Construction disputes: your options as a subcontractor

Most disputes between a subcontractor and a main contractor settle by negotiation. If they do not, adjudication is usually the fastest route to a binding decision. Mediation, arbitration and court deal with what negotiation and adjudication leave unsettled.

Which route fits depends on what is in dispute, how much it is worth and what your subcontract says. Whatever the route, your claim is only as strong as your records.

A disagreement becomes a dispute when one side makes a claim and the other rejects it, or does not answer. That matters, because adjudication can only decide a dispute that already exists.

So put your claim in writing, with the sum and how you worked it out. Give your main contractor a fair time to reply, and keep every letter, email and notice.

Most disputes a subcontractor faces concern payment.

A payment may have been reduced by a Pay Less Notice or withheld altogether. Other disputes concern undervalued or refused variations, contra-charges, delay damages, a final account assessed below your valuation or retention held beyond its release date.

For more on the point where a claim becomes a dispute, see When does a claim against me become a dispute?

Most disputes end with an agreed figure, not a decision. Negotiation costs least and keeps the working relationship going.

It works best when your claim is clear, priced and backed by records. Set out each item, the sum, the reason and the evidence. A Scott Schedule, a table with both sides' figures side by side, keeps the talks on the items that matter.

Put any settlement in writing and read it before you sign. A full and final settlement usually ends every other claim on the job too.

Section 108 of the Housing Grants, Construction and Regeneration Act 1996 gives each party to a construction contract the right to adjudicate at any time. That Act is usually called the Construction Act.

An independent adjudicator decides the dispute, usually within 28 days of the referral. The adjudicator can take 14 more days if the party who referred it agrees, or longer if both sides agree.

The decision binds both sides straight away, and the courts enforce it. It stays binding unless the dispute is later settled by agreement, arbitration or court.

The adjudication follows a defined sequence.

The process starts with the notice of adjudication, which tells the other side what the dispute is and what you want. An adjudicator is then appointed, often by a nominating body named in the subcontract. Your referral notice, setting out the full case and evidence, follows within 7 days of the notice. The other side responds by the date the adjudicator sets, before the adjudicator issues the decision.

Each side usually pays its own costs, and the adjudicator decides who pays the adjudicator's fees. See How much does construction adjudication cost? and Is an adjudication decision final and binding?

Payment disputes often go to adjudication in one of two ways. A smash and grab adjudication asks only whether the notified sum was paid. It does not ask what the work is worth.

A true value adjudication asks what the work was actually worth. The Court of Appeal ruled on the order of the two in S&T (UK) Ltd v Grove Developments Ltd [2018] EWCA Civ 2448. The paying party must pay the notified sum first. Only then can it start a true value adjudication for the same payment.

In mediation, an independent mediator helps both sides reach their own agreement. The mediator decides nothing.

It is voluntary and private, and it is often done in a single day. What is said in it usually cannot be used against you later.

It suits disputes where both sides want a deal but cannot reach one alone, such as a large final account. If it fails, you can still adjudicate or go to court.

Arbitration is a private hearing before an arbitrator, whose award is final and binding. It applies only if your subcontract provides for it, or if both sides agree to it.

Its aim is set out in section 1 of the Arbitration Act 1996: a fair decision by an impartial tribunal, without unnecessary delay or cost. The courts can overturn an award only in narrow cases.

It usually takes longer and costs more than adjudication. Some JCT and NEC contracts offer it in place of court, so check which one your subcontract names.

Larger construction disputes that go to court in England and Wales are usually heard in the Technology and Construction Court. It is a specialist part of the High Court.

Before a claim is issued, the Pre-Action Protocol for Construction and Engineering Disputes expects each side to set out its case and meet. Court is the slowest and most expensive route, and its decision is final, subject to appeal.

This is the stage to have your solicitor act for you, if one is not already involved.

Start with a clear written claim and give a fair deadline for a reply. If money is overdue and the notices are wrong or missing, adjudication is usually the quickest binding route. Where both sides want to settle a large account, try mediation before anything else. Arbitration or court may be the route if your subcontract names arbitration or you need a final answer on the law.

Above all, act before a time limit runs. Your subcontract may set deadlines for notices, and the law limits how long you have to start a claim at all.

The glossary explains the terms you will meet along the way.

I've been underpaid. We value the shortfall and challenge unsupported reductions. See Underpayment Claim.

I haven't been paid. We check what is due and pursue overdue payments. See Late Payment Claim.

My variations aren't being paid. We value instructed changes and pursue unpaid variations. See Variation Claim.

My compensation events are being refused. We challenge refused or undervalued NEC compensation events. See Compensation Event Claim.

Delays and disruption are costing me. We organise delay records and prepare evidenced claims for the cost. See Delay & Disruption Claim.

Money is being deducted from my account. We check the evidence and challenge unsupported deductions. See Contra-Charge Claim.

I'm being charged for delays. We challenge unsupported charges for late completion. See Delay Damages Claim.

My final account is being undervalued. We value your final account and challenge disputed assessments. See Final Account Claim.

My retention hasn't been released. We check release conditions and pursue overdue retention. See Retention Claim.

I'm working without a signed contract. We pursue payment for work carried out without a signed subcontract. See Letter of Intent Claim.

My costs have risen since I priced the job. We pursue cost increases your subcontract lets you claim. See Price Rise Claim.

A claim has been made against me. We test the evidence and answer claims against you, figure by figure. See Counterclaim Defence.

My subcontract has been terminated. We value your termination account and challenge unsupported costs. See Termination Claim.

My main contractor has gone bust. We record your assets, value the debt and prepare your insolvency claim. See Insolvency Claim.