With construction insolvencies up over 50% in five years, commercial disputes in the sector are increasing rapidly. In this climate, adjudication remains one of the most effective tools to manage risk, protect cashflow and resolve disputes before projects derail. Construction litigation expert Mustafa Sidki of Thackray Williams explains the types of adjudication, when they are appropriate and the liabilities for different parties
Construction pressures are driving more disputes. Rising material and labour costs, supply chain disruption and contracts priced in a different market – the strains on both contractors and subcontractors continue to rise at every level. With many projects being delivered at little or no margin – and sometimes at a loss – it is not surprising that disputes are increasing.
Payment disputes remain the most common trigger, followed by disagreements over delays, variations, scope of works and alleged defects. For developers, funders and asset owners, unresolved disputes threaten programme certainty and delivery. For contractors and consultants, delayed or withheld payment can quickly escalate into financial distress.
Against this backdrop, adjudication has become a critical mechanism for resolving disputes swiftly without halting live projects.
The purpose and framework of adjudication
Adjudication is a statutory dispute resolution process under the Housing Grants, Construction & Regeneration Act 1996 (HGCRA). It gives parties to most construction contracts in England and Wales the right to refer disputes to an independent adjudicator at any time.
The fundamental aim is speed. Most disputes are determined within 28 days, providing a temporarily binding decision that preserves cashflow while leaving the door open to final resolution through litigation, arbitration or settlement, if required. Adjudicators are typically experienced construction professionals who combine technical and legal expertise to reach pragmatic decisions.
Importantly, the right to adjudicate applies regardless of whether a contract includes an express adjudication clause. Where contractual payment or adjudication provisions are missing or non-compliant, the Scheme for Construction Contracts applies, importing statutory safeguards to ensure disputes can still be resolved.
Common types of adjudication
Two types of adjudication now feature prominently: “smash and grab” and “true value” adjudications. Understanding the difference is essential for effective risk management.
A smash and grab adjudication arises where a contractor submits a valid payment application and the employer fails to issue a compliant payment notice or pay less notice within the strict statutory timescales.
In these circumstances, the contractor is entitled to be paid the full amount claimed – the “notified sum” – regardless of whether it reflects the true value of the work. These adjudications are powerful where employers have fallen into technical non-compliance with the payment regime.
For contractors facing cashflow pressure, smash and grab adjudications can provide rapid relief. For employers and developers, they underline the importance of robust payment processes and disciplined contract administration.
Smash and grab versus true value adjudications
While smash and grab adjudications focus on payment compliance, true value adjudications allow parties to determine the actual value of works carried out under the contract. Critically, the courts have confirmed that an employer may commence a true value adjudication only once the notified sum has been paid in full.
This reflects the policy principle of “pay now, argue later” designed to keep money flowing through the supply chain while allowing valuation disputes to be resolved properly. True value adjudications are commonly used to challenge interim valuations, final accounts or alleged overpayments.
The interaction between smash and grab and true value disputes has generated significant judicial attention. Recent case law confirms that, in some circumstances, both issues may form part of a single dispute if they are closely connected and arise from the same payment application. This reinforces the need for strategic advice before embarking on either process.
Enforcing adjudication decisions
Although adjudication decisions are usually complied with, enforcement is a vital safety net. If a party fails to pay, the successful party may apply to the Technology & Construction Court (TCC) for summary judgment using an accelerated procedure designed to reflect the speed of adjudication.
An adjudicator’s decision is binding unless and until finally overturned, and the courts are generally robust in enforcing awards. However, enforcement may be refused in limited circumstances, such as where the adjudicator lacked jurisdiction, breached natural justice or where there is a real risk that payment would not be recoverable, particularly in insolvency situations.
The consequences of non compliance
Failure to comply with an adjudicator’s decision carries serious consequences. Non-payment can form the basis for insolvency proceedings, including statutory demands and winding-up petitions, where the debt is undisputed and enforceable.
As financial pressure across the construction sector continues to intensify, adjudication remains a vital tool for managing disputes, maintaining cashflow and safeguarding commercial outcomes. For stakeholders at every level, understanding how adjudication operates – and when to deploy it – is now essential.
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