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Statutory Adjudication - Asking the end user

Kevin M Trash

Kevin is a Quantity Surveyor who has been involved in the construction industry for his entire career, at all levels from site QS up to Commercial Director. As well as an honours degree in Building Kevin also has a Diploma in Arbitration and an MSc in Project Management. This year he completed an MA in Arbitration and Dispute Resolution Practice and he has recently started a PhD concerning decision-making in adjudication. This article is based upon research Kevin carried out as part of his MA.

Kevin now works for Schofield Lothian and is currently involved on a day-to-day basis with dispute resolution in the construction industry. The firm is actively involved in building, civils, M & E and the rail industry, participating in mediation, adjudication, arbitration and litigation support.

As part of an MA I have recently completed I carried out research into the attitude and experiences of end-users to the process of adjudication in the construction industry. The hypothesis that I sought to test was 'Statutory adjudication has proved to be a satisfactory means of dispute resolution for the construction industry'. This article sets out some of the results of my research that may be of interest to the readers of News and Views.

By way of a structured questionnaire I approached a wide cross section of the industry and asked them for their observations and recommendations with regard to statutory adjudication. After all it is their industry and they are at the 'coal face' of the process, so to speak. I had a very good response to the questionnaire, for which I thank the industry; the findings are very interesting and worthy of consideration.

I must admit when I set out upon this research I imagined that I would find a whole raft of dissatisfaction addressing many different angles. I was, I am pleased to admit, quite wrong. This article explains why.

One of the first questions I asked my end user sample was as to whether they considered adjudication under the HGCRA to be satisfactory. I set out 10 options for the end user to select 9 being specific and the last asking for them to specify a reason for their dissatisfaction(s), if the 9 did not adequately describe it or them. The reply was quite enlightening, with 61% saying they were dissatisfied with some aspect of the adjudication process. Equally enlightening is what they were dissatisfied about, which is summarised as follows.

This is, I hope you will agree, very interesting, with the end users biggest dissatisfaction being overwhelmingly, excessive unrecoverable party costs. The adjudicators' fees are very prominent with management of the process and understanding of the facts/law being of notable concern. With regards to the high level of costs I can recall the phrase 'administered by the industry for the industry'? being used when adjudication was first introduced. Sadly, I now hear more often the phrase 'hijacked by the lawyers'. Isn't that what happened to arbitration?

I wanted a true industry view so the questionnaire went further and asked the following question; If you could make one suggestion for improvement of adjudication under the HGCRA 1996 what would it be? As can be imagined the replies were varied, but they can, fortunately, be easily grouped, as follows;

Again, the industry has focused on costs and in particular the unsavoury practice found in some main contractor's subcontract conditions of requiring the referring party, inevitably the subcontractor, to pay the adjudicator's fees, and sometimes even the main contractor's costs, in any event, win or lose. This clause is often tucked away, some would say concealed, in the subcontract conditions. I know some of the offenders, as I am sure we all do.

Some users wanted to extend the time taken for adjudication, but if they do are they using the appropriate dispute resolution process for their dispute? You can of course extend time as the referring party (up to 14 days) or generally by any period if all parties agree. I make the suggestion that if the dispute will genuinely take much longer than adjudication ordinary provides then perhaps the parties should consider an alternative dispute resolution process. 'Think before you leap' should be an adjudication watchword. Finally it is interesting that capping of adjudicators' fees and expenses was not more prominent given the previous replies. From these figures it is apparent that if we could deal with agreements to pay costs in any event and reduce the necessity to expend large sums on unrecoverable party costs, or give the adjudicator the statutory right to deal with, allocate and even assess party costs much of the dissatisfaction felt by end users would disappear.

Whilst space does not permit much further examination of the questions, I would also mention that, towards the end of the questionnaire, I asked 'If you could choose would you retain or disregard the statutory right to adjudication". 87% wanted to retain the right, thus showing that despite some dissatisfaction overall its use is still popular.

I have learnt much from this research. We could make changes to the statutory process that will make it much more satisfactory to the industry it provides for, and these would be quite simple. The first, to outlaw the payment of costs in any event could be achieved by importing an amended version of the Arbitration Act 1996 s60 into the HGCRA. The second concerning party costs could be dealt with by amending legislation to allow the adjudicator to decide party costs and it may also serve to bring parties to heel when they have those familiar tantrums and unfounded objections to jurisdiction based on those standard letters that are printed seemingly in reams.

We as professionals also need to do our part in trying to maintain adjudication as a relatively economical dispute resolution method. This research has found that there are dissatisfactions, which can be grouped, but the responses are common. I would ask Sir Michael Latham to do one thing, fix that which clearly needs to be fixed and leave the rest alone. In construction dispute resolution there will never be an absolutely perfect system, but indeed step one was in general a success, step two must strive to be the same.

Reader's comments on this topic are by all means welcome. Please contact me at my email address, kevintrash@schofields.com

Editors note Kevin's article makes interesting reading and confirms many of the comments made by Nigel Cornwall of Skanska Construction in his recent presentation to the branch, as set out elsewhere in this news letter.

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