Construction disputes need not be a legal black hole

News Article

Many companies dread the idea of entering into a dispute with a contractor, fearing that it will lead to a lengthy and costly legal battle.

Adam Davis, a partner with Palmers who specialises in construction and engineering disputes said: “Alternative Dispute Resolution can often be a more suitable and less costly way to resolve disputes. In particular, Adjudication is a compulsory dispute resolution mechanism that applies to the construction industry in England and Wales.”

Adjudication can either be commenced due to a contractual right to do so or under statute. Statutory Adjudication in the construction industry was introduced by the Housing Grants, Construction and Regeneration Act 1996 (“the Construction Act”).

The Construction Act allows any party who has a “construction contract” which is defined further in the Construction Act, but can include contracts both in writing and made orally, to refer a dispute at any time to Adjudication and the parties cannot contract out of this right.

Adjudication is a 28 day procedure (although the parties can agree to extend this period) and is most suited to resolving claims relating to interim payment issues, delay and disruption of works, extensions of time for completion of works, termination disputes and final account disputes. It has often been described as a “pay first and argue later” mechanism for resolving disputes in the construction industry as its quick process allows parties to protect cash-flow during a construction project.

The most common form of Adjudication relates to where a Contractor or Sub-Contractor has not followed the correct procedure in submitting interim applications throughout a construction project. The Construction Act together with the Scheme for Construction Contracts Regulations 1998 also implies into all construction contracts a mechanism for applying for interim payments and what a contractor/employer should do if they intend to pay less than the amount applied for.

The effect of an Adjudicator’s award is that they are binding on the parties until the dispute is finally determined by legal proceedings, arbitration or by agreement. If the losing party fails to pay an award this can be enforced in the Technology and Construction Court under an accelerated procedure, the costs of which are recoverable. In addition, it is important to note that the Court will very rarely and only in very limited circumstances not allow an Adjudicator’s award to be enforced.”

Palmers have the experience and skills to aide clients through the process and in conjunction with Crown Office Chambers (a specialist set of Construction and Engineering Barristers) we are able to offer a fixed fee adjudication scheme so that you know the precise costs that will be incurred. It is not always necessary to involve Counsel in such matters and there are a range of fee structures that Palmers have devised so as to aide clients to resolve disputes, quickly, efficiently and at relatively low cost so as to maintain their cash-flow.

The costs of the Adjudication are usually not recoverable from the other side even if successful, however, whilst enforcement of an Adjudicator’s award is excluded from this fixed fee scheme, the costs associated with enforcement of an Adjudicator’s award are recoverable.

Caroline Williams, a Company Director with Façade Systems (UK) Ltd instructed Palmers to handle a dispute and was pleased with the positive outcome achieved.

She commented: We would like to take this opportunity to thank Palmer’s, and especially Adam Davis and the Construction and Engineering Department for all of their hard work and support throughout the court case that we instructed Palmer’s to defend us in.

“We would have no hesitation in using your services again or recommending you to friends or colleagues. We were overjoyed in the result that we achieved and it was a big weight of our shoulders, allowing us to move forward with progressing our business. We found that Adam was very professional, approachable, reliable and calming during this process and his expert knowledge of construction law was invaluable to our organisation.”

For advice and support on dispute resolution and for further details of the Fixed Fee Adjudication Scheme, please contact us.