The long awaited amendments to the Construction Act came into force in England and Wales on 1 October, with Scotland having to wait a month longer before the new regime took effect. It is a new regime, but has it changed very much? After seven years of consultation and debate some sweeping and radical new measures may have been expected. But that has not happened.
The fact that changes are being introduced in late 2011 via an Act of 2009 tells its own story of an industry divided in its opinions on the shape of the law that should govern its commercial dealings.
There have been some positive outcomes though. The main changes concern the dispute resolution and payments sections of the original Housing Grants, Construction and Regeneration Act 1996. A potentially major change is that contracts no longer need to be in writing to be covered by the adjudication provisions of the 1996 Act.
Another major change is that parties can no longer make provision in contracts regarding the allocation of legal and other costs relating to the dispute. Provision can be made regarding the adjudicator’s fees and expenses. Parties can still strike agreements about the allocation of legal costs after notice of intention to refer a dispute to adjudication has been given.
Despite all the time the government’s drafters have had to at least ensure that the new legislation expresses their intentions clearly, the amendments still might have inadvertently permitted parties to make provision for allocation of legal costs as long as they also make provision for the adjudicator’s fee and expenses. This could, on some readings, mean that a party could still provide that the other side pays all costs regardless of the outcome of the adjudication. The government has said this was not their intention and that they do not agree that this interpretation can be put on the legislation. The courts may have a different opinion.
If an adjudicator makes clerical or typographical errors in his decision he is to be allowed to correct them. One payment related anomaly that has been addressed affects Private Finance Initiative (PFI) contracts. The Local Democracy, Economic Development and Construction Act 2009 prohibited pay when certified provisions in subcontracts.
Along with the new amendments there is an exclusion order that makes an exception to this for PFI first tier sub-contracts. These sub-contracts may now provide for payments conditional on obligations being performed under the project agreement. The original ban on pay when certified clauses in other sub-contracts, including those related to PFI projects, remains in force.
Contract producers, the JCT in particular, have responded in good time to the need to amend contracts to take account of the changes. One upside of taking seven years to produce the amendments is that there is a wealth of opinion, commentary and advice that has been freely disseminated over what the changes might mean. This is one time when ignorance of the law will be no excuse at all.
Nick Barrett
Editor