Revised construction act and scheme in 2011

This article is all about the Adjudication revised construction act and scheme in 2011. These amendments to previous acts and schemes affect anyone concerned with construction contracts in the UK.

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We support legal representation in more complex cases but we want to encourage especially smaller companies to feel more confident fighting for their contractual rights.

Adjudication revised construction act and scheme in 2011

In 2011 several amendments were made to the Construction Act of 1996 and the Scheme of 1998. Before we discuss those amendments lets look at what went before them, the original legislation.

Adjudication for construction was introduced in May 1996 by ‘Part II of The Housing Grants, Construction and Regeneration Act, the Construction Act 1996‘.

The Scheme for Construction Contracts (England and Wales) Regulations 1998, known as ‘the Scheme’ supplemented this Act filling in any loop-holes that had been identified over the previous years. The scheme applies where a construction contract does not meet the requirements of a construction contract according to the construction act.

So, in effect, if a construction contract does not fulfil the requirements of The Construction Act, chances are the scheme will apply. This means the terms of the scheme are implied into the original construction contract.

So, in summary Adjudication in the UK Construction Industry exists because of The Construction Act and The Scheme.

In this article we are going to look at some amendments to both the Act and the scheme. Basically the same essential changes were made to the construction act and the scheme so that if a construction contract was not eligible for adjudication through the construction Act it would be eligible through the scheme.

2009 Amendments to the Construction Act

In 2009 several amendments were issued to the Construction Act. These changes took effect in 2011.

These were included in Part 8 of the Local Democracy, Economic Development and Construction Act 2009.

What are the main changes in the 2009 Amendments to the Construction Act ?

We are going to be looking at the changes focusing only on what is relevant to Adjudication. There are some notable changes regarding payments in construction contracts.

Contracts do not have to be in writing

Parties to a construction contract can refer a dispute to adjudication using the amended act even if the contract was not in writing and was in fact an oral contract. This is an attempt to stop parties objecting to the jurisdiction of an Adjudication because the contract was not in writing.

So, if a contract is not in writing it will still be eligible for adjudication under the revised construction act.

This allows many more parties that don’t have a written contract to refer a dispute to adjudication.

How this works in practice is yet to be fully figured out – how do you prove the terms of an oral contract ?

The slip rule – An adjudicator has time to amend a decision

If the Adjudicator makes an obvious error, ‘a slip’ then he or she has five days in which to amend it. These errors are more a typographical error rather than an interpretation of the law. The Adjudicator can amend his decision of his own accord or in response to the application of either party.

If the contract expressly says six days then it will be six days. But if no mention is made of this in the contract then the scheme applies and it will be five days.

Costs of adjudication

Any clause regarding the allocation of costs of adjudication is ineffective and the Adjudicator has the final say over where costs are allocated.

These clauses are known as Tolent clauses and a typical example would if the contract states that the referring party has to pay the costs of the referring party and the responding party!

So the Adjudicator has the final decision about who pays his fees.

Allows the adjudicator to set the start date of the adjudication

The adjudication must take 28 days from the time the adjudicator receives the referral notice and not the date the referral notice was issued. So the adjudicator once appointed has to work out the timetable for the adjudication from that point.

This was in response to challenges being made to adjudicators decisions based on the fact that the decision was not issued on time.

What are the 2011 Amendments to the Construction Scheme ?

In 2011, when the amendments to the construction act took effect, similar changes were made to the revised Scheme for Construction Contracts (England) Regulations 2011.

Like previously, the amended scheme effectively gives the same statutory rights to refer a dispute to adjudication as the amended construction act. If a contract does not meet the requirements to fall under the Construction Act then it may well meet the requirements of the scheme.

The Scheme amendments give specifically five days for the Adjudicator to amend a decision. The changes to the act did not mention a number of days.

The adjudicator determines how payment for their fees is to be apportioned.

The adjudicator must confirm to all parties the date it received the referral notice and work their timetable from that date.

Why amend the construction act and the scheme ?

The stated purpose of the amendments were to:

• make construction contracts clearer
• increase the fairness of the payment system in construction
• allow contractors to suspend their works due to non-payment
• encourage the use of adjudication in construction dispute resolution

In reality, these amendments are always about formalising the decisions of the courts system over the past number of years. These amendments generally remove loop-holes and such that have been used against the intent of the Act and the scheme.

You can examine each amendment and easily figure out what loophole they shut down. Of course, more attempts will be made by solicitors and barristers to have an adjudicators decision reviewed and more loop-holes will be discovered. It is up the Judge in each particular case to decide how to interpret the legislation if it is unclear.

Who do the amendments apply to ?

The amendments apply to all construction contracts in England, Wales and Scotland as defined in the construction act.

If a construction contract does not fulfil the requirements of the Act or amended act then the revised scheme applies.

Confusions regarding these changes

The amendments discussed above were not made very clearly.

There are specifically issues regarding whether Tolent clauses are permitted in construction contracts are not. We discuss Tolent clauses here.