A guide to Construction Adjudication

MJD Solicitors, specialists in construction disputes and adjudication, provide their guide to Construction Adjudication. Although first written in 2015, it remains valid today (2024), albeit slightly revised.

Matthew Dillon, who undertakes all Construction Adjudications at MJD Solicitors, undertook his first adjudication over 20 years ago and is a member of TECSA, the Adjudication Society, The Society for Construction Law, & The Chartered Institute of Arbitrators.

1     What is  Adjudication?

Construction Adjudication is a fast and relatively cheap way of resolving disputes in the construction industry, whereby an impartial third party decides the issue between the parties.

The decision reached by the adjudicator is usually binding on the parties until such time as the decision is overturned by a judge or arbitrator following a trial. In the vast majority of cases the parties just accept the decision of an adjudicator and move on.

2     When can I go to Construction Adjudication?

Under the Housing Grants, Construction and Regeneration Act 1996 (commonly referred to as the Construction Act), a party has the right to refer a dispute arising under a construction contract to adjudication at any time. However, the dispute must have “crystallised”, prior to commencing an adjudication. MJD Solicitors can advise you whether your dispute has crystalised or not.

3     How fast is Construction Adjudication?

From start to end as little as 28 – 35 days.

The first document to be prepared is the Notice of Adjudication which sets out in brief the particulars of the dispute. Notwithstanding the brevity of the document, it is arguably one of the most important documents as it sets out the jurisdiction of the adjudicator – get it wrong and there will be consequences.

Following service of the Notice of Adjudication, an adjudicator is appointed.

Within 7 day of the Notice of Adjudication, the Referral Notice has to be sent. The Referral Notice essentially comprises the case and evidence which will form the backbone of the case to be considered by the Adjudicator.

Due to time constraints the Referral Notice needs to be prepared and ready to go prior to the Notice of Adjudication being issued.

4     How much does Construction Adjudication cost?

The cost of the adjudication will depend upon the size, nature and complexity of the dispute. The following needs to be considered:

• The fees and expenses of the adjudicator

We are seeing most adjudicators charging between £300 – £400 plus vat an hour for their appointment. This usually translates into a final fee of between £7,000 – £15,000. For simple disputes the charges may be less.

Whilst the adjudicator will order which party is to pay his fees, it is not as simple as the losing party picking up the bill.

It is not uncommon for adjudicators to apportion their fees between the parties; if a party overstates their claim or raises issues which they have lost, the adjudicator may direct that a winning party picks up part of the bill.

Occasionally an adjudicator will order that the Referring Party pay the charges in the first instance and then reclaim from the Responding Party.

The parties are joint and severally liable for the adjudicator’s fees and so therefore regardless of how they are directed to be split, if one party does not pay then the adjudicator will seek payment from both parties. This is a real issue if the Responding Party is insolvent.

If the Responding Party says that the adjudicator’s decision is invalid, he can simply refuse to pay the adjudicator’s charges. The choice for the Referring Party is to pay instead and seek an indemnity from the Respondent or let the Adjudicator sue both parties (not ideal).

For disputes less than £100K it is possible to use a cheaper procedure and see our blog here.

• The cost of the nominating body

A small fee will be paid if you have to ask somebody like TECSA, RICS or RIBA to nominate an adjudicator. The fee is usually around £250 – £400 plus vat and you will not get this fee back even if you win the adjudication. 

• Your professional fees

Generally speaking, each party bears their own legal and professional fees unless the parties agree otherwise.

The costs of representation in adjudication will be determined by the issues in stake. As a benchmark, our fees (based on an hourly rate of £280 – £300 for a lawyer with 20+ years experience in construction disputes.) for a straightforward adjudication will be in the region £5,000 – £7,000. If the matter settles early then costs can be as low as £2,000. If the matter proceeds on a fully contested basis then fees in the region of £10,000 – £13,000 are common.

For low value disputes our costs may be lower depending upon the issues.

If your contract contains a provision that says a party must pay the other side’s costs or an adjudicator’s costs in any event then such provision is invalid.

We can usually agree to cap costs to provide you with certainty, but need to understand the issues in the case before we do this.

5     How do I nominate an adjudicator?

If your contract nominates a specific adjudicator or nominating body, then you must follow the contract otherwise the appointment will be invalid.

If no such adjudicator or nominating body is specified, then you are free to choose which nominating body to go to and in this situation thought should be given as to the desired professional background of the adjudicator.

6     Do I need a written contract to start a Construction Adjudication?

No. But there must be a contract.

It is worth thinking about matters further if your contract is with a homeowner. If the homeowner or his advisor produced the contract, and it contains an adjudication provision then you should be able to adjudicate. If the Contractor produced the contract, then the adjudication provision is probably invalid as it is an unfair term.

7     Can I adjudicate on more than one dispute at a time?

No. Usually however, by phrasing the referral in generic terms it is possible to adjudicate on a wide issue that encompassing several sub-issues – i.e how much money is the Referring Party due?

8     How will the Construction Adjudication progress?

After the Notice of Adjudication has been served and the adjudicator nominated, the Referring Party should then serve their Referral Notice.

The adjudicator will then invariably give directions which will include a direction that the other party serves a Response.

It is usual for there to be a further exchange of written submissions and indeed the Referring Party may, on occasions, even plan to put the majority of its case in its second submission by responding to the defence advanced by its opponent.

9   What next?

Adjudication can be rough justice. The majority of adjudicators are good at their job, but mistakes do happen. The general approach is to “pay now argue later”, i.e., the decision of the adjudicator should be complied with even if it is incorrect, on grounds of fact or law. The decision cannot in itself be appealed but it can, exceptionally, be overturned by the Court.

The vast majority of adjudicator’s decisions are complied with. To put this into context about 98% of the adjudications we undertake are complied with and without further ado. The remaining 2% have been enforced subsequently by consent or by order of the High Court. 

If a decision is not complied with then you can enforce it by going to the High Court and applying for “summary judgment”. It is the practice of the Court to enforce adjudicators’ decisions, even when they are factually or legally incorrect. 

There are only limited grounds on which an enforcement of a decision will be resisted, which includes “jurisdictional” arguments and where there has been a breach of “natural justice; the consequence of this is why it is so important to commence the adjudication on the correct footing and to try to ensure the adjudicator does not take any action throughout the adjudication that could render it invalid.

The process of seeking summary judgment should take no more than 8 weeks including a short hearing of up to half a day (depending on the number of issues raised). Costs usually amount to about £15,000 – £20,000 per party. Often, we can agree to discount fees substantially pending a successful resolution.

If the court agrees that the decision of the adjudicator should be complied with then the court will order that the losing party comply with the decision by way of summary judgment and also award legal costs.

If assistance is required on any aspect of construction law then please contact Matthew Dillon on 01277 280761 or email us at [email protected].

Matthew Dillon LLB, Solicitor, MCIArb

This article is for information purposes, does not constitute legal advice and should not be relied upon. For terms and conditions of this article please read here.

Matthew Dillon

MJD Solicitor