Here’s another of Latham’s review panels, this time worrying over the state of adjudication. But it’s adjudicators’ state of mind that should be ringing alarm bells
I told you last week about part one of Sir Michael Latham’s Construction Act review. That bit was about tinkering with the payment rules. This week, as promised, I will tell you about part two – tinkering with adjudication. The tinkerers on Sir Michael’s think-tank represent industry’s thinkers. And since they represented construction, guess what happened while debating adjudication? Blow me down, they had a dispute! One of the group, the Construction Confederation, argued that its remit was only to report on issues which had achieved universal agreement. That would have been a skinny report. So the group invented a system where they “beg to differ”. They installed a traffic light in the corner of the meeting room. It flashes green when the group is unanimous; amber when there is some support and some not; red when only one group member gave the thumbs-up. The report did not include issues in the red category. What a bunch of spoilsports. Rumour has it that one red devil was urging Latham to check adjudicators’ heads once a month. Cheek!
The group discussed changes to the act, then changes to the Scheme for Construction Contracts, the latter being a set of procedural rules. Insofar as the act is concerned, tidying up is needed, they say, on PFI contracts. Then they say adjudication should apply to residential occupiers’ building works, which are currently excluded. There is a plea to get to grips with the half-baked rule about adjudication only applying to “contracts in writing”. The amber light flickered over the idea of bringing “process plant” works into scope.
But the issue the green light went mad over was what’s known as “the Tolent clause”. The group said: “Some organisations have used their dominant position in the marketplace to impose adjudication procedures that require the referring party to pay all the legal costs … whether they win or lose. The purpose has been to discourage the use of adjudication, by imposing unfair penalties on those who do. The right to impose such provisions under the current legislative regime has been upheld in the case of Bridgeway Construction vs Tolent Construction. This is universally felt to be an unfair practice, which should be outlawed.”
The Tolent case shows that inequality of bargaining power reigns supreme, or that Tolent’s subcontractors can’t read. The Tolent clause will go, says construction minister Nigel Griffiths.
Rumour has it that one red devil was urging Latham to check adjudicators’ heads once a month. Cheek!
The group glowed amber/green about having one set of procedural rules for adjudication. Green again for widening the jurisdiction or type of dispute that can come to adjudication. And green again to prevent a rule whereby the adjudicator is obliged to order money to go into a stakeholder account instead of giving effect to the contractual payee. Amber flashed doubt on giving adjudicators the right to make a binding decision about their right to be the referee at all.
As for changes to “the scheme” there was green/amber on the idea of being able to claim party and party costs of adjudicating. Currently it is taken to mean “pay your own costs” win or lose. This one is worth a debate. The scheme is thought to also say that only one dispute at a time can be brought. The group said that clause should go. Another unclear provision was the right to award interest. Green flashed to oblige adjudicators to give reasons in their formal decisions. Interestingly the group spotted that the scheme doesn’t give an express right for the defending party to put in a response. It said it should. But the reason why no response is mentioned is that the duty on the referring party is to refer the whole dispute. They don’t do it of course. The group agreed there is a problem by a fetter on the adjudicator’s powers to review a certificate in the face of a term in the contract that the certificate is final and conclusive. In other words how do you adjudicate a dispute over a conclusive certificate?
This tinkering is all very well, but the group didn’t touch on a real hot spot: the training of adjudicators. I mean retraining and getting shot of some and getting others on board. With my “user’s” hat on I demand that my fellow adjudicators improve. Come on, Sir Michael Latham, come on minister for construction, get these adjudicators’ heads examined.
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.