Adjudication in Construction Law

Darryl Royce

Document

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CHAPTER 1 Statutory regulation of construction contracts

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1.1 Definitions

1.1 Adjudication is, conventionally, the process of judging, a court's pronouncement of a judgment or decree or the judgment so given.1 It has been said that a judge or an arbitrator adjudicates and in this sense adjudication is or should therefore be synonymous with a judicial process.2 From 1976, standard forms of construction sub-contracts began to contain provisions for an ‘adjudicator’ to decide disputes between the sub-contractor and the main contractor as to the entitlement to payment pending a final resolution by arbitration.3 The use of such provisions was adopted in other forms during the 1980s and by 1992, ‘adjudication’ could be defined as a procedure where, by contract, a summary interim decision-making power in respect of disputes was vested in a third party individual (the adjudicator) who was usually not involved in the day-to-day performance or administration of the contract, and was neither an arbitrator nor connected with the state.4 A party to a construction contract regulated by Part II of the Housing Grants, Construction and Regeneration Act 1996 now has the right5 to refer a dispute arising under the contract for adjudication under a procedure complying with the requirements of section 108 of that Act. The word ‘adjudication’ is thus commonly used now to denote the process whereby a decision is reached pursuant to the provisions of the Act. A fuller definition has been suggested as that of a process by which within a short and defined time, and with a curtailed procedure left primarily to the adjudicator, all disputes under most construction contracts have to be presented to

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and decided by a person who will not be the arbitrator or the judge (unless of course the parties agree) where the decision is binding (and is swiftly enforceable) until the dispute is considered on its own merits by the ultimate tribunal, without regard to the decision of the adjudicator, so that there is, in this sense, no appeal from the adjudicator but, until that time arrives, there are very limited means of questioning the result of the adjudication.6

1.2 Background to Part II of the 1996 Act

1.2.1 The Latham Report

1.2 Part II of the Housing Grants, Construction and Regeneration Act 1996 contains a package of measures relating to construction contracts which followed upon the recommendations of Sir Michael Latham's report Constructing the Team (HMSO 1994). His report was jointly funded by the construction industry and the Department of the Environment. In May 1995, the Department of the Environment issued a consultation paper entitled Fair Construction Contracts. It was concerned with the extent to which improved construction contracts could and should be underpinned in law. It was noted that the Latham Report had confirmed what was widely believed, that the existing arrangements militated against co-operation and teamwork, and that the reform of current contractual relations was central to the competitiveness of the industry in both the short and long term. Attention was drawn to the list of principles that Constructing the Team had identified as those which the most effective form of contract in modern conditions should include. Among these principles, which were set out in Annex A to the consultation paper, was the following:

Clearly setting out the period within which interim payments must be made to all participants in the process, failing which they will have an automatic right to compensation, involving payment of interest at a sufficiently heavy rate to deter slow payment.7

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