The Tolent clause: Making a horlicks

To quote Otto Von Bismarck: “Laws are like sausages. You should never watch them being made.” Some of us have been working with the Department for Business Innovation and Skills on the new Construction Act. As with all working relationships there has been the odd disagreement. I should state the opinions and comments expressed here are entirely mine.

I think there is a problem. The new section 141 of the Act introduces section 108A, the original purpose of which was to ban contractual clauses that force one party to pay their own and the other side’s costs if they take a dispute to adjudication. This is known as a Tolent clause after a case involving Tolent Construction in 2000. I do not think the wording of section 108A has that effect at all.

If you make a provision in your contract that says one side pays all the costs of the adjudication (party to party and adjudicator fees and expenses), provided the contract also says the adjudicator has the power to allocate its own fees and expenses, the bit that deals with party to party costs is still valid. This is just Tolent with knobs on.

This was recognised by the industry before the act became law. We made representations to the business department and MPs. The department has said there is no problem. I and many others say that there is a stonking great problem that could and should have been eliminated.

It doesn’t matter whether I am right or wrong. If the point is arguable someone will argue it. That’s what we do in the construction industry with our collection of claims consultants, lawyers and the like.

In a last ditch attempt to avoid the effects of the new Tolent provision we looked at the possibility of isolating section 141 by not commencing that section in the commencement order for the act.

It doesn’t matter whether I am right or wrong. If the point is arguable someone will argue it

The business department said to do this we would have to make out a case and give impact assessments. The Technology and Construction Solicitors Association swung into action to produce analysis of the existing position. TeCSA said there is a case to isolate. I then produced an analysis on the impact assessment and the likely effect on the marketplace of the new section 108A. This was sent to the government by the Construction Umbrella Bodies Adjudication Task Group.

The work we did was to no avail. Last week the business department announced the government will be enacting section 141 and the new Scheme and the commencement order have been laid before parliament.

How strange that the machinations of government can produce an opposite effect to that put forward by industry.

The business department says “Under section 141, the only ambiguity (if there is ambiguity) would be around whether the clause effectively prevents the use of Tolent clauses in the manner parliament intended. On the face of it, that would appear to be a question directed to the heart of the matter and one which the courts might quickly answer, should they have to.”

Well, come on, we told you that in the first place. The industry has had 12 years of the Construction Act and 500 or so cases concerning enforcement to get to what might be a satisfactory position after the ruling of Yuanda vs Gear Construction, which banned Tolent clauses.

Why relegate this matter to the courts again? Although the Technology and Construction Court is excellent in the way that it has dealt with this legislation, any resolution of this may well be a Court of Appeal matter and be some time off. This whole matter could have been avoided by a proper drafting of section 141 and by listening to the industry in the consultation processes.

John Riches is managing director at Henry Cooper Consultants and an arbitrator and adjudicator