I explained that our act had reduced the inequality in bargaining power between contractors and subcontractors, but difficulties remained. As the CLG report revealed, there are dozens of scams – legal and otherwise – designed to get round the act.
Well, our New Zealand civil servant has been busy. A Construction Contracts Bill was published there in May and is likely to become law towards the end of next year. I was delighted to find that it had addressed some of the weaknesses in our own legislation, even though the explanatory note states the bill "closely follows" our act. However, the bill goes much further than our act. It applies to residential construction contracts, process plant and the prefabrication of components forming part of any building or structure.
As with our own legislation, "pay when paid" is outlawed but the New Zealand bill has no "pay if paid" exemption. This is the clause in our act that allows a payer to deny payment to a payee when a third party upstream has gone bust. The parties are given an opportunity to agree an adequate mechanism for determining the number, due dates and amounts of periodic payments. Where any of these requirements are missing, there are default provisions contained in the body of the bill akin to our Scheme for Construction Contracts.
The New Zealand bill does not have a "notice of withholding" provision akin to our section 111. Instead, the payee has the option of serving a written payment demand on the payer in respect of the relevant payment period. The payer may respond by providing a payment schedule and, if this is for an amount less than that specified in the demand, the payer must explain the reasons for the difference.
Adjudicators can award a party its costs and expenses, irrespective of whether that party has won or lost
Where the payer does not provide a payment schedule, he must pay the amount claimed by the payee within 10 working days after the payment demand is served. If the claim remains unpaid, it crystallises into a debt. It is enforced by court proceedings or by the exercise of a statutory right of suspension of performance of the contract. Similar consequences will befall a payer who fails to make payment in respect of any amount he admits as due in his payment schedule. There is greater clarity in this approach than in section 111.
Finally, we come to adjudication. The adjudication procedure is written into the bill; there is no scope for bespoke procedures. In time, our act must also incorporate an adjudication procedure. Many of the provisions in our scheme have found their way into this bill. But, again, there are some differences.
The adjudicator's jurisdiction is limited to determining whether or not a party is liable to make payment under the contract, the amount that is payable and the date upon which the amount became or becomes payable.
The adjudicator may also determine that a charge should be placed on the land on which the construction work is being carried out as security for money owed. Adjudicators can award a party its costs and expenses, irrespective of whether that party has won or lost, if they consider such costs and expenses to have been incurred unnecessarily, through bad faith, unfounded allegations or unfounded objections by the other party.
I am grateful to Dr Issaka Ndekugri of Wolverhampton University for supplying me with the bill. Rudi Klein is a barrister and chief executive of the Specialist Engineering Contractors Group. He will be chairing a major conference on adjudication on 20 November. Details from Karen Cooper on 01902-322742.