Jacob Austin 00:00:00 Hi all! Jacob Austin here and welcome to episode 149 of the Subcontractors Blueprint. The show where subcontractors learn how to ensure profitability, improve cash flow and grow their business. Today we're continuing our mini series on disputes, and we're focusing in on an important concept that doesn't get explained very often. But it's vitally important because this is the gate that every dispute has to pass through before you can take it anywhere. Get this one wrong. And even the strongest, most perfectly put together claim can be worth nothing in front of an adjudicator. So let's dig in. Last week I told you that every formal route to getting your money has a gate that you've got to walk through first. And crystallisation is that gate. Good firms owed real money could march straight into the adjudicators office and knock themselves clean out before they've thrown a single punch. If they don't follow this one principle. And that means you can be completely in the right. You can be owed every single penny and sitting on a claim that you'd stake your house on, and you can still lose your adjudication in the first 48 hours.
Jacob Austin 00:01:28 Not on merits. Not because the other side is only cleverer, but because you've pulled the trigger too early and the dispute hasn't properly crystallized. That one mistake makes the whole thing worthless. And not only that, it costs you money, so it makes it worse than just losing. When your adjudication fails on crystallisation, you don't just walk away without your money. The disputed sum. You walk away having spent your own costs to get there and an adjudication you carry those Win or lose, you spent the time to get there. You spend money on the adjudicators fee. And the part that really stings is you've shown the other party your entire hand, your case, your evidence, your number, all of it for nothing. And that is because a crystallization failure is a jurisdiction failure. It's saying no dispute has arisen when you've served your notice. And that's a key thing in the Construction Act. You can refer a dispute at any time, but there has to first be a dispute. The adjudicator then doesn't have the power to decide.
Jacob Austin 00:02:36 So even if they go on and hand you a decision, it's a dead letter. The court won't enforce it. They might not even touch it. And you're back to square one. Poorer, slower. And now facing an opponent who knows exactly what's coming. So this isn't a dry bit of legal housekeeping. This is a difference between a clean win or even a dirty win. And pain. The privilege of teaching the other side how to beat you. That's why we're spending a whole episode today on the thing that nobody covers. So let's start with a good foundation. This is the bit that trips people up. A claim is not a dispute. So you making a claim, sending an application, telling somebody you're owed money, that on its own isn't a dispute. It's just a claim sitting there. A dispute only comes in once that claim has been put to the other side and they've rejected it. Or perhaps they've not admitted it. That moment when your claim meets their refusal, that is crystallisation.
Jacob Austin 00:03:39 And as I said before, the Construction Act gives you the right to refer a dispute to adjudication at any time. But it has to be a dispute first. No dispute, no jurisdiction, no enforceable decision. So before anything else, you need an actual dispute, not just a grievance that you're carrying around against the other party. And this has cost big, reputable companies with in-house legal departments and commercial teams big money. But it doesn't have to cost you because after today, you'll understand how a claim can turn into a dispute following the clues of case law. The leading case here is AMEC, as everybody refers to it, but it's the AMEC Civil Engineering Limited versus Secretary of State for transport case. And the judge presiding over this case, Mr. Justice Jackson, set out a run of practical propositions on when a dispute arises that has shaped this part of the law ever since. Now you don't need the case citation in your head. You just need the principles, the shape of it, and the shape is this that a dispute needs three things.
Jacob Austin 00:04:48 Firstly, it needs a clear claim. Secondly, that that claim has been communicated to the other side. And thirdly, and finally, that claim has been rejected or not admitted. That rejection doesn't have to be a formal letter saying we reject your claim. It can be an outright. Now it can be them going quiet for long enough that the silence itself acts as a refusal. It can be them prevarication following you off, asking you for the same information over and over, and never actually engaging with you. All of those can tip a claim over into a dispute. The moment that matters is when you serve your notice of adjudication. The dispute has to have crystallised. It has to have become a dispute by that time, not a week later, but by the time that notice goes out. There are four classic ways that this goes wrong. The first is just going too early. You're angry and maybe. Fair enough. The application's gone in, the date's gone. You fire off the notice almost on a reflex.
Jacob Austin 00:05:56 But they haven't actually said no yet. They haven't had the chance as a claim in that application. But there's no rejection, so there's no real dispute. And by jumping the gun, the whole thing is built on sand. The second one is the no time to respond trap. This is a little bit more subtle, but it's obvious really. So you submit a claim on a Friday and then you send a notice out on a Monday. You might think you've given them a chance, but you haven't really. The other side has to have genuine, reasonable opportunity to consider your claim and respond to it. There's no fixed minimum, so it depends on the facts and where the parties have been arguing for months. A dispute can sometimes crystallise quickly, but the more substantial and more complex your claim is, the more time they reasonably need to consider it, to review it properly and to respond to it. So if you give them no realistic time at all, and you've handed them an argument that no dispute was formed.
Jacob Austin 00:06:59 The third is the ambush or the moving target. The dispute you refer has to be the dispute that actually crystallized the one that they saw and then rejected. So if your claim has ballooned, if you've doubled the number, if you bolt it on new heads of claim, if you've dragged in arguments that they've never laid their eyes on, then the thing you're referring isn't the thing that they've refused. It's something new. And you can't refer a dispute. The other side has never had the chance to consider. So what gets referred to the adjudicator needs to be the same size and shape as the claim that's been rejected by the other side. The fourth way is lumping everything in the rules like one adjudication deal with one dispute, unless both sides to bundle more in together. So if you throw in five separate, unrelated arguments into a single notice because you want it all sorted at once, you're not being efficient. You're giving a jurisdiction challenge to the other side on a plate. These issues are all fairly simple, but they're surprisingly common, and the defense that no dispute is crystallized is one of the most common knockback arguments that a main contractor's advisers will throw at your referral.
Jacob Austin 00:08:12 It's the first thing that they're going to reach for. So understanding crystallization does two jobs. It stops you handing them that argument against your own claim, and it tells you when you can pick it up and use it yourself. Come the day that you're the one on the receiving end of a half baked referral. So how do you get it right? How do you get the right side of that gate before you serve any notice? You need to run four questions past yourself. Do it out loud if you have to first. Have I put the claim in? Clearly? Is it in writing? Is it properly quantified? Set out so that they can actually understand it and respond to it, a claim that's vague and woolly that the other side can't genuinely tell what you're claiming or why, might never crystallize into a dispute at all. Clarity isn't about being polite here, it's what makes the dispute capable of forming. Secondly, have they had a fair and reasonable chance to respond? Not a token chance, but a real one.
Jacob Austin 00:09:18 That might mean allowing your JCT time to respond to a lapse. It might mean for any see agreeing a sensible period with the contractor to extend their period of reply to demonstrably agree a sensible deadline in writing, and then let it run. By doing that, you're building a record that says I gave them the opportunity. And crucially as well, here's the proof of it. Third, have they rejected it? Or have they stored so long that it amounts to a rejection? An outright no is easy, but silence over a period of time. Counts two and so does endless following off. And this is the good news for you. They can't dodge crystallization forever just by stalling. If they keep swabbing you off. That pattern itself can form the dispute. So document the stalling. Every chase, every non-answer, every. Can you resend that? That record can turn their silence into a crystallized dispute. And fourth question is the dispute that I'm referring the same one that they've actually seen and rejected? Same claim, same number, same heads? No fresh ambush bolted on at the last minute.
Jacob Austin 00:10:34 If you've genuinely got new claims, that may be a separate dispute for another day, but it's not something that you just smuggle into this one. So run those four questions, pass yourself, and keep it to one dispute per notice, unless you've agreed otherwise with your contractor. By doing that, you've closed off the easy jurisdiction challenge before that challenge is made. You can incorporate evidence to make your case absolutely watertight that the dispute was served on this date. You spoke about responding. You've allowed a reasonable period of time, and the contractor has never got back to you. It's written in plain, clear English with supporting calculations, and the copy of the claim that you submitted on that date is the same claim that you're now presenting to be decided by the third party. When a contractor challenges an adjudication referral on crystallisation, they will likely do it in one of four ways. The first one is the most obvious, and it's what most of this episode has been about. The headline challenge that no dispute had arisen when you served your notice.
Jacob Austin 00:11:42 So everything we've already spoken about is how you get rid of that argument, a clear claim, a fair chance to respond, and a clear rejection or documented silence. Tick those ones off and that argument has got no water. The second one is sneakier. They'll say that your claim was too vague to respond to too woolly, that they genuinely couldn't tell what you were claiming or why, and there's nothing there for them to dispute. And if they're right, that one's on you. If your claims gone over in a muddle, somebody's having to piece together various bits of calculations and there's no summary drawing a clear total. Together, you're listing out some grievances. Maybe you're then calculating something on Excel, listing out another problem, and then there's another calculation. But without a clear summary and clear references on all of your documents, you might be handing somebody that argument. But the good thing is, the fix is relatively easy. It's proper quantifying of your arguments. It's summarizing them clearly. If you're carrying things from one calculation into a summary, then write that at the bottom of the page.
Jacob Austin 00:12:54 Subtotal. Carried to Grand total calculation or collection page. Reference all of your documents so that it's clear what is in relation to what. If you're including some invoices as substantiation, then put them in an appendix number. Each one of them say what page of that document somebody is going to find the subtotal. Make it super easy for somebody to follow your logic. And then woolly is never a word that they can make stick. The third one can catch a lot of flies. The contractor will say that you're still in active negotiations, that there wasn't a dispute. You were just negotiating and that you've jumped the gun whilst talks are still ongoing. This one is fact sensitive and there is truth in it. Genuine live good faith discussion can mean a dispute hasn't crystallized yet. But there's a world of difference between real negotiation and somebody using. We're still looking at it as a stalling tactic. And you beat this the same way you beat a lot of other things we've mentioned on this show. You set a deadline in writing.
Jacob Austin 00:14:01 When that deadline passes, with nothing of substance behind it, the still talking line falls apart because your record shows there is no talking. There is just dodging and stalling. One more thing before I move on. When you refer, you can expect the other side to cry that no dispute is crystallized. It's one of the first cards they'll try and play, and they might even reserve their position on it and carry it all the way to the enforcement hearing. So you might assume that big danger is that the court agrees and your decision gets thrown out. The reality is, though, that the court set quite a low bar for what counts as a dispute, and particularly if an adjudicator has taken the time to review the case already, they are more likely to side with the adjudicators view that the dispute has crystallised because that's one of their first responsibilities to check as well. So even if the other party has reserved their position on it, a late challenge to that is more often than not going to fail. What the court does do is take a really robust line on enforcement.
Jacob Austin 00:15:06 They want to see that the contractor is paid you the money and is arguing later. That is the principle that they follow. But what it doesn't do is fail for free. Sometimes it buys them delay. It drags you into a sideshow argument about jurisdiction instead of about your money. It piles on cost and uncertainty that you don't need. So this warning isn't about being terrified of losing it. Enforcement is about not handing them that sideshow in the first place. Get the crystallization clean, document it as part of your referral. Then the favorite stalling card is dead before the contractor even gets the chance to play it. That's the real win that you're aiming for. Not drama. Just a fight that you've avoided. You get to the right gate before you serve. Not during, not after, but before. Ultimately, if your adjudication does get knocked out on jurisdiction on lack of crystallisation, it's not the end of the world. And you shouldn't think that it is. You're not losing on the merits of your case.
Jacob Austin 00:16:13 You're losing on a technicality. The dispute itself is alive and well. The contractor now knows that you're willing to adjudicate over it, so they might now be more amenable to sitting down and have sensible discussions with you about settling the issue. But they might also take that adjudication win and think they're home and free. And in that case, what you do is let the dispute crystallise properly this time and you can refer it again cleanly. But and this could be a big but you'll have burned a set of costs getting nowhere. You'll have shown the other party your entire hand. You'll have waited weeks for a decision that never came. And if you're owed half £1 million, going without that cash in your bank could be setting you on the road to financial ruin. So the advice is get it right first time. So to sum up, a claim alone is not a dispute. A dispute only forms once your claim has been rejected or not admitted. Rejection can be a no or it can be silent for a reasonable period of time.
Jacob Austin 00:17:20 It can also be stalling over that seem reasonable. Period. Document the pattern. Give them genuine, documented time to respond, and record that time in a way that can be evidenced and make clear that crystallization in your referral. You must refer the dispute that they've actually seen, not ballooning up your claim, not adding new heads of claim that you've thought of since it's not a moving feast, and base your adjudication on one dispute, unless you agree with the contractor to bundle more than one together. Don't gift them a challenge by lumping multiple issues together. The no dispute crystallized defense is the other side's favorite and simplest jurisdiction. Knockout. Don't hand it to them. Be ready to use it yourself. So that's the gate, a claim that's been put and rejected. And the dispute you refer being the same one they turned down. Get that right. Nobody can knock you out before you started next week with that gate behind us. We're going to discuss the machinery itself, the actual mechanics of adjudication, how you served the notice.
Jacob Austin 00:18:31 What goes into a referral? That 28 day clock and how it really runs and how to pick who decides the thing. Knowing you've got a dispute is one thing, but driving it properly is the next. Now, I genuinely hope that you never have to use this advice, but if you do, I hope it helps.
