Jonathan Nugent, Managing Director at Arbicon ADR Ltd, explains how many Contractors are still unaware of the right to Adjudication in construction contracts, and are losing out on significant payments due.
The construction industry is well known for late payment and indeed non-payment.
When Main Contractors and Subcontractors fall foul of a payment dispute, it
should come as a surprise that many are still unaware of their right to Adjudication to recover sums…but unfortunately it is not a shock to Arbicon.
After 23 years of the Construction Act being in force, providing rights to payment and Adjudication, it is incredible that so many firms still know nothing about it and how the process is designed to protect their rights and avoid Court proceedings. Not to mention the payment notice process and how many paying construction firms fall foul of it, using the Late Payment Act to compensate the suffering.
I will give you an example, I recently took a call from a Roofing Subcontractor, who had been hit by a Main Contractor for a Contra Charge of £20,000. The deduction was a round unsubstantiated number and was for alleged delay costs and defects. The case dated back 4 years and previously had some airing in Court through a failed attempt with a Statutory Demand, resulting in £5,000 costs for the Subcontractor.
Understandably sceptical that the issue could be cost effectively resolved, having been advised from a Solicitor that Court is an option but that costs would outweigh gain. They turned to Arbicon with some curiosity having seen that we deal with recovering Contra Charge payments, one of the many construction disputes we resolve…..without any need for Court. I advised Adjudication as being an affective dispute resolution in this situation, which the Subcontractor was unaware of, asking, “what is Adjudication?”, “am I too late to claim after four years?”. I explained the Adjudication process and highlighted that disputes are usually resolved within 28 days, with rights determined and sums recovered, and that there are six years to claim.
Unfortunately, this is a conversation I have too often with Contractors that are party to a commercial construction contract, unaware of their statutory righto adjudication, irrespective of any Court case, even after 23 years of it being in practice and widely successful.
With no written contract except for an exchange of emails, no payment terms and adjudication provisions, the Subcontractor had dismissed that they even had a case. They were unaware that although a construction contract is preferred and provides more protection, without one, the Construction Act and Scheme step in as terms. The Late Payment Act provides 8% over the base rate and the costs of pursuing the debt, except the Adjudicator’s fees.
The Contra Charge advice turned up 3 months after the payment application and no other payment notices or Pay Less Notices were served so the payment was due in Default. Arbicon wrote to the Main Contractor pointing out the position of the Subcontractor, with a claim for costs and interest, highlighting the right to adjudicate the default payment notice if ignored. Full payment was recovered swiftly.
There are many small contracting businesses who do not fully understand the commercial payment process and dispute management, ending up out of pocket thinking that a Court case is the only option.
Arbicon are regularly appointed as Expert Witnesses in Court proceedings and I find it incredible that in a commercial construction contract, where there is a significant amount disputed, the payee Claimant has not adjudicated to recover payments.
If you have a construction dispute, let us help, Arbicon are a Leading Practice of Chartered Quantity Surveyors and Construction Claims Consultants specialising in Construction Dispute Resolution and Alternative Legal Services (ADR) including Expert Witness. Get in touch with our expert team on firstname.lastname@example.org or call 01733 233 737.