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Adjudication: Tips, Traps and Tactics

A practical guide in adjudication in the UK construction industry.

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Adjudication: Tips, Traps and Tactics

  1. 1. Adjudication : tips, traps and tactics 05 May 2015 Ben Worthington, Senior Associate ben.worthington@olswang.com | + 44 20 7067 3541
  2. 2. www.olswang.com2 Adjudication The Basics • Compulsory dispute resolution procedure • Right to refer a dispute at any time / Binding on an interim basis • Anatomy of a typical adjudication: • Crystallisation • Notice of Adjudication • Appointment of the Adjudicator • Referral (within 7 days from Notice) • Response • Reply / further submissions • Meeting / site visit • Decision (28 / 42 days or agreement) “The need to have the "right" answer has been subordinated to the need to have an answer quickly. The scheme was not enacted in order to provide definitive answers to complex questions.” Chadwick LJ in Carillion Construction Ltd v Devenport Royal Dockyard Ltd (CA) (2005)
  3. 3. www.olswang.com3 Ambushes How to spring them • Decision not unenforceable simply because dispute is complex or there is a large volume of material: see CSK Electrical Contractors Ltd v Kingwood Electrical Services Ltd (2015) and Dorchester Hotel Limited v Vivid Interiors Limited (2009) • An “ambush” does not amount to procedural unfairness – see Twintec Ltd v Volkerfitzpatrick Ltd (2014) • A dispute does not arise unless and until it emerges that the claim is not admitted : AMEC Civil Engineering Ltd v SoS for Transport (2004) • Put arguments to the other side before referring the dispute to adjudication • Consider the timing of the adjudication carefully • Only include material that is necessary to prove your case “The plain fact is that adjudication is a rough and ready process because it has to be carried out within a very strict timetable. That often causes particular pressure for the responding party. That is, I am afraid, a fact of adjudication life; it is inherent in the whole process.” Twintec Ltd v Volkerfitzpatrick Ltd (2014)
  4. 4. Ambushes How to break them • Contract drafting issues: • Prescribe detail required in contractor’s (or sub-contractor’s) payment applications • Provide contractual timescales for considering applications • Ensure adjudication clauses provide adequate timescales for responding in adjudications • Use clauses which seek to prevent disputes arising? • Do not reject claims outright / play for time. But see St Austell Printing Company Ltd v Dawnus Construction Holdings Ltd (2015) – • “crystallisation may require no more than the service of a claim by the claiming party and subsequent inactivity for a further short period by the responding party”. • if supporting documentation is missing that goes to the level of assessment not whether there is a dispute www.constructiveblog.com4
  5. 5. Ambushes How to break them • Warning signs • Formal delay notices • Letters that are legalistic in tone • Correspondence that adopts the terminology of a dispute • Consider whether adequate commercial staff available • Ensure there is a protocol in place for reacting to adjudication notices • Prepare now • If the adjudication starts: • Ask adjudicator for more time • Reserve position on jurisdiction if extension is not given • Highlight prejudice www.constructiveblog.com5
  6. 6. www.olswang.com6 The adjudicator and the adjudication rules Playing by the rules Approaches to incorporation of rules • Remain silent – the Scheme applies • Use bespoke rules • Incorporate rules by reference, but be careful : • Adjudication procedure goes to heart of the adjudicator’s jurisdiction: Twintec (2014) • Adjudicator followed wrong rules: Ecovision Systems Ltd v Vinci Construction UK Ltd (2015) Choosing between the rules • Parties’ costs • Adjudicator’s fees • Jurisdiction “… an adjudicator has no jurisdiction to determine whether he has jurisdiction… a choice between two sets of adjudication provisions will amount to such a determination if the choice makes a material difference as to how he should be appointed.” Ecovision Systems Ltd v Vinci Construction UK Ltd (2015)
  7. 7. The adjudicator and the adjudication rules Getting the right person • Naming the adjudicator • Seeking to agree an appointment • Appointment by an Adjudicator Nominating Body • No external controls over ANBs • There is a Fee • Party fills in a form which asks for details of the dispute • Key considerations : • Expertise • Experience • Conflicts • Fees • Reputation www.constructiveblog.com7
  8. 8. The adjudicator and the adjudication rules Influencing the nomination process Filling in the nomination form • Eurocom Ltd v Siemens PLC (2014) : fraudulent misrepresentation goes to the heart of the validity of the appointment • CSK Electrical Contractors Ltd v Kingwood Electrical Services Ltd (2015) : “There may be circumstances in which a stated preference could amount to a misrepresentation…” Representations to the nominating body • London Borough of Camden v Makers UK Ltd (2009) : • No implied term that a party would not seek to influence the ANB’s decision • Contact with the adjudicator did not give rise to apparent bias • Lanes Group v Galliford Try (2011) : referring party could let first notice lapse Pre – appointment contact • Paice & Anor v MJ Harding (t/a Mj Harding Contractors) (2015) : • Telephone conversation between claimant and adjudicator’s office manager should have been disclosed www.constructiveblog.com8
  9. 9. The Notice of Adjudication How to describe the dispute • Do not define the dispute too narrowly – “or such other sum as the adjudicator finds to be due” • Make sure the definition of the dispute is focused : St Austell Printing Company Ltd v Dawnus Construction Holdings Ltd (2015) • Note that it is difficult to limit the scope of the referral : • Pilon Ltd v Breyer Group plc (2010) : adjudicator should have considered the employer's set-off defence • Wales And West Utilities Ltd v PPS Pipeline Systems GmbH (2014) : A responding party may raise any factual or legal defence to the dispute referred to adjudication www.constructiveblog.com9
  10. 10. Jurisdiction When to challenge the adjudicator’s jurisdiction A party faced with an invalid appointment might: • Seek an injunction / declaration • Twintec : “If it is clear that an adjudicator's appointment is invalid… no useful purpose would be served by allowing an adjudication to proceed… “ • MW High Tech Projects UK Ltd v Haase Environmental Consulting GmbH (2015): Court gave declaration regarding the correct interpretation of a professional appointment • Refuse to participate • Participate but reserve position on jurisdiction • Reserve rights generally at the outset : Bothma v Mayhaven Healthcare Ltd (2007) • Be careful to avoid giving the adjudicator jurisdiction • Raise specific challenges as soon as possible : AT Stannard Ltd v Tobutt (2014) www.constructiveblog.com10
  11. 11. Receiving the decision Timing • The adjudicator must reach his decision within 28 days of the dispute being referred to him • This period can be extended by 14 days if the referring party agrees • The parties can agree to a longer timescale • Case law is unclear as to whether a late decision is enforceable, it seems that: • An adjudicator is bound to reach his decision within 28 days (or the agreed extended time) • A decision not reached within 28 days (or as agreed) will probably be a nullity • A decision reached within time, but communicated after that period, will be valid provided it can be shown it was delivered forthwith • A party who does not agree an extension of time must make this clear : KNN Colburn LLP v GD City Holdings Ltd (2013) www.constructiveblog.com11
  12. 12. Receiving the decision Identifying and correcting errors • All construction contracts must include a written provision giving the adjudicator the right to correct a typographical or clerical error in his decision • Check the provisions – the Scheme provides that any correction must be made within five days of the date the decision was delivered to the parties • Parties can agree a different period • Act quickly • Be clear as to what you want the adjudicator to correct : see PP Construction Ltd v Geoffrey Osborne Ltd (2015) • If you dispute the adjudicator’s jurisdiction, tread carefully - asking for a correction may be constructed as a waiver of any challenge : Laker Vent Engineering Ltd v Jacobs E&C Ltd (2014), “With some hesitation I have come to the conclusion that a party can still rely on the general reservation of jurisdiction and apply under the slip rule or make payment.” • Do not pay without a specific reservation : Wales & West Utilities Limited v PPS Pipelines Systems GmbH (2014) www.constructiveblog.com12
  13. 13. Any questions?