The judges – even those of the Technology and Construction Court, which acts as the enforcing court if adjudicators' payment decisions are not complied with – are neutral as to the possible shortcomings of the act, since our task is to apply the existing law dispassionately. However, the court has a privileged role in the interpretation and development of adjudication law, since all but a handful of the decisions based on the act have been decided by TCC judges. We have, in consequence, some experience of the actual and perceived difficulties in the operation of the act.
The act, with hindsight, should be considered as a legislative triumph. It established a novel, compulsory, relatively cheap and speedy dispute resolution system that was entirely paid for and administered by its users. The best evidence of its virtues is that nobody wishes its demise and most seem to believe that any changes should be marginal. Moreover, the act already achieves the clearly desired balance between speedy payment and the circumventing of unfair withholding strategies on the one hand and fairness to paying parties seeking to protect themselves against poor contractual performance on the other. I suggest that any change should be tested by asking whether it would significantly alter the balance that the current legislation has struck.
From the perspective of the enforcing court, there are three broad areas that could be considered for possible change.
Suitable cases for adjudication
The scope of the act is as wide as it could be. Any dispute arising out of any construction contract, except for designated exceptions, is covered. There is clearly scope for de-exempting all the exceptions, apart from owner-occupied premises where the contracting party is an individual. However, the act – as originally formulated before its amendment during the legislative process – was not intended to cover final payment disputes or those arising out of professional engagements. There is a growing tendency to refer these to adjudication. This is not intrinsically objectionable but such disputes are more complex than interim payment disputes and the 28-day process is usually inadequate. A compromise would be to remove such disputes from the ambit of adjudication or, alternatively, to provide a mechanism allowing the adjudicator to extend time in appropriate cases.
One set of rules
The principal problem encountered by users of adjudication is the bewildering variety of procedural rules, since each nominating body and several forms of contract have produced their own. A remedy would be to keep the privatised system of nominating bodies but provide that the rules in the Scheme for Construction Contracts should govern all adjudications. In that way, the secretary of state, in regular consultation with the users of adjudication, could keep a soft hand on the process by reissuing updated procedural rules. This could, at a stroke, provide the mechanism for bringing certainty and uniformity to such problem areas as the power to award costs, provisions requiring the referring party to pay both sides' costs come what may, minimum standards of procedural fairness, service of notices, the definition of what constitutes a "dispute" and the like.
The problem of jurisdiction
That leads to the current and developing area of jurisdiction. My starting point is that it is surprising that jurisdictional problems have not featured even more prominently. Enforcement is a part of public law, which is the interface between the court system and the tribunal and administrative structures of the state. Since adjudication is a mandatory process, adjudicators inevitably form one small part of the huge underbelly of dispute resolution and rights enforcement processes that are provided by the state. Public law is concerned with ensuring that such tribunals do not exceed their remit.
Any changes to the rules for judicial intervention must be considered with care. Enforcement must not be allowed to change from a process for the enforcement of a party’s legitimate rights into one involving state-sponsored oppression
That concept has two components: the subject matter of any dispute must fall within the tribunal's remit, and the decision-making process must accord with minimum standards of fairness and legality. A tribunal may be required to act speedily and informally but it must still only administer law to those disputes it has the competence to decide.
So, any court faced with a challenge to the decision of any adjudicator has a difficult task since it must answer two questions. The first is whether the subject matter decided by the adjudicator was on the right playing field. The second is whether or not the level of fairness adopted by the adjudicator fell below a level that no tribunal is allowed to fall by the general law. The trend of cases has been generous to the adjudication process. For example, the courts have defined "dispute" in wide terms and they have allowed adjudicators much leeway in setting the procedure to be followed. The guiding principle adopted has been to follow the act's intention that adjudication should provide a speedy, temporary and compulsory process so that only the most flagrant breaches of natural justice should be penalised.
If it is considered that the courts have not struck the right balance between tribunal autonomy and state intervention, any attempted change must be considered and drafted with care. Enforcement must not be allowed to change from being a process for the enforcement of a party's legitimate rights into one involving state-sponsored oppression. Moreover, any attempt to exclude or further restrict the court scrutiny of an adjudicator's decision may result in less certainty and more litigation. The touchstone of any change should be: will this possible restriction of court intervention speed up or slow down enforcement and will it maintain the present restricted rights of paying parties or further restrict them? I suggest that a reform should only be contemplated if it would speed up enforcement without further restricting a paying party's already constrained contractual rights.
The act is not only concerned with adjudication but also with payment processes and the outlawing of pay-when-paid provisions. The review could well place these processes under the microscope. The notice procedures are thought by many to be unduly complex. Essentially what is needed is a three-point triggering process: a definition of when and in what amount an obligation to make a contractual payment should crystallise; a definition of when and in what terms a withholding, reduction, set-off, abatement or cross-claim may be made by the paying party; and a definition of when and with what, if any, reduction the contractual payment must be made. The act seeks to achieve these steps, but could be greatly simplified. One change may be to provide that in all but final payments the sum that arises for payment is the sum claimed, unless the paying party has challenged it in writing within a defined period.
The review should also audit the provisions outlawing pay-when-paid clauses and the payment provisions against the domestic and European legislation concerned with unfair terms. These are pushing the law into recognising a general test of reasonableness for enforceability of payment obligations. The review should ask itself: should the absolutism of the existing act be replaced by more fluid tests that would outlaw more but not necessarily all prohibitions?
A final thought is that adjudication is becoming ever more expensive, largely because of the charging rates of the adjudicators, the lawyers and the claims consultants. The revised act could well include a mechanism that controls and caps the fees charged by adjudicators and by a party's own legal and claims professionals.
His Honour Judge Thornton is a judge of the Technology and Construction Court.