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Marion Rich and Rod Pettigrew: Review of the Construction Contracts Legislation 16th January 2007

New 'improved formula' adjudication has been long awaited. In the meantime the old formula remains well used. You could be forgiven for wondering why anybody still has hopes for change. Such thoughts may have occurred frequently to Marion Rich and Rod Pettigrew since moves to update adjudication legislation started in 2000. But, over the years, they have, as representatives of BCSA and HVCA, kept up the lobbying on successive construction ministers (four in five years, none of whom have stayed for long enough to see anything through).

After the Government's review of adjudication was announced in 2004, Marion and Rod had taken part in the payment and adjudication working groups. They were now involved in the 'sounding board' set up by the DTI to gauge industry reaction to reforms being considered.

Many times over the last seven years they had wondered if anything would happen. They were now more optimistic that there would finally be reform in 2007 or 2008.

On payment provisions, they were unsure what changes there would be, but the most likely reforms were:

(i) redefining what is an adequate payment mechanism (and perhaps thereby restricting use of 'pay-when-certified' clauses);

(ii) redefining withholding notices;

(iii) requiring all construction contracts to have provisions for payment applications.

Reform was not expected to include:

(i) giving a right to time for re-mobilisation after lawful suspension;

(ii) restricting cross-contract set-off;

(iii) outlawing 'pay-when-paid' in all circumstances (currently allowed if there is upstream insolvency); (iv) giving a limited right to stage payments for off-site materials (of great interest to steel fabricators, amongst others).

On adjudication, three reforms were expected:

(i) outlawing 'Bridgeway v Tolent' clauses requiring the referring party to bear both sides' costs whatever the outcome;

(ii) clarification of what is meant by 'contract in writing' (to sort out the wholly unsatisfactory situation left by the Court of Appeal's decision in RJT Consulting Engineers);

(iii) outlawing clauses requiring money flowing from adjudicators' decisions to be held in trustee stakeholder accounts.

Marion and Rod did not expect that there would be a single adjudication procedure, statutory immunity for adjudicators, a right to refer disputes arising 'out of' as well as 'under' a contract, a requirement for adjudicators to be independent, or power for adjudicators to rule on their own jurisdiction. In addition, no changes were expected to the scope of application of the Act (i.e. PFI contracts to continue to be excluded, as well as residential occupiers and process plant).

Many aspects of the Scheme for Construction Contracts had been considered for reform, but only one was expected to be enacted, giving the adjudicator the power to open up final and conclusive certificates and decisions.

As to timetable, latest thoughts were that (with a fair wind) further proposals would be out for consultation from March to June 2007, followed by legislation in the autumn and commencement in 2008 (perhaps).

Marion and Rod were optimistic that there would be reforms, but in the audience we noticed that they were not offering odds on what these would be or when they would come into effect.

Talks on adjudication (and other dispute resolution issues) are usually given by practitioners. Marion and Rod were therefore all the more welcome as representatives of two important groups of adjudication users.

Report by Robin Orme

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