Hidden agenda: the weakness of adjudication

Earlier this year Ann Minogue criticised disputes, lawyers and adjudication (22 January, page 51). She suggested that if lawyers were better educated (that is, less contentious), it would lead to a “step change” in the industry. It would be nice if this were true. But the fact is that making contentious lawyers less contentious would not change the underlying factors that give rise to disputes. It would not prevent unforeseen ground conditions, or stop contractors from underbidding or developers from value engineering projects. And it wouldn’t change the fact that building contracts are inherently adversarial because of their bi-partite nature, their outmoded programming and extension of time machinery, their liquidated damages clauses, and their uncertain valuation mechanisms.

By and large the industry has, for good reason, welcomed adjudication. It’s no surprise that disputes lawyers have become involved. Adjudication is a dispute resolution process, and that’s what disputes lawyers are expert in. It may not be perfect (as the current consultation on proposed amendments to the Construction Act demonstrates), but adjudication has done what it said on Sir Michael Latham’s tin. Remember the old days with all those Official Referee’s Court skirmishes on the road to nowhere?

There’s little recourse against duff adjudicators. At least with judges parties can ask an appellate court to have another look if their decisions stink

Ann suggests that she would have advocated banning all lawyers from adjudication. That suggestion, if serious, should be taken with a hefty pinch of salt. In low-value disputes, where the costs are unlikely to be recoverable, clearly there may be no value added. But some adjudications turn on points of law or are high value, and only those living in cloud-cuckoo-land would advocate that parties to a dispute resolution process should be unable to involve lawyers if they chose to. The point of adjudication is to resolve disputes quickly, not to exclude lawyers from the process.

That said, adjudication does present some dangers; they just aren’t the ones that Ann identifies. Over the past decade the Technology and Construction Court (TCC) has spent more time answering questions about the enforcement of adjudicators’ decisions than it has addressing substantive points of construction law. Add to this an over-reliance in some quarters on alternative dispute resolution and a prospective litigant might, perhaps unfairly, form the impression that a cash-strapped government would rather the TCC left parties to resolve their own disputes so that it could save the cost of providing a specialist court.

The mandatory right to adjudicate - irrespective of the dispute’s suitability - also means that parties may have to go through adjudication whether they like it or not. I’ve lost count of the number of times I have been asked, “So, I can’t appeal the adjudicator’s decision?” I have had to say no and explain that the dispute would need to be heard afresh in litigation or arbitration. And, of course, if the adjudicator’s decision is a carve up, then nine times out of 10 the parties go away feeling equally aggrieved but aren’t prepared to do anything about it. They certainly don’t have the stomach for subsequent litigation.

Since adjudication is often as far as a dispute goes these days, barring enforcement shenanigans, most construction law decision-making is done in private. There’s little recourse against duff adjudicators. At least with judges parties can ask an appellate court to have another sniff if their decisions stink. This, I believe, is the real problem with adjudication: it means that construction law is not being made.

We have a common law system that relies on judges developing the law incrementally. Adjudication means that they are not doing as much of this. The result is that in important areas where the industry is changing (for example, procurement strategies, design methodologies, programming and innovative construction techniques), the law is not keeping up. And if the judges aren’t developing the law, lawyers won’t improve the contracts they draft.

So when Ann says that education is the key, she seems to miss the point that it used to be - when judges made law and drafters drafted contracts to reflect it - but in future it may not be. We could even find ourselves in a catch-22 situation where because the law doesn’t keep pace with change in the industry, the resultant uncertainty arising from the lack of legal development deters potential litigants from pursuing their legal rights. Education will not improve the way contracts are drafted. What will improve them is developments in construction law and a less nervous approach from non-contentious construction lawyers.

Nick Lane is a partner in the construction group at Olswang