UK Adjudication

UK adjudication

Sean Sullivan Gibbs BSc LLB(Hon) PGDipArb PGDipBar LLM FCInstCES FRICS FCIOB FICE AFIChemE Chief Executive Officer, Hanscomb Intercontinental 

A UK roundup of adjudication

ON the 1 May 1998 the UK construction industry had a dispute resolution process imposed upon them by parliament – adjudication. Parliament had passed the Housing Grants, Construction and Regeneration Act in 1996 (HGCRA 1996) but due to government and ministerial inaction The Scheme for Construction Contracts (England and Wales) Regulations took until the 6 March 1998 to be approved. It was vital to support this new form of dispute resolution which was designed to enable parties to resolve disputes relatively quickly and inexpensively.

Under the HGCRA 1996, parties to construction contracts have the right to commence adjudication at any time.

In adjudication, parties refer their dispute to the adjudicator, who is an impartial decisionmaker. They will consider arguments from both parties, and may also apply their own initiative and experience to the issues, before making a decision on how the dispute should be resolved.

In adjudication, parties refer their dispute to the adjudicator, who is an impartial decision-maker. They will consider arguments from both parties, and may also apply their own initiative and experience to the issues, before making a decision on how the dispute should be resolved.

The adjudicator’s decision is legally binding, meaning that either party could obtain a judgment from a court, ordering the other party to comply with it provisionally. This means the decision is binding unless, and, until the parties resolve the dispute in arbitration, litigation, or by agreement.

Given its success and popularity, it is little surprise that the industries excluded it due to the power, process and other exemptions, as well as territorial application rules which would also come to embrace adjudication as an attractive interim, binding, process as it is one that can be used during the execution of a complex project by including suitable contractual provisions.

UK Adjudicators has seen a large rise in offshore construction contracts both in the offshore wind and oil industries that name them in their contracts, and, as a consequence, the numbers of these type of adjudication nominations has rapidly increased. Unfortunately the pool of adjudicators with offshore and marine experience is extremely low and is an area that needs training to ensure sufficient adjudicators are available.

Many commentators have said that the HGCRA 1996 was poorly drafted. The first case the court had to decide under the new act was Macob Civil Engineering Ltd v Morrison Construction Ltd (1999) CLC 739, BLR 93, 64 Con LR 1, 37 EG 173.

The judge in this case was The Honourable Mr Justice Dyson (as he was then known) who was sitting as a judge in the Technology and Construction Court (TCC). The jurisprudence from this case alone has been significant, and both ratio and obiter comments have been cited many times since it was heard. Despite criticism by judges and industry practitioners, this does not mean that the industry has not embraced it as the preferred dispute resolution process in the UK.

It is thought that since statutory adjudication was introduced, there have been just over 2,000 cases for enforcement.The TCC and its judges would soon grasp what adjudication was, what the parliament meant when it passed the act and scheme, and how natural justice and insolvency defences would be decided in enforcement. The introduction in 1998 of the right to refer disputes in construction contracts to adjudication changed the landscape of litigation in the TCC. Lengthy trials of contractual disputes became a thing of the past, and the TCC faced the new challenge of devising speedy and appropriate procedures for enforcing adjudicator’s decisions when they are challenged.

The TCC soon had a regular flow of enforcement cases from the HGCRA 1996 and created a swift process for summary enforcement of adjudicators awards. It is thought that since statutory adjudication was introduced, there have been just over 2,000 cases for enforcement.

Those in the TCC and High Court can be easily found, but there have been enforcement cases in the county court and small claims court that have not been reported.

Notable cases in the Court of Appeal have included: 

Cases heard in the House of Lords and Supreme Court include:

Various reports and studies into adjudication indicate that there are between 2,000 to 3,000 adjudications per year. Around 2,000 of the adjudications use an adjudicator that has been nominated by an adjudicator nominating body (ANB). There are around twenty ANBs in the UK, though many of these make very few nominations each year.

The King’s College report on adjudication in 2022 confirmed that some of the more significant ANBs had made 2,171 nominations in the 12 month period from May 2020 to April 2021. The TCC report for 2021 to 2022 confirms that there were adjudication decision enforcement hearings numbering only 148 in this period.

Various reports and studies into adjudication indicate that there are between 2,000 to 3,000 adjudications per year. Statutory adjudication has evolved and its current format is that it is most likely that an adjudicator will be nominated by an ANB. The adjudicator will give a decision in 28-42 days, whereby the parties will comply with the decision in over 90% of all matters, and the court will usually enforce an adjudicator’s decision on a swift summary basis.

The few areas that may cause the court not to enforce, are a breach of natural justice or party insolvency, indeed an adjudicator can be wrong on the facts and law and still have their decision enforced.

Coulson L.J. said in the case of John Doyle Construction Ltd (In Liquidation) v Erith Contractors Ltd (2021) EWCA Civ 1452, (2021) Bus LR 1837, (2021) WLR(D) 516):

“I rather cavil at the suggestion that construction adjudication is somehow ‘just a part of ADR’. In my view, that damns it with faint praise. In reality, it is the only system of compulsory dispute resolution of which I am aware which requires a decision by a specialist professional within 28 days, backed up by a specialist court enforcement scheme which (subject to jurisdiction and natural justice issues only) provides a judgment within weeks thereafter. It is not an alternative to anything; for most construction disputes, it is the only game in town.”

As we move through 2023; the sixth anniversary of the founding of UK Adjudicators is approaching and the growth in its panel and popularity among adjudication users has grown year on year.As we move through 2023; the sixth anniversary of the founding of UK Adjudicators is approaching and the growth in its panel and popularity among adjudication users has grown year on year. Since October 2017, there have been more than 2,000 nominations made free of any nomination fee in the UK alone. Compare this with the RICS charging structure of around £425 per nomination, and the industry has saved over £850,000 just by carefully choosing which ANB it utilises.

UK Adjudicators has the largest multidisciplinary panel of adjudicators in the UK as well as a significant panel of international adjudication and dispute board members who range from: 

The dispute board member panel for experienced dispute board members includes adjudicators on the FIDIC presidential list, national lists of FIDIC member organisations, IChemE and other bodies such as the ICC and LCIA, and continues to grow with members drawn from all continents of the globe.

The dispute board member panel for experienced dispute board members includes adjudicators on the FIDIC presidential list, national lists of FIDIC member organisations, IChemE and other bodies, such as the ICC and LCIA, and it continues to grow with members drawn from all continents of the globe. UK Adjudicators is working to increase diversity on its panel and as one of the largest complaints made about other ANBs is they lack diversity.

So we are continually striving to:

One of UK Adjudicator’s strengths is that we have many adjudicators with a wide range of native language skills which include English, Arabic, French, German, Dutch, Italian, Romanian, Bulgarian, Mandarin, Cantonese, Afrikaans, Hindi, Russian, Bengali, Swahili, Zulu, Xhosa, Spanish, Portuguese, Turkish, Greek, Javanese, Urdu, Japanese and Gaelic.

UK Adjudicator panel members are diverse and sit on other ANBs such as:

Studies by Glasgow Caledonian University and Addleshaw Goddard LLP on what users of adjudication want, showed that those in favour of capping or tiering fees for UK Adjudications included contractors, in-house lawyers and developers.

The UK has benefitted from extensive case law on adjudication and the courts support for it with swift enforcement.For UK adjudications, UK Adjudicators offer three schemes:

  1.  Free adjudication nomination scheme (UKA).
  2.  Free adjudication nomination scheme with capped fees for the adjudicator (UKA).
  3.  ZCIC LVD MAP (VER 2) that UKA does charge a fee for making a nomination and has limited capped fees for disputes up to £100k.

UK Adjudicators’ first two schemes are unique in that there is no charge for making a nomination which for lower value disputes can make it very attractive for the referring party to use. Unlike the capped fee schemes of TECSA and the CIC LVD MAP; UK Adjudicators’ capped fee schemes doesn’t have financial limits and can be used for declaratory relief.

The values of the amount being claimed and the adjudicator’s total fee caps are set out below for the UKA capped fee scheme.

Claim Value & Fee Cap (exclusive of VAT):

Up to £10,000 capped at £1,750

£10,001 to £25,000 capped at £2,188

£25,001 to £50,000 capped at £3,063

£50,001 to £75,000 capped at £3,938

£75,001 to £100,000 capped at £4,375

£100,000 to £150,000 capped at £6,500

£150,000 to £200,000 capped at £8,000

£200,000 to £250,000 capped at £10,000

Claims that exceed £250,000 will not have a total cap; but the daily fees that can be charged are limited to £2,250.00 plus VAT. While Declarations only are capped at £5,000.

There is no nomination fee.

The UK Adjudicators’ capped fee scheme can be used as normal for claims under construction contracts within the meaning of the HGCRA 1996 (as amended) or for claims under other types of construction contracts which have adjudication provisions which incorporate the Scheme for Construction Contracts made under the Construction Act or have adjudication provisions substantially the same as the Scheme. The referring party or its representative simply applies to UK Adjudicators for the nomination of an adjudicator using the specified form.

During 2022 and 2023, there have been a number of UK court decisions which will be of interest to users of adjudication.In the event that an adjudicator is appointed under the UK Adjudicators’ capped fee scheme and the adjudication proceeds but it becomes clear that the referring party has undervalued the claim (whether deliberately or otherwise), then the adjudicator will continue with the adjudication and charge up to the relevant fees cap.

Claimants wishing to commence an adjudication under the UK Adjudicators’ capped fee scheme are required to use the application form which can be downloaded from the UK Adjudicators website. UK Adjudicators has also created bespoke services for users of ADR both in the UK and internationally which includes the nomination of early neutral evaluators, expert determiners, independent assessors as well as arbitrators.

The UK has benefitted from extensive case law on adjudication and the courts support for it with swift enforcement. This makes it extremely attractive to parties with large complex disputes who prefer adjudicating disputes rather using litigation or arbitration. During 2022 and 2023, there have been a number of UK court decisions which will be of interest to users of adjudication in the UK and internationally and are noted here.

Liverpool City Council v VITAL Infrastructure Management (Viam) Ltd (In Administration) (2022) EWHC 1235 (TCC)

Liverpool City Council entered into a framework agreement with VITAL Infrastructure Asset Management (Viam) Ltd in relation to highways planned work projects. The framework agreement provided that each work project was subject to an individual call-off contract. VITAL commenced an adjudication against LC in which the adjudicator decided that LC should pay VITAL £128,500 for VITAL’s maintenance of temporary highways fencing.

LC brought part 8 proceedings for declarations that the adjudicator had no jurisdiction, which arose under two contracts.

In respect of the two contracts issue, a dispute that arises under more than one contract cannot generally be the subject of one adjudication reference, however, HHJ Davies disapplied this principle due to the specific facts of the case. The contract expressly contemplated that a dispute might arise under both the framework agreement and call-off contract, and in such circumstances, it could be referred to adjudication as one dispute.

Northumbrian Water Limited v (1) Doosan Enpure Limited; (2) Tilbury Douglas Construction Limited (2022) EWHC 2881 (TCC)

This case was an application by the claimant for summary judgment to enforce an adjudication decision directing the defendants, an unincorporated joint venture to pay £22,458,540. The JV applied for the proceedings to be stayed pursuant to section 9 of the Arbitration Act 1996.

Option W2 provides that a dispute arising under or in connection with the contract is referred to and decided by the adjudicator, and that a party my refer a dispute to the adjudicator at any time.

In the contract data, ‘the tribunal’ was stated as ‘arbitration’ and the dispute resolution procedure option W2 applied. Option W2 provides that a dispute arising under or in connection with the contract is referred to and decided by the adjudicator, and that a party my refer a dispute to the adjudicator at any time. The adjudicator’s decision is binding on the parties, unless, and, until revised by the tribunal. The JV sought a stay of the proceedings on the basis that the parties agreed that their disputes should be decided in arbitration, the court rejected the arguments advanced and gave judgment for the claimant.

O’Farrell J in the judgment, ‘the courts take a robust approach to adjudication enforcement, enforcing the decisions of adjudicators by summary judgment regardless of errors of procedure, fact or law, unless the adjudicator has acted in excess of jurisdiction or in serious breach of the rules of natural justice’.

WRB (NI) Limited v Henry Construction Projects Limited (2023) EWHC 278 (TCC)

Henry Construction Projects Limited engaged the claimant, WRB (N.I) Limited to ‘design, supply, install, test and commission the mechanical, electrical and public health systems for the development for a total sum of £2,180,000 plus VAT’. The claimant is and always has been a dormant company.

The defendant applied for a stay of execution and, by way of a cross-claim, sought payment. They argued that if they were successful in their counter-claim it was very likely that monies would not be paid because the claimant was a dormant company.

The stay was refused and Pepperall J was in agreement with Akenhead’s J’s judgment in Westshield Civil Engineering Ltd v Buckingham Group Contracting Ltd (2013) EWHC 1825 stating this was ‘the inevitable consequence of having placed a contract with a dormant company’.

Pepperall J further goes on to say it would be ‘unfair and contrary to the spirit of the adjudication’ to allow HC to escape liability based on WRB’s unchanged financial position. Accordingly, the court decided it was appropriate to enforce the adjudicator’s decision.

LRJ Interiors Limited v Cooper Construction Limited (2023) EWHC 3339 (TCC)

LRJ Interiors Limited, the claimant, sought enforcement of an adjudicator’s decision against the defendant, Cooper Construction Limited for the payment of £3,256.58 – unpaid by the defendant in respect of a payment application which it had ignored. The defendant responded by commencing its own part 8 proceedings seeking a declaration that the adjudicator’s decision was in fact void and unenforceable because the adjudicator had failed to recognise that the claim was time-barred under the Limitation Act 1980.

Finding in favour of the defendant, the judge ruled that the adjudicator had failed to consider the terms of the contract when deciding that the accrual date was the final date for payment. The adjudicator had also been wrong to assume that the lack of a pay less notice negated the need to assess whether or not the payment application itself was timely. The judge concluded that on the facts, the right to be paid application no. 4 had accrued shortly after completion of the works in November 2022. The outstanding sum did not simply become due again by being demanded some eight years later and thus usurping the statutory rules on limitation. Critically, the Judge confirmed that the Limitation Act 1980 applies equally to adjudication as it does to litigation. 

Sean Sullivan Gibbs BSc LLB(Hon) PGDipArb PGDipBar LLM FCInstCES FRICS FCIOB FICE AFIChemE, Chief Executive Officer, Hanscomb Intercontinental

sean.gibbs@hanscombintercontinental.co.uk

@SGibbs121

Sean Gibbs is vice chair of the CICES Contracts and Dispute Resolution Panel and is a committee member of CICES South West and South Wales.

Nomination forms can be downloaded from the website www.ukadjudicators.co.uk For further information about becoming an adjudicator or dispute board member panellist, email info@ukadjudicators.co.uk

 

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