The draft bill currently before the UK Parliament radically proposes a widening of statutory adjudication in the construction industry to cover all oral and part-oral contracts under its umbrella. However, it addresses few of the major practical issues concerning the practice of adjudication raised during the lengthy industry-wide consultation period. Recently, Lord O’Neill tabled some interesting further amendments specifically targeting some of those concerns – in particular, a proposed uniform statutory scheme and a prohibition on any form of agreement requiring one party to an adjudication to bear the costs irrespective of outcome.
Since the proposed draft bill1 tabling amendments to statutory adjudication provisions under the Housing Grants Act 19962 was introduced into the House of Lords in December 2008 (see Justin Mort’s paper ‘Adjudication: possible amendment to the 1996 act’ in this issue3), one of the prime movers and shakers of the process, Lord O’Neill, recently tabled further proposed amendments.4
Lord O’Neill’s proposals are of considerable interest, particularly those amending s.108 of the 1996 act, namely the provision that identifies the basic structure of and programme for adjudication under construction contracts. Lord O’Neill is president of the Specialist Engineering Contractor’s Group, a group representing a wide spread of mainly subcontractors working in heating and ventilation, electrical, plumbing, steelwork and areas. Although it is difficult to assess whether the proposals emanate from that group in particular, they do address some of the longstanding and widely expressed criticisms of the existing legislation which have not been addressed or only inadequately addressed in the current draft bill.1
Lord O’Neill’s 19 January 2009 amendments4 cover several sections of the existing 1996 and the draft amending bill, but this briefing refers only to those provisions which affect amendment s.108 of the 1996 act. They are set out below.
A comprehensive statutory adjudication scheme binding on all construction contracts with a prohibition on any standard form or bespoke contract-specific or adjudicator-nominating body schemes.
The statutory scheme (which will be brought into effect by way of a statutory instrument) may include provisions relating to the courts’ powers of enforcement.
A prohibition on any agreement, whether forming part of the construction contract itself, any adjudication agreement or agreement reached after the dispute has arisen, whereby one party is liable for the adjudication costs of both parties irrespective of outcome.
A right on the part of the adjudicator to correct any accidental clerical or typographical errors within 7 days of her or his decision.
A prohibition on any agreement or demand for security for costs of the adjudication.
An adjudicator’s decision requiring the payment of money may be enforced as a debt irrespective of any counterclaim or rights of set-off or abatement.
The proposal for a mandatory statutory scheme meets a long-standing criticism of the plethora of existing schemes with many standard form contracts and/or adjudicator nominating bodies all putting forward their own, and often vastly different schemes. Not only does this frequently give rise to further argument as to which scheme applies, but also to whether or not it is 1996 act-compliant. Although the terms of a mandatory scheme have yet to be spelled out, they are unlikely to differ greatly from the existing scheme – save to the extent that they may well include new provisions strengthening an adjudicators’ powers to manage the process more efficiently and for the proposed courts’ powers of enforcement (see point (b) above) to be designed to reduce further jurisdictional challenges.
The point (c) proposal prohibiting any agreement making one party liable for the costs of the adjudication irrespective of outcome removes a clumsy and unwelcome proposal in the existing draft bill whereby only such costs agreements reached prior to the coming into existence of a dispute are prohibited. The draft bill’s approach does not allay, and to some extent compounds the mischief of these agreements under which principal contractors, by wielding their superior might and muscle, frequently make adjudication simply too costly for subcontractors chasing unpaid monies, thereby entirely negating the ‘teeth’ of the statutory process.
The point (d) proposal is a practical solution to the point raised by Mort3 that the current draft bill leaves the period in which slips and errors can be corrected entirely open – even, potentially, after compliance with the decision as originally provided to the parties.
The prohibition on agreements or requirements for security for costs as a precondition to adjudication (point (e)) is also welcome as part and parcel of the attack on costs provisions being abused by more powerful contracting parties. It is tempered by a further proposed amendment whereby a party to a construction contract which requires the other party to provide performance security, whether in the form of a bond, guarantee or otherwise, has a right to suspend further compliance with its own obligations under the contract until such time as that security has been provided.
The last point (point (f)) speaks for itself, and undoubtedly forms part of the overall proposals to strengthen the original purpose of adjudication as a swift, and relatively less costly means of dealing with disputes and keeping money flowing.
The final point about Lord O’Neill’s amendments4 is that the words ‘at any time’ appear to have been dropped from s.108 of the 1996 act. The proposed wording now deals with ‘a’ dispute but omits all references to when it arises. Given that an amended wording would, in the normal course of statutory interpretation, be taken to indicate an intention to provide for something different, it will be interesting to see whether the courts will attempt to construe the new s.108 if passed in that form as providing for a dispute to be referred ‘at any time’ notwithstanding the amendment.
