CAASA NEWSLETTER JANUARY 2024
 
Welcome to this, the first of CAASA’s monthly newsletters.  In the past we aimed to publish a newsletter 2 -3 times per year. The motivation behind this monthly newsletter is to provide better and more frequent communication to CAASA members, and to solicit suggestions and responses to the contents. We need input from you to ensure that the content of this newsletter, our webinars and annual conference remain both topical and relevant.

Contents:
  • Construction Adjudication in the United Kingdom
  • LVDR Rules
  • Training & Mentoring
  • Recent Court Cases
CONSTRUCTION ADJUDICATION IN THE UNITED KINGDOM

The Centre of Construction Law and Dispute Resolution, Kings College, London recently published the results of their survey “2023 Construction Adjudication in the United Kingdom – tracing trends and guiding reform” by Professor Renato Nazzini and Aleksander Kalisz.
The full publication can be downloaded at kcl.ac.uk/construction-law. Some of the key findings from the comprehensive report are as follows:

“Adjudication was introduced as a swift, relatively inexpensive method of dispute resolution, one that would provide determination by an independent third party that would be binding on a temporary basis. Despite reservations by those who were concerned that it might give rise to an unacceptable level of ‘rough justice’, adjudication has been a resounding success in achieving timely decisions in construction disputes, ensuring an interim resolution that maintains cash flow, pending a final determination or, more likely, settlement. As noted by Lord Briggs when delivering the judgment of the court in Bresco Electrical Services Ltd v Michael J Lonsdale (Electrical) [2020] UKSC 25:
‘adjudication of construction disputes has been a conspicuously successful addition to the range of dispute resolution mechanisms available for use in what used to be an over-adversarial, litigious environment’.

The statistics in the report show this to be demonstrably true. Adjudication referrals have been consistent at approximately 2,000 per annum for the last five years, outstripping the number of claims issued in the TCC and the Commercial Court combined, and comfortably exceeding referrals to arbitration. The vast majority of adjudications form the basis for a final resolution of the dispute. There are now optional adjudication schemes available for technology disputes, professional negligence disputes, telecoms and IT services, and airline disputes. There is a strong argument for extending adjudication to all forms of construction operations and, indeed, other areas.

Despite this admirable achievement, the value of the report’s impressive research also lies in its willingness to probe and shine a light on areas that require improvement. Two issues stand out – adjudicator bias and lack of diversity. Perception of bias on the part of the adjudicator should be capable of remedy through codes of practice and early disclosure to the parties of any potential conflict; transparency is usually sufficient to allay any concerns regarding impartiality. Improved diversity will take more time and effort, through leadership within the industry and the adjudication nomination bodies diversification and training.  

Referral trends. The number of adjudication referrals received by ANBs has remained on an upward trend since the introduction of statutory adjudication in 1998. The number of referrals reached the second-highest number on record between May 2022 – April 2023 at 2,078, slightly below the 2,171 referrals recorded in May 2020 – April 2021.

Value, causes and categories of claim. The most common value of an adjudication claim in the past year was between £125,000 and £500,000 – a response selected by 45% of individual respondents. Only 3% selected claim values of less than £25,000. 25% stated that the most frequent value of claims in the past year was between £500,000 and £1 million. The leading three causes of disputes in construction adjudication in the past year are lack of competence of contract participants at 48%, inadequate contract administration at 42% and changes by client at 32%. Those are followed by exaggerated claims at 30% and adversarial industry culture at 27%.

Duration of proceedings. 60% of questionnaire respondents stated that adjudications in the past year were typically completed within 29 and 42 days from the date of the referral notice. 12% of questionnaire respondents stated that the default 28-day period under the Construction Act was the typical length of proceedings. 28% stated that the duration of proceedings exceeded 42 days, such extensions being subject to agreement of both parties. The main factor affecting the length of proceedings was the complexity of the case, identified by 58% of respondents, rather than the value of the claim, adjudicators’ ability or their availability

Publication of adjudicators’ decisions. 52% of individual respondents stated that adjudicators’ decisions should not be published. 35% stated that they should, but parts of the decision should be redacted. 6% would publish decisions without any redactions. Those who opposed the idea, cited several grounds including: (i) confidentiality and privacy of proceedings, (ii) expedited nature of adjudication as opposed to obtaining necessarily the ‘right’ answer and (iii) the need to avoid creating any notion of precedent. On the other hand, 55% of questionnaire respondents supported a pilot scheme to trial the publication of redacted adjudication decisions.

Enforcement of adjudicators’ decisions and subsequent litigation or arbitration. It is rare for adjudicators’ decisions to proceed to litigation or arbitration. 42% of questionnaire respondents stated that, in the past year, not a single adjudicated dispute was referred to litigation or arbitration. A further 21% stated that less than 5% of cases were subject to such referral. Empirical analysis of reported enforcement cases since October 2011 shows that courts enforce adjudicators’ decisions most of the time – in 79% of the cases in the period under review. However, in 21% of cases enforcement was denied in whole or in part. Jurisdictional objections were successful in 9.5% of cases, followed by other grounds (such as fraud) at 5.5% and natural justice at 5%. Both jurisdiction and natural justice arguments succeeded in a further 2% of the cases.”

At a recent meeting the Construction Industry Development Board (CIDB) bemoaned the maltreatment of subcontractors by main contractors and who do not have the time or wherewithal to pursue dispute resolution. They were reminded that they published draft legislation on prompt payment and legislated adjudication some 10 years ago, but which has never seen the light of day.
Nazzini, R & Kalisz, A 2023, 2023 Construction Adjudication in the United Kingdom: Tracing trends and guiding reform. King’s College London. https://doi.org/10.18742/pub01-161
LOW VALUE DISPUTE RESOLUTION (LVDR)

As you are aware CAASA has published a Low Value Dispute Adjudication model for use in the SA construction industry. We see the rules providing access to a large part of the SA construction industry to an inexpensive and efficient dispute resolution process which was denied before.  The SA construction industry has a need for such a process given that:
  • The industry is required to transform - meaning more smaller less sophisticated contractors with smaller contract values.
  • 30% of the value of government contracts must be subcontracted to SMME’s.
  • there are numerous small companies  who undertake contracts at a local or provincial level who simply get bullied out of an entitlement. 
  • We need to get back to the true purpose of adjudication – the quick resolution of a current dispute which allows the cash to flow as appropriate. Cash flow is vital for these smaller companies to be sustainable and grow. 
  • Neither the Association of Arbitrators or SAICE have such rules, nor do they currently have an appetite for dealing with low value disputes.  
  • Our biggest challenge will be to educate the industry  - employers, contractors and subcontractors – of the benefit of this approach.
Members are encouraged to make use of the Rules where possible.
TRAINING & MENTORING

Given the challenge of finding both topics and speakers for our monthly webinars we have taken the decision to run these only every second month for the moment. 

The webinar on Friday 2nd February deals with the challenges of constructing an airport on the island of St. Helena, the second most remote island in the world.
Again we encourage you as the members to provide topics for our webinars and even to present on any matter or issue which you believe relevant.

Should you wish to attend, please register via the CAASA website.
RECENT COURT CASES

Prescription is often raised as a defence against a claim. The vexed question being “when does prescription start running?” The Supreme Court, in the case listed below  discusses the minimum facts necessary for prescription to start running.
Stemmet and Another v Mokhethi and Another (681/2022) [2023] ZASCA 127
 
 Any comments, suggestions or proposals please forward to secretary@adjudicators.co.za
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