The adjudication you cannot use

Adjudication is the fast lane for getting paid on a build — until it isn't. Four contract facts decide whether the lane is open, and all four are knowable before you serve a notice.

Adjudication works because Parliament made it work. Section 108(2) of the Housing Grants, Construction and Regeneration Act 1996 requires a construction contract to let either party give notice at any time of an intention to refer a dispute, and to set a timetable aimed at appointing an adjudicator and referring the dispute within seven days of that notice. The adjudicator must decide within 28 days of referral, extendable by up to 14 days with the referring party's consent or longer by agreement. Under section 108(3) the decision binds until the dispute is finally determined by litigation, arbitration or agreement.

That is the whole commercial point. Seven days to referral, four weeks to a decision, and money that moves before anyone gets near a trial. It is the single most useful piece of leverage a contractor or consultant has, and founders quite reasonably treat it as always available.

It is not always available. The statutory right attaches to a construction contract as the Act defines one, between parties the Act covers. Get either wrong and you spend six weeks and a five-figure adjudicator's fee to be told there was never any jurisdiction — and you have told your counterparty exactly what your case is, for free.

Here are the four facts to establish before the notice goes out.

Fact one: who is actually at the other end of the contract

Section 106 takes a whole category of contract out of Part II of the Act. A construction contract with a residential occupier means one which principally relates to operations on a dwelling which one of the parties to the contract occupies, or intends to occupy, as his residence.

Read that twice, because the answer to the query most founders type is in it. A developer building units for sale or for rent is not occupying them as a residence. Ordinary residential development — a housebuilder, a build-to-rent SPV, a residential contractor's employer — sits inside the Act, and the statutory adjudication right is there.

The exception bites in a narrower, sneakier place: where the contracting counterparty is an individual, or the individual behind the SPV, and the works are principally to a dwelling they live in or intend to live in. High-end refurbishment, a director's own house tacked onto a schedule of works, a single-plot "development" that is really somebody's home. That is where jurisdiction disappears.

Two consequences people miss. First, section 106 disapplies the Part, not just the adjudication section — so the payment machinery goes too. No section 111 notified sum, no automatic right to be paid the sum in your application because no valid pay less notice was served. You are left with whatever the contract says, and nothing more.

Second, losing the statutory right does not necessarily mean losing adjudication. Parties can agree to adjudicate contractually, and standard forms contain their own provisions. But where the other party is a consumer, section 62 of the Consumer Rights Act 2015 means an unfair term is not binding on the consumer — and a dispute-resolution clause the consumer never negotiated is precisely the kind of term that gets tested. Do not assume the clause survives just because it is printed.

Fact two: whether the works are construction operations at all

Section 105(2) carves out a list. Drilling for oil or natural gas. Extraction of minerals. The assembly, installation or demolition of plant or machinery on sites where the primary activity is nuclear processing, power generation, water or effluent treatment, or the production of chemicals, pharmaceuticals, oil, gas, steel, or food and drink. It also excludes the manufacture or delivery to site of components, materials, plant or machinery unless the contract also provides for installation, and works wholly artistic in nature.

This matters more than it used to, because so much founder-led construction spend now sits at the edges: fit-out for a food production line, plant installation at an energy site, supply-only packages that someone else installs.

Running the other way, section 104(2) pulls in agreements to do architectural, design or surveying work, or to advise on building or engineering, where they relate to construction operations. Consultants and designers are usually in, not out.

And since section 139 of the Local Democracy, Economic Development and Construction Act 2009 repealed the writing requirement, an oral or partly oral contract can carry the statutory right. The absence of a signed document is not, by itself, an answer.

Fact three: what your amendments did to the machinery

An amended JCT is not a JCT. The schedule of amendments is where the deal actually lives, and it is the first document to read — not the last.

Start with section 108(5): if the contract's adjudication provisions do not comply with section 108, the Scheme for Construction Contracts applies instead. Bespoke amendments that add conditions precedent, restrict what can be referred, or fetter the "at any time" right tend to fail compliance — and the drafter's careful clause is then simply replaced. That is often good news for the referring party, but you need to know which rulebook you are in before you nominate.

Then the money. Section 111 requires the payer to pay the notified sum by the final date for payment unless a pay less notice has been given. Where the payer misses that, S&T (UK) Ltd v Grove Developments Ltd [2018] EWCA Civ 2448 held it must pay the notified sum but may then commence its own adjudication on the true value. A smash-and-grab win is real cash, not a final answer.

Then liquidated damages, which is where amended forms move the goalposts quietly. In Triple Point Technology Inc v PTT Public Co Ltd [2021] UKSC 29 the Supreme Court held that liquidated damages accrue up to termination and are not lost simply because the contractor never completed the works. Amendments that change the LD rate, the cap, the non-completion notice or the extension-of-time mechanism change the arithmetic of your claim, and the deduction still has to be run through the payment-notice machinery.

Finally, costs. Section 108A makes a contractual allocation of adjudication costs ineffective unless it is in writing in the contract and confers power on the adjudicator to allocate his own fees and expenses, or it is agreed in writing after the notice of intention to refer. Clauses saying the referring party bears all costs are usually worth nothing.

Fact four: the pre-construction and insolvency history

Pre-Construction Services Agreements are treated as commercial preliminaries and drafted as though nothing binding is happening. They frequently are construction contracts, because section 104(2) captures design and advisory work relating to construction operations. They also frequently carry design liability, novation obligations, warranty commitments and payment terms that survive into the main build — priced by nobody.

Where the counterparty chain has been through an insolvency, three points bite at once.

In Bresco Electrical Services Ltd v Michael J Lonsdale (Electrical) Ltd [2020] UKSC 25 the Supreme Court held that a company in liquidation retains the right to refer a dispute to adjudication and refused an injunction to restrain it. Getting a decision and enforcing it are different questions, and the second one is where insolvent claimants come unstuck.

Section 113 makes pay-when-paid clauses ineffective — except where the third party is insolvent. That exception is live in exactly the situation where you most need paying.

And section 233B of the Insolvency Act 1986 stops a supplier of goods or services terminating a contract, or a supply under it, because the company has entered a relevant insolvency procedure. Walking off site because your employer filed is not the free option it looks like.

Where a specialist is needed

Adjudication enforcement, Part 8 declarations and jurisdictional challenges are litigation. They are conducted by solicitors and counsel, and Dinmore Bell does not conduct them. Where liquidated damages interact with a corporation tax deduction or VAT on a settlement, that is a tax computation and a filing position, and a tax specialist is instructed. Where an insolvency practitioner is involved, insolvency counsel is instructed.

What Dinmore Bell does is decide whether the notice should be served at all, choose and brief the specialist, set the budget, and stay accountable for the commercial outcome — including the outcome where the right answer is that you do not adjudicate and you negotiate instead.

The week before you serve

Pull four documents: the executed contract and every schedule of amendments; the PCSA and anything signed before the main contract; the payment applications, payment notices and pay less notices in date order; and the counterparty's filing history at Companies House. Establish who the contracting party is, whether an individual intends to live in the building, whether the operations are excluded, and what the amendments did to section 108 compliance and to the LD mechanism.

That is a day's work. It is considerably cheaper than a jurisdiction ruling.