The DTI’s consultation on reforming the Construction Act could clarify grey areas on adjudication that cloud the original intentions – but only if the industry responds in time
In my final column on the Construction Act consultation document, I turn my attention to adjudication. There is a growing feeling that adjudication is becoming expensive, lengthy and inaccessible – the very opposite of that which parliament intended. To some extent this is borne out by Hammonds’ survey (4 February, page 52).
First, there is the issue of whether to ban “trustee stakeholder accounts”. Bespoke provisions that require an adjudicator to place monies in a stakeholder account deny the essence of adjudication. As Lord Ackner said in the Lords debate on the act, adjudication comes under the rubric of “pay now, argue later”. The ban must be total.
Second, the plan to give the adjudicator power to rule on certain aspects of his own jurisdiction. This is where most of the “lawyerising” takes place. The proposal is that the adjudicator should have power to decide whether he has jurisdiction over the following: Is there a construction contract? Is there a dispute? Was he or she properly appointed? Let’s agree with this with a couple of riders. The list should be extended to include decisions as to whether an activity comes within the process plant exemption (excluding power stations, water works and similar sites), which is full of anomalies and ambiguities.
I would also add “scope of the dispute” to the list.
Third, there is the proposal that adjudicators should have power to reopen “final and conclusive” decisions where these relate to interim payments.
I have seen the odd bespoke clause where a party is saying all his decisions shall be “final and conclusive”. What a great way to avoid adjudication – there can be no disputes. These clauses should go, whether they relate to interim payments or any other matter.
The consultation document argues that the valuation of the final accounts should be certified by a supervising officer and, therefore, a final and conclusive provision in respect of final payment would be acceptable. This is wrong: 90% plus of contracts let in the construction industry do not have a supervising officer. In any event, I thought that Lord Hoffman told us a few years ago that architects and the like were acting on behalf of their clients even where they were issuing certificates.
Now for matters on which the Department of Trade and Industry is not consulting.
First, having a single adjudication procedure for all adjudications. Why have thousands of different procedures? Presumably, because people want to include trustee stakeholder accounts and final and conclusive clauses. Are we going to come back each year to amend the act to outlaw other nasties? Tell the DTI you want one scheme.
Adjudication is a stop-gap process. Allowing party and party costs in adjudication would sound its death knell
Second, the meaning of “evidenced in writing”.
The consensus reached in the review process was that the adjudicator should decide whether the contract was sufficiently in writing to satisfy the act. Very sensible, though this good sense has not, as yet, permeated all the dark recesses of the DTI.
Third, enforceability of adjudicator’s decisions.
I have added this. The act must make clear that adjudicators’ decisions must be enforced as a debt free of abatement, set-off and counterclaim.
Finally, cost in adjudications. The DTI will amend the act to outlaw clauses requiring a party to meet all the costs of the other party in adjudication (isn’t it sensible to have one statutory scheme)? The DTI will also amend the act to make clear that the adjudicator cannot award party and party costs. I have a slight niggle here.
The DTI proposes that the parties can agree that the adjudicator should have the power to award party and party costs following referral of the dispute. Definitely not. The rule that costs follow the event (if it can be described as a rule) is wholly inappropriate for adjudication. Adjudication is a stop-gap process. It is not a forensic process aimed at establishing a “winner” whose legal costs are paid by the “loser” (unless he has been badly behaved). Allowing party and party costs would be the death knell of adjudication.
Don’t forget, responses have to be in by 21 June.
Rudi Klein is a barrister and chief executive of the Specialist Engineering Contractors Group