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Local Democracy, Economic Development and Construction Bill [HL]

I shall speak to Amendment 204B, which stands in the name of my noble friend Lady Hamwee. The amendment has been suggested by the Royal Institution of Chartered Surveyors to remedy what it sees as some unintended consequences in Clause 135. The purpose of that clause is to eliminate what have been known as the Bridgeway v Tolent clauses in construction contracts. The clauses made the referring party responsible for all costs of the adjudication, including the legal costs of the other side, regardless of the merits of the case. This was thought to be a disincentive to using adjudication to resolve disputes. Clause 135 introduces a new Section 108A into the Housing Grants, Construction and Regeneration Act 1996. It is maintained that the Bill will make void the allocation of fees and expenses between parties as contained in current standard contract forms. Unless the parties reach an agreement after the notice of intention to refer the dispute, the adjudicator will no longer be able to allocate fees and expenses between the parties. The amendment would remedy that situation. Without the amendment, the mischief of the Bridgeway v Tolent clauses will prevail, and there will be an absence of agreement on costs in proposed new Section 108(2). Without the default provision in the amendment, the referring party will have to pay the adjudicator’s fees and expenses, even if it has won. These costs are a significant consideration, particularly to small and medium-sized enterprises, and they will have to be met from the principal sum claimed, thus discounting a sum of money to which the referring party had entitlement.