UK Construction Payment Legislation – Clarity or Chaos

This paper looks at whether payment processes in the construction industry have been improved to the benefit of supply chain cash flow.

Effective from 2011, the Local Democracy, Economic Development and Construction Act 2009 sought to improve upon the provisions of the Housing Grants, Construction and Regeneration Act 1996. Often recognised as the catalyst for change, the judgment of Lord Macfayden in 'SL Timber Systems Limited v Carillion Construction Limited' [1] had turned the ‘cut and dry’ approach to payment under the 1996 Act on its head and highlighted a need for clarity; there being no sanction in the event that the payer did not issue a payment notice. Essentially, the aim of the revised legislation was to ensure the payment notice was ‘King’ in order to improve cash flow.

However, can it be said that this has been the case in practice – has the payment notice reigned supreme or has it been overthrown?

Recent court judgments indicate that there has been a seismic shift in the attitude of the UK courts, running the risk of undermining the Adjudication process. Just as the judgment in SL Timber Systems facilitated change with regards to the 1996 Act, could it be said that these judgments should encourage further review of current UK legislation? Looking to practice in other international jurisdictions provides some useful insights.

[1] [2001] ScotCS 167

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