Tolent Construction has a home-made clause in its subcontract agreement that is supposedly designed to deter “spurious claims”, but is it a case of the pot calling the kettle black?

Tolent Construction, a company with a turnover of £90m, was reported recently in The Northern Echo to be “one of Britain’s fastest-growing builders”. That’s good: it needs a little help in the public relations department. That is because in Bridgeway Construction Ltd vs Tolent Construction Ltd, number 26 in our adjudication series, it relied too much on the law and not enough on what employers might think of it.More on that in a minute, but first let us ask, when will the penny drop? Those of us who place building contracts are not, nowadays, looking for the lowest price. Sir Michael Latham and Sir John Egan push best value, and by golly that’s right. And when you are looking for best value, you will above all avoid a builder who creates the impression of having difficult relations with suppliers. Sir Michael pithily summed it up: “A conflict-ridden, adversarial project is unlikely to come out to cost and time, or to the quality required. The client will be the loser in the end.”

The impression I got when reading the judgment in the Bridgeway case is that Tolent comes into conflict with its suppliers and subcontractors and then does its legal best to shoo away calls for the adjudicator. Wrong, wrong, says Tolent, we only want to shoo away subcontractors with spurious claims.

Let’s find out what is going on here. Tolent placed a groundwork subcontract with Bridgeway that was on Tolent’s home-made terms. Included in the terms was a reference to the model adjudication procedure published by the Construction Industry Council. This procedure was not printed out. What Tolent did is change a clause to the effect that if a subcontractor calls for the referee, then – win or lose – the subcontractor has to pay Tolent’s costs of coming to adjudication. In court, it was argued that this was an attempt to bar the subcontractor’s right to adjudicate. At the least, it is a deterrent term.

Bridgeway did call for the referee, believing the gross due was £117 702, whereas Tolent said only £53 570 was due. The adjudicator ordered that £100 139 gross less previous cash was due, and Tolent was to pay net just under £40 000. But now, Tolent runs up its costs flag, deducting £13 205.94 for solicitors’ fees and “management costs”. That figure was not made known to the referee, Mr Gywn Owen, but he did order that the winner, Bridgeway, was to pay the loser’s costs. He did so because he read the subcontract and how it changed the CIC model adjudication rules, and realised he was bound by that change.

If a subcontractor calls for a referee, then – win or lose – the subcontractor has to pay Tolent’s adjudication costs

I cannot help but wonder if Tolent told him what it told me. When I asked what it was up to with the clause, it said: “It is intended to deter spurious claims.” I asked that because in trying to understand the meaning of the words, I had to know the context or setting for what was clearly a deterrent clause. What was it trying to deter? Tolent did not intend it to deter legitimate claims. Had Mr Owen known that, would he then have ordered Bridgeway to pay Tolent’s costs?

Bridgeway came to court in Liverpool over the costs matter. Experienced barristers argued the nature of this deterrent clause, but the judge would not interfere. He understood why Bridgeway was disgruntled, but he could not change things. The reason the judge could easily understand this grievance is that costs orders in court and in arbitration invariably obligate the loser to pay the winner’s costs. Here, the adjudicator ordered the opposite. But nothing in the judgment indicates that Tolent only meant this clause to deal with spurious claims.

Tolent also told me this clause was introduced two years ago, when it was unsure how adjudication would unfold. Its solicitor said that his worry was the sort of literature that lands on his desk from a well-known claims consultant, stating: “From a subcontractor’s point of view, [adjudication] is a licence to print money”.