HGCR Act 1996 - Adjudication Procedure

© Daniel Atkinson 2001 02 October 2001

Adj Decision - Section 108(2)(c),(d)

Practice Note

The Referring Party is required to submit its Referral Notice to the Adjudicator within 7 days of the Notice of Adjudication. The Referral Notice is required to set out the basis of the Referring Party’s remedy sought and to include the evidence it intends to rely upon.

It is for the Adjudicator to decide the procedure to be followed thereafter, but usually the Responding Party is given 7-10 days to make its Response.

A hearing may be held lasting one day to discuss the matters that are required to be decided and to have the issues explained. In some cases this has involved representation by barristers and legal argument. In other cases the day has involved an investigation of facts.

In most cases there are interrogatories in the form of written questions from the Adjudicator answered by the parties and requests for further statements on discrete topics and requests for copies of correspondence referred to in correspondence submitted by the parties.

The Adjudicator gives his decision within 28 days of the Referral Notice.

1. Required Terms

Section 108(2) lists terms (a)-(f) which the contract is required to provide. These are that the contract shall:

enable a party to give notice at any time of his intention to refer a dispute to adjudication;
provide a timetable with the object of securing the appointment of the Adjudicator and referral of the dispute to him within 7 days of such notice;
require the Adjudicator to reach a decision within 28 days of referral or such longer period as is agreed by the parties after the dispute has been referred;
allow the Adjudicator to extend the period of 28 days by up to 14 days with the consent of the party by whom the dispute was referred;
impose a duty on the Adjudicator to act impartially; and
enable the Adjudicator to take the initiative in ascertaining the facts and the law.

Any construction contract to which Part II of the Act applies must comply with the requirements of Sections 108(1)-(4) otherwise the Scheme for Construction Contracts applies — Section 108(5). It is necessary therefore to examine each of the sub-Sections 108(2)(a)-(f) as well as the relevant clauses of the Scheme.

It is suggested that the contract must comply with all the provisions of Sections 108(1) - (4), otherwise the contract provisions will be totally displaced by the adjudication provisions of the Scheme, which are Part I of the Schedule to the Scheme Regulations.

2. Adjudicator's Decision - Section 108(2)(c),(d)

The Contract must require the Adjudicator to reach a decision within 28 days of referral. A longer period can be agreed by the parties, but only after the dispute has been referred (Section 108(2)(c)).

The Contract must also allow the Adjudicator to extend the 28 day period by up to 14 days, with the consent of the party by whom the dispute was referred (Section 108(2)(d)). The initiative comes from the Adjudicator and may be due to a number of causes such as the complexity of the case, or pressure of other commitments although the Act does not require reasons. It is suggested that such a request is unlikely to be refused by an informed party.

3. Adjudicators Decision - The Scheme

A. Timetable for Decision

The Scheme fulfils the timetable requirements of Sections 108(2), c and d in paragraph I.19. Paragraph I.19(1) requires the adjudicator to reach his decision no later than:-

"(a) twenty eight days after the date of the referral notice in paragraph 7(1), or

(b) forty two days after the date of the referral notice if the referring party so consents, or

(c) such period exceeding twenty eight days after the referral notice as the parties to the dispute may, after the giving of that notice, agree."

Where the adjudicator fails to reach his decision in accordance with Paragraph I.19(1), then Paragraph I.19(2) provides a re-notification and re-appointment process similar to Paragraph I.9(3).

It is to be noted that the timetable refers to the Adjudicator reaching his decision, and not the date of publication to the parties. Paragraph I.19(3) makes clear the distinction, since it requires the Adjudicator to deliver a copy of the decision to each of the parties to the contract, as soon as possible after he has reached his decision. The Adjudicator is not therefore entitled to withhold publication pending payment of his fees it is suggested.

B. Contents of Decision

Although Section 108(2)(f) requires the contract to enable the adjudicator to take the initiative in ascertaining the laws, Paragraph I.12(a) of the Scheme makes it clear that the Adjudicator is required

to carry out his duties in accordance with any relevant terms of the contract and
shall reach his decision in accordance with the applicable law in relation to the contract.

The process envisaged by the Scheme is clearly a quasi-judicial process, and not intended to be a commercial view of how the disputed matter should lie until resolved by litigation or arbitration.

C. Reasons

Paragraph I.22 requires the adjudicator to provide reasons for his decision, if requested by one of the parties to the dispute. It is to be noted that this does not require that reasons should be part of the decision, but could be provided separately to the decision.

4. Adjudicators Duty to Act Impartially - Section 108(2)(e)

The Contract must impose a duty on the Adjudicator to act impartially.

An adjudication differs from a construction contract in that there is no owner responsible for the Engineer or Architect acting impartially. To be clearly effective, the duty to act impartially needs to be part of the tri-partite Adjudication Agreement.

There is no requirement of independence but only of impartiality.

5. Adjudicators Duties - The Scheme

A. Impartiality

The duty of impartiality required under the Act is set out in Paragraph I.12(a).

B. Quasi-Judicial

Paragraph I.12(a) requires the Adjudicator to reach his decision in accordance with the applicable law of the contract which is a quasi-judicial approach.

C. Efficiency

Paragraph I.12(b) requires the Adjudicator to avoid incurring unnecessary expense.

D. Confidentiality

Paragraph I.18 requires that the adjudicator and any party to the dispute shall not disclose any information or document which the party supplying has indicated was to be treated as confidential, except to the extent that it is necessary for the purposes of, or in connection with, the adjudication.

6. inquisitorial Approach - Section 108(2)(f)

The contract must enable the Adjudicator to take the initiative in ascertaining the facts and law. Although most commentators take this to mean that the Adjudicator can carry out his own investigations, it is suggested that this is not practical in the timescales involved, nor desirable. It is suggested that Section 108(2)(f) is intended to allow the Adjudicator to adduce evidence or invite legal argument from the parties by asking questions either at a hearing or in correspondence, giving both parties the opportunity to answer. After all, the parties will have been involved with the issues for a longer period than the Adjudicator and better able to respond quickly.

It is clear that the Adjudicator cannot adopt the same approach to hearing arguments and evidence as in a court or arbitration proceedings. He must take a robust approach, restricting the time for the parties.

It is suggested that an Adjudicator when presented with a thorough statement of case, with clear legal argument and presentation of relevant evidence and logical analysis, will have little need to take such initiatives in ascertaining law and fact. This gives a clear advantage to the well prepared party making the reference to adjudication.

7 . Adjudication Procedure - The Scheme

A. Ascertaining the Facts and Law

The requirements of Section 108(2)(f) of the Act are met by Paragraph I.13 of the Scheme which provides:

the adjudicator may take the initiative in ascertaining the facts and law necessary to determine the dispute; and
the adjudicator shall decide on the procedure to be followed in the adjudication.

The Scheme goes farther than the Act in that the adjudicator must ascertain facts and law "necessary to determine the dispute". The need to determine the dispute quasi-judicially will place a heavy burden on the adjudicator, unless the words are interpreted to take into account the timetable of the adjudication. It is suggested that the adjudicator has to decide on the evidence submitted to him and on the evidence he is able to ascertain for himself in the time available.

It is suggested that this is the proper interpretation. Paragraph I.17 requires the adjudicator to consider any relevant information submitted to him by any of the parties to the dispute. The adjudicator is required to make available to the parties any information to be taken into account in reaching his decision. It is suggested that this applies to information submitted or obtained from one of the parties, as well as from separate investigations such as test, experiments, site visits and inspections.

Paragraph I.15 allows the adjudicator to make a decision on the basis of information before him if a party fails to produce information requested by the adjudicator, without just cause. He can attach such weight as he thinks fit to any evidence submitted to him outside any period he may have requested or directed.

B. Procedure

Paragraph I.13 makes clear that the Adjudicator is master of the adjudication procedure. Particular powers of the adjudicator are listed in subclause I.13(a)-(h). Paragraph I.14 requires the parties to comply with any request or direction of the adjudicator in relation to the adjudication.

Paragraph I.15(a) allows the Adjudicator to continue in the absence of a defaulting party, or in the absence of requested information. Under Paragraph I.15(b) the Adjudicator may draw such inferences from the failure as in his opinion are justified. All this is subject to the defaulting party not being able to show sufficient cause for his failure to comply.

C. Representation

Paragraph I.16(2) provides that where the Adjudicator is considering oral evidence or representations, a party to the dispute may not be represented by more than one person, unless the adjudicator gives directions to the contrary.

Paragraph I.16(1) provides that any party to the dispute may be assisted by, or represented by, such advisers or representatives (whether legally qualified or not) as he considers appropriate, subject to agreement between the parties to the contrary.

8 . Adjudicator Immunity - Section 108(4)

The contract must provide that the Adjudicator is not liable for anything done or omitted in the discharge or purported discharge of his functions as Adjudicator, subject to bad faith. The contract must also provide that any employee or agent of the Adjudicator is similarly protected.

Generally, a common law Adjudicator who is not an arbitrator is likely to be liable to the parties in negligence if he fails to exercise his duty of care to the parties. This is far from clear, however, and the Courts could well follow Pacific -v- Baxter and hold that the parties have their remedy in subsequent arbitration. This will turn on whether the parties have the right to have the matters decided de novo.

Section 108(4) resolves the issues for statutory adjudications by providing the Adjudicator with some immunity. This is regarded as important to ensuring that the high calibre of Adjudicators are attracted, and allowing him to focus on ensuring a fair decision. It is to be noted, however, that this immunity only operates if there is a contract between the parties, and it is of the type covered by Part II of the Act.

The main reasons for immunity are:

the likelihood of a quick, robust decision is unlikely if there is a threat of action;
there is likely to be a big demand for Adjudicators, the number available may be drastically reduced if there was no immunity;
if the Adjudicator is requested to give reasons for a decision he will be unlikely to do so if he could be sued;
there would be a need for professional indemnity insurance which could increase the Adjudicator’s costs and therefore increase the fees;
to establish a case for negligence is far from straightforward.

9 . Adjudicator Immunity - The Scheme

Paragraph I.26 of the Scheme implements Section 108(4) of the Act in the same terms.