REUTERS | Brian Snyder

Non-compliant adjudication provisions and the Scheme: what should happen?

The decision in Banner Holdings Limited v Colchester Borough Council has already caught the attention of Matt Molloy. It is another decision of the TCC on a Part 8 claim dealing with non-compliant adjudication clauses, and it raises (and indeed revisits) a number of interesting issues.

“Final and conclusive” decisions of the employer

The contract in Banner Holdings incorporated the GC Works/1 Form of Contract and the provisions of Model Form 24. It included a provision which provided that the adjudicator had no jurisdiction to vary or overrule certain decisions of the employer, including any decision to determine the contract (Condition 59(8)).

Although Coulson J took the view, on his analysis of the contract, that Condition 59(8) did not prevent the adjudicator from considering the dispute referred to him as to the validity of the determination, he also said that if he was wrong on that and Condition 59(8) did deprive the adjudicator of jurisdiction, then the clause would fall foul of section 108 of the Construction Act 1996.

It would appear from Banner Holdings, therefore, that if a party wishes to make a decision of the employer “final and conclusive” and remove it from the adjudicator’s jurisdiction, an exclusion clause of the type considered may not succeed.

Where one adjudication provision is non-compliant doesn’t the Scheme replace all the adjudication provisions?

Condition 59(5) of the contract provided for the adjudicator’s decision to remain valid if it was issued after the statutory period. At the hearing, the parties agreed that this condition was non-compliant with section 108 of the Construction Act 1996 and the judge referred to authority (including the judgment in Aveat Heating v Jerram Falkus), “which makes plain that this particular provision does not comply with the Act”.

Coulson J did not make an express finding on this point. However, he did comment on what may happen in these circumstances: whether the Scheme was to be implied wholesale or in a piecemeal manner. Interestingly, he expressed only a “tentative view” that “…in relation to the adjudication provisions in section 108, the wording suggests… that the whole Scheme replaces the express terms…”.

I must admit that I had thought that this issue was settled and that the entirety of the adjudication provisions in the Scheme replaced all of the express adjudication terms in the parties’ contract where any were held to be non-compliant with section 108.

However, given the judge’s comments, is there a valid argument that a piecemeal approach could be adopted by the courts where only parts of the Scheme are incorporated, as necessary? If so, are the courts more likely to take such an approach with complex adjudication clauses such as the one in this case, which included more than the basic rights set out in section 108 of the Construction Act 1996?

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