The House of Lords is considering an amendment to the Construction Act that would make its payment rules ever so simple to use. Here’s what it says
I have no doubt that the House of Lords has got an eagle eye on this page in Building. Evidence? Well on 2 February, I had a gentle prod about the proposed changes to the payment rules in the new Construction Act. And lo! a member of their lordships’ house immediately tabled amendments to be laid before parliament. Building’s page said: “The payment rules are rhythmic, expressive, poetic and incomprehensible.” So, Lord Borrie took a scythe to the lot. Swoosh. Then he started again. Here’s what he said.
The Construction Act and proposed revisions say the following: all construction contracts shall provide an adequate mechanism for determining what payments become due and when. And if they don’t, then the payment mechanism in the Scheme will apply. The Scheme is a parliamentary publication known as a statutory instrument. As well as proposing this mechanism for the what and when of payment, the noble lord urges that every construction contract shall, in relation to every payment, require the payee to compile a document calculating, using the mechanism or rules in the contract, the sum due. You and I call that document an “application for payment”. It’s the valuation at any point in time. The swoosh of the scythe takes out of the original bill the idea that it will be the architect/contract administrator that does the valuation and issues a certificate. Does away, too, with a payer doing the valuation and publishing the basis of its calculation. The starting pistol to the next cheque is all down to the payee. They do the legwork.
So, in everyday activities between main contractor and employer, the main contractor compiles and explains what’s due.
Mr Architect Certifier can happily leave the stage. He will say hurrah for that. Saves time and money. As between subcontractor and main contractor, the sub compiles and explains what’s due. Ordinary. Mr Main Contractor simply scrutinises the application and does his normal thing. This idea of the payee being the person that calculates the sum due does clarify who has the burden for doing all that. Some will say that the burden of proof for accuracy falls on the payee. Some will applaud that.
Okay, so is this application for payment the sum due and to be paid? Well, yes and no. If part one is the application for payment, part two is the “pay less notice”. The idea is that the employer or its QS will cast a beady eye over the application and if it likes it, it will say nothing; the same thing happens between subcontractor and main contractor.
If the parties can’t decide which sum is right, it’s easy enough to call an adjudicator. Meanwhile, presumably the lower of the two notified sums will be paid on time
If the payer pulls a long face, it is obliged to send that pay less notice. It must be in time, meaning before the “final date for payment”, and must give chapter and verse about that long face: that is, “the precise reasons that justify the difference” between the pay less notice and the application.
So, to recap, the application for payment becomes the “notified sum” unless there is a long-faced pay less notice, in which case that one becomes the notified sum. By the way, rumour has it that parliament is going to call the pay less notice, the “long-face notice”.
If the parties can’t decide which sum is right, it’s easy enough to call an adjudicator. The quarrel will be whose notified sum is nearer the bull’s eye. Meanwhile, presumably the lower of the two notified sums will be paid on time.
Now then, what’s the score if the payer forgets to send a long face notice in time, or fails to “give precise reasons” for paying less? Ah well, as I understand it the application becomes the notified sum and is payable on the usual final date for payment. And is it then open to the now-awakened Rip Van Winkle to call on an adjudicator to open up, and review the notified sum? Let’s face it, the application may have included £1m for the shed that houses the scythe when it ought to have said £100. Well, I can be ever so clear about that; if the answer is yes, then I am all for Lord Borrie’s scythe. If it’s no, let’s ask him to pop into the shed, move the scythe, and sit at the dusty old drawing board.
Oh, I nearly forgot. Borrie also asks parliament to make the Scheme the only set of rules for adjudicating. That’s got merit, too. But let’s see the Scheme first, eh what?
Tony Bingham is a barrister and arbitrator at 3 Paper Buildings Temple
Original print headline: 'Why the long face?'