Adjudication's fragile justice: the roles at play

After the collapse of construction giant ISG in September 2024, following a failed rescue deal and financial instability, questions have arisen about contributory causes. The company, which employed 3,000 people, had a turnover of £2.2 billion, and was left unable to meet financial obligations after a planned sale and refinancing efforts fell through.

Among the potential contributing factors, the adjudication system has come under scrutiny for its role in dispute resolution.

Parties involved in an adjudication have an immense responsibility to uphold the principle of the rule of law, because of the fragile but well-intentioned foundation on which the adjudication process is built. This is a story about what can happen if they don’t.

Adjudication is the high-speed line on the litigation network. The only emergency brake is the point after a decision is made and before enforcement action is taken. The parties should always take stock and reflect at that moment, because the conduct of the parties during the adjudication itself will become crystalised for regulatory examination once the decision is enforced.

Prior to the introduction of adjudication, the building industry was hampered by poor payment practices that enabled reluctant employers to withhold and delay payments by litigating claims through the courts. This was a key catalyst for the passing of The Housing Grants, Construction and Regeneration Act 1996, giving a right for parties to building contracts to refer disputes to adjudication. The process was designed to help improve cash-flow for contractors during construction projects, by providing a fast, simple and cheap resolution mechanism, and with a social purpose to keep the wheels of the building industry turning.

A party can commence adjudication proceedings at any time. There are no pre-action protocols to follow. There is no financial limit to the amount claimed. The referral must be for a single dispute. The referring party has one shot at compiling its referral notice, which is the equivalent of a statement of claim. The responding party has a right to a single response, at which point the adjudicator has unfettered discretion to proceed directly to a decision, or to allow a reply or rejoinder to gather more information or evidence. The procedure must be completed in 28 days.

There are limited grounds to challenge an adjudicator’s decision. The courts will not revisit the decision itself, regardless of its probity, unless the disgruntled party can show in a challenge to enforcement that there is a short and self-contained issue that arose in the adjudication that requires no oral evidence or other elaboration beyond that which is capable of being provided during the interlocutory hearing set aside for the enforcement. It’s a game of pay now, argue later.

So, for adjudication to work properly, these compromises on due process must not be allowed to derail the rightful carriage of justice. That places a heavy duty on the participants. It should be a reassurance that the principal actors are usually members of regulated professions. In this story we have the Solicitors Regulation Authority (SRA) for the lawyers, The Royal Institution of Chartered Surveyors for the adjudicator and the Architects Registration Board for the expert witness.

The story

After recent construction works, a building owner notices leaks in the roof of its city office building, and the commercial tenants complain. The roof is repaired.

Five years later, a new owner of the building initiated an adjudication against the contractor, alleging that the roof membrane had not been properly installed, violating the manufacturer’s guidance. The contractor submitted evidence to the adjudicator to prove that the manufacturer’s guidance was complied with, directly contradicting the owner’s claim. However, the adjudicator permitted the owner to submit a second witness statement, without allowing the contractor to respond. The adjudicator then based the decision solely on the second witness statement.

After the decision, the contractor discovered that the second witness statement was a false account of a conversation with the manufacturer. If the contractor had been given the opportunity to challenge the second witness statement, the decision would have been reversed.

In the same way a multi-disciplinary team in the critical care unit of a hospital observes the Hippocratic Oath by working together to uphold medical standards, professionals in quasi-judicial proceedings like an adjudication must commit to upholding the constitutional principle of the rule of law and the proper administration of justice.

An examination of the roles and duties of each actor in this story creates a vivid picture of how the odds can be stacked against contractors.

The lawyer

For lawyers acting for the referring party, it can be tempting to find ways to believe what they would like to be true, to secure an instruction to act for the employer. Often, multiple disputes can be present in a single claim, so the lawyer’s skill lies in finding the one that is likely to generate the biggest payout in an adjudication. It is a form of reverse engineering which lawyers are highly adept at. This is particularly advantageous when used in complex claims such as breach of contract, which would otherwise be subject to several layers of procedural checks and balances under the Civil Procedure Rules.

A decision by an employer to take the adjudication route for such cases could not be further removed from the stated purposes of the process. It is unsuitable for a complex contractual dispute, where the speed of the decision plays no part in advancing equity, and the accompanying shortcuts in scrutinising evidence are likely to be severely prejudicial to the fairness of the outcome. It is telling to observe that contractors rarely instigate such claims for that reason.

From a critic’s perspective, using adjudication in these circumstances could be seen as a form of professional cheating. By using a fast-track system that bypasses the normal rules of procedure and evidence, the referring party must ensure their claims are sufficiently investigated and not overly complex. The referral notice should only put forward statements, representations or submissions which are properly arguable and substantiated, because the responding party has no right, ability or time to test the evidence.

The adjudicator

The adjudicator’s primary and overriding duty is to act impartially, ensuring that disputants are treated equally. The role carries responsibility and power in equal measure, and should serve as another layer of security in a real world twomulti-factor authentication system. The adjudicator, like the lawyer, is tasked to uphold the constitutional principle of the rule of law in the vulnerable adjudication environment. It is a central tenet of the rules of natural justice, which adjudicators must abide by, to give a party a reasonable opportunity to respond to submissions or evidence relied on by the other.

Qualification and training requirements for adjudicators are inconsistent and largely unregulated. While there are numerous Adjudicator Nominating Bodies (ANB), there is no pre-qualification requirement and no uniform standard of competence. Most adjudicators appointed by ANBs are professionals drawn from diverse backgrounds, such as in surveying, legal, architecture and engineering. Their applications are often scrutinised to a high standard, but the ability to challenge an adjudicator’s conduct depends on the lottery of which, if any, regulated profession the adjudicator is a member of.

The witness

Witness evidence supporting a referral or a response in adjudication will be verified by a statement of truth, which serves as critical protection in the process. Typically, experts will confirm that opinions expressed lie within their fields of expertise and disclose any matters which might adversely affect their opinions. They are also obligated to notify their instructing parties if they subsequently consider their evidence requires any correction or qualification. If the commitments in a statement of truth are ignored and the witness is not held to account, public trust and confidence in the profession and in the rule of law can be undermined.

The ending

It is easy to see how multiple failures across multiple actors – lawyers, adjudicators and witnesses - can undermine the value of adjudication in protecting the contractor’s side of the construction industry partnership worthless. The question remains whether regulators will step in to right the wrongs of a dispute resolution mechanism which can be hijacked and led down a course that it was never intended to follow.

This guidance from the SRA is apposite.

The courts often accept that such cases have been pursued in accordance with a client's instructions. However, while solicitors are responsible for the strategy of their client's case, they cannot abrogate their responsibility to the court and to regulatory principles and codes, on the basis that they are acting on their client's instructions alone.

Although solicitors are not routinely obliged to challenge their own client's case, they do have a duty to interrogate and engage properly with the legal and evidential merits. They must avoid advancing arguments that they do not consider to be properly arguable and they must have regard to the rule of law and the proper administration of justice.