Adjudication: Multi-party joinder and "Tolent" costs clauses

In Yuanda (UK) Co Ltd v W W Gear Construction Ltd [2010] EWHC 720 (TCC), the Technology and Construction Court ("TCC") made important decisions  on whether multi-party joinder was possible in adjudication proceedings and on "Tolent" costs clauses.

Multi-party joinder

In Yuanda, part of the contractual adjudication provisions stated that the TeCSA Rules should be amended to "require joining members of the professional team in a multi-party dispute situation". 

Although the judge did not have to formally decide the point (because he found that the contractual adjudications provisions were to be replaced by the Scheme - see below), he considered whether this wording lacked contractual certainty of meaning and/or was inoperable and/or incapable of being performed.  He said that such a clause could be given proper effect by limiting its application to joinder of members of the professional team where there is an issue that needs to be decided as against the member of the professional team as well as against the contractor, but without extending the referral to a separate potential dispute about the liability of the member of the professional team. 

For example, there could be a finding that a defect was one of design as opposed to one of workmanship, which finding could be binding.  The liability of the member of the professional team would have to be decided separately, since he may have a defence that the design defect was beyond his control or not a breach of duty, or beyond the scope of his duty.

"Tolent" clauses

By virtue s108 of the Housing Grants, Construction and Regeneration Act 1996 ("the Act"), a party to a construction contract governed by the Act has a right to refer a dispute to adjudication "at any time".

In Bridgeway Construction Ltd v Tolent Construction Ltd (2000) CILL1662, the court held that a provision in a contract that the party serving a notice to adjudicate should bear all of the costs and expenses incurred by both parties (including legal costs and the adjudicator's costs) (known as a Tolent clause) did not inhibit a party's rights to adjudicate "at any time" and was not void for being contrary to s108.  In Yuanda, having reviewed many authorities, the judge held that a Tolent clause was contrary to s108 and therefore void.  The effect of this was that all of the contractual adjudication provisions had to be replaced by the provisions in Part I of the statutory Scheme for Construction Contracts.

Note that this judgment does not affect contractual clauses which allow an adjudicator to decide how the parties' costs are to be allocated.

When brought into force, s141 of the Local Democracy, Economic Development and Construction Act 2009 will outlaw Tolent clauses. This section applies in relation to any contractual provision made between parties to a construction contract which concerns the allocation as between those parties of costs relating to the adjudication of a dispute arising under the construction contract. Such a contractual provision will be inneffective unless: