Yuanda (Uk) Co Ltd V Ww Gear Construction Ltd

Clause 9A of the trade contract, which required the trade contractor to pay the employer's legal costs of any reference made by it to adjudication, was in conflict with the requirements of section 108 of the Construction Act and the Scheme for Construction Contracts


Technology and Construction Court
Edwards-Stuart J
13 April 2010
Clause 9A of the trade contract provided that regardless of the eventual decision in the adjudication or in any subsequent litigation, the trade contractor agreed that in the event of it making a reference to adjudication, it would be fully responsible for meeting and paying both its own legal and professional costs and those of the employer. The trade contractor contended that this provision was unenforceable. The employer relied on Judge Mackay’s decision in Bridgeway Construction v Tolent Construction (2000) that the contractual provision that any party referring a dispute to adjudication was to be liable to pay the responding party’s legal costs (as well as its own) was valid.
Edwards-Stuart J held that this provision was in conflict with the requirements of section 108 of the Construction Act and the Scheme for Construction Contracts and was therefore unenforceable and in doing so disapproved Judge Mackay’s decision. It was well established that the intention of Parliament in enacting the Construction Act was to introduce a speedy mechanism for settling disputes in construction contracts on a provisional interim basis and to require adjudicators’ decisions to be enforced pending the final determination of disputes by arbitration, litigation or agreement. It was noteworthy in this connection that section 108(3) provided that the decision of the adjudicator was binding until the dispute was finally determined by legal proceedings and paragraph 23(2) of the Scheme for Construction Contracts provided expressly that the parties were to comply with the decision of the adjudicator. The Act and the Scheme were silent on the question of costs. Nowhere in the Scheme was the adjudicator given the power to order one party to the adjudication to pay the costs of the other. The practical effect of a provision that the contractor had to pay the legal and professional costs of the employer would be that the contractor would be deprived of his remedy (up to the amount of the employer's costs) notwithstanding that it could be said strictly speaking that the employer would be required to comply with the adjudicator's decision, to pay the sum awarded to the contractor and then to recover his costs of the adjudication from the contractor under the contract.