The review of the Construction Act is more than welcome to Tony Bingham, who can hardly wait to see an end to the misapplication of 28-day adjudication as a dispute resolution process
The state of adjudication and the “payment rules” under the 1996 Construction Act are to undergo formal eyeballing. It’s only the second time in 20 years that the government folk have triggered scrutiny. So it’s about due. And it is welcome. I rank the Construction Act up there at the top, in terms of importance to your business. It’s about getting paid – promptly, or not. Whether you are a big ’un or a tiddler, it’s everyday stuff. It all started so well in 1998. It has since gone to pot.
The consultation paper (found on the government’s website) has hit the nail on the head. Smack bang at the front, it announces an objective of “encouraging parties to resolve disputes by adjudication”. Please hear this: 28-day adjudication in the Construction Act is not, nor ever can be, a device “to resolve disputes”.
In law – indeed, in common sense – 28 days is not enough time to resolve where to go on holiday, never mind any dispute. It is enough time to scrabble around and gawp at what each side says, sniff, stick a finger in the air and then decide … ah, wait, wait … decide what?
Who holds the cash isn’t a final resolution
In that time, anyway, the Construction Act – from the very beginning – is only meant to decide whether which of the folks in dispute will hold the money. And whoever holds it will do so only until the matter is more thoroughly investigated within machinery that resolves disputes. I repeat: 28-day adjudication is not a dispute resolution system.
28-day adjudication is not a device to resolve disputes. In law – indeed, in common sense – 28 days is not enough time to resolve where to go on holiday, never mind any dispute
Come back with me to 1996; the Construction Act was only a bill going through parliament. On the Monday, the bill said: “A party to a construction contract has the right to refer a dispute arising under the contract for resolution”. On Tuesday, a revision amended this to “the right to refer a dispute under the contract for adjudication”. So yours truly wrote to parliament and asked what this very quiet alteration was about. The answer came that “this is not a dispute resolution system, Mr Bingham”
So what? Well, in the beginning, and for a while after, we adjudication users, and we adjudicators, treated the device as an adjudication of who will hold the cash. The subtle and important difference is that we were deciding this cash-flow question, as do QSs carrying out a valuation.
That, believe me, is not a forensic examination of the rights of the parties. We’re talking cheap and cheerful. It involved an outsider, the adjudicator, coming along to take a view – a non-partisan view, and an approximate view – on the value of variations, of disruption and of prolongation, on the amount of extension of time; to take a look at alleged defects, fathom whether practical completion had been reached, and/or decide whether a lump of retention be paid.
This adjudication thingy was an unconnected QS, or engineer, or architect, simply breezing in and – crash, bang, wallop – that’s the way the money goes. And we could do all that in the pub, with the two job QSs and the QS adjudicator knocking Dim books together.
What then? It wasn’t a slow drift; it was almost an overnight crash. The dawn broke, and there stood a phalanx of lawyers (me too) and consultants, eager to be the body of troops, the missionaries come to save the industry. Adjudication became a dispute resolution circus. The bands played, the drums banged and the flags waved.
So what? The litigators invaded adjudication. None of them could get their mind round deciding who would hold the cash without resolving the dispute. None has QS culture; all are trained to litigate – like sticks of rock with the Civil Procedure Rules running through from top to bottom.
Litigators aren’t to blame
By now you might think I am criticising litigators: wrong. You might think I am about to suggest that we lawyers have climbed aboard the gravy train: wrong. What I am saying is that litigators are thorough beasts: we search nooks and crannies for argument, evidence and tactics. We are ever so good at litigating. But to import all that into a 28-day machinery, designed to decide who will temporarily hold the cash, is overkill. And that overkill requires pots of money.
Meanwhile, the courts saw this shift. It yelled a reminder about what adjudication is. Time and again, we were told it is a “pay now, argue later” system. We shrugged.
Lord Justice Chadwick in the Court of Appeal (Carillion vs Devonport) said: “The task of the adjudicator is not to act as arbitrator or judge. The time constraints within which he is expected to operate are proof of that.
“The task of the adjudicator is to find an interim solution, which meets the needs of the case. Parliament may be taken to have recognised that, in the absence of an interim solution, the contractor (or subcontractor) or his subcontractors will be driven into insolvency through a wrongful withholding of payments properly due. The statutory scheme provides a means of meeting the legitimate cash-flow requirements of contractors and their subcontractors. The need to have the ‘right’ answer has been subordinated to the need to have an answer quickly.”