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Adjudication is a quick-fix solution, not a legal substitute

'The industry was ... secretly flattered that the government was prepared to treat it as a special case'

Last year, the great gurus of the construction industry were asked to look into the crystal ball and predict the future of adjudication. Inevitably the prophesies varied, but two distinctive trends could be detected, and these were dependent upon whether the guru had an industry background or was a lawyer.

The industry was very optimistic and secretly flattered that the government was prepared to treat it as a special case and speedily put together some legislation that would deal with one or two problems that marred otherwise sterling achievements. It predicted that the hgcr Act would reduce adversarial attitudes on site and encourage a culture of co-operation (and, incidentally, prompt payment).

In the unlikely event that a rogue operative broke ranks and reverted to confrontational type, the boil of any subsequent dispute would be lanced, promptly, by an impartial adjudicator wielding a 28-day needle.

The lawyers, on the other hand, were rather gloomy. They regretted that the government had interfered with the industry's freedom to contract. They saw all too many holes in the hastily thrown-together provisions. They wondered what would be done if the adjudicator's needle was blunt, rusty or poorly aimed. They shook their heads and predicted that those who were cock-a-hoop at the dawn of adjudication would be running to when the whole thing went wrong.

Vindication of these respective views was thought to lie with the courts. Would they get behind the new process and support the adjudicator, or would they pick away at the holes in the legislation leaving it frayed and useless? The pundits scrutinised the first decisions, Macob and Outwing. Early indications were that adjudication was receiving the judicial 'thumbs up' to the chagrin of the lawyers. Undefeated, they pointed out that neither case raised any issues of real significance. What if the adjudicator's decision is clearly wrong on its face? What if it is given after practical completion or after the contract is determined? Or after the expiry of 28 days? Will the courts still uphold it then?

The tcc decision in a&d Maintenance v Pagehurst Construction will fuel the lawyers' disappointment. The case concerned a disputed adjudicator's decision. The main contractor, Pagehurst, did not want to pay a&d the £100,000 odd ordered by the adjudicator for sub-contract works, because, Pagehurst said, a&d's negligent installation of a boiler and flue had caused a fire and considerable damage to the works. Pagehurst said it had a much larger claim against a&d, which would extinguish its claim for payment. Furthermore, shortly before the fire, the contract with a&d had been determined and further payment withheld until the works were complete.

In a brisk judgment, tcc Judge Wilcox dismissed these arguments. He said that the adjudicator's powers under the Scheme were so wide that he could have dealt with the fire-damage claim as well as the claim for payment had he or the parties wanted him to. The Judge pointed out that the hgcr Act permitted a reference to adjudication 'at any time' and, whereas Parliament had set out a strict timetable for the giving of a decision, it imposed no limits on the timing of references. Finally, Pagehurst had taken part in the adjudication, had not tried to stop it, nor asked the adjudicator to rule on his own jurisdiction at the outset. So, he said, Pagehurst should pay up.

This decision gives us lawyers cause for concern. The Act does allow a reference to adjudication 'at any time' and we know that the arbitration clause survives the end of the contract. But adjudication is something different. The whole idea was that the adjudicator's 'cheap and dirty' decisions would keep the contract going until practical completion after which the matters in dispute could be thoroughly probed in the comparative leisure of more formal proceedings. Once the contract is over, however, there is nothing to stop the parties starting those proceedings there and then. In fact, litigation proceedings for the fire claim had started. So surely there was no need for the adjudicator's needle: major surgery was already under way.

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