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Commercial disputes - pitfalls of adjudication
As the economy starts to slow down, there will be an increase in commercial disputes. This will be especially the case in construction and building industry cases.
The preferred method of resolving disputes in many construction contracts is now adjudication because this can be a quick and cost effective way of resolving straightforward disputes.
Generally, the adjudicator's decision is required within 28 days after being referred to adjudication. The tight timetable can however cause problems especially for the unprepared.
We were recently instructed when the dispute was just being referred to adjudication.
The client was originally given 11 days to respond to a referral notice, four of which were weekends and another a bank holiday i.e. only six working days.
The referral notice that had been served was a 44-page submissions document prepared by Counsel, supported by two lengthy witness statements and two lever arch files of documents. This was clearly not a straightforward dispute.
Appointed to provide commercial litigation services and legal advice, JMW were successful in obtaining an extension of time for a further four working days and, with a great deal of hard work by the client and JMW / Counsel, a full and substantive response was filed.
The lesson to be learnt is that solicitors should be instructed as soon as a dispute arises and not when the dispute is about to be referred.
Being prepared when a dispute arises should avoid the timing pitfall involved in adjudication.
What it will not avoid is the often random nature of adjudicators' decisions. Adjudicators will generally be chartered surveyors and not lawyers, and therefore their decisions tend to be based on what they believe is a fair price for the work undertaken rather than the contract agreed between the parties.
Parties should therefore think very carefully before agreeing to adjudication.
At the moment, the reality is that because adjudication is set out in standard JCT contracts, it invariably becomes the preferred method of dispute resolution without any thought being given about whether it is the most appropriate method of resolving disputes under that particular contract.
Partner and Head of Department
Commercial Litigation/Corporate Recovery and Insolvency