What the review missed

If you ask most people involved in the UK construction industry today how Part 2 of the Construction Act could be improved (that is, the statutory payment and adjudication provisions) there would be a strong consensus as to the key issues.

When one considers the payment provisions, clearly the lack of understanding and hence inconsistent application of sections 110 and 111 would be of paramount concern. Not surprisingly, the review of payment has at its heart concerns over the meaning and effect of these sections and makes some sensible proposals. The proposal that the requirement for the service of a payment notice under section 110 (2) be removed is a good example.

Confusion has abounded for years over the difference between the “due date” and the “final date for payment”. It is to be hoped the proposal that the due date be removed from the Scheme for Construction Contracts will be adopted and followed through in the act – it is hard to imagine anyone will object to that. It is just a shame the DTI has not proposed a wholesale redrafting of the Scheme so it can be understood.

Turning to adjudication, it is vitally important to remember that adjudication is far and away the most commonly used method of resolving construction disputes in the UK. There is relatively common ground between most users of adjudication as to its problems and pitfalls and how it might be improved.

In short, the DTI’s proposals (if adopted) will give adjudicators more power and immunity for their actions, but with no corresponding thought for how the quality of decision-making may continue to improve. To address the industry’s long-held and widespread concerns about the quality of decision-making, it would surely have made sense to propose minimum requirements that have the force of law in terms of qualifications, experience and training for adjudicators and that there be a limit to the number of adjudications any individual adjudicator could conduct at any given time. Consistently correct decisions based on proper legal entitlement can only assist in improving payment practices in the industry. The Adjudication Task Group’s proposal (as part of the Latham review) admitted that this vitally important issue needed to be addressed.

Further, although most people are agreed that adjudication generally works quite well for straightforward payment disputes and quantum and valuation within the statutory time limits, there is a wider concern with regard to disputes concerning professionals and complicated, high-value technical disputes. This has been the subject of recent judicial comment and it would surely have been sensible for the DTI to have taken this opportunity to consult the industry on whether or not such disputes (which arguably Latham had never intended to fall within the ambit of adjudication in the first place) should be omitted from the scope of the act.

As regards the proposals made concerning the adjudication process, I find myself agreeing with Tony Bingham’s comments (above) in relation to jurisdiction and particularly the adjudicator’s power to reopen “final and conclusive” decisions of certifiers under the contract. Although the proposal is that some decisions will remain “final and conclusive”, others will not, and that will be a matter for the adjudicator to decide. One can see further jurisdictional challenges arising as a result.

An adjudicator may in some circumstances be impartial, but not independent. Not a legal loophole I have heard too many people complain about, yet the DTI proposes that a “double test” of impartiality and independence be adopted. One cannot really criticise such a proposal but it is symptomatic of proposals that generally miss the point.

In the round, when considering the real issues that affect adjudication (less so with payment), one is left a little disappointed that the proposals do not go further and seem to have focused on a few relatively minor issues to the exclusion of matters that, if addressed properly, could have a real and positive effect on the primary method of resolving construction disputes in the UK.

Nick Henchie is a partner in the construction and engineering group at Mayer, Brown, Rowe & Maw LLP