SMM7 does not apply to NEC3 ....

SMM7 does not apply to NEC3, at least not automatically, that is.
Under the JCT Standard Building Contract (2005), the Standard Method of Measurement is stated as being the SMM7.
However, under the NEC3, the ‘method of measurement’ is not a defined term, but is provided to the Contractor at the time of tender by way of Part One of the Contract Data.
Therefore, particularly given that the information provided in the Bill of Quantities is not Works Information or Site Information; and given that one of the Compensation Events relates to where the Project Manager corrects mistakes in the Bill of Quantities which are departures from the rules for item descriptions in the method of measurement, it is imperative that the Contractor understands what the ‘method of measurement’ is before it attempts to price a Bill of Quantities under an NEC3 Form of Contract.
If a Contractor assumes that SMM7 will always (or ever) apply to a NEC3 Bill of Quantities, it may be sadly mistaken, and there may be huge financial implications arising from this incorrect assumption by the Contractor.
Therefore the moral is; check the ‘method of measurement’ before you price a Bill of Quantities under a NEC3 Contract, not after you have been awarded the contract.

Withholding notices may not be needed at all soon

Withholding notices will soon be a thing of the past. Just when we thought that we were starting to understand withholding notices, everything has started to unravel. The Pilon Limited v Breyer Group plc case in 2010 followed by the Urang Commercial Ltd. v Century Investments Ltd case in 2011, has made it clear that reliance cannot be made on lack of a withholding notices unless the withholding in question should have been issued against an ‘amount due’ as defined under the contract.

What had at one time appeared so clear; is now so confusing. But fear not, help is at hand, when the new ‘Construction Act’ comes into force (now widely predicted to be in October of this year (2011)), withholding notices will be swept away, and therefore the need to understand exactly when withholding notices are effective (and when they are not) will be a thing of the past.

Phew, that will be a relief!

Unfortunately the withholding notice is set to be replaced by a ‘Pay Less Notice’ which is governed by a different set of rules to those that applied to the withholding notices, and we will therefore have to ‘un-learn’ everything that we thought that we knew about ‘withholding notices’ and put our mind to learning the new rules that apply to the ‘Pay Less Notices”.
Good luck – and you have been warned!

Withholding notices not always needed for counterclaims

An Adjudicator can consider a counterclaim even where a withholding notice has not been issued. In the very recent case of Urang Commercial Ltd. v Century Investments Ltd. and Eclipse Hotels (Luton) Ltd., the court held that an Adjudicator should have considered a counterclaim even where a withholding notice was not issued, but only where the counterclaim did not relate to payments due under an Interim Payment Certificate.

The logic that the court applied was that where, under a JCT Standard Building Contract, an Interim Payment Certificate has been issued then the amount stated on that Certificate is the ‘amount due’ under the contract. Therefore, if the Employer wishes to pay less than the amount certified to the Contractor because of counterclaims, he is to issue a withholding notice (so that an amount can be withheld from the ‘amount due’).

However, the court found that there is no requirement to serve a withholding notice in relation to other claims made by a contractor, whether under a different provision in the contract or for damages. Therefore, even in the absence of a withholding notice, an Employer can deploy its counterclaim as a defence to the Contractor’s claims in an adjudication action.

Therefore the moral of this case is: You cannot always simply rely on the lack of or the late issue of a withholding notice to prevent a counterclaim being considered by an Adjudicator, and in many cases the substance of the counterclaims will need to be addressed even where a withholding notice has not been issued.

Employers’ liability for compensation under TUPE

If, as an Employer, you have not disclosed certain information about employees being transferred through TUPE, you may face a compensation claim from the Employer that took on those employees.

Under the TUPE Regulations, there is a legal obligation on the Transferor [the Employer that transfers the employees] to make certain information about transferring employees available to the Transferee [the Employee that took over the employees of the Transferor].

The information that must be provided by the Transferor is mainly to do with information that the Transferee must be aware of such as, the employees’ identities and age; the employees’ particulars of employment; details of any disciplinary procedure undertaken by the Transferor or any grievance made by the employee; details of any tribunal proceedings brought by the employee against the Transferor in the past two years and so forth. The information has to be provided at least 14 days before the transfer has been completed, unless it is not practicable to do so.

If the Transferor fails to provide the necessary information an Employment Tribunal must award the Transferee, upon a successful complaint, a minimum compensation of £500 per employee (unless it is just and equitable to award a lesser sum). If the Transferor failed to disclose the existence of a discrimination claim (for example), and compensation was awarded to the employee, the Transferee would arguably be able to recover the sum paid as compensation to the employee as part of its own compensation from the Transferor.