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Housing Grants, Construction And Regeneration Bill Hl

Volume 570: debated on Thursday 28 March 1996

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8.6 p.m.

House again in Committee on Clause 105.

Page 60, line 32, leave out ("7") and insert ("14").

The noble Lord said: In moving Amendment No. 154 I should like to speak also to Amendments Nos. 155 to 157. Clause 105 sets certain time limits which in our view are too rigorous. Amendment No. 154 seeks to postpone the time limit on the appointment of the adjudicator. Amendment No. 157 seeks to create a longer interval for an adjudicator to arrive at a decision. The Government have put down Amendment No. 156 which may meet our concerns. I shall leave my noble friend Lord Howie of Troon to speak to Amendment No. 155, if he so requires. I beg to move.

I support the noble Lord, Lord Williams of Elvel, in what he said. Amendment No. 155 is a small and self-evident amendment. Its only purpose is to add a measure of precision to a matter which at first sight appears imprecise. If there is a time limit it ought to have a starting point. My amendment is intended to provide it.

As I hope the Committee will be able to judge from Amendment No. 156, we have been listening to the industry. We are convinced that in many cases it will not be possible for an adjudicator to reach a decision within 14 days. We no longer wish to insist that every adjudication agreement includes a 14-day timetable. I hope that that will satisfy the intent of Amendment No. 157. We also believe that some adjudications will take more than 28 days. I believe it right that parties should be able to agree a suitable extension. In order to safeguard weaker parties, however, we propose that such an extension may not be agreed until adjudication proceedings have started. That means that parties could not give away their right to quick adjudication in the contract but would be able to take a separate decision on each dispute as it arose.

But time limits should still be challenging. Amendment No. 154 would double the period to appoint an adjudicator. We do not believe that that is necessary. Appointment should be a relatively simple matter, and we certainly wish to avoid the situation which has arisen in some arbitration proceedings where the appointment of a tribunal has dragged on for months. By far the easiest way to ensure rapid appointment is to name the adjudicator in the contract. Naming a reserve or two might also be good policy.

Where the appointment of an adjudicator is left to another person or an institution there is no need to build in unnecessary delay. In these days of fax machines, electronic mail, and computerised record-keeping, it should be possible to name a single adjudicator and refer a dispute to him within one week. I therefore urge the noble Lord to withdraw his amendment.

Amendment No. 155 also appears to introduce unnecessary delay. It could be interpreted as requiring a party to the dispute to notify the others before proceeding to adjudication and may have been laid in the belief that the period of an adjudicator's appointment needs some formal starting date. That is not the case. Clause 105(2) would require an adjudicator to be appointed within seven days of any party starting the process. We do not wish to slow things up by imposing steps that could be unnecessary.

If parties wish to stipulate formal notification in their contracts they are free to do so, but we do not wish to insist upon it in statute. Most parties will not embark upon adjudication lightly. While it is intended to be cheap and quick, it is neither free nor instant. If parties seriously believe they can get something put right with a couple of letters or phone calls I am sure they will do it. Where a dispute goes beyond the immediate goodwill of the parties to resolve, the adjudicator should be brought in as soon as possible. We would oppose any intermediate steps. I hope that noble Lords will reconsider the need for their amendments.

I am entranced by the Minister's remarks about months. My noble friend is talking about an extra seven days. That is hardly months, hardly an unconscionable delay. I think my noble friend should pursue his amendment.

I certainly will, with that encouragement. I have taken advice, as I am sure the noble Lord will recognise. Unless it is written into the contract—I agree with the noble Lord that if it is written into the contract—that a certain person, or two or three people, will adjudicate in a dispute in the contract, there is then a question of finding an appropriate adjudicator who must be impartial, as I think we agree, although the Government did not accept the amendment tabled by my noble friend Lord Howie. Nevertheless, I think that it was understood that he should be independent.

The adjudicator, whoever he or she may be, may have many other things to do, a full diary, and so on. I and others feel that seven days is a short period of time. We are talking about calendar days rather than working days. There could be bank holidays; there could be weekends. It is a short period unless the adjudicator's identity is specified in the contract. I ask the noble Lord to reflect upon what I am saying, because it has been represented to me as being a little too short. Given that the Government rightly want to impose some timetable, seven days seem to me and to others to be too short. I hope very much that I can persuade the noble Lord to look again at the matter.

My noble friend Lord Ferrets and I are united in thinking that, having listened to the argument put by the noble Lord, Lord Williams, we should consider what he said.

I am most grateful to the noble Lord. I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

[ Amendment No. 155 not moved.]

Page 60, line 32, leave out from ("days,") to end of line 35 and insert—

("(b) require the adjudicator to reach a decision within 28 days of referral or such longer period as is agreed by the parties after the dispute has been referred;").

The noble Lord said: spoke to this amendment with the previous one. I beg to move.

On Question, amendment agreed to.

[ Amendments Nos. 157 and 158 not moved.]

[ Amendment No. 159 not moved.]

8.15 p.m.

Page 60, line 38, at end insert—

  • ("(e) enable the adjudicator to have regard to Codes of Practice published by the Construction Industry Board;
  • (f) preclude subsequent legal proceedings against the adjudicator; and
  • (g) provide for the adjudicator's finding to be binding unless appealed.").
  • The noble Lord said: It may be for the convenience of the Committee if I speak also to Amendment No. 162A in the name of my noble friend Lord Berkeley. Amendment No. 160 relates to the adjudicator's role. The Committee has already discussed possible legal proceedings against the adjudicator. So I do not need to go into that. I wish to expand upon the codes of practice which the Construction Industry Board is publishing and will publish in the future.

    I accept that to date the Construction Industry Board has been considering codes of practice in respect of tendering rather than the performance of contracts. Nevertheless, I am advised that the board is considering codes of practice related to the performance of contracts as well as to tendering. If that is the case—one cannot deny that it is the case, because it is the case—I would have thought that the adjudicator should be allowed to have regard to those codes of practice when they are produced. It is important that the adjudicator be fully apprised of what the board, which, after all, is the overall body supervising this arrangement, believes to be right in terms of practice.

    I recognise, and the Committee will recognise, that codes of practice have different functions and different legal status. There have been many debates in this place on the legal status or otherwise of codes of practice. I am not trying to put codes of practice into legal forms; in other words, I am not saying that the codes of practice should be like a highway code or anything that can be quoted in evidence in court. All I am trying to establish is that as and when the Construction Industry Board produces guidance in the form of codes of practice, the adjudicator should be enabled, including in his decision, to have reference to such a code of practice.

    I leave out paragraph (f) for the time being because we have already discussed that. I come to paragraph (g) of the amendment which will:

    "provide for the adjudicator's finding to be binding unless appealed".

    Again, we have had some discussion of what happens when the adjudicator adjudicates. Our belief is that the proper method of going about this is to say, "All right, this is binding, so it must be implemented unless it is appealed." In our view that is the right way rather than to leave slightly in the air the matter of whether there is any binding adjudication or whether there is more in the nature of arbitration. How far an adjudicator's findings should be binding is complex. The noble Viscount, Lord Ullswater, referred to that in our earlier debates. Nevertheless, I feel it useful to propose the amendment so that the Government can put on the record how they see an adjudicator's position; how they see the finding by an adjudicator; and in what respect it can be binding or non-binding.

    My noble friend Lord Berkeley will be speaking to his amendment which puts a slightly different picture, but in my view a reasonable picture. I hope that we can, first, concentrate the debate upon the codes of practice question. Secondly, I hope that we can get to the point of the status of the adjudicator's decision. I beg to move.

    I wish to speak to my Amendment No. 162A. My objective in tabling the amendment is similar to that of the noble Lord, Lord Williams of Elvel. It concerns a worry that many noble Lords expressed during the Second Reading debate as to whether the adjudication was binding or interim and, if it were the latter, at what stage could either party seek arbitration or some other means of resolving the dispute.

    We must remember that we are looking at contracts which have a wide span—the largest perhaps like Waterloo Station, which has been mentioned ad nauseam this evening as a good example. If the steel roof of the noble Lord, Lord Howie, with its glass had been made six inches too big for the foundations and there had been some adjudication, that would have been fine, but I do not believe that anybody could have expected the contractual dispute to have been resolved in four or even eight weeks. So I personally am convinced that there has to be an option for the adjudication to be revisited, perhaps at a time that one might define as "after substantial completion of the contract", or some such wording. It is not quite so important whether it is a requirement to revisit it. With small contracts I am sure that the two parties could agree that the adjudication was final and binding.

    I received my amendment from the Law Society of England and Wales (as distinct from that of Scotland). I do not believe that it has proposed this amendment as a means of increasing lawyers' fees, which is a subject about which we have had much discussion. I believe that it is a genuine attempt to draw out the problem and try to have drafted in the Bill with the utmost clarity whether the decision has to be interim or may be interim or whether there is an option for either party to seek arbitration or some other means of resolving the dispute and when that can take place.

    The noble Lord, Lord Lucas, gave us some explanation earlier this evening. As I said, I tabled the amendment basically so that we could have a resolution of the problem and, I hope, clarity. On that basis, I hope that the noble Lord will agree to look again at this amendment.

    As the noble Lord, Lord Williams, said, to some extent we have already covered the substance of these amendments. The Committee will be aware that we accept the principle behind the point on immunity for the adjudicator.

    Amendment No. 160 also suggests that the adjudicator should be able to have regard to codes of practice published by the Construction Industry Board. We are very sympathetic to the suggestion that the adjudicator should be a best practice operator. There is nothing in this legislation which would prevent an adjudicator having regard to appropriate codes of practice. If parties wished to make doubly sure by putting a reference in the contract, that is up to them. They may even choose to insist that certain guidelines are followed. However, we do not feel that this should be a matter for primary legislation.

    With regard to the amendment of the noble Lord, Lord Berkeley, and that part of the amendment of the noble Lord, Lord Williams, which refers to it, the effect would be to make an award binding and to put that system into the Bill. We are well aware that many people would like adjudication to resolve disputes only until practical completion of the contract. They would like it to be possible to re-open an adjudicator's decision once the work was out of the way. We have no problem with that. Parties would be free to make that clear in their adjudication agreement under the contract. There is nothing in the Bill which says that adjudication should be either one way or the other. We show no preference in the Bill. We do, of course, show preference in the scheme. But that is the subject of a later discussion.

    However, we are not prepared to forbid agreement to the contrary; that is, to insist that adjudication could never be permanent. Some in the industry see the advantage of knowing where they stand once an adjudicator has ruled. But not everyone may be prepared to agree to submit to a process which makes temporary decisions but denies them access to the courts, sometimes for years. It would not be right to force them to do so.

    I hope, therefore, that the noble Lords will feel able to withdraw their amendments.

    Before we finish this discussion, with regard to the first point, I accept that it may not be right to put on the face of the Bill the matter of enabling the adjudicator to have regard to the codes of practice issued by the Construction Industry Board. Nevertheless, there is a case—I may have to return to this point at another stage—for putting the codes of practice issued by that board, which, after all, is the overseer of the whole arrangement, into a slightly special category rather than in just any other code of practice that happened to be around or any other piece of guidance that may have been issued by any other non-statutory body.

    I am in some difficulty on the question of the nature of the adjudicator's finding. In practical terms, if there is a dispute between two parties to a contract and if they go to adjudication, the adjudicator will make up his mind and say, "Right, this is the answer." What then happens? Presumably, the payments are made according to whatever the adjudicator has found. Those payments are made under the adjudicator's finding, which is, therefore, to that extent, binding.

    What happens when someone says, "Yes, but in the contract we did not actually say that the adjudicator's decision would be binding, but that it would be binding subject to, say, Clause 53(4)(b) of the contract", and so on? What would be the status of any such decision? I am still unclear and I believe that my noble friend Lord Berkeley is unclear, whether the Government want an adjudicator's finding to be binding and payments made accordingly subject to something else, or whether the Government are, as the noble Lord, Lord Lucas, seemed to say, rather neutral about whether or not the adjudicator's finding should be binding and that should be something left to the contract. Can the noble Lord help me on that point?

    Before the noble Lord replies, perhaps I may add that I am increasingly unclear also. The noble Lord, Lord Williams, put the issue very sharply. Adding to my own lack of understanding is Clause 105(4)—a clause to which we shall turn in a moment—which states that:

    "The scheme may apply & the provisions of the Arbitration Act".
    It seems to add to the optional nature of everything that is being done, which was indeed the point made by the noble Lord, Lord Berkeley, and my amendment earlier today.

    I do not believe that there is any situation in which the adjudication could be made binding on all contracts. If there is a serious problem, one cannot expect disputes worth tens or hundreds of millions of pounds to be resolved in four weeks. I do not know whether there is a category of dispute which could be made binding or whether the wording should perhaps be more on the lines of the amendment put forward by the noble Lord, Lord Williams, to discourage people from revisiting the adjudication. That matter does need clarification and resolution. If we in this House have trouble understanding the provision this evening, I worry about the industry applying it in the future.

    8.30 p.m.

    Our position is clear; we do not mind what people agree so long as what they agree is within the terms of the Bill. The Bill does not specify binding or any other particular form of the finding being unbound. We recognise that certainly with regard to major contracts it would be surprising to find arrangements which allowed a dispute involving £1 million or £100 million to be settled in 28 days by a single individual choosing his own evidence and having no form of appeal. However, whatever is provided in the contract, most contracts provide a standard clause which states that the decision is binding until practical completion. If nothing is stated in the contract, as things stand at present adjudication will be binding. Therefore, we expect that, as the provisions stand in the Bill at present, if nothing is stated in the contract, adjudication is binding. If something is stated in the contract to make it less than totally binding, that will be acceptable so long as it is within the terms of the Bill.

    Does the Minister mean "binding" when he says that it will be binding until practical completion, or does he mean that it is an issue which will not be revisited until after practical completion, which is very different from being binding?

    No. I mean binding as in, "will be settled", and that is the end of it unless you have a dispute which can be taken to the court. That is a strictly limited category connected with errors of law and misbehaviour.

    That is where the Minister has us worried. There is confusion between adjudication and arbitration. One cannot have a situation in which the adjudicator's decision is binding and can be sorted out only on a point of law, which is what the Minister said. The adjudicator's decision must be subject to revisitation, not only on points of law but on whether he was correct in his decision in terms of the contract and the context in which the contract was carried out.

    I am sure that my noble friend is right but the problem is, what happens when there is an adjudication which is sort of binding subject to practically everything one can think of and when payments, perhaps large sums, must be made and the contract must continue according to adjudication? I would like the Minister to go through the practical circumstances. Where are the parties at that point? Are they bound by the adjudicator's decision until such time as the problem is revisited, to repeat that expression, in one form or another or are they not bound? What is the situation?

    Adjudication is a right under the Bill. In order for the adjudication to be effective, the adjudicator must be able to issue a decision. That decision must be implemented. Therefore, if the adjudicator comes to a decision, that decision will be implemented and the payments will be made. The only point at issue is whether the adjudication can be reopened at a later date, as though it had never been made, and the whole issue rejudged, or some version of it—I believe that that is what the noble Lord, Lord Berkeley, was describing and it is a common way in which such things are done—or whether that should be an end of it; it should be an adjudication verging on arbitration and something which comes to a clean end.

    The Bill does not express itself on that matter one way or another. It allows either form, or any other imaginable form, so long as it fits in with the provisions of the Bill and there is an effective arbitration. We would expect different contracts to use different forms of arbitration. The only time in which we descend into certainty is in the scheme, which provides that arbitration is binding almost as though it were arbitration, although it is not.

    I believe that my noble friend is right. He is describing what I mentioned in an earlier intervention; that the scheme for adjudication should be this quick way of resolving disputes. I believe that the noble Lord, Lord Williams, equally understands that to be the purpose of adjudication. It is the resolution of that at a later date which a contract can agree to by arbitration or by going to the court after the contract has been completed.

    It is in order for the work to flow and for the contract to continue that such arbitration is placed on the face of the Bill. If that form of adjudication is not in the contract, as my noble friend said, one must rely on the scheme for construction contracts, which is much more draconian, as I indicated. I know that it is wrong to try to muddle the words "adjudication" and "arbitration" but when I read the scheme—I found great difficulty in doing so—to my untrained mind it was almost a form of arbitration. It would be much more difficult to reopen it at a later date. The scheme is the quick resolution. If what is in the contract is what is required in the Bill, I understand that it can be reopened by arbitration after the contract has ended. However, it is not like the scheme, which would be the fall-back position.

    I do not know whether I have understood the Minister. Whether or not the adjudication is binding depends in the first instance on what is written in the contract. However, whatever is written in the contract, if it is not binding, adjudication or some other resolution of disputes cannot be opened until substantial completion, as the noble Viscount, Lord Ullswater, said. Am I correct in that interpretation?

    I shall certainly write to the noble Lord if he is wrong. I believe that he is right and I believe that an award which could be reopened immediately would not be a conclusive adjudication and would not fall within the terms of the Bill as I understand it. I shall certainly write to the noble Lord if there is any doubt about that.

    Would the Minister be good enough to copy the letter to me and to the noble Baroness, Lady Hamwee, and my noble friend Lord Howie of Troon, setting out what on earth the Government mean by the provision? I really do not understand it. I beg leave to withdraw the amendment.

    Amendment, by leave, withdrawn.

    Page 60, line 41, leave out subsection (4).

    The noble Baroness said: I had not realised that the amendment would be so topical. In moving Amendment No. 161 I shall speak also to Amendments Nos. 191, 192, 193, 194 and 197.

    Amendment No. 161 seeks to delete the reference to the Arbitration Act 1996 in Clause 105. Seeing it at that point I stumbled and wondered whether it might more appropriately appear in Clause 111. However, having listened to the previous debate, I am not sure whether it should be there at all or whether it should be there and strengthened. It may not be wise to take up much of the Committee's time pursuing that matter because underlying issues need to be resolved first.

    Amendment No. 191 in Clause 111 seeks to change the subject matter of the clause. Clause 111(1) allows the Minister to:

    "make a scheme & containing provisions about the matters referred to in the preceding provisions of this Part".

    The term "matters" appears to me to include everything that has already been referred to in this part of the Bill; for instance, Clause 101, which defines a construction contract, Clause 102, which defines construction operations, and Clause 103, which deals with the exclusion of residential construction contracts. I do not believe that it is intended to allow the Minister to rewrite those provisions, among others. I have therefore sought to define the scope of the Minister's powers more strictly to what is to be the subject of the scheme for construction contracts.

    Amendment No. 192 seeks to suggest that if the Minister is to have powers to make regulations regarding the scheme, we should at any rate address whether he should have similar powers to amend that scheme. I may be told that the clause contains a power to allow amendments, but I tabled the amendment in order to ask that question.

    Finally—and I do not believe that this contradicts what I have just said—Amendment No. 197 seeks to provide that regulations made under the section which creates a scheme should be subject to approval by resolution of both Houses of Parliament. I was grateful, as I am sure were other Members of the Committee, to see a copy of the draft scheme, which according to the accompanying letter from the Minister one might call a draft draft. He refers to it very much as a first shot, which has an appealing honesty about it and recognises the difficulties that there are in creating a satisfactory scheme.

    He says also that the Government intend to have both consultation and discussion before a statutory instrument is laid. The very complexity of the matter and its controversial nature seem to me to indicate that the affirmative resolution procedure will be appropriate.

    I take this opportunity to ask the Minister to confirm that that consultation and discussion will be the widest reasonable consultation and discussion with all sections of the industry. Perhaps he will take this opportunity to confirm that. I beg to move.

    8.45 p.m.

    I was rather surprised to find my Amendment No. 194 suddenly popping up. It has the effect of leaving out "Lord Advocate" and inserting "Secretary of State" for Scotland.

    I raised this matter on Second Reading and my reason for doing so was quite simple. I did not believe that the Lord Advocate, estimable though he may be, was quite the man to be dabbling in construction contracts. At that time, as I recall it, the noble Lord, Lord Lucas, pointed out that the Lord Advocate was chosen because he knows about arbitration.

    That did not help me very much. I know that the confusion is not as great as we thought it was, but we know that there is a confusion between arbitration and adjudication. The scheme will deal with other matters in relation to arbitration and adjudication; for example, payment and so on. I believe that the Secretary of State for Scotland, who has a department not unlike the Department of the Environment, which deals with such matters, is to be preferred to the Lord Advocate. But I leave it at that. The Government may be right. I doubt it but they may be.

    I should like to say a few words about Amendment No. 161 in the name of the noble Baroness, Lady Hamwee. That seems to me a very sound, sensible and succinct amendment. I was going to speak about this issue on the debate that the clause stand part until I noticed this amendment.

    This is where we get into difficulties. We must not forget that the intention of the Bill, which we applaud, is to help rather than hinder. That is the idea. Everything in it should tend towards helping rather than hindering. Sir Michael Latham wanted an arrangement whereby adjudication was followed by arbitration, for which we have argued constantly and which has been the practice followed in the construction industry since Brunel's time.

    Most contracts of any size are carried out under standard conditions of contract. There are quite a variety of those established by the Institution of Civil Engineers and other groups. There are standard conditions of contract under which large contracts are carried out and which would almost meet the requirements of Clause 105. They could very readily be tweaked and altered in such a way that they do meet the requirements of Clause 105. Therefore, all contracts of any size in future will be carried out under standard conditions of contract which suit the requirements of Clause 105.

    The noble Lord, Lord Lucas, is quite right that through the contracts, adjudication and arbitration arrangements will have been sorted out in the way that we have asked for. The problem is—and this point has been touched upon by the noble Viscount, Lord Ullswater—that smaller contracts may not be carried out under those standard conditions of contract. Under the provisions of subsection (4), the scheme will then apply to those contracts; but, as the noble Viscount, Lord Ullswater, said and as the noble Lord, Lord Lucas, admitted, the provisions of the scheme which hang over the whole of this part of our discussion like a very dark black cloud are more onerous than the conditions in standard conditions of contract.

    The Government are saying that, whereas large contracts will be carried out under the standard conditions of contract, small contracts will be carried out perforce under the conditions of this scheme, which are more onerous. Why hit the small contracts when a small contractor is less able to safeguard his interests than a larger contractor? I suggest that subsection (4) should most certainly go. Later I shall suggest that the scheme should go too, but perhaps this is not the time to forecast such dire pronouncements.

    We now come to a number of detailed amendments concerning the scheme for construction contracts. That is a set of provisions which will operate when a contract fails to make proper provision for a number of matters which are the subject of this Bill. It would operate where contracts do not contain adequate arrangements for adjudication or where payment arrangements were deficient in certain respects. The scheme will be made as a statutory instrument by the Secretary of State in England and Wales and the Lord Advocate in Scotland. The draft proposals for England and Wales have already been made available to your Lordships.

    Amendments Nos. 161 and 193 in the name of the noble Baroness, Lady Hamwee, would have the effect of moving the reference to arbitration law from Clause 105 to Clause 111. We know that there are some who feel that such a reference is not at all necessary, but we feel that not only is it necessary but that it also belongs rightly in the clause which deals with adjudication.

    As regards the scheme-making powers to which Amendment No. 192 refers, I assure the noble Baroness that under Section 14 of the Interpretation Act 1978, the powers to make a scheme would also confer powers to amend it from time to time using the same procedures.

    With Amendment No. 197, the noble Baroness raises the more important point of whether such powers should be made subject to the affirmative resolution procedure, which has been mentioned more than once today. I hope that Members of the Committee will agree that we have been quick to concede that, where we have not got it quite right, we are happy to make amends, and indeed amendments. I have already undertaken to return with amendments to make the powers of amendment under Clauses 102 and 103 subject to the affirmative resolution procedure.

    However, the power to make the scheme for construction contracts is somewhat different. It would not be used to amend primary legislation as it currently applies; all it would be used for is to apply and, if necessary, modify certain provisions of arbitration law which would only operate within the very limited confines of scheme adjudication. It would not amend the Arbitration Bill, or the equivalent Scottish provisions—as applied to those seeking dispute resolution through arbitration—and it is not, therefore, a Henry VIII clause, which I know always frightens everyone. I can assure the noble Baroness of that. It is right, therefore, in this respect that it should not be subject to affirmative resolution.

    The noble Baroness asked whether the consultation and discussion over the draft proposals would be in the widest form. I believe that I can assure her that that will be so. We have published the draft proposals because Members of the Committee were concerned to see the sort of proposals that we had in mind. They are draft proposals, and they have been sent out not only to Members of this place but also to others in the industry for consideration. They will let us have their views. It will then be up to the Government to produce draft proposals which will then be sent out for consultation before the appropriate statutory instrument is laid.

    I turn now to Amendment No. 194 tabled in the name of the noble Lord, Lord Howie of Troon. It seemed to surprise the noble Lord that it was on the Marshalled List or in this group of amendments. In fact, it made him jump. Of course, I do not blame him. I understand his puzzlement as to the reason why my noble and learned friend the Lord Advocate has been nominated as the Minister responsible for making the scheme for construction contracts for Scotland. I believe that we had such a discussion on Second Reading and I thought that my noble friend Lord Lucas had dealt with it as he has dealt so excellently and clearly with all the other matters raised. However, perhaps the concentration of the noble Lord was relaxed at that moment. He needs to be convinced and I shall try to do so.

    The noble Lord said that the Government may well be right. That was most generous of him. However, I happen to believe that the Government are right and the noble Lord is on the right track. Shortly put, the reason why my noble and learned friend the Lord Advocate is the appropriate Minister for the job is that he has ministerial responsibility in Scotland for dispute resolution. The Secretary of State for Scotland has no ministerial responsibility in that area. Therefore, it is entirely appropriate that my noble and learned friend should be the Minister who is to make the scheme in Scotland. I hope that that explanation is helpful and that the noble Lord will agree that my noble and learned friend the Locd Advocate is the correct person to undertake that particular responsibility.

    Yes, that explanation has helped me. In fact, it went further than I expected. It indicated the areas of responsibility upon which I was not clear. I understand that the Lord Advocate is involved in disputes, but is he also involved in payments as part of the scheme?

    If the payments are part of a dispute and disputes are the responsibility of the Lord Advocate, I presume that my noble and learned friend will be responsible for that aspect.

    In his response the Minister mentioned on at least two occasions the fact that the draft scheme—this first shot, as he described it—had been made available to Members of this Chamber. I have to advise the noble Earl that it has certainly not been made available to me. Moreover, following sight of the document by courtesy of my noble friend Lord Berkeley, I checked with the Printed Paper Office and with the Library of the House but neither department recognised the document. Therefore, could some other mechanism be found to ensure that all Members of this Chamber have sight of such documents?

    I do not believe that the situation is particularly unique; indeed, we have had other Bills recently where draft schemes have been circulated. It is possible that there is a need to devise a circulation mechanism rather like that which applies to a Green Paper or a White Paper to ensure that all Members of this place have access to the relevant documentation.

    Perhaps I may add to the questions that have been put to the Minister before he responds. Does the noble Earl have a timetable for the consultation or, at any rate, for the first stage of the process? I am not sure whether responses have been requested from the industry by a particular date. Perhaps the noble Earl can tell the Committee how he sees the process going in terms of time; and, indeed, tell us how that will fit in with the progress of the Bill. In addition, my concentration may also have been a little relaxed—to use the noble Earl's wording when replying to the noble Lord, Lord Howie of Troon—in that I am not sure whether the noble Earl responded to Amendment No. 191.

    I should like first to point out that the intervention of the noble Lord, Lord Monkswell, greatly disturbed me. It is an important document and I gave instructions that copies of it should be sent to every Member of the Committee who had spoken. I believe that my noble friend Lord Lucas signed the letters, so I do not understand what has happened. The noble Lord was either left off the mailing list, or the letter may have gone astray, which may explain why he has not received it. Instructions were also given that copies should be available in the Printed Paper Office and in the Library. I am disturbed that the noble Lord was unable to obtain a copy from those departments. As I said, I am most upset about the matter. The noble Lord should have received a copy of the document, but perhaps he will allow me to look into the matter to ascertain what happened. I hope that the noble Lord will accept my apologies for the fact that he has not been in receipt of the document.

    The noble Baroness wanted to know about the progress of consultation and the relevant dates. I believe that the results of the consultation will probably appear after Royal Assent. Clearly one has to leave a certain amount of time to allow people to react to the documents. Therefore, the response is not likely to be available all that soon.

    As regards Amendment No. 191, I should point out that this amendment would fundamentally change the nature of the Secretary of State's powers. It would mean that the provisions of the scheme could override any arrangements parties had freely entered into by contract, even where they met the statutory requirements laid down in Part II of the Bill. I believe that that would go too far. The purpose of the scheme is to supply provisions which can be used where matters are not adequately dealt with in the contract. It is not our intention to go further than is necessary to achieve the minimum statutory safeguards, as the amendments would do. That is the reason why we are not too keen on the amendment. However, I can assure the noble Baroness that her concentration was not relaxed at that moment. Indeed, I believe that my concentration was not as fine tuned as it might have been in that I failed to reply adequately to the amendment. I can only apologise for that omission.

    I am not sure that my concentration has been entirely engaged and, indeed, perhaps not my intellect. I do not really understand the Minister's response. I was trying to limit the Secretary of State's power by the amendment. However, we have debated the issues for quite a long time and I shall not, therefore, press the matter.

    9 p.m.

    I am very grateful for the Minister's helpful remarks with regard to the Lord Advocate. However, I think he helped me in an area where I did not need help at all. He said that the Lord Advocate had a significant role here because the question of payment would be part of a dispute. He will see that Part II relating to payments is not about disputes. I think I am right in saying that it is about ordinary payments in the course of the contract. Since it is not about disputes, it is none of the Lord Advocate's business and should happily be handed over to the department of the Secretary of State for Scotland.

    I know that the noble Lord, Lord Howie, is very keen on pushing this all over to the Secretary of State. He probably knows far more about Scottish law than I do, but it has its own peculiarities and idiosyncrasies and I am advised that this slots well into the responsibilities of the Lord Advocate and does not slot into the responsibilities of the Secretary of State. If the noble Lord says, "Well, there is a difference between payment and adjudication", I dare say there is, and I shall certainly look at the point, but I assumed that his argument ,was tied up with the fact that the arbitration or adjudication also depended upon payment. If it depends upon payment, or if the payment is dependent upon the result of the arbitration or adjudication, that falls within the responsibility of the Lord Advocate. I will, of course, make sure that I have not misdirected myself and have not informed the noble Lord incorrectly.

    Perhaps I could thank the Minister for his words of apology and his obviously serious intention to look into the situation of my not having received the document and its not being available to the House as he thought it should be.

    Is it sensible for Parliament to complete its consideration of this Bill and for it to be passed for Royal Assent when we do not have responses from the industry on the scheme that is being drafted? I ask the Minister whether it might be useful when circulating this draft to ask the industry for at least an interim response in time for Parliament—whether it be this House or the other House—to have in front of it a report from the Government on the industry's response to the draft scheme.

    I think the noble Lord, Lord Monkswell, is slightly confused. In order to assist people, we have provided the draft proposals for their consideration. That is not necessarily an obligation upon us but we have done it. We cannot put the substantive proposals out for consideration until the Bill is passed into law because we have no statutory right to do so. It has to be after the Royal Assent that the statutory requirement to produce the proposals for discussion is undertaken. For that reason, it would be wrong to delay this matter, because it is only with the passing of the Bill that the Government will have a statutory obligation to put the proposals out for consultation.

    I am delighted to hear that the Minister regards the power to make regulations as an obligation to consult. I do not think that is what the Bill says but I am very pleased to read it that way. I beg leave to withdraw the amendment.

    Amendment, by leave, withdrawn.

    [ Amendments Nos. 162 and 162A not moved.]

    On Question, Whether Clause 105 shall stand part of the Bill?

    I put my name to a clause stand part debate on the understanding that I fully comprehended what Clause 105 was meant to say. However, after our debates in Committee, I have at the moment no idea what Clause 105 is meant to say, nor have I any idea how that clause will appear when the Bill is finally enacted. It is rather difficult to oppose the proposal that the clause should stand part when I do not understand the clause.

    In order to assist the noble Lord, Lord Williams, in opposing this clause on a future occasion, I will certainly arrange for a letter to go to him and to others who have expressed an interest in this clause in order to put them in a better position to oppose it at Report.

    Clause 105, as amended, agreed to.

    Clause 106 [Entitlement to stage payments]:

    Page 61, line 4, after second ("to") insert ("payment by instalments,").

    The noble Earl said: Perhaps I may also speak to Amendments Nos. 165 and 169. These are grouped with Amendments Nos. 164 and 166 to 170.

    Since the Bill was published, the point has been made many times that the construction industry understands the term "stage payments" in a much narrower way than was intended by its use in Clause 106. The Bill is intended to give the right on longer contracts to payment by instalments, by stage payments, or by any other kind of periodic payment. We do not wish to restrict the right to "stage payments" only in the very specific terms understood by the industry. This was an error and we apologise for the confusion caused. I therefore commend to your Lordships Amendments Nos. 163, 165 and 169.

    As the noble Lord, Lord Williams of Elvel, will have perceived, again we have been a listening Government and have listened to the concerns of people.

    I have two amendments in this group which stand in my name, Amendments Nos. 164 and 170. I need not detain the Committee for any length of time because they are more or less in agreement with the amendments just spoken to by the noble Earl, Lord Ferrers. I welcome those amendments of his and would merely say that they would be slightly improved if my words were added to his words. Then he and I could be in greater harmony than we usually are.

    On Question, amendment agreed to.

    [ Amendment No. 164 not moved.]

    Page 61, line 4, at end insert ("or other periodic payments").

    On Question, amendment agreed to.

    Page 61, line 8, leave out second ("is") and insert ("was before the commencement of the work").

    The noble Baroness said: This amendment seeks to inquire at what stage the parties should have agreed that the duration of the work is estimated to be less than 60 days. I can envisage a situation where, when the parties start off, the work is estimated to last a particular length of time, but as it goes on it is accepted that the contract is slipping—that is understood by both parties—and therefore they may be forced to agree on how long the work is likely to continue. It is a minor point but I did not understand whether that agreement as to the duration of the work should be reached before the work starts or whether it can be reached at any time. I beg to move.

    We would not particularly wish to limit the circumstances in which parties could agree that the work would last for less than 60 days. I do not think that there appears to be much benefit to anyone in doing so. If a party were being bullied into waiving the right to periodic payment by agreeing to an unreasonably short duration, he may simply refuse to agree. In the same way an employer may secure his position by making sure that a sensible period is specified in the contract. I do not think that the amendment of the noble Baroness would be of great assistance.

    I might understand that reply if I read it when my intellect is less relaxed. I beg leave to withdraw the amendment.

    Amendment, by leave, withdrawn.

    [ Amendments Nos. 167 and 168 not moved.]

    Page 61, line 10, leave out ("stage").

    On Question, amendment agreed to.

    [ Amendment No. 170 not moved.]

    Clause 106, as amended, agreed to.

    After Clause 106, insert the following new clause—


    (". The Secretary of State shall submit a report to both Houses of Parliament within 6 months of the passing of this Act on proposals for a scheme for trust funds.").

    The noble Lord said: This is a simple probing amendment to see where we are on trust funds. As the Committee will be aware, trust funds were in some respects an essential part of the Latham Report. My understanding is that agreement has not been reached between various participants in the industry, and therefore what Sir Michael Latham proposed in his report has not come to pass. The object of my amendment is simply to ask the Government where we are at the moment on trust funds and where we might be going in the future. I beg to move.

    The concept of trust funds is contentious in the construction industry. Despite repeated efforts by senior representatives of the industry over a long period, no workable scheme has emerged which can command any agreement within the industry. If no solution has come forward by now, we can be fairly confident that none will in the foreseeable future.

    There are several problems. The first is that trust funds may fundamentally alter the cashflow of contractors in that sums of money will have to be set aside regularly to maintain and to replenish the fund, and they will therefore be unusable while they are in the fund. That is a prospect which is attractive neither to clients nor to most contractors simply because it is expensive to have considerable sums of money lying idle. The construction industry always has considerable cashflow difficulties and if one locks away a certain slice of cash into a trust fund that may exacerbate the difficulties with which businesses have to deal.

    The Government are not convinced that trust funds are consistent with well established practice in respect of insolvency. Parliament has agreed an order of creditors if a company is liquidated under the Insolvency Acts. Trust funds would change that order by ring-fencing payments owed on construction contracts from the main assets of the insolvent company. That may be very convenient for the unsecured creditors who are on construction contracts but it would be very much less acceptable to secured creditors who are claiming on a depleted stock of assets.

    I understand the reasons that people think it would be a good idea to have a trust fund. But the fact is that it would make certain sums of money unusable by the industry which is always short of money. It may create its own forms of financial difficulties to industries, and it is not acceptable by the industry as a whole. Therefore we have decided not to proceed with it.

    9.15 p.m.

    I am grateful to the noble Lord for that response. Do I understand that the Government now say that not only is there no agreement within the industry and therefore at present there cannot be any trust funds, but also that the ranking of creditors would be so destroyed by such a trust fund arrangement that the Government themselves are setting their face against trust funds even if there were an agreement in the industry?

    We are saying that we do not want to legislate on this issue unless there is agreement within the industry. One of the reasons why there is no agreement is that the industry, which is much concerned with cash flow, will find that deflecting some of its funds into a trust fund will exacerbate the problems of financial viability within the industry. We would not wish to see that happen.

    Conditions may change; an industry may find this a good thing to do. But to remove willingly, by legislation, certain sums which are applicable to various contractors and to put them to one side exacerbates rather than ameliorates the problems of the industry.

    I understand those arguments. However, the noble Earl put forward a further argument about the ranking of creditors. I understand about the ranking of creditors. If I understood the Minister correctly, he said that if trust fund arrangements were agreed certain funds would be put aside to the disadvantage of other creditors. That means that the Government are not prepared to see a trust fund arrangement even if industry were to agree. As I understood it, that is what the noble Earl said. I may have got it wrong.

    I do not believe that the noble Lord is far wrong. There are the Insolvency Act procedures. If a firm goes bust, the Insolvency Act procedures work. If one has ring-fenced a sum of money, other people would be disadvantaged.

    I know all about that. To get it absolutely clear, the Government do not want to disturb the procedure of insolvency legislation. We have to conclude that even if—it is unlikely—the industry on all sides were Lo agree that trust funds were necessary, the Government would say, "No, we cannot accept on the basis of the Insolvency Act". I fully understand. I am now clear on the subject, but I wished to have that completely and clearly on the record.

    The noble Lord keeps saying that he quite understands everything I say; I am so glad he does. He is correct that if all the industry were to say, "Yes, we want this", the Government would still have very grave reservations about introducing the provision.

    I beg leave to withdraw the amendment.

    Amendment, by leave, withdrawn.

    Clause 107 [Dates for payment]:

    Page 61, line 17, leave out ("an adequate") and insert ("a").

    The noble Baroness said: The amendment is grouped with Amendment No. 173. Amendment No. 172 seeks to delete the description "adequate" from the mechanism for determining payment. What is the test for determining whether the mechanism is adequate? Is it an objective test? If the parties agree that the mechanism is adequate, why does it have to be described as adequate? It would merely be an agreed mechanism. Does some third party determine that the mechanism is adequate or inadequate? To the extent that that third party considers it inadequate, will he impose the provisions of the scheme? I seek to ask how the mechanism will work in practice. I beg to move.

    Amendment No. 173 is grouped with Amendment No. 172 and deals with the issue of adequate mechanism. The Bill gives no description of either adequacy or mechanism. My Amendment No. 173 attempts to remedy that defect in the Bill.

    The mechanism relates to the amount of payment due and when it is due. Without defining the mechanism, the Bill lacks any objective standard that might be applied to it. Presumably the object of the clause is to ensure that at any time a party to a construction contract can establish a debt. Without such a debt being established, there is no prospect of legal action to recover outstanding moneys, and many of the proposed remedies set out in the Bill may prove ineffective.

    It is essential that the constituent elements of an adequate mechanism should be set out in legislation and not left—perhaps to the scheme, who knows? Without these elements the avoidance of payment provisions will be a simple task for any unscrupulous contractor who seeks to delay payment. The Bill should include a description at least of the elements of an adequate mechanism. My amendment attempts to set out what those might reasonably be.

    The noble Baroness was concerned about what would be considered "adequate" in a payment mechanism. A payment mechanism will be considered adequate if it is successful in determining the amount of the payments and when they become due. Some idea of adequacy is important. If the mechanism failed in either of those tasks it would be considered inadequate, and the relevant procedures in the scheme for construction contracts would apply instead.

    It would be unwise to be too prescriptive as to what constitutes adequacy. Compared to many of the payment arrangements about which we hear at the moment, simply clarifying the amount and the time of the payment is a big step forward. Other refinements would complicate matters and constrain contractual freedom.

    Amendment No. 173 tabled by the noble Lord, Lord Howie, for example, spells the matter out in fairly good detail. However, it could be taken to read that the intervals between payment should all be the same length and that payment dates should be specified in the contract. Both of those run counter to many modern payment regimes. It would also require the payee to be notified of the amount due to him before the expiry of the payment interval, and that is far too tight for many standard contracts. Such a detailed description of adequacy would need to be perfectly right to be workable, and there is no perfect answer for all types of work and all types of contract. We want to see that payment is made, that the timing is known, and how much it will be.

    I take the Minister's point about what the subject matter should be. But is he suggesting that under Clause 107(1), if the parties fail to agree, it means that the mechanism has been inadequate and therefore the scheme for construction contracts will kick in? That seemed to be the logic at the beginning of his reply to the amendment.

    I am not sure that I follow the noble Baroness quite as well as I should do. It may be that my intellectual mechanism has slowed up, too. Certainly, the parties are free to agree how long the period is to be between the date on which a sum becomes due and the final date of payment. That is in the Bill. As I understand it, the noble Baroness is concerned that, if the parties do not agree on that, this provision should operate. I believe that is so. The whole purpose of a contract is that it should include what payments are to be made and when they will be made—on the first of the month, every two months, or whatever it may be, and that people should be notified in advance of the sums of money they can expect. If the contract does not apply that provision, and if there were a dispute, this part of the Bill could come into operation.

    The Minister is making my argument for me, which means that what we are talking about is a mechanism rather than an "adequate" mechanism. I am still unclear as to how one can judge whether it is "adequate". It seems to me to he almost irrelevant. Either it is a mechanism or it is not. I shall not press the matter further at the moment. I beg leave to withdraw the amendment.

    Amendment, by leave, withdrawn.

    Page 61, leave out lines 21 and 22 and insert—

    ("(1A) The constituent elements of an adequate mechanism as set out in sub-section (1)(a) above are as follows—

  • (a) construction contracts shall specify the payment interval;
  • (b) the payment interval shall commence when any work under the contract commences;
  • (c) the due date for payment shall be the date of expiry of the payment interval;
  • (d) the final date for payment shall be stated in the construction contract; and
  • (e) contracting parties shall be advised in writing by the due date of the amount and the basis of the assessment of the payment to be made to them.").
  • The noble Lord said: The noble Earl, Lord Ferrers, may be correct in saying that Amendment No. 173 is prescriptive. So it is; that was the idea. I can see that he may not want it in the Bill. The Bill merely says an "adequate" mechanism. That is a fairly flimsy way of legislating. It refers to the scheme, and if the noble Earl remembers, we spoke a little earlier about the payment part of the scheme, which seems to have been forgotten.

    The payment part of the scheme is also flimsy. It is just feasible that the payment part of the scheme may not be thought adequate by some pettifogging Scots lawyer. A little further thought must be given to this part of the Bill. I do not intend to press the amendment and I shall not move it.

    [ Amendment No. 173 not moved.]

    Clause 107 agreed to.

    Clause 108 [ Notice of intention to withhold payment]:

    Page 61, line 40, leave out ("award") and insert ("decision of the adjudicator").

    The noble Lord said: Amendments Nos. 174 and 175 are small amendments but they are quite clear as to their meaning, and I hope that they will be acceptable.

    The amendments are identical and both leave out the word "award". That is a term applied to an award by an arbitrator. Instead, the amendments insert "decision of the adjudicator". That clarifies the distinction between arbitration and adjudication which bedevils this part of the Bill and has caused some unseemly discussion in this Chamber. I hope the Minister will accept these simple and direct amendments. I beg to move.

    It is always tempting, when the noble Lord says "I hope that the Government will be able to consider this simple amendment", to do so. We always consider simple amendments, as well as difficult ones.

    It is clear that the noble Lord, Lord Howie, is sensitive to the word "award" which I suspect he identifies chiefly with arbitration proceedings. It is true that the word has particular associations with arbitrators, but of course they do not enjoy a monopoly over the word. It is also frequently used in connection with other decisions, particularly where money is involved. Subsection (4) of Clause 108, where it appears, is concerned entirely with payment.

    I do not believe that the word "award" is inappropriate and the alternative suggestion does not serve so well. However, I am happy to consider the matter again to see whether we have got the right wording. If the noble Lord will be content with that, I shall ensure that that is done.

    I am content and I sincerely hope that the noble Lord's consideration will bear fruit in due course. I beg leave to withdraw the amendment.

    Amendment, by leave, withdrawn.

    [ Amendment No. 175 not moved.]

    Clause 108 agreed to.

    Clause 109 [ Right to suspend performance for non-payment]:

    Page 62, line 15, at end insert—

    ("( ) Payment made under this Part shall be without prejudice to any right of the party making payment to claim repayment or compensation, or both, pursuant to the Scheme for Construction Contracts.").

    The noble Baroness said: I do not think it would be fruitful to pursue this matter before seeing the explanation of the workings which we were promised earlier this evening. That being so, I shall not move the amendment.

    [ Amendment No. 176 not moved.]

    9.30 p.m.

    Page 62, line 16, at beginning insert ("Subject to subsection (5)").

    The noble Lord said: Amendment No. 177 goes hand in hand with, and paves the way for, Amendment No. 181. As drafted, the Bill appears to assume an immediate resumption of work when work has been properly stopped following a suspension. That level of rough justice is too rough, even for the construction industry. The duration of the suspension may be easily definable but provision has to be made to cover time lost and costs incurred in demobilisation of plant and staff and then remobilisation at a later period, or perhaps, if there is an extension of time, changing from summer working to winter working, where the costs may very well be quite different. The defaulting party in this matter should be responsible for the time and for the costs. I beg to move.

    The two significant new elements here are further extensions of contractual time limits to allow for disruption and the idea that costs should be recoverable against a defaulting party. The provisions of Clause 109 permit the suspension of work but they are not intended to encourage it. Suspension should always be a last resort where one party has refused payment and has failed to give effective notice of doing so or where he has refused to comply with an adjudicator's award. If suspension happened in other circumstances, we would always expect the remaining parties to pursue their claims vigorously.

    Since legitimate suspension should only occur where conflict is serious, there are dangers in making it too easy for parties to add further elements to the dispute. Extending contractual time limits by the period of suspension might be relatively straightforward but adding further periods for consequential delays and disruption is unlikely to be a simple matter. We would not wish to stop parties pursuing extensions of time or indeed the recovery of costs if they made proper provision for that in their contract. But that is a very different matter from giving them a statutory right in those circumstances which might encourage suspension in cases where it would be by no means easy to work out the full consequences. That could lead to further litigation, the very thing which we are trying to avoid. I hope the noble Lord will realise that, although his amendment may be well intentioned, it would lead to more complications than if it were not in the Bill.

    There is a difficulty in this situation and I suggest that one should look at the matter from the other direction. The assumption is that if someone does not pay, the contractor has a right to stop work. But what would happen if one party wanted to delay the contract and cause difficulties for the other party'? Under this clause virtually the only recourse is to stop work. That stopping of work might put the contractor into difficulties, which might be exactly what the first party wants. We need to be careful about viewing from one perspective. I suspect that that is what my noble friend Lord Howie of Troon is getting at in his amendment.

    I did not have anything quite so Machiavellian in mind, though it is extremely interesting to have it put there by my noble friend. The noble Earl is overlooking the point that, while extensions of time are quite proper and occur frequently, they have consequential knock-on effects. It is those consequential knock-on effects with which I am hoping to deal in this amendment.

    The consequential effects may be consequential on other parties. The stoppage of time of one contractor may produce adverse conditions for a sub-contractor or even a later sub-contractor, perhaps throwing him from summer working into winter working. That is easily the most obvious example of what I have in mind. I am sure that the Minister will pay close attention to my comments when he reads Hansard, as he always does. I beg leave to withdraw the amendment.

    Amendment, by leave, withdrawn.

    Page 62, line 17, after ("computing") insert ("for the purposes of").

    The noble Earl said: In moving this amendment I shall speak to Amendments Nos. 179 and 180. I admit at the outset that Clause 109(4) is somewhat ambiguous. Our intention was to make sure that where suspension had been properly conducted any contractual time limits, such as for the purpose of incurring penalties or winning bonuses, would be extended by the period of suspension. Several experts have pointed out to us that the clause can he react differently. The amendments which I have laid are designed to rectify that situation. I hope that they will meet with the approval of the Committee. I beg to move.

    On Question, amendment agreed to.

    Page 62, line 18, leave out ("for the completion") and insert ("the time taken").

    Page 62, line 19, leave out first ("or) and insert ("to complete").

    On Question, amendments agreed to.

    [ Amendment No. 181 not moved.]

    On Question, Whether Clause 109, as amended, shall stand part of the Bill?

    Before we leave Clause 109, I am advised by the Law Society of Scotland that it is of the view that the clause has no useful place in Scots law in view of the common law of retention and the law of unjustified enrichment which applies in Scotland. I sometimes wish that we had the law of unjustified enrichment in England and Wales.

    The noble Lord, Lord Williams of Elvel, is remarkably knowledgeable about many things. Before coming to this Committee stage I briefed myself on a number of matters but I have not done so on unjustified enrichment. I am sure that. I am rich in intellectual knowledge and that is about as far as it goes, and that does not go very far anyhow. I shall certainly look at the point and consider who is justified and who is not as regards enrichment. I shall ensure that that point is considered before the next stage of the Bill.

    Clause 109, as amended, agreed to.

    Clause 110 [Prohibition of conditional payment provisions]:

    Page 62, line 23, leave out subsections (1) to (5) and insert—

    ("(1) Any provision in a contract whereby payment to a party who is required to provide construction work is dependent on payment being made by some other person is void.").

    The noble Lord said: This amendment leaves out a very large part of Clause 110 and may seem somewhat severe for that reason. I shall explain why. The clause is unclear because it mixes the problems of insolvency with those of payment where no insolvency occurs. These are two separate conditions and they should be kept separate.

    The main contractor can defend himself against insolvency. He should not attempt to recoup his costs from the subcontractor or from a number of them. As always, the devil is in the detail and the detail here is how the subcontractor is to know when or if the main contractor has been paid. The subcontractor is entitled to be paid for the work he has done whether or not the main contractor has been paid for the work he has done.

    I know that the big contractors do not care for this amendment and they have a problem. Insolvency is a serious matter and if it is to be dealt with in the Bill, as it probably should be, this is not the place to do it. The Bill should leave payment and insolvency as separate matters. The clause should be split in two to indicate that it deals with two quite separate and disparate matters. I beg to move.

    I remind the Committee that if Amendment No. 182 is agreed to it will not be possible to move Amendments Nos. 183 to 189.

    My noble friend's Amendment No. 182 is grouped with Amendments Nos. 185 to 189. Referring to Amendment No. 185, my noble friend has rightly pointed out the problems of the insolvency provisions in Clause 110. I accept that it is an extremely difficult and complicated matter. As drafted, the difficulty with the Bill is that sub-contractors and sub-sub-contractors down the line may well suffer undeservedly if the contract between the main contractor and his client cannot be fulfilled. This was the purpose of the trust funds originally proposed by Sir Michael Latham in his report. I understand what has been said about trust funds, but there is a problem about insolvency. I agree that this matter is subject to the insolvency Act, but I believe that my noble friend has a serious point in arguing that the matter should be thought through more carefully. For instance, if there is a case of insolvency it may be sensible for the insolvency practitioner—the receiver or whoever winds up the company—to be required to allocate certain funds as a matter of prior credit, rather than unsecured low-ranking credit, to the sub-sub-sub-contractors down the line. This may require an amendment to the insolvency Act. I do not believe that the Bill has yet got it right. I do not have a ready-made solution to the problem, but I believe that it has to be thought about again.

    As far as concerns Amendment No. 189, I have always believed that subordinate clauses should contain verbs. This particular subordinated clause has no verb and my amendment proposes to insert one.

    I should like to speak to the amendment moved by the noble Lord, Lord Howie of Troon, and the amendment spoken to by the noble Lord, Lord Williams of Elvel. In so doing, I should like to speak also to Government Amendments Nos. 186 to 188. The most substantial of the amendments are Amendments Nos. 182 and 185. They stem from a desire to abolish completely the effectiveness of pay-when-paid and pay-if-paid clauses when they appear in contracts. I have much sympathy with this. We are already going a long way to rid the industry of the wholesale application of such measures.

    Nevertheless, there appear to be limited circumstances where, if parties have agreed to a pay-when-paid clause in a contract, it should be effective. Such circumstances are, fortunately, not only limited but very rare. I refer to the situation where payment at the top of the chain is withheld by reason of a party's involvency. If parties have signed up to a contract where such an event is enough to defer payments lower down the chain, we believe that the relevant provisions should he honoured. Risk-sharing is not uncommon in the construction industry. Parties regularly make contracts where risk is a consideration; and risk is also a factor of business life. While it is likely that many smaller contractors may be persuaded to bear some risk in order to win a contract, that is not necessarily a bad thing. At least under the arrangements that we propose here it will be impossible to enforce pay-when-paid unless it is clearly part of the contract.

    At the moment we believe that many larger contractors simply use the excuse that they have not yet been paid in quite unjustified situations and without any contractual basis. Such practices must cease. Perhaps I should also add that in agreeing that a pay-when-paid clause may operate in the event of insolvency, a party would not be signing away all rights to payment. It would merely mean that the insolvency rules operate in the normal way, and the parties would have to recover their money accordingly. I hope that I have said enough to persuade both noble Lords respectively to withdraw or not move their amendments.

    Amendment No. 186 in the name of my noble friend Lord Ferrers is in a similar category. Part III of the Insolvency Act 1986 refers to a "receiver or manager" and it is right that Clause 110(2)(b) follows the same wording.

    Amendments Nos. 187 and 188 are intended to clarify the criteria for insolvency used here. Chapter I of Part III of the Insolvency Act 1986, which applies to England and Wales, largely supplies the wording used in subsection (2)(b). Chapter II, which applies in Scotland, refers to the appointment of a "receiver". These amendments are required to leave no doubt that such an event would qualify as insolvency under the terms of Clause 110. I hope that Amendments Nos. 186, 187 and 188 will meet with the Committee's approval.

    I hope that the noble Lord, Lord Williams, will feel able to move Amendment No. 189 when we reach it, not least because my noble friend Lord Ferrers has some particular comments that he would like to make on it.

    9.45 p.m.

    I should like to make a few comments in support of the suggestion made by my noble friend Lord Howie that the pay-when-paid clause should be separated from the pay-when-paid insolvency clause. Even with the amendment to line 25 which changes "void" into "ineffective", to me it reads that pay-when-paid clauses are ineffective unless the third party has gone into liquidation. The insertion of a full-stop there and a new paragraph might help. I believe that the intention is that the pay-when-paid clauses should be ineffective, "full-stop". We should then go on to talk about what happens when the third party becomes insolvent.

    I confess to being somewhat reassured by the comments of the noble Lord, Lord Lucas. He seems to be apprised of the dangers of pay-when-paid and all such things. I strongly welcome the remarks of my noble friend Lord Berkeley who supported my belief that the issue of payment as a whole should be considered separately from payment in conditions of insolvency. However, we have reached that point in the Bill when what I shall do is look carefully in Hansard at what the noble Lord, Lord Lucas, said, and see what happens when we come to the Report stage. In the meantime, I beg leave to withdraw the amendment.

    Amendment, by leave, withdrawn.

    Page 62, line 25, leave out ("void") and insert ("ineffective").

    The noble Earl said: I shall speak also to Amendments Nos. 184 and 190. Amendments Nos. 183 and 190, and Amendment No. 184 tabled by the noble Lord, Lord Williams—I beg the noble Lord's pardon for suggesting that I will move it, because that is for him to do—are all concerned with the word "void" as it appears in Clause 110.

    I understand that the clause is a problem in Scotland. I have no doubt that the noble Lord, Lord Williams, has been told that by—who else but the Law Society of Scotland. I gather it causes a problem where a contractual clause cannot become void. It is either void from the start or it is not. The meaning that we intended to convey here is ineffective. My Amendments Nos. 183 and 190 would make that substitution and so rectify the position.

    The noble Lord wishes to put in the word "unenforceable". I dare say that there is not much to choose between the two words. One might say that it was six of one and half a dozen of the other; but in this case I believe that it is seven of one and five of the other because we have our amendment down in two places and the noble Lord has his amendment down in only one place. I beg to move.

    Just because the amendment is down twice does not mean to say that it is right. It is twice wrong.

    The noble Earl is right. I have been advised by the Law Society of Scotland. But it is generally true, not only in Scotland but in England and Wales and probably Northern Ireland too (though I do not know about Northern Ireland), that a statutory provision cannot make a contractual provision void but at the same time impart efficacy to those conditions in certain circumstances.

    A void term or condition is void ab initio and is merely an apparent condition; but in fact once it is declared void it has no legal existence or effect. Using the word "ineffective" does not seem to me to solve the problem entirely. I am advised that the word "unenforceable" is the right word, not only in Scotland but elsewhere.

    I leave the matter at that. It is for the noble Earl to reconsider whether the Law Society of Scotland is right, the Scottish Office is right or I am right.

    Is the Minister suggesting that if Members of the Committee put every amendment down three or four times, they would win the point?

    I was merely trying to point out that the noble Lord, Lord Williams, for once was lacking his normal perspicacity because he had not realised that it was necessary to put the amendment down twice and had put it down only once. If the argument against using the word "void" once is wrong and holds water, then the argument for putting the amendment down twice equally holds water. I believe that the noble Lord made an error in putting down his amendment once. That is why I thought that we had scored some Brownie points by putting it down twice.

    Of course, I shall consider the words of the noble Lord, put forward as they were with the authority of the Law Society of Scotland. I do not suppose there is a great deal of water between the two words, if one can put such a thing between two words, but we all know what we intend. I shall certainly look again at the matter.

    On Question, amendment agreed to.

    [ Amendments Nos. 184 and 185 nor moved.]

    Page 62, line 31, leave out ("and") and insert ("or").

    Page 62, line 32, after ("under") insert ("Chapter I of").

    Page 62, line 32, at end insert (" or the appointment of a receiver under Chapter II of that Part,").

    The noble Lord said: I spoke to these amendments with Amendment No. 182. I beg to move the three amendments en bloc.

    On Question, amendments agreed to.

    Page 63, line 2, after ("he") insert ("grants").

    The noble Lord said: I have spoken to this amendment. I beg to move.

    When I saw this amendment, I could not think why the noble Lord had tabled it. I could not believe that it was necessary. I was not sure whether it was a frivolous amendment, a probing amendment or that he was just trying to be unusually awkward—I did not believe that that was likely because the noble Lord is not usually awkward. But I wondered whether I should come up with an unusually robust response.

    I know that the noble Lord is an assiduous reader of Bills. I commend him on that. All of a sudden the light at Damascus hit me and I realised that there was a mistake and the noble Lord, Lord Williams, had found the mistake. I congratulate him on that. If I were to write a report on the noble Lord, rather like a headmaster at the end of the term I would say that he concentrated, was industrious and was sometimes right. On this occasion the noble Lord is right and I am happy to accept his amendment.

    On Question, amendment agreed to.

    Page 63, line 7, leave Out ("void") and insert ("ineffective").

    On Question, amendment agreed to.

    Clause 110, as amended, agreed to.

    Clause 111 [ The Scheme for Construction Contracts]:

    [ Amendments Nos. 191 to 195 not moved.]

    Page 63, line 19, at end insert—

    ("( ) Where any provisions of the Scheme for Construction Contracts apply by virtue of this Part in default of contractual provision agreed by the parties, they have effect as implied terms of the contract concerned.").

    The noble Earl said: The amendment aims to ensure that where the scheme for construction contracts operates, the relevant provisions will become an implied term of the contract concerned. That simply means that if the scheme's provisions are used they will have the same force as though they were written into the contract in the first place and parties may rely on them in the same way. That had been intended from the outset and we believe that an amendment is required in order to leave no doubt about the matter. I beg to move.

    On Question, amendment agreed to.

    [ Amendment No. 197 not moved.]

    On Question, Whether Clause 111, as amended, shall stand part of the Bill?

    When my noble friend Lord Williams and I recently visited the Minister, I said that I was tempted to place the draft scheme as an amendment to the Bill in the form of a schedule. My reason for doing so was to give the Committee an opportunity to discuss the scheme and possibly to amend it. I promptly realised that the noble Earl did not fancy that idea at all. Being the kind of person I am, I revised my opinion. Instead of tabling the scheme as an amendment, I decided with my noble friend Lord Williams to oppose the Question that Clause 111 shall stand part of the Bill.

    Much of what I am about to say covers old ground over which we have trawled once or twice today. However, it is none the worse for that and it is worth repeating. We have all agreed that the draft scheme is more draconian than the ordinary contract. It is also much closer to arbitration than it is to adjudication. The reason for that is simple. So far as I can see, parts of this scheme have been lifted wholesale from the Arbitration Bill and shoved into the scheme. That is a convenient way of doing things. Just as the Government plagiarised the tax Bill for Clause 102, so they plagiarised bits of the Arbitration Bill for the scheme.

    The difficulty with the scheme, which is more draconian than other arrangements, is that it will apply only to small contracts—the large contracts will operate under the standard conditions of contracts—and relatively informal contracts such as those not in writing. That is because the normal standard contracts will have been adjusted and amended to suit the requirements of Clause 102. For that reason, the weight of the scheme will hear most heavily on the small contractors and the small contracts and therefore the people least able to look after their own interests.

    This is not the place to try to amend the scheme but the Bill should make clear, probably in Clause 29, that the adjudicator is not an arbitrator—and I repeat "not". I believe that the scheme is misconceived because it creates a final and binding arbitration with unreal time constraints instead of a quick enforceable decision which might be described, and has been described, as "pay now, argue later".

    Clause 36 of the scheme seems to suspend the timetable while a court deals with the points of law. Again, that is part of an arbitration process and not an adjudication process. It also destroys entirely the idea of the quick fix which adjudication is intended to provide and which was, it will be recalled, the intention of Sir Michael Latham in his report.

    The scheme is far too long. It takes several pages to appoint an adjudicator, quite apart from anything else. If one looks at the ICE sixth edition of the Standard Conditions of Contract, it can be seen that it covers the whole gamut of design, construction, contract management, payment, dispute settlements and much more in only 71 clauses with conciliation, which is much the same as adjudication, in one single subsection of 14 lines of text.

    The scheme takes 66 clauses to do what the Institution of Civil Engineers does in 14 lines. And we know that many more contracts will he carried out under the sixth edition than under the scheme.

    The scheme was no doubt conceived with the best intentions but it is really a monster. The Government should think again and withdraw it. I oppose the Motion that Clause 111 shall stand part of the Bill.

    10 p.m.

    I also oppose the Motion that Clause 111 shall stand part of the Bill for similar reasons to those given by my noble friend Lord Howie. From what we have seen so far of the scheme, it is complex, difficult to understand, confuses arbitration and adjudication, has far too many clauses, and needs serious pruning if it is to make any sense.

    The idea that any scheme such as the draft that we have seen should be put into regulations is monstrous. As my noble friend said, at one point we had intended to table the scheme in draft as a new schedule to the Bill. That would have provided an opportunity to discuss it. Under the procedures of the House, it would have been possible to amend the new proposed schedule which would have enabled us to have a debate at least on some of the major points. But the more we thought about it, the more we decided that if we followed that procedure it would take up the time of this Committee not only for the whole of this evening and possibly the night but also tomorrow. We did not feel that my noble friend the Opposition Chief Whip would thank us very much if we went on through the night discussing the scheme in relation to construction contracts.

    I know that the scheme is in draft but in its present form it is a bad document. In many cases it is also irrelevant because it addresses only certain points which obviously need to be addressed. But there are many matters which the scheme should cover. When we discuss the regulations—and I shall ask the Minister what he intends to do about such regulations—we shall make many suggestions. Unfortunately, when regulations come forward, they are in the form of a statutory instrument which we are not able to amend.

    My noble friend and I oppose the clause because we believe that the scheme is inefficient in what it sets out to do. It needs serious amendment. I hope that the result of the consultation process, which is taking place at present, will be serious amendment so that when the scheme comes forward in the form of regulations it is a sensible instrument of law.

    I support the remarks made by my noble friends Lord Howie of Troon and Lord Williams of Elvel and should like to make a few comments on the scheme for construction contracts. Perhaps it may be useful for Members of the Committee to imagine themselves in the position of a small or medium sized contractor who has heard about the adjudication procedure. He may decide to have a go at it, but will wonder whether he can do so without lawyers. He asks himself, "Can I go through this one or two month procedure without the benefit of lawyers?"

    However, such a contractor will be faced with 10 to 12 pages of documentation. When he gets to Clause 61 of the scheme which states:
    "Powers of the court in relation to an award … In such cases … the Arbitration Bill shall apply",
    he will be completely lost. I share the view expressed by my noble friends that the scheme needs to be completely rewritten, bearing in mind how such a contractor would feel when faced with such wording.

    It is impossible for me to comment on the contents of the scheme because I have not as yet seen or read it; indeed, we have already discussed that point. However, as my noble friend Lord Williams of Elvel alluded to the mechanism of inserting the scheme on the Marshalled List by way of an amendment which could then in turn be amended, perhaps I may make a suggestion. It relates to the facility that exists to circulate documentation to all Members of this Chamber—that is, not only those who have taken part in the Second Reading debate and who have, therefore, identified their interest in a particular subject, but all Members who receive the regular paper distribution.

    In the future, when the Government have such a draft scheme that they wish to present to Parliament, although not necessarily to be written into legislation, would they consider putting down what one might describe as a shadow government amendment? That would then be available for Members of this Chamber to study with the understanding that, at a later stage of the proceedings on the Bill, it would effectively be deleted by an amendment.

    I am most grateful to the noble Lord, Lord Howie, for giving notice of his intention to discuss clause stand part, even though he said that he did not agree with it. He is perfectly right; indeed, he did say that he was considering tabling all the draft proposals as an amendment. I told him, in the safest language, that that could be described as bumping along the bottom. Although they may not have been the words that I used when I spoke to the noble Lord, that was in fact what I had in mind.

    It is quite difficult sometimes to assuage the desires of Members of this Chamber. We have this scheme in the Bill and if such a provision is in the Bill, then it is perfectly clear that we are going to make proposals. Noble Lords may ask what the proposals will be and whether they can have sight of them before the Committee stage. We then try to send out some draft proposals, but as soon as we do so some noble Lords seek to include them in amendments. I do not know how one can have an amendment relating to draft proposals when the Bill is concerned with making something into law. Nevertheless, I am glad that the noble Lord, Lord Howie of Troon, took my advice and did not table the proposals as an amendment.

    The noble Lord, Lord Monkswell, asked if we could have a shadow government amendment. Quite frankly, I do not see how one could have such an amendment which would later be removed. In fact, we have a Bill which is likely to become an Act of Parliament. One does not put into such Acts proposals and provisions which will not ultimately form part of the legislative vehicle.

    Perhaps I may reassure noble Lords who are worried about that. I believe that we sometimes lose sight of the main objective. The Government's intention throughout the whole of Part II of the Bill is to enable contracting parties—and, indeed, to encourage them—to include adequate adjudication and payment arrangements in their contracts. The reason for all the trouble previously was that people had not done so. I see that the noble Lord wishes to intervene. I give way.

    I am sorry to intervene at what is perhaps an inopportune moment. However, the Bill as published has an "Explanatory and Financial Memorandum" attached to it which seeks to explain its background, but which will not form part of the Act when it receives Royal Assent. We already have a mechanism and it may simply be a question of extending it.

    There are historical reasons for having financial memoranda. I do not think one could suggest that putting this kind of provision in a Bill would equate with a financial memorandum.

    The point that I and my noble friend were making was that it was well within the procedures of this House not to put the draft into the Bill as a schedule but to put it down as a probing amendment and to amend the probing amendment in order to express our views on particular clauses in the draft scheme. For various reasons, my noble friend and I have decided not to adopt that procedure. That is not trying to put it into the Bill; it is trying to find a mechanism to enable this Committee to focus discussion on particular points in what we regard as a defective scheme.

    I entirely see that. What I was endeavouring to do—obviously unsuccessfully—was to congratulate the noble Lord, Lord Howie, and the noble Lord, Lord Williams of Elvel, on having taken what I consider the right course to move that the clause should not stand part of the Bill.

    The reason we wanted the clause in the Bill in the first place was that for many years the trouble has existed in the industry that people do not pay their bills. It is in everyone's interests that people should pay their bills and that others should receive payment for what they have done. We want them to include in their own contracts sufficient details about this. When there is a dispute between two parties who have not put that provision in their contract, there will be something statutory to fall back upon. It is for that reason that we have this clause in the Bill, and I think it is right.

    The noble Lord, Lord Howie, said that it is a monster. That is not a very attractive word for a nice piece of drafting. I will certainly see that the matter is considered.

    I am distressed. I understand that the paper is not in the Printed Paper Office and I can understand the frustration of the noble Lord, Lord Monkswell. It will be discussed throughout the industry and comments will be made on the draft proposals. It is upon the comments on the draft proposals that we shall provide the proposals, which will themselves be available for consultation. I believe it is important to do this because, if we do not have something in law to help when there is a dispute, people will not be paid. I think the noble Lord, Lord Howie, said that these proposals were more draconian than the terms that appeared in normal contracts. If that is the case, that in itself will encourage people to put similar or appropriate provisions in their own contracts. If the scheme achieves that, it will have achieved quite a lot.

    I hope your Lordships will agree that this is an important clause. Even if your Lordships do not approve of all the details of the draft proposals—and we shall have to see whether other people approve of them—the principle of having a position as a matter of law when people have not included appropriate details in their own contracts is, I believe, a good thing and will encourage people to ensure that their contracts are correct. I hope your Lordships will agree that this should remain part of the Bill.

    10.15 p.m.

    "Draconian" was not my word, although I quoted it. It was used by the noble Lord, Lord Lucas, and also by the noble Viscount, Lord Ullswater, earlier in our discussions on the Bill. They were certainly correct in doing that. I followed their extremely good example in describing the draft, as I understood it. I am a little confused because the noble Earl congratulated me at one moment—which I enjoyed, as usual—but a little earlier he said that I was humping along the bottom. I did not quite know what that meant because it does not come within my usual vocabulary. However, I did not think it was intended to be totally complimentary.

    There is no procedural reason of any kind whatsoever why the draft scheme should not have been put down as a schedule to the Bill to enable it to he fully discussed, and possibly amended. When we discussed this matter at the Ministry I gave the Minister examples of precedents where exactly this kind of thing had been done. There is nothing wrong with it at all. I know that he was a little alarmed about it because he did not want the scheme to be discussed or amended. I can see why that is the case because it barely existed. However, it is wrong that we should pass a Bill, an important part of which comprises a scheme which we cannot discuss and amend. That is wrong. I know that there are procedures which make it permissible, but that does not make it right. This is not the way to go about this matter.

    The scheme should be included in the Bill as a schedule, preferably put down by the Government at a later stage, so that we can discuss it and amend it. As my noble friend Lord Williams said, if the scheme is introduced by means of regulation, we can discuss it right enough, and we can talk about it all night, but that is all we can do. We cannot amend it and we cannot change it, regardless of what advice we receive from the people to whom we talk. I do not think that Clause 111 should remain in the Bill. The Government have made a mistake and the clause should not stand part of the Bill.

    The noble Earl is quite right that many noble Lords said on Second Reading that we could not really discuss this Bill properly without having a copy of a draft scheme. We have been given the draft scheme, but what worries me is that—I believe it was in response to a question from the noble Baroness, Lady Hamwee—the Minister said that the consultation would be open until after the Bill receives Royal Assent. As this matter has already been discussed within the industry, I am fearful as regards what those in the industry will say to us who have been debating it, even before Report stage. I think they will crucify this scheme. We shall obtain a reaction from the industry and no doubt we shall have an opportunity to talk about that. But I wonder whether there is not a way of reconsidering this scheme, and perhaps having several rounds of consultation, if it is not possible to do what the noble Lord, Lord Howie, has suggested.

    I was glad when the noble Lord, Lord Howie, said that he enjoyed being congratulated. I enjoyed congratulating him. He was quite right to say that he had not heard the expression "bumping along the bottom". I believe it is an expression that sailors sometimes use when they think that their craft is not working as well as it should. In the days when they sailed boats and something went wrong, they humped along the bottom. I was suggesting that if the draft proposals had been included in the Bill we would have been humping along the bottom and that it was much better to discuss the matter under the Question of whether the clause should stand part of the Bill.

    It was not a matter of my not wanting to discuss the proposals. The noble Lord wags his finger at me as if I am a sort of wicked old master, but I can tell him that the proposals are available to he discussed. However, what we do not want to do, as has been suggested, is to include them even in a schedule and set them in stone. What we want to do is to have in the Bill the format as it is in this clause and then put in draft proposals on how we think that should he interpreted. We go out to people and say, "This is the way in which we think that this part of the clause which Parliament is in the process of approving should be carried out; and do you agree?"

    The statutory details are in the clause and not in the draft proposals. There is a duty to consult in the Bill. That can only become effective on Royal Assent. Therefore, however much we consult before Royal Assent, we still have to consult afterwards. Therefore the final version could not be in the Bill.

    I hope that I can persuade the noble Lord, Lord Howie. I find it somewhat difficult to persuade him when he sets his mind on something. However, I assure him that we want to consult. We want to ensure that the legal process, the statutory wording, is correct. There is nothing new here. One has the statute saying one thing, and then the guidance or codes of practice putting the statute into effect—the flesh on the bones, as it were. That is what we do here. We are undertaking quite a lot of consultation on the issue.

    It is not that we wish to bounce anyone. We do not wish to place draconian measures on anyone. We want some form of background so that when there is a dispute, if people have been unwise enough not to include in their contract some form of resolution of disputes, they can fall back on this part of the Bill. I hope that I have persuaded the noble Lord, Lord Howie, even if somewhat reluctantly, to accept that this is the right clause to have in the Bill.

    I am no more set in my ways than is the noble Earl. However, my objection to the procedure is quite simple. The way in which the Government have gone about the matter evades proper parliamentary scrutiny. That is what is wrong with it. I do not believe that it is the right way to go about parliamentary business.

    10.22 p.m.

    On Question, Whether Clause 111, as amended, shall stand part of the Bill?

    Their Lordships divided: Contents, 13; Not-Contents, 9.

    Division No. 1


    Annaly, L.Mackay of Ardbrecknish, L
    Blatch, B.Mackay of Clashfern, L. [Lord Chancellor.]
    Caithness, E.
    Chesham, L. [Teller.]Norton, L.
    Ferrers, E.Skelmersdale, L.
    Howe, E.Strathclyde, L. [Teller.]
    Lucas, L.Wynford, L.


    Berkeley, L.Howie of Troon, L.
    Cocks of Hartcliffe, L.Monkswell, L.
    Dubs, L. [Teller.]Rodgers of Quarry Bank, L.
    Graham of Edmonton, L [Teller]Williams of Elvel, L.
    Hamwee, B.

    10.30 p.m.

    As it appears that fewer than 30 Lords have voted, in accordance with Standing Order No. 55 I declare the Question not decided and, pursuant to the standing order, the House will now resume.

    House resumed.

    My Lords, I beg to move that the House do now adjourn.

    Moved, That the House do now adjourn.—(Lord Strathclyde.)

    My Lords, we have an almost unprecedented situation where the Government have not achieved success in what may be described as a small part of the Bill. I am wondering how they will react. Perhaps I may make a suggestion as to how the Government might recoup the day in the eyes of the House.

    It seems to me that there are two issues. One is the substantive question itself, which is that Clause 111 should stand part of the Bill. There was an extensive debate about the inadequacy of the scheme referred to in the Bill, but also about the lack of facility for Members of your Lordships' House to have sight of the scheme. A number of suggestions were made as to how the Government could ensure that the text of the draft scheme was put in front of your Lordships so that every noble Lord had access to it. The Government initially, prior to the current situation, appeared to suggest that they would not entertain any of the mechanisms to ensure that your Lordships' House was fully apprised of the scheme. We hope that the Government can give us a response at this point as to how they envisage the House having in front of it the scheme under discussion. That is the first substantive point.

    The second substantive point is a situation which is almost unprecedented; at least it is very rare. The Government have effectively lost further consideration of the business in front of the House because there were insufficient Members present. It is only 10.33 p.m., which is not a late hour for the House. The House has on other occasions sat well after midnight with a goodly attendance. The question arises whether the Government have effectively either felt that the Bill was not worthy of their maintaining sufficient numbers to ensure that they could carry it through or, because of this stage in the Government's lifecycle, there is a tiredness on the Government Benches to support them.

    It would be useful if the Government could give some indication of how they explain themselves in this situation, so that the House, at some later stage or even tonight, can consider that and respond accordingly.

    My Lords, I am grateful to the noble Lord the Chief Whip for moving the adjournment of the House. As I understand it, our standing orders are such that, if there is no quorum in the Lobbies in a Division, the House must adjourn. However, as I understand it, the business that is unresolved at that point comes up as the first business on the next convenient day. I should he grateful if the noble Lord the Chief Whip could confirm my understanding of standing orders and the conventions relating to standing orders in the Companion. I very much hope that the noble Lord will be able to explain that my understanding is correct.

    I also hope that the Chief Whip can confirm that it is up to the Government to keep a House and that it is up to the Government to ensure that enough people are around, in whatever part of the Palace may be appropriate, for the House to continue to operate as a House of Parliament. I hope very much that nothing we have achieved this evening, or nothing we have not achieved this evening, will derogate from that basic principle.

    My Lords, there will be 30,000 very disappointed registered architects tonight. They all believed that by the end of the day Part III of the Bill would have passed its Committee stage. As the noble Lord, Lord Williams, made clear, the responsibility lies with the Government Chief Whip. That should be fully understood.

    It has crossed my mind that it might be appropriate, even at this late hour, not of course, because it would not be permitted, to move the six amendments which stand in my name, but at least to make the speeches that I intended to make. Then there would be some reassurance to all those 30,000 registered architects that whatever the shortcomings of Part III of the Bill it has many virtues too. That is what I principally intended to say.

    I am delighted that the Government have included in the Bill, though it is something of a rag-bag, provisions for the future registration of architects. Indeed, Part III is the most important legislation that the registered architect in this country has experienced for 60 years. That is another reason why there will be great disappointment about what happened this evening.

    I also believe that the important matters raised on Part II were worthy of greater consideration. I know that the noble Lord, Lord Howie of Troon, showed great restraint in not arguing more strongly and at greater length for the very many important points that he made.

    I come back to what the noble Lord, Lord Williams, said in asking when we shall return to these matters. There is provision for further proceedings on Monday, but, as I understand it, that time was restricted to half the day. It would be helpful to know from the Government Chief Whip whether that time will now be extended to a full day and whether, because we have not completed the business before us this evening, the Report stage of the Bill might be postponed. I had in mind to ask the Government whether they would consider that because clearly there is such a mess over Part II of the Bill that it would be quite wrong to leave the House in its present state. If the Report stage were delayed until after the date that is at present fixed it would then be possible to put the Bill in good order. The Government could then bring it back to the House and I am sure that it would have a better reception than hitherto.

    I am sorry that it has been necessary to prolong the Sitting for a little while. This was a totally unanticipated event and a matter of the deepest regret, I am sure, to us all.

    My Lords, perhaps I may explain to the noble Lord, Lord Rodgers, that it was certainly not my intention to disappoint the 30,000 architects who unfortunately have been deprived of the proceedings this evening. Perhaps I may also support him in his view about extra time, now that the Government have failed to keep a House and therefore we have to proceed, subject to the view of the Government Chief Whip, on the next convenient business day, which will be Monday anyway because we are due to take the Bill further in Committee on that day.

    I was devoutly hoping to get to the end of Part III this evening and hear the views of representatives of architects and others. Unfortunately, we have been unable to achieve that. Therefore, I hope very much that the Government Chief Whip will be accommodating in allowing us a little extra time so that 30,000 architects, who are hanging on every word of the noble Lord, Lord Rodgers, and others in the House, will not be disappointed by a shortage of time.

    My Lords, I support the noble Lord, Lord Rodgers of Quarry Bank, in his appeal that the Report stage be delayed a little. My reason for saying that is that if it were delayed it would give the noble Earl the opportunity to let us have some idea of the results of the consultations which he told us he was already having on the famous scheme. I am sure that, with a little delay, he will be able to give us some guidance on how these consultations are going and what consequences they may have.

    My Lords, it is a rarity for us to debate the Motion for the adjournment. However, we are suffering under what I might call "unusual circumstances" this evening because there were insufficient noble Lords in the House for a quorum and therefore we are rising somewhat earlier than we originally intended. Nevertheless, I am grateful to all noble Lords who have taken part in this small debate. I well understand the frustration that some may feel that we have not managed to go a little further with the Bill to meet our intended target.

    I hope that the House will not be surprised if I do not go into any great detail about Clause 111. That is not because I am not deeply interested in it, but because those who were in the House will know that I was not present for the initial debate, which I know my noble friend Lord Ferrers dealt with in a most expert manner, aided by his and my noble friend Lord Lucas.

    I have a sense of déjà vu. In 1988 or 1989, when I was dealing with the Companies Bill before your Lordships' House as a very junior Whip, against the noble Lord, Lord Williams of Elvel, precisely the same thing happened and the House was counted out. It became in my mind what I shall now call "The Williams Gambit". Of course, now, as Government Chief Whip, I should have been prepared for this. I sense that I owe the House an apology for not making sure that more of my noble friends were here, if not to hear the noble Lord, Lord Williams, and his friends debate this interesting Bill, then to be within the Palace of Westminster so that they could support the Government when the time came.

    I can confirm that we shall re-start this Bill at the place we left off on the undecided Clause 111, and we shall do so on Monday, although I am reminded that the rule is not strictly that it should be on the next sitting day, hut at a subsequent sitting. However, as the House knows, we shall deal with this Bill on the next sitting day, which is next Monday.

    I join with the noble Lord, Lord Williams, in saying to the noble Lord, Lord Rodgers of Quarry Bank, that no offence was intended, and I hope that none has been caused, to the 30,000 architects who are waiting to listen to the deliberations of this Committee. I am also extremely grateful that the noble Lord, Lord Rodgers of Quarry Bank, saved us from his six speeches.

    I do not believe that any great damage has been done this evening. This Bill has been carefully thought through, planned for some time, and, in the hands of my noble friends when it returns on Monday for the Committee stage, I am sure that the Government will put their case as expertly as they have tonight. With a little extra support I hope that we shall be able to complete the Bill in good time so that we can deal with the final stages of the Education (Student Loans) Bill. I hope that we can now adjourn.