Adjudication is being turned into an expensive and inefficient process by the proliferation of home-made procedures. So why isn’t the DTI doing something to stamp them out?
The DTI’s second round of consultation on amendments to the Construction Act is supposed to be imminent. But, as we await this, it is clear that we are skirting around some important issues concerning the future of adjudication as a process that is supposed to be an inexpensive stop-gap.
One of these is a statutory adjudication procedure. The industry has tired of the proliferation of costly and confusing bespoke procedures and bespoke amendments to standard procedures. I cannot understand why this matter has not been addressed. There was huge support for a single statutory adjudication procedure in Sir Michael Latham’s review of the act in September 2004.
The only opposition I can detect to this proposal comes from those bodies that are concerned about the loss of their own procedures. If they want to keep their own procedures, I am happy to incorporate them into a single statutory procedure. Alternatively the Scheme for Construction Contracts – with some amendments – could be the procedure.
To date the DTI has proposed the outlawing of trustee stakeholder accounts, “final and conclusive” provisions and the “Tolent” clauses that require a referring party to pay the other side’s legal costs irrespective of the outcome of the adjudication. But repeatedly amending the act to outlaw onerous bespoke clauses and procedures is not an efficient use of parliamentary time.
Meanwhile, other onerous cost provisions are emerging. For example, a large national contractor has a provision in its domestic subcontracts that requires subcontractors to place £10,000 in a “stakeholder account” as “security for costs” before a dispute is referred to adjudication. So, if this firm is unjustifiably withholding your £5,000 retention, you are £15,000 down before adjudication begins.
The industry has tired of costly bespoke procedures. I cannot understand why this has not been addressed
Most firms are unable to tell if a procedure complies with the act. If you want to be sure you’ll have to seek legal advice knowing that, when push comes to shove, such advice could be challenged. More costs wasted. When a dispute gets to adjudication there will be the inevitable claim that the adjudicator should have applied the bespoke procedure rather than the scheme, on the basis that the contractual procedure is act-compliant. Alternatively, the argument could be that the adjudicator should have been appointed in accordance with the bespoke procedure rather than under the scheme. Even more costs wasted.
If a bespoke procedure does not fully comply with the act, does the compliant part still stand? The act does not say it is void. This issue preoccupied Judge Havery in two recent cases. In Epping Electrical vs Briggs and Forrester, he said: “The scheme applies in place of the adjudication provisions of the contract. If it were otherwise, two competing sets of adjudication provisions would simultaneously apply to the contract … That is a recipe for confusion and uncertainty.”
But, in Aveat Heating Ltd vs Jerram Falkus Construction, Havery was not as emphatic. “In my judgment, the scheme and the contractual provisions cannot coexist in the contract unless provision is made in the contract for how that is to work.”
We now have the possibility of a dispute being governed by the act, the scheme and the contractual adjudication procedure, providing that such procedure has made provision for dealing with any conflicting provisions in the scheme. What a mess!
So what do we do about it? You can write to the DTI now and make it clear that you want a single statutory adjudication procedure. Or you can make this clear in your response to the next consultation – whenever that is.
Rudi Klein is a barrister and chief executive of the Specialist Engineering Contractors Group