It was announced earlier this year that Parliament is finally to push through amendments to the Construction Act – officially known as the Housing Grant Construction and Regeneration Act 1996 - during the next Parliamentary Session. Following a lengthy period of consultation with Industry and other interested parties, a draft Construction Bill has now been published by DBERR (Department for Business, Enterprise and Regulatory Reform). The Bill has been trumpeted by the department as having the potential to reduce the regulatory burden of adjudication payments by £5.8m, and save the construction industry as a whole up to £1bn by improving payment frameworks.
The draft Bill, which extends to England, Wales and Scotland, envisages a number of changes to the 1996 Act. The most notable change will see the current requirement for construction contracts to be in writing in order for the Act to apply, as contained in Section 107 of the 1996 Act, being relaxed significantly. The intention now is that contracts which are wholly or partly oral will fall within the ambit of the Act, provided that the adjudication provisions set out in Section 108 are "evidenced in writing". This would allow parties to contracts to refer disputes to adjudication in situations where they are not currently able to do so. Other changes include:
- New provisions relating to the costs of adjudication so
that:
- Any provision in the contract dealing with the
allocation of costs of the adjudication is ineffective
unless it is made in writing after the appointment of the
adjudicator.
- Where the contract provides for payment of costs (other
than the fees and expenses of the adjudicator) by one
party, the adjudicator may determine that such provision is
unreasonable and may disallow certain costs on that basis.
This is designed to prevent a stronger contracting party
from imposing an obligation on a weaker contracting party
to pay the costs of adjudication regardless of the outcome
of the dispute.
- Provision is made for parties to be liable on a joint
and several basis to pay the adjudicator a reasonable
amount in respect of fees and expenses, such amount to be
determined by the adjudicator.
- A prohibition on any agreement that interim or stage
payment decisions are conclusive. This would ensure that all
disputes about interim or stage payments can be referred to
adjudication.
- The simplification of payment notice provisions,
including allowing withholding notices to be included in the
initial notice giving details of the sum which is proposed to
be paid.
- A ban on "pay when certified" clauses.
- Improvement of the right to suspend performance, allowing
the suspending party to recoup more of its costs.
- A provision limiting the effect of the House of Lords
decision in Melville Dundas Ltd (in receivership) v George
Wimpey UK Ltd & Others to insolvency has been included.
This therefore preserves the right of a paying party to
withhold monies upon the payees insolvency despite the fact
that no valid withholding notice may have been given.
- A provision, effective only in Scotland, has been added
allowing an adjudicator to correct a clerical or
typographical error in his or her decision after it has been
issued.
So what happens next? A period for comment and feedback on the draft Bill has been provided for until 12th September 2008. If the Bill progresses as planned, it could be on the Statute Book early in the next Parliamentary Session. However it has already been described by the Construction Confederation as "disappointing, divisive and dubious". Watch this space!
Disclaimer
The material contained in this article is of the nature of general comment only and does not give advice on any particular matter. Recipients should not act on the basis of the information in this e-update without taking appropriate professional advice upon their own particular circumstances.
