Peter Jansen who specialises in construction law and dispute resolution, examines the roles and functions of the JCT’s Dispute Adjudication Board and highlights some key considerations for parties planning to adopt the Rules in their JCT contracts.
In March 2021 the JCT issued the JCT Dispute Adjudication Board Rules 2021 (the “Rules”).
This is the first attempt at introducing an Adjudication Board (“DAB”) specifically for use in the UK. As such, the Rules need to comply with S.108 of the Construction Act 1996 (the “Act”) and whilst they are likely to be compliant, jurisdictional challenges are still a possibility.
Roles and Functions
DABs serve both as an advisory panel to help resolve disputes throughout a project and also as the formally appointed adjudicator to whom disputes are referred. There is potential tension between these two roles.
The advisory role has three functions:
- Periodic site visits and meetings with the parties on site;
- Providing non-binding ‘informal advisory opinions’; and
- Making non-binding ‘recommendations’ through a formal process.
Setting up the DAB
In order for the Rules to take effect, the JCT contract the parties are to use has to be amended. The supplement containing the Rules includes recommended wording that incorporates them into the contract. JCT contracts otherwise apply adjudication rules under ‘Scheme for Construction Contracts’ 1998 (“Scheme Rules”).
Once adopted, the DAB Rules become mandatory, with some exceptions. The Scheme Rules are not replaced, however, they are retained for cases where the Rules cannot be implemented. Once the contract is signed, the DAB should be appointed within 20 days. If DAB appointments cannot be agreed this can be done by the Chartered Institute of Arbitrators on request by either party.
JCT DAB panels come in two sizes: a one person DAB or a panel of three. There are risks in the number the parties select, as explained opposite.
Another scenario is where a JCT contract is signed with DAB Rules, but the parties then do nothing to appoint the DAB. If a dispute arises, without a DAB having actually been appointed, adjudication can proceed not under the DAB rules but under the Scheme Rules, which become the default in this situation.
There are other exceptions where the Scheme Rules would be applied instead of the DAB Rules. These include DAB failing to reach a decision, cases of extreme urgency or requiring relief outside the powers of the DAB (e.g injunctions).
Compliance with the Construction Act
The Scheme Rules in any event apply whenever adjudication provisions do not comply with S108 of the Act, so do the Rules comply? To do so, they must:
“Enable a party to give notice at any time of his intention to refer a dispute to adjudication.”
The Rules do this. Whilst they offer alternatives, adjudication is commenced by a party notifying its intention to refer a dispute to the DAB and is mandatory for obtaining a decision.
“Provide a timetable to secure the appointment of the adjudicator and referral of the dispute to him within seven days of the notice of intention to refer.”
In appointing the DAB parties chose between the options of a one-member or three-member DAB. The Rules can only clearly comply with the seven day timetable requirement if the single-member option has been selected in the contract.
A three-member DAB is problematic because S108 makes no provision for a “plural” adjudicator. It has been argued that the word ‘adjudicator’ used in S108 doesn’t require the adjudicator to be a single or ‘natural’ person.
Nevertheless, the position is unclear. S108(2)(b) refers to the ‘appointment of the adjudicator and referral of the dispute to him within seven days of such notice’.
The same pronoun appears in S108(2)(c), with “his” and “him” used consistently throughout, pointing to a requirement for a single adjudicator. Paragraph 4 of the Scheme also provides: ‘any person requested or selected to act as an adjudicator in accordance with paragraphs 2, 5 or 6 shall be a natural person acting in his personal capacity’, which suggests (although does not mandate) a single adjudicator.
Arguably if the intention had been for the “adjudicator” to be either singular or plural a neutral expression such as “the tribunal” as in the Arbitration Act 1996 would have been used. Whilst a panel of three is not expressly precluded, it is safer to choose a single adjudicator.
“Require the adjudicator to reach a decision within 28 days of referral to him or such longer period as is agreed by the parties after the dispute has been referred”.
This time limit provides a further good reason for a single adjudicator requirement in the legislation. Ordinarily, it can be met by a single adjudicator. Imposing this commitment on three independent adjudicators is likely to involve a greater burden.
That will be increased because the 3 member DAB must always try to reach a unanimous decision. The DAB is likely to have less than 28 days to reach a decision because time must be allowed for trying to achieve unanimity.
As written, the Rules do reflect this precise requirement of S108. However, doubt remains about whether the requirement for a three-member DAB to reach a unanimous decision within 28 days from receipt of the referral is realistic or achievable.
The Rules comply with other S108 requirements and are consistent with them.
The referring party notifies the responding party and simultaneously the DAB of its intention to refer a dispute to adjudication. Within seven days from that notice the referring party serves its referral on the DAB and the responding party. At that point 28 days for reaching a decision commences. The DAB can establish its own procedures in the adjudication.
The Scheme empowers the adjudicator to arrange independent tests / experiments, e.g., on defective materials. By contrast the Rules empower the DAB to “make use of its own specialist knowledge” e.g., meaning that one member of a three-member DAB panel could give expert advice to the DAB as a whole. The position of a single member DAB is unclear.
Under the Scheme, the adjudicator may by agreement appoint his own experts, assessors or legal advisers. In disputes about instructions to open up the works for inspection, JCT contracts require the adjudicator either to have his own relevant expertise or to appoint an independent expert with suitable expertise. The DAB Rules if applicable cancel these requirements.
The focus on a DAB’s own specialist knowledge could involve the opinion of another member, perhaps a member not previously involved in the dispute. In that situation rules of natural justice should be observed.
These can require the DAB to share with both parties any technical opinion (including from another member of the DAB) upon which a decision might be based. In RSL (South West) Ltd v Stansell1 Ltd the TCC refused to enforce an adjudicator’s decision which relied upon the final report of an expert that had not been shared with both parties.
The Scheme requires adjudicators to make available all information taken into account in reaching his decision, including all the information that it receives from third parties such as experts. The equivalent Rules, however, only cover information received from parties to the dispute.
Decisions are binding pending final determination of the dispute by a court or arbitrator. Unlike a scheme adjudication, the DAB adjudication is mandatory: disputes cannot be referred to arbitration or court proceedings unless first determined by the DAB. Even if a final determination is sought, the adjudicator’s decision must be complied with without delay. Summary relief is available from the court to secure compliance until the dispute is finally determined.
As an alternative to an adjudication decision the Rule allow the referring party instead to ask the DAB to make a “Recommendation”.
Although procedural rules for arriving at a Recommendation are the same for reaching a decision, a Recommendation is not adjudication under the Act. Therefore, many of the legal principles around adjudication would not apply to a non-binding Recommendation.
Although non-binding, a “Recommendation” is nevertheless admissible in later legal/arbitral proceedings: neither party is bound by the Recommendation, but the court could assess its evidential weight. However, parties should be cautious: unlike some forms of “evaluation” given by mediators, a “Recommendation” is not a “without prejudice” communication.
A favourable Recommendation cannot be used to support a subsequent referral for an adjudication decision on the same dispute.
Informal Advisory Opinion
The DAB can be asked to give an informal advisory opinion on a potential dispute. The opinion may be provided during a conversation with the parties (e.g., a conference call), at a meeting on site with the parties or during a site visit, or in a written note requested by the parties.
In any subsequent Recommendation or decision, the DAB is not bound by any “advisory opinion” it has previously given to the parties including any statements made during a site visit.
The intent is to capture anything said by the DAB in the nature of “advice”. The broad description covers much of what is stated, whether recorded or not and irrespective of the DAB’s intention.
Site Visits and Meetings
Informal advisory opinions are an extension of the DAB’s site visiting role. After an initial meeting, the frequency of the DAB’s site visits is agreed, with a default frequency of 2 months. During site meetings the DAB can take information from “informal conversations” with attendees about the performance of the contract and pending claims. Visits may also be combined with hearings of any disputes which have been referred for a decision.
The DAB will prepare a report of each site visit.
The DAB may not communicate, orally or in writing, with any one party in the absence of the other. Communications from one party
to the DAB must also be copied to the other.
Without prejudice correspondence is not to be copied to the adjudicator2.
The dual role of the DAB can mean that the risk of apparent bias from its presence at discussions on site will be inevitable.
Costs and Fees
Unless otherwise directed the parties are jointly and severally responsible for DAB members’ fees for ongoing site visits.
The DAB is empowered to decide how its fees for acting as adjudicator on any disputes will be apportioned. Ordinarily the losing party is ordered to pay these but not necessarily so. The parties must meet their own legal costs.
Peter Jansen is Legal Director at Sharpe Pritchard LLP.
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