The big law society

This is not another column about the seemingly endless tussles in the Technology and Contruction Court by aggrieved parties resisting enforcement of adjudicators’ decisions. But instead we do need to reflect on some of the consequences of the explosion in adjudication since 1998 some predicted, but others not.

When recommending adjudication in his 1994 report, Sir Michael Latham made two pertinent observations:

• That such published experiences existing at that time suggested that the possibility of adjudication appeared to induce parties to reach settlement without recourse to it
• That the courts should only be approached as a last resort.

Both have been borne out, but I suspect the statutory adjudication that has developed is not what Sir Michael hoped for – over-lawyered, over-long, aping the adversarial procedures of arbitration and litigation, and much abused by referring parties who produce dozens of lever-arch files of documents leaving the other parties seven days to respond to them. Nevertheless – and perhaps because of this – the threat of adjudication is often enough to push the parties to the negotiating table. If you risk a time-consuming and expensive process, culminating in an often arbitrary decision, perhaps you are better off negotiating?

And it is also true that, for whatever reason, the corridors of the TCC are much quieter than they were a decade ago. And most contentious construction lawyers are focused on international arbitration and not domestic disputes – with the breathtaking exception of the Wembley litigation where Judge Coulson was moved to comment that in 25 years he had never seen costs at such a level. Brookfield (formerly Multiplex) and Mott MacDonald have spent two years engaged in pre-action protocol processes and Brookfield has spent £28.5m in costs to the end of 2009 with £8.4m being spent on the pre-action protocol process alone and a monthly legal bill of about £1m. Judge Coulson produced an aide-memoire for the parties, suggesting a sub-trial to resolve as many issues as possible. Even the sub-trial he noted would take up the bulk of his working life during 2011.

if the bulk of disputes are settled either by negotiation or adjudication, and no longer by the courts, how will the law move on?

There is little empirical evidence, for obvious reasons, and surveys on adjudication – like opinion polls – only give an impression. But if the signs are right and the bulk of construction disputes are settled either by negotiation or by adjudication with relatively little oversight from the courts, what impact will this have on the development of construction law? With the notable exception of the Construction Act 1996 and its updating last year, construction law is overwhelmingly based on common law – decisions by the courts including some ground-breaking interventions by the Court of Appeal and the Supreme Court and House of Lords on the meaning of the various standard forms, on implied contractual terms, on the assessment of damages, on liabilities in tort and all of the other issues addressed in the construction law text books. Indeed, most landmark cases in the law of tort have stemmed from construction disputes. If those disputes are no longer determined by courts – except as a last resort – how will the law move on?

We will undoubtedly need to look more widely at developments in other areas that may have a bearing on construction law. By way of example, Building included an article on the Sigma Finance Corporation case (23 April, page 52), in which the Supreme Court looked at the correct interpretation of a trust deed following the collapse of an investment vehicle. The decision had considerable relevance to those drafting construction contracts. Similarly, a recent case involving an attempt to avoid a development agreement executed before the recession based on an argument that a fall in the housing market amounted to a “frustration”, provides help to those looking at the frustration of construction contracts. Lawyers of course are trained to make these legal arguments but this will not be so easy for construction practitioners, who may well be unaware of developing law in other areas.

And how will the industry ever get guidance on some of the real questions that baffle it at the moment? Some of the questions arising out of the use of the NEC spring to mind – after all, do we know what the obligation to work in “good faith and a spirit of trust and respect” really means?

So although settling disputes is obviously to be recommended and adjudication is undoubtedly reducing the industry’s expenditure on legal costs and experts’ fees, there are unanticipated consequences on the development of construction law. Maybe in the end the industry as a whole will just have to become better all-round lawyers?