Subbies may have to pick up adjudication costs

The government has decided not to close a legal loophole which critics say could allow contractors to force subcontractors to pick up the costs of adjudication proceedings.

The amendments to the 2009 Construction Act were intended to outlaw contractual clauses which force one party, often the subcontractor, to pay both their own and the other side’s costs if they take a dispute to adjudication.  But some lawyers and industry figures say the changes to the contractual clauses, known as Tolent clauses after a case involving Tolent Construction in 2000, will have the opposite effect. They had lobbied government to clarify the amendment but the government decided changes were not necessary.

A letter from Tony Mulcahy, assistant director of the construction sector unit at the department for Business Innovation and Skills, said parliamentary time was unlikely to be found for more legislation banning Tolent clauses and that the courts could quickly clarify the amendment if it was held to be ambiguous.

John Riches, arbitrator and adjudicator at Henry Cooper Consultants Limited, said: “I think the government have got it completely wrong. They have managed to stick the industry with a problem that might take a long while to resolve through the courts.”

However other lawyers felt the problem was a small one. Rupert Choat, partner at CMS Cameron McKenna, said the court would recognise the intention of the amendment was to ban Tolent clauses. He said: “The court will quite readily look behind the words to the parliamentary debates, as it is entitle to do, and see this was discussed at the time.”

Rudi Klein, chief executive of the Specialist Engineering Contractors Group, said:  “My annoyance is someone will take this to court wasting money needlessly. The court will not regard this as upholding Tolent.”

He said he was more concerned about another provision in the amendment which allows organisations about to go to adjudication to produce a written agreement about how they will distribute adjudication costs. He said: “Some firms could say if you lose then you must pay our costs. Unsuspecting firms could go with that or there could be the threat that if they don’t agree to this they won’t get any more work. It would be better if in adjudication people just paid their own costs. This the thin end of the wedge of undermining that principle.”