Problem: I am the managing director of a general building company and we specialise in the erection of industrial warehouses.
Back in 2012, we received an enquiry from another main contractor (albeit much bigger than us). The work involved was for the construction of 3 new warehouses, whereby we would carry out the sub and super-structure works, at which point the main contractor’s team would carry out the M&E and internal fit-out for its client. Although we do not normally work as a sub-contractor, not only was the work routine, but would fit nicely into our order book! We tendered and won the work.
We completed the work last year. However, the main contractor was a nightmare to work for, and we have ended up in dispute over the final account. We believe we are owed just under £110,000, but according to the main contractor, no further monies are due.
During the last few months, letters have been flying back and forth. We have consulted a claims consultant who has told us that we should refer the dispute to adjudication. I did not like to show my ignorance, but I have never heard of adjudication. My very limited understanding of the legal system is that we just go off to court. Could you please enlighten me?
David, Leicester
Response: Hello David. Firstly, please do not feel embarrassed to ask your expert questions should you not understand something he has said, as the law and the resolution of disputes is very complex, even daunting for those outside the legal profession.
The Housing Grants, Construction and Regeneration Act 1996 as amended by the Local Democracy, Economic Development and Construction Act 2009 (“The New Construction Act”), gives any party to a construction contract the right to refer a dispute arising under the contract to adjudication. Although there are certain limitations, from your outline of the matter, I have little doubt that you will have the right to refer your dispute to an adjudicator.
The New Construction Act therefore gives you a statutory right to have the dispute decided by an adjudicator, and this right cannot be contracted out nor opposed by the main contractor. As a way of resolving disputes in the construction industry, statutory adjudication has revolutionised the way disputes are settled. It is quick (28 days to receive an adjudicator’s decision), can be inexpensive, and lawyers are not necessarily needed. Providing your case has a good chance of success, I would recommend that you give this dispute resolution method some serious thought.
There are other methods of resolving disputes, including arbitration (although this method is consensual), mediation and of course litigation. However, issuing a Notice of Arbitration or a Claim Form, you will need to send to the main contractor, a letter of claim, which is a requirement under the Civil Procedure Rules Pre-Action Protocol [for construction and engineering disputes], which requires the proposed claimant (i.e. you), to send to the proposed defendant (i.e. the main contractor), a letter of claim. More information can be obtained by viewing the Governments justice website.
A letter of claim essentially sets out your case. The Protocol lists what the letter must contain and this should be carefully followed. The Protocol also states the time period for a response.
Good luck.
© Michael P. Gerard MSc, PGDipLaw, PGDipBar, FCIOB, MCIArb, MAE
The advice provided is intended to be of a general guide only and should not be viewed as providing a definitive legal analysis.
Author background
Michael is a Barrister, Chartered Builder, Registered Adjudicator & Accredited Expert in quantum and planning matters. He is Managing Director of Michael Gerard & Co www.michael-gerard.co.uk, a company of chartered building consultants and quantity surveyors who provide a specialised service in the areas of construction law, quantum, programming, business recovery and insolvency support to the construction industry. Michael is also a practising solicitor and consultant with Silver Shemmings LLP.