The Human Rights Act 1998 ("Act") is due to come fully into force in October this year. This Act may not, on the face of it, appear to have much to do with the construction industry. However, one question that has been exercising legal minds is whether or not the right to adjudication created by the Housing Grants Construction and Regeneration Act 1996 ("HGCR Act") infringes the right to a fair trial enshrined in the European Convention on Human Rights ("Convention").
The Act incorporates the Convention which, in articles 1 to 18, sets out a list of rights and freedoms. Article 6 deals with the right to a fair trial and provides that "every one is entitled to a fair and public hearing within a reasonable time by an independent and impartial tribunal established by law. Judgment shall be pronounced publicly ..."
The Act requires that all legislation must be interpreted and given effect to in a way which is compatible with the Convention rights. Individuals are permitted to rely on Convention rights in domestic courts.
Infringement
One school of thought considers that the adjudication process introduced by the HGCR Act is inconsistent with the Convention, for the following reasons:
A "fair trial" should require that each party has the opportunity to put its case under conditions that do not place it at a substantial disadvantage to the other side. The general perception of adjudication is that a respondent has insufficient time to prepare and is at a disadvantage compared with a referring party.
The adjudicator does not have sufficient time (generally, 28 days) to complete his investigations and come to a reasoned decision. The short timetable is incompatible with the requirement that a hearing be held within a "reasonable time"
The Convention requires a hearing. Adjudication rules leave it to the adjudicator’s discretion.
The Convention requires a hearing in public and for decisions to be published. This would be a major change, as although decisions are available via the internet, adjudications are held in private. In addition the European Court has held that a judgment must contain full reasons so as to allow the losing party to decide whether to take the matter further. Some standard forms of contract preclude this.
Adjudicators will be required to be independent. However many adjudicators are appointed at the instigation of one or other of the parties, and thus their independence may be called into question.
There may be circumstances where a Defendant party is likely to go into liquidation either during or shortly after and award is made as in Dahl- Jensen. The liquidation would have the practical effect of making the award final. Although the point was not strongly argued before Judge Dyson at the hearing, it is nevertheless an argument on "fairness".
If this line of reasoning is correct, the end result could be that courts would be compelled to refuse to enforce adjudicator’s decisions where the adjudication procedure was not compliant with the Convention. This would lead to uncertainty as to the enforceability of individual decisions, and ultimately, no doubt, to further litigation.
No Illegality
The opposing (and prevailing) view seems to be that the perceived problem is largely illusory. Section 4 of the Act provides that if a provision of UK legislation is incompatible with the Convention, the court may make a declaration of that incompatibility. That declaration does not however affect the validity or continuing operation of the provision and has no coercive effect: it is not binding on the parties.
Further, and more fundamentally, the right to adjudicate does not infringe the right to a fair trial for the following reasons:
Imperfections in the adjudication process (i.e. ambush by a referring party) have more to do with how the parties conduct proceedings, rather than failings in the process itself. It is a matter for the adjudicator to regulate proceedings.
The HGCR Act does require the adjudicator to act impartially. Several versions of adjudication rules (e.g. TeCSA) contain provisions to the effect that the adjudicator must conduct the proceedings fairly.
The fact that adjudication is private does not in itself render the process incompatible: arbitration is private, and many court proceedings are dealt with in chambers.
Whilst adjudication is a right that must be made available in any construction contract, it is not mandatory.
Adjudication is an interim ruling. Although a decision is enforceable (and we have seen in a series of recent judgments how eager the courts are to enforce adjudicators’ decisions), it is not finally binding until either the parties agree or the decision is confirmed through litigation or arbitration. Adjudication does not take away the ordinary right to a fair hearing in those subsequent proceedings.
Conclusion
The Act does not appear to present the threat to adjudication as was initially feared in some quarters. Even if the right to adjudicate could be construed by the court as being incompatible with the Convention, that would not render the adjudication itself invalid (section 4 of the Act). Moreover there are strong arguments against incompatibility, the most compelling of which is the fact that adjudication is an interim process only, in which the rights of the parties are not finally determined. The parties still have the option of going to arbitration or litigation for a final determination of their rights.
The information and opinions contained in this article are provided by Hammond Suddards. They should not be applied to any particular set of facts without appropriate legal or other professional advice.
For further information please contact David Moss, Construction and Engineering; David Jones, Construction and Engineering; Mark Hilton, Construction and Engineering.
