After lengthy periods of consultation and having received Royal
Assent almost two years ago, Part 8 of the Local
Democracy, Economic Development and Construction Act 2009
('LDEDCA') will finally come into force on 1 October 2011 in
England and Wales, amending Part 2 of the Housing Grants
Construction and Regeneration Act 1996 ('HGCRA')
As a result there will be a new adjudication regime. There are two
main elements to the changes that will be introduced:
1. Removal of the requirement for a construction contract to be in
writing; and
2. Changes to adjudication procedures
Removal of the Requirement for a Construction Contract to
be in Writing
For a party to a construction contract to have the right to
adjudicate, that construction contract must be in
writing.
This has been a two edged sword for construction professionals, as
whilst it has limited their right to adjudicate for their
fees it has also proved a useful tool in avoiding adjudications for
professional negligence.
As of 1 October 2011, this requirement will be removed (LDEDCA
s.139(1))
Some legal commentators have suggested that the effect of this has
been diluted by the requirement for the contract to include certain
provisions in writing (LDEDCA s.139(2)), but this is not the case,
as if the contract does not contain those provisions in writing,
the parties retain the right to adjudicate and the Scheme for
Construction Contracts applies (HGCRA S.108(5))
Changes to Adjudication Procedures
Whilst there are a number of changes to adjudication procedures,
the main change relates to agreements as to adjudication
costs.
At present, construction contracts can provide for all adjudication
costs and expenses to be borne by the party referring a dispute to
adjudication, irrespective of the outcome of that
adjudication.
Such provisions have unsurprisingly been criticised as fettering a
party's right to adjudicate and consequently, as of 1 October
2011, agreements as to adjudication costs are prohibited,
save for two very narrow exceptions (LDEDCA S.141):-
(a) Parties can agree a contractual provision which permits the
adjudicator to allocate his fees and expenses between the parties
provided the term is in writing and contained in the construction
contract
(b) Parties can agree a contractual provision which concerns the
allocation of costs relating to the adjudication of a dispute,
provided the agreement is in writing and made after the notice of
the intention to refer the dispute has been given
The Future
Whilst Part 8 of the LDEDCA comes into force on 1 October 2011, it
does not apply to contracts entered into before 1 October 2011. As
such there will be two co-existing systems for adjudication for
years to come.
In relation to contract made on or after 1 October 2011, in light
of the changes discussed above, it will certainly be easier to
adjudicate. As such you should expect an increase in adjudication
being used as a means of resolving disputes.
Hill Dickinson has a wealth of experience in dealing with the full
range of Professional Risks issues. If you have any queries
relating to the above, or any other legal matter, please do not
hesitate to contact us
for advice.
