SINCE MAY 1998, when the Housing Grants Construction and Regeneration Act 1996 came into force, adjudicators and judges have been tirelessly unravelling its complexities.
They arose from the novelty of the processes, some poor parliamentary draughtsmanship, and not forgetting the ingenuity of people determined to avoid payment.
The working of the Act has been under review for the past three years. All interested parties have had their say about what’s wrong with it and how it can be put right. The DTI has published its third set of proposals, and most commentators seem happy with what will be changed; fewer with what will not be changed. I may be in a minority, but I am unhappy with something that is going to be changed.
To overcome the effects of the decision in RJT Consulting Engineers v DM Northern (Ireland) Ltd in 2002, the DTI wants to extend the Act to oral and part-oral contracts. RJT’s was an unfortunate case where some, but not all, the contract terms were in writing. The court said that all the terms – not just the main terms or even the relevant terms – had to be in writing. If any one thing was agreed but not put into writing, the Act did not apply. That was harsh.
We are now going to the other extreme. Any agreement for ‘construction operations’ will be subject to the Act.
One of the most difficult things in the legal world is to prove the existence and terms of an agreement that is not written down anywhere. You can see why. It becomes one man’s word against another’s. I’ve sat in courts for days at a time hearing witnesses recollect what was or was not said or agreed. It’s time-consuming and expensive. There are no short cuts. The judge had to hear all the evidence.
At present, the adjudicator’s decision is often made on documents only, without seeing the parties, much less hearing evidence from the witnesses. True, witness statements are often used (and there may be times when the adjudicator finds it difficult to decide who is telling the truth by just reading them).
That, I am afraid, will change if purely oral contracts are subject to the Act. Mini-trials with barristers, solicitors or other claims professionals will become the norm. How else, except by seeing and hearing the witnesses and testing them by cross-examination, will the adjudicator be able to decide who is telling the truth?
There is another problem. Under the Act as it stands, the adjudicator can make a binding decision about what are the terms of the contract but not a binding decision on whether or not there is a contract at all. The court will review any such decision, because if there is no contract then the adjudicator has no jurisdiction.
With oral contracts there is an even greater chance that not all the terms have been agreed in the first place and that there is no contract. So there will be a greater risk that the adjudicator’s jurisdiction will be open to challenge, leading to less certainty and more applications to the court.
Adjudication already costs thousands – sometimes tens or even hundred of thousands – of pounds. These complexities will add to the cost.
If the proposal is made law, disputants can still chose between adjudicating (which involves irrecoverable expense to get a decision which might or might not be binding, or is at best only temporarily binding) or going to court or arbitration, avoiding any jurisdiction problem, for a fully considered and final decision and costs.
So is there any real need to extend the Act to oral contracts? Where is the clamour? Only those too sloppy to write their contracts down will be left outside the Act, but with their normal remedies intact.
I suggest that there is no clamour, no need, and it would be no kindness to extend the Act as proposed.
There is time to think again. If the Act is to be extended, then extend it only to contracts where the basic terms – parties, price, work and time – or the material terms (for example, the terms material to the dispute) are in writing.
That would be a fair compromise. It will not get rid of the problems but it will reduce the number of disputes in which they arise.