This article explores the genesis of statutory adjudication and the remarkably curious concept of temporary finality, but is it genius or are futures made of temporary finality virtual insanity?
The Old Ways
Disputes in construction are not new. In the United Kingdom in the twentieth century, the pendulum swung from the contractor friendly Dawnays v Minter[1]by the indefatigable Lord Denning to the pandoras box of cross claims opened by Modern Engineering Ltd v Gilbert Ash[2].In this case Lord Diplock wryly observed that the need for cash flow in business had not escaped the attention of judges over the past 130 years. Diplock went further, publicly crossing swords with Denning with his on the nose quip: “cash flow is the lifeblood of the village grocer too”.
Following Modern Engineering the commercial reality on the ground was payments could be withheld for years, for any ‘reason’ the paying party decided to conjure up. Getting the dispute resolved was expensive and protracted. The golden rule was- whoever had the gold made the rules.
The Primordial Adjudication Soup
The need to address the high costs of disputes in the construction industry came to the fore in the early 1990’s against the backdrop of a deep-seated recession. From here, the origins of statutory construction adjudication can be traced to ‘Latham’[3].
Latham was a comprehensive review of the construction industry aimed at driving efficiency, reducing disputes, and developing ‘win win solutions’ or as Sir Michael put it in the foreword:
“I prefer the immortal words of the Dodo in ”Alice’s Adventures in Wonderland”, “Everybody has won and all must have prizes”.
Latham consulted extensively with industry regarding a suitable dispute procedure, the well known claims consultant Roger Knowles contributed, stating:
“A well drafted disputes procedure involving adjudicators…will help disputes to be resolved quickly and inexpensively…appeals and reference to the High Court should not be permitted under any circumstances, as it is the constant spectre of appeal…which has emasculated the whole process[4]“.
Clearly Mr Knowles was acutely aware of the mischief that could be caused if adjudication decisions could be escalated to the High Court, the whole procedure would be undermined to a debilitating degree.
In respect of the formation of the adjudication regime in Latham, Coulson[5] stated:
“The unequivocal recommendation in the Report was that the best way of resolving such disputes was by way of adjudication…the conclusion was that a system of adjudication ‘must become key to settling disputes in the construction industry”.
A key recommendation of Latham was to ensure awards were supported by the courts:
“Resort to the courts should be immediately available if a party refuses to implement the award of an adjudicator”.
Parlimentary Debates
This concept received widespread support in the Commons and the Lords. The more difficult legal principle was that of ‘finality’ and/or ‘temporary finality’. Coulson[6]notes:
“Lord Lucas registered his surprise…that a dispute involving £100 million to be settled in 28 days by a single individual, choosing his own evidence and with no form of appeal.”
This point was the subject of intense parliamentary debate, with Lord Howie of Troon identifying the impracticality of the proposition of finality and stressing there must be recourse to the courts. This view found traction and prevailed, but with caveats. The first mention of the concept of ‘temporary finality’ was by John Uff CBE QC:
“the objective should be to ensure decisions of temporary finality only[7]”
In an SCL paper[8] regarding finality of decisions, Uff employs the Latin phrase: “Interest reipublicae ut sit finis litium”. This broadly translates as dispute resolution should be final, save for a few exceptions.
Lord Ackner, made notable contributions to the debate including the notion that the adjudicator’s decision is binding until finally determined by court or arbitration, coining the phrase: “pay now argue later”
Statutory adjudication was then ‘brought to life’ with the Housing Grants Construction and Regeneration Act 1996, (“the Act”) incorporating many of Latham’s recommendations.
On the Origin of Adjudication
To understand the nature of adjudication it is necessary to understand the sources from which it was drawn, namely expert determination and arbitration and the distinguishing features of each.
For expert determination, the observations made by Lord Denning in In Campbell v Edwards[9]remain germane:
“It is simply the law of contract…they are bound by it…even if he has made a mistake they are still bound by it. The reason is because they have agreed to be bound by it.”
For arbitration, a definition is given in Northern RHA v Derek Couch[10]by Sir John Donaldson:
“Arbitration is usually no more and no less than litigation in the private sector. The arbitrator is called upon to find facts, apply the law and grant relief to one or the other or both parties”.
The differences between expert determination and arbitration is explored in the case of Macdonald Estates Plc v. National Car Parks Ltd[11]:
“Expert determination…can be distinguished from arbitration in not being judicial in character”
In Deko Scotland Limited v. Edinburgh Joint Venture[12]it is noted:
“adjudication is a form of arbitration…The only distinction is that an adjudicators award is merely provisional”
Lord Drummond goes on to reaffirm that adjudication is a form of arbitration, driving home the distinction between ‘ordinary errors of law’ that are not subject to judicial review and errors of law regarding jurisdiction that are subject to review. Support for Lord Drummonds view on the nature of adjudication in relation to arbitration is found in the Act which contains ejusdem generis provisions for liability with the Arbitration Act 1996. Also, as Uff[13] points out:
“The important distinction between adjudication and various forms of ADR is that adjudication is intended to result in a decision which is enforceable”
Adjudication is effectively a hybrid system appropriating elements such as ‘taking the initiative’ from expert determination and ‘judicial in character’ from arbitration. Overall, the ratio decidendi demonstrates that adjudication is more closely aligned with arbitration.
The Curious Case of Temporary Finality
In respect of the temporary finality of adjudication Coulson[14]notes: ‘the construction industry has had little difficulty with the concept of ‘temporary finality’.
That does not mean there have not been difficulties along the way. HHJ Bowsher appeared to ‘hold his nose’ in Discain Project Services Ltd v Opecprime Developments Ltd[15] when he made the inference:
“Repugnant as it may be to ones approach to judicial decision making, I think the system created by the Act can only be made to work in practice if some breaches of the rules of natural justice which have no demonstrable consequence are disregarded.”
The courts initial distaste for adjudication is palpable. However, the court has repeatedly sought to defend adjudication and uphold the ‘will of parliament’ where possible. The general rule is that even if the adjudicator gets the answer wrong, but answers the right question then the decision will be enforced. This can be seen in the very first adjudication case to come before the court, Macob Civil Engineering Ltd v Morrison Construction Ltd[16], where the unsuccessful party sought to challenge the decision on an alleged procedural error. This argument was given short shrift by Dyson J where he stated such an argument would: “would drive a coach and horses through the scheme.”
One prominent example, where the adjudicator ‘got it wrong’ but the award was enforced is Bouygues (UK) Ltd v Dahl-Jensen (UK) Ltd[17] where a calculation error in the order of £350,000 did not prevent the adjudication being enforced. It is likely the party on the receiving end of this ‘bad decision’ were displeased with the process[18].
However, the option to have any dispute finally determined is clearly stated in the Act at 108(3) which simultaneously provides for the ‘temporary binding’ nature of the decision. In practice the adjudication is often the final word on a dispute.
Travelling Without Moving
In this authors opinion, the concept of ‘temporary finality’ is an ingenious solution to a complex problem. The system delivers an expedited and powerful dispute resolution process to the industry that was sorely needed. The system is checked by the ability to refer to litigation or arbitration for final determination.
The success of adjudication is a testament to those who developed the Act and the courts for embracing the system. The equilibrium that has been achieved by the concept of temporary finality is a finely tuned but balanced and brilliant apparatus that has been a great boon to the construction industry.
An article written by Byron Tyson
[1] [1971] 1WLR.
[2] [1974] AC 689.
[3] Sir Michael Latham, Constructing the Team (HMSO 1994).
[4] Ibid [3] Para 9.6.
[5] Peter Coulson, Construction Adjudication (4th Edition, Oxford University Press 2018) para 1.13.
[6] Ibid [5] para 1.24.
[7] Hansard, 18.6.96, columns 331 and 332: Standing Committee F.
[8] John Uff CBE QC, SCL Paper, How Final Should Disputes Be?, 2010.
[9] [1976] 1 WLR 403.
[10] [1984] Q.B.
[11] [2010] S.C.
[12] [2003] SLT 727.
[13] John Uff, Construction Law (Twelfth Edition, Sweet & Maxwell 2017) page 67.
[14] Ibid [5] para 14.30.
[15] [2001] BLR 285 (TCC).
[16] [1999] EWHC (TCC).
[17] [2000] BLR 49; Court of Appeal [2000] BLR 522.
[18] The introduction of the ‘slip rule’ in 2011 has helped iron out arithmetic and clerical errors in decisions.