The bath water is the bespoke adjudication clause that a few main contractors include in their subcontracts. The "Tolent clause", as it is known, was ridiculed by Rudi last week and has been roundly condemned by the Construction Industry Board. The case that began the CIB's unhappiness was Bridgeway Construction Ltd vs Tolent Construction Ltd (14 July 2000, page 65). Bridgeway accepted a subcontract, which had a clause requiring the referring party in any forthcoming adjudication to pay the costs of the responding party even if the referring party won. Bridgeway, the referring party, did win and had to pay for Tolent's legal costs – the judge having decided that the subcontract clause was lawful.
The case has led the CIB to recommend a change either in the Construction Act itself or in the accompanying Scheme for Construction Contracts, which frequently applies to adjudication. The idea is that each side will pay its own costs. This is supposed to outflank the Tolent clause.
Assume for now that it does do so. This is where the baby goes hurtling down the drain. A rule that each side pays its own costs will torpedo the very idea of adjudication, which is to provide a low-cost and impartial means of managing typical disputes. Trouble is, it is plain as a baby's dummy that disputes frequently include tricky legal issues and sometimes the need for expert opinion. So a dispute about £20,000 could easily see £3000 or more being spent on advice. There is a respectable debate going on as to whether that £3000 is claimable in damages as a natural consequence of a breach of contract. Certainly, it smells a bit off to succeed on the £20,000 claim only to have it discounted by unrecoverable costs.
It may even become uneconomic to bring an adjudication for a dispute over a modest sum; parties might feel it would be better to use public funds by litigating. The court will then oblige the loser to pay the winner its costs.
A rule that each side pays its own costs will torpedo the very idea of adjudication, which is to provide a low-cost means of managing disputes
The CIB recommendation is wrong. Instead of saying each party will pay its own costs, it is better to say the loser will pay the winner's costs.
It may well be that bespoke, ad hoc adjudication clauses are perfectly lawful. It may be right to say that the contract can include the most loony tune dispute process you might imagine. It may equally be right to say that nobody can deny either party its absolute right to use the Construction Act provisions. The act says you can adjudicate according to its provisions whenever you like. If a subby of Tolent is faced with a contract clause that runs against parliament's intentions, the subby can still exercise its right to use the scheme and ignore what some folk see as a nasty clause. Follow?
The DETR consultation paper also discusses ambush, natural justice, intimidating tactics, the slip rule, the timing for giving "reasons" with each decision and the training of adjudicators. But it doesn't intend to do much more than encourage the industry to sort these things out for themselves. Hurrah!
One thing on the subject of ambush worried me. The CIB and the DETR rather seem to like the way some adjudicators are robustly ordering a party that submits umpteen lever-arch files to forget all that bumf and replace it with a "summary submission". That advice might be wrong. Look, if the dispute is all about 15 files, and if those 15 files have been tossed between the parties, then that lump of information is "the dispute". The adjudicator can't refuse to consider the dispute.
Postscript
Responses to the DETR are due by 18 June and can be emailed to pauld.smith@detr.gsi.gov.uk, tel 020-7944 5662. Tony Bingham is a barrister and arbitrator specialising in construction. You can write to him at 3 Paper Buildings, Temple, London EC4 7EY, or email him on info@tonybingham.co.uk.
