Construction Disputes – Christmas Ambush
In the run up to Christmas, most of us think food, tinsel and Christmas songs. For the lucky ones, your mind might be on the closure of your office given that many industries shut down during the Christmas period, if only for a few days.
The construction industry, like many others, is one of those industries that shuts down and re-opens in the new year.
It is uncommon for construction contracts, such as JCT’s (‘Joint Contracts Tribunal contracts), to specifically address the Christmas period and the industry shutdown. Instead, parties factor this period into the schedule of works. Whilst construction may temporarily shut down during the festive period, the disputes that arise do not, making Friday 23 December a dreaded day for many in the industry. The reason: Adjudication Notices.
If a contract falls under the remit of the Housing Grants, Construction and Regeneration Act 1996 (“the Construction Act”), a party has the statutory right to refer any dispute, at any time, for adjudication (“Adjudication Notices”).
Adjudication is intended to be a swift and cost-effective process by which construction disputes can be settled, usually within a 28-day timeframe (unless the parties agree to extend this timeframe). The appointed adjudicator (decision maker) should be an expert on the matter at hand, with years of experience. The types of disputes that can be referred are extensive and can range from simple disputes regarding interim payments or delay and disruption of the works, to the more complex disputes regarding a breach of contract and/or professional negligence.
So why are the last few days before Christmas important?
Adjudication is a 28-day procedure overall, but also has timescales imposed when dealing with certain elements. For example, the usual timeframe for serving a referral notice or a response to the referral notice is 7 days. Under the Construction Act, weekends count as days and only Christmas Day and Bank Holidays are excluded.
Despite December supposedly being the month of charity and goodwill, it is not uncommon for Adjudication Notice to be served on the last few working days of the month. Why? Because, unless an extension of time can be agreed or granted by the adjudicator, the deadline for a defending party to respond can be as short as 7 days, as stated above. In practical terms, this means that if an Adjudication Notice is served on Friday 23 December and a response is required in 7 days, the deadline for filing this response would be 4 January 2023. Given the complex nature of construction disputes and parties on annual leave, this adds pressure to an already pressurised situation.
If a party fails to comply with their obligations under the Construction Act, this can have a significant outcome on the dispute.
What Christmas ‘Top Tips’ can we offer?
1. Consider defusing potential disputes in the run to the Christmas.
Identify and discuss problems as soon as possible. Do not let a nasty surprise spoil the Christmas break.
2. Be vigilant.
It is important to keep a careful eye on all communication channels. All too often (especially since the Covid pandemic) a company’s registered office is different to their principal place of business. If an Adjudication Notice is sent to the registered office and not picked up for a few days, this has a significant impact on your timeframe to respond and inevitably increases stress.
If you have a remote office or registered office that is not your principal place of business, make sure to check the post regularly and make sure the person checking the post understands what needs to be actioned immediately.
3. Be organised
If a dispute is inevitable, start gathering up all your paperwork. Start collating your contract(s), any Pay Less Notices, communications regarding any variations or on the dispute itself. The more documentary evidence you have, the better. Make the adjudicator’s job easy, help them understand your position.
4. Take immediate action
If you receive an Adjudication Notice, do not delay and seek legal advice as soon as possible! The earlier dispute resolution practitioners are involved, the greater value they can provide.
5. Meet your deadlines – Do not leave it to the last minute.
Respond in time, so you are not giving the other party an upper hand. If you have to respond in 7 days, that does not mean you can send your response on day 7, it means the receiving party must receive it on or before day 7.
Thankfully, this tactic is being used less and less. Nevertheless, serving notice late in December is still a tactic deployed. If the dispute relates to payment, tough economic times and the Christmas period can incentivise parties to use this tactic.
In the event that you are served with an Adjudication Notice, you should not only get early legal advice, but you should also speak with your own building surveyor and/or quantity surveyor and get their initial assessment on the issues raised within the Notice. A surveyors input is also crucial when dealing with an Adjudication Notice.
If you require any advice, please do not hesitate to contact Herrington Carmichael’s Dispute Resolution department.
Merry Christmas and a Happy New Year!
This reflects the law and market position at the date of publication and is written as a general guide. It does not contain definitive legal advice, which should be sought in relation to a specific matter.
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