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Adjudicators could be given the power to decide jurisdiction

legal matters

At last! The Department of Trade and Industry's (DTI) consultation paper on amendments to the payment and adjudication provisions of the Housing Grants Construction and Regeneration Act l996 has arrived, writes Kim Franklin.

The original timetable for Sir Michael Latham's review of the Act envisaged that consultation would take place in October 2004 and any necessary reform proposed by spring 2005.

The roadmap diverted sharply on the presentation of Latham's report, when construction minister Nigel Griffiths gave a prompt response to some aspects of the review, but then stalled the general consultation.

These delays and the impending general election prompted some commentators to wonder whether the review was to go ahead, or whether all the good work of the payment and adjudication working groups would be forgotten by the new government/chancellor/ construction minister.

Such thoughts were scotched on 22 March, when the DTI released its 120-page paper. Perpetuating the original theme that problems with the payment regime prompted the review, the document rejoices in the title Improving Payment Practices in the Construction Industry.

But dig deep and you will find the proposals for adjudication lurking in the final chapter.

The intention is to enable parties to construction contracts to reach agreement on what should be paid and, where they cannot agree, to make an informed referral to adjudication. Reference to adjudication is intended to be made without the disincentive of unnecessary challenge. The proposals are intended to simplify the payment provisions by defining what is meant by 'an adequate payment mechanism' and requiring withholding notices to provide details of the remaining amounts. These proposals are welcome, not least because the payment provisions are a mismatch of logic, defying requirements on time periods, dates and notices.

There are no proposals to change the scope of the Act. This was to be expected after the minister's prompt response of October last year. Thus the present exclusions for residential occupiers, PFI and process engineering will remain. Equally, the Act will continue to apply to contracts for architectural and engineering services. The contentious entitlement to refer disputes 'at any time' does not even get a mention.

There are no proposals to amend the requirement that a construction contract be 'evidenced in writing'. The statutory definition of what amounts to evidence in writing gave rise to some confusion, exacerbated by court decisions, including the Court of Appeal's decision in RJT Consulting v DM Engineering (2002).

The DTI is considering five proposals intended to encourage the use of adjudication:

. preventing the payment of sums awarded into 'trustee stakeholder accounts' pending litigation, other than when the recipient is insolvent;

. empowering adjudicators to rule when their jurisdiction to act is challenged;

. enabling adjudicators to overturn 'final and conclusive' decisions such as final certificates;

. extending adjudicators' immunity to claims by third parties; and . requiring adjudicators to be both impartial and independent of the disputing parties.

The potential power to decide jurisdictional challenges is perhaps the most interesting. Hitherto, while adjudicators have been able to express a view as to whether a contract is a construction contract as defined by the Act, and whether they are therefore entitled to act as adjudicator, such views were non-binding.

The unsuccessful party was able to challenge the adjudicator's jurisdiction when contesting enforcement in court.

Empowering adjudicators to decide jurisdiction would reduce the number of contested enforcements. It would also oblige adjudicators to decide the very legal issues the courts have struggled with since the advent of the Act.

Do adjudicators want that responsibility?

Would you want them to have it? Get a copy of the paper at www. dti. gov. uk/construction/ hgcra/hgcralead. htm and respond to the DTI.

Kim Franklin is a barrister and chartered arbitrator at Crown Office Chambers.Visit www. crownofficechambers. com

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