Some changes to the Construction Act
Posted by Michael Janney on 6th January 2012
On 1 October 2011 the Local Democracy, Economic Development and Construction Act 2009 (“LDEDCA”) came into force in England and Wales. LDEDCA amends the adjudication and payment provisions of the Housing Grants, Construction and Regeneration Act 1996 (“HGCRA”). The amendments also led to the drafting of a new Scheme which also came into force on 1 October 2011.
Only construction contracts entered into on or after 1 October 2011 will be affected.
One of the main changes to adjudication introduced by LDEDCA is that “Tolent” clauses which provide that one party will be responsible for both parties’ costs of the adjudication have probably been outlawed.
Under the HGCRA, it was open to parties to agree who would pay the costs of the adjudication prior to service of the Notice of Adjudication. These clauses became known as Tolent clauses.
The HGCRA (as amended) and the revised Scheme only allow parties to agree liability for such costs following service of the Notice of Adjudication.
However, the HGCRA ( as amended) and the revised Scheme permits parties to confer power on the adjudicator to allocate and apportion responsibility for his own fees and expenses between the parties.
Parties will probably try to find ways of circumventing the true intention of the LDEDCA but it is likely that the Technology and Construction Court (“TCC”) will try and bring a final end to Tolent clauses.
NEC3 Adjudicator’s Contract
The NEC3 Engineering and Construction Contract is increasingly popular amongst government departments and local authorities. It was also the standard form used for the London 2012 Olympics construction works.
The usual position is that basically the losing party is responsible for the adjudicator’s fees relating to any adjudication but the NEC3 Adjudicator’s Contract contains an interesting departure from this.
In the event that there is a dispute under an NEC3 contract then, in the absence of any agreement between the parties to different terms and conditions, it is fairly reasonable to assume that the adjudicator will be appointed under the NEC3 Adjudicator’s Contract.
Under this contract, regardless of the outcome of the adjudication, each party is to pay the adjudicator’s fee in equal shares by virtue of clause 3.2. This states as follows:-
“The adjudicator assesses the amount due and submits an invoice for that party’s share of the amount due. Unless otherwise agreed, the parties pay the adjudicator the amount in equal shares”.
This position may indeed be appealing to some. Those who are entering into an adjudication believing there is a strong likelihood they will lose the case will embrace such a provision.
However for those who are more confident of the outcome then it would be prudent practice to either insert a provision that clause 3.2 of the NEC3 Adjudicator’s Contract does not apply or to seek to exclude the applicability of the NEC3 Adjudicator’s Contract and appoint an adjudicator under different terms and conditions.
