Practical Law

As some of you may well have seen, the second edition of the Construction Industry Council’s Users’ Guide to Adjudication has now been published, and not before time. The first edition was published in 2003, when most of us were still using the original Nokia 3310.  I have said a couple of times in past blogs that an update was well overdue (perhaps the esteemed members of the CIC read my blogs?). This was particularly the case given that the first edition was based on the un-amended Construction Act 1996, and consequently stated that the provisions of the Act only applied to construction contracts in writing.

Who can benefit from reading the guide?

As the title of the blog suggests, this is a user-friendly, basic guide to adjudication. But that certainly shouldn’t be seen as a criticism, as I think it is just what the industry needs.

Those of us involved in adjudication on a daily basis take a great deal of our knowledge for granted, so actually providing a basic outline can sometimes present difficulties. Not only this, we have a wealth of adjudication and construction law textbooks to refer to, but these are unlikely to be much help to a first time user of adjudication.

Therefore, the CIC guide is perfect for solicitors and other representatives to give to unsophisticated clients (such as small builders and developers who are new to adjudication), in order that they can gain a basic understanding of the process. However, I don’t think the CIC guide’s usefulness stops there. It is also useful for:

• Solicitors and other representatives to give to larger, more sophisticated clients. Such organisations may not have been involved in adjudication before and, even if they have, the guide might help to dispel misconceptions about the process.
• Adjudicators to give to unrepresented parties, in order that they understand the process they are involved with.
• Trainees. I think the CIC guide should be compulsory reading for any trainee undertaking a seat in a construction department (although I’m sure Practical Law might suggest looking at one of their Quick Guides instead).

What’s in the CIC guide?

The second edition of the CIC guide roughly follows the same structure as the first edition and the basic outline is as follows:

• Introduction. It does what it says on the tin, so to speak.
• What is adjudication? This provides a broad definition of adjudication, sets out the key requirements from section 108, and introduces the Scheme for Construction Contracts 1998.
• Establishing a right to adjudicate. This goes through a series of questions such as is there a construction contract?, has a dispute arisen?, and so on. The guidance on whether a dispute has arisen has been updated to reflect the principles set out by Jackson J (as he was then) in Amec v Secretary of State for Transport (which was approved in the Court of Appeal).
• Do I need professional help? This section has been amended and expanded, and now leans towards professional help being necessary. In my view, this is a reflection of how adjudication has developed over the 13 years since the first edition was published.
• Starting adjudication. This is a clear guide to how to go about starting an adjudication, including issuing a notice of adjudication, appointing an adjudicator, and preparing and issuing the referral.
• Replying to a notice of adjudication. This section sets out a suggested course of action when a party is on the receiving end of a notice of adjudication. I think that there are a couple of bits that could have done with a few tweaks, in particular, the CIC guide suggests that:
  •  if the responding party considers that it hasn’t had sufficient time to consider a claim, it should argue that no dispute has arisen. However, the TCC has made it clear that no dispute challenges are almost never successful. For example, see St Austell Printing Company v Dawnus Construction Holdings. I think the CIC guide would benefit from a qualification to this effect;
  • adjudicators usually direct that a responding party provides its response “within 14 days from the date of the referral notice, although sometimes they may give you less time than this”. Personally, I am only likely to provide a responding party with 14 days (or longer) to submit its response in larger disputes where a timetable of greater than 28 days is agreed from the outset, otherwise this gives little time for any remaining submissions. Given that those relying on the guide are likely to be involved in smaller disputes, I think it may have been sensible to have managed expectations and stated seven or ten days; and
  • with regard to cross claims, generally speaking, a responding party “will be able to rely, as part of [its] defence, on any claim that [it] may have arising under the same contract”. That is certainly technically correct when it comes to money claims, but there is a very important caveat that I think should have been mentioned, namely that it is subject to the responding party having issued the requisite payment notice and/or pay less notice (see Pylon Ltd v Breyer Group plc). That said, I acknowledge that the guide does refer to responding parties seeking professional advice concerning cross claims, so I would hope any lack of notice is identified.
• What happens next? This section considers what the adjudicator will do next, for example request documents, hold a meeting, and so on, and stresses the need to comply with the adjudicator’s directions.
• The adjudicator’s decision. As one might expect, this section explains what an adjudicator is likely to order.
• The costs and who pays. This section has been expanded, and divides the subject between the adjudicators fees and the parties’ costs. New sections have been added on paying for expert advice and the charges of the adjudicator, which are welcomed. One point I disagree with concerns the recovery of party costs, which states “Whether the adjudicator has the power to award the parties’ costs (as opposed to the adjudicator’s own costs) depends upon the terms of the adjudication procedure”. To me, this implies that if the parties’ contract states that the adjudicator can award party costs, then they are free to do so. However, surely any such provision would be caught by section 108A, which prohibits contractual provisions concerning the allocation of costs relating to the adjudication (with the exception of the adjudicator’s fees) unless they are made after the notice of adjudication has been served?
• What do I do now? I think that this is one of the most useful sections, as not only does it address issues of enforcement and slips, it also refers to the temporarily binding nature of the decisions and the need to comply with them even if a party disagrees with the adjudicator’s findings.
• Where do I go for further information or assistance. This section provides links to the primary and secondary legislation, but I’d have liked to have seen links to other organisations that also produce guidance, for example the Adjudication Society and RICS.

All in all?

I suspect that those reviewing the first edition might have been tempted to expand the guide greatly given the development of adjudication over the past 13 years. Thankfully, they resisted and only updated the key essentials. They should be commended on producing a clear and concise guide that will undoubtedly be of assistance to many. Peter and Jane would be proud!