UK Adjudicators January 2018 newsletter

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EDITORS COMMENTS
As another year begins it is refreshing to see
diversity among alternative dispute resolution
practitioners being raised on a regular basis
with commitment being expressed to change
the status quo by individuals and
organisations. If you, your business or your
employer haven’t signed up to support these
initiatives I would urge you to do so and make
adjudication and adjudicators fit for the 21st
Century.
By the time this newsletter is distributed the
Department for Business, Energy & Industrial
Strategy two consultation papers on retention
use and the Post Implementation Review of
the 2011 changes to Part 2 of the Housing
Grants, Construction and Regeneration Act
1996 will have closed, what their findings will
be remains to be seen. I hope that the critical
comments on the power and process
exemptions expressed by the honourable Mr
Justice Coulson will be taken on board by the
government and thought given how to
remove this exemption from the Construction
Acts.
Sean Gibbs LLB(Hons)MICE FCIOB FRICS
FCIARB, is a director in the global construction
claims consultancy Hanscomb
Intercontinental and is available to sit as an
arbitrator, adjudicator, mediator, quantum
expert and dispute board member.
HOW CAN STATUTORY
ADJUDICATION BENEFIT THE
CONSTRUCTIONINDUSTRY IN
HONG KONG
Theremustbe a ‘cashflow’in the building
trade.It is the very lifeblood of the enterprise.”
– LordDenning M.R.– [1973]
Challenges in the construction industry on
payment in the past decade have been
attributed to a number of causes:
1. Shortage in labour recourses,
experienced and well-educated professionals
in the industry to cope with the booming
industry.
2. Low tender prices in the competitive
bidding environment.
3. Rising claim consciousness and
awareness of loopholes i n contract
documents.
4. Increasing construction costs at a
higher rate than inflation.
5. Ambiguities in contractual payment
mechanism.
6. Ill-prepared contract documenst by
less experienced contract drafters.

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Court litigation is the traditional way of
dispute resolution and notoriously it is costly,
time consuming with a lack of
confidentiality. Over the years, dispute
avoidance mechanism such as the Dispute
Resolution Adviser and alternative dispute
resolutions such as mediation and
arbitration emerged in the construction
sector. Each of these methods has its own
merits and drawbacks as listed below:
1. Dispute Resolution Advisor (DRA) is a
neutral jointly employed by the contracting
parties who tenure throughout the contract
period to facilitate early handling of potential
disputes before they get worsen and return
into formal contractual disputes. Any
differences or disagreements between the
contracting parties can be resort to the DRA
for opinion. By nature of an opinion, the
DRA’s independent view is not binding on the
parties but its function merits the prevention
of a portion of contractual disputes.
2. Mediation1
is a very popular mean of
dispute resolution in the construction
industry. Confidentiality is the prime benefit
of the mediation process where all mediation
communications are by default undisclosed to
any third party, the Court, or the opponent
1
Mediation Ordinance (Cap. 620)
party during a caucus section with one party.
The mediator performs as an independent
and neutral facilitator in the process that is
conducted at the parties will. The mediator
exerts minimum control of the mediation
process and inspires the parties to general
options to resolve disputes in a non-
judgmental manner. Once again, the process
requires voluntary participation by both
parties in good faith and the parties are not
bound to resolve the entire dispute in one
mediation session.
3. Arbitration is perhaps the last
alternative dispute resolution method before
court litigation. Its features define a less
formal procedure than the Court, upholding
the three pillars of party’s autonomy,
minimum intervention by the Court, cost
effective and expeditious dispute resolution
process. The law2
provides a legal framework
to conduct arbitration, where the arbitrator
is empowered to manage the process and
order procedural issues as he sees fit. The
arbitrator acts as a ‘judge’ of the proceedings
to provide a binding arbitral award upon
necessary steps of document exchange and
oral hearings.
In each standard form of construction
contract in Hong Kong, a dispute resolution
clause contains the method of resolving
2
Arbitration Ordinance (Cap. 609)

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disputes arising between the contracting
parties. Mediation and arbitration are the
most commonly used dispute resolution
methods. Once a construction dispute has
arisen, the parties are free to choose to
mediate voluntarily. If the parties do not
refer the dispute to mediation or if the
dispute cannot be resolved by mediation, the
dispute will be referred to arbitration. In
some construction contract, arbitration will
not commence until after completion of the
construction work, which means any sum
allegedly owed to a main constructor or sub-
contractor in lower tiers will have no choice
but to experience a ‘do first, argue later’
situation. With this impediment, cash flow
problems inevitably cumulate and possibly
impede the progress, quality and safety of
subsequent works. The unpaid party has a
risky choice to suspend work until payment
that may lead to repudiatory breach of
contract of its part and liable for damages of
the other side.
Knowing the shortfalls of the DRA, mediation
and arbitration processes in easing cash flow
problems, it is not difficult to imagine the
question of whether any alternative dispute
resolution method merits a quicker
resolution of dispute than arbitration and
the decision is also binding on the
contracting parties. Construction adjudication
fills this gap.
In June 2015, the Hong Kong Government
initiated a Consultation Document – Proposed
Security of Payment Legislation for the
Construction Industry (SOPL). The incentive
of providing legislative control over late
payment problems in the construction
industry follows foreign experience in the
UK3
, Australia4
, New Zealand5
, Singapore6
,
Malaysia7
and Ireland8
. With the aim to ease
cash flow in the construction operations, the
following three key features of SOPL are
outlined:
3
The Housing Grants, Construction and
Regeneration Act 1996, as amended by the
Local Democracy, Economic Development and
Construction Act 2009
4
The Construction Contracts Act 2004
(Western Australia) amongst others
5
The Construction Contracts Act 2002, as
amended by the Construction Contracts
Amendment Act 2015
6
The Building and Construction Industry
Security of Payment Act 2005
7
The Construction Industry Payment and
Adjudication Act 2012
8
The Construction Contracts Act 2013

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1. Strict proceedings timetable
Once a notice of adjudication is served on the
appointed adjudicator, the adjudicator is
bound to resolve the dispute within 20 days
from the receipt of the parties’ document,
extendable to 55 days by the adjudicator. The
parties are also subject to strict timeframe on
submission. Therefore, the party serving an
adjudication notice could reasonably expect a
binding decision to be served in about four
months.
2. The right of suspension of work
Adjudication is inherently a ‘pay first, argue
later’ method of dispute resolution. An
adjudication decision is known as ‘temporary
binding’ and is subject to appeal in
arbitration in the later stage of the
construction contract. However, the
adjudicated sum must be paid according to
the operative part of the decision, failing
which the unpaid party has a statutory right
of suspension of work until payment is
made. This is a very powerful statutory right
conferred by the SOPL to avoid late payment.
The winning party, in default of payment by
the losing party, may suspend performance
or reduce the rate of progress of performance
of any construction work if the adjudicated
sum is not fully paid according to the
adjudication decision. The proposed law
provides that the party exercising this right of
suspension is not in breach of the
construction contract, entitled to a fair and
reasonable extension of time to complete his
obligations under the contract, and also
entitled to recover any loss and expenses
incurred as a result of the suspension or
reduction in the rate of progress of
performance from the default party.
3 Prohibition of “Pay-when-paid” clause
"Thetotalpricepaidto [subcontractor] shallbe
[price], no part of whichshallbe paiduntil5
daysafter payment is received from[owner]."
Conditional payment terms such as the above
‘pay-when-paid’ condition provide a good
protection of cash flow to the main
contractor. However, the risk of payment
arrear is shifted to subcontractors with low
bargaining power, impeding the working
relationship down the supply chain. The
proposed law provides that any conditional
payment provision in a construction contract

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in relation to payment is void. This express
provision inhibits the contracting party to
reply on a conditional payment term to
withhold payment down to lower tiers.
Statutory adjudication inherits the benefits
of mediation and arbitrations in terms of
relieving cash flow problems in the
construction industry. It is a fast process to
allow the unpaid parties to recover their
costs. It is also a temporarily binding
process. Failure to pay the adjudicated sum
will enable the unpaid party a rightful
suspension of work and subsequently the
non-paying party will suffer from paying
interest on delay payment and the loss of
time and costs during the suspension
period. A notable concern is how much
justice is done by making the adjudication
decision in such a short statutory timetable.
Adjudication is sometimes known as ‘rough
justice’ for regulating immediate payment
control in the construction industry and the
arbitrator or court judge will act as the
judicial gate-keepers.
Albert YEU, MSc BEng LLB PGDipArb CEng
FCIArb FAMINZ MICE, is a resident engineer
(ARUP Hong Kong), Independent Arbitrator,
Accredited Adjudicator, Accredited Mediator,
Expert Witness.
COULD ADJUDICATOR GRADING
HELP TO INCREASE THE DIVERSITY
OF ADJUDICATORS ?
At the annual Adjudication Society conference
held in London in 2017 the issue of diversity
and inclusion was raised about adjudicators
by Simon Tolson a Senior Partner with
Fenwick Elliott .
One way that it may prove possible to
introduce new and less experienced
adjudicators onto panels is to create a grading
system for adjudicators. Queensland Australia
currently has such a scheme in place and uses
three grades:
1. Adjudicator (lowest)
2. Advanced Adjudicator
3. Senior Adjudicator (highest)
Unlike the United Kingdom there is only one
nominating body and as such this has
succeeded in its aims in line with the
recommendations made by Andrew Wallace
in his report titled Final Report of the Review
of the Discussion Paper – Payment dispute
resolution in the Queensland building and
construction industry dated 24 May 2013.
For such a grading scheme to work in the
United Kingdom the thirty plus adjudicator
nominating bodies and the principle
professional bodies would need to firstly

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recognise there is a problem then reach
consensus how to tackle it.
Factors that would need to be discussed and
agreed upon would be the minimum standard
required to become an adjudicator , the
grading process and procedure and how
should disputes and decisions be categorised
so that a an inexperienced adjudicator can
develop from the starting grade and become a
Senior Adjudicator.
How seriously the industry takes the diversity
of adjudicators remains to be seen by the
action and commitment made in the months
ahead to firstly understand the problem then
to identify actions needed. What we cannot
afford to let happen is that the same pool of
old white male faces dominate and hog the
profession until their demise leaving a
succession problem and possible learning
curve for future generations.
UK adjudicators have on the whole been
highly thought of and respected globally and it
is important that their experience and wisdom
is passed on to future generations.
Thomas Johnson, is a director in the global
construction claims consultancy Hanscomb
Intercontinental.
JANUARY DATE FOR MP’S BILL FOR
SCHEME TO HOLD RETENTIONS IN
TRUST
A private member’s bill to provide for
retentions in construction projects to be held
in a third party trust scheme is being
introduced to Parliament on the 9th
January
2018.
The government’s own consultation on
retention concludes ten days later and one of
the issues it seeks views on is the costs and
benefits of holding retentions in a deposit
scheme or trust account.
WORSHIPFUL COMPANY OF
ARBITRATORS
Lord Dyson will be giving The Master’s Lecture
on Tuesday 13th March 2018 at Simmons &
Simmons LLP, CityPoint, One Ropemaker
Street, London, EC2Y 9SS . The title of the
lecture is What Are The Proper Limits To The
Immunity Of Arbitrators?

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SCL INTERNATIONAL CONFERENCE
2018
The Society of Construction Law 8th
International Conference is being held at the
Palmer House Hotel Chicago from the 26th-
28th September 2018.
ADJUDICATION SOCIETY ANNUAL
CONFERENCE 2018
The Society's Seventeenth Annual Conference
will be held at the Mercure Bristol Hotel on
Thursday 8th November 2018.
FIDIC CONFERENCES 2018
The FIDIC Middle East Contract Users'
Conference main conference is taking place
on the 20 & 21 February 2018 with workshops
on the 19 & 22 February 2018 in Dubai.
The FIDIC Asia Pacific contract users'
conference takes place in July 2018, the Latin
America contract users' conference takes
place in September 2018 and the Africa
contract users' conference is taking place at
Livingstone, Zambia in October 2018.
DRBF CONFERENCES 2018
Paris, France 23 March 2018
Mexica City, Mexico 25-26April 2018
Tokyo, Japan 23-25 May 2018
Charlotte, USA 17-19 October 2017
Geneva, Switzerland 14-16 November 2018
UPDATED FIDIC SUITE
The FIDIC conference held in London on the
5th December 2017 saw the release of the
new Red, Yellow and Silver books.
FIDIC have now released copies for sale to the
general public in PDF and hard copy formats.
http://fidic.org/bookshop
ADR-ODR INTERNATIONAL
ADR-ODR International is holding an Executive
Negotiation & Conflict Management Skills
Course in Dubai on the 26th - 28th March
2018 at The Palm in partnership with the
European Institute for Conflict Resolution.
http://adrodrinternational.com/executive-
conflict-and-negotiation-skills-course/