In the UK, adjudication was to be found, albeit in a limited form, in certain standard forms (particularly the Green Form and the Blue Form of subcontract) for some years before it was clothed with any statutory status. Even when the Housing Grants, Construction and Regeneration Act was passed in 1996, it brought adjudication in, not as a rigid statutory system, but as a requirement that construction contracts contain a compliant adjudication provision, failing which a statutory scheme would be implied into the contract. And so the message was, "Put your own adjudication agreement in place, or the legislation will do it for you".
Certain contracts were excluded, including domestic contracts and oil and gas contracts. It is not hard to see why domestic contracts were excluded: the consumer legislation represents a minefield, and the draftsmen of the legislation felt it was just too difficult to draft something in the domestic field that would be free from challenge. There was nothing very noble about this, since of course it is domestic employers who would most benefit from a quick, cheap and accessible system for resolving their disputes with their builders (except, perhaps, only those poor small builders faced with the nightmarish task of getting paid relatively small amounts by difficult clients).
As it happens, however, it has become not uncommon for parties to domestic contracts to include adjudication clauses in their contracts. There is no reason why they should not do so; the mere fact that there is no statutory right to adjudication in domestic building contracts does not prevent the parties agreeing to adjudicate.
It is perhaps unsurprising that these consensual adjudications have been challenged, and in Picardi v Cuniberti (2002)[1] an adjudication clause in the RIBA terms of engagement was struck down pursuant to the Unfair Terms in Consumer Contracts Regulations 1999; Judge Toulmin characterised an adjudication clause in a consumer architect engagement as “clearly an unusual provision which must be brought to the specific attention of the lay party if it is later to be validly invoked”.
Is there any reason why the same approach should not be taken in Australia? There seems to be little evidence so far that parties have made consensual adjudication agreements in cases where the Security of Payment legislation does not bite (e.g. in construction contracts in South Australia or Tasmania, where the legislation has not yet arrived, or in excluded areas such as domestic contracts in other states). But could that change?
On one analysis, the commercial climate in Australia is different from
that in England, since there are no standard forms of adjudication
agreement that the parties can adopt "off the shelf". But in
principle there seems to be no jurisprudential reason why an
adjudication agreement, freely entered into by contracting parties,
should not be given just as much effect in Australia as in the UK or
elsewhere in the common law world.
In Security of Payment cases to date, the courts in Australia have not been much troubled by this question. The statutes contain their own enforcement regimes which make little demand on jurisprudential theory.
But in the case of consensual adjudication, a number of analyses are
possible, each leading to rather different enforcement consequences:
Probably, the answer to this question will depend on the wording of the adjudication agreement. But it is worth noting that the approach of the courts in the UK has been to worry rather little about the classification of consensual adjudications, and instead to treat them in exactly the same way as they treat statutory adjudications.
The reasons why parties in Australia might want to agree to a consensual adjudication in Australia include those which make it relatively popular in the UK (i.e. to take advantage of a rapid, economical system in a case where, for one reason or another, the statutory regime has not extended). But further, there may be real advantages in a system in which the parties can agree a much more flexible system. Particularly in large or complex cases, the parties might want to agree a longer time period, so that the adjudicator can much better understand and evaluate the issues, with proper opportunity for fact finding and proper oral submissions. In all cases, the parties may benefit from being able to choose their own adjudicator, instead of being straight jacketed by an ANA.
What would be the position if the parties to a construction contract in a state with Security of Payment legislation in place were to agree a consensual adjudication regime, tailored to their own wishes and needs? As far as we are aware, there is no example of this yet being done in Australia, but the position may well be as follows:
We will have to wait and see. But insofar as patterns tend to replicate themselves around the common law world, it is quite possible that, as parties get more and more used to the advantages of adjudication and, at the same time, more conscious of the difficulties caused by the intense restrictions on it under the Australian statures, a desire for consensual adjudication in one form or another may well emerge.
RJFE
May 2006
“It follows, in my view, that in assessing whether a term
that has not been individually negotiated is “unfair” for the purposes of
Regulation 5(1) it is necessary to consider not merely the commercial effects
of the term on the relative rights of the parties but, in particular, whether
the term has been imposed on the consumer in circumstances which justify a
conclusion that the supplier has fallen short of the requirements of fair
dealing.”
Post script: Now see note on the Contractual Adjudication Group Scheme (CAG Scheme)