Adjudication - Differences between England and Scotland

There have been difficulties in statutory adjudication of construction disputes in the UK which were introduced under the Housing Grants Construction and Regeneration Act 1996, in that a number of companies were introducing what were called “Tolent” clauses (named after one of the companies concerned) which stated that if a contractor, or subcontractor, took a dispute to adjudication, they had to pay the costs of the client (or main contractor as the case may be) whatever the outcome.  

This was seen as having a chilling effect on the willingness to use adjudication, making it a relatively expensive process, no matter the outcome.  There was also little encouragement to the client/main contractor to act reasonably, since all of their costs were to be paid by the other party in any event.

These sorts of clauses were outlawed in England and Wales by a decision called Yuanda, but unfortunately (in Traprain’s view) the Scottish courts have taken a different view in the case of Profile Projects.  The Scottish courts have held that such clauses do not breach the 1996 Act, although it is unclear whether they will fall foul of the amended legislation that is shortly to be brought into force.  The ruling from the Court of Session indicated that the judge felt that merely requiring the party to pay both side’s costs in any event would not have any adverse effect on their ability to use this method of relief.

In Traprain’s opinion, this flies in the face of commercial reality, particularly when relatively small subcontractors are involved in dealing with large international main contractors.  

We therefore have the unsatisfactory position that while the legislation is the same throughout the United Kingdom, the interpretation of a relatively important provision is different between England and Scotland.  

While our primary base is in Scotland, we mainly work on contracts subject to English law, and we do try to provide advice which is relevant throughout the United Kingdom and also to work in an international context.  Our clients work in many countries, and we do as well.  However, this point illustrates the fact that there can be differences even within a single country, and care has to be taken that parties do not assume that what they did today in one part of the country will be legally valid and/or enforceable in another part tomorrow.