Construction adjudication under the HGCR Act to resolve claims and disputes. Advice from an experienced construction adjudicator.
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On this page Overview | The Housing Grants Construction and Regeneration Act 1996 | The Scheme for Construction Contracts | Procedure | Construction Contracts | Practical Advice
Construction Adjudication is not the answer to every problem in the industry but it has achieved some improvement in two main areas. It restrains the excesses of those who thought they need not pay when expected and it enables smaller disputes to be resolved economically. Both tend to benefit the smaller contractor, although it is not unknown for bigger firms to make use of the process.
To obtain the full benefit of construction adjudication requires a clear analysis and presentation of the issues and evidence. The responding party also needs to be able to act quickly. As a practising construction adjudicator accredited by a number of professional nominating bodies, I am well placed to provide the necessary advice and assistance.
The Housing Grants Construction and Regeneration Act 1996 is popularly known as the Construction Act or the HGCR Act. It introduced new rights into most construction contracts. It requires contracts to include minimum provisions for Payment and Adjudication. If the minimum standards are not achieved the law implies into the contract, terms set out in the Scheme for Construction Contracts. A contract provision that attempts to exclude the minimum requirements has no effect in law.
The minimum requirements for construction adjudication are set out in the Housing Grants Construction and Regeneration Act 1996 as follows © HMSO
Adjudication | |
| Right to refer disputes to adjudication. | 108. - (1) A party to a construction contract has the right to refer a dispute arising under the contract for adjudication under a procedure complying with this section. |
| For this purpose "dispute" includes any difference. | |
| (2) The contract shall- | |
| (a) enable a party to give notice at any time of his intention to refer a dispute to adjudication; | |
| (b) provide a timetable with the object of securing the appointment of the adjudicator and referral of the dispute to him within 7 days of such notice; | |
| (c) require the adjudicator to reach a decision within 28 days of referral or such longer period as is agreed by the parties after the dispute has been referred; | |
| (d) allow the adjudicator to extend the period of 28 days by up to 14 days, with the consent of the party by whom the dispute was referred; | |
| (e) impose a duty on the adjudicator to act impartially; and | |
| (f) enable the adjudicator to take the initiative in ascertaining the facts and the law. | |
| (3) The contract shall provide that the decision of the adjudicator is binding until the dispute is finally determined by legal proceedings, by arbitration (if the contract provides for arbitration or the parties otherwise agree to arbitration) or by agreement. | |
| The parties may agree to accept the decision of the adjudicator as finally determining the dispute. | |
| (4) The contract shall also provide that the adjudicator is not liable for anything done or omitted in the discharge or purported discharge of his functions as adjudicator unless the act or omission is in bad faith, and that any employee or agent of the adjudicator is similarly protected from liability. | |
| (5) If the contract does not comply with the requirements of subsections (1) to (4), the adjudication provisions of the Scheme for Construction Contracts apply. |
The Scheme is divided into two parts, covering Adjudication and Payment provisions. As far as construction adjudication is concerned, if any one of the requirements of the Act is not met, the Scheme provisions apply in full and displace all the relevant contractual terms. The arrangements for Payment are dealt with separately.
The Scheme for Construction Contracts has provisions to comply with the HGCR Act and includes other matters to regulate appointment and conduct of the construction adjudication. It is open to the parties to make any arrangements they wish, which are in addition to the minimum required in the HGCR Act. However, if the minimum is not provided, either party can insist on a 'Scheme' adjudication.
Professional bodies, such as the Institution of Civil Engineers, the JCT and Construction Confederation, produce Standard Conditions of Contract, which either include or refer to sets of adjudication rules. These extend the scope of adjudication. By and large they comply with the Act, although there are doubtful areas. It is important to recognise and take account of the different requirements. The main areas to be considered are summarised below.
Construction Adjudication is intended as a rapid means of settling disputes on an interim basis, so that construction team can get on with constructing. It is not a perfect system but the courts are reluctant to over-rule an adjudicator's decision arrived at in good faith. It should be remembered that it is strictly an interim decision, which can be completely reopened in arbitration or litigation. However, experience shows that parties usually accept the adjudicator's decision.
The HGCR Act says a dispute (or difference) must arise 'under the contract', that is something directly related to a contractual obligation. The contract may provide for adjudication of other issues arising 'out of' or 'in connection with' the contract. The Scheme for instance, allows the adjudicator to open up and revise decisions by any person referred to in the contract, such as an architect.
The notice starts the adjudication process. It usually contains the details of the parties, the dispute and what the applicant seeks in redress. More or less is required by different rules. It is served by the applicant on the other party (here called the Respondent for convenience).
The applicant must now obtain the appointment of an Adjudicator. An Adjudicator Nominating Body or an Adjudicator may be specified in the contract. If not, it is open to the applicant to apply to any nominating body, such as the Institution of Civil Engineers, Royal Institute of Chartered Surveyors or the Royal Institute of British Architects. The aim expressed in the Act is that an adjudicator will be in place within seven days.
Normally within seven days of the original notice of adjudication, the applicant must submit its notice of referral. This must typically set out the case and include copies of the contract and other documents which are relied upon to prove the claim. As it may be the only opportunity to put the case, careful preparation is essential.
The construction adjudicator has wide powers to investigate the facts and the law in relation to the dispute. He can visit the site, meet the parties and take advice or carry out tests, without following the formal procedures of litigation or arbitration. This includes setting the timetable for a reply to the claim by the respondent. Typical rules limit this to 7 to 14 days after referral. The construction adjudicator cannot be expected to pay much notice to late submissions, in fact he is entitled to draw adverse inference from a failure to comply with his instructions.
The construction adjudicator is required to reach his decision within 28 days of the Notice of Referral being served. This can be extended to 42 days with the applicant's agreement or longer if both parties agree.
The HGCR Act allows the construction adjudicator to make the decision peremptory. That means that there is 'no excuse for non-compliance'. Most procedural rules do this in any event. The majority of cases taken to court so far, on the grounds of a decision being wrong, have found little favour.The courts support the intention that the decision in a construction adjudication is binding in law on the parties and must be complied with until it is overturned in litigation or arbitration or by agreement. As the Decision is readily enforceable in the courts everything that contributes to it is therefore, of great importance.
The Housing Grants Construction and Regeneration Act 1996 defines a construction contract at length. It must be in writing or evidenced in writing (a letter will usually be sufficient) and made after 1st May 1998. It is broadly what the man in the street might expect. The main points are summarised below.
It is
It is not
It includes
It excludes
The provisions of the Housing Grants Construction and Regeneration Act 1996 are intended to enable the lay practitioner to pursue a construction adjudication without the advice of a construction adjudicator or other professional. Many parties do so with great success. However there are a number of matters that may be overlooked by those who are not familiar with the process.
The most obvious point to consider is the basis of a construction claim. The familiar construction claim for A minus B with little attempt to justify it either in law or in fact, will not do. The construction adjudicator is generally required to decide the issues in accordance with the terms of the construction contract and the law. He may take the the initiative in discovering the facts and the law, but he is not obliged to do so. He is certainly not expected to 'make the case' when a party has a poorly presented case.
A construction adjudicator is well placed to assist when the unexpected happens. The most common defence to an adjudication is to challenge the adjudicator's jurisdiction. In such cases a practising construction adjudicator is in a better position to argue the case for jurisdiction persuasively.
Construction adjudication has spawned a considerable amount of case law. Much of this is reported in headline form in the technical press. Some of it is highly relevant, much of it is contradictory, yet more is now overturned by subsequent cases and the remainder is often quoted out of context. Again, a construction adjudicator is most likely to clear a way through the conflicting arguments.