Defending adjudication: How to avoid common pitfalls?

Adjudication has been successful in overcoming problems previously associated with resolving construction disputes, which largely focused on the holding up of cash flow and the time taken to resolve matters. 

Adjudication has proven to be a popular, often cost-effective and quick form of dispute resolution. Most referring parties in an adjudication have the benefit of lengthy and ample time in which to prepare their case. However, in contrast, the defending responding party very often has very little time, sometimes as little as 7 days, to respond to the referral notice.

In this article, I look at how a responding party can avoid certain pitfalls and ensure that it produces the best defence (response) within the very strict timescale.

Organisation and prioritisation

Usually, the adjudicator is obliged to reach a decision within 28 days of the referral of the dispute to him/her. That is a very tight timetable, subject to an extension of the timetable either unilaterally by the referring party for a period of 14 days or if by agreement of all parties beyond the 42 days.

The timescale for serving a response can vary but is generally between 7 to 14 days. Under the new CIC Low Value Dispute Model Adjudication Procedure, the responding party is usually given 14 days to provide a response. If the referring party has produced a vast quantity of materials, e.g. a large final account claim, within its Referral Notice, it could be particularly difficult to produce a detailed response within the limited timescale. 

The law provides that, irrespective of the volume of materials or complexity of the dispute, such matters can still be dealt with in adjudication proceedings as long as the adjudicator adequately grasps the nature of the issues referred to him. 

An adjudicator’s task is not to act as an arbitrator or judge. Due to the time constraint, the task of the adjudicator is to find an interim solution that meets the needs of the case. For example, it might be to resolve the cash flow issue or provide an interim answer to a particular question.

In order to assemble all the vital information required to formulate a strong defence, the responding party must immediately, upon receipt of either the Notice of Adjudication or the referral notice, set out a plan of action, organise resources and prioritise different tasks, including:

• seeking legal advice and representation;
• instructing relevant technical experts, e.g. quantum and/or delay experts;
• assembling the team working on the project to provide witness statements
•  assembling all relevant documentation and records to support the defence.

Jurisdiction challenges

At the outset, the Notice of Adjudication and Referral Notice should be checked as soon as they are received. This is to ascertain whether the adjudicator has jurisdiction to determine the dispute referred to him and consider:

• Whether the adjudicator has properly been appointed under the correct adjudication rules or by the correct adjudicator nomination body?
• Whether a dispute has crystallised between the parties?
• Whether the Referral Notice is consistent with the Notice of Adjudication?
• Whether the names of parties named in the Notice of Adjudication are correct?
• Whether a single or more than one dispute has been referred to adjudication?
• Whether the dispute was referred to under construction contract?
• Whether the Referral Notice was served within seven days of the Notice of Adjudication? and
• Whether the subject matter of the contract is exempt from statutory adjudication, for example, one of the parties is a “residential occupier”?

If it appears that the adjudicator does not have jurisdiction, then the responding party should raise, and set out the grounds of, a challenge to the adjudicator’s jurisdiction at the earliest possible opportunity to ask the adjudicator to resign. The adjudicator may make a non-binding finding that he has jurisdiction and would continue. In that case, the responding party should reserve its rights and continue with the adjudication under protest.

The response (defence)

In general, the responding party can raise any defence, even those which were not canvassed before and the adjudicator has a duty to consider those defences.

The supreme court in Bresco Electrical Services Ltd (in liquidation) v Michael J Lonsdale (Electrical) Ltd [2020] UKSC 25 stated that “However narrowly the referring party chooses to confine the reference, a claim submitted to adjudication will nonetheless confer jurisdiction to determine everything which may be advanced against it by way of defence, and this will necessarily include every cross-claim which amounts to (or is pleaded as) a set-off." 

Therefore, the responding party can raise any defences it considers properly arguable to rebut the claim made against it. By doing so, the responding party will not be widening the scope of the adjudication; but instead engaging with and responding to the issues within the scope of the adjudication.

Where the referring party seeks payment in respect of specific elements of the works, the responding party is entitled to rely on all available defences. That includes the valuation of other elements of the works, to establish that the referring party is not entitled to the payment claimed.

However, where the referring party seeks a declaration as to the valuation of specific elements of the works, it is not open to the responding party to seek a declaration as to the valuation of other elements of the works.

Similarly, the responding party is not entitled to widen the scope of the adjudication by adding further disputes arising out of the construction contract (without the consent of the referring party). It is, of course, open to the responding party to commence separate adjudication proceedings in respect of other disputed matters.

In order to achieve the above, and in terms of strategy, the responding party should decide whether it wishes to set out a positive case in its defence or to adopt a line-by-line response. The response should:

• set out the responding party’s position or positive case in a clear and succinct manner;
• refer to all relevant contractual provisions and explain the basis on which the claim is refuted;
• identify crucial information or conclusions from reports (e.g. valuation or expert reports), case law reports and witness statements to ensure that they are at that forefront of the defence;
• include narratives within relevant spreadsheets and to, for example, photographs; and
• provide details of any cross-claims or counterclaims.

Suryen Nullatamby – Senior Associate and Adjudicator