The Arbitration Act applies hereabouts, but the UK adjudication system would work here, too – as it would anywhere in the world. More than 3000 adjudications have been completed in the UK in the first three years. And it works. It's an industry solution to an industry problem. Building disputes are ordinary … no matter where in the world. And the UK courts are giving huge support. Another superb example is from the Scottish judge Lady Paton in RE: Watson Building Services. It is case 53 in our series.
Rot. That's what had set in at Holy Cross Church, Glasgow. Watson, the main contractor, employed Miller (Preservation) as the subcontractor rot sorter-outer. They didn't see eye to eye on something quite ordinary, so Miller called on the independent Academy of Adjudicators to appoint the referee.
Watson said, you can't do that because the subcontract says: "The subcontract is placed with you subject by and large to the same terms and conditions as the main contract." Therefore, said Watson, this is a "back-to-back" subcontract, and since the main contract has a different appointing body, Miller is out of order by going to the academy. By now, the referee, Graham Harrison, was ostensibly appointed and Watson told him to get off the pitch.
Pause here for a moment. Let me interject. Will my main contractor friends please stop talking poppycock about this back-to-back idea. Hardly ever does it work. More on that anon.
Will my main contractor friends please stop talking poppycock about back-to-back subcontracts. Hardly ever do they work
Where was I? Ah yes, the adjudicator could not make head nor tail of how the main contract could be made to work as a subcontract, and pronounced that he did indeed have jurisdiction to be the ref.
It is often said that unless parties expressly or impliedly give the power to an adjudicator to decide their jurisdiction, there is no power for the referee to make a binding decision as to whether jurisdiction exists. This judgment of Lady Paton explains how wrong this idea is.
I will explain. Adjudicators only have power to decide matters arising under the contract. In the case before this court, Watson said the main contract, GC/Works/1, contained an adjudication clause that said who would appoint. The contractor said it was "stepped down", or written into, the subcontract – but the subcontractor said it wasn't. The court said this quarrel was an issue arising under the contract, and therefore the adjudicator had the authority to decide his fate. So, was he properly on the pitch or not? When one party says an adjudication clause is or is not part of a contract, that issue is a dispute arising under the contract. It would be different if the quarrel was whether or not a construction contract existed. No power ordinarily rests in an adjudicator to decide such a fundamental question, nor can he or she bind the parties to the answer because it is not an issue arising under the contract. The referee Harrison was doing nothing more than construing the existing contract to see what terms made up the bargain.
As for stepping down a main contract into a subcontract, the judge accepted that the standard forms between employer and main contractor were designed solely for that main contract relationship. The obligations between main contractor and subcontractor were completely different. It made no sense to try to read standard forms applicable to a main contract into the subcontract (the back-to-back idea). It is not the job of the court to manipulate clauses in one contract to fit into another.
Tony Bingham is a barrister and arbitrator specialising in construction. You can write to him at 3 Paper Buildings, Temple, London EC4 7EY, or email him on firstname.lastname@example.org.