I was tasked with writing an article on the Building Safety Act (“BSA”). Now for those involved in Higher Risk Buildings, this is of course vitally important to understand, but in truth it does not impact on 95% of the construction industry. Lawyers love to write about law stuff and you will find lots of great articles on the BSA, but most of our clients are more focussed on getting paid for what they have done.
We work for clients with turnovers ranging from £½million to £4 billion and they all have the same issue – getting paid.
So I’m going to let others talk about the BSA this time, and focus on some simple options for getting paid.
Option No. 1 – Your right to suspend
If you are working on a job and not getting paid, the most powerful tool is often exercising your right to suspend your works. Every party has a statutory right to suspend on the giving of 7 days’ notice if they have not been paid sums due under their contract.
There needs to be an element of caution, as sums have to be due, so if you have a nil payment notice / pay less notice that has been validly issued, this right is not open to you, even if you know you are in practice owed money. However, assuming there is a clear sum owing, the ability to suspend is a very powerful tool.
Why would you not use this if you are owed money? You’d be mad to keep working and keep spending you own money, wouldn’t you? I say this slightly tongue in cheek as we are all reluctant to take such action, but any rational person would say ‘I will do no more until I am paid’. All too often we see a scaffolding company, or a plastering company (for example) owed tens, if not hundreds of thousands of pounds by a main contactor who has gone into insolvency and we all wonder how they got into that situation. They no doubt listened to false promises and kept working.
Option No. 2 – Adjudication
For those of you who are experienced in going through adjudication, you will know that it is ‘rough and ready’. And yes, it’s not perfect. And yes, sometimes you wonder what the Adjudicator was thinking (although occasionally this benefits you!). But it is quick and efficient and does work to get money moving.
Also, for those debts below £100k there are a number of possibilities to keep adjudicator’s fees down. One such example is the Construction Industry Council Low Value Disputes process, which does not need the parties’ agreement. So if your contract is ad hoc (let’s say for example a PO, an email exchange etc) you can use this process.
We find ourselves still bringing a lot of adjudications over sums where no valid payment / pay less notice has been issued – ‘smash and grab’ adjudications. These are quick to do, not costly, and have a high success rate for fairly obvious reasons. Another myth is lawyers’ fees are more expensive than commercial consultants’ fees – not all lawyers (or at least, not ours…).
Option No. 3 – Winding Up Petitions (WUP)
During Covid times, there was a hiatus on winding up petitions, but the position is now back to normal. So, if you are owed money and there is no dispute about this – where it’s a case of can’t or won’t pay rather than a genuine dispute – the use of a WUP should be considered.
The real issue with WUPs is the fact that once one is issued, everyone piles in and for the company against whom the petition is issued, they have to fight off a whole host of creditors before they can get the WUP withdrawn – so the threat of issuing one is often enough to get paid. WUPs are not to be used lightly and need to be carefully considered, but if the sum is owed and no cross claim or dispute has been raised they can be a good option. Also you do not need to issue a statutory demand if you are bringing a WUP against a company – this only applies against individuals.
Conclusion
Most of you will know the above and I know that it is easy to talk about these things rather than do them. There is always a commercial angle to this, but ask the creditors owed millions from any of, to name but a few, Buckingham Group, Henry Construction, Claritas Group and Tolent Construction, if they wish they had got onto the sums owed quicker. I think you know what the answer will be.
The market is tough. When I speak to clients those in the civils sector are finding it easier than those in the building sector, but no one is finding getting paid simple – whatever tier or level in the chain you are.
So we all know cash is the lifeblood of the construction industry – cash is king. As I often say to clients, trust the process. And use the time you’ve saved by getting payment in early to find a good article on the BSA…
This article originally featured in September 2023’s edition of our Aggregate newsletter: to read the complete edition, click here.
About the author
Andrew is Archor’s senior partner. Read more about him here.
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