Adjudication – A comparison from around the globeJuly 2022
Adjudication, an interim dispute resolution forum commonly utilised between parties to a construction contract, is available in varying forms in different jurisdictions world-wide. Adjudication offers a statutory right to a binding interim determination in a timely, efficient and cost-effective manner during the life of a project until a dispute can be determined with finality through litigation, arbitration or settlement.
Following the passing of the Building and Construction Industry (Security of Payment) Act 2021 (WA) in Western Australia last year, the process for adjudication has taken a further step towards cohesion and alignment across the various Australian state and territory jurisdictions. Excluding the Northern Territory, in this publication, we provide an overview of the most common process of adjudication in Australia, which focusses on a progress claim for payment (Payment Claim) submitted by a contractor and the corresponding assessment by the party the claim was submitted to. We also consider how this compares with the process in the United Kingdom under the Housing Grants, Construction and Regeneration Act 1998 (UK) (HGCR Act).
When can adjudication be used?
In the United Kingdom
Under the HGCR Act, a ‘party to a construction contract has the right to refer a dispute arising under the contract for adjudication’. A ‘construction contract’ is an agreement to:
- carry out construction operations;
- arrange for the carrying out of construction operations;
- provide labour, or the labour of others, for the carrying out of construction operations;
- carry out architectural, design or surveying work; or
- provide advice on building, engineering, interior or exterior decoration.
The dispute to be referred to adjudication means any difference between the parties to the construction contract and therefore, is not limited to one regarding payment. Disputes that can be referred to adjudication under the HGCR Act include whether certain works constitute a variation, a contractor’s entitlement to an extension of time and a party’s responsibility for delays.
Under the HGCR Act, adjudication may be commenced ‘at any time’ by a party providing the other party to the construction contract with a notice of intention to refer a dispute to adjudication (Notice of Intention). The notice will include a description of the nature of the dispute, the parties involved and the nature of the remedy being sought by the referring party.
Despite there being differences in the wording and applicability across the relevant legislation in each jurisdiction, generally adjudication can be utilised by parties to a construction contract under which one party undertakes to carry out construction work, or to supply related goods and services, for another party. It is a precondition before the adjudication procedure can be utilised by a contractor that it has submitted a Payment Claim to the party above it in the project chain, in accordance with the construction contract or the relevant security of payment legislation where the construction contract is silent on a particular matter.
Where a party fails to assess a Payment Claim within a prescribed time period or fails to pay by a due date for payment, or the assessed amount is less than the claimed amount in the Payment Claim, then the contractor is entitled to apply for adjudication. A contractor may then apply for adjudication within the time period prescribed under the legislation of the relevant Australian jurisdiction following one of these instances occurring.
The process of adjudication
In the United Kingdom
Section 108 of the HGCR Act sets out a timetable for the conduct of an adjudication, with an adjudicator normally appointed within seven days of the service of the Notice of Intention. Where the relevant construction contract does not specify an adjudicator and the parties are unable to agree on an adjudicator to refer a dispute to, then the referring party may request an adjudicator nominating body to select a person to act as adjudicator.
Once an adjudicator has been appointed, the referring party will serve both the adjudicator and the responding party with a notice of referral, which is usually served within seven days of service of the Notice of Intention. The notice of referral will set out in detail the dispute that the party has referred to adjudication and be accompanied by such documents that are relied on to support the referring party’s position, including witness statements and expert reports.
It is within the powers of the adjudicator to decide on the procedure to be followed in the adjudication, including requesting documents from either party to the construction contract to assist them in determining the adjudication and providing directions as to the timetable for the adjudication, including any deadlines for the provision of documents. This includes providing the opportunity to the other party to respond and whether further submissions are allowed by way of reply or rejoinder.
Section 108 of the HGCR Act sets a time limit of 28 days for the adjudicator to reach their decision. However, the time limit for service of documents and the adjudicator’s determination can be extended by such longer period as agreed by the parties. Subject to an alternative agreement, the parties shall bear their own costs of the adjudication in the United Kingdom.
The submission of an adjudication application by a claimant to an adjudication nominating authority commences the adjudication process in Australia. The adjudication application sets out the claimant’s position regarding the validity of the Payment Claim and entitlement to be paid the claimed amount, and is accompanied by supporting material including witness statements and expert reports. Following the submission of an adjudication application the nominating authority appoints an adjudicator, with the time limitation for a respondent to submit an adjudication response commencing from service of the application.
The periods for a respondent to serve a response and an adjudicator to make their determination differ between the relevant legislation of the various jurisdictions in Australia. However, generally an adjudicator has the power to request further submissions from each party and to request that the parties agree to an extension of time for the adjudicator in making their determination. Included in the adjudicator’s determination will be an apportionment of responsibility for the adjudicator’s costs, which is normally a reflection of the success of the claimant’s adjudication application.
Enforceability of adjudication determination
In both the United Kingdom and Australia, the decision of an adjudicator is binding until the dispute is finally determined by litigation, arbitration or settlement. However, there are limited grounds of appeal where a party can seek to have the determination of an adjudicator be overturned through court proceedings. These include where jurisdictional error has been committed, for instance an adjudicator acting beyond their jurisdiction and making a finding outside of the limits of the dispute they were asked to determine, or where there has been a breach of natural justice, where an adjudicator has failed to act impartiality.
While both forms of adjudication in the United Kingdom and Australia are intended to provide a quick resolution of disputes on the papers during the lifetime of a project, the triggering point in Australia requires a claim for payment to have been made before a party can proceed in this forum. In a somewhat reactive manner, this requires a party to have already performed and incurred costs for work, with a fight to come later about its entitlement. This compared to the process in the United Kingdom, where adjudication has developed into a mechanism where a third party determination can be sought for project related issues not limited to payment and before certain works have been performed.Download PDF