Construction Breakfast – May 2017
Adjudication – Soured Dreams? Paul Newman, Barrister 3PB
Our guest speaker Paul Newman, from 3PB, joined us this month to talk about the hot topic of adjudication and where things stand now, 20 years since adjudication became commonplace in the construction industry.
A skilled and practised Barrister, Paul has nearly 30 years’ specialist experience in contentious and non-contentious construction law, and advises across a broad range of construction disputes, both under standard form contracts and less formal arrangements.
Paul explained that the Conservative Government introduced the Construction Act in 1996. It was unusual that the Government would intervene into dispute procedures in a particular industry, however the Act works so well that other common law countries like New Zealand, Australia and South Africa have followed suit.
The basics set out at s.108 of the Construction Act 1996 state:
- There must be a dispute or difference
- A contract should record the right to go to adjudication
- The right can be exercised at any time
- Parties must work to a strict timetable aimed to achieve a decision within 28 days or referral (or 42 if claiming party agrees)
- The adjudicator is impartial and takes time finding out what’s what
- The adjudicator’s decision is a stop-gap – temporarily binding – until final resolution under the terms of the Contract..
It might be said that the costs of adjudication, which may consist of an adjudicator’s fees, plus legal costs on each side, are expensive for a decision which is, ultimately, non-binding and where costs are not readily recoverable.
RICS is looking at ways for disputes up to £50,000 to be resolved cheaply, but it is hard to come up with options when so many private sector workers need to be paid. The Irish recently introduced a maximum fee adjudication for claims up to 80,000 Euros; could others follow suit? Recently, damages-based agreements have become popular as they look after adjudication and take a cut of winnings, so for example on a claim of £25,000 resolved within the 28 days, they will take 25% of your winnings, so £5,000.
Can you get your costs back?
That depends on the case in question:
- Each party is responsible for paying their own costs
- The winning party usually must pay adjudicator’s costs, and then recover them from the losing party
- Parties can enter an agreement after the inception of the adjudication to say that they empower the adjudicator to deal with costs
What if the payer doesn’t pay?
There are a couple of key elements here:
- The decision can be submitted for enforcement under Part 24 of the Civil Procedure Rules in the Technology and Construction Court.
- The Court deals with why the decision of the adjudicator should be enforced
Tony Bingham in Building Magazine said, “adjudication, introduced as a quick fix solution, has become blighted by tactical game playing.”
However, recent case law, such as Caledonian v Mar City (2015), suggests that the approach that often saw contractors sending in huge payment notices and then taking their employers to adjudication for the notified sums has had its day. The courts are growing wise to ‘smash & grab’ tactics and, with more enforcements necessary after the losing parties refuse to pay, costs are on the rise and that quick-fix solution could well be becoming simply an alternative to litigation that is not quicker nor cheaper.
This was another invaluable session for attendees, and a great example of how the construction industry and the legal expertise of Gregg Latchams can work more closely together. Our next construction breakfast will take place on Tuesday 6 June, with speaker Nick Pollock, of the Duchy of Cornwall. Click here to book your place!
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