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Latham pushes again for trust funds in legislation

NEWS - Letter sent to construction minister Griffiths urging inclusion of trust funds to protect payment arena

SIR MICHAEL Latham has called again for trust funds to protect payment in his report on the Construction Act review.

In a letter to construction minister Nigel Griffiths, he presses for the statutorily backed trust funds omitted from the original 1996 legislation 'because not all the payment concerns have disappeared' He adds: 'There can be no place for unsatisfactory payment practices through- out the team.Nobody has a right simply to be paid what they demand, because that might not be the correct amount.

'But they do have the right to be paid the correct amount on time, irrespective of whether other parties in the supply chain have themselves been paid.'

In the detailed report published by the DTI last week, one of the few areas of agreement in the payment subgroup was improved rights and compensation when firms suspend work due to non-payment.

The review group also agreed on scrapping largely unused 'five-day payment'notices, improved rights for third parties to pay some or all of costs to companies in cases of insolvency, and new efforts to clarify the act's definition of debt.

But they failed to agree on forcing payers to give more details in situations where payment is withheld, the current practice of retaining 'pay-when-paid' clauses in case of insolvency and the use of 'pay-when-certified' clauses.

The group acknowledged the problem of lengthening payment periods in the industry but said there was 'little scope' to improve the situation through legislation.

Phillip Capper, head of engineering and construction at law firm Lovells, said: 'It is regrettable that there is little consensus on payment because it means that there is little chance of pushing through changes using a regulatory reform order.

'The review also does not go far enough to define what a debt is under the act.'

The adjudication subgroup has agreed on preventing forcing the referring party in disputes to pay the other's costs.

And the group will recommend the outlawing of trustee stakeholder accounts, where construction firms who win awards in adjudication cannot get to their awards until the end of the dispute because the funds are put in trust accounts.

The DTI is expected to publish a consultation document by the end of October.