UK: Guidance for Adjudicators

The Housing Grants, Construction and Regeneration Act 1996 (the "Construction Act") has been the most significant piece of legislation to affect the construction industry for a number of years. Since its implementation in May 1998 statutory adjudication has become the principal means of dispute resolution within the industry, but it has not happened without complaint. There have been over 100 cases in the courts led by unhappy parties referring "unsatisfactory" decisions.

Parties have sought to frustrate the enforcement of awards in order to prevent paying, by attacking the jurisdiction of adjudicators and their conduct, alleging bias, prejudice and conflict of interest. In the majority of cases the courts have upheld the decisions of the adjudicators, but in so doing have taken the opportunity to give guidance on the operation and mechanism of adjudication under the Construction Act. Notwithstanding this, the 28-day timetable and the tactics of certain parties have left the industry in no doubt that the process amounts to "rough justice".

This led the industry to call upon the Government to intervene, with parties trying to ambush each other into an adjudication, using bullying tactics and keeping relevant information to themselves, right up until the appointment of an adjudicator. Rather than intervene with new legislation, the Government chose to support the Construction Umbrella Bodies’ Adjudication Task document "Guidance for Adjudicators" (the "Guidance"). The purpose of the document is to highlight issues which arise in adjudications under the Construction Act, and to provide guidance for adjudicators in the form of suggestions not rules. It is not meant to be comprehensive or to be treated as legal advice, nor is it binding.

The Guidance spans seven subjects, natural justice (procedural fairness), challenges to jurisdiction, intimidatory tactics, unmanageable documentation, reasons for the decision, accidental errors or omissions and the parties’ costs. Each section contains an explanation of the issue and the law and guidance for adjudicators.

Natural justice is all about ensuring procedural fairness. In a small number of cases, the courts have refused to uphold an adjudicator’s decision because the adjudicator did not act fairly. The Guidance is designed to set out what fairness should mean in this context.

It requires that the adjudicator act in a manner which is free of bias, that is, the adjudicator must be impartial and act independently. It is not necessary for actual bias to occur, the real possibility of it will suffice. This is in keeping with the guidance the courts have already issued, what is new is the wording of the actual guidance given to adjudicators within this section. This goes further by saying that if the adjudicator is aware of any connection, however remote, with either party he or she must notify the parties and consider refusing the appointment. This may present problems, because the size and nature of the construction industry is such that a connection will not be uncommon and it may be used by one of the parties as a tactical means of objecting to the appointment of the adjudicator and delaying the process.

The second element of natural justice is that a fair hearing should be ensured for each party. Whilst the procedural "niceties" of court proceedings are not expected within the limited adjudication timetable, (it is not necessary for example for there to be an oral hearing) the Guidance sets a minimum standard to ensure that each party has a reasonable opportunity to present its case, know what the case is against it and be in possession of all of the evidence and information that is produced against it or obtained by the adjudicator.

Once a party commences an adjudication, the only way it can be stopped is by a challenge to the jurisdiction of the adjudicator. The Guidance gives a list of examples of jurisdictional challenges and provides some useful guidance on how an adjudicator should deal with them. Essentially, the adjudicator should investigate the challenge, seek the views of the parties and make up his own mind. The risk is of course that an adjudicator who fails to follow the Guidance may well find himself subject to a challenge to his jurisdiction for such an omission. An adjudicator has no obligation to consider his or her own jurisdiction unless it is challenged.

Some parties use intimidatory tactics such as spurious challenges to jurisdiction or overly lengthy submissions or threats not to take part in the adjudication, or even threats against the adjudicator, just as they do before other tribunals. This type of behaviour might prejudice the independence of some adjudicators pressurising him or her to follow a course of action desired by one of the parties and is clearly unacceptable. The Guidance suggests that the adjudicator should recognise such tactics early on and counter them fairly, remembering who is in control of the procedure.

Given the limited timetable parties sometimes provide disproportionate quantities of documents to the adjudicator and the other party. Not only can this overwhelm the adjudicator, making it difficult to produce a decision within the time limit, but it can also make him or her vulnerable to a challenge for not considering all relevant material. The Guidance emphasises that the adjudicator is in control of the procedure and can limit the length of documents provided to him. It also states that an adjudicator is under no obligation to take into account all information submitted to him, and the responsibility for judging what is or is not relevant remains with the adjudicator. Some ambiguity remains therefore on how this decision process should be carried out.

An adjudicator is required to give reasons for his or her decision under the Scheme if asked. Sometimes the parties make this request at a late stage within the timetable, and the Guidance suggests setting a date at the outset by which any request to give reasons must be made.

Accidental errors or omissions in an adjudicator’s decision may be corrected. It is not uncommon for an adjudicator to be unsure as to what extent he or she has the power to correct an error and the Guidance by analogy to section 57 of the Arbitration Act 1996 clarifies this. An adjudicator may correct his award to give true effect to his first thoughts and intentions, but cannot change the substantive decision because he has second thoughts or intentions.

A number of areas in the Guidance remain vague, but on the whole it is a very useful document. It generally refers to adjudication conducted under the Scheme in England and Wales, but it is intended to be of use elsewhere or when contractual (as opposed to statutory) adjudication procedures are employed.

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