What is ‘Adjudication’

Adjudication is first and foremost a dispute resolution procedure that can be used without the need for recourse to lengthy and expensive litigation in the courts and has been available for the past 21 years.

It is used in this context in relation to construction disputes and is regularly utilised as a cost- effective method of deciding a particular dispute within a construction arrangement, and can be especially useful when the relationship between two parties has broken down.

The Adjudication Society Report

This annual report measures the progress and development of adjudication and includes the regular research of the Society on adjudication statistics since its inception.

Below are some of the highlights from the 18th Report which was published in December 2019 (and covers the period from May 2018 to April 2019):

    1. Total number of adjudications

There was a rise from 1685 adjudication referrals in 2017-2018 to 1905 in 2018-2019 which is a 13% increase.  This is consistent with a continuing pattern that can be seen of year-on-year growth in the number of referrals to adjudication, although this has generally lacked consistency.

    2. Why do parties usually adjudicate?

Parties tend to adjudicate over a variety of disputes however the report makes it clear that some are far more prevalent than others in 2018/19.

  • 39% of disputes relate to payment/payless notices, which involves the mechanism used in construction contracts for when contractors and sub-contractors can be paid and for how much. A payless notice is generally issued when the paying party does not agree with the quantification of what is owed by them
  • 18% relate to the interim valuation of works, bring a process used to stagger payments to contractors over the timespan of a building project;
  • 16% relate to the final account determination for a project; and
  • 5% to each of repudiation/termination of the contract and to the issue of defective works.

    3. What is the typical value of an adjudication?

According to the 18th report the typical value of an adjudication can vary but the most common bracket of disputes referred is the £10,000 to £50,000 bracket which accounts for 25% of referrals. This is followed closely by the £50,001 to £100,000 range at 19%, while disputes at less than £10,000 accounted only for 3% of referrals.

With regards to the higher values only 5% of disputes are for sums in excess of £1 million and so it appears adjudication remains as a most popular option for disputes of a lower value.

    4. Typical Parties

The most common adjudication disputes are between sub-contractor and main contractor at 48%, whilst those between a main contractor and the employer are at 34%. It is also very clear from the research that most adjudications are referred by the party seeking payment (the payee) as against the party owing money (the payer).

The 18th Adjudication Society Report

Grove Developments Ltd v S&T (UK) Ltd

Further to the judgment in the above case, there was discussion in the report as to the potential impact this could have on the number of adjudication referrals going forward. Especially of interest was whether the total number of adjudications would decrease as a result of a decline of ‘smash and grab’ adjudications as compared to a smaller increase in subsequent ‘proper value’ disputes.

However, the results from the 18th report indicate that the judgments for the above have had no negative effect on the number of adjudication referrals.  As can be seen above, the total number has increased by 13% and almost 40% of those relate to the issue of notices.

At Myerson, our Construction Team can offer advice on all aspects of contentious adjudication matters. For more information on the range of legal services Myerson LLP can provide please call Myerson’s Construction Team on +44(0)161 941 4000 or email lawyers@myerson.co.uk.