The End of the Tolent Clause?
If your contract or subcontract includes a clause that makes you liable for the other party’s adjudication costs irrespective of the outcome of any adjudication proceedings commenced by either party (a ‘Tolent’ clause), and this clause is preventing you from commencing an adjudication action to recover your entitlement under the contract or subcontract, then you need to be aware of a recent court case which may make that clause unenforceable.
In the Bridgeway Construction v Tolent Construction case in 2000, Bridgeway accepted a subcontract which had a clause requiring the referring party in any future adjudication to pay the costs of the responding party in that adjudication even if the referring party won. Bridgeway, commenced an adjudication action and won the adjudication but, because of the said clause in the contract, was required to pay Tolent's legal costs in the adjudication process – the judge in that case having decided that the subcontract clause was enforceable. Such a clause became known as a ‘Tolent’ clause, and the court’s ruling on that clause remained largely unchallenged for 10 years.
However, the 2010 case of Yuanda (UK) Co Ltd v WW Gear Construction Ltd, has drastically changed the position. Yuanda’s contract included a form of a ‘Tolent’ clause. Yuanda challenged the clause in court on the basis that it was unenforceable, and the judge in the court case agreed with Yuanda. The judge’s ruling being based upon the premise that the ‘Tolent’ clause in question could allow WW Gear from avoiding an adjudicator’s decision in favour of Yuanda by claiming costs in the adjudication process that exceeded any award that the adjudicator may find in favour of Yuanda. The judge decided that this clause therefore conflicted with the requirements of section 108 of the HGCR Act 1996 which requires that a party must have the freedom to refer a dispute to adjudication at any time, and in his view the ‘Tolent’ clause in question may prevent a party from commencing an adjudication action for fear of the extent of the other party’s costs in the adjudication process that it may face.
The judgment in the Yuanda case clearly has the potential to affect the speed at which a party will proceed to refer a dispute to adjudication since that judgement will in many cases effectively removed the obstacle of cost from the pathway of adjudication.
Parties that have been restricted in the past from commencing an adjudication will clearly welcome this decision and, indeed, parties who have not pursued potential adjudication actions in the last 10 years because of a ‘Tolent’ clause may now wish to consider pursuing an action in light of this ruling.
If you would like any further information on this change in adjudication law, or if you would like to discuss how the change may affect your particular circumstances, please do not hesitate to contact Melbury Construction Consultants Ltd for specific advice.
In the Bridgeway Construction v Tolent Construction case in 2000, Bridgeway accepted a subcontract which had a clause requiring the referring party in any future adjudication to pay the costs of the responding party in that adjudication even if the referring party won. Bridgeway, commenced an adjudication action and won the adjudication but, because of the said clause in the contract, was required to pay Tolent's legal costs in the adjudication process – the judge in that case having decided that the subcontract clause was enforceable. Such a clause became known as a ‘Tolent’ clause, and the court’s ruling on that clause remained largely unchallenged for 10 years.
However, the 2010 case of Yuanda (UK) Co Ltd v WW Gear Construction Ltd, has drastically changed the position. Yuanda’s contract included a form of a ‘Tolent’ clause. Yuanda challenged the clause in court on the basis that it was unenforceable, and the judge in the court case agreed with Yuanda. The judge’s ruling being based upon the premise that the ‘Tolent’ clause in question could allow WW Gear from avoiding an adjudicator’s decision in favour of Yuanda by claiming costs in the adjudication process that exceeded any award that the adjudicator may find in favour of Yuanda. The judge decided that this clause therefore conflicted with the requirements of section 108 of the HGCR Act 1996 which requires that a party must have the freedom to refer a dispute to adjudication at any time, and in his view the ‘Tolent’ clause in question may prevent a party from commencing an adjudication action for fear of the extent of the other party’s costs in the adjudication process that it may face.
The judgment in the Yuanda case clearly has the potential to affect the speed at which a party will proceed to refer a dispute to adjudication since that judgement will in many cases effectively removed the obstacle of cost from the pathway of adjudication.
Parties that have been restricted in the past from commencing an adjudication will clearly welcome this decision and, indeed, parties who have not pursued potential adjudication actions in the last 10 years because of a ‘Tolent’ clause may now wish to consider pursuing an action in light of this ruling.
If you would like any further information on this change in adjudication law, or if you would like to discuss how the change may affect your particular circumstances, please do not hesitate to contact Melbury Construction Consultants Ltd for specific advice.
posted by Melbury at
14:54
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