Coronavirus - Should I Adjudicate?

Construction

1 Apr

Whilst the coronavirus outbreak has severely disrupted many projects, construction operations have not been suspended by Government and disputes in respect of them will continue to occur: indeed, the crisis may increase their incidence. Therefore, parties may wish to know whether they can still adjudicate.

In principle, the answer is yes. The parties to a construction contract within the meaning of the Housing Grants Construction and Regeneration Act 1996 have the entitlement to adjudicate at any time, and that remains the position. Even if the present crisis should bring a contract to an end, the right to adjudicate will continue. Whether imposed by the Statute or freely entered into by the parties, the adjudication provisions in a contract effectively operate as a separate agreement. Therefore, if the parties' obligations under the underlying contract come to an end, eg by way of repudiation, force majure, or frustration, the agreement to adjudicate remains enforceable.

However, it is said that knowledge is knowing that a tomato is a fruit: wisdom is not putting it in a fruit salad. Similarly, the fact that a party is entitled to adjudicate does not mean that it should. Doing so may encounter practical difficulties. The situation is analogous to commencing an adjudication on the 23rd December of any given year, but with even stronger objections. In the first place, it may be difficult for the relevant appointing body to find a competent adjudicator. If one is appointed, unless there are good reasons as to why the adjudication cannot wait, the adjudicator may consider commencement at this time to be sharp practice and give rise to bias against the referring party. Secondly, the adjudicator is bound by the rules of natural justice and may not agree to proceed if the respondent, through no fault of its own, cannot apply the usual resources to the defence. Thus, important witnesses may be unvailable or, where oral testimony is called for, it may not be practicable to convene a physical hearing allowing for cross-examination.

Even if a favourable decision is obtained, it may be difficult to obtain enforcement through the courts (which are operating a reduced service): certainly, proceeding by way of insolvency is unlikely to be effective. Claimants will also need to look to their own financial standing. If the effect of the crisis is to call into question the ability of a claimant to repay monies awarded (in the event that the adjudicator's decision is overturned in litigation or arbitration), the respondent may simply be required to pay the relevant sum into court pending the final outcome.

Notwithstanding the above words of caution, there may well be occasions when an immediate adjudication will be necessary. The rationale for the process has not disappeared, ie to ensure that cashflow in the Industry is not wrongfully disrupted. Therefore, where a decision is required quickly, and where the dispute does not require unrealistic procedures, such as giving evidence in person, there is no bar to commencement.