Introduction

2.1 As explained more fully in paragraphs 1.2 to 1.10 inclusive in chapter 1 above, adjudication has been included in the past as a dispute resolution mechanism in various contractual agreements in the United Kingdom, including in a number of standard form contracts used in the construction industry.² Such contractual provisions would frequently limit the scope of disputes that could be referred, such as to disputes arising under certain specific provisions of the contract.³ This chapter, however, focuses upon the more recent, statutory, form of adjudication now used in England and Wales, with separate chapters considering the position in Northern Ireland (chapter 15) and Scotland (chapter 16).

2.2 The concept that parties to a construction contract should have a general right to adjudicate all disputes arising under that contract at any stage was originally proposed by Michael Latham in his Review of Procurement and Contractual Arrangements in the United Kingdom Construction Industry, published in July 1994.

2.3 Part 2 of the Housing Grants, Construction and Regeneration Act 1996 (the HGCRA) [Appendix 1.1], which, amongst other things, incorporated Michael Latham’s suggestion in the form of the adjudication provisions (appearing at section 108 thereof), came into force on 1 May 1998 and has applied to any disputes arising out of contracts entered into subsequent to that date. Under section 108 of the HGCRA, compulsory adjudication is now commonplace – in most construction disputes.⁴

2.4 Publication of the HGCRA provoked a welter of criticism from specialist construction law practitioners. The opening paragraph⁷ of an article by the (late, great) Ian Duncan Wallace QC contained the following strident passage:

2.5 In December 1997, publication of A Plea for Sanity⁸ sought to persuade the new Labour administration to delay bringing the HGCRA into force, so as to enable its provisions to be reconsidered. As Mr Duncan Wallace further observed thereafter:⁹

2.6 Mr Duncan Wallace’s criticisms continued unabated in a further seminal article,¹⁰ in which he asserted:¹¹

2.7 He concluded as follows:12

2.8 Not all those who originally criticised the HGCRA remained critical for very long, however!

2.9 In A Plea for Sanity, Professor John Uff QC predicted in his paper:

2.10 By 1998, however (doubtless, having received a number of appointments as adjudicator!), Mr Uff changed his spots somewhat as follows:¹⁴

2.11 Mr Duncan Wallace sadly went to his grave with his hatred (which bordered on the rabid!) of the HGCRA15 unabated.

2.12 By 1999, the first case under the HGCRA reached the English Court of Appeal, where it received the first of many judicial commendations.

2.13 In Macob Civil Engineering Limited v Morrison Construction Limited,¹⁶ Dyson J (as he then was) removed all doubt that the adjudication process under the HGCRA was not only endorsed by the courts, but that decisions of adjudicators would generally be enthusiastically enforced:

Reform of the HGCRA

2.14 In 2009, Part 2 of the HGCRA was amended by the Local Democracy, Economic, Development and Construction Act 2009 (the LDEDCA) [Appendix 1.3], which came into force on 1 October 2011. Subsequent to that amendment, it is no longer required for the construction contract to be in writing, or evidenced in writing;¹⁷ the HGCRA henceforth also applies to oral and partly written such contracts. However, if the parties wish to include the possibility of statutory adjudication, the specific adjudication provisions (ie the adjudication clause) must still be in writing, since, otherwise, the Scheme for Construction Contracts ( the Scheme) [Appendices 1.2 and 1.4] applies.¹⁸

2.15 A second important change is that the parties are no longer permitted to provide for which of them is to bear the cost of any adjudication, prior to the notice of adjudication being issued; if they do so nonetheless, the clause will be rendered ineffective. Since October 2011, the parties are only allowed to determine the allocation of costs once the notice has been served and they must then do so in writing19 (which is, of course, hugely unlikely).

2.16 In addition, the LDEDCA changed the payment procedure to which the parties have to adhere. The employer is now required to serve a payment notice within five days of the payment due date, which was agreed upon in the contract.²⁰ If the employer fails to do so, the contractor is entitled to serve his own notice (ie a default payment notice).²¹ The new and final payment due date is, subsequently, prolonged by the number of days between the original date (set out in the contract) and the date of the contractor’s notice.²² The employer has the right to serve a pay less notice before the final due date of payment.²³ Payment will be made on the final date, in accordance with the amount set out in the last notice that was served²⁴ (ie either the payment notice, default payment notice, or the pay less notice).

2.17 Next to these main alterations, the LDEDCA amendments also include a number of other specific changes:

• .1 Pay-when-certified clauses are no longer permitted and, accordingly, contractors can no longer link the payment to, or make it contingent upon, the certification of performance under another contract;
  
• .2 The payment of retentions to sub-contractors can no longer be made conditional upon the certification of making good any defects, or paying the main contractor’s retention under the contract;
  
• .3 The right of suspension has been amended, so as to allow the contractor to extend the time of suspension, as well as to recover any reasonable costs and expenses incurred in connection therewith;²⁵ and
  
• .4 A notice of the contractor’s insolvency must be expressly included in the contract if the employer wishes to withhold money in case of the contractor becoming insolvent.²⁶

When can parties adjudicate a dispute?

2.18 Put shortly, the parties can adjudicate a dispute (1) if the contract provides for it and (2) under any qualifying construction contract entered into after 1 May 1998.

2.19 Sections 104 and 105 of the Act define what constitutes a “construction contract” and what “construction operations” mean, both of which have been interpreted extremely broadly.

2.20 Section 106 of the Act excludes construction contracts with a residential occupier. Section 107 of the Act requires the construction contract to be in writing, although this is very widely defined. There also needs to be “dispute” at the time of the referral to adjudication.

Conduct of an adjudication

2.21 The basic requirements are set out in section 108 of the Act, which, in essence, amount to the following:

• .1 A party can give notice of his intention to refer a dispute at any time;
  
• .2 The timetable must allow for the appointment of an adjudicator and referral to them of the dispute within seven days of the notice of adjudication;
  
• .3 The basic period allowed for the whole process from referral to decision is 28 days (the adjudicator having the ability to extend by only 14 days with the consent of the referring party alone, with any further extension needing to be agreed by all parties);
  
• .4 The adjudicator must act impartially; and
  
• .5 The adjudicator can take the initiative in ascertaining the facts and law (ie adopt an “inquisitorial” approach).

2.22 If the contract does not contain a mechanism that complies with each of the above statutory requirements, then the Scheme for Construction Contracts (England and Wales) Regulations 1998 (the Scheme) [Appendices 1.2 and 1.4] will apply.

2.23 As to the detailed procedure, that is left for the adjudicator (generally with the input of the parties) to decide.

2.24 The net result of this, on a practical level, is that:

• .1 Adjudications can be properly commenced at any time (once a dispute has arisen), both during and after the completion of work, or the provision of services, under the construction contract and the right to adjudicate, in common with arbitration, survives termination and repudiation of that contract;²⁷
  
• .2 Beyond service of the referral on the adjudicator within seven days of the notice of adjudication, neither the Act, nor the Scheme provides for any particular procedure for the adjudication. There is no specific requirement for the service of any response by the “other party”, or any further submissions. The adjudicator has a free hand in establishing the procedure, provided that it is just and impartial. Further, whether the parties attend any “hearing”, or “meeting”, will again be a matter for the adjudicator. The procedure will largely depend upon the preferences of the adjudicator (generally, with input from the parties) and the nature of the dispute;
  
• .3 In litigation, the parties might expect a claim followed by a defence and a reply, with no permission for further exchanges of pleadings, or submissions. In an adjudication, it is not unheard of for there to be service of a referral, a response, a reply, a rejoinder, a “surrejoinder”, a “rebutter” and further pleadings and submissions for which names have yet to be invented! An alternative common approach is for the parties to “disguise” further rounds of submissions (up to and beyond the decision!) as letters to the adjudicator which begin “We have no intention of responding in detail to the [X], but. …”!

2.25 Beware costs and interest! The adjudicator has no inherent jurisdiction to award either costs or interest (unless this is expressly stipulated in the contract). Parties must therefore beware of an ad hoc submission to the jurisdiction, by requesting, or failing appropriately to respond to, a request for costs, or interest: see also Hortimax Limited v Hedon Salads Limited.28