi alteram partem).
2. Test: Not “is the result fair?” but “was there an opportunity afforded for justice to be done?” (Costain).
3. Relevance: Informality of proceedings doesn’t relieve duty but may be considered in determining a breach.
4. Immaterial breaches: Can be ignored if no indication of materiality; if in doubt, presume materiality (Costain, Balfour Beatty).

Case law:
1. Costain - Established the test for equality of treatment in adjudication.
2. Balfour Beatty - Immaterial breaches of natural justice may be ignored, but in doubt, presume materiality.
3. Discain - Temporary nature of adjudication doesn’t excuse breaches of natural justice.

Consequence: Failure to comply with the principle of equality of treatment renders adjudication proceedings null.

Question 26

Express Powers and Obligations in Adjudication

Answer 26

1. Adjudicator’s powers and obligations determined by the contract but must still adhere to fundamental principles of natural justice (Costain).
2. JCT Standard Form (Clause 41A.5.5) - Adjudicator must act impartially, set their own procedure, and take the initiative in ascertaining facts and law.
3. Construction Act (s108(2)(e) and (f)) - Requires adjudicator to act impartially and take the initiative in ascertaining facts and law.
4. Schemes for Construction Contracts (England and Scotland) - Adjudicator must act impartially, decide on procedure, and take the initiative in ascertaining facts and law (para. 12(a) and 13).

Case law:
1. Costain - Express powers do not affect the fundamental basis of judicial control in adjudication.

Key principles:
- Adjudicator must act impartially.
- Adjudicator has discretion to set their own procedure.
- Adjudicator can take the initiative in ascertaining facts and law.

Question 27

Principles of Natural Justice in Practice

Answer 27

1. Failing to disclose information from one party to the other - Woods Hardwick Ltd v Chiltern Air Conditioning Ltd (breach of Scheme’s para. 17).
2. Involvement in earlier mediation - Glencot Development and Design Co Ltd v Ben Barrett and Son Contractors Ltd (bias).
3. Knowledge of prior offers - Volker Stein Limited v Holystone Contracts Limited (not biased in this case).
4. Adjudicating in a previous adjudication - Pring and St. Hill Ltd v C J Hafner t/a Southern Erectors (risk of carrying forward judgments).
5. Improving a party’s case - Balfour Beatty v Lambeth LBC (breach of first and second principles).
6. Adjudicator relying on irrelevant document - Primus Build Limited v Pompey Centre Limited and Slidesilver Limited (material breach of natural justice).
7. Allowing late evidence from Referring Party - London and Amsterdam Properties Ltd v Waterman Partnership Ltd (adjudicator should have rejected new material or allowed additional time).

Key points:
- Adjudicators must ensure impartiality and avoid breaches of natural justice.
- Balance between inquisitorial and adversarial approaches is difficult.
- Ambush is not always a breach of natural justice, depends on case circumstances.

Question 28

Principles of Natural Justice in Practice (Continued)

Answer 28

Non-Participation of a Witness:

• A&S Enterprises Ltd v Kema Holdings Ltd [2004] EWHC 3365 (TCC): Adjudicator’s drawing of adverse inferences from non-participation of a witness constituted breach of natural justice, indicating real possibility of bias.

Payment of Fees:

• Mott MacDonald Ltd v London and Regional Properties Ltd [2007] EWHC 1055 (TCC): Adjudicator not entitled to withhold decision until fees paid by referring party, breaching natural justice and indicating lack of impartiality.

New Evidence:

• Kier Regional Ltd v City & General (Holborn) Ltd [2006] EWHC 848 (TCC): Adjudicator’s refusal to consider new evidence may not necessarily breach natural justice; adjudicator error is inherent in the process and not a ground for refusing to enforce decision.

Refusing to allow/consider submissions:

• GPS Marine Contractors Ltd v Ringway Infrastructure Services Ltd [2010] EWHC 283: Adjudicator’s decision to limit submissions did not constitute breach of natural justice.
• Amec Group Ltd v Thames Water Utilities Ltd [2010] EWHC 419: No breach of natural justice for not specifically referring to rejoinder in decision or considering complex dispute unsuitable for adjudication.
• PC Harrington Contractors Ltd v Tyroddy Construction Ltd [2011] EWHC 813 (TCC): Breach of natural justice when adjudicator erroneously excluded aspects of defense.
• Urang Commercial Ltd v Century Investments Ltd [2011] EWHC 1561 (TCC): No breach of natural justice when adjudicator considered and dismissed counterclaim instead of excluding it from jurisdiction.

Question 29

Enforcement in Insolvency Situations

Answer 29

1. Wimbledon Construction Co 2000 Ltd v Vago (2005) - Stay of enforcement is limited, and the court outlined relevant principles for considering a stay.
2. Bresco Electrical Services Ltd (In Liquidation) v Michael J Lonsdale (Electrical) Ltd [2020] UKSC 25 - Insolvency set-off does not deprive adjudicator of jurisdiction, and adjudication can be useful for liquidators.
3. Companies in a Company Voluntary Arrangement (CVA) have no general rule against summary judgment being granted or enforcement of an adjudicator’s decision, which differs from companies in liquidation.

Question 30

Enforcement in Insolvency Situations: The Current Position

Answer 30

1. Insolvent parties can adjudicate and obtain a decision on their claim.
2. Enforcement of adjudicator’s decision requires showing the “net balance” can be determined.
3. Security granted by insolvent party for potential cross claims must be clear, unequivocal, and free from exemptions.