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Get off my back
Main contractors that try to say provisions in
their contract with the client should apply to subcontracts are
almost always wrong. And now adjudicators can say so
"Will my main contractor friends please stop talking poppycock about back-to-back subcontracts. Hardly ever do they work"
It is early evening. I am sitting on the
veranda. The gin and tonic is smooth. So is the Indian Ocean,
lapping on the beach beyond the palms. A dhow is inching its way
back to port, bringing the day's catch from Zanzibar. A Masai
warrior stands in the shade of the palms. His long red robe is
magnificent; his right hand is propped by his ceremonial staff as
he mutters into his mobile. Tomorrow, I will be sitting elsewhere;
sitting as part of a tribunal hearing the next stage of a building
dispute here in east Africa.
The Arbitration Act applies hereabouts, but the
UK adjudication system would work here, too – as it would
anywhere in the world. More than 3000 adjudications have been
completed in the UK in the first three years. And it works. It's
an industry solution to an industry problem. Building disputes are
ordinary … no matter where in the world. And the UK courts are
giving huge support. Another superb example is from the Scottish
judge Lady Paton in RE: Watson Building Services. It is case 53 in
our series.
Rot. That's what had set in at Holy Cross
Church, Glasgow. Watson, the main contractor, employed Miller
(Preservation) as the subcontractor rot sorter-outer. They didn't
see eye to eye on something quite ordinary, so Miller called on
the independent Academy of Adjudicators to appoint the referee.
Watson said, you can't do that because the
subcontract says: "The subcontract is placed with you subject
by and large to the same terms and conditions as the main
contract." Therefore, said Watson, this is a
"back-to-back" subcontract, and since the main contract
has a different appointing body, Miller is out of order by going
to the academy. By now, the referee, Graham Harrison, was
ostensibly appointed and Watson told him to get off the pitch.
Pause here for a moment. Let me interject. Will
my main contractor friends please stop talking poppycock about
this back-to-back idea. Hardly ever does it work. More on that
anon.
Where was I? Ah yes, the adjudicator could not
make head nor tail of how the main contract could be made to work
as a subcontract, and pronounced that he did indeed have
jurisdiction to be the ref.
It is often said that unless parties expressly
or impliedly give the power to an adjudicator to decide their
jurisdiction, there is no power for the referee to make a binding
decision as to whether jurisdiction exists. This judgment of Lady
Paton explains how wrong this idea is.
I will explain. Adjudicators only have power to
decide matters arising under the contract. In the case before this
court, Watson said the main contract, GC/Works/1, contained an
adjudication clause that said who would appoint. The contractor
said it was "stepped down", or written into, the
subcontract – but the subcontractor said it wasn't. The court
said this quarrel was an issue arising under the contract, and
therefore the adjudicator had the authority to decide his fate.
So, was he properly on the pitch or not? When one party says an
adjudication clause is or is not part of a contract, that issue is
a dispute arising under the contract. It would be different if the
quarrel was whether or not a construction contract existed. No
power ordinarily rests in an adjudicator to decide such a
fundamental question, nor can he or she bind the parties to the
answer because it is not an issue arising under the contract. The
referee Harrison was doing nothing more than construing the
existing contract to see what terms made up the bargain.
As for stepping down a main contract into a
subcontract, the judge accepted that the standard forms between
employer and main contractor were designed solely for that main
contract relationship. The obligations between main contractor and
subcontractor were completely different. It made no sense to try
to read standard forms applicable to a main contract into the
subcontract (the back-to-back idea). It is not the job of the
court to manipulate clauses in one contract to fit into another.
The dhow is still bobbing across the ocean.
Tomorrow's hearing will go ahead. The cost is enormous. I have
called for another gin and tonic. The Masai is still on his
mobile!
Readers are invited to forward recent judgments for reporting
in this column (with full acknowledgement) to: Tony Bingham,
3 Paper Buildings, Temple, London EC4Y 7EU.
DX:007I LDE
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