Chapter 1 : Introduction

1.1

Background of Topic

The construction industry has been and will continue to be prone to disagreements and disputes due
which is by its nature. These are largely contributed by the complexity of the construction process
which are frequently expose to many uncertainties and risks, along with probable gaps between the
various parties involved in the process which comes from different disciplines (Murdoch and Hughes
2000; Latham 1994). Having accepted this fact, the industry has and is continuously seeking efforts to
improve the methods available for resolving construction disputes.
One of these efforts include the introduction of Adjudication through legislation back in 1998, where
under the Housing Grants, Construction and Regeneration Act (the Act) any party to a construction
contract has the right to seek resolution at any time from a neutral third party known as the
adjudicator. It was also a respond to the recommendations made by Sir Michael Latham in his report
Construction the Team: Final Report of the Government/Industry Review of Procurement and
Contractual Arrangement in the UK Industry (Cottam 2002, p.1). It has become one of the most
significant innovations made in the UK construction industry (Ndekugri and Russell 2006, p.380). In
contrast to other dispute resolution mechanisms, current literature suggested that adjudication provides
rapid and speedy dispute resolution which saves energy, resources and time as well as securing parties
working and business relationships (Naseem 2006; Gausen 2005; Redmond 2001).
From its early years, adjudication has been gaining more popularity compared to other resolution
method. Newman (2008) claimed that adjudication has become the prime force for construction
dispute resolution demising from arbitration due to its quick resolution and cheap cost. While the
temporarily binding effect of an adjudicators decision until final determination is made through
arbitration or litigation (Lloyd 2005), has made adjudication becoming more preferred resolution
method than negotiation and mediation. Besides that, the Technology and Construction Court is said to
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have been able to deal with disputes more promptly due to the rise of adjudication that has reduced the
courts case load (Jones 2008). It has been described as a pay now and argue later policy, which
helps improve the general performance of the construction industry by reducing projects from being
starved of cash whilst disputes are resolved by the traditional methods of litigation and arbitration
(Ndekugri and Russell 2006, p.381). Its successful has even attracted other countries to give it a go,
making it now a global trend for the construction industry. This can be evidenced by the adaptation of
similar legislation in other countries such as Australia, New Zealand, Hong Kong and Singapore,
whereas in other parts of the world, such legislation has been suggested for introduction. For example,
in Malaysia, Construction Industry Payment and Adjudication Act is still being considered by the
Parliament as a tool to help them resolve payment-related issues (Naseem 2007).
Despite the fact that adjudication has brought a lot of positive impacts to the UK industry, there are
still those who always try to find ways to make dispute resolution not an easy task. As mentioned
earlier, the decision made by an adjudicator has only an interim binding effect. This requires every
party in disputes to comply with the decision only until the dispute is finally determined by other
proceedings such as litigation, arbitration or an ultimate tribunal. Therefore, the best thing for a
successful party to do is to enforce the decision made by the adjudicator by applying for a summary
judgement, mandatory injunction, statutory demand or Part 8 proceedings (Riches and Dancaster 2004
pp.265-73). Nevertheless, losing parties tend to make their way on resisting the enforcement. Some of
them may simply scrabble to find argument to resist payment and trying to delay the quick resolution,
but some do genuinely believe that they do have probable reasons for challenging the decision.
Herbert (2007) had reported that by end of last year, there have been over 250 reported court decisions
on adjudication. Majority of these cases are related to the issue of challenging the enforcement of an
adjudicators decision. However, the courts have been consistently protecting the statutory
adjudication from this attack. Macob Civil Engineering Ltd v Morrison Construction Ltd [1999] 64
ConLRI was the first case where the courts had to consider the adjudication provision of the Act. Mr
Justice Dyson (whom he was back then) made it clear in that case that the court would not accept
arguments that undermine the effectiveness of the adjudication scheme. Similar views were also given
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in RJT Consulting Engineers Ltd v DM Engineering (Northern Ireland) Ltd [2000] EWCA Civ 270
and Pegram Shopfitters Ltd v Tally Weijl UK Ltd [2003] EWCA Civ 1750.
There have been varieties of reasons used by reluctant parties to make challenges against the
application to enforce adjudicators decisions. There are cases where the resisting party may argue that
the adjudicator had no jurisdiction to adjudicate the dispute (Carillion Construction Limited v
Devonport Royal Dockyard Limited [2005] EWCA Civ 1358), while in other cases the losing party
may argue that the adjudicator had acted in breach of natural justice, making his decision
unenforceable (AMEC Capital Projects Ltd v Whitefriars City Estates Ltd [2004] EWHC 393 (TCC),
[2004] EWCA Civ 1418). There are also cases that argued that the decision cannot be enforced
because the contract came into being prior to 1 st May 1998, therefore the adjudicator had no
jurisdiction (Project Consultancy Group v Trustees of the Gray Trust 65 ConLR 146), which
nowadays could no longer be relevant. Others resist the enforcement arguing that the decision made by
the adjudicator is wrong (C&B Concept Design Ltd v Isobars Ltd [2002] EWCA Civ 46).
In some cases, the resistance is made on several grounds that the party believe they have prospect to
challenge the decision. For example, in Ale Heavylift v MSD (Darlington) Ltd [2006] E.W.H.C. 2080
(TCC), the defendant had challenged the enforceability of the adjudicators decision on several
grounds which include that the second contract was not in writing, the defendant was entitled to set off
sums, the adjudicator had unfairly exclude the defendants cross-claim, the claimant is insolvent and
may be unable to repay any money that was paid to it and many more. Although, quite a number of
grounds were used, HHJ Toulmin QC in High Court of Justice High Court concluded that none of
these challenges were successful and held to enforce the adjudicators decision. This shows that
although resisting parties may come up with all sorts of arguments to resist the enforcement, not all of
the challenges made may be accepted by the courts.
Therefore, it is clear that adjudication has been widely used and preferred by many as a means to
resolve construction disputes. Nevertheless, there are reluctant parties that refused to comply with the
decision made by adjudicators, since the decision is only temporarily binding, thus challenging the
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application to enforce such decision. Further to that, many grounds for challenging the decision of an
adjudicator have been canvassed in the court. Thus, it is important for construction players who have
preferred this method, as well as for those who has just embarked on it to understand the adjudication
process, the issue of resistance towards the enforcement proceedings, and more importantly to
understand the principles governing the determination of such resistance. The scope of study for this
research will be limited to the UK adjudication system in regards to construction disputes, because UK
is the pioneer in this dispute resolution technique.
1.2

Aim and Objectives of Research

Generally, the aim of this research is to develop knowledge and understanding on the most
common grounds used to challenge the enforcement of adjudicators decisions, in the context of
UK construction industry. To achieve the aim of this research, the following objectives were
identified:
i.

to study on the overview of statutory adjudication and the issue of challenging the

ii.
iii.

enforcement of adjudicators decisions;

to identify and investigate the grounds used for such challenge;
to identify the two most commonly used ground for such challenge and further identify

iv.

another two most commonly used bases for challenge under each of these grounds;
to critically examine cases in which the courts have dealt with the issue of challenging the

v.

enforcement of adjudicators decisions;

to identify the legal principles governing the determination of such challenges;

vi.

to make necessary recommendations such as ways promote a more effective adjudication

and recommendation for future research.

1.3

Research Methodology

To achieve the aim and objectives of the research, a specific methodology strategy needs to be planned
and adopted accordingly. This research is more of a legal based research which involves a critical
examination on court cases that are relevant to the subject in matter. Basically, the methodology used
in carrying out this research involves several stages that include the collection of secondary data,
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literature review, collection of primary data, statistical analysis, legal analysis, as well as findings,
conclusion and recommendation. The process involves are described in more detail in the next chapter.
References were made to Holborn (2006), Hanson (2003) and Chatterjee (1997).
1.4

Summary of Findings, Conclusion and Recommendation

The following are the findings derived from this research:

a)

Statistical Analysis
It was identified in section 5.2 that more than 50% of the total cases dealing with challenges
made against the application to enforce adjudicators decisions, within the last 10 years, was
contributed by jurisdictional challenge. The second highest contributor was breach of natural
justice challenge with 18%. Under the jurisdictional challenge, the basis of challenge which
contributed most to the high number of cases was contract not in writing with 16%, while
no dispute came at second place which contribution of 13%, as identified in section 5.3.1.
Besides that, a majority of 68% of the total challenges made under jurisdictional challenge,
was held not to be successful by the courts, 30% was successful, while challenges that were
not considered by the court makes up the 2% balance, as described in section 5.3.2.
In section 5.4.1, it was identified that the basis that contributed the most to the total number of
cases in regards to breach of natural justice challenge, was failure of the adjudicator to
consider a partys submission with 24%, and the second in the rank was use of the
adjudicators own special knowledge with 18%. Besides that, 61% of the challenges made
under breach of natural justice challenge was unsuccessful, 37% was successfully, and the
remaining 2% involves cases where the challenges were not considered by the courts, as
identified in section 5.4.2.

b)

Legal Analysis on Jurisdictional Challenge

Issues that were raised in courts when jurisdictional challenge are made on basis that the
contract was not in writing, were whether or not all the terms of the contract were needed to
be evidenced in writing, and issue on the true interpretation of section 107(5) of the Act. It
was discovered in section 6.2.1 that majority of the courts accepted that for there to be a
contract in writing for the purpose of adjudication, all the terms of the contract must be
evidenced in writing. It was also found in section 6.2.2, that most courts that dealt with section
107(5) of the Act stated that this provision applies when there has been an exchange of written
submissions during a preceded or current adjudication, arbitration or litigation, where one
party alleges that the contract was other than in writing and the other party did not denied it.
Jurisdictional challenge made on basis that there was no dispute as discussed in section 6.3,
raised the issue of whether or not there was a dispute and whether or not such dispute was the
pre-existing dispute. It was discovered in section 6.3.1, that to decide the issue, the courts are
influenced by the definition of dispute used. Some courts adopted the wider definition being
that a dispute should be given its ordinary meaning without any special, while the rest applied
a narrower definition giving special meaning to the word dispute.
c)

Legal Analysis on Breach of Natural Justice Challenge

It was identified that the issue arose from arguments that the adjudicator had failed to consider
a partys submission under the breach of natural justice challenge is whether or not such
failure invalidates the adjudicators decision. In section 7.2., it was discovered that later cases
have established that such failure by the adjudicator is simply an error that does not invalidate
the decision and does not constitute a breach of rules of natural justice. Explanation given was
that this error is expected to occur due to the speedy process of adjudication. But if it was
apparent that the adjudicator had acted unfairly by such failure, the court would refuse to
enforce the decision.
The issue in the use of own special knowledge by the adjudicator is whether or not the
adjudicator had in fact used such knowledge. Challenges will be accepted only if it was
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obvious that the adjudicator had adopted his own special knowledge in making his decision
and did not invite the parties to make comments or representations. Moreover, only knowledge
that is decisive and potentially important would require the adjudicator to bring the matter to
the attention of the parties. It was suggested that decision that differs than what the parties had
asserted does not necessarily means that a special knowledge was used, and only the party that
was deprived from the use of such knowledge should make the complaints.
The following conclusions were drawn from the whole research:
i.

Adjudication offers a speedy dispute resolution for the UK construction industry, where its
success in the industry had made it a global trend. The procedure is less formal than litigation
and arbitration, with the decision made by an adjudicator has only a temporary binding effect,
unless otherwise agreed by the parties. Parties to adjudication must comply with the decision
in order to attain the benefits that the system offers. Where a party resist to abide to such
decision, the other party may seek from the courts to enforce the decision, commonly by way
of summary judgement, thus making it binding on both parties. Therefore the first objective of
this research has been achieved.

ii.

There have been quite a number of court cases on adjudication, with majority of it contributed
by the resistance of the losing parties to comply with the adjudicators decisions. Reasons
alleged for such resistance were adjudicator had no jurisdiction, adjudicator was in breach of
natural justice, breach of Human Rights Act 1998, the decision is wrong, subsequent
correction of the decision, entitlement of paying party to set-off or abatement, insolvency of
paying party, stayed to arbitration or litigation, and exclusive foreign jurisdiction clause.
However, only challenges made for reasons that the adjudicator had acted without jurisdiction
or acted in breach of rules of natural justice, will the court consider not to enforce the
adjudicators decision. Therefore the first and the second objectives of this research have been
achieved.

iii.

Within the past 10 years, most of the challenges made by the reluctant parties were made on
grounds that the adjudicator had no jurisdiction and the adjudicator had breach the rules of
natural justice. Under the jurisdictional challenge, the two most widely used arguments were
contract is not in writing and no dispute, while for breach of natural justice challenge, the
arguments commonly used were failure of the adjudicator to consider a partys submission
and use of the adjudicators own special knowledge. Nevertheless, most of the challenges
made were not accepted by the courts, suggesting the protectionism of the courts towards
adjudication. Therefore the third objective of this research has been achieved.

iv.

For now, when it comes to allegation that contract was not in writing as defined in section 107
of the Act, the court will consider whether or not all the terms of the contract were evidenced
in writing. The Department of Trade and Industry had suggested to delete such requirement
because it limits the access to adjudication. Until it is approve by the Parliament, the only
exception to this principle is where during an exchange of written submission made in a
preceded adjudication, or the current adjudication or at arbitration or litigation, one party
submits that the contract was other than in writing, and the other party did not denies it, which
complies with section 107(5) of the Act. The cases analysed showed that half were successful,
while the other half were not. Where it was alleged that there was no dispute, the courts
decisions depend heavily on the definition of dispute that will be adopted. Some courts
applied the narrow definition, while the majority implemented the wide definition where the
word dispute should be given its ordinary meaning, without any additional ingredients to it.
And most of the cases analysed showed that the challenges made have not been successful.
Therefore the fourth and the fifth objectives of this research have been achieved.

v.

The courts displayed reluctance to allow challenges made due to failure of the adjudicator to
consider a partys submission because such failure is an error that does not amount to a breach
of rules of natural justice since it is very likely to occur in adjudication due to the quick
resolution process. Only where it was obvious that the adjudicator had acted unfairly to the
parties by such failure, will the court decide not to uphold the adjudicators decision. As for
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use of own special knowledge by the adjudicator, challenge on this basis have a very low
chance of succeeding. The court will decide whether or not the knowledge used by the
adjudicator was decisive and potentially important to his decision, and whether or not the
adjudicator had provide the parties opportunity to comment or make representation. Perhaps,
the position of the ground being the second most widely used for challenge are contributed by
the suggestion that the challenge under this ground are very likely be accepted by the court;
but these two bases of challenge do not seem to fall within this category. Therefore the fourth
and the fifth objectives of this research have been achieved.
The following recommendations were made based on the findings from the whole study. Accordingly
the final objective of this research has been achieved:
i.

Parties who are about to enter into a contract or has a right to adjudication, it recommended to
consider to agree on the definition of the word dispute for the purpose of adjudication, as
part of their contract provisions by getting advises from their legal advisors or contract
drafters to ensure such definition are for the best interest of the project and both parties. It
could be even better if the legislation itself provide a more clear definition of dispute for the
purpose of adjudication.

ii.

It was recommended to parties who intend to make challenges on reasons that the adjudicator
had acted in breach of rules of natural justice, to ensure that they have a strong case because it
would not be enough to simply make such an allegation without clear evidence that the
adjudicator had appeared to have acted unfairly.

iii.

Recommendation for future research was also made to focus on other grounds for challenging
enforcement of adjudicators decisions, other than jurisdictional challenge and breach of
natural justice challenge.

iv.

It was also recommended that future research should be done to cover the other basis of
challenges used to make up arguments for jurisdictional challenge and breach of natural
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justice challenge, other than those covered in this research, being contract not in writing and
no dispute for jurisdictional challenge, and failure to consider a partys submission and use
of adjudicators own knowledge for breach of natural justice challenge.
1.5

Restrains and Limitations

In searching the available data to be analysed, one of the limitations that existed was during the
process of collecting the relevant cases in relation to the area of research. The difficulty was having
acquired cases from law cases database, some cases that are not reported but are relevant to the issue
cannot be included in the analysis because the full text of the law reports are not available in the
databases for reference. Although such limitation may not be totally eliminated, additional effort were
taken to at least minimise its impact on this research.
Another limitation in this research came about from the nature of law itself which is in the state of
flux. If the decision of the cases being referred to was held by the First Instance Court or Court of
Appeal, the conclusions of such cases are not in a strong position. In other words, if the similar cases
were to be resolved up to the House of Lord, there is a possibility for a different decision being
concluded in contrast to the decision made by the First Instance Court or Court of Appeal. Therefore,
the former decision is no longer relevant. There is never an ultimate decision until such decision is
made by the House of Lords. The decision of the cases that are held by the House of Lords will be a
good reference for this research because such decision is definitive.
Time limitation is only one of the main restrain in this research. Since the general area of the research
topic is very extensive consisting quite a number of grounds for challenging the application to enforce
adjudicators decisions , due to limitation in time, not all grounds of challenge that have been used to
make such challenges can be covered under this research. Therefore, this research only focused on the
top two most commonly used ground to challenge, with further focus on the top two widely use basis
of arguments under these two grounds of challenge.
1.6

Research Beneficiaries
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One of the underlying purposes of this research is to produce useful references to the parties involved
in the delivery chain of construction industry, which may include employers, construction consultants,
main contractors, sub-contractors, as well as suppliers. It is hope that these professionals will attain
better understanding on the principle and procedures of adjudication.
The investigation on the grounds for challenging the decision of an adjudicator through analysis of
sufficient legal cases might reveal the weakness of the adjudication procedure in the United Kingdom.
Therefore, the findings derived from this investigation may be useful, where there is a probability for
solutions or even new ideas to be recommended to improve the Housing Grants, Construction and
Regeneration Act 1996. This may result to a reduction in the number of cases brought to litigation.
Eventhough the research area is limited to the UK construction arena, it would be a good reference to
the Malaysian Industry Working Group (WG10) led by the Institution of Surveyors Malaysia (ISM) to
improve the outline proposal of a Malaysian Construction Industry Payment and Adjudication Act.
Thus, it can contribute towards reducing payment default and increase efficiency in resolving disputes
in the construction industry to achieve the vision of making the industry a world class by 2015.
Possession on the knowledge and understanding about the ability to challenge an adjudicators
decision could alert the adjudicators on matters that call for their serious attention, particularly in
conducting the adjudications and making the decisions.
Finally, this research could also be useful to students who study in contract law, construction law and
quantity surveying, because this exploration may provide better understanding on the related issues
pertaining to the objectives of this study.
1.7

Guide to Dissertation

Chapter 1

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The First Chapter is basically an introduction to the research background, aim, objectives and scope of
research, research methodology, summary of the findings, conclusion and recommendation, research
limitations and beneficiaries, and outline structure of the research.
Chapter 2
The Second Chapter basically describes the methodology adopted which involves collection of
secondary data, literature review, collection of primary data, statistical analysis, legal analysis, and the
findings, conclusion and recommendation.
Chapter 3
The Third Chapter is a literature review on the overview of adjudication system in the UK, covering
the period prior to and after the introduction of the Act, its current development and the general
procedure in adjudication. All data is based on relevant textbooks, journals, article, and other sources.
Chapter 4
The Fourth Chapter involves literature review on the issue of challenging the adjudicators decisions.
Most importantly it described the ten main grounds of challenge that have been used by resisting
parties to make such challenges in enforcement proceedings. All information is based on relevant
textbooks, journals, articles, the Act and the Scheme and other sources.

Chapter 5
The Fifth Chapter involves statistical analysis, which contains simple bar chart presentations to
illustrate the number of cases that relates to the issue of challenging the enforcement proceedings
according to the type of grounds available. Further presentations are also made on the two most widely
used ground being jurisdictional challenge and breach of natural justice challenge to illustrate the

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number of cases for each of the further basis of challenge made under these two grounds, as well as to
compare the number of cases where the challenges made were successful and unsuccessful.
Chapter 6
The Sixth Chapter is basically one of the core parts in this research, involves legal analysis which
focused on critically examining and analysing the relevant court cases in relation to the most
commonly used ground for challenge being jurisdictional challenge, but covering only the top two
most used basis of challenge being contract not in writing and no dispute.
Chapter 7
The Seventh Chapter is the other core part of this research which involves legal analysis which
focused on critically examining and analysing the relevant court cases in relation to the second most
commonly used ground for challenge being breach of natural justice challenge, but covering only the
top two most used basis of challenge being failure to consider a partys submission and use of the
adjudicators own special knowledge.
Chapter 8
The Final Chapter consists the summary of findings, conclusion and recommendation of the whole
research. The findings and analysis, conclusion and recommendation are utilized in order to answer
the objectives of the research.

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