When parliament served up adjudication in the Construction Act, it intended it to be a fast, cheap way of sorting out a dispute. But it’s turned into something much bigger than that.
We, you, me, us, have squeezed adjudication out of a pint pot and made it into a quart. We have made adjudication into twice the size - no, 10 times the size of what was intended. It was never intended to get to what it now is, and it’s done it without changing the rules. Just last week the court that hovers above the TCC with even more senior judges talked about what we invented, or rather, parliament invented at our behest, 15 years ago. And I am going to talk about what it’s become. And you can think about whether that’s good or bad.
In the Court of Appeal, Lord Justice Longmore told us how and why all this process came about. It’s worth reciting: before 1996 it was a common complaint of contractors (and subcontractors) in building contract cases that employers and developers would attempt to set off debateable cross-claims (for example, in relation to the quality of the work) against legitimate claims for interim payment during the progress of the work. This tactic was given considerable impetus by the decision of the House of Lords in Gilbert-Ash vs Modern Engineering [1974] which overruled a series of decisions of the Court of Appeal, which had assimilated architects’ interim certificates to bills of exchange and required immediate payment regardless of set-off. Contractors continued to complain that there was serious interference with their cash flow.
Parliament intervened in the Construction Act 1996 by creating the concept of adjudication. Intended to give a contractor interim cash in appropriate cases, it was described as “an intervening provisional stage in the dispute resolution process. The final rights of the parties can still be determined by arbitration, legal proceedings or agreement after the dust has settled”. Do you see where Lord Justice Longmore was taking us to? It was a new way of stopping debateable cross-claims by having an outsider give the quality of a payment certificate the status of a bill of exchange.
Yes, the adjudicator’s decision is as good as a bill of exchange provided he tip-toes across the cracked ice of legal bamboozlers. Adjudication has become a search for evidence and facts and legal process
The Construction Act reversed the demolition job in Gilbert-Ash by the House of Lords. Lord Denning was then the senior Court of Appeal judge. He said: “When the main contractor has received the sums due to the subcontractor … the main contractor must pay those sums. He cannot hold them up so as to satisfy his cross-claims. Those must be dealt with separately in appropriate proceedings … There must be a ‘cash flow’ in the building trade. It is the very life-blood of the enterprise. The subcontractor has to expend money on steel work and labour. He is out of pocket. He probably has an overdraft at the bank. He cannot go on unless he is paid for what he does as he does it. The main contractor is in a like position … He has to have cash from the employers; otherwise he will not be able to carry on. So, once the architect gives his certificates, they must be honoured all down the line … Cross-claims must be settled later.”
It took us until 1996 to get Lord Denning’s modern view into place. The adjudicator is properly an “over-view certifier”, that’s all. All he had to be was the independent architect, engineer, or QS. Fast and cheap and no lawyers; lawyers don’t get involved with certifying.
The greyhounds were out of the box. Almost within a few months, like a chicken-pox rash, we ‘went legal’
But within two years of inventing this “over-view certifier”, some bright spark argued that if an adjudicator spoke to one party without the presence of the other, it was a mortal sin, a breach of natural justice. The greyhounds were out of the box. Almost within a few months, like a chicken-pox rash, we “went legal”. Yes, yes, the adjudicator’s decision is as good as a bill of exchange provided he tip-toes across the cracked ice of legal bamboozlers. Adjudication has become a search in depth for evidence and facts and law and legal process. It is a search for the rights of the parties; it’s no longer a simple question of who will have the cash pro-tem. This is a legal machine operating at lightening speed requiring skills of a very high order. So what? Well, my friends, I think what we have turned adjudication into is bloody marvellous. It works. We can truly say we in this country can litigate or arbitrate at lightening speed.
As for the original idea of the adjudicator being an “over-view certifier” looking and sniffing - well, we can always invent that idea all over again.
Tony Bingham is a barrister and arbitrator at 3 Paper Buildings, Temple
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