Adjudication Consultants                                                              ç Back

What is Adjudication?

Adjudication, was introduced to the UK Construction Industry by way of Part 2 of the Housing Grants, Construction and Regeneration Act 1996. The Act applies to all construction contracts (with some exceptions) made after the 1st May 1998.

Two main things occurred in response to the provisions of this Act;

Firstly, statutory instruments were produced and set out the detailed procedures for dealing with an adjudication in the event that the parties to a contract fail to agree any adjudication procedures within their construction contract, that were compliant with the requirements of the Act.

These statutory instruments are collectively referred to as The Scheme for Construction Contracts.

Secondly, publishers of standard forms of contract (for example JCT) amended their standard contracts to include adjudication procedures and to be compliant with the provisions of the Act.

Inevitably as with all statutory instruments a considerable body of Case Law has developed following the introduction of the Act.

Jurisdiction of Adjudication

The Housing Grants, Construction and Regeneration Act 1996 applies to all contracts for carrying out construction operations within Wales, Northern Ireland, England & Scotland.

The Act also incorporates agreements, which provide architectural, design or surveying work or to provide advice on building, engineering, interior and/or exterior decoration, the laying out of landscapes, in relation to construction operations.

However, it is extremely important to note that the Act DOES NOT APPLY TO:

1. Contracts with residential occupiers;
2. Contracts that are not in writing;
3. Assembly, installation or demolition of plant and machinery or its supporting steelwork on a site, where the primary activity is nuclear processing, power generation, water or effluent treatment, or the processing or storing of chemicals, pharmaceuticals, oil, gas, steel, food or drink;
4. The supply only of building or engineering components or equipment or materials or plant or machinery except under a contract that also provides for their installation;
5. The drilling for or extraction of oil or natural gas or minerals;
6. The making, installation or repair of artistic works;
7. (g) Finance agreements, contract entered into under the private finance initiative;
8. (h) Development agreements.

APA’s expertise

APA Property Services Ltd, have an experienced team of adjudicators and an extensive network of solicitors and barristers, which enables APA to service their clients needs very quickly and professionally, ensuring that they are protected as a consequence of any adjudication procedures.

The vast experience of our team and our contacts allows us to maintain an upto date information on the continually evolving case law, relating to adjudication.

The adjudication process is very quick and is often seem by some as “rough justice”. From the crystallisation (beginning) of the adjudication process matters would normally be concluded within 28 days unless there are exceptional circumstances where the adjudicator may extend the period.

Dealing with any contractual through the civil courts dispute is a very expensive and time consuming process for all parties involved, and it is therefore advantageous to any party to obtain independent legal advice prior to signing any contract,. Clients who are proactive in their approach will in some instances agree with the other party that the adjudicator will be nominated and that nomination stated within the contract. This can provide some financial benefits to both parties by not incurring any fees charged by an independent body such as the Royal Institution of Chartered Surveyors for appointing an arbitrator.

The most important aspect of any adjudication is to ensure that the adjudicator has jurisdiction, failure by any party to do this will create avoidable and unnecessary costs. Which is in fact the essence of the Act, to minimise dispute procedures, deal with the issues at hand and resolve those so that both parties can continue to complete the contract (if it is an interim dispute).

The adjudicator must act impartially, deal with the issues put before him by the Referring Party (the party initiating adjudication) and the issues raised by the Respondent Party (the party defending the adjudication). The adjudicator has and retains the right in Law to be WRONG, and without any criticism being placed upon them. If a party feels aggrieved by the adjudicator’s decision, they are entitled to appeal the adjudicator’s award and in such cases this would normally be referred to the Technology and Construction Courts (the TCC).

It is therefore extremely important that the experts assisting in the parties in the adjudication process have the relevant expertise, and training to deal with the process, which is in its very essence can be a technical and/or legal dispute and in many instances, the adjudicators award, and any defence to that will fall on technical issues.

Jurisdiction

Jurisdiction, is paramount, if there is a question over jurisdiction the adjudicator should be mindful of any arguments raised by the Responding Party, challenging his jurisdiction and should be aware of the relevant Case Law. If an adjudicator considers any arguments, but dismisses these and continues on the basis that jurisdiction is valid, the Referring Party could at a later date find themselves being challenged on a technical issue, and as a consequence if any challenge is successful, the Referring Party will have incurred a significant amount of money in the first instance by bringing the action, liability for the adjudicator’s fees and costs incurred by the Responding Party, both for the adjudication process and any subsequent defence against enforcement or appeal procedures.

These costs can often run into many thousands of pounds and often exceed the amount in dispute. Obviously where there is a significant amount of money in dispute then parties may adopt a strategy where there is a calculated risk that the potential liability for the cost may justify proceeding with adjudication.

It is therefore RIGHT AND PROPER, that the question of jurisdiction is addressed in the Housing Grants Construction and Regeneration Act 1996, section 107 in the following terms.

1. The provisions of this Part apply only where the construction contract is in writing, and any other agreement between the parties as to any matter is effective for the purposes of this Part only if in writing. The expressions “agreement”, “agree” and “agreed” shall be construed accordingly.
2. There is an agreement in writing -
   1. if the agreement is made in writing (whether or not it is signed by the parties),
   2. if the agreement is made by exchange of communications in writing, or
   3. if the agreement is evidenced in writing.
3. Where parties agree otherwise than in writing by reference to terms which are in writing, they make an agreement in writing.
4. An agreement is evidenced in writing if an agreement made otherwise than in writing is recorded by one of the parties, or by a third party, with the authority of the parties to the agreement.
5. An exchange of written submissions in adjudication proceedings, or in arbitral or legal proceedings in which the existence of an agreement otherwise than in writing is alleged by one party against another party and not denied by the other party in his response constitutes as between those parties an agreement in writing to the effect alleged.
6. Reference in this Part to anything being written or in writing include its being recorded by any means.”

It has been authoritatively established by the Court of Appeal in RJT Consulting Engineers Ltd v DM Engineering (Northern Ireland) Ltd. [2002] EWCA Civ 270 that whether reliance is placed on sub-sub-sections (a), (b) or (c) of sub-section 2 of Section 107 of the 1996 Act, the requirements of that Section are fulfilled only if that which is in writing records the “whole agreement” between the parties. In the words of Ward LJ at paragraph 19 “What has to be evidenced in writing is, literally, the agreement, which means all of it, not part of it. A record of the agreement also suggests a complete agreement, not a partial one …”.

Auld LJ’s dissenting judgment has no authority. RJT Consulting was followed by another division of the Court of Appeal in Thomas-Frederic’s (Construction) Ltd. v Keith Wilson [2004] BLR 23 and applied by Her Honour Judge Kirkham in Debeck Ductwork Installation Limited v T and E Engineering Ltd. (unreported), October 19 2002, a case in which she stressed the impossibility of ignoring additional terms not reflected in the written record relied upon.

Further, the existence of a binding contract in some form or other is a pre-condition to the existence of an agreement in writing within the terms of Section 107 of the Act. Galliard Homes Ltd. v J. Jarvis & Sons plc (1999) Con. L.R.219 was concerned with Section 32 of the Arbitration Act 1950. The Court of Appeal held, amongst other things, that an agreement which provided that the “Contract will be executed as a deed under seal” was in effect “subject to contract” and hence could not be a “written agreement” within the meaning of that section. Although the wording of that section is different to the wording of Section 107 of the 1996 Act, I have no doubt that the principle applies to the latter- which refers to “a construction contract”.

Challenging Jurisdiction, can be done at any time during the course of the adjudication process. Obviously the sooner the jurisdiction challenge has been raised, the better as this will reduce any unnecessary costs if the challenge is successful. In the first instance an application can be made to the TCC for a declaration that the jurisdiction is void and obviously this would be subject to satisfying the requirements of Section 107 and precedence established by the various Case Law.

The process for challenging jurisdiction is a very quick process and is something that is often undertaken by a senior Counsel, such as QC’s or barristers, assisted by junior Counsel. The costs involved in challenging jurisdiction can be expensive in the first instance but in the long term considerably cheaper than actually defending an adjudication process, of course depending on the size of the dispute and the time involved. Because of the nature of the time constraints in dealing with these issues, and indeed in dealing with the adjudication process, there is often a large amount of out of office hours work and close liaison between the clients and APA is paramount to achieving the desired results.