EXECUTIVE SUMMARY
This is the analysis of responses received to the Scottish Executive's (now the Scottish Government) consultation from 29 August 2007 to 24 October 2007 which sought industry views on the proposals that were developed to amend the Housing Grants, Construction and Regeneration Act 1996 (the Construction Act).
Background
In January 2003 the Scottish Government issued a Consultation Document ' Improving Adjudication in the Construction Industry' and published the Consultation and Proposals Report 1 in May 2004.
However, this was overtaken by the subsequent effects of the Chancellor's Budget announcement in March 2004 of a Review of the Construction Act 2. This Review, led by Sir Michael Latham, reported in September 2004 that although the Construction Act was generally working well some improvements would be helpful.
Since March 2005 the Department of Trade and Industry ( DTI now Department of Business, Enterprise and Regulatory Reform ( BERR)) and the Welsh Assembly Government ( WAG) have conducted two consultation exercises to develop the necessary amendments required.
Responsibility for the Construction Act is devolved to the Scottish Parliament therefore in an effort to minimise any divergence for the construction industry across the United Kingdom the Scottish Government undertook a similar consultation exercise to BERR from 29 August to 24 October 2007. Although the Scottish Government's consultation was conducted independently the proposals contained within it replicated the proposals contained in BERR's consultation issued on 20 June 2007.
Consultation Proposals
The 2007 consultation paper "Improving Payment Practices in the Construction Industry" put forward the following proposals:
Introduction of a 'slip rule' to enable the correction of errors
- Provision to allow the adjudicator to correct errors and omissions in their decisions.
Adjudication
- Removing the requirement for contracts to be 'in writing for the Construction Act to apply';
- Prohibiting agreements that interim or stage payment decisions will be conclusive;
- Introducing a statutory framework for the costs of adjudication.
Payment Framework
- Preventing the unnecessary duplication of payment notices;
- Clarifying when a payment notice should be served;
- Clarifying the content of payment and withholding notices;
- Clarifying what constitutes the sum due;
- Prohibiting pay-when-certified clauses.
Suspension
- Improving the right of suspension.
Other Issues
- Clarification of the implication of the House of Lords judgement on Melville Dundas vs George Wimpey.
Consultation Responses
There was broad support for the proposed amendments set out in the consultation.
Minimising Divergence
Respondents unanimously agreed that we should continue to work to minimise divergence across the United Kingdom, subject to legal difference between Scottish and English law.
Introduction of a 'slip rule' to enable the correction of errors
There was undivided support for the introduction of a provision allowing the adjudicator to correct errors and omissions in their decisions and 7 days was generally agreed as an acceptable period to review the adjudicator's decision.
Adjudication
The responses for the proposed amendments on adjudication were exceptionally robust.
- Almost all of the respondents supported our proposal to remove the requirement that contracts should be in writing for the provisions of the Construction Act to apply.
- Our proposal on conclusive decisions was welcomed - although some felt it might be better to deal with this issue with a different legislative solution.
- Our proposal in relation to the introduction of a statutory framework for the costs of adjudication was broadly welcomed.
Payment
There was understandably a range of diverse views in relation to the proposed amendments to the payment framework. However on balance, it was generally felt that our proposals would improve the operation of the existing statutory framework.
- The removal of the requirement to issue a payment notice for contracts subject to a third party certification process received mixed responses with some questioning the extent to which it was an issue.
- Respondents broadly welcomed the increased clarity and transparency our proposals were seeking to introduce to the existing statutory framework, although some felt that the issues concerning payment would be best dealt with through guidance.
- The proposal to abolish "pay-when-certified" clauses was broadly welcomed although this support was subject to the detailed mechanisms being made sufficiently robust.
Suspension
Our proposal to improve the right of suspension received unanimous support.
The judgement of the House of Lords in Melville Dundas -vs-George Wimpey
It was clear the recent House of Lords decision in Melville Dundas vs George Wimpey had given rise to some confusion and just over half of the respondents were keen to see some clarification in statute to make it clear that other than in cases of a subsequent insolvency, the requirement for the payer to issue a section 111 withholding notice should apply.
Way Forward
The Construction Act applies in Scotland and the legislation is devolved to the Scottish Parliament. To support consistency of content and timing for the construction industry across the UK, the Scottish Government has continued to work with BERR and the other devolved administrations.
The responses and subsequent analysis of the consultations issued in 2007 by BERR and the Scottish Government have informed the development of draft Bill Clauses which BERR have published for technical scrutiny.
The Cabinet Office's current consultation on the UK Government's draft legislative programme for 2008/09 - Preparing Britain for the Future - indicates the UK Government's intention to introduce the provisions to amend the Construction Act as part of the Community, Empowerment, Housing and Economic Regeneration Bill.
Scottish Ministers have confirmed their agreement in principle, to the extension of the Construction Act amendments to Scotland. In accordance with the Sewel Convention the Scottish Ministers will seek the consent of the Scottish Parliament by means of a Legislative Consent Motion to extend to Scotland the Construction Act provisions to be included in the Community, Empowerment, Housing and Economic Regeneration Bill.
BERR have published the draft Bill Clauses and an Explanatory Note which can be found at http://www.berr.gov.uk/sectors/construction/constructionact/page13956.html
In anticipation of the consent of the Scottish Parliament to a Legislative Consent Motion the draft Bill Clauses also extend to Scotland and include a Scottish only provision for a slip rule to enable the correction of errors in an adjudicator's decision.