It doesn’t seem that many weeks since I was writing about Edwards-Stuart J’s decisions in the TCC on adjudication enforcement. Just last week, he gave a landmark decision in Yuanda v WW Gear. This case has received a lot of coverage and, having read the judgment, I can see why.
Is this the end for Tolent clauses?
Amongst other things, Edwards-Stuart J decided that Tolent clauses are unfair and conflict with section 108 of the Construction Act 1996. As such, he replaced all of the contractual adjudication clauses with all of the adjudication provisions in the Scheme for Construction Contracts 1998.
I doubt many in the construction industry would disagree with Edwards-Stuart J. HHJ Mackay’s decision in Bridgeway v Tolent has been turned on its head after 10 years.
Edwards-Stuart J said that if the referring party has to wait until it is worth making a referral (because the sum it expects to recover will exceed the costs it may be liable for), then that is not an effective remedy “at any time”. I can see the logic in that. If the referring party has to add the responding party’s costs to the equation, with so many unknowns in litigation, it is hard to imagine many situations where the balance will swing in the referring party’s favour.
(It should be noted that Edwards-Stuart J expressly said that clauses which allow the adjudicator to make an award as to how the parties’ costs are allocated do not conflict with either the Act or the Scheme.)
Adjudication was supposed to be about cash-flow, which Lord Denning described as the lifeblood of the construction industry. Adjudication was supposed to deal primarily with payment issues as a project progressed. I’m not sure that Sir Michael Latham (or the drafters of the Construction Act 1996) envisaged that adjudication would become the dispute resolution mechanism we have today, with a myriad of case law on almost every possible aspect of the process.
The LDEDC Act 2009
Many in the construction industry would say that it was about time this happened. Although Tolent clauses will become a thing of the past when (or if) Part 8 of the LDEDC Act 2009 becomes law, it seems that Edwards-Stuart J has got there ahead of the legislature. As he referred to the LDEDC Act 2009 amendments, this may have been a policy decision on his part, just in case the Act doesn’t make it into force.
Does the LDEDC Act 2009 do “exactly what it says on the tin”?
Finally, does the LDEDC Act 2009 do “exactly what it says on the tin” with regard to agreements on who pays the costs of an adjudication? I wonder if there is a loophole in the drafting that would have enabled parties to continue to include Tolent clauses in their contracts.
The new section 108A says that a clause dealing with the allocation of the parties’ costs will be ineffective unless certain criteria are met (in writing, confers power on the adjudicator to apportion his fees OR was made after the notice of adjudication was given). Section 108A doesn’t say that the parties cannot also agree who will pay the responding party’s costs in that agreement. It is arguable that, post-LDEDC Act 2009, without Edwards-Stuart J’s decision, we may have found ourselves still arguing over the interpretation of Tolent-type clauses.
