Construction Act: One year on

After eight years of meetings and debates - including three industry consultations, you would think that the industry would have celebrated the first anniversary of the launch of the amended Construction Act with much popping of corks and lighting of fireworks. At least, that was what I was hoping. But sadly, 1 October seemed to pass by almost unnoticed.

The Construction Act may not have been perfect - its drafting was poor and there were real issues concerning its scope - but it did make a really positive impact for those at the sharp end. That was why, when the review of the legislation was announced back in early 2004, the industry was generally enthusiastic.

The menu of changes that emerged from that seemingly endless review stage looked good on paper. The payment provisions would be overhauled, which was no bad thing given the anomalies of the existing rules. On the adjudication side of things, Tolent clauses would finally be outlawed. Less central, perhaps, were the introduction of a statutory slip rule to allow adjudicators to correct clerical errors in their decisions and a review of the rules on adjudicators’ fees. But the most significant change, at least in my view, was getting rid of the senseless rule that the legislation only applied to written agreements. So, why the deafening silence on 1 October?

Is the amount of case law generated by new legislation a reliable measure of its success or failure? I cannot think of a single decision that has shed light on the revisions to the legislation, which are just as poorly drafted as the original

Does the fact that the Technology and Construction Court (TCC) has not been awash with cases on the revised legislation provide a clue perhaps? One way of interpreting the lack of case law is that the changes must have really hit the spot. I don’t think you can read anything into it personally. I am sure that in time there will be a trickle of cases, perhaps building up to a peak and then tailing off, involving the most significant areas of change. After all, it took a couple of years before there was any reported litigation concerning the original legislation, and then the amount of case law followed that sort of pattern.

The reports that I am getting from people in the industry, whose job it is to keep abreast of these things, are not a cause for optimism but they are revealing. They suggest that the changes have actually made no real impact at all. For many, it is as if nothing ever happened or, if it did, they were far too busy putting out the fires to take them on board.

Ignorance and the simple fact that people are tired of constant rule changes that increase bureaucracy without making any difference to the economic realities certainly do go some way towards explaining the lack of reaction to the revised legislation. However, in my view the main reason is, or at least it should be, the fact that, apart from the abolition of the “in writing only” rule, the final set of changes were either insignificant or, in some cases, just plain bad.

That certainly goes for the new payment regime. Admittedly, the old regime had its problems but its replacement is so complicated and badly drafted that in places it is almost incomprehensible. Goodness knows what busy surveyors, who are not steeped in this stuff, could ever make of it. Finally, on payment, I dread to think of the confusion that is going to result in the long run from the conflation of valuation and other quite different grounds for withholding as the new regime envisages.

Is it any wonder therefore that, despite the risks, most people are reportedly not even attempting to apply the new payment regime? Furthermore, what lessons are we going to learn from the fact that, even when the new rules are applied, paying parties are apparently just finding different ways of inflicting financial grief such as imposing ever-longer payment cycles and forced discounts.

As if that wasn’t bad enough, there is still the mess concerning the government’s botched attempt to outlaw Tolent clauses once and for all. The fact is that the final version of the provision intended to achieve that objective is at best ambiguous in its effect. Having refused to clean up the mess in advance of the revised legislation coming on stream, one cannot say with any confidence that the Tolent problem is no more and in truth it will not be until the Court of Appeal becomes involved that this issue will be finally resolved.

I wonder what we will think about all this on 1 October 2013?

Dominic Helps is a consultant for construction specialist law firm Corbett & Co