Whilst adjudication remains the go to dispute method in the construction industry there remains a number of commonly asked questions on the process.
In week one we thought we would go back to basics and look at what adjudication is, as it is still a procedure which some people are unaware of.
The adjudication process is unique to the construction industry and is a statutory dispute resolution method. It was introduced to speed up cash flow, but today it is often used for more complex disputes out with the payment regime.
A party under a construction contract, which is defined in legislation, has a right to adjudicate a dispute at any time. There are a number of contracts which do not fall within the remit of the legislation. Whilst not exhaustive, the three most notable exclusions are:
1 A contract with a residential occupier;
2 Contracts for certain specified activities in relation to power generation projects; and
3 Supply only contracts.
To be able to adjudicate under any of the excluded contracts, there needs to be an express contractual right to adjudicate.
Unless any contractual rules apply, adjudication is governed by the Scheme for Construction Contracts (Scotland) Regulations 1998 (as amended in 2011) ("the Scheme"). Amongst other things the Scheme sets out what must be contained in the Notice of Intention to Refer, the powers of the Adjudicator and issues surrounding the adjudicator's decision.
An adjudication is supposed to be a fast track process with a decision being given within 28 days (calendar not working days) from the date of the Referral. At the adjudicator's request, the 28 days can be extended by 14 days with agreement of the party referring the dispute. Any request for an extension to the decision date beyond 14 days requires agreement of both parties.
An adjudication will initially be run on a documents only basis. The decision on whether to have a hearing lies with the adjudicator who is very much the master of proceedings.
Unlike other formal dispute methods, parties are liable for their own costs of pursuing or defending an adjudication. It is possible for parties to agree that costs will be allocated in a certain manner but this agreement will only be valid if it is made after an adjudicator has been appointed. This applies to agreements both as to the allocation of the adjudicator's fees and expenses and agreements as to who is to bear the parties' own costs. Because of this, at Morton Fraser we have developed a number of different feeing options for adjudications and will discuss these with clients on a case by case basis.
The adjudicator can allocate liability for their own fees following their decision. This will normally be awarded against the "losing" party but there are exceptions. If a party is only partially successful, the adjudicator can split their fees between the parties equally or on some other split basis, or if a party has run a particular argument with no merit which has caused unnecessary delay and expense to the process, the adjudicator can take this into account when deciding how to allocate their fees.
Now that we have set the scene for what adjudication is, please read next week's blog which will provide a glossary of commonly used terms in the adjudication process.
Should you require any assistance with adjudication, we have a large and experienced construction team who regularly deal with adjudications and we would be happy to discuss the process with you.