Jacob Austin 00:00:00 Hi all! Jacob Austin here and welcome to episode 152 of the Subcontractors Blueprint, the show where subcontractors will learn how to ensure profitability, improve cash flow and grow their business. Today's episode continues our disputes mini series and we're touching on defending and adjudication, covering jurisdiction and natural justice the two ways that a referral can get stopped before the merits are ever reached, and one mistake that can lose you. A case that you should have won. So let's dig in. A notice of adjudication lands on your desk. Someone is coming to you for money that you haven't got, and you've got 28 days. And your first instinct is going to be to prove them wrong. But that's the wrong first instinct. Because before you argue about who's right and who's wrong. There's one question that comes first. Are you even allowed to be here at all? So far in this series, you've been the one with the whip in your hand, picking the moment, building your case and firing the first notice. And today we're turning it round.
Jacob Austin 00:01:33 Because sooner or later you may find yourself on the other side of the table and everything I told you in the mechanics episode about the first mover advantage is now pointing at you like a loaded gun. They've had months, months to build the case, index the records, get the numbers straight, and now you've got days to turn around your defense. That's the position you're in. The second that notice lands and it's not a fair fight. It was probably never designed to be won. And the money is real because a decision against you binds immediately. That means pay now argue later working the opposite direction. Remember, if it goes against you, you pay. Then you can go off and argue it properly in court later, if you can face it and if you can afford it. Most people never do. So that interim decision now becomes the answer, which means defending well is worth every bit as much as referring well, and arguably more because you didn't choose the timing. The hard truth. Before I give you two defenses, I've got to take something away from you first, because this is the belief that sinks more defenses than anything else.
Jacob Austin 00:03:02 The adjudicator got it wrong is not a defense. I'll say that again because everybody fights that. The adjudicator, if they misread your contract, if they get the law wrong, if they botch the numbers, adding up the final decision, if they pluck a decision from thin air that any competent SHS would tell you is an absolute nonsense, the court will still enforce it against you. That's not just me being dramatic. It's what the Court of Appeals said in the Carilion versus Devonport case. And it's about as settled as construction law gets. Adjudicators decisions must be enforced even when they result from an error of procedure, fact or law. And we've seen it happen. Errors more than one and forced anyway. Why on earth would the law work like that? Well, the whole point is speed. That's what adjudication is there for. Parliament decided a quick answer beats a perfect answer because cash flow keeps firms alive. And perfect answers take years. So you get temporary finality. If the judicata is wrong, you pay and then you pay again to get it fixed afterwards.
Jacob Austin 00:04:21 What you don't do is refuse to pay because you think they're wrong. So if wrong isn't a defence, what is? Two things. Only two jurisdiction and natural justice. That's your lot. Everything else is noise. So these are the two gates jurisdiction. This is about power, not about whether the decision was right, about whether the adjudicator had the power, had the authority to decide this thing at all, because if they didn't. The decision isn't a bad decision. It's a nothing decision. A dead letter that the court won't touch. So what knocks jurisdiction out here are the ones you'll actually meet. First, you know this one already. No dispute had crystallized when the notice was served. There it is. Crystallization back again, this time acting as your shield against the dispute rather than your sword. Everything you learned about that gate a few weeks back, you now point at them. Did they actually put this claim to you? Did you get a fair chance to respond? Have you actually rejected it? And if the answer's no, they've walked through the gate that was never open.
Jacob Austin 00:05:42 The second argument that falls under jurisdiction is having more than one dispute in a single referral without your agreement. Remember one dispute per adjudication. If they bundled three separate arguments together into one notice to save themselves time and money. That's a jurisdiction. Points that they're waiting for you. The third argument here under jurisdiction is that the adjudicator has climbed out of their sandbox. The notice sets the scope, as we discussed in the mechanics episode. If the adjudicator decides something that was never in that notice, then that is beyond their power. Now, three other arguments that you'll meet less often, but they're worth a look every time. One. There's no construction contract. Or perhaps the work isn't construction under the Construction Act. If you Google the Construction Act, you can find the definitions of what it terms construction. If you're doing construction work. You can almost bet your bottom dollar that you are subject to the act. But there are some exceptions that are worth having a look at. Then, if the same dispute has already been referred to an adjudication, then you don't get to run that twice hoping for a better answer.
Jacob Austin 00:07:00 This will be quite obvious to you. If that is the case, it's going to be rare and contractors are going to know better than that. But it's worth you knowing in case you've won an adjudication. And then the contractor decides actually, we'll have another go at that and see if we can win it. Finally, technicalities. If the appointment itself is defective, if the wrong nominating body has been used according to the subcontract or the wrong procedure has been used altogether, that's gate one. Gate two is natural justice, and that's about fairness. This boils down to two old rules. The person deciding must be impartial, and each side must get a fair chance to put its case forward to answer the other side's. So the grounds on this case look like this. Starting with bias. Whether it's actual or just the appearance of it, the adjudicator deciding on a point that neither side have ever argued without giving you a chance to comment on it, or perhaps you're not given any realistic chance to respond at all, which is the ambush from the mechanics episode now aimed at you.
Jacob Austin 00:08:07 And one more. But you have to be careful with this. Perhaps the adjudicator has completely ignored a defence that you actually run. There is a distinction with that and it matters enormously. Ignoring your defence is not the same as rejecting it. If they've looked at your argument and dismissed it, that's just them being wrong. And we've established that wrong is enforceable. But an adjudicator is perfectly entitled to look at your evidence, decide that it's not relevant and set it aside. That's not unfair. That's just them doing their job, making a decision. It only becomes a natural justice problem if they haven't engaged with it at all. There is a bar that we have to reach with natural justice, and I want you to hear this clearly, because this is where the fantasy of overturning a decision meets the reality. It's not enough that the process was a bit rough because adjudication can be it has to be a serious breach and it has to have materially affected or mattered to the outcome. The courts are not there looking for reasons to let you off in the famous carillon case.
Jacob Austin 00:09:13 The message to judges was to examine technical defences with real skepticism, and only that, in rare circumstances, should a court interfere with an adjudicators decision. The Court of Appeal went further with that. It said that the courts should give no encouragement at all to the kind of approach that was being run in that case. So yes, these gates exist and they're real, and when you've genuinely got one, they can win. But they are narrow, they're high bars to meet, and the court isn't on your side when you walk up to them. You have to have a very compelling argument. So anyone telling you that jurisdiction is an easy way out of a lost adjudication is selling you something. Now, speaking practically, you have to decide whether to use those gates at all, and you have to do it well. So if you take one thing away from today, then take this. If you think that the adjudicator has no jurisdiction, you have to say so clearly, specifically straight away and in writing.
Jacob Austin 00:10:14 That's called reserving your position. And where you can throw that away is sticking it as a one liner at the bottom of an email. We reserve all our rights. Job done, they think. But it's not job done. That line on its own can mean absolutely nothing and be worth absolutely nothing as well. The Court of Appeal has been really clear on this. A vague catch all reservation, the sort that reserves your right to raise any jurisdictional issue at any time, whether you mention it before or not, can be completely ineffective, and it fails precisely because it's vague. If you knew or ought to have known about a specific objection and you didn't spell it out, you can't spring it on somebody later. And also, if the court decides that you've worded some reservation so broadly to try and keep every option open to you in case the case is lost, that won't fly either. And that makes logical sense when you think about it. The reason you're reserving your rights specifically, is so that the adjudicator can actually look at your point and decide whether to carry on, and so that the other side can weigh up whether your objection has any merit.
Jacob Austin 00:11:24 A vague reservation gives nobody anything to work with. It's not fair. It's not a real reservation. It's you hedging your bets. Throwing in a one liner just in case. And if you don't reserve at all, if you just roll your sleeves up and take part in the process, then you've waived your opportunity to it. It's gone. You can't raise it as an enforcement stage because by taking part without objecting, you're accepting the adjudicators authority. So the rule is simple. State your reservations specifically in writing at the first opportunity. Name the exact grounds and say why. Because if you have got genuine reservations, you should be able to articulate them in a way that the other side understands. So where can this actually go wrong? We've had two pointers from me already, and I'm not going to repeat those reserving vaguely or not reserving at all, allowing the gate to shut before you reach it. But here are two other points that cost people money. The first is a big one, going all in on jurisdiction and never answering the merits.
Jacob Austin 00:12:31 Just think that through with me. Your jurisdiction point probably fails because most of them do. And when it fails, the adjudicator still has to decide the money. And if you've put nothing in front of them on that money, they decide it on the other side's evidence alone. You've handed away a walkover in a case you might have won. On the facts, if you argued them properly. The second way is ignoring it completely. Every so often you will hear of somebody deciding that if they don't take part, it doesn't touch them. And that is plain wrong. The adjudication will run along perfectly. Happy without you. The decision comes out against you in full and then it gets enforced. Sticking your head in the sand is not a defence, it's just a slower way of losing. Let's just put this in a scenario. Picture an M&A Subi, a notice of adjudication is landed and the main contractor is coming after 180 grand alleged defects plus a delay. Now the subi reads it properly and spot something the referral has bundled together two separate arguments into one.
Jacob Austin 00:13:39 Firstly, the defects claim and secondly the delay claim. And critically, the delay claim has never once been put to them. It's appeared out of thin air. So there are two potential jurisdiction points sitting right there. More than one dispute and no crystallisation on the delay here would be the wrong way to go about it. The showbiz advisers go in full on jurisdiction 20 pages of forensic examination, arguing that there isn't jurisdiction without a word on the defects or the delay. The adjudicator picks it up, considers it and decides, no, I do have jurisdiction. So they turn to the money, and the only evidence in front of them is now the main contractors at 180 grand, gone on a job where defects evidence was actually strong. That's a self-inflicted injury. So now look at a better way to handle it. The same subi, same notice. Day one they write and they're specific. We object to jurisdiction on two grounds. One, the referral is bundling two separate disputes together without our agreement. And two, no dispute is crystallized on the delay claim because it's never been put to us.
Jacob Austin 00:14:54 So we reserve our position on both. We take part under that reservation. We will reserve our rights to raise both at enforcement stage if necessary. And then this is the whole point of making they answer the merits in full anyway. Every defect commented on priced if necessary with photographs and sign off records, quality inspections and so on. The delay answered with their own contemporaneous records. The difference there is massive. If the jurisdiction point wins, then they're out and job done. Nice and easy. If it loses, they've still got a complete defense on the table and the adjudicator decides the money on the actual evidence, rather than by a walkover of the contractor's argument. Also, because they've reserved their position specifically in writing on day one, if the decision still goes against them, they can run that jurisdiction argument again at enforcement. That is the same facts, the same notice, but two completely different outcomes. And the only difference is refusing to choose. It's answering the questions and stating their objections. So here's what protecting yourself looks like.
Jacob Austin 00:16:06 It's a discipline that you need to have. The day a notice lands, read the notice and quite clearly know and understand the dispute that they're describing. What are they asking the adjudicator to decide? What are they asking them to judge and rule on? Then watch whether the referral stays inside that ask the crystallisation question has this actually been put to you before properly and you've rejected it. This is your shield now, so use your critical eye. If they haven't put these arguments together and presented them to you before then, they've jumped the gun and there's no dispute. Hunt for those other issues as well and reserve your position in writing on day one. Name the grounds. Explain it. Never just rely on we reserve. All right, because that one liner does nothing for you. Then, crucially, you have to fight the full merits. The full argument anyway. Always both. Not one or the other. That's what's going to keep you out of trouble. Diaries, everything. The second it lands. Because in a 28 day process, there is no room to be casual about the dates and the deadlines and crucially, never, never ignore it, never hope it goes away because it won't.
Jacob Austin 00:17:21 So the key points to take away from today's episode. Firstly, the adjudicator got it wrong is just not a defence. Decisions get enforced even if they result from an error of procedure, fact, or law. There are two gates that you can use to defend yourself from the whole thing. They're narrow and they are jurisdiction. Did they have the power and natural justice? Was the process seriously unfair? As I said, both of these are narrow and the courts are robust about it. Crystallization is now your shield. If they never put the claim to you and you've never rejected it, then they've walked through a gate that was never open. The statement we reserve all rights can be worthless, vague catch all reasonings and reservations fail because they're vague. If you have reservations about the process, state them specifically. Name the grounds in writing on day one. But if you don't state the facts quickly, you're waiving your entitlement to make that reservation to raise them completely. And if you do have Reservations. You have to state them and fight the merits in full.
Jacob Austin 00:18:30 If you go all in on jurisdiction and lose the points, then the adjudicator decides the money on the opponent's evidence alone. And never, never ignore a notice. If it runs without you, the decision lands against you. It will get enforced whether you took part in the process or not. So that's how you defend reserve properly and fight anyway. Next week we'll follow the whole thing to the end of the road enforcement. The decisions landed. Somebody won. Hopefully that's you. But if the other side isn't paying, what actually happens. So we're visiting the technology and construction court, and I'll show you how quickly a decision turns into a judgment. Why pay now, argue later has teeth, and just how narrow the grounds to resist actually are. Every bit of that reservation discipline that was talked about today is either going to pay off there or it's going to cost you. So don't miss it. I hope that's been useful for you. My mission with this podcast is to help the million SM contractors working out there in our industry.
Jacob Austin 00:19:36 If you've taken some value away from today's episode, then I really need your help to share the show and pass that value on to somebody else who'd benefit from hearing it, so that can help as many people as possible. And thanks again for tuning in. If you like what you've heard and you want to learn more, then please do find us at www.SubcontractorsBlueprint.uk or also on all your socials at @SubcontractorsBlueprint And remember, miss the contract detail and the commercial risk falls on you. Thanks all. I've been Jacob Austin and you've been awesome.
