LONG AWAITED legislation aimed at reducing construction litigation, will actually spark a significant rise in legal costs, lawyers warned this week.
They told NCE that industry uncertainty over the Construction Act, which comes into force tomorrow (Friday), would see firms rushing to their lawyers to avoid coming unstuck.
Ashurst Morris Crisp partner Chris Vigrass said: 'There are so many unanswered questions - lawyers are going to love it'. Winward Fearon senior partner Richard Winward added: 'It may actually accelerate disputes'.
Cameron McKenna, senior partner Ann Minogue, told NCE: 'There will be contracts to change and then there will be many test cases. I do not think it will take the sting out of the large disputes.'
Freshfields senior partner Simon Stebbings said: 'We are anticipating more work across the board in preparing adjudications'.
The Housing Grants, Construction & Regeneration Act 1996 was born from the 1994 Latham review of the industry and was part of a package of measures aimed at reducing the adversarial nature of construction (see profile, page 8).
NCE's research suggests it is the Act's introduction of adjudication procedures to resolve disputes which is causing particular alarm.
Masons construction partner Phillip Capper said: 'These procedures can be made to work, but it is unfamiliar territory. Good lawyers will still have a valuable contribution to make.'
He added that there were many parts of the Act's drafting which introduced legal uncertainties and took the legislation away from Latham's vision. 'Many of his principles are filtered by the Act,' he said.
Minogue said that in the short term there would be no reduction in legal workload. What would happen when the legislation finally bedded in was harder to say: 'If the industry reacts in the way that Latham intended we could gradually find ourselves short on the litigation front'.
Minogue said that a great deal depended on how the industry chose to change its approach to disputes. 'No-one wants adjudication to be highjacked by lawyers, but it is the industry that rings up the lawyers - it should not assume it is all down to the legislation.'
Vigrass claimed: 'I am basically an optimist and think the legislation will eventually settle down. But there will always be parts we have to work through.'
He said that the adjudication process would certainly give a quick resolution to a dispute. But he added: 'Any large claim will always be reopened after the contract is completed.'
Vigrass also highlighted how important it was for firms to use their own specially drafted or model adjudication schemes rather than relying on the government's fall-back adjudication scheme, as there were still many unanswered questions in its drafting. For example, he said: 'The Scheme is silent as to whether or not the adjudicator can award costs to the winning party.'
Winward agreed that although the industry was keen to avoid expensive disputes, there were so many uncertainties and potential pitfalls in the Act that most firms would still have to rely on legal advice. He thought the Act would have little effect on his workload. 'It may actually accelerate disputes - you press the trigger and consult your lawyer.'
Stebbings said that if disputes were addressed early it could reduce the number of set piece actions. 'If people get into the swing of things it would affect our fees eventually,' he said.