Using Adjudication To Fight The Big Boys.

Sub-contractors experience increasing difficulties obtaining due payment from main contractors. There are many complaints from small sub-contractors that if they threaten litigation for recovery of sums due, they will receive no more work.

Furthermore, most small sub-contractors cannot afford the litigation costs and risks attached, in addition there is the time factor in that litigation/disputes can take many months or even years. It is in these circumstances that Alternative Dispute Resolution (ADR) can be more effective.

Adjudication and arbitration are the most common forms of ADR in the construction industry. Arbitration however, can be just as costly and lengthy as litigation and this is where adjudication can be a life saver to many aggrieved sub-contractors.

The right to adjudication arises in The Housing Grants Construction and Regeneration Act 1996 and what a very important right this is !!!

Previously ADR requested a consensual approach in that both parties had to agree to settle their dispute by way of existing arbitration, expert determination, conciliation and mediation. Now however, Parliament has provided that construction contracts disputes shall be subject to adjudication if either party wishes.

The benefits of adjudication to the sub-contractor are great. The adjudicator must decide within 28 days of the referral and this can be extended to 42 days by agreement. An adjudication decision is binding on the parties. Generally the only way the decision can be challenged is where the Adjudicator has acted outside his powers or the dispute is otherwise decided by arbitration, litigation or agreement.

The decision can be enforced by the Courts upon application for summary judgment and in the event of non payment by the paying party and upon further application, the Court may then order recovery of sums due from the paying party’s bank accounts and/or charges levied against assets such as property and shares.

A sub-contractor can therefore invoke the adjudication right and obtain a quick decision while still on site. However, each area of contention needs to be decided on its merits and in conjunction with the drafting of the contract etc. Who pays for the adjudication usually depends on the terms of the contract.

Most standard form contracts incorporate adjudication rules which provide that the party’s cannot recover their own costs in the adjudication. Neither party can claim any fees incurred by lawyers, experts or anyone else who helps prepare his case. Both parties are jointly and severally liable for the adjudicators fee in common with the scheme, standard forms usually provide that the adjudicator can decide who is to pay his fees and reasonable expenses by apportionment between the parities in his decision.

Finally The Housing Grants Construction and Regeneration Act 1996 provides that a construction contract must embody eight principles concerning the right to adjudication (section 108). If the contract does not comply with section 108 then the adjudication provisions in the contract are ignored and the scheme applies.

The above applies to construction contracts entered into after 1st May 1998.