Back to Basics: The Adjudication Process

In a previous article, we discussed the statutory right to adjudication under the Housing Grants, Construction and Regeneration Act 1996 (as amended) (the “Construction Act”).

Adjudication has been a central feature of the UK construction industry for over 25 years. Designed to keep cash flowing and projects moving, it provides a rapid, temporarily binding decision on disputes arising under construction contracts.

This article considers (i) how to determine whether a dispute has crystallised (a necessary precondition to adjudication) and (ii) the basic procedural steps that apply in a statutory (and most contractual) adjudication procedure.

Has a dispute crystallised?

Before a party can validly refer a matter to adjudication, there must be a “dispute” that arises “under the contract”. That might seem obvious, but it is one of the most common technical challenges raised in adjudication enforcement proceedings.

The referring party can only refer a single dispute, which must relate to matters under the contract. A party that refers multiple disputes under a single notice is likely to face an immediate challenge to the adjudicator’s jurisdiction.

The Construction Act does not define “dispute”. The meaning has therefore been developed by the courts in a significant number of cases. Some key points include:

• Courts will, where possible, not apply an overly legalistic view of the definition of “dispute” (subject to the points below)
• In general, a dispute will not be found to have crystallised until a claim has been made by one party and either not admitted or rejected by the other party
• That rejection may be express or it may be inferred from the dealings between the parties
• The period of time from which it might be inferred that a claim is not admitted will depend on the circumstances and will not automatically be determined by a deadline fixed by the referring party
• A claim need not be a claim for money or for the payment of money. It may simply involve an assertion of a right by one party against another
• A claim must not be too “nebulous or ill-defined”
• The surrounding facts, circumstances and evidence up to the moment that the matter is referred to adjudication will be key to determining whether a dispute has crystallised

A successful challenge to the jurisdiction of the adjudicator based on a dispute not having crystallised can lead to significant irrecoverable expenditure. It is important to take advice before serving a notice of adjudication or when faced with such a notice if there are any questions over crystallisation.

The basic adjudication process

Parties to a construction contract have a statutory right to adjudication (under the Construction Act) regardless of whether this is provided for in the contract itself. Once a dispute has crystallised, either party has the statutory right to refer it to adjudication “at any time”.

The adjudication procedure is governed by:

• The Construction Act
• Either the contractual adjudication provisions or, if non-compliant, the Scheme for Construction Contracts

The process is deliberately fast.

Step 1: The Notice of Adjudication

Adjudication begins with service of a Notice of Adjudication. This document must briefly set out:

• The nature and description of the dispute
• The parties involved
• Details of where and when the dispute arose
• The redress sought
• The proposed adjudicator (if applicable)

The Notice defines the adjudicator’s jurisdiction. If it is drafted too narrowly, it may restrict the scope of the decision. If too broad or vague, it may attract jurisdictional challenge. Taking advice at this stage to get the Notice right can prevent wasted expenditure and effort.

Step 2: Appointment of the adjudicator

The adjudicator must be appointed within 7 days of the Notice. This may occur:

• By agreement between the parties
• Through an adjudicator-nominating body (ANB) named in the contract (for example, RICS or other professional institutions)

The adjudicator must be impartial and must confirm that they are free from conflicts of interest.

Step 3: The Referral Notice

Within 7 days of the Notice of Adjudication, the referring party must serve its Referral Notice.

This is effectively the referring party’s full case. It includes:

• Detailed factual and legal submissions
• Witness statements (if any)
• Expert reports (if required)
• Contract documents and supporting material

Given the compressed timetable, in practice the Referral should be substantially prepared before the Notice of Adjudication is served.

Step 4: The Response (and possibly a Rejoinder)

The responding party typically has 7–14 days to serve its Response, although this depends on the adjudicator’s directions.

Further submissions (Reply and Rejoinder) may be permitted. The adjudicator controls procedure and has wide discretion on whether to allow further rounds of submissions.

Unlike litigation, adjudication is not bound by strict rules of evidence. It is intended to be swift and practical.

Step 5: The decision

The adjudicator must reach a decision within 28 days of the Referral Notice (although that is extendable to 42 days with the agreement of the parties).

The decision is binding on an interim basis — it must be complied with immediately. Compliance can only be validly refused on very limited bases (e.g. the adjudicator lacked jurisdiction).

Enforcement

If the losing party does not comply, the successful party can seek enforcement in the courts of Scotland or England and Wales (as applicable).

Final thoughts

Adjudication is a powerful tool for resolving construction disputes quickly, particularly payment disputes.

It was intended for parties to be able to represent themselves in adjudication proceedings. However, in practice, it is common for parties to have solicitors and counsel representing them in adjudication proceedings. They can sometimes feel like a court procedure on fast-forward.

Ensuring that a dispute has properly crystallised, framing the Notice carefully, and preparing a robust Referral are the foundations of an effective adjudication strategy.

We are here to help

Our specialist Contentious Construction team regularly represents parties who are referring or responding to adjudications. We pride ourselves on our expertise, industry knowledge and our straightforward advice.

If you have any queries relating to adjudication or any other issues arising from ongoing or previous construction, engineering or energy projects, please contact Ryan McCuaig or a member of our Contentious Construction team.