The Construction Act deals a knock-out blow to adjudicators who try to hold on to the award until they get paid. But if the parties don’t like that rule, they don’t have to adjudicate at all
Two technical and complex knock-out blows defeat the adjudicator’s decision, which was that Mott MacDonald should get £63k in withheld fees. Knock-out blow number one was the awfully silly rule about “contracts in writing”. I need say no more about that, except “parliament, please get rid of it”.
Knock-out blow number two is much more interesting. It’s another affair to do with what I call “fair exchange”.
If your adjudicator says you can have their product – the decision – when you pay for it, is that fair exchange? This is important, because the decision contains some good news and some bad news. And the receiver of the bad news is sometimes a tad fed up. And sometimes they become spiteful and want someone’s blood – the adjudicator’s.
As a result, adjudicators up and down the land now say: “Fair exchange, please”. There are even several respectable institutions that publish standard adjudication rules saying, “Pay the adjudicator, then take delivery of the award”. What’s more, in arbitration, parliament has laid down a rule that the arbitrator is allowed to refuse to deliver their award before full payment of fees and expenses.
In several recent cases, the adjudicator has run past the formal due date for the delivery of their decision because their fees had not been paid. What’s more, the parties both seem to have agreed to those terms in their adjudication agreement or implied their consent by agreeing the adjudicator’s terms. You would have thought that if those parties had agreed such a deal as “fair exchange”, the deal would stick. Well, er, no.
Some of the cases have said that delivery of the award on day 28 or some other agreed date is mandatory. No pre-dispute agreement in adjudication rules can defeat that. Fair enough. So if the contract has a rule that allows the adjudicator to run past the mandatory date, that rule is said to be void under the Construction Act because parliament created a rule that cannot be overruled.
If the parties conduct a dispute under machinery of their own choice and neither insists on his right to have construction Act dispute machinery, so be it
The Construction Act is one of those acts of parliament that contains rules that cannot be changed by party-and-party consent. So, any rule in the Construction Act is unalterable even if the parties agree it is. Moreover, a party can even resile after the decision is delivered. And in recent cases, the courts have then said the decision was void. Wow, what a great escape route. Can’t be right.
Look, Construction Act adjudication and its mandatory rules are only mandatory when used. Construction Act adjudication is not mandatory in itself. When a dispute pops up, the parties need not use Construction Act adjudication at all. They can use litigation, arbitration, mediation, expert determination, negotiation or any invented dispute resolution process.
On the other hand, parties can ignore parliament’s adjudication machine and invent their own if they want. So, if the parties conduct a dispute under machinery of their own choice and – this bit is important – neither party insists on their right to use the Construction Act machinery, so be it.
Here is a silly example. If you and I, in a contract, pre-agree that my Auntie Nell will be the adjudicator, and you know I am her favourite nephew, then it’s bias and the Construction Act will strike it down. It’s not compliant. That’s true, but unless you or I insist on a Construction Act adjudication, we can use our own dispute resolution process, even though it offends the act.
Put shortly, as soon as two parties agree by one means or another, a rule or machine outside the Construction Act, they are not triggering their statutory right, they are triggering a homemade right – and that’s not void at all. It is enforceable and fair.
Two things to remember: you can invent all your own rules, but you can’t take away the statutory right to sling your own rules out of your own contract. Parliament reigns supreme … sort of.
Tony Bingham is a barrister and arbitrator