Local Democracy, Economic Development and Construction Bill [HL]

My Lords, the amendments in this group cover the three areas in Part 8; namely, adjudication, payment and suspension. I will deal with them in that order, starting with adjudication. The noble Baroness has proposed Amendment 169ZA, which would apply to Clause 136 and is known in the trade as the "slip rule". The amendment is unnecessary and it is based on a very narrow reading of the clause. For example, if an error is created by adding 7+7 and getting the answer 13, simply removing the 13 does not solve the problem. It is resolved only when a correct answer—in this case, 14—is inserted. I hope therefore that the noble Baroness will understand why we are resisting this amendment. More substantially, she has tabled Amendment 169A, which concerns the adjudicator’s ability to award his or her fees and expenses. Since Committee stage, we have discussed the issues around this amendment with the Construction Umbrella Bodies Adjudication Task Group. We have also had the opportunity to fully consider a recent and very relevant High Court case, to which the noble Baroness referred—the Linnett v Halliwells case—and how this would work in Scotland. Rather than follow the suggestion put forward by the noble Baroness in her amendment, we are minded to simply "carve out" contractual agreements which allow the adjudicator to award his fees and expenses. We believe that such an amendment will have a not dissimilar effect to the amendment that the noble Baroness is proposing. We will look at this further and think how to move forward on this when the issue comes before another place. I will ensure that noble Lords are made aware of any such developments. Therefore, I hope that the noble Baroness will understand why we are resisting this specific amendment while recognising the problem lying behind it that she has raised. I move on to payment and the new amendments concerning the statutory payment framework. The 1996 Act requires that certain notices are issued in advance of the final date by which payment must be made which communicate the amount, with reasons, of the intended payment. These are what are known as the "payment" and "withholding" notices. Their lack of effectiveness in communicating what would be paid at the final date for payment was the prime reason for the review of the 1996 Act. The noble Baroness’s Amendment 169B would remove the ability of the payee’s application to stand as the statutory payment notice in default. We think this is founded on a misconception and a concern that a payee’s application will sometimes be a cumulative statement showing the amount up to the date of its issue. The noble Baroness is concerned that, on a cumulative basis, month one could see a £1,000 application. In the event £500 is paid, but £500 is withheld because of a disagreement about unsatisfactory workmanship. Month two sees a £2,000 application—that being the cumulative amount under the contract—of which only £1,000 would be payable if all of the first payment had been made. We believe the noble Baroness fears that the payer could become liable to pay £1,500 in this example if the payer did not again issue a withholding notice for the disputed £500. We do not believe this will be the case. The revised Act is quite clear that a statutory payment notice must, in relation to every payment provided for by the contract, state the sum considered to be due at the payment date in respect of the payment and the basis on which that sum is calculated. In short, any type of cumulative notice would not be adequate to serve as a statutory payment notice if it did not adequately differentiate between what was currently payable and what had been paid to date. In such a case the payee would have to issue a separate notice claim setting out what was due and why in respect of the month two payment; that is, £1,000. Our reason for persisting with the position as set out in the Bill is that in many cases the application will meet the definition and otherwise qualify as a payment notice such that it would be unreasonable in those cases to require the payee to issue a separate notice. Other than in an inadequate cumulative notice scenario, any separate notice would probably be identical to the application and it would inevitably take a little time for the payee to realise that the payer payment notice had not been issued—for example, that it was not stuck in the post—and this would result in an extension of the payment period. Extending payment periods is something we are keen to avoid in this legislation. I therefore hope that the noble Baroness will withdraw the amendment. Amendment 169C relates to the ability of the payer to revise the amount set out in the statutory payment notice before it becomes payable at the final date for payment. Its purpose, it seems, is to limit the grounds on which the payer may amend that payment notice. I believe that we need to look at what we are doing across all the revised payment framework to understand why we have reached the position we have. We are requiring that the amount set out in the payment notice, as revised, becomes the sum payable at the final date for payment, which is not necessarily the case under the 1996 Act; allowing the payee to issue the payment notice should the parties agree that in their contract—under the 1996 Act only the payer can do so; and introducing a fall-back provision which allows the payee to issue the statutory payment notice in default. Together these measures put the payee in a considerably stronger position than is currently the case. While what is ultimately payable as a matter of the parties’ contract is unaffected, the payee has certainty that the sum in the notice will become payable at the final date for payment. So allowing the payer to amend the amount payable within a contractually agreed period, on whatever grounds, simply balances that off and gives him or her an appropriate opportunity to ensure that he or she does not overpay. Given that explanation, I hope that the amendment will be withdrawn. That brings us to suspension. Clause 141 has drawn almost universal support from the industry and very little adverse comment. I apologise to noble Lords as I have moved on to the next amendment, which I did not intend to do. Therefore, I simply ask the noble Baroness to withdraw her amendment.