Notice of Intention to Refer a Construction Dispute to Adjudication
You have received a notice of intention to refer a construction dispute to adjudication (notice of adjudication) - what does it mean?
It means that you must act very quickly; you must be served with a referral notice within 7 days of the first notice of adjudication. This sets out the detail of the referring party’s claim. This may be a large and complex document requiring a detailed and lengthy response but you will only have 7 days to make it. Before you respond you should get, as best you can within the time limit, advice from a specialist construction law solicitor or a construction claims consultant about whether the dispute is one over which an adjudicator has jurisdiction and about the process generally. You must do it quickly as the referring party are unlikely to agree to any extensions to the time table. Ask a question by email and we will try to respond within an hour during working hours.
The receipt of a notice of intention to refer the dispute to an adjudicator means that the other side has exercised its contractual or statutory right to have a dispute referred to an adjudicator. Before engaging in the adjudication process you must decide whether the right to adjudicate actually exists. If you are advised that it doesn't then you need to clearly reserve your right to challenge the jurisdiction of the adjudicator by immediately setting out in writing your challenge to the adjudicator's jurisdiction. If the adjudicator accepts the appointment then they must give a binding decision within 28 days of the referral notice (unless the referring party agrees to extend that time limit). Subject to certain very narrow exceptions the courts will uphold and enforce an adjudicator's decision even if it is wrong. The philosophy is for a quick resolution by an adjudicator, more often a construction professional than a lawyer, and for the adjudicator's decision to be paid or performed before final resolution of the dispute by court proceedings or arbitration.
A party aggrieved by the adjudicator's decision has only two ways to challenge it: by arguing that there has been a breach of natural justice or that the adjudicator does not have jurisdiction - arguing that the adjudicator made an error of fact of law is not a ground upon which the validity of the decision can be challenged. If a proper challenge cannot be made the aggrieved party must pay the decision and then commence court proceedings or arbitration to try to claim the money back (in very limited circumstances it may be possible to commence and complete those court proceedings before you are ordered to pay the adjudicator's decision using the Part 8 procedure).
The basic rule about adjudicator's decisions is that you must pay now and argue later. Parties often incur significant liabilities for the other side's legal costs because they do not understand this and they refuse to pay the decision. In those circumstances the other side apply to the court to enforce the decision and claim the additional legal costs of having to do so which can easily be £5,000-£10,000.
If a jurisdictional challenge is to be maintained against the enforceability of an adjudicator's decision it must be raised early and one must be careful not to waive it by word or by deed.
That means that every thing you do from the moment you receive the notice of intention may determine your rights under the process. Sometimes the referring party does not have the right to refer the dispute under the contract or under the legislation. If you nevertheless participate without reserving your challenge to the adjudicator's jurisdiction you may validate an otherwise invalid adjudication. That is why we strongly recommend that if you are not knowledgeable about the adjudication process that you seek immediate advice from a solicitor or a construction claims consultant.
This note is not intended as a guide to adjudication and is designed to raise awareness of the value of early advice if you are served with a notice of intention. It also emphasises that you must act quickly in taking that advice because the time limits are inflexible. If you do not fully understand the process you should get specialist advice immediately.
Jonathan Waters is the founder of Helix Law. Before qualifying as a Solicitor he worked in industry and in investment banking for over a decade. He was also the Partner in charge of Commercial Litigation, Employment Law and Property Litigation at Stephen Rimmer LLP. Jonathan has wide experience of helping and advising businesses to avoid or to deal with commercial disputes and in particular construction disputes.
This article is written to raise awareness of the issues it discusses and it may not be updated after it is first written, even if the law changes. It is not intended to be legal advice and cannot be relied on as such. Helix Law is not responsible or liable for any action taken or not taken as a result of this article. If you think the matters set out affect you and you wish to apply them to your particular circumstances then we are happy to give you free initial telephone advice.