| Date | 26 July 2000 |
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| Judgment | Bridgeway Construction Ltd -v- Tolent Construction Ltd TCC 11 April 2000. |
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| The Issue | Contractual provisions relating to the costs of adjudication. |
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| Implication |
The Courts will not upset a clear and unambiguous agreement between parties applying the Construction Act, where that agreement is not contrary to the clear intentions of the Construction Act. |
printIt has been said that the Housing Grants, Construction and Regeneration Act 1996 was brought about by the mischief of large contractors abusing smaller sub-contractors by failing to pay and by making unjustified counter claims and deductions. Although this may be true to an extent, it is clear that the Act has itself created certain mischiefs in the application of the payment and adjudication provisions. One example concerns the payment of adjudication costs. In Northern Developments (Cumbria) Ltd -v- J & J Nichol it was held that the parties to an adjudication may agree to give the adjudicator powers to award parties' costs. Indeed such agreement may be inferred from the parties' representations in the adjudication. Since the Act is silent on the matter of who should pay the costs of adjudication, the parties are therefore free to agree such matters in their contract, either by express terms or by the incorporation of adjudication rules which deal with the matter. One such set of rules is the Construction Industry Council Model adjudication procedure. Clauses 28 and 29 deal with the question of costs as follows: Clause 28: The parties shall bear their own costs and expenses incurred in the adjudication. Clause 29: The parties shall be jointly and severally liable for the adjudicator's fees and expenses. There is of course nothing to stop parties agreeing alternative terms in respect of such matters as costs. In a recent case between Bridgeway Construction Ltd and Tolent Construction Ltd, clauses 28 and 29 were revised to read the following: Clause 28: The party serving the notice to adjudicate shall bear all of the costs and expenses incurred by both parties in relation to the adjudication including but not limited to all legal and expert's fees. Clause 29: The party serving notice to adjudicate shall be liable for the adjudicator's fees and expenses. Disputes arose and Bridgeway, the sub-contractors, made an application to an adjudicator. They asked for their costs. In the event the adjudicator awarded them a sum of money but rejected their request for costs because of the terms of the sub-contract. In the event Tolent paid the sums ordered to be paid by the adjudicator less a relatively substantial amount in respect of their costs and expenses in defending the adjudication. Bridgeway took umbrage with the amount deducted, both in terms of the basis for its deduction and the amount. Accordingly Bridgeway applied to the Court for a declaration that the contractual terms in revised clauses 28 and 29 were by their very nature void since they had an effect of inhibiting people from pursuing their remedies under the 1996 Act. Tolent argued that the clause was not void. They argued that it was not unfair. In support of this argument Tolent pointed out that the clauses applied to both parties. Of course they did not add that unless they, under their own steam, put themselves in a situation of overpayment to their sub-contractor, the clauses concerned would not impact on both parties with the same commercial force. Nevertheless Tolent argued that if the Court were to throw out these clauses it would be interfering with the procedures set out in the contract and agreed to by the parties. They also argued that since the adjudicator had himself dealt with these matters, and in as much as adjudications are sacrosanct, then Bridgeway were caught by that adjudication and their claim must be dismissed. In examining all of these matters, his Honour Judge Mackay came to the view that there should be no interference with the contract. He considered that main contractors and sub-contractors were entitled to develop contracts to implement Acts of Parliament. He added that there are good grounds for saying that a system for costs is important and relevant. The mere fact that in this particular case Bridgeway were disgruntled, and perhaps understandably so, did not entitle Judge Mackay to say "Well these clauses are a bit unfair. Let's change them". Reference had been made to the case in the House of Lords of Johnson -v- Moreton in which there had been a deliberate attempt to contract out of the provisions of the Agricultural Holdings Act. The House of Lords had held that such a term was void. Judge Mackay did not consider that this case was relevant to the present issues. He noted that in this particular case the parties were concerned only with costs relating to adjudication which was not dealt with by any Act of Parliament. Moreover, Judge Mackay considered that as the parties had argued before the adjudicator the application of clauses 28 and 29, they were bound by the decision of the adjudicator in that respect. Thus while they might be free to argue over the amount of the deduction for costs, (and indeed perhaps run a separate adjudication in respect of this matter), there was nothing in the contractual terms which could be regarded as void and the adjudicator was therefore entitled to find as he did.
CJ-0029
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