Last week, King’s College, in collaboration with the Adjudication Society, published their much-anticipated report on construction Adjudication in the United Kingdom. The report analyses the results of two surveys: one addressed to Adjudicator Nominating Bodies; and the other to individuals involved with statutory adjudication.
Quigg Golden are adjudication experts, and as a result we are very interested in any in this report’s findings. In this article we outline some of the key findings of the report that will likely affect approaches to adjudication going forward.
The vast majority of adjudications settle the dispute in question without the need for litigation or arbitration. 42% of surveyed respondents stated that less than 5% of adjudicated disputes went on to be referred to litigation or arbitration, and 25% said they had never seen an adjudication be referred, as such.
This is fantastic news for adjudication as a method of Alternative Dispute Resolution, proving its ability to relieve pressure from the court system and provide parties with a faster, cheaper way of resolving disputes. In the words of Lord Justice Coulson in John Doyle v Erith [2021]:
“I rather cavil at the suggestion that construction adjudication is somehow ‘just a part of ADR’. In my view, that damns it with faint praise. In reality, it is the only system of compulsory dispute resolution of which I am aware which requires a decision by a specialist professional within 28 days, backed up by a specialist court enforcement scheme which (subject to jurisdiction and natural justice issues only) provides a judgment within weeks thereafter. It is not an alternative to anything; for most construction disputes, it is the only game in town.”
Parties to a construction dispute should therefore be aware that adjudication is the premier option for resolving the matter.
The number of referrals received by ANBs continues its upward trend, reaching an all-time high of 2,171 in May-April 2020, then returning to roughly 2018-2019 levels in 2021-2022. The report concludes that the pandemic has to date not significantly changed the trend of adjudication referrals.
ANBs reported that complaints and disciplinary proceedings concerning adjudicators are relatively rare – the ten ANBs that participated in the survey reported upholding three out of thirty-nine complaints in the period between May 2020-April 2021, and twelve out of forty-seven complaints in the subsequent period up to April 2022. None of the upheld complaints resulted in the removal of an adjudicator in these time periods. This reflects well on the professionalism and capability of qualified adjudicators.
By discipline, 32% of the adjudicators who responded to the questionnaire were quantity surveyors, 14% were claims consultants, 10% were engineers and 8% were architects. While, in our experience, adjudicators bring high levels of experience and technical understanding regardless of their background, the variety of disciplines represented among adjudicators is encouraging.
One of the report’s most notable findings is that 49% of respondents consider ‘inadequate contract administration’ to be one of the main underlying causes of disputes, with a further 41% pointing to ‘lack of competence of project participants’. These results emphasise the need for construction professionals to be properly trained and qualified in contract management.
Regarding heads of claim, extensions of time were the most common by far, at 73%, followed by final account claims at 51% and claims for interim payments at 49%. Further heads of claim included variations (45%); defects (28%); damages (25%); and liquidated damages (20%). The report notes that this data demonstrates adjudication acting as a dispute resolution procedure for various disputes, and not simply as a tool to ensure cash flow. Accordingly, parties to a wide variety of disputes should consider adjudication as the most effective method of resolving the matter.
Regarding assignment of adjudicator fees, 39% of questionnaire respondents stated adjudicators most often follow the ‘loser pays all’, and 38% said apportionment was most often made based on the degree to which each party is successful or fails with respect to the claim. This indicates that risk associated with the assignment of the adjudicator’s fees is most often tied to the merits of a claim and its success at adjudication.
The rising cost of adjudication is a stated concern for the Adjudication Society, as it represents a threat to the philosophy of statutory adjudication as being a simpler, faster and cheaper process than litigation. Some measures suggested by respondents included capping adjudicator fees and amending the Construction Act to give adjudicators the power to award payment of the other party’s costs in appropriate circumstances. Three respondents suggested adjudicators should have a lien on their fees to avoid non-payment and subsequent disputes.
Time will reveal what measures are put under serious consideration by the Adjudication Society for limiting the cost of adjudication, but it remains far cheaper than alternatives. The median of total fees charged by adjudicators fell between £12,000 and £14,000, which, when compared to soaring court costs and considering massive court backlogs, still places adjudication as a very practical and cost-effective method of dispute resolution.
Regarding time, 56% of respondents reported that adjudications tend to last between 29 and 42 days from the date they are referred. While this is slightly longer than the originally envisaged 28 days, it is still a much tighter timeframe than litigation.
The majority (58%) of respondents replied that adjudicator’s decisions should not be published, as is currently the case. But perhaps surprisingly, 30% of respondents replied that decisions should be published, albeit with redactions.
This is an interesting point, and industry professionals will doubtless follow the discussion around it with interest. The report’s foreword by the Committee Chair of the Adjudication Society notes that if implemented, the publication of decisions, whether with redactions as is the Singaporean Model, or without redactions as is now the case in Queensland, could create “an informal system of ‘precedent’, affording consistency or certainty and may encourage adjudicators to maintain high standards”. However, in our experience privacy is considered an advantage of adjudication for many involved parties, so it remains to be seen if advocacy for this kind of change gains much traction.
Respondents were asked if they would make any changes to the Construction Act, with an eye to informing future Adjudication Society comments to the Government.
Existing exclusions to disputes that can be referred for statutory adjudication came under some fire. 25 respondents said that the exclusions for power generation, oil and gas installations under section 105(2) of the Act should be removed, citing difficulty caused in making Adjudication unavailable in relation to construction work undertaken on such sites. 16 respondents also opined that the exception for residential occupiers under section 106 of the Act should be removed, making statutory adjudication available to both homeowners who have ‘fallen afoul of cowboy builders’ and for ‘small builders who are faced with large legal bills to recover outstanding debts in Court from poor paying homeowners’.
The report identified the exclusion for contracts for direct procurement projects relating to sewage or water under the Construction Contracts (England) Exclusion Order 2022 as potentially open to similar criticism.
Additionally, 31 respondents were critical of the payment regime of the Construction Act, with some suggesting that the Act should be simplified and provide for fixed payment periods as default. 12 of these respondents were also critical of the payment/pay less notice regime introduced by the 2011 reforms, and the resulting ‘smash and grab’ approaches that have arisen in adjudication. Despite this, smash and grab adjudications are growing in popularity and impact, due to their ability to resolve payment disputes relating to payment without needing to resort to extremely expensive litigation.
In summary, the report reflects the growing view, as espoused by Lord Justice Coulson, that statutory adjudication is not just a method of alternative dispute resolution, but the primary method of resolving disputes under construction contracts. This is excellent news for the heavily pressured court system, and for industry professionals in need of dispute resolution that is both cheaper and faster than litigation, yet still binding and effective.
The proposed reforms and areas for improvement regarding adjudication are well reasoned, and the construction industry will doubtlessly be keen to see if they make an impact at the governmental level.
The joint report has reinforced what Quigg Golden has known for a long time – adjudication can dramatically reduce the length and cost of disputes. Quigg Golden are market leaders in adjudication and are involved in dozens of adjudications every year. We can assist you in understanding and maximising the benefits of this and many other procedures that help you sort out your problems efficiently and as painlessly as possible. Should you need any advice on adjudication do not hesitate to contact us.
Quigg Golden are also leading training providers, and with ‘inadequate contract administration’ and ‘lack of competence of project participants’ ranking so highly as the most commonly perceived causes of disputes, training in contract management should be a priority for the construction industry. Read more and inquire about our training courses here.
Published 20 February 2024
