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Earl Ferrers: I know that the noble Lord, Lord Howie, is very keen on pushing this all over to the Secretary of State. He probably knows far more about Scottish law than I do, but it has its own peculiarities and idiosyncrasies and I am advised that this slots well into the responsibilities of the Lord Advocate and does not slot into the responsibilities of the Secretary of State. If the noble Lord says, "Well, there is a difference

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between payment and adjudication", I dare say there is, and I shall certainly look at the point, but I assumed that his argument was tied up with the fact that the arbitration or adjudication also depended upon payment. If it depends upon payment, or if the payment is dependent upon the result of the arbitration or adjudication, that falls within the responsibility of the Lord Advocate. I will, of course, make sure that I have not misdirected myself and have not informed the noble Lord incorrectly.

Lord Monkswell: Perhaps I could thank the Minister for his words of apology and his obviously serious intention to look into the situation of my not having received the document and its not being available to the House as he thought it should be.

Is it sensible for Parliament to complete its consideration of this Bill and for it to be passed for Royal Assent when we do not have responses from the industry on the scheme that is being drafted? I ask the Minister whether it might be useful when circulating this draft to ask the industry for at least an interim response in time for Parliament--whether it be this House or the other House--to have in front of it a report from the Government on the industry's response to the draft scheme.

Earl Ferrers: I think the noble Lord, Lord Monkswell, is slightly confused. In order to assist people, we have provided the draft proposals for their consideration. That is not necessarily an obligation upon us but we have done it. We cannot put the substantive proposals out for consideration until the Bill is passed into law because we have no statutory right to do so. It has to be after the Royal Assent that the statutory requirement to produce the proposals for discussion is undertaken. For that reason, it would be wrong to delay this matter, because it is only with the passing of the Bill that the Government will have a statutory obligation to put the proposals out for consultation.

Baroness Hamwee: I am delighted to hear that the Minister regards the power to make regulations as an obligation to consult. I do not think that is what the Bill says but I am very pleased to read it that way. I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

[Amendments Nos. 162 and 162A not moved.]

On Question, Whether Clause 105 shall stand part of the Bill?

Lord Williams of Elvel: I put my name to a clause stand part debate on the understanding that I fully comprehended what Clause 105 was meant to say. However, after our debates in Committee, I have at the moment no idea what Clause 105 is meant to say, nor have I any idea how that clause will appear when the Bill is finally enacted. It is rather difficult to oppose the proposal that the clause should stand part when I do not understand the clause.

Lord Lucas: In order to assist the noble Lord, Lord Williams, in opposing this clause on a future occasion, I will certainly arrange for a letter to go to him and

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to others who have expressed an interest in this clause in order to put them in a better position to oppose it at Report.

Clause 105, as amended, agreed to.

Clause 106 [Entitlement to stage payments]:

Earl Ferrers moved Amendment No. 163:


Page 61, line 4, after second ("to") insert ("payment by instalments,").

The noble Earl said: Perhaps I may also speak to Amendments Nos. 165 and 169. These are grouped with Amendments Nos. 164 and 166 to 170.

Since the Bill was published, the point has been made many times that the construction industry understands the term "stage payments" in a much narrower way than was intended by its use in Clause 106. The Bill is intended to give the right on longer contracts to payment by instalments, by stage payments, or by any other kind of periodic payment. We do not wish to restrict the right to "stage payments" only in the very specific terms understood by the industry. This was an error and we apologise for the confusion caused. I therefore commend to your Lordships Amendments Nos. 163, 165 and 169.

As the noble Lord, Lord Williams of Elvel, will have perceived, again we have been a listening Government and have listened to the concerns of people.

Lord Howie of Troon: I have two amendments in this group which stand in my name, Amendments Nos. 164 and 170. I need not detain the Committee for any length of time because they are more or less in agreement with the amendments just spoken to by the noble Earl, Lord Ferrers. I welcome those amendments of his and would merely say that they would be slightly improved if my words were added to his words. Then he and I could be in greater harmony than we usually are.

On Question, amendment agreed to.

[Amendment No. 164 not moved.]

Earl Ferrers moved Amendment No. 165:


Page 61, line 4, at end insert ("or other periodic payments").

On Question, amendment agreed to.

Baroness Hamwee moved Amendment No. 166:


Page 61, line 8, leave out second ("is") and insert ("was before the commencement of the work").

The noble Baroness said: This amendment seeks to inquire at what stage the parties should have agreed that the duration of the work is estimated to be less than 60 days. I can envisage a situation where, when the parties start off, the work is estimated to last a particular length of time, but as it goes on it is accepted that the contract is slipping--that is understood by both parties--and therefore they may be forced to agree on how long the work is likely to continue. It is a minor point but I did not understand whether that agreement as to the duration of the work should be reached before the work starts or whether it can be reached at any time. I beg to move.

Earl Ferrers: We would not particularly wish to limit the circumstances in which parties could agree that the

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work would last for less than 60 days. I do not think that there appears to be much benefit to anyone in doing so. If a party were being bullied into waiving the right to periodic payment by agreeing to an unreasonably short duration, he may simply refuse to agree. In the same way an employer may secure his position by making sure that a sensible period is specified in the contract. I do not think that the amendment of the noble Baroness would be of great assistance.

Baroness Hamwee: I might understand that reply if I read it when my intellect is less relaxed. I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

[Amendments Nos. 167 and 168 not moved.]

Earl Ferrers moved Amendment No. 169:


Page 61, line 10, leave out ("stage").

On Question, amendment agreed to.

[Amendment No. 170 not moved.]

Clause 106, as amended, agreed to.

Lord Williams of Elvel moved Amendment No. 171:


After Clause 106, insert the following new clause--

Scheme for trust funds: report by the Secretary of State

(". The Secretary of State shall submit a report to both Houses of Parliament within 6 months of the passing of this Act on proposals for a scheme for trust funds.").

The noble Lord said: This is a simple probing amendment to see where we are on trust funds. As the Committee will be aware, trust funds were in some respects an essential part of the Latham Report. My understanding is that agreement has not been reached between various participants in the industry, and therefore what Sir Michael Latham proposed in his report has not come to pass. The object of my amendment is simply to ask the Government where we are at the moment on trust funds and where we might be going in the future. I beg to move.

Earl Ferrers: The concept of trust funds is contentious in the construction industry. Despite repeated efforts by senior representatives of the industry over a long period, no workable scheme has emerged which can command any agreement within the industry. If no solution has come forward by now, we can be fairly confident that none will in the foreseeable future.

There are several problems. The first is that trust funds may fundamentally alter the cashflow of contractors in that sums of money will have to be set aside regularly to maintain and to replenish the fund, and they will therefore be unusable while they are in the fund. That is a prospect which is attractive neither to clients nor to most contractors simply because it is expensive to have considerable sums of money lying idle. The construction industry always has considerable cashflow difficulties and if one locks away a certain slice of cash into a trust fund that may exacerbate the difficulties with which businesses have to deal.

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The Government are not convinced that trust funds are consistent with well established practice in respect of insolvency. Parliament has agreed an order of creditors if a company is liquidated under the Insolvency Acts. Trust funds would change that order by ring-fencing payments owed on construction contracts from the main assets of the insolvent company. That may be very convenient for the unsecured creditors who are on construction contracts but it would be very much less acceptable to secured creditors who are claiming on a depleted stock of assets.

I understand the reasons that people think it would be a good idea to have a trust fund. But the fact is that it would make certain sums of money unusable by the industry which is always short of money. It may create its own forms of financial difficulties to industries, and it is not acceptable by the industry as a whole. Therefore we have decided not to proceed with it.

9.15 p.m.

Lord Williams of Elvel: I am grateful to the noble Lord for that response. Do I understand that the Government now say that not only is there no agreement within the industry and therefore at present there cannot be any trust funds, but also that the ranking of creditors would be so destroyed by such a trust fund arrangement that the Government themselves are setting their face against trust funds even if there were an agreement in the industry?


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