Peter Clayton

The article considers the duties owed by architects when designing to budget or providing costs advice and examines the difficulties of pursuing claims arising out of alleged breaches of the same.

International security of payment legislation for the construction industry (“SoPL”) seeks to improve cash flow and reduce costly disputes. It does so primarily through regulating payment practices and providing rights to fast track, interim adjudication. This article examines the development of SoPL in eight jurisdictions where it has been in force for at least 15 years and been subject to substantive review and amendment. The different models of SoPL are examined from the policy perspectives of improving economic efficiency and protecting small businesses. The focus is on the practical implications of SoPL and consideration is given to fairness and balance between those who undertake and those who pay for construction. It is argued that SoPL has been successful in many of its aims and, intentionally or not, effected a significant de facto privatisation of justice. In many ways it has addressed problems of the justice system rather than the construction industry. However, the international development of SoPL has also shown that ex post regulation by enforcement of rights through adjudication alone cannot achieve all policy objectives, especially for the smallest businesses. Provisions for actual security of funds and criminal sanctions for compliance failures are gaining traction in some jurisdictions. Whilst SoPL has sometimes been criticised as intruding into freedom of contract or giving special treatment to the construction industry it might be more relevant to ask whether SoPL should have resonance and application in other sectors.

Since 1996, security of payment legislation (SoPL) for the construction industry has been introduced in a number of common law jurisdictions. It aims to limit unfair payment practices and provides rapid dispute resolution through adjudication. This article examines SoPL from a regulatory perspective in the context of the particular policy rationales for SoPL in different jurisdictions. Namely, increasing economic efficiency and/or protecting the contracting and subcontracting businesses most impacted by payment delays and disputes. It finds that the original models of SoPL took a smart or decentered approach to regulation reliant on ex-post enforcement actions by market participants. The steps contractors and subcontractors can take to secure payment are identified but it is further noted that, while SoPL has largely succeeded in its aims, experience in practice has led some jurisdictions to take a more muscular approach including introducing more formal models of regulation backed by penalties and sanctions. The article concludes by noting that the appropriate regulatory model depends on the primary policy objectives in individual jurisdictions. It is also noted that those jurisdictions which sanction particular behaviors are targeting mala prohibita breaches of requirements created specifically by the SoPL. The question is posed whether all SoPL models and rationales should proscribe and sanction those who knowingly and unlawfully seek to avoid or delay payments. This seems to be the commercial mala in se to which all SoPL is addressed even if articulated policy rationales differ. Thus, although SoPL has brought undoubted benefits, particularly to those who undertake construction work, some stakeholders may wish to lobby for further protections.

This article evaluates whether adjudication under Part 2 of the Housing Grants, Construction and Regeneration Act 1996 (HGCRA) can be procedurally optimised by drawing on statutory adjudication models from overseas—particularly New South Wales’s Building and Construction Industry Security of Payment Act 1999. The research is based on both doctrinal and functional comparative analyses of international security of payment legislation and adopts an economic lens to assess whether more streamlined mechanisms could reduce transaction costs and promote fairer outcomes. By noting features across jurisdictions and proposing measured reforms - such as adopting statutory claim and response procedures, simplified adjudication commencement, unified statutory rules and restrictions on what can be adduced in adjudication - this article offers a framework for policymakers and practitioners to enhance adjudication’s efficiency and predictability without undermining access to justice. The recommendations support a modernised adjudication system better aligned with the realities of commercial construction and the demands of timely dispute resolution.