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Lord Lucas: My Lords, I am grateful for my noble friend's support. As he points out, with an amendment such as Amendment No. 81A in place, it will be possible for a party bent on avoiding adjudication to insert a term which would allow notice to be given within an unreasonably narrow window, and we cannot allow that.

I am of course aware that some have doubted the wisdom of allowing parties to refer a dispute to adjudication long after work under the contract has ceased. However, as long as there is any possibility of disputes arising under a contract, parties will have to live with the fact that an adjudicator's decision may be sought. Indeed there may be times, even at such a late stage, where it is desirable to have a quick and cheap procedure that can produce an effective temporary decision, particularly since this will not prevent parties from seeking a permanent decision through arbitration or the courts.

As long as there is a possibility of a dispute arising under a contract, the right to seek adjudication will remain. There is no evidence that this will cause any particular difficulties in practice and on balance we feel that it is likely to be helpful. We should, of course, always be prepared to look again at the legislative framework if persistent problems emerged. Until that stage is reached, I hope the noble Lord, Lord Howie of Troon, will be content to leave the Bill as it is now and to withdraw his Amendment No. 81A.

Lord Howie of Troon: My Lords, in the course of the Bill I have frequently agreed with the noble Viscount, Lord Ullswater. I agreed with his speech today until the end when he disagreed with my amendment, but the rest of his speech was sound. The kind of examples which have been suggested of people inserting unreasonable timetables into a contract do not hold water. No one would accept a contract which contained such unreasonable conditions. Clause 107(2) concerns timetabling and provides that the contract

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should have a timetable. My amendment proposes the period within which adjudication can be taken in the context of a timetable. The wording of the Government's Amendment No. 81 is "at any time" and it removes adjudication from the context of a timetable.

However, I have been assured by the noble Lord, Lord Lucas, that the Secretary of State will consider our proposals carefully and examine the manner in which the Bill works in practice over the next year or two. If any of the flaws which I have detected are real and not imaginary, he will deal with them. I am therefore happy to withdraw my amendment.

Amendment No. 81A, as an amendment to Commons Amendment No. 81, by leave, withdrawn.

On Question, Commons Amendments Nos. 79 to 81 agreed to.

6.15 p.m.

COMMONS AMENDMENTS

82

Clause 107, page 60, line 28, at end insert 'of such notice'.


83

Page 60, line 31, at end insert--


'( ) allow the adjudicator to extend the period of 28 days by up to 14 days, with the consent of the party by whom the dispute was referred;'.
84

Page 60, line 34, at end insert--


'(2A) The contract shall provide that the decision of the adjudicator is binding until the dispute is finally determined by legal proceedings, by arbitration (if the contract provides for arbitration or the parties otherwise agree to arbitration) or by agreement.
The parties may agree to accept the decision of the adjudicator as finally determining the dispute.'.
85

Page 60, line 39, leave out 'provide for a procedure which complies' and insert 'comply'.

Lord Lucas: My Lords, I beg to move that the House do agree with the Commons in their Amendments Nos. 82 to 85, to which I have already spoken.

Moved, That the House do agree with the Commons in their Amendments Nos. 82 to 85.--(Lord Lucas.)

On Question, Motion agreed to.

COMMONS AMENDMENT

86

Clause 107, page 60, line 42, leave out from beginning to end of line 2 on page 61 and insert--


'( ) For England and Wales, the Scheme may apply the provisions of the Arbitration Act 1996 with such adaptations and modifications as appear to the Minister making the scheme to be appropriate.
For Scotland, the Scheme may include provision conferring powers on courts in relation to adjudication and provision relating to the enforcement of the adjudicator's decision.'.

Lord Lucas: My Lords, I beg to move that the House do agree with the Commons in their Amendment No. 86. At the same time, it may be convenient if we consider Amendments Nos. 93 and 112.

There has been considerable misunderstanding about making the scheme and in particular our reference to the Arbitration Act. Although there may still be some who are suspicious that such a reference could be used to foist arbitration on an unsuspecting industry, I am

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pleased to say that there is now a general understanding in the industry of the need to mention the Arbitration Act.

We cannot provide adequately for court intervention under an ordinary regulation-making power. Asking the courts to intervene in a way that was outside their normal sphere could only be done through primary legislation or through an adaptation of the Arbitration Act, which contains the right sorts of provision. I need hardly say that it would be quite improper to take a wider power than we think we might need, and we are fortunate in having such a good range of suitable provisions available in such an up-to-date piece of legislation. I beg to move.

Moved, That the House do agree with the Commons in their Amendment No. 86.--(Lord Lucas.)

Lord Howie of Troon: My Lords, in earlier stages of the Bill we had the opportunity to read the draft scheme as it related to England and Wales. There was some discussion in this House and elsewhere about it and I believe that the Government are reconsidering the matter. Is there any possibility of being able to see the scheme applying to Scotland reasonably soon? I have made inquiries but so far they have been fruitless.

Lord Lucas: My Lords, I shall ensure that the noble Lord receives an answer fairly soon but I am afraid that I cannot give him the information he needs now.

On Question, Motion agreed to.

COMMONS AMENDMENT

87

Clause 108, page 61, line 8, leave out '60' and insert '45'.

Lord Lucas: My Lords, I beg to move that the House do agree with the Commons in their Amendment No. 87. It may also be convenient for us to consider Amendments Nos. 88 and 92, to which I believe the noble Lord, Lord Chapple, has an amendment.

We have always envisaged that the right to interim payments should extend to all construction contracts, provided they were of sufficient duration. The reason for having a time threshold to trigger that right is because we do not think it practicable or reasonable to give that right on shorter contracts. It would clearly make no sense to have compulsory instalments on contracts lasting a day or two. We originally suggested a time threshold of 60 days. However, we have listened carefully to those who argued that this might be too long for small businesses to go without payment and we have accordingly decided to put forward a reduced threshold of 45 days. That is the effect of Amendments Nos. 87 and 88.

The effect of Amendment No. 92 is to remove the word "purporting" from the paragraph which makes contractual pay-when-paid provisions ineffective. We believe that the intention behind the word was not clear to many in the construction industry and accordingly agreed with an amendment made by the Opposition in another place that it should be removed. Provisions should be ineffective if they make payment conditional on the payer receiving payment from a third party. It is as simple as that. I beg to move.

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Moved, That the House do agree with the Commons in their Amendment No. 87.--(Lord Lucas.)

On Question, Motion agreed to.

COMMONS AMENDMENT

88

Clause 108, page 61, line 10, leave out '60' and insert '45'.

Lord Lucas: My Lords, I beg to move that the House do agree with the Commons in their Amendment No. 88.

Moved, That the House do agree with the Commons in their Amendment No. 88--(Lord Lucas.)

On Question, Motion agreed to.

COMMONS AMENDMENT

89

Clause 109, page 61, line 23, at end insert--


'(1A) Every construction contract shall provide for the giving of notice by a party not later than five days after the date on which a payment becomes due from him under the contract, or would have become due if--
(a) the other party had carried out his obligations under the contract, and
(b) no set-off or abatement was permitted by reference to any sum claimed to be due under one or more other contracts,
specifying the amount (if any) of the payment made or proposed to be made, and the basis on which that amount was calculated.'.

Lord Lucas: My Lords, I beg to move that the House do agree with the Commons in their Amendment No. 89. Amendments Nos. 89 to 91 are complex amendments at the heart of the payment issue. I believe that they offer a most useful and significant improvement to the construction industry's payment mechanisms. When the Bill was in another place, the Government were persuaded that it might be possible to do something further to limit the abuses persistent in the name of set-off and abatement.

We had already done much to this end in the Bill but with Amendment No. 89 we can ensure that a party should know exactly how much he will be paid. The amendment would require a payer to disregard all issues of set-off and abatement in calculating a payment and then to indicate, within five days of the due date of that payment, how much he actually intended to pay. He would need to explain how that amount was calculated and, in doing so, take account of set-off and abatement, regardless of whether they were calculated into the sum due under the contract or simply subtracted afterwards. If he changes his mind he must indicate the change within the time available for issuing or withholding notice. This is the second notice and it is outlined in Clause 110(2). Once the time available for issuing or withholding notice is passed, the payer is bound to hand over the sum indicated. Should he fail to do so by the final date of payment, the payee may take steps to suspend performance, as indicated in Clause 111.

I shall also indicate the purpose of the other amendments in this group. Amendment No. 90 is consequential and Amendment No. 91 is required to make sure that the payer does not need to issue a second notice unless he decides to pay less than he said he

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would. This is a significant advance and will do much to address a major cause of dispute and disharmony. I beg to move.

Moved, That the House do agree with the Commons in their Amendment No. 89.--(Lord Lucas.)

On Question, Motion agreed to.


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