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Conundrum about which adjudication rules apply

Picture this scenario. Your construction contract:

My question is, when a dispute is referred to adjudication in 2012, should the adjudicator apply the “most recent” rules, which have been updated to take into account the Construction Act 1996 changes, or is it more appropriate to use the rules that pre-date that change?

I ask this question because that’s a scenario I recently had to contend with.

Does it matter which rules apply?

When the Construction Act 1996 was amended, relative to the payment terms, only minor changes were made to its adjudication provisions. We now have a requirement that certain aspects of section 108 are in writing (despite the repeal of section 107), a statutory slip rule (section 108(3A)) and provisions outlawing Tolent clauses (section 108A).

So if, under a pre-1 October 2011 contract, an adjudicator follows a set of rules that takes these amendments into account, what, if any, issues could arise?

While I doubt very much that the amended rules offend the original Construction Act 1996 (so the amended rules are unlikely to be replaced by the Scheme for Construction Contracts 1998), could any other issues arise? For example:

  • Section 108 in writing. The rules haven’t needed to be amended to take this provision into account because they are in writing in any event.
  • Statutory slip rule. Many of the amended rules provide for the correction of slips within five days of the date of the adjudicator’s decision. If a party notifies the adjudicator of a slip on day six and the adjudicator advises that he is unable to deal with it as a result of the amended rules, the aggrieved party might argue that the old rules apply. If so, without an express slip rule, the adjudicator can rely on an implied term (Bloor v Bowmer & Kirkland).
  • Provisions outlawing Tolent clauses. If the pre-1 October 2011 contract contains a Tolent clause, I imagine that the party who benefits from it (usually the responding party) will argue that the adjudicator should apply the old rules since they do not outlaw Tolent clauses. However, it is arguable that following Yuanda v WW Gear, Tolent clauses are outlawed. Thus, the clause might be inapplicable even if the old rules are applied.

So, the question “which set of rules apply?” does matter, albeit only in limited circumstances.

Clarify any ambiguity

To resolve the conundrum, the referring party should seek the responding party’s agreement over which version of the adjudication rules apply. This will rule out any ambiguity going forward, and should remove the threat of a jurisdictional challenge. After all, it will be more difficult for the responding party to maintain such a challenge when it has been given an opportunity to settle the issue at the outset.

If the parties cannot agree, why not ask the adjudicator? He may not be able to make a binding decision on his own jurisdiction (unless the parties allow it), but again it will provide some clarity for the parties. It is difficult to envisage the current crop of TCC judges having much time for such arguments and, in my opinion, it would be a brave party to take the matter to them at enforcement.

As for the adjudicator, I would suggest that he conducts the adjudication so it doesn’t offend either the old or the new rules, just to be on the safe side. That’s certainly what I did…

Anymore for anymore?

I’d welcome your thoughts on which terms should apply, and whether there are any further implications I have missed.

2 thoughts on “Conundrum about which adjudication rules apply

  1. Hi Jonathon – it seems to me that as it is this way around (new Scheme, old Act) that there shouldn’t be too many real problems other than the Tolent clause problem?

    s108 in writing – as you say, seems that the parties have an agreement that the new Scheme applies and so that’s OK.

    Slip rule – it seems then to me that you have two ‘slip rules’ – the implied one and the express one. I think there is a difference in what can be corrected in that the implied one talks about ‘giving effect to first thoughts and intentions’ whereas the express one makes no such reference. I would have thought though that the express agreement that the time limit is 5 days for a correction would override any implied timetable – although I suppose you could argue that the 5 days applies to an error of the type referred to in the express slip rule whereas the implied timetable could still apply to any ‘first thoughts and intentions’ slip!

    It does seem then that in paragraph 20(b) there is a difficulty in that the mechanism referred to in s111(9) is based on a certification mechanism that won’t apply to the contract as it is ‘old Act’. Assuming you’ve been asked to decide what to pay, and by when, maybe that is tricky? Logically it seems to me that the ‘subject to’ bit between the commas should just be deleted but I can see a problem.

    As for the Tolent clause, it seems to me that your decision on that would be severable from the rest of it, and Matt’s recent blog helps us work out that a court can therefore deal with this easily enough whatever you decide to do!

  2. Mat – thanks for your comments.

    I think that this issue is more likely to occur when adjudication rules other than the Scheme apply. Due to the number of changes to certain sets of rules (CIC went through four editions under the original Act), many contracts were drafted to refer to the ‘latest edition of the [insert applicable rules]’ – I haven’t seen any references to the ‘latest edition of the Scheme’, but I take your point.

    If it is right that the latest set of rules apply (which include an express slip rule), then in my view the Bloor slip rule would not be implied. The implied slip rule is only relevant if the old rules apply.

    I agree that there appears to be some uncertainty regarding the payment provisions in the ‘new’ Act and Scheme, and its certainly worth another blog!

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