The Scheme for Construction Contracts (England and Wales) Regulations 1998 (Amendment) (Wales) Regulations 2011

Welsh Statutory Instruments

2011 No. 1715 (W.194)

CONSTRUCTION, WALES

The Scheme for Construction Contracts (England and Wales) Regulations 1998 (Amendment) (Wales) Regulations 2011

Made

12 July 2011

Coming into force

1 October 2011

The Welsh Ministers, in exercise of the powers conferred upon the Secretary of State by sections 108(6), 114(1) and 146(1) and (2) of the Housing Grants, Construction and Regeneration Act 1996(1) (“the Act”) and now exercisable by them(2) make the following Regulations.

Before making these Regulations, the Welsh Ministers have consulted such persons as they think fit as required by section 114(2) of the Act.

In accordance with section 114(5) of the Act(3), a draft of these Regulations was laid before the National Assembly for Wales and approved by a resolution of the National Assembly for Wales.

Title, application, commencement and interpretation

1.—(1) The title of these Regulations is the Scheme for Construction Contracts (England and Wales) Regulations 1998 (Amendment) (Wales) Regulations 2011. They come into force on 1 October 2011.

(2) These Regulations apply to construction contracts entered into after the coming into force of these Regulations.

(3) These Regulations apply to construction contracts in so far as they relate to the carrying out of construction operations in Wales.

(4) In these Regulations—

• “the Act” (“y Ddeddf”) means the Housing Grants, Construction and Regeneration Act 1996;

• “the Principal Regulations” (“y Prif Reoliadau”) means the Scheme for Construction Contracts (England and Wales) Regulations 1998(4);

• “the Schedule” (“yr Atodlen”) means the schedule to the Principal Regulations.

Amendment to regulation 3 of the Principal Regulations

2.  In paragraph (b) of regulation 3 of the Principal Regulations, after “section 110”, insert “or by section 110A”(5).

Amendments to Part 1 (Adjudication) of the Schedule

3.—(1) Part 1 (Adjudication) of the Schedule is amended as follows.

(2) In paragraph 1(1), before “of his intention”, insert “at any time”.

(3) After paragraph 7(3) insert—

“(4) Upon receipt of the referral notice, the adjudicator must inform every party to the dispute of the date that it was received”.

(4) In paragraph 9(4), for the second sentence substitute—

• “Subject to any contractual provision pursuant to section 108A(2) of the Act, the adjudicator may determine how the payment is to be apportioned and the parties are jointly and severally liable for any sum which remains outstanding following the making of any such determination”(6).

(5) In paragraph 11(1), for the third sentence substitute—

• “Subject to any contractual provision pursuant to section 108A(2) of the Act, the adjudicator may determine how the payment is to be apportioned and the parties are jointly and severally liable for any sum which remains outstanding following the making of any such determination”.

(6) In paragraph 15(b) for “draw such inferences from that failure to comply as circumstances may, in the adjudicator’s opinion, be justified” substitute “draw such inferences from that failure to comply as the circumstances may, in the adjudicator’s opinion, justify”.

(7) In paragraph 19(1)—

(a) in paragraphs (a) and (b), for “the date”, substitute “receipt”; and

(b) in paragraph (c), insert “receipt of” after the word “after”.

(8) In paragraph 20(b), for “section 111(4)”, substitute “section 111(9)”(7).

(9) In paragraph 21, omit “in accordance with this paragraph”.

(10) After paragraph 22 insert—

“22A.— (1) The adjudicator may on the adjudicator’s own initiative or on the application of a party correct the decision so as to remove a clerical or typographical error arising by accident or omission.

(2) Any correction of a decision must be made within five days of the delivery of the decision to the parties.

(3) As soon as possible after correcting a decision in accordance with this paragraph, the adjudicator must deliver a copy of the corrected decision to each of the parties to the contract.

(4) Any correction of a decision forms part of the decision.”

(11) Omit paragraph 23(1).

(12) Omit paragraph 24.

(13) In paragraph 25, for the second sentence substitute—

• “Subject to any contractual provision pursuant to section 108A(2) of the Act, the adjudicator may determine how the payment is to be apportioned and the parties are jointly and severally liable for any sum which remains outstanding following the making of any such determination”.

Amendment to Part 2 (Payment) of the Schedule

4.—(1) Part 2 (Payment) of the Schedule is amended as follows.

(2) In paragraph 5 omit “the expiry of” and insert “the expiry of” before the words “30 days following completion of the work”.

(3) For paragraph 9, substitute—

“Payment notice

9.— (1) Where the parties to a construction contract fail, in relation to a payment provided for by the contract, to provide for the giving of a notice pursuant to section 110A(1) of the Act, the provisions of this paragraph apply.

(2) The payer must, not later than five days after the payment due date, give a notice to the payee complying with sub-paragraph (3).

(3) A notice complies with this sub-paragraph if it specifies the sum that the payer considers to be due or to have been due at the payment due date and the basis on which that sum is calculated.

(4) For the purposes of this paragraph, it is immaterial that the sum referred to in sub-paragraph (3) may be zero.

(5) A payment provided for by the contract includes any payment of the kind mentioned in paragraph 2, 5, 6, or 7 above.”

(4) For paragraph 10, substitute—

“Notice of intention to pay less than the notified sum

10.   Where, in relation to a notice of intention to pay less than the notified sum given in accordance with section 111(3) of the Act, the parties fail to agree the prescribed period as provided for in section 111(5), that notice must be given not later than seven days before the final date for payment determined either in accordance with the construction contract, or where no such provision is made in the contract, in accordance with paragraph 8 above.”

John Griffiths

Minister for Environment and Sustainable Development, one of the Welsh Ministers

12 July 2011

Explanatory Note

(This note is not part of the Regulations)

These Regulations amend the Scheme for Construction Contracts (England and Wales) Regulations 1998 (S.I. 1998/649) (“the Scheme”), in part to reflect changes made to the relevant primary legislation, the Housing Grants, Construction and Regeneration Act 1996 (c. 53) (“the 1996 Act”), by the Local Democracy, Economic Development and Construction Act 2009 (c. 20) (“the 2009 Act”), and in part to reflect changes which the Construction Umbrella Bodies Adjudication Task Group has suggested would be desirable.

The amendments to the Scheme made by these Regulations apply in relation to construction contracts for construction operations in Wales.

The provisions of Part 1 of the Schedule to the Scheme have effect (as implied terms of the parties' contract) where the parties to a construction contract fail to make provision in their contract for one or more of various terms relating to “adjudication” (a dispute resolution procedure which the 1996 Act introduced as regards disputes under construction contracts).

Regulation 3(3) inserts a new provision into the Scheme to the effect that, upon a dispute being referred to an adjudicator, the adjudicator is to inform every party to the dispute of the date of the referral.

Provisions relating to the fees and expenses of an adjudicator are amended by regulation 3(4), (5) and (13). The effect of these amendments is to ensure that the adjudicator’s ability to look to both parties to the construction contract for the payment of the adjudicator’s fees and expenses is subject to any valid (express) contractual provision to the contrary (see section 108A of the 1996 Act which was inserted by section 141 of the 2009 Act and which is to be commenced on 1 October 2011).

Regulation 3(7) amends paragraph 19(1) of the Scheme to clarify that the period within which an adjudicator must reach a decision regarding a dispute begins when the adjudicator receives the referral.

Regulation 3(10) introduces a new provision into the Scheme to the effect that adjudicators have the power to correct minor errors in their decisions. Any such corrections must be made within five days of the relevant decision.

Regulation 3(11) and (12) repeal provisions which enabled adjudicators to make peremptory decisions.

Regulation 4 amends Part 2 of the Schedule to the Scheme which concerns “payments” and implies into the contract provisions relating to payments to the extent that express terms are absent or deficient.

Section 110A of the 1996 Act (which was substituted by section 143 of the 2009 Act and which is to be commenced on 1 October 2011) provides that a construction contract must contain a provision to the effect that a “payment notice” (setting out, in relation to every payment, the sum considered due) must be given by the person whom the parties have agreed — the payer, the payee or certain other persons. Where the parties have failed to make express provision in their contract as to who is to give such notices, regulation 4(3) substitutes a new paragraph 9 of Part 2 of the Schedule to the Scheme with the effect that this is the payer’s responsibility.

Section 111 of the 1996 Act (which was substituted by section 144 of the 2009 Act and which is to be commenced on 1 October 2011) introduces a requirement to pay the sum set out in a payment notice (whether given pursuant to express terms in the parties' contract or by virtue of new paragraph 9 of Part 2 of the Schedule to the Scheme). It also makes provision for the sum in such a notice to be challenged or revised by the giving of a type of counter-notice — a notice of intention to pay less than the notified sum. Regulation 4(4) substitutes a new paragraph 10 of Part 2 of the Schedule and thereby makes provision for the timing of such a counter-notice where the parties have failed to agree on this.

A full regulatory impact assessment of the effect that this instrument will have on the costs of business and the voluntary sector is available from the Department for Environment, Sustainability and Housing, Welsh Government, Merthyr Tydfil Office, Rhydycar, Merthyr Tydfil, CF48 1UZ, and is annexed to the Explanatory Memorandum which is available alongside the instrument on www.legislation.gov.uk.

(1)

1996 c. 53.

(2)

Functions of the Minister and Secretary of State, so far as exercisable in relation to Wales, were transferred to the National Assembly for Wales by the National Assembly for Wales (Transfer of Functions) Order 1999, S.I. 1999/672. The functions were transferred to the Welsh Ministers by paragraph 30 of Schedule 11 to the Government of Wales Act 2006 (c. 32).

(3)

Section 114(5) provides that the Secretary of State may not make a statutory instrument containing regulations unless a draft of the regulations has been laid before and approved by a resolution of each House of Parliament. By virtue of paragraph 34(2) of Schedule 11 to the Government of Wales Act 2006 (c. 32), the provision applies to the exercise by the Welsh Ministers of the function of making a statutory instrument containing such regulations as if any reference to either House of Parliament were a reference to the National Assembly for Wales.

(4)

S.I. 1998/649.

(5)

Section 110A was inserted by section 143(3) of the Local Democracy, Economic Development and Construction Act 2009 (c. 20).

(6)

Section 108A was inserted by section 141 of the Local Democracy, Economic Development and Construction Act 2009.

(7)

Section 111 was substituted by section 144 of the Local Democracy, Economic Development and Construction Act 2009.