51 Q&As regarding Adjudication in the UK

I am posting my revision note for MSc Construction Law and Dispute Resolution at KCL. 

References

Burr, A. (2017) International Contractual and Statutory Adjudication. London: Informa Law

Knowles, R. (2012) 200 Contractual Problems and their solutions (Third ed.). Oxford, Wiley-Blackwell

Pickavance, J. (2016) A Practical Guide to Construction Adjudication. Oxford, John Wiley & Sons

?1. Finality Is adjudicator's decision final and binding?

The adjudicator's decision is interim binding. Under s. 108(3) of the Housing Grants, Construction and Regeneration Act 1996 (the 1996 Act), adjudication decision is binding until the dispute is finally determined (a) by legal proceedings, (b) by arbitration (if the contract provides for arbitration or the parties otherwise agree to arbitration) or (c) by agreement.

2. A timescale of adjudication What is the timeline of adjudication?

Under s. 108(2) of the 1996 Act, the Referring Party can provide a Notice of Adjudication at any time. And the Referring Party shall provide the Referral Notice within 7 days of the Notice of Adjudication. The Adjudicator shall decide within 28 days of the Referral Notice unless agreed by the parties after the dispute has been referred. The extension is up to 14 days. The adjudicator takes the initiative in ascertaining the facts and the law.

3. Late Referral Notice What will be the consequences if the Referral Notice is late?

Where the Scheme for Construction Contracts (the Scheme) applies, the appointment of the adjudicator must be within 7 days of the date of the adjudication notice. In the event of the referral notice being served late, the adjudicator will have no jurisdiction. 

Reference: Knowles 14.30

4. The Scheme When does the Scheme kick in?

Under s. 108(5) of 1996 Act, if the contract does not comply with the requirements of subsections (1) to (4) of 108 of 1996 Act, the adjudication provisions of the Scheme for Construction Contracts apply.

(1) A party to a construction contract has the right to refer a dispute arising under the contract for adjudication under a procedure complying with this section. For this purpose “dispute” includes any difference.

(2) The contract shall—

(a)enable a party to give notice at any time of his intention to refer a dispute to adjudication;

(b)provide a timetable with the object of securing the appointment of the adjudicator and referral of the dispute to him within 7 days of such notice;

(c)require the adjudicator to reach a decision within 28 days of referral or such longer period as is agreed by the parties after the dispute has been referred;

(d)allow the adjudicator to extend the period of 28 days by up to 14 days, with the consent of the party by whom the dispute was referred;

(e)impose a duty on the adjudicator to act impartially; and

(f)enable the adjudicator to take the initiative in ascertaining the facts and the law.

(3) The contract shall provide that the decision of the adjudicator is binding until the dispute is finally determined by legal proceedings, by arbitration (if the contract provides for arbitration or the parties otherwise agree to arbitration) or by agreement. The parties may agree to accept the decision of the adjudicator as finally determining the dispute.

(4) The contract shall also provide that the adjudicator is not liable for anything done or omitted in the discharge or purported discharge of his functions as adjudicator unless the act or omission is in bad faith, and that any employee or agent of the adjudicator is similarly protected from liability.

5. Contracts which vary with the Act. What happens if the adjudication provisions as set out in the contract are at variance with the provisions of the 1996 Act?

The 1996 Act includes basic requirements relating to adjudication. Detailed provisions for the working of adjudication have been produced by the minister and incorporated into the Scheme for Construction Contracts. The Scheme is not mandatory and, therefore, most of the organisations responsible for publishing standard conditions of contract and other learned bodies have produced their own adjudication rules. However, the Act states that if the contract does not comply with the Act, then the Scheme for Construction Contracts will apply. The adjudication rules which have been drafted for the CIC and GC/Works/1 contracts provide for the timescales within which the adjudicator must reach a decision which can be extended without the agreement of the parties. It has been held in the case of both of these sets of standard conditions that this does not comply with the Act and therefore the Scheme for Construction Contracts applies. Where this has occurred, it has been held that the adjudication rules in the contract are void in their entirety and should be replaced with the Scheme for Construction Contracts.

Reference: Knowles 14.28

6. Adjudicator's jurisdiction What are the circumstances considered that adjudicators have no jurisdiction?

No adjudicator’s jurisdiction arises when there is:

(1) No construction contracts under s.104 of the 1996 Act. S.108 provides for the statutory right to refer a dispute to adjudication. The Act applies a party to a construction contract.

(2) Construction operations excluded by the s. 105(2) of the 1996 Act

(3) Notice by residential occupier under s. 106 of the 1996 Act.

(4) No dispute or No crystallisation of a dispute

Reference: Burr 2.39

7. No Jurisdiction as to construction operations Section105(1) of the Housing Grants, Construction and Regeneration Act 1996 defines what construction operations covered by the Act are. Section105(2)  defines what construction operations are excluded from the Act. Does the Act apply if on a project some of the operations are covered by the Act, whilst others are not? 

The drafting of the Act, which provides for some operations, such as power generation, to be excluded from the Act, but leaving unanswered what the position is regarding operations on the project which are defined as construction operations: for example, scaffolding, has presented some difficulties for the courts.

Judge Thornton in the case of Palmers Ltd v  ABB Power Construction Ltd(1999)  has taken what has been referred to as the ‘narrow view’, in allowing the Act to apply to scaffolding, which is a construction operation but forms part of a power generation project, which is an exempt operation. A ‘broad view’ has been taken by Judge Lloyd in ABB v Norwest Holst (2000), who was strident in explaining that it would be invidious to allow adjudication as a dispute resolution process for a part of a project, but excluding it from other parts. Judge Ramsey, in a case North Midlands Construction PLC v. AE&E Lentjes UK (2009) heard some ten years after the decisions of judges Thornton and Lloyd, adopted the narrow view that civil works for plant at a power station site were not excluded from the definition of “construction operations” by s.105(2)(c)(i) of the 1996 Act, and the sub-contracts for these works were, therefore, subject to the provisions of the Act.

The situation is still unsettled, but the most recent case supports the ‘narrow view’.

Reference: Knowles 14.31

8. No Jurisdiction, the meaning of dispute under s. 108(1) of the 1996 Act What constitutes a dispute to be referred to adjudication? What are the requirements for the crystallisation of a dispute to be referred to adjudication?

The Court of Appeal in the case of Amec Civil Engineering Ltd v. The Secretary of State for Transport (2005) recognised that the authorities had, when taken together, laid down seven propositions which would constitute a dispute, namely:

1. The word ‘dispute’ does not have a special meaning and should be given its normal meaning;
2. There is no hard-edged legal meaning to the word ‘dispute’, but judicial decisions have produced helpful guidance;
3. The fact that one party has notified the other of the existence of a claim does not in itself give rise to a dispute: it requires a claim not to be admitted for a dispute to arise;
4. There may be several circumstances which may lead to a claim not being admitted: the claim may be rejected; one of the parties may prevaricate, giving rise to the inference that the claim is not admitted; the responding party may simply remain silent for a period of time, again giving rise to the same inference;
5. The period of time a party may remain silent depends upon the facts: where the claim is notified through an agent such as an architect, more time will be required than if the claim had been submitted direct to the other party;
6. If the claimant imposes a deadline for responding, it does not mean that a dispute arises merely because the deadline has expired; and
7. Should a claim be so nebulous and ill-defined that the respondent cannot sensibly respond to it, a non admission is unlikely to give rise to a dispute.

Reference: Knowles 14.3 

9. No Jurisdiction re ‘In writing or evidenced in writing’ To comply with the Construction Act 1996 and be subject to adjudication, the contract must be ‘in writing or evidenced in writing’ under s.107 of 1996 Act. Has this been amended by the Local Democracy, Economic Development and Construction Act 2009 (the 2009 Act)?

The need for contracts to be ‘in writing or evidenced in writing’ was repealed by the Local Democracy Economic Development and Construction Act 2009, which applies to all contracts entered from 1 October 2011.

Reference: Knowles 14.4

10. No Jurisdiction re oral instruction/variation Can a dispute concerning oral amendments to a construction contract be referred to adjudication?

The LDEDC 2009 repeals the need for contracts to be in writing or evidenced in writing. This being the case, an oral variation to a written contract would be governed by the legislation. An oral variation to a written contract would, if entered into after the revision by 2009 Act came into force, be enforceable.

Reference: Knowles 14.5

11. No Jurisdiction re multiple disputes The Construction Act states that ‘a party to a construction contract has the right to refer a dispute arising under the contract for adjudication’ under s. 108(1). As this suggests disputes can only be referred one at a time, does this mean that a dispute regarding variations and also delays will have to be the subject of separate references?

In Fastrack Contractors Ltd v. Morrison Construction Ltd (2000), Judge Thornton held that claims, heads of claim, issues, contentions or causes of action which are in dispute and included in a reference to the adjudicator will all be classified as ‘a dispute’ saying ““During the course of a construction contract, many claims, heads of claim, issues, contentions and causes of action will arise. Many of these will be, collectively or individually disputed. When a dispute arises, it may cover one, several or all of these matters.” Where an extension of time and associated delay costs were the subjects of dispute, again this would be regarded as one dispute.

Where, however, there were disputes regarding an extension of time and the evaluation of variations, then, as these two matters are unconnected, for the purposes of the Construction Act they would be regarded as two disputes (David and Teresa Bothma (In Partnership )T/A DAB v. Mayhaven Healthcare Ltd (2007)

Reference: Knowles 14.11

12. No Jurisdiction re multiple disputes Is there any guideline whether there is a single dispute or multiple disputes?

In Witney Town Council v Beam Construction (2011) Akenhead J provides the guideline as:

1. A dispute arises generally when and in circumstances in which a claim or assertion is made by one party and expressly or implicitly challenged or not accepted.
2. A dispute in existence at one time can in time metamorphose in to something different to that which it was originally.
3. A dispute can comprise a single issue or any number of issues within it. However, a dispute between parties does not necessarily comprise everything which is in issue between them at the time that one party initiates adjudication; put another way, everything in issue at that time does not necessarily comprise one dispute, although it may do so.
4. What a dispute in any given case is will be a question of fact albeit that the facts may require to be interpreted. Courts should not adopt an over legalistic analysis of what the dispute between the parties is, bearing in mind that almost every construction contract is a commercial transaction and parties can not broadly have contemplated that every issue between the parties would necessarily have to attract a separate reference to adjudication.
5. The Notice of Adjudication and the Referral Notice are not necessarily determinative of what the true dispute is or as to whether there is more than one dispute. One looks at them but also at the background facts.
6. Where on a proper analysis, there are two separate and distinct disputes, only one can be referred to one adjudicator unless the parties agree otherwise. An adjudicator who has two disputes referred to him or her does not have jurisdiction to deal with the two disputes.
7. Whether there are one or more disputes again involves a consideration of the facts. It may well be that, if there is a clear link between two or more arguably separate claims or assertions, that may well point to there being one dispute. A useful if not invariable rule of thumb is that, if disputed claim No 1 can not be decided without deciding all or parts of disputed claim No 2, that establishes such a clear link and points to there being only one dispute.

13. No Jurisdiction re exclusive jurisdiction in contracts When a clause in a construction contract which states that all disputes are subject to the exclusive jurisdiction of the courts outside the UK and law of another jurisdiction, will  the UK courts have the power to enforce an adjudicator’s award?

Attempts have been made to circumvent the effects of the adjudication process under the Construction Act. In Comsite Projects Ltd v. Andritz AG (2003), a clause written into the contract, which states that all disputes will be subject to the exclusive jurisdiction of the Austrian courts and Austrian law would not affect the enforcement of an adjudicator’s decision by the UK courts. Having said, exclusive jurisdiction clause in contracts will not affect the enforcement of an adjudicator’s decision by the UK courts. Moreover, a clause conferring a foreign jurisdiction will not prevent a party from commencing an adjudication, so long as the contract in question is a "construction contract". The adjudicator's award will be enforceable by the English courts.

Reference Knowles 14.14.

14. No Jurisdiction re a settlement agreement: Where a compromise agreement relating to a dispute on a construction contract is itself the subject of a dispute, can it be referred to adjudication?

The basic rule is that a compromise agreement which arises out of a dispute on a construction contract is not, in itself, normally classed as a construction contract. Any dispute, therefore, which relates to the compromise agreement cannot be referred to adjudication. In Lathom Construction Ltd v. AB Air Conditioning (2000), it was considered the adjudicator had no jurisdiction to deal with a compromise agreement.

Reference: Knowles 14.12

15. Competence/competence: Who decides whether adjudicator has jurisdiction or not? Does the doctrine of competence/competence apply to adjudication?

Unlike an arbitrator, an adjudicator does not have a statutory power to determine his own jurisdiction (see s. 30 of the Arbitration Act 1996), which can only be determined by the court unless the contract says to do.

Reference: Burr 2.39

16. How to address a jurisdictional issue Where the jurisdictional issue arises before or during the adjudication, what are the options to a party available?

?      A party may reserve its position on the adjudicator’s jurisdiction and, having made the reservation, continue to participate in the adjudication

?      A party may refer the issue to the court for determination. Proceedings may be brought through the procedures set out in either CPR Part 7 or Part 8.

?      A party may seek a determination from the adjudicator. Invariably, where a jurisdictional issue arises during the adjudication, the adjudicator should or will investigate it in any event. If as a result of that investigation he determines that he does not have jurisdiction to act, he must resign.

?      A party may refer a challenge to another adjudicator for a decision.

?     A party may withdraw from the adjudication entirely.

?     A party may make an application for an injunction.

Reference: Pickavance 16.3

17. The scope of Dispute, Cherry-picking Where there is a large financial claim comprising many sub-issues, can a Referring Party refer the strongest issues to adjudication rather than refer the entire suite of disputed issues?

Sometimes known as cherry-picking, or sampling, this approach is perfectly permissible in adjudication. In Fast Contractors v Morrison construction (2000), the judge referred to it as 'pruning’:

“23. In some cases, a referring party might decide to cut out of the reference some of the pre-existing matters in dispute and to confine the referred dispute to something less than the totality of the matters then in dispute. So long as that exercise does not transform the pre-existing dispute into a different dispute, such a pruning exercise is clearly permissible. However, a party cannot unilaterally tag onto the existing range of matters in dispute a further list of matters not yet in dispute and then seek to argue that the resulting ?dispute? is substantially the same as the pre-existing dispute.” 

Pickavance 8.4.5

18. The scope of dispute and Scope of defence Is it possible for a Referring Party to restrict or exclude part of the defence?

It is the intention that the adjudication notice fixes the boundaries of the dispute. Having said that, case law has decided that it is open to the responding party to raise any arguments by way of defence in response to the claim during the adjudication. This applies even if the defence had never been previously raised. Further, the parties are not limited to the arguments, contentions and evidence put forward before the dispute crystallised. If the cherry-picking approach is deployed, it must be remembered that the Responding Party is entitled to raise whatever deference it wishes, if it falls with the scope of the dispute. In Pilon v Breyer(2010), the Referring Party sought to limit the scope of adjudication. The adjudicator acceded to this curtailment and, in so doing, refused to consider a significant portion of the responding party's case. The court held that the adjudicator was wrong to do this. It said the Responding Party was not limited to issues expressly set out in the notice of adjudication. It is entitled to raise, and the adjudicator must consider, any defence put forward, whether or not it has been raised before.

Reference: Knowles 14.29 and Pickavance 8.4.5

19. The scope of defence Is there any restriction to raise a defence during the adjudication?

In William Verry v Furlong Homes (2005) subject to two provisos, the responding party is entitled to raise, and the adjudicator must consider, any defence, regardless of whether that defence was raised in advance of the adjudication. The first proviso is that the defence raised must fall within the scope of the dispute. And the second proviso is that the defence must be permissible in law or in fact. A common example of an impermissible defence is a set-off which had not been raised before and was therefore not the subject of the appropriate contractual and statutory the withholding or pay less notice.

 In Pilon v Breyer(2010),  it said the Responding Party was not limited to issues expressly set out in the notice of adjudication. It is entitled to raise, and the adjudicator must consider, any defence put forward, whether or not it has been raised before provided that (a) it is within the scope of the adjudication and, in respect of a defence relating to money, (b) the appropriate withholding or pay less notices have been given.

Reference: Pickavance 8.4.5 and 10.3.3.

20. New materials during adjudication Are the parties entitled to introduce evidence which was not disclosed before the adjudication commenced?

The parties are not limited to the arguments, contentions and evidence put forward before the dispute crystallised. However, raising defences that have never been raised before the notice may be viewed with scepticism by the adjudicator so therefore it is advisable that new defences are accompanied by sound evidence in support.

Reference: Knowles 14.29 and Pickavance 10.48

21. Ascertaining the facts When the new materials are introduced during the adjudication, should the adjudicator should consider the new materials?

In exercising the powers afforded to an adjudicator, the adjudicator will often ask questions or seek information in relation to matters that form part of the dispute from one or both of the parties during the adjudication. In these circumstances, it is plain that the adjudicator is acting within his jurisdiction and, if so far as the information asked for in some way enables him to answer the questions put to him, he is entitled to – indeed obliged to- ask for it. Both parties should be kept appraised of the adjudicator's requests and given some opportunity to review and comment on the material. The issue of the scope of the adjudicator's jurisdiction in relation to new material is sometimes raised hand in hand with a claim that the adjudicator breached the rules of natural justice. 

Reference: Pickavance 16.6.7

22. The scope of defence Is there any risk of a breach of natural justice when the adjudicator excludes the defence on the basis that the defence is out the scope of the dispute when the adjudicator tries to avoid exceeding his jurisdiction?

When the defence is outside the scope of the dispute, the adjudicator must exclude it, or risk exceeding his jurisdiction. However, adjudicators should tread carefully before deciding to exclude a defence. He should be careful between the acting in excess of his jurisdiction or in breach of the rules of natural justice because he failed to consider part or all of the defence.  In Pilon v Breyer(2010),  it was said that:

“26. As a result, an adjudicator should think very carefully before ruling out a defence merely because there was no mention of it in the claiming party’s notice of adjudication. That is only common sense: it would be absurd if the claiming party could, through some devious bit of drafting, put beyond the scope of the adjudication the defending party’s otherwise legitimate defence to the claim.”

Reference: Pickavance 8.4.5 and 10.3.3.

23. A cross-claim: set-off and abatement What is a cross-claim?

A cross-claim can be taken to mean any claim that seeks to reduce the claimant’s or the referring party’s claim. A cross-claim can be used defensively, as an abatement or a set-off during the adjudication.

Where a claimant and a defendant have a liability to each other, the general principle is that a defence arises where one obligation is deducted from the other. This can be characterised as a set-off or an abatement. Such a defence is available absent clear words to the contrary in the contract. (Gilbert Ash v Modern Engineering (1974)). Set-off or abatement commonly arises in four ways.

(a) abatement

(b) equitable set-off

(c) An independent or legal set-off

(d) A contractual set-off

Reference: Pickavance 10.6.4

24. Set-off What is the common law position as regards setting-off? The common law position has been changed by the Act? What did the Latham Report recommend as to the setting-off? What is a withholding notice and a pay less notice? Is it so important? Without a withholding notice or a pay less notice, the responding party can make a cross-claim of set-off during adjudication?

In the 1070s and 1980s, payees in the construction industry often struggled to ensure that they were remunerated in a timely fashion for the work they had done. The House of Lords decision of Gilbert Ash v Modern Engineering (1974) effectively enabled payers to avoid paying payees merely by advancing a cross-claim. If the payee wished to contest the payer’s position, the only way was getting the decision by the court or by an arbitral tribunal. Due to the lengthy process of arbitration and litigation, thousands of firms were forced out of business. The common law position as regards the ability to set off sums against amounts due is adjusted by virtue of the payment provisions in the Act.

‘Constructing the team’ made recommendations regarding set-off amongst others. Recommendation 25 was that Parliament should enact legislation to ensure that the payer paid the whole sum applied for unless it notified the payee of its contrary intention within a fixed period of time, specifying the reasons why. If there was no notification, the payee would be entitled to the amount applied for, regardless of any reason the payer had for not paying. S.111 of the 1996 Act make provisions for a withholding notice, and it was amended by the 2009 Act. Under the 2009 Act, a pay less notice is required for the responding party to use a defence of set-off whether or not the paying party certifies the amount due.  

Pickavance 1.2 and 10.6.4

25. Self-Certification When the payer does not certify the amount due, can the payee self-certify the amount?

The 1996 Act prohibits a payer from setting off sums certified as due, unless a withholding notice or pay less notice is served within a fixed period of time indicating the intention to set off and the reasons for doing so. However, the 1996 Act provides no consequences on the payer for failing to comply with certification requirements. It was recognised as a shortcoming of the 1996 Act.

Under the 2009 Act, the payee has a further right to self-certify in the absence of the necessary certificate from the payer (by virtue of default notice), and the payer must then serve its pay less notice against that self-certification, or no set-off is permissible.

Reference: Pickavance 10.6.4

26. Natural Justice What is natural justice? Will the rules of natural justice apply to adjudication?

Pickavance (2016) summarises the rules as “A party has a right to a fair hearing in that it is entitled to hear the case against it and have the opportunity to respond to it, and the adjudicator must not be biased. The requirement to comply with these rules in adjudication and in most other forms of dispute resolution that involved an independent party decision maker.”  Burr (2017) states “various decisions by adjudicators have not been enforced by reason of breaches of the rules of natural justice.” 

27. Natural justice re general guidelines Have the courts laid down any general guidelines as to how the rules of natural justice should be applied in respect of adjudication?

The rules of natural justice apply to adjudication. The adjudicator must ensure that both parties know fully the case which is being made against them. And both parties are given a proper opportunity of providing answers. Arguments put forward by the losing party that a breach of natural justice has occurred, however, will often be met with some scepticism by the courts. Where elementary and basic principles of natural justice have not been observed, the courts will be prepared to refuse to enforce the adjudicator’s decision. Case law has established that, if the adjudicator fails to consider submissions made by the parties, he risks breaching the rules of natural justice. In BAL v. Taylor Woodrow Construction Ltd (2004), it was held that

(1)  each party must be given a fair opportunity to present its case. That is the overriding principle and everything else is subservient to it.

(2)  Subject to (1) above, together with any express provisions in the parties’ contract, procedure is entirely under the control of the adjudicator.

(3)  In considering what is fair, it must be remembered that adjudications are conducted according to strict time limits; thus time limits will be severely restricted.

(4)  The adjudication procedure is designed to be simple and informal; all that it will normally require is that each party should be given an opportunity to make comments at any relevant stage of the adjudication process.

(5)  Each party must be given an opportunity to comment on the other’s submissions and additional new submissions.

(6)  An adjudicator is normally given power to use his own knowledge and experience in deciding the issues in dispute. If he raises new points that have not been canvassed by the parties, it will normally be appropriate to invite submissions.

(7)  If the adjudicator obtains more information or carries out tests, it will be appropriate to make the results known to the parties and call for their comments.

(8)  An adjudicator may be given power to obtain from other persons such information and advice as he considers necessary on technical or legal matters. If he does so, the situation is similar to (6) above (9). In this connection no distinction can be drawn between issues of fact and issues of law.

Reference: Knowles 14.20

28. Natural Justice How can the breach of natural justice be categorised?

Burr (2017) categorises the breach of natural justice into three:

?     Bias Discain Project Services v Opecprime Developments No2 [2001] 

?     Failure to consider the matters before the adjudicator. Buxton Building Contractors Limited v The Governors of Durand Primary School [2004], see 68(2)(d) of the Arbitration Act 1996

?     Failure to permit a party adequate opportunity to deal with the case against it Balfour Beatty Construction v The Mayor & Burgesses of the London Borough of Lambeth [2002] 

Reference: Burr 2.41

29. Natural Justice re materiality In order to challenge the arbitrator’s award under s.68 of the Arbitration Act 1996 there must be serious irregularity has caused or will cause substantial injustice to the applicant. Similarly, will the courts consider “materiality” when the enforcement of adjudication decision is resisted on the basis of the breach of natural injustice?

Only in instances where there is clearly actual or apparent bias or a party’s right to a fair hearing has been impinged, such that it is likely to have had a significant effect on the outcome of the adjudication, there will be a breach of natural justice. In Discain v Opecprime no.1 (2000)

“That scheme makes regard for the rules of natural justice more, rather than less important. Because there is no appeal on fact or law from the Adjudicator's decision, it is all the more important that the manner in which he reaches his decision should be beyond reproach. At the same time, one has to recognise that the Adjudicator is working under pressures of time and circumstance which make it extremely difficult to comply with the rules of natural justice in the manner of a Court or an arbitrator. Repugnant as it may be to one's approach to judicial decision making, I think that the system created by the Housing Grants Construction and Regeneration Act can only be made to work in practice if some breaches of the rules of natural justice which have no demonstrable consequence are disregarded.”

Reference: Pickavance 17.1.2

30. Natural Justice Is there a guideline as to “materiality”?

In Cantillon v Urvasco (2008) at 57

“From this and other cases, I conclude as follows in relation to breaches of natural justice in adjudication cases:

(a) It must first be established that the Adjudicator failed to apply the rules of natural justice;

(b) Any breach of the rules must be more than peripheral; they must be material breaches;

(c) Breaches of the rules will be material in cases where the adjudicator has failed to bring to the attention of the parties a point or issue which they ought to be given the opportunity to comment upon if it is one which is either decisive or of considerable potential importance to the outcome of the resolution of the dispute and is not peripheral or irrelevant.

(d) Whether the issue is decisive or of considerable potential importance or is peripheral or irrelevant obviously involves a question of degree which must be assessed by any judge in a case such as this.

(e) It is only if the adjudicator goes off on a frolic of his own, that is wishing to decide a case upon a factual or legal basis which has not been argued or put forward by either side, without giving the parties an opportunity to comment or, where relevant put in further evidence, that the type of breach of the rules of natural justice with which the case of Balfour Beatty Construction Company Ltd -v- The Camden Borough of Lambeth was concerned comes into play . It follows that, if either party has argued a particular point and the other party does not come back on the point, there is no breach of the rules of natural justice in relation thereto.”

Reference Pickavance 17.1.2

31. Natural justice re complex cases It has been argued that adjudication in accordance with the Construction Act 1996, because of the short timescale involved, should not be used in complex cases, as it is likely to result in a breach of natural justice. Is this a correct statement of current law?

It is not uncommon for adjudication to involve a major dispute regarding variations, extensions of time, loss and expense and liquidated damages, referred to by Judge Coulson as a kitchen-sink final account adjudication. In William Verry v Furlong Homes (2005), the court held that while kitchen sink’ final account adjudications are not prohibited by the Act.

“While such Adjudications are not prohibited by the Housing Grants Construction and Regeneration Act as presently drafted, there is little doubt in my mind that some composite and complex disputes as this was are not easily accommodated by the summary procedure of Adjudication. A referring party should think very carefully before attempting to use the Adjudication process to try and obtain some sort of perceived tactical advantage in a final account dispute such as this.”

He warned of the unsuitability of adjudication for dealing with such a final account. Parties to adjudication have, therefore, on a few occasions, tried to resist enforcement of an adjudicator’s decision on the grounds that because of the complexity, there is a danger of a breach of natural justice. So far, parties resisting enforcement on the grounds of complexity have been unsuccessful. In Amec v TWUL (2010), Coulson J summarised the law as follow:

“In my judgment, therefore, the law on this subject can be summarised as follows:

(a) The mere fact that an adjudication is concerned with a large or complex dispute does not of itself make it unsuitable for adjudication: see CIB v. Birse.

(b) What matters is whether, notwithstanding the size or complexity of the dispute, the adjudicator had: (i) sufficiently appreciated the nature of any issue referred to him before giving a decision on that issue, including the submissions of each party; and (ii) was satisfied that he could do broad justice between the parties (see CIB v. Birse).

(c) If the adjudicator felt able to reach a decision within the time limit then a court, when considering whether or not that conclusion was outside the rules of natural justice, would consider the basis on which the adjudicator reached that conclusion (HS Properties). In practical terms, that consideration is likely to amount to no more than a scrutiny of the particular allegations as to why the defendant claims that the adjudicator acted in breach of natural justice.

(d) If the allegation is, as here, that the adjudicator failed to have sufficient regard to the material provided by one party, the court will consider that by reference to the nature of the material; the timing of the provision of that material; and the opportunities available to the parties, both before and during the adjudication, to address the subject matter of that material.”

Reference: Knowles 14.26, Pickavance 17.76

32. Natural justice re bias Does an adjudicator who communicates with one party without disclosing the details of the communication to the other party risk his decision being nullified by the courts on the grounds that his conduct amounted to bias?

Adjudicators are allowed to make their own enquiries to ascertain the facts relating to the matters in dispute. However, if ascertaining the facts involves communicating with one of the parties, an adjudicator runs the risk that his decision may not be enforced. (Discain Project Services v Opecprime Developments No2 [2001] )

Reference Knowles 14.17

33. Natural justice as to failing to address an issue, part of a submission or evidence Where the adjudicator fails to address an issue, part of a submission or evidence, is there a risk he breaches the rules of natural justice?

Where the adjudicator fails to address an issue, part of a submission or evidence, there is a risk he breaches the rules of natural justice. The law on this matter is summarised in Pilon Limited v Breyer(2010)

“22. As a matter of principle, therefore, it seems to me that the law on this topic can be summarised as follows:

22.1. The adjudicator must attempt to answer the question referred to him. The question may consist of a number of separate sub-issues. If the adjudicator has endeavoured generally to address those issues in order to answer the question then, whether right or wrong, his decision is enforceable: see Carillion v Devonport.

22.2. If the adjudicator fails to address the question referred to him because he has taken an erroneously restrictive view of his jurisdiction (and has, for example, failed even to consider the defence to the claim or some fundamental element of it), then that may make his decision unenforceable, either on grounds of jurisdiction or natural justice: see Ballast, Broadwell, and Thermal Energy.

22.3. However, for that result to obtain, the adjudicator’s failure must be deliberate. If there has simply been an inadvertent failure to consider one of a number of issues embraced by the single dispute that the adjudicator has to decide, then such a failure will not ordinarily render the decision unenforceable: see Bouygues and Amec v TWUL.

22.4. It goes without saying that any such failure must also be material: see Cantillon v Urvasco and CJP Builders Limited v William Verry Limited [2008] EWHC 2025 (TCC). In other words, the error must be shown to have had a potentially significant effect on the overall result of the adjudication: see Keir Regional Ltd v City and General (Holborn) Ltd [2006] EWHC 848 (TCC).

22.5. A factor which may be relevant to the court’s consideration of this topic in any given case is whether or not the claiming party has brought about the adjudicator’s error by a misguided attempt to seek a tactical advantage. That was plainly a factor which, in my view rightly, Judge Davies took into account in Quartzelec when finding against the claiming party.”

Reference: Pickavance 15.5.7

34. Natural justice as to failing to address a defence An adjudicator should accept any defence which is (a) within the scope of dispute and (b) permissible in law or in fact. Do the courts make a guideline to what extent the adjudicator should deal with the responding party’s defences.

In C&E Jacques Partnership v Ensign Contractors Limited [2009] at 26.

“(a) The Adjudicator must consider defences properly put forward by a defending party in adjudication.

(b) However, it is within an adjudicator's jurisdiction to decide what evidence is admissible and, indeed, what evidence is helpful and unhelpful in the determination of the dispute or disputes referred to that adjudicator. If, within jurisdiction, the adjudicator decides that certain evidence is inadmissible, that will rarely (if ever) amount to a breach of the rules of natural justice. The position is analogous to a court case in which the Court decides that certain evidence is either inadmissible or of such little weight and value that it can effectively be ignored: it would be difficult for a challenge to such a decision on fairness grounds to be mounted.

(c) Even if the adjudicator's decision (within jurisdiction) to disregard evidence as inadmissible or of little or no weight was wrong in fact or in law, that decision is not in consequence impugnable as a breach of the rules of natural justice.

(d) One will need in most and possibly all “natural justice” cases to distinguish between a failure by an adjudicator in the decision to consider and address a substantive (factual or legal) defence and an actual or apparent failure or omission to address all aspects of the evidence which go to support that defence. It is necessary to bear in mind that adjudication involves, usually, the exchange of evidence and argument over a short period of time and the production of a decision within a short time span thereafter. It is simply not practicable, usually, for every aspect of the evidence to be meticulously considered, weighed up and rejected or accepted in whole or in part. Primarily, the adjudicator, needs to address the substantive issues, whether factual or legal, but does not need (as a matter of fairness) to address each and every aspect of the evidence. The adjudicator should not be considered to be in breach of the rules of natural justice if the decision does not address each aspect of the evidence adduced by the parties.”

Reference: Pickavance 17.84

35. Natural justice re the employment of legal services Where an adjudicator seeks legal advice to assist him in reaching a decision, is he obliged to reveal the advice to the parties involved in the adjudication?

Where an adjudicator receives legal advice to enable him to reach a decision, he should disclose it to the parties. If he fails to do so, the courts are likely to consider this failure to be a breach of the rules of natural justice and refuse to enforce the adjudicator’s decision.(BAL v. Taylor Woodrow Construction Ltd (2004))

Cf. s.37 of the Arbitration Act 1996 regarding power to appoint experts, legal advisers or assessors

Reference: Knowles 14.19

36. Natural justice as to the employment of the expert services Can an adjudicator employ the services of an expert to assist in making a decision?

If an adjudicator wishes to use the services of an expert, he must seek the agreement of the parties. In addition, any report produced by the expert must be passed to both parties to allow them to pass comment Balfour Beatty Construction v The Mayor & Burgesses of the London Borough of Lambeth [2002] 

Cf. s.37 of the Arbitration Act 1996 regarding power to appoint experts, legal advisers or assessors

Reference: Knowles 14.18

37. Enforceability and resisting to enforcement The Arbitration Act 1996 makes provisions for enforcement and challenge to the arbitration award. Does the 1996 Act or 2009 Act make provisions for (a) the enforcement of adjudication decision, (b) resisting grounds for enforcement and (c) challenge of the decision?

The Act is silent on the matters. The courts (case laws) have developed the guidelines as to the adjudication decision.

38. Enforceability: If the Act is silent on the enforcement of adjudication decision, how to enforce the adjudication decision?

Dyson J in Macob Civil Engineering Ltd v. Morrison Construction (1999), held the appropriate procedural route for enforcement of adjudication decision is by summary judgment by the court. Acknowledging that the timescale of statutory adjudication was set with the intention of resolving disputes quickly, the TCC moulded a rapid procedure for enforcing adjudicator’s decisions, the details of which are contained at section 9 of the TCC guide. The process is reasonably straightforward and will usually result in a decision from the court in no more than eight weeks from the commencement of the claim. CPR Part 24 sets out the rules and procedures where a party wish to apply for summary judgement. In order to enforce, a party should issue a CPR Part 7 claim form and a Part 24 application for summary judgement, or Part 8 claim form.

Reference: Pickavance 13.3 Burr 2.42

39. Enforceability: Will an adjudicator’s decision be enforced by the courts? What is the Courts’ approach?

It has been made clear by the courts that in passing the Construction Act the intention of Parliament is clear to secure the speedy payment regime using adjudication. Having said, a decision of an adjudicator appointed under the Act can be enforced by summary procedure. The Courts have adopted a robust and purposive approach to enforce the adjudication decision from the first relevant case in Macob Civil Engineering Ltd v. Morrison Construction (1999). In Carillion v Devonport (2005), the general policy approach was reaffirmed.

Reference: Knowles 14.1 and Burr 2.46

40. Enforceability re a wrong award Will a court enforce an adjudicator’s award which is clearly wrong?

Whether a court will enforce an erroneous decision will depend upon the type of error involved. If a matter is referred to an adjudicator who, in his decision, arrives at the wrong answer, the decision will be enforced. (Bouygues UK Ltd v. Dahl & Jensen Ltd (2000)). Should the adjudicator’s decision include a matter which was not referred to him, it will be regarded as being outside his jurisdiction and will not be enforced. An adjudicator’s decision will not be enforced if he does not have jurisdiction because of a defective appointment or he acts outside the rules of natural justice.

Reference Knowles 14.7.

41. Partial enforcement, the doctrine of severability Will a court enforce part only of an adjudicator’s award?

The original orthodoxy was that adjudicators’ decisions were not severable. If a part was tainted, say for lack of jurisdiction, then no part of the decision can be enforced. This view came under review, and the general consensus of opinion which prevails now is that, if the referral relates to two separate issues, then the good part can be severed and enforced.

Reference Knowles 14.2. and Pickavance 14.3.10

42. Enforceability regarding late adjudication decision If an adjudicator issues a decision late, can it be enforced?

An adjudicator is required to reach a decision with the period allotted to him. Where the Act applies and where no extension of time has been given, that period is 28 days from the date of receipt of the referral notice. Where the decision is not reached in time, it will be reached outside the adjudicator’s jurisdiction and will be invalid. The cases distinguish between the act of reaching a decision and communicating that decision to the parties. In Cubitt Building v Fleetglade[2006], a decision reached within the agreed extended date (just), but only communicated to the parties twelve hours later and after the expiry of that period was held to have been communicated ‘forthwith’. The adjudicator’s decision was upheld.

Reference: Knowles 14.10. Pickavance 16.7.3

43. Power to award interest Is there a freestanding power of an adjudicator to award interest?

The adjudicator has no freestanding power to award interest under the Act. However, the Scheme gives the adjudicator the power to award interest at subparagraph 20(c).

In Carillion v DRC (2005) the Court of Appeal interpreted subparagraph 20(C) at 91

“So the adjudicator may decide questions as to interest if, but only if, (i) those questions are “matters in dispute” which have been properly referred to him or (ii) those are questions which the parties to the dispute have agreed should be within the scope of the adjudication or (iii) those are questions which the adjudicator considers to be “necessarily connected with the dispute”. Questions which do not fall within one or other of those categories are not within the scope of paragraph 20(c) of the Scheme. There is no freestanding power to award interest.”

Reference: Pickavance 10.7.8

44. Challenge Can a losing party challenge the adjudicator’s decision by referring to arbitration or litigation without (a) paying the adjudicated sum, or (b) complying with the terms of the decision?

In Macob Civil Engineering Ltd v. Morrison Construction (1999), it was held that a defendant can not elect to serve notice of arbitration to dispute the adjudication decision, and at the same time argue that the adjudication decision is not enforceable.

The losing party to an adjudication must comply with the terms of the decision before commencing litigation or arbitration proceedings in respect of the same dispute. (Anglo Swiss v Packman Lucas (2009)).

Reference: Pickavance 15.3.4

45. Resisting to enforcement What kinds of argument are possible to resist the enforcement of adjudication decision?

Potential grounds on resisting the enforcement of adjudication decision are:  

(a) error in law using CPR Part 8 claim 

(b) set off, 

(c) lack of or excess jurisdiction, 

(d) breach of natural justice, 

(e) fraud, 

(f) duress, 

(g) Insolvency,

(h) Impecuniosity, or

(i) breach of Human Rights Act,

Reference: Pickavance

46. CPR Part 8 claim There has been a move by the courts to allow a CPR Part 8 application for a declaration that the adjudicator’s decision is wrong in law, where the facts are not in dispute. When can a party use a CPR Part 8 claim?

Party may litigate before, during or after that dispute is adjudicated. For a certain type of dispute, it may be possible to avoid the consequences of the adjudicator’s decision by commencing a CPR Part 8 claim. Where the nature of the dispute between the parties does not involve a substantial dispute of fact but relate to the proper construction of the contract documents, the respondent party may commence a claim in the court to neuter the effect of the adjudicator’s decision through CPR Part 8 proceedings.

But the courts may allow this strategy in very special circumstances. In Structure Consulting v Maroush Food Production (2017), when the claimant issued CPR 7 proceedings to enforce the adjudication decision, the defendant issued CPR 8 proceedings to overturn the adjudicator’s decision and sought declaratory relief to determine “whether the contract between the parties was a simple letter of intent agreement or incorporated the JCT Design and Build 2011 conditions of contract”. The Defendant argued that there should be a stay of any judgment against the defendant claiming, “the Part 8 claim should be heard with the enforcement application”. Additionally, the defendant argued that “given that the Part 8 claim can be heard very shortly and the sum in dispute is substantial”, it would be fair to stay any enforcement until that matter has been determined. O’Farrell J held that the issues were sufficiently defined to be dealt with under Part 8 Proceedings but enforced the adjudication decision because there were not any special circumstances in this instance which required a stay to be granted.  The Judge followed Carillion and said that “although the court has a discretion to order a general stay pending determination of the Part 8 issue, the general rule is that the court should take a robust approach to the enforcement of adjudication decisions”. 

Reference Knowles 14.7.

47. Setting off against the decision: Can a losing party set off the adjudicated amount?

The general rule is that compliance with an adjudicator's decision will not be affected by any other right or claim. (VHE v RBSTB (2000))

The general rule is subject to certain exceptions, which have been summarised in Naylor v Acoustifoam (2010) when(a) a set-off follows logically from the adjudicator's decision (Balfour Beatty v Serco(2004)), or (b) set-off is naturally corollary of the adjudicator's decision (Ledwood v Whessoe Oil(2007)) 

Potential arguments whether a losing party is entitled to set off are:

?     Pursuant to a contractual right

?     Following the issue of a withholding or pay less notice against the sum the adjudicator has decided it should pay

?     Following the issue of a later interim or final certificate

?     Liquidated and ascertained damages against the adjudicator’s decision

Reference: Pickavance 12.6 and Knowles 14.22

48. Setting off against the decision: Where the adjudicator has already, in the course of the adjudication, considered the substance of the particular set-off, the losing party can seek to set up the same set-off for not paying the sum ordered? 

Where the adjudicator has already, in the course of the adjudication, considered the substance of the particular set-off, the losing party can seek to set up the same set-off for not paying the sum ordered (Levolux v Ferson (2003)) In the case, when the Court of Appeal stated that to allow a set-off from an adjudicator’s decision would defeat the intended purpose of adjudication under the Construction Act.

Reference: Knowles 14.21, Pickavance 12.6.3

49. Insolvency or impecunious party If the claimant is insolvent, or the evidence of the claimant's present financial position suggests that it is probable that it will be unable to repay the judgment sum, will a stay execution be granted?

Even where the court holds that the adjudicator’s decision is valid, the losing party may temporarily or permanently avoid the consequences of that decision where the court determines that the party is insolvent or in financial difficulty. In cases of formal insolvency, there is now a fairly well-established rules that formal insolvency ‘trumps’ adjudication enforcement. The court will not enter a judgement where either party is insolvent.

For the impecunious party, the courts may grant a stay of execution under the “special circumstances”. In Wimbledon Construction Company 2000 v Vago (2005), HHJ Peter Coulson QC held that adjudication is designed to be a quick and inexpensive resolution in a construction dispute, which is generally enforced by the courts, and a stay of execution would only apply in “special circumstances”. He concluded that an inability to pay or insolvency could amount to special circumstances, but no stay will be granted (a) if the claimant’s impecuniosity is caused by the defendant’s failure to comply with the decision, and (b) if the claimant was impecunious when the contract was awarded.  

Reference: Pickavance 14

50. European Convention on Human Rights Act Can a losing party resist the enforcement, because of the very restricted nature of the adjudication process, it is contrary to the European Convention on Human Rights?

It is clear from the decisions in Elanay Contracts Ltd v. The Vestry (2000) and Austin Hall Building v. Buckland Securities (2001) that the adjudication process does not contravene the European Convention on Human Rights.

Reference: Knowles 14.23

51. The second adjudication A matter in dispute can only be referred to adjudication once. Where an adjudicator’s decision has been received relating to a dispute over sums included in an interim certificate in respect of variations, can a dispute relating to the value of those variations when included in the final account be referred to adjudication?

A matter which has been referred to adjudication once cannot be referred a second time. However, if a dispute has been based on factual differences, it may be the subject of a further adjudication(see Quietfield Ltd v. Vascroft Contractors Ltd (2006)) .The referral of an extension of time claim, based upon limited supporting information, which does not meet favour with the adjudicator, may be the subject of a second adjudication if full details are provided. Another example would be a claim for interim payment purposes that may be resubmitted with the final account, where more supporting details are provided.

It would seem, however, that the courts are latterly taking a more restricted view as to what constitutes a separate dispute from those cases heard earlier. In Benfield Construction v. Trudson (2008) His Honour Mr Justice Coulson summed up the situation succinctly as “Adjudication is supposed to be a quick one-off event; it should not be allowed to become a process by which a series of decisions by different people can be sought every time a new issue or a new way of putting a case occurs to one or other of the parties.”

Reference Knowles 14.13

52. Adjudication expense Can the party that is successful in adjudication recover its costs from the losing party?

An adjudicator has the power to provide in his decision that one of the parties pays the other party’s costs if the power is granted to him by the conditions of the contract. There is, however, no such provision in the Scheme for Construction Contracts. In the absence of express powers in the contract, an adjudicator has no power to provide in his decision that the losing party is to pay the winning party’s costs. However, both parties may agree to vest in the adjudicator such powers under the s.110(A)(2) of the Act as amended,

The contractual provision referred to the allocation as between those parties of costs relating to the adjudication of a dispute arising under the construction contract is effective when

(a)it is made in writing, is contained in the construction contract and confers power on the adjudicator to allocate his fees and expenses as between the parties, or

(b)it is made in writing after the giving of notice of intention to refer the dispute to adjudication.

Reference: Knowles 14.24

53. What is the slip rule?

Section 108(3A) of the Construction Act 1996 as amended provides that construction contracts must include a clause permitting the adjudicator to correct a typographical or clerical error in their decision. These are often known as ‘slips’ hence the ‘Slip Rule’.

54. Immunity Are the parties entitled to challenge an adjudicator’s fees on the grounds that they are unreasonably high?

The parties cannot challenge the level of an adjudicator’s fees. Under the Construction Act, the adjudicator is not liable for anything done or omitted in discharge of his duties, unless carried out in bad faith under s.108 (4) of the 1996 Act.

Reference: Knowles 14.15

55. Where one party claims that the adjudicator has no jurisdiction, but, whilst maintaining this position, continues to take part in the proceedings, can that party avoid paying the adjudicator’s fees on the grounds that he claimed the adjudicator had no jurisdiction?

If one of the parties challenges an adjudicator’s jurisdiction, he has to make a choice. He can withdraw from the proceedings, in which case there will be no obligation to pay any fees. Alternatively, having raised the challenge, he can continue to take part in the adjudication, in which case there will be a contractual obligation to pay the fees.

Reference Knowles 14.27.