Michael Hopkins of Masons Solicitors examines the recent House of Lords decision in Beaufort Developments Limited -v- Gilbert Ash (Northern Ireland) Limited and Others (1998) handed down by the House of Lords on 20 May 1998.

Introduction
Ever since the Court of Appeal reached its decision in Northern Regional Health Authority -v- Derek Crouch Construction Co Ltd [1984] Q.B. 644 construction law commentators had debated whether or not the decision was rightly decided. No less than 14 years after Crouch was originally decided the House of Lords has now held that it was wrong after all. However, other things have moved on. The reversal of Crouch comes at a time when both the Arbitration Act 1996 and the Housing Grants, Construction and Regeneration Act 1996 are both in force. Further, JCT has recently published amendment 18 to JCT'80. The purpose of this article is to consider not only the material aspects of the judgement but to focus on its possible effects.

The Decision
Not surprisingly the principal issue in the Beaufort decision concerned whether the Court had power to "open up, review and revise" a certificate issued, in this case by an Architect under JCT'80.
Of their lordships judgements the leading and most notable is that of Lord Hoffmann. Lord Hoffmann considered that what the Court of Appeal in Crouch were considering was a two-tier arrangement of Architects’ certification followed by the dispute resolution arbitral procedure. He defined the main issue in the case as follows:

"The Court [of Appeal in Crouch] appears to have considered that in the absence of a second tier power of the Arbitrator to open up, review and revise the Architect's certificate, they would (if given in good faith and within the ambit of the relevant contractual revisions) be binding on the parties. So the critical question is whether, upon the true construction of the contract, such certificates are binding."

Before reaching the ratio of the case he had this to say on the role and position of the Architect under the contract:

"The Architect is the agent of the employer. He is a professional man but can hardly be called independent. One would not really assume that the contractor would submit himself and be bound by its decisions, subject only to a challenge on the grounds of bad faith or excessive power... At all events, I think that today one should require very clear words before construing the contract as giving an Architect such power."

Strident judicial words indeed putting paid to the taboo that Architects in this day and age do not at least at times succumb to the dictates of their paymasters.

In reaching his decision that the Courts have an inherent jurisdiction to open up, review and revise the certificates of Architects unless there are "very clear words" to the contrary Lord Hoffmann referred and relied upon the 1905 High Court decision of Robbins -v- Goddard [1905] K.G. 294 in terms that the Court in Robbins -v- Goddard:

"....clearly took the view that the draftsman had seen no need to confer express power on the Court in the same terms as the arbitration clause. The Court's jurisdiction was unlimited. It was the Arbitrator's powers which needed to be spelled out."

Finally, Lord Hoffmann went on to consider the Court of Appeal's decision in Balfour Beatty Civil Engineering -v- Docklands Light Railway. The contract concerned substituted the Employer's Representative for the Engineer as having the certifying role. The arbitration clause was deleted. The Employer's Representative's certificates were not expressed to be binding or conclusive. The Court of Appeal held, following the decision in Crouch, that the Court did not have a power to open up review and revise Architect's certificates and that in absence of any express provision the Court could not readily imply a term to this effect. The House of Lords has expressly overruled the Balfour Beatty decision.

So there we are. Back to the starting blocks. What are the effects.

To arbitrate or litigate
Following the Crouch decision the legislature permitted under Section 43A of the Supreme Court Act 1981, inserted by Section 100 of the Courts and Legal Services Act 1990, the option, subject to the agreement of all parties concerned, for the High Court to be able to exercise any specific powers which the particular contract conferred upon an Arbitrator. In light of this enactment there sprung up various clauses, some more sophisticated than others, which arguably would have permitted the Court to open up review and revise Architect's certificates. In light of the Beaufort decision the utility of Section 43A of the Supreme Court Act 1981 is no more. If the parties so chose it now appears that so long as the arbitration clause is deleted (and assuming there are no clear words expressly stipulating that the Architect's decisions are final and binding) that a party dissatisfied with a certificate of the Architect can issue a Writ of Summons in the Official Referees Court in time honoured tradition.

The position is however entirely different where the arbitration clause remains. Under Section 9 (4) of the Arbitration Act 1996 the Court is obliged to stay legal proceedings to arbitration where a binding arbitration agreement exists between the parties. It has no discretion in the matter. The recently decided Court of Appeal decision in Halki Shipping Corporation -v- Sopex Oils Limited [1997] illustrates that the Court is obliged to grant a compulsory stay to arbitration even where the claim, on an objective basis, is indisputable.

Recent amendments to standard form of contract
By a remarkable coincidence at the same time as the Beaufort case was winding its way through the judicial system the JCT was drafting amendment 18 to the JCT'80 form of Main Contract which is concerned predominantly with compliance with the Housing Grants Construction and Regeneration ACT 1996. The JCT took this opportunity to provide, for the first time, an option to arbitrate or litigate which the parties can agree between themselves by whether or not they choose to delete the words "clause 41B applies" from the Appendix. Although the option to litigate under JCT amendment 18 can still function notwithstanding the Beaufort decision it is ironic to say the least that a large part of its cumbersome drafting has immediately been rendered unnecessary.

Impact on adjudication
Lastly, as is no doubt well known by now throughout the construction industry, Section 108 of the Housing Grants Construction and Regeneration Act 1996 provides a statutory framework for adjudication in construction contracts defined under the Act. However the Act in question does not provide the adjudicator with an express power to open up, review and revise Architect's certificates. It would seem that unless the parties have expressly provided that the adjudicator has powers to open up, review and revise certificates or unless they have incorporated adjudication rules which so provide this power will not be available to an adjudicator. Beaufort is concerned only with the express powers of Arbitrators and with the inherent powers of the Court. Where a contract does not provide for adjudication the statutory scheme will apply. The interesting point here is that the statutory scheme constitutes a piece of secondary or delegated legislation in this case under Section 114 of the Act. Since no mention is made of any express power for Adjudicators to open up, review and revise Architect's Certificate in the Act itself it is highly arguable that the scheme is ultra vires the Act. Hence it is highly arguable that Adjudicators who are appointed under the Scheme for construction contracts do not, despite the express wording of the scheme, have any power to open up, review and revise the Certificates of Architects.

Conclusion
The inescapable moral of this judicial volte-fa'ce is that if one waits long enough significant principles of construction law will revert back to the same position prior to a particular watershed decision such as that of Crouch. However, things have moved on. It is therefore necessary to take stock, consider those developments and take proper account of them in order to ensure that the contract being entered into will enable any disputes that might come along to be resolved by the forum that the parties intended.

Michael Hopkins is a Partner at Masons Solicitors specialising in construction and engineering law. He can be contacted at Masons Manchester office on 0161 224 8234.