REUTERS | Paulo Whitaker

Does seeing the Scottish Scheme mean we are a step closer to the Construction Act amendments?

Or should that be “Damp squib Part 2”? (For Part 1, see Matt’s April 2010 post.)

When BIS launched its consultation on the Scheme for Construction Contracts 1998, we were all hopeful that, once our answers to the consultation had been submitted, it would pave the way for the amendments to the Scheme and the Construction Act 1996 to come into force before the end of 2010. Unfortunately, that was not to be and the results of BIS’s consultation have still not been published.

The Scottish Government has now published a consultation on the proposed amendments to the Scottish Scheme and the Scottish Exclusion Order. The consultation suggests that the amended Construction Act 1996 and Schemes will come into force by October 2011, however I don’t think we should hold our breath…

Responses to the Scottish consultation have to be submitted by 1 April 2011 and I would encourage interested parties to respond, even if they do not primarily practice in Scotland. BIS and the Scottish Government will no doubt try and get as much consistency between the two Schemes as possible and responses to the Scottish consultation may therefore affect what England and Wales end up with.

The amendments proposed to the Scottish Scheme are broadly similar to those proposed to the English Scheme and are again divided between consequential amendments and supplemental amendments.

Consequential amendment one: adjudication costs

A minor amendment is proposed to paragraph 25(2) of the Scottish Scheme to acknowledge that an adjudicator’s power to apportion his fees and expenses between the parties is subject to section 108A(2) of the Construction Act 1996 (as amended). Unlike the English Scheme, an adjudicator’s power to apportion his fees and expenses between the parties is already provided in the Scottish Scheme so no amendment is required for this.

Consequential amendment two: slip rule

The Construction Act 1996 (as amended) expressly provides for the adjudicator to correct slips. Like the English Scheme, the Scottish Government proposes a seven day limit on the correction of slips. While this provides the parties with certainty, I think it is too prescriptive and will not allow courts to exercise discretion in the same way as if the Scheme provided for the slip to be corrected “within a reasonable time” or similar.

The Scottish Government has also asked respondents to comment on whether the Scottish Scheme should be amended to set a deadline for complying with an adjudicator’s decision as a result of the slip rule amendment, albeit it has not gone as far as to suggest an eight-day period like BIS.

Like most people I have spoken to, I do not see any need for stipulating a time period for compliance, regardless of the slip rule amendment. If the Scheme has to change, eight days is certainly too long. Why not simply state that it must be complied with “forthwith”?

Consequential amendment three: payment notices

While there are some minor differences between the BIS and Scottish Government’s proposed amendments, they both reflect the revised system of “payment notices” and “pay less notices“.

Both Schemes suggest continuing with a payer-led payment system. While some commentators, particularly those representing sub-contractors, want to see a payee-led system, I do not see problems maintaining a payer-led system as payees will have the protection offered by section 110B of the Construction Act 1996 in the event that the payer defaults.

Supplemental amendment one: confidentiality

The Scottish Government has asked a number of questions regarding confidentiality and whether the whole process should be presumed confidential.

Personally, I see no reason why adjudications should not be presumed confidential and this is likely to be attractive to many parties. The Scots have expressly provided for confidentiality in the Arbitration (Scotland)  Act 2010 and so may follow suit with adjudication, even if BIS decide not to amend the confidentiality provisions.

Supplemental amendment two: final and conclusive certificates

The Scottish Government has asked respondents to comment on whether there is any practical problem removing the words “unless the contract states that the decision or certificate is final and conclusive” from paragraph 20(2)(a) of the Scheme, meaning that adjudicators could open-up, review and revise any certificate.

Sub-contractors are obviously keen to see the words removed and I agree that it will lift the restrictions that some contractors and employers attempt to put on all certificates. However, the practical problem that needs to be overcome is what affect this will have on the conclusiveness of final certificates under JCT contracts and similar.

Supplemental amendment three: awarding interest

While I would welcome a statutory power to award interest, I would still feel somewhat uncomfortable awarding interest to a party that has not claimed it.

Supplemental amendment four: section 42 of the Arbitration Act 1996

Paragraph 25 of the English Scheme provides that a court can make an order requiring a party to comply with an adjudicator’s decision in line with section 42 of the Arbitration Act 1996. The Scottish Government has asked respondents whether a similar amendment is required to the Scottish Scheme.

I see absolutely no point in the Scottish Scheme incorporating such a provision because it is not used in England and Wales. In the very first English enforcement case, Macob Civil Engineering Ltd v Morrison Construction Ltd, Dyson J (as he was then) said:

“It is not at all clear why section 42 of the Arbitration Act 1996 was incorporated into the Scheme”.

Supplemental amendment five: Exclusion Order

One very interesting amendment that the Scottish Government has asked for comments on does not concern the Scheme, but rather section 110(1A) of the Construction Act 1996.

The Scottish Government has asked whether it should exercise its powers so that the amended provisions of section 110(1A), which prohibit “pay when certified” clauses, should be excluded from sub-contracts on PFI projects. This was the subject of much debate when the amendments to the Construction Act 1996 were being discussed and, personally, I can see the benefit of the exclusion so that the sub-contracts reflect the principal PFI contract.

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