A number of senior judges, including Sir Rupert Jackson and Lord Justice Coulson, both of whom sat in the Technology and Construction Court, have acknowledged the success of adjudication in the construction sector.
In S&T (UK) Ltd v Grove Developments Limited, Sir Rupert Jackson stated, “Adjudications are swift. They are generally completed within 28 days. There is a limit to how much money people can spend on their disputes in that limited time frame. Overall, the payment regime and the adjudication regime have been successful. At least 14 overseas jurisdictions …. have adopted similar rules”.
The potential of adjudication
Lawyers and other dispute resolvers are renowned for their analytical skills.
However, their intelligence is concerned with analysis: categorisation and definition, drawing distinctions and interpretation. Lawyers are not so highly renowned for their creative skills, or as innovators, or intuitive entrepreneurs.
So, it is not perhaps surprising that adjudication’s full potential has not been fully recognised by lawyers and other dispute resolvers in more than 20 years since construction adjudication was enshrined in statute by the Housing Grants, Construction and Regeneration Act 1996, coming into effect in 1998.
But if we had, in this room, entrepreneurs such as Lord Sugar, or an inventor such as James Dyson, or a visionary businessman like Richard Branson, I suggest that they would quickly comment in relation to adjudication “you’re onto something here”.
I expect that they would quickly see the potential of adjudication to re-shape dispute resolution, not just in the construction sector, but across a wide range of commercial sectors and for a broad swathe of companies and other businesses and institutions and organisations.
Derek Roebuck, in his article in Arbitration Journal ‘The Myth of Modern Mediation’ states that, “everywhere in the Ancient Greek world, including Ptolemaic Egypt, arbitration was normal and, in arbitration, the mediation element was primary”.
So, we know, beyond any reasonable doubt, that arbitration, mediation and med arb were being practised in the Ancient World thousands of years ago.
Against this long history of dispute resolution, a statute-backed contractual scheme of construction adjudication is quite a striking modern innovation. It is, in fact, another British invention.
It has, of course, been recognised that construction adjudication has a potential and significance and effectiveness within the construction industry. It is recognised right around the world. Construction adjudication is now practised in New Zealand.
Construction adjudication does have that feel of the typically British invention – something that we accidentally stumbled across it.
But then, the British have stumbled across a good many inventions which have changed the world.
It was an English schoolboy who picked up his football and ran with it and invented the game of rugby. We now find ourselves surpassed by South Africans, and sometimes by New Zealanders, on the rugby field. We could, easily, find ourselves surpassed in the field of adjudication by other Commonwealth jurisdictions.
But there is a real potential for us to be innovators and world leaders in the field of adjudication.
Adjudication, as we know it, is “made in Britain”. It is time for British institutions such as the CIArb to expand the success of adjudication into other sectors and to develop systems of rules and procedures to enable this, so that we do not, once again, become inventors of an important invention which is more effectively developed by others.
We need to move quickly to devise effective rules, systems and methods of enforcement and methods of appointment of adjudicators so that adjudication can effectively be applied to other sectors.
If we are going to expand and develop adjudication into other sectors and fields, we need to address certain issues and problems with construction adjudication.
It is probably wrong to use metaphors of imprisonment or restraint and to describe construction adjudication as shackled or fettered by its origins. It has already achieved a great deal as a properly functioning dispute resolution mechanism.
It is perhaps better to speak about construction adjudication as entangled in some historical issues. We can then disentangle it to create a more effective system for its application to other sectors.
These entanglements include, as we know, definitions of what is, or is not, a construction contract and what is, or is not, a construction operation. There are also definitions and exclusions in respect of residential occupiers.
Contracts can be partly inside and partly outside, the regime of the Construction Act.
We also have to bear in mind that the driving force behind what we now call the Construction Act was a desire to improve payment under construction contracts. It seems to have been quite late in the formulation of Part II of the Act that it was resolved that construction contracts should contain a written provision enabling a party to notify and then refer any dispute to adjudication at any time. I recall many discussions between leading lawyers along the lines of “can this be right? Is this what was really intended?”.
For adjudication to be extended successfully into other sectors and disciplines, some of these historic entanglements will need to be removed in a cleansing process.
Extending adjudication to other sectors
Initially, adjudication will be extended to other sectors of commercial life consensually, by including adjudication clauses or provisions and schemes in contracts.
The adjudication regime can be written into the contract, specifically shaped for that particular contract. Or the contract can refer to adjudication rules and procedures of dispute resolution bodies such as CIArb/DAS.
Those institutional regimes could borrow extensively from Section 108 of the Construction Act and/or the Scheme for Construction Contracts, if appropriate.
It is important to remember that construction adjudication was being practised through standard form construction contracts before the Construction Act was even considered. The original JCT With Contractors Design Form of Contract from 1981 contains an adjudication regime.
It is unlikely that, initially, in its expansion, adjudication would be considered suitable for consumer disputes.
It may be prudent, in these consensual systems of adjudication, to look at new and different methods of enforcement of the adjudicator’s Decision and to reconsider the status of the Decision. The current status of a Decision under the Construction Act as binding pending final determination by legal proceedings (in accordance with Section 108(3) of the Construction Act) will not always be suitable or appropriate for disputes in other sectors.
Of course, Section 108(3) does say that the parties may accept the Decision of the adjudicator as finally determining the dispute.
I will mention, anecdotally, that soon after the Construction Act came into effect, I found myself with two Decisions ready to enforce because payment had not been made under them and the question was “how do I enforce this – since the other party won’t pay?”. I recall ringing another law firm and the view there was that it could be enforced by a mandatory injunction. I decided to apply for summary judgment and obtained by two summary judgments. To the very best of my recollection, the other firm applied for a mandatory injunction and were also successful – in that very brief window before the Court ruled firmly that the method of enforcement should be by summary judgment.
In short, it may be fair to say that the Construction Act was enacted and came into effect without any clear guidance on the method of enforcement.
I suggest that it may be more effective, in some sectors, to deal with the enforcement of consensual adjudication, by taking a leaf out of the Party Wall Etc Act 1996 and how that deals with Awards made by Surveyors.
The Party Wall Act at Section 10(17) provides that either party to a dispute may, within 14 days beginning with the day on which the Award is served upon him, appeal to the County Court against the Award. The County Court may:
a) Rescind the Award or modify it in such manner as the Court thinks fit; and
b) Make such order as to costs as the Court thinks fit.
The 14-day time limit for appeal is strict. The right to appeal places the onus on the recipient to challenge the Award. This seems to be fair.
The case law in relation to the Party Wall Act has acknowledged that a document may purport to be a valid Award under the Act and not be valid. The recipient of the Award would then have the right to ignore the Award and argue his case on the invalidity of the Award when it was being enforced against him, which would include a jurisdictional challenge. However, in practice, such challenges are not very common.
Assuming that the beginning of the expansion of adjudication to other sectors is by consensual adjudication, then the parties would be effectively “opting-in” to adjudication. As stated above, they would put adjudication clauses in their contracts and these may cross-refer to a pre-existing scheme or rules for adjudication. The Construction Act’s Scheme for Construction Contracts could form a useful template.
An example of a sector which may be ripe for consensual adjudication is the insurance industry or market.
There is no need to single out a particular commercial sector for the development of adjudication. It could be used in banking, or maritime contracts, transport and logistics, manufacturing, leisure or many other fields. The list is almost limitless.
However, the insurance sector could usefully adopt adjudication to foreshorten the time and limit the expense of disputes.
Billions of pounds are spent on resolving insured claims, across a huge range of contracts and kinds of disputes.
Therefore, the potential for saving time and money and human resources in resolving insurance-related disputes is huge.
A regime for adjudication which is swift and lean will save costs by its efficiency.
Insurers and others involved in the insurance market, such as brokers, as well as major users of insurance policies, need to take the lead in explaining and formulating a consensual system of adjudication.
If we see construction adjudication as an invention and adopt the internal combustion engine as a parallel exemplar – it took over 100 years to develop the motor car engine from a sound concept but a messy, dirty and inefficient device into the lean engines of today.
We can expect adjudication to need improvement from its early origins in construction.
Since discussing with the CIArb the scope for expanding adjudication into the insurance sector, the Professional Negligence Bar Association (“PNBA”) has launched its Professional Negligence Adjudication Scheme. This Scheme is intended to apply to all professional negligence disputes. It could be used in relation to accountants.
This Scheme facilitates the requirement in the Professional Negligence Pre-Action Protocol that parties consider whether the dispute is suitable for determination by adjudication.
So, the potential of adjudication to resolve professional negligence disputes, where professional negligence insurance is involved, is already enshrined in the Professional Negligence Pre-Action Protocol. A bespoke Professional Negligence Adjudication Scheme is already in place, with a panel of barristers available to act as adjudicators.
The Society for Computers and Law has launched a bespoke adjudication scheme with its own time limits and procedures.
The practical, incremental expansion of adjudication beyond the construction sector is already underway.
Aspirations for adjudication
We already have contractual but statute-backed construction adjudication.
In the not too distant future, it is possible to envisage an Adjudication Act similar to the Arbitration Act 1996 which, like the Arbitration Act, allows people freedom to adjudicate within a statutory regime with minimal mandatory requirements.
If adjudication expands widely to other sectors, then one can foresee the Government appointing an adjudication Tsar or other champions for adjudication.
What about the lawyers and professional dispute resolvers? "What about me?"
Do lawyers and other dispute-related professionals really need to be afraid of adjudication as something that might deprive them of work and fees?
The answer is “no” – not if adjudication is used properly.
Adjudication offers an intensive means of resolving disputes quickly. It calls out for high calibre people who are prepared to work under pressure to resolve disputes within a short time.
Professionals who are prepared to work hard, under pressure, to resolve disputes quickly, can expect to be highly remunerated.
I can see the law firms of the future having commercial adjudication departments employing top-level, high calibre teams which are very profitable.
Adjudication, as with equitable remedies such as injunctions, can be the province of the best of lawyers.
What is essential is not to encumber or water down adjudication. Its speed and dynamism and its flexibility need to be preserved.
CAVEAT: Adjudication – “Don’t Fence Me In”
Any alternative system of dispute resolution, operating as an alternative to claims through the Courts, must retain its alternative nature.
If that system is too restrictively controlled by the Courts and the legal establishment, it will lose its effectiveness as an alternative.
There is a balance to be struck between control and disciplined monitoring to avoid malpractice on the one hand, and freedom to be effective on the other
The understanding of a need for this balance places responsibility alike on users of adjudication and the Courts themselves.
If the users of adjudication are too eager to rush off to the Courts for rulings, or seek to use the Courts to myopically challenge and analyse the adjudication process, then the process will become too complicated, with too many qualifications.
The Courts, for their part, can decline to adopt an overly prescriptive approach, as they have done with arbitration following the 1996 Arbitration Act.
One way of avoiding complication is to give adjudicators power to decide their own jurisdiction within the consensual adjudication regimes which are written into contracts.
This talk is a clarion call that the British, as the inventors of adjudication, urgently grasp its true potential. To some extent, it is aspirational, but it is also pragmatic – because the practical potential of adjudication is well within our grasp.
Unlike the weird sisters in Macbeth, we cannot look into the seeds of time and say which seeds shall grow and which shall not. But we can get on with the propagation of adjudication with confidence that it will yield well.