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Adjudication? Not so fast….

With its rapid and relatively cost-effective process, adjudication is an attractive proposition for potential claimants, particularly where cash-flow is an issue. For responding parties, notice of adjudication can come as a nasty shock with little time to prepare a reply.

However, a dispute referred to adjudication must have “crystallised”. There are no hard and fast rules and crystallisation is determined on a case-by-case basis.  A dispute is likely to have crystallised in circumstances where a claim from one party is met with rejection, prolonged silence or procrastination over a response (e.g. excessive requests for further information).

Whichever side you are on, it is worth considering this issue at an early stage – perhaps at the merest hint of a claim. Referring parties should ensure that the dispute has crystallised. Responding parties may be able to delay the adjudication, allowing time for response preparation or even resolution of the claim.

For the referring party – ensuring your dispute has crystallised

Commencing an adjudication before a dispute has crystallised can result in protracted debates over crystallisation and adjudicator’s jurisdiction, or worse, may result in a court refusing to enforce an adjudicator’s decision. Often there is a clear rejection of your claim and in such cases there is little doubt the dispute has crystallised, however where the responding party has not responded or is seeking further information, it can be difficult to be certain.

Case-law requires that where the parties have been engaged in discussions or correspondence over an issue, a reasonable period must be given to allow a party receiving a claim to respond. Parties wishing to crystallise a dispute will often use wording such as “It is clear that a dispute has arisen between us” or perhaps “If you do not make payment/agree our position within [x] days we will assume that you dispute our claim”. 

On the receiving end?

It can be a useful tactic to delay or prevent crystallisation of a dispute. Consider whether you need further information, use wording such as “We understand your comments, however…” and (making no admissions) avoid any hint of denial. Case-law suggests that the information given by the referring party need not be complete before a dispute is referred to adjudication.

Responding parties will need to take a view on this and consider whether the information is sufficient to allow a broad assessment of the claim. Clearly if fundamental information is missing, a dispute is unlikely to have crystallised. A word of warning however – use time wisely and don’t delay unduly as the responding party must make its position clear within a reasonable time and disputes can crystallise quickly if that is not done.

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Emilie Sclater has just joined the Construction team. To contact phone 01242 248296 or email emilie.sclater@bpe.co.uk

These notes have been prepared for the purpose of an article only. They should not be regarded as a substitute for taking legal advice

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