Inside Adjudication – Adjudication: What is it?

In the first episode of this series, David Owens, Peter Jansen, and Aanya Gujral introduce adjudication, exploring why it was introduced, what kinds of contract it applies to, and when a party can start the adjudication process. We wrap up with a recent case study that demonstrates how adjudication works in practice.

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Episode Transcript:

[Music]

David Owens:

Hello and welcome to this edition of Inside Adjudication, the adjudication podcast from Sharpe Pritchard. I’m David Owens, a Partner in the construction team at Sharpe Pritchard – a leading UK law firm with particular expertise in the public sector, infrastructure and construction disputes – and I’ll be your host.

If you work in construction, you’ll know that disputes can be disruptive, expensive, and time-consuming, indeed sometimes it feels like dealing with disputes takes up as much time as completing the actual work. In this series, we aim to help you understand adjudication – a fast and practical way to resolve disputes in construction.

In this series my colleagues Aanya Gujral and Peter Jansen will share their insights and give you a clear understanding of what adjudication is, why it exists, and how it works.

In each episode we aim to delve deeper into the finer details of the process, and we’ll look at some recent adjudication enforcement or challenge cases coming up in the technology and construction courts, all with the aim of providing some practical tips to help you deal with adjudications.

So, let’s get going, over to you Aanya.

Aanya Gujral:

Thanks David.

Hello everyone, I’m Aanya, a junior associate at Sharpe Pritchard. If you’re new to adjudication, we hope this podcast will be a helpful guide for you.

In this episode, we will cover what adjudication is, why it was introduced, what kinds of contract it applies to, when a party can start the adjudication process, and at the end, briefly talk about a case, a recent case, that shows how adjudication works in practice.

I’m joined by my colleague Peter, who has a has a wealth of experience in advising and supporting clients through the adjudication process.

Peter Jansen:

Hello, I’m Peter Jansen I’m a legal director in Sharpe Pritchard’s construction team, and I work closely with Aanya and David. Aanya and I have just finished a particularly complex adjudication

Aanya:

That’s right Peter, and before we get into detail, lets start with the basics. So, what exactly is adjudication?

Peter:

Adjudication is a fast and cost-effective way to resolve disputes in the construction industry. It was introduced by the Housing Grants, Construction and Regeneration Act 1996, which is more commonly known as the Construction Act.

Before this Act, disputes typically had to be resolved through court or arbitration, both of which could take months or even years. That made it especially difficult for smaller contractors and subcontractors to recover money owed to them quickly.

The Construction Act changed that by giving either party to a construction contract the right to refer a dispute to adjudication and receive a binding decision within a matter of weeks.

Aanya:

And that shift has been hugely important across the industry. Adjudication was designed to keep cash and projects flowing, and sectors really embraced it. In fact, a recent study by King’s College London found that adjudication referrals across the UK rose by 9 percent between May 2023 and April 2024. That’s over 2,200 referrals in a single year.

Interestingly, a significant proportion of those referrals came from the public sector, which continues to be the biggest commissioner of construction work in the UK. And this just shows how widespread the process has become.

Peter, can you explain what types of contracts adjudication applies to, and whether there are any exclusions?

Peter:

Certainly. A construction contract, under the Act includes more than just traditional building work. It also covers things like design services, site preparation, mechanical and electrical installations, and some forms of professional consultancy, such as architecture, engineering, and project management. So, it’s a broad definition.

Ther are some exclusions, however. The most common one of these is the residential occupier exception, which means that if you are having work done on your own home, the statutory right to adjudicate under the Act does not apply unless the contract expressly includes an adjudication clause.

Other sectors such as power generation, large-scale process engineering, or bespoke plant assembly are also excluded from the ambit of the Construction Act.

Aanya:

And it’s also worth saying that even when adjudication is not a statutory right, parties can still agree to include it in their contract and sometimes we do see this. An example is sometimes in PFI contracts – and David, myself and Peter have all been involved in these and have seen it crop up many times.

So, assuming you can adjudicate, the next question Peter, is when can you actually start the adjudication process?

Peter:

Well, that’s a very good question. The short answer, in accordance with what the Act provides, is any time. Adjudication may be commenced at any time. There is no need to wait for the contract to end, or to go through other dispute resolution steps, such as mediation, beforehand.

The only requirement for parties wishing to refer a dispute to adjudication is to demonstrate that that dispute has crystalised, as to say that it’s come into existence. To ensure a dispute is crystallised, parties simply must ensure that the issue in dispute has been clearly raised with the other party, and the other party has had a reasonable chance to respond. The correspondence evidencing the dispute need not be formal or detailed, it just has to be enough to show that both parties understand that there is a disagreement between them that has not been resolved.

Aanya:

And that is where clear communication makes a real difference. If you have exchanged emails or letters and there is an unresolved issue such as around payment or delay, then that is often enough to meet the test of crystallisation. We would always advise that all correspondence with other parties on construction projects is recorded in writing to avoid any ambiguity in the future.

And another practical point to consider is that, while adjudication can still be used to resolve a dispute after the contract has ended, this only remains true so long as the adjudication is referred within the legal limitation period. And there was a case in 2023, heard in the technology and construction court of LGR Interiors v Cooper Construction case, which made clear that the Limitation Act does apply to adjudication claims just like they do in court proceedings. Peter will talk through another case towards the end of this episode where this is further confirmed.

Peter:

Yes, that case is a useful reminder, that while adjudication moves quickly, the rules around limitation still apply in the background. So, it is important not to sit on your rights for too long.

Now we’ve covered the basics in a whistlestop tour, but we will be going into further detail and many other points in later episodes, so stay tuned.

In the meantime, Aanya, what would you say is the key piece of advice for someone who is thinking about starting an adjudication process, or who is a party to a construction contract and who might face an adjudication at some stage?

Aanya:

That’s a very good question Peter. The main piece of advice I would give is to always be prepared. Whether you’re referring a dispute or if you’re responding to one, make sure you and all of those who may need it have easy access to your records, correspondence and contract documentation

Being organised not only helps to avoid disputes, it also puts you in a stronger position if you do need to escalate things through the adjudication process.

Peter:

This is very true. Preparation really is key. Good contract administration, including clear records, issuing notices correctly, and tracking payments, makes a huge difference when a dispute arises. In fact, the King’s College study we mentioned earlier also highlighted poor contract management as one of the leading causes of disputes in the first place. And in my experience of handing adjudications on behalf of parties, I cannot stress the importance of staying prepared before, during, and after a construction project, enough.

David:

Thanks both. Before we wrap up today, I want to touch on a recent case that illustrates how powerful adjudication can be, even years after a construction project ends. The case is BDW Trading Ltd v Ardmore Construction Ltd, and it involved a dispute over fire safety defects that only came to light nearly two decades after completion.

The case highlights how adjudication can still apply to historic issues where legal time limits have been extended, and how important it is for parties to follow proper procedure when referring a dispute. Peter, can you walk us through what happened?

Peter:

In this case, a dispute was referred to adjudication approximately 20 years after practical completion, concerning fire safety defects in a residential development. The High Court upheld an adjudicator’s award of approximately £14.4 million in favour of BDW, based on breaches of contract and liability under the Defective Premises Act 1972.

Ardmore sought to resist enforcement, arguing that the dispute had not crystallised and that statutory claims under the Defective Premises Act fell outside the scope of the adjudication clause, which only covered disputes “arising under the contract.” The Court rejected both arguments. The judge held that BDW had clearly presented its case, and Ardmore’s failure to respond over a significant period contributed to the finding that the dispute had crystallised. The Court also confirmed that statutory claims arising from the contractual relationship can fall within the adjudicator’s jurisdiction. It relied on principles from a case known as the Fiona Trust, which was actually based on arbitration, which support a broad interpretation of dispute resolution clauses in the absence of clear language to the contrary.

Now, this judgment is significant. Due to the retrospective effect of the Building Safety Act 2022, the limitation period for claims under the Defective Premises Act was extended to 30 years. As a result, historic claims may now be validly pursued through adjudication, even decades after project completion, so long as the correct procedures are followed and the contractual wording supports it.

Aanya:
That’s a great summary, thank you Peter. In short, BDW Trading confirms that, as long as statutory procedure is followed and timelines are met, even historic defects can be adjudicated and enforced. Jurisdictional loopholes will not necessarily defeat a validly referred dispute. The case is another powerful reminder that robust contract management, timely documentation, and strict adherence to procedure are essential in being successful in bringing or defending any adjudication proceedings you may face.

Peter:
Yes, and adjudication exists to avoid long delays and keep work and money flowing. If you prepare properly, it can protect your project and your budget.

David:

Very true, thanks both. That brings us to the end of this episode of Inside Adjudication by Sharpe Pritchard. Thank you to both our speakers, Aanya and Peter, today for joining the session and for sharing their insights. And thank you too for listening. We hope this podcast has helped you to build your understanding of what adjudication is, why it exists, and how it works.

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