'Heads we win, tails you lose' adjudication outrage

Exclusive by John d'Arcy



A shock ruling by a Liverpool court upholding a "heads we win, tails you lose" disputes clause in a construction contract has brought dismay to subcontractors and cast doubt on the future of adjudication.

"This is a very serious development," said Rudi Klein, chief executive of the Constructors Liaison Group. "It is horrendous news for adjudication."

The case was heard by Judge Mackay at Liverpool's technology and construction court. It involved adjudication proceedings brought by subcontractors Bridgeway Construction against main contractors Tolent Construction. The former were seeking the recovery of monies that they claimed were due.

Klein said the substance of the court ruling was to uphold a contract clause dictating that the party referring a dispute to adjudication would have to pay both sides' costs irrespective of the eventual findings. In this case, the adjudicator did indeed find in favour of Bridgeway. The subcontractor still had to pay both its own and Tolent's costs.

The subcontract was on the main contractor's standard terms which incorporated the model CIC adjudication procedures - but with amended terms regarding costs.

Klein contended that the outcome made a nonsense of the adjudication process.

Bridgeway was represented by David Oram, of solicitors Hill Dickinson. He said: "So far adjudication has proved a successful method of extracting money from a recalcitrant payer since its enactment under the Housing Grants, Construction and Regeneration Act 1996. Coupled with the success of adjudication there have been numerous attempts to draft adjudication terms that frustrate adjudication as envisaged by the Act."

Oram said the court upheld terms within the contractual adjudication procedure which provided that:

l The party serving notice of adjudication will bear all costs and expenses incurred by both parties; and

l Shall bear all the costs of the adjudicators.

He continued: "On the law as it presently stands, it will be no surprise if similar terms now become widespread in construction contracts. And this should be a major concern for anyone wishing to commence an adjudication."

Judge Mackay stated: "It seems to me that main contractors and subcontractors are entitled to develop contracts to implement Acts of Parliament. There are good grounds for saying that a system for costs is important and relevant.

"The mere fact that in a particular case the claimants are disgruntled, perhaps understandably so, about their costs situation does not entitle me to say: 'Well, these clauses are a bit unfair, let's change them.'"