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Setting out the stall leaves adjudication review in limbo

legal matters

The current Latham review of the adjudication provisions of the Construction Act, it transpires, nearly didn't happen, writes Kim Franklin. Despite what were either indications, or undertakings (depending upon your source), from previous construction minister Nick Raynsford that the government had promised a review adjudication, the 2004 Budget announcement majored on the fraught payment provisions of the act and made no mention of adjudication whatsoever.

The perseverance of the Construction Umbrella Bodies Adjudication Task Group (CUB ATG) - which embraces numerous industry bodies such as the Construction Industry Council (CIC), the Property Federation and the Federation of Master Builders - paid off when it was asked to act as the adjudication working group for the current review under the chairmanship of CIC's Graham Watts. A separate working group was set up to consider payment, chaired by Richard Haryott.

At construction solicitor Fenwick Elliott's recent presentation of its popular bi-annual adjudication seminar, Watts explained how the timetable for the review envisaged both groups reporting in July and the Department of Trade and Industry publishing a consultation paper at the end of October. The degree of agreement within CUB ATG meant it was able to report a number of issues upon which it was unanimous that the act should be amended. These so-called 'green issues' included abolishing some of the present exclusions and extending the scope of legislation to include PFI contracts and residential occupiers. By contrast, the difficulties experienced by the payment group were such that Michael Latham was unable to report until September.

During the following weeks, keen adjudication watchers anticipated the publication of the consultation paper. Instead, on 21 October 2004, present construction minister Nigel Griffiths responded, identifying issues he was clear should be excluded from the consultation process.

These government 'no-go' areas all relate to the application of the legislation to contracts that are currently excluded. Griffiths set them out thus:

l Residential occupiers - he stated that as adjudication was essentially a commercial dispute-resolution process, to extend it to what he called 'domestic customers' would 'represent an unwanted shift in balance away from the customer and towards the industry'.

l PFI contracts - these he considered to be far removed from the 'traditional adversarial construction contract', which, in any event, incorporated detailed dispute-resolution mechanisms.

He was unaware of any 'fundamental weaknesses' in the operation of PFI contracts.

l Process plant - he recognised that the intersection between process-plant and construction contracts had led to cases where a practical interpretation of the exclusion was required. This was not, however, sufficient to justify a change in the law. Instead, there should be industry guidance on the implications of the case law that has emerged.

This change of tack suggests that the publication of the paper will be stalled, either temporarily or until after the election. In the meantime, the industry will find the ministers' preliminary stance something of a mixed bag.

The exclusion of residential occupiers is to be welcomed, at least by the 'customers' themselves and the adjudication fraternity. The residential community should still be alert to the fact that the statutory exclusion can be overridden by the express terms of the contract and that some standard forms expressly provide for adjudication. The failure to embrace all process-plant contracts will, however, lead to more court cases. No amount of guidance will prevent the referring party from conjuring ever more complex reasons why their contract for pipework, boiler repairs or the installation of plant that burns a lot of rubbish and generates a bit of electricity should be a construction contract and not a process-plant contract.

Interestingly, attempts to limit the scope of adjudication to exclude claims against construction professionals foundered - not on the grounds that adjudication is unsuitable, but because it would be unfair to exclude professionals from the benefits of the process should they want, for example, to claim their fees.

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

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