Housing Grants, Construction and Regeneration Bill [H.L.]

HL Deb 28 March 1996 vol 570 cc1836-89

Earl Ferrers

My Lords, I beg to move that the House do now again resolve itself into Committee on this Bill.

Moved, That the House do now again resolve itself into Committee.—(Earl Ferrers.)

On Question, Motion agreed to.

House in Committee accordingly.

[The CHAIRMAN OF COMMITTEES in the Chair.]

Clause 101 [Construction contracts]:

Lord Williams of Elvel moved Amendment No. 125: Page 58, line 8, at end insert ("and such operations shall be specified in the agreement").

The noble Lord said: At this point we enter a new phase in the Bill which deals with the construction industry and the results of the report. Sir Michael Latham chaired the proceedings with distinction. Construction operations, which will be a matter of some contention as we move through these clauses, should be specified in any contract which is concluded under the specifications of Clause 101, which is an introductory clause. I introduce this amendment to show that there is a great deal of confusion about what a construction operation really is. I do not believe that the industry can properly function unless that confusion is cleared up.

One of the ways in which that can be done is by ensuring that each contract should specify which particular parts of it are covered by the Bill which is before the Committee. That may be a useful addition, and I put the amendment forward without prejudice to discussions which will take place at a later stage in Committee about the nature of such operations. I beg to move.

Lord Howie of Troon

I support my noble friend in this amendment for this simple reason. Clause 101 refers to a construction contract and this part of the Bill deals with such matters. Contracts relate to construction operations which are then defined in Clause 102. Those Members of the Committee who remember the Second Reading will recall that many of us felt that the definition of construction operations in Clause 102 was defective and confusing in the sense that operations which many of us thought, with our long experience in construction, were construction operations were in fact excluded from the part of the Bill included in Clause 102. I wonder whether it might be helpful, as my noble friend has suggested, for the contracts themselves to define those construction operations to which they are intended to refer, rather than for us to fall into the confusion which is apparent in Clause 102. I support my noble friend in this amendment.

Earl Ferrers

As the noble Lord, Lord Williams, said, we are moving into a different area of the Bill. I say at the outset that it is quite a complicated area. I quite see why the noble Lord wishes to make the position as clear as possible. We shall always consider his suggestions carefully.

As I see it, the amendment is designed to assist where a contract covers both construction and non-construction operations. It would require all the elements of work which fall within the construction definition to be specified in the contract agreement. That is what the noble Lord, Lord Howie of Troon, would like to see. He would like to see everything written down. The trouble is that when everything is written down, anything that is not written down is considered to be outside the provisions which are written down. So one has to be careful.

I believe that this amendment will be a cause for confusion for this reason. As the Bill is currently drafted, if, for example, a bricklayer was building a wall, he would know that he was entitled to the fair treatment which the Bill provides. But with the noble Lord's amendment in place, if his wall-building was not specifically mentioned as a construction activity under the contract, he would wonder where he stood. Would he still be entitled to these fair contract provisions or would he face a legal battle to establish that his work should have been specified from the outset? I believe that lawyers would have a field day over this. At worst, he could be persecuted, but incorrectly, that the contract document effectively ruled his work outside the Bill. That is something which I do not believe noble Lords would wish to do or we would wish to see happen. Small firms, the self-employed and everyone else engaged in construction work should have clear rights to the measures on adjudication and payment which we are trying to provide here.

At the moment, the activities either fall within the definition of construction operations as specified in Clause 102 or they do not. Although we have tried to draft the Bill so that there are as few grey areas as possible, one is bound to accept that some will remain. That is inevitable and in some ways it is not a bad thing. It would certainly be good practice for contractual parties to get together to make sure that they know which parts of the contract are construction operations in terms of the Act. Of course, they would be quite within their rights to apply the same sort of terms, by agreement, to any work that fell outside the definition. But I do not believe that we can require parties to specify construction activities in their contracts. I understand the reason why the noble Lord has tabled this amendment, but I believe that the context would be best without it because it allows for less doubt and would give fewer problems later on.

Lord Howie of Troon

The Minister's interesting reply does not wholly convince me. I know that the Bill is complicated and detailed but I had not thought that it went into such detail as a single brick and a single bricklayer. In my noble friend's amendment the definition of construction operations is not concerned with a wall but a building, or something of that nature, of which a brick is part. The activities of the bricklayer will be defined in the specification which will be part of the contract as a whole. I do not believe that the Minister has grasped the point.

Lord Monkswell

The Minister referred to bricklaying. There are situations in which bricklaying can be carried on and is effectively excluded from a construction contract under Clause 102. I call in aid the Ideal Home Exhibition, which I believe opened recently.

I understand that within that exhibition a number of houses have been constructed. When one looks at Clause 102(2)(f) one sees that what is excluded is, the making, installation and repair of artistic works, being sculptures, murals and other works which are wholly artistic in nature". The construction of a whole house in the Ideal Home Exhibition, which can be defined as a temporary structure of an artistic nature, may not be considered to be "construction". This highlights the difficulty we face. I ask the Minister to comment.

Lord Elton

Perhaps I may encourage my noble friend to treat the regulation of the exhibition industry as a wholly distinct issue from the regulation of the construction industry.

Earl Ferrers

The noble Lord, Lord Howie, says he is not convinced by what I said. I always regard it as a matter of regret if I cannot persuade him that what I have said is right. Either one lists everything or one leaves a certain amount to reasonable common sense. The Bill provides in Clause 101(2): Where an agreement relates to construction operations and other matters, this Part applies to it only so far as it relates to construction operations". That can include a whole lot of matters. If one puts in the words suggested by the noble Lord, Lord Williams, one has to specify what those construction operations are. I know that the noble Lord, Lord Howie, would not wish to exclude the bricklayer. My fear is that if those words were put in the bricklayer would be excluded. One would have to specify what construction operations were covered.

I thought that the noble Lord, Lord Monkswell, had had a rush of blood to the head when he said that the Ideal Home Exhibition and the houses built therein could be described as, the making, installation and repair of artistic works, being sculptures, murals and other works which are wholly artistic in nature". Whenever I visit the Ideal Home Exhibition my experience is that wonderful houses are put up. One says that they are exactly what one wants because they are so convenient, cheap, and so on. One does not consider them beautiful objects to be looked at in an artistic manner. I do not believe that the Ideal Home Exhibition comes into it. I hope that I have been able to satisfy the noble Lord, Lord Monkswell, on that point.

I return to the remarks of the noble Lord, Lord Howie. I believe that we must keep the Bill as simple as we can. My fear is that the proposed words would make it more complicated in the result, not the intention.

Lord Williams of Elvel

I believe that in reply to my noble friend Lord Howie, the noble Earl said that in such a contract it would be normal to specify various procedures and operations carried out under the contract. Normally, any good lawyer negotiating such a contract would wish to say what was and what was not covered by the Bill. The specification for an operation of any kind is a complicated business. I agree that we should keep it as simple as possible. Nevertheless, these are complicated matters. I do not believe that it would be difficult for a contract to specify, say, in an appendix, that A was covered by the Bill, B was not covered, and so on. That would be agreed between the parties and lawyers concerned. It would make the position absolutely clear. We do not want to write matters into the Bill which make it more complicated. I would have thought that my amendment makes the whole position much clearer for those people engaged in construction activity within or outwith the Act, as it will be.

Earl Ferrers

We are talking about the kinds of matters that may be in construction contracts. Clause 101 says: (1) In this Part a 'construction contract' means an agreement for the carrying out of construction operations. (2) Where an agreement relates to construction operations and other matters, this Part applies to it only so far as it relates to construction operations". It is for any two contracting parties to draw up such contracts as they wish. Our concern is to ensure that the minimum is dealt with and that these matters come into use when there is a dispute and the parties concerned have not put anything into their agreement as to how it should be resolved. Where that arises this part of the Bill will come into operation. The noble Lord says that it tells people what to put into their contracts. It does not. The Bill says that this part will operate only if contracts do not specify the equivalent wording.

Lord Williams of Elvel

I do not quite understand the last words of the noble Earl. However, I understand that this part applies only to construction contracts which do this, that and thus. What I am trying to establish—I believe that the noble Earl has gone some way towards it—is that in any contract negotiated between two reasonable parties, as a result of the passage of the Bill there will inevitably be a discussion to decide which bits of the contract are included, given that it may contain something called a construction operation under the Act, as it then will be, and which bits are excluded. Any reasonable lawyer will establish that at the outset. All I say is that it is more helpful if it is put on the face of the Bill. However, having heard the explanation of the noble Earl that that is what the Government want to see but do not want it on the face of the Bill, I am happy to leave the matter for further discussion should that be necessary. I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Lord Howie of Troon moved Amendment No. 126: Page 58, line 12, after ("Wales") insert (", Northern Ireland").

The noble Lord said: As I understand the Bill, it deals with three major and important matters; namely, adjudication, payment and the right of a contractor to cease work in certain appropriate circumstances. I well understand that those are the Bill's main objectives, but I notice that the Bill does not apply to Northern Ireland. I wonder why, because adjudication, payment and the right to stop work in appropriate circumstances in construction contracts must be as important in Northern Ireland as they are elsewhere in the UK. I am asking the Government to explain why Northern Ireland is excluded, because I notice that there is a reference to Northern Ireland in Clause 110(5).

If that clause applies to Northern Ireland, I cannot help but wonder why the rest of this part does not also apply to Northern Ireland. I am reinforced in that by noticing that there is a further reference to Northern Ireland in Clause 143. If my memory serves me right, that refers to Part III. I wonder why it is that those parts of the Bill which apply to the registration of architects apply to Northern Ireland whereas Part II does not.

I notice something further. The scheme which is referred to in Clause 111, to which no doubt we shall be returning from time to time later in our discussions, leans heavily on the Arbitration Bill which is now before another place. I notice that the Arbitration Bill applies to Northern Ireland. So I wonder how it comes about that arbitration applies to Northern Ireland but adjudication does not. Those are questions to which I merely seek an answer. I am not trying to provoke the Government into doing anything that they do not want to do. I hope that will enable me to understand why they want to do the things that they are trying to do. The two amendments which are associated with Amendment No. 126 are consequential upon it. I beg to move.

Viscount Ullswater

My reading of Clause 143 is that by an Order in Council the measures in Part II can be brought in for Northern Ireland. In fact it goes a little further and says that instead of an affirmative resolution, it can be brought in by negative resolution, which I should have thought was probably a good thing in this case.

Earl Ferrers

I may be able to make the noble Lord, Lord Howie of Troon, happy, anyhow on this occasion, by telling him that it is our intention that the benefits of this legislation should apply across the whole of the United Kingdom. That means of course Northern Ireland as well. The inclusion of Northern Ireland will be achieved by means of an Order in Council. That is how these arrangements for Northern Ireland are commonly made.

With reference to the amendment to give a scheme-making power to the Secretary of State for Northern Ireland, that is something which would be contained in the Order in Council. The scheme for Northern Ireland is likely to be substantially the same as that for England and Wales, taking into account the normal adjustments that one makes for Northern Ireland.

The noble Lord referred to arbitration. The Arbitration Bill is largely a Consolidation Bill. No work is needed to adapt it locally because that has already been done. I hope that the noble Lord will feel satisfied that Northern Ireland will be covered properly.

Lord Howie of Troon

I was pleased with the earlier part of the Minister's comments which were reassuring. My feeling of reassurance was somewhat modified when he said that the scheme for Northern Ireland would be similar to the proposed scheme for England and Wales. Since the scheme for England and Wales is terrible, as we shall discuss later on, I do not see why we should inflict it upon the Northern Irish as well.

I have just one slight note of dissent. Although it is a consolidation Bill, if the Arbitration Bill can apply directly to Northern Ireland without regulations, why on earth should not the same procedure be followed in this Bill? The confusion which I have been under, and which the Minister has largely dispelled, arises from the exclusion of Northern Ireland from the first clause. That confusion would be dispelled completely if my amendment were accepted. I hope that the Minister will think again and accept it. I know that he is that kind of man.

Earl Ferrers

I do not know what the noble Lord, Lord Howie, is asking me to accept. First, he puts down an amendment to say that Northern Ireland should be included, and then he says that he was greatly reassured by what I said but that he could not understand why on earth we should want to impose such a rotten Bill on Northern Ireland.

Lord Williams of Elvel

Scheme.

Earl Ferrers

All right, scheme. I shall modify that. This, I believe refers mostly to the scheme. The problems about which the noble Lord is concerned are covered, will be covered and will apply to Northern Ireland. As I explained to him, the arbitration matter has already been taken account of and it is not necessary therefore to alter it to apply.

Lord Howie of Troon

As the Minister, with his long experience, knows, I try to agree with what he says whenever possible. In the face of his comments, I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Lord Howie of Troon moved Amendment No. 127:

Page 58, line 15, after ("to") insert ("private sector construction contracts, and").

The noble Lord said: Clause 101(1) refers to: the carrying out of construction operations".

That might be construed as meaning all construction operations except where those are excluded under Clause 101. That is a sensible way to construe the Bill. However, Clause 101(5) refers to certain operations under the Crown but not all of them. In parenthesis, I ask why not all of them, although I do not want to press that point.

What is more important is to ask why it is necessary to distinguish between the apparent general terms of subsection (1) and the particular terms of subsection (5). That is why I ask to include the words in Amendment No. 127—to show that this part refers to private construction projects as well as the projects under the Crown. I beg to move.

Lord Williams of Elvel

I support my noble friend in this amendment. It has been represented to me that there is some confusion in Clause 101, and that the amendment proposed by my noble friend will remove that confusion altogether. I imagine that the Government mean Clause 101 to apply to private sector contracts as well as to those which are mentioned under subsection (5). Nevertheless, as I say, a number of representative bodies which are concerned in this industry have made approaches to me to say that they are not entirely happy about the wording and that my noble friend's amendment would clarify the matter beyond any shadow of doubt. If the Minister can clarify it beyond any shadow of doubt, then I am sure that my noble friend will be happy.

Lord Berkeley

I support the amendment, but I have one or two questions about it. It is my understanding that this whole part of the Bill is being put forward in response to pressure from the construction industry as a whole. This is the introductory clause, and we have suddenly gone to the particular. There are public sector contracts, private sector contracts, Crown contracts and probably many other types of contract. I wonder whether, in addition to supporting the amendment of the noble Lord, Lord Howie, we should ask the Minister to think again about making it even wider, starting off with all contracts and leaving the exclusions to come under Section 102(2) when we come to it.

4 p.m.

Earl Ferrers

My Lords, I shall try, as the noble Lord, Lord Williams, wishes, to clarify the matter beyond any measure of doubt. The best way for me to do that is to follow the notes that are meant to assist me in trying to explain the Government's position on this rather complicated Bill.

According to my note, the amendment of the noble Lord, Lord Howie, is simply not required. I should not have put that in quite such a rough way. I would say that I expect the noble Lord, after he has heard the considerations put forward and taken account of them, will say that on the whole he agrees with the Government and that his amendment would not be an improvement to the Bill.

The Bill of course applies to private sector contracts. That is the whole purpose of the Bill. The drafting of Clause 101(5) simply reflects the fact that, without a specific inclusion, legislation does not normally bind the Crown. We want to see the Crown so bound. Therefore we have to make sure that it is not excluded but that the Crown is included. That inclusion does not exclude any private sector contracts. I hope that that explanation will satisfy the noble Lord, Lord Berkeley, that all these provisions are to cover all contracts.

Lord Howie of Troon

I am grateful to the Minister for that reply. Like him, I am all in favour of binding the Crown wherever possible. I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Clause 101 agreed to.

Clause 102 [Meaning of "construction operations"]:

Lord Williams of Elvel moved Amendment No. 128: Page 58, line 47, at beginning insert ("off-shore").

The noble Lord said: In moving this amendment, it may be for the convenience of the Committee if I speak also to Amendments Nos. 130, 131, 132, 133, 134 and 135. We now embark on this rather difficult clause, which is an attempt to define the meaning of "construction operations"—what are and what are not construction operations.

As I said at Second Reading, we have a number of doubts about the definition. We do not believe that the Bill as drafted covers more than about 50 per cent. of what could properly be called the construction industry. Our figure is based on the Department of the Environment's research.

Amendment No. 128 deals with off-shore drilling for, or extraction of, oil or natural gas. I am advised that on-shore drilling should not be excluded from the ambit of the Bill but off-shore drilling should be excluded. Off-shore drilling is a very specialised business. Construction companies undertake certain activities with the construction of platforms or drilling rigs, but, I believe, not nearly so much as in on-shore drilling. There is also a certain amount in off-shore drilling. I am sure that my noble friend Lord Howie will correct me if I am wrong, but it seems to me, that as a minimal inclusion in the Bill, off-shore drilling should be considered as a construction operation.

Amendment No. 130 deals with subsection (2)(c), which starts with the word "construction". I find it very odd that the word "construction" should be put into a subsection which defines something which is not construction. I should have thought that for clarity—indeed, possibly also for substantive purposes—the word "construction" in that line should be removed.

I move on to Amendment No. 131. I am advised that it is extremely difficult to define the meaning of "primary" activity. I simply offer the alternative "sole" activity in this probing amendment. I am trying to find out from the Minister what exactly "primary activity" is intended to mean in the Bill.

With Amendment No. 132 it is quite clear that water and effluent treatment are major activities of the construction industry. The view has been expressed to me that there is no reason whatever why water or effluent treatment should be excluded from the ambit of the Bill. After all, those are activities in which construction companies, in the ordinary meaning of the word, engage on a daily basis. It seems to me and my advisers that it would be proper for water and effluent treatment to come within the ambit of the Bill.

Amendment No. 133 is related to Amendment No. 134 which no doubt will be spoken to by the noble Earl when he comes to reply. As I said at Second Reading, I have great difficulty understanding why construction activities in warehousing—construction activities in the storage particularly of food and drink—should not be included within the ambit of the Bill. That is a matter that I raised at Second Reading and I do not wish to go through the arguments again. I am sure that the Committee understands my arguments.

With regard to Amendment No. 135, I simply cannot understand why construction activity inside a warehouse of food and drink should not be treated as a construction activity for the purposes of this Bill.

No doubt the noble Earl will wish to speak to his Amendment No. 134. I reserve my comments on that. In the meantime, I beg to move.

Viscount Ullswater

I support my noble friend's amendment, Amendment No. 134, in this group. I believe that it helps to clarify the position of Clause 102(2)(c). So far as I can see, in that subsection the important words are "on a site"—this argument will assist the noble Lord, Lord Williams—which identify a process engineering site as opposed to a building site or civil engineering site.

The definition of "construction operations" which appears in the Bill is drawn from the Income and Corporation Taxes Act 1988. The Latham Review Working Group 10 produced a very different draft definition of "construction operations". When that was presented to the Construction Industry Board it was accepted without comment. Amendment No. 139, tabled by the noble Lord, Lord Howie, is much closer to that definition.

However, I believe that the definition in this Bill recognises the divergent views of the process industry and the building and civil engineering industries and their history as regards dispute resolutions. I was impressed by the case put to me by the Process Industry Latham Group. Its industries do not suffer from the litigations and claims-oriented attitude which beset the building and civil engineering industries. It claims that the difference occurs for two good reasons. First, that the process plants are not speculative developments but facilities where products are made. Secondly, the number of clients and contractors are small and it is therefore important that good relations should continue for future business success.

In supporting that evidence, PILG—I notice the noble Lord, Lord Williams of Elvel, grimacing at my use of "PILG" and I understand that—can point to the number of arbitrators, for instance, between 200 and 300 appointed by the RIBA, RICS and the ICE per annum compared with two to three per annum appointed by the Institution of Chemical Engineers.

I would go along with some of the amendments put forward by the noble Lord, Lord Williams, in particular Nos. 128 and 130 because I believe that they add to the clarity of the exclusions. However, as I have indicated, I cannot go along with some of his other amendments, in particular to Clause 102(2)(c), because I believe that the whole point of "on a site" identifies a process engineering site as opposed to a building or civil engineering site. Those are the key words that I put forward for my noble friend's consideration.

Lord Williams of Elvel

The noble Viscount has been kind enough to go along with some of my amendments. Does he go along with my arguments about water or effluent treatment? It is an important matter.

Viscount Ullswater

I do not feel so strongly about those matters. Perhaps I may refer to the Government's amendment to the latter part of the subsection. We are talking about the bulk storage of food, probably in steel vats, in the process industry and for that reason I would allow that subsection to remain. I feel less strongly about whether water or effluent treatment is something to do with the process industry. I suspect that it is, however, and therefore I would see the provision left in as part of "on a site".

4.15 p.m.

Lord Howie of Troon

I am reassured by Amendment No. 134 tabled by the noble Earl, Lord Ferrers. It shows that the Government have accepted the fact that the definition of "construction operations" in the Bill is defective. It is much more defective than is admitted in Amendment No. 134 but I do not wish to go into that at the moment. I shall deal with it in my Amendment No. 139.

I intervene as a result of a remark made by the noble Viscount, Lord Ullswater, relating to the process engineering industry. There was much good sense in what he said. I too have had the benefit of meeting members of the Institution of Chemical Engineers to discuss their attitude towards the Bill. My amendment does not exclude the process engineering industry because I want the Minister to explain on the record why it should be excluded.

I can readily understand that certain elements of process engineering are different from the ordinary construction industry. Let us consider, for example, an oil refinery which has a catalytic cracker or something of that nature. The plant itself will be powerfully integrated into the structure and they could be considered as one item. Sometimes they are, sometimes they are not, but I see my noble friend Lord Berkeley shaking his head from side to side in a way which indicates a certain amount of disapproval. I am being as open-minded on the subject as possible.

I can understand that there would be some argument in that respect but perhaps we might consider the following. I have in mind Grangemouth oil refinery, which was specifically mentioned to me by the members of the Institution of Chemical Engineers when I met them recently. It is founded on a large cellular concrete foundation which is wholly and entirely a piece of civil engineering construction. It has nothing whatever to do with process engineering, or processes of any kind. It has a straightforward, ordinary foundation but it is a big piece of civil engineering work. I cannot see how it should be dealt with in a way different from any other civil engineering construction. So long as the foundation is in the right place and the holding-down bolts are in the right place so that the process engineers can put their plant in the right place all will be well. There is no reason at all why the foundation as a contract—it might well be a separate contract and would certainly be a sub-contract—should not be included under construction operations.

Furthermore, I remember that 30 years ago or more I was involved with civil engineering colleagues in designing the Llandarcy gas works. It was an excellent work and won an RIBA gold medal for its architect, Alex Gordon—the prize went to the architect, not to the engineer. Obviously, that gas works was a piece of process but the building which we built was a shed. It was a lovely, prize-winning shed but it was a shed nevertheless. As a shed it was the same in the construction context as any other kind of shed. The fact that it had a gas works inside made it no different; there might have been something else inside. The fact that it has since been demolished may remove many of my arguments, but the point I am making is that the structure was a civil engineering structure and should therefore be included as a construction operation under the terms of the Bill. I can see no reason why it should be excluded as part of a process plant.

Lord Berkeley

I support the amendments proposed by the noble Lord, Lord Williams of Elvel. Following on from what was said by the noble Lord, Lord Howie, perhaps I may say that I too have worked on process plants as a civil engineer. I see little difference between putting in foundations using holding-down bolts—the noble Lord's may have been wrong and mine may have been right—or putting bridge beams or a cracker on the top or a lot of pipework.

To a large extent, the process people with their separate types of contract have got that side of it pretty well sewn up. But we should think of the civil engineers and the building people and their sub-contractors and suppliers. They need just as much protection when they are working under or around the process plant as when they are working around any other type of building or plant.

I shall speak further to the amendment tabled by the noble Lord, Lord Howie. I believe that it is important to widen the scope as much as we can in order to protect—because that is why we are here—the "small" people such as the sub-contractors and specialist suppliers in the civil engineering and building industry.

Earl Ferrers

I am grateful to the noble Lord, Lord Howie, for saying that he is reassured by Amendment No. 134. I am glad about that and perhaps I may return to it later. This part of Clause 102 covers a very complex subject. Some of the discussion that has taken place outside this Chamber may have resulted from a misunderstanding. I should like to clarify what we are trying to do. However, I accept that the drafting needs some fine-tuning and I tabled Amendment No. 134, which reassured the noble Lord, Lord Howie.

My noble friend Lord Ullswater is right to say that process engineering is totally different from construction. Process engineering is industrial work involving certain types of chemical, physical or biological processes. Examples include refining oil, generating electricity, and making chocolate. This clearly involves a great deal of heavy plant and machinery, with complicated steelwork to hold it all in place. It is only the construction of such plant, machinery and steelwork which the Bill excludes. The construction of buildings on the same site would be covered by the Bill.

We are excluding process plant from the legislation because it does not suffer on anything like the same scale from the problems which Sir Michael Latham identified in building and civil engineering. In the process engineering sector, clients, contractors and suppliers have proved themselves capable of finding voluntary solutions to their difficulties. The Process Industry Latham Group has warmly welcomed the intention of this part of Clause 102 and is satisfied that we have covered all the industries where process plant should be excluded from the Bill.

There is little doubt, however, that water and effluent treatment, much food and drink production, and the on-shore extraction of oil and gas are part of a well-understood process engineering sector. I re-emphasise that the exemption here would apply only to work on plant, machinery or steelwork, and not to site work or building. So much of the construction sector's interest in process engineering would be covered by the new provisions.

The noble Lord, Lord Williams, asked why on-shore drilling and off-shore drilling should be different. They are both engineering operations and not construction operations. We must remember that the whole purpose of the Bill is to deal with the construction industry. Therefore, I do not see that there is any difference between the operations, whether they are on-shore or off-shore, if they are engineering operations. If neither is a construction operation, it is right that both should be excluded.

The noble Lord then referred to Clause 102(2)(c) which includes the word "construction". He wishes to exclude the word "primary". The following operations are not construction operations within the meaning of the Bill: construction, installation or demolition of plant, machinery or steelwork on a site where the primary activity is nuclear processing, power generation, or water or effluent treatment", Therefore, we return to the point that those engineering industries have shown themselves quite capable of resolving their problems. The difficulty arises within what one might call loosely the building industry. In that industry, there is a long chain of different organisations. One starts with the person who is the main contractor and the work is then passed down the chain. The chaps at the end may get left out as, indeed, may some of those in the middle. But we are trying to direct our attention to that situation. Large civil engineering projects do not have that problem which is why we have decided to exclude them.

Amendment No. 134 is designed to include in the Bill warehousing and supermarkets but not bulk storage such as oil tanks which are part of an oil refinery. Our previous clause would have excluded buildings used for storage such as food and drink warehouses. Therefore, we have tried to recognise the difficulties which may occur.

Amendment No. 134 would restrict the exemption relating to storage sites so that any bulk storage is exempted. By that I mean things which are not held in separate packages or bottles such as may be found in supermarkets. That will bring warehousing fully within the scope of the provisions of the Bill and will go some way towards satisfying the intention behind the amendments proposed by the noble Lord, Lord Williams, or at least I hope that that will be so.

Lord Howie of Troon

I should like to return briefly to the question of process engineering. The Minister will be aware that quite frequently, where an oil refinery is alongside the coast, the tankers come along to a jetty made of tiling and with a structural steel superstructure. On top of the jetty there is equipment that transfers the oil from the tanker into pipes and hence into the nearby refinery.

Process engineers would regard the refinery and the pipes and machinery as their business. But, from my conversations with the Institution of Chemical Engineers, I find that chemical engineers would regard the jetty itself as a part of civil engineering construction; and so it is. I designed several in the old days and as far as I know they are still standing.

The jetty which supports the plant is exactly analogous with the oil refinery foundations I mentioned earlier. If the process engineers are perfectly happy—and they tell me they are—to exclude the civil engineering component of the jetty, I cannot see why they demur when it comes to consideration of the civil engineering element in the foundation.

Earl Ferrers

I am on dodgy ground—I use common parlance—in dealing with the noble Lord, Lord Howie of Troon, who has constructed jetties. I am delighted to hear that they still exist. He has a natural understanding of the matter. As I understand the position, if the construction was taking place off-shore, that is part of a civil engineering process and would not be covered by the Bill. Of course, the construction of the jetty would be covered because I think I am right in saying that that is regarded as a construction. But, in this case, the jetty has been built and therefore you are referring to the pipework which is supported by the jetty.

I shall take note of what the noble Lord, Lord Howie, said and consider it in full. Obviously, he has a great deal of knowledge. We do not wish to impose a lot of regulation on a part of the industry which has shown over time that it can manage its affairs quite well. We wish to contain the regulation to one part of the building industry. There will inevitably be overlaps but we must try to make sure that as far as possible the overlaps are kept to a minimum. I shall certainly consider the points which the noble Lord raised.

4.30 p.m.

Lord Berkeley

I thank the Minister for agreeing to look again at these matters. Following on from the remarks of the noble Lord, Lord Howie, I believe that it may be convenient for us to consider Amendment No. 131. Steelwork can cover a multitude of sins. A jetty may be made of steel or concrete; it could have pipes on it which are also made of steel; the cables which go down to the jetty may also be made of steel; and there may be steel fenders. Moreover, it may or may not be in the sea. Supermarkets are quite often built with steelwork. It would be helpful if the noble Earl could look again at the definition without, as he said, going into too much detail.

Earl Ferrers

I shall be happy to look again at the matter. However, I believe that the noble Lord, Lord Berkeley, may be under a slight misapprehension. Paragraph (c) of subsection (2) of the clause refers to anything which deals with, nuclear processing [or] power generation". That is where the steelwork comes in—only when referring to nuclear processing, power generation, or water or effluent treatment". Of course it comes in elsewhere; for example, in building. Where it does so, it will be covered by the Bill. But where it is involved in nuclear power stations it is excluded.

Lord Monkswell

The Minister puts his finger on the nub of the problem. He says that the exclusion refers to the nuclear processing or the power generation, which I believe we would accept. The difficulty is that the wording of the Bill refers to a site where such activity is taking place. It does not refer to the nuclear generation or the power generation; it talks about a site where such work goes on. Therefore, the wording of the Bill actually widens the sphere of exclusion rather than narrowing it.

By the use of those words, the Minister has highlighted a difficulty which presents itself to us. I accept that the noble Earl recognises the strength of the argument put forward by the noble Lord, Lord Howie of Troon. Perhaps the odd remarks that I have just made will help to clarify and highlight the difficulties with which we are faced.

Viscount Ullswater

I have a point to make before my noble friend the Minister replies. I am led to believe by the conversations I have had with the Institution of Chemical Engineers that the word "steelwork" can indeed involve the bulk storage of food and drink in the food processing industry. Therefore, it is not just the steelwork which might be the frame of a building; indeed, it is actually steelwork which is used within the manufacture of those bulk vessels. We should also understand that that can be construed in the word "steelwork".

Lord Monkswell

I believe that we are entering into a most important area. We can think in terms of steelwork forming the frame of a building and that providing a support structure for the process plant within it, or one can think in terms of the steelwork which does not form the frame of a building but which is part of the process plant itself. The difficulty is where to draw the line. It is not clear from the way that the Bill is currently worded where the line that I suspect the Government and the rest of us would agree on should be drawn.

Earl Ferrers

I have tried to make it as clear as I can. If I may say so, I believe that we are talking about two totally different concepts. The noble Lord, Lord Monkswell, referred to construction, and so on, in paragraph (c) and the installation, demolition and steelwork on a nuclear site. That is excluded. A nuclear site, and whatever goes on there, is excluded from the legislation because it is a specialised area and those concerned have not found trouble in that respect.

I see that the noble Lord, Lord Monkswell, is frowning. However, I am trying to say that much of the process engineering activity like building reservoirs and large nuclear stations, and so on, is not supposed to be covered by the Bill. It has operated perfectly well and the participants in that industry do not want this to operate. However, the participants in the construction industry do want it because they do not get paid properly.

Therefore, with regard to the noble Lord, Lord Monkswell, and his nuclear site, as I said, that is excluded. As regards my noble friend Lord Ullswater and his vats, they are excluded by virtue of the amendment that I am now proposing to the Committee. It would exclude from the provisions of the Bill large warehouses for vats and so on—for example, vats of, say, olive oil, if one can have such things. However, it would not exclude Sainsbury's and Tesco which have what one might describe as warehouses containing bottles of olive oil. It is the large warehouses which will be excluded but the supermarkets, inasmuch as they may be considered to be warehouses, would not be excluded.

Lord Monkswell

I am sorry to press the Minister, but I believe it would be useful to try to clarify the matter. The noble Earl referred to a nuclear site and said that there were no problems. The industry was quite happy with the way things operate. However, when the Minister refers to a "nuclear site", I wonder whether he means the nuclear vessels and the process pipework that goes into such a site. Alternatively, is he including the whole site which may include the perimeter wall or fence or the gatehouse at the entrance to the site which are obviously just normal construction activities, if I may put it that way? Where is the border line? That is the difficulty.

Earl Ferrers

I believe that I now understand the noble Lord's concern rather more than I did before. I should like to consider the points that he made and write to him. My understanding is that if you are demolishing a whole nuclear site, the whole lot would be excluded and that if you are building a whole new nuclear site, including a gate and a manager's house, then that would also be excluded. However, if you had a site that was already constructed and you wanted to give the manager a jazzed up house and you built it on that site, I believe that the building would be included within the Bill. I believe that we have taken the matter as far as we can at present. I shall certainly consider the points that have been raised and, indeed, will write to the noble Lords, Lord Monkswell and Lord Howie, specifically.

Lord Howie of Troon

I have no wish to persecute the Minister or, indeed, to prolong the debate much further. However, I am intrigued by the references to nuclear power stations. I fear that I must again draw on my own personal experience. I was one of the designers of the pre-stressed concrete pressure vessel for Wylfa nuclear power station which was constructed by Taylor Woodrow, a very well-known civil engineering company, not a process engineering company or anything of that sort. The pressure vessel was constructed by civil engineers, not by process engineers. It was designed by them and built under the standard conditions of contract of the Institution of Civil Engineers. I forget which edition it was; it was probably the second or the third. It was quite a while ago. The exclusion of nuclear activities from construction seems to me odd at best, possibly even perverse.

Earl Ferrers

One of the advantages of such a Committee stage is that it draws out of noble Lords the most astonishing abilities. I did not know that the noble Lord, Lord Howie of Troon, had ever been able to design a pre-stressed concrete pressure vessel. If my mind wafted away while the noble Lord was speaking, it was because I tried to get that linguistic knot right; namely, that it was a pre-stressed concrete pressure vessel.

Lord Howie of Troon

I did not do it all!

Earl Ferrers

Now the noble Lord spoils it. I thought that he had done it all on his own. In any event, he is a very clever fellow to have done even a little of it, even if he just put the lid on.

I have no doubt that that work was carried out successfully, with no trouble and no hassle, as they say. I do not think the noble Lord would have liked all the fandango in this Bill to have applied to that pressure vessel which he was trying to construct. We are not trying to aim the Bill at things like that; we are trying to aim it at the construction industry, where they have had the problems which the noble Lord, Lord Howie, did not have in the case to which he referred.

Lord Williams of Elvel

This has been a long debate and no doubt there will be other long debates on this matter. As the Minister now appreciates, the drafting of Clause 102, and in particular of subsection (2), gives rise to all sorts of complexities. In particular, I am not entirely happy with the Minister's response with regard to my point about "off-shore" versus "on-shore" but we will certainly consider it.

My noble friend Lord Monkswell drew out the point about "primary activity" versus "sole activity". Indeed, that is the point that was at issue when we were discussing whether something was properly described as a nuclear power station or as what the Minister referred to as a jazzed-up house for a manager. I am advised that the word "primary" in Clause 102(2)(c) will give rise to great dispute and earn a lot of fees for lawyers.

With regard to warehousing, I am happy to accept the noble Earl's amendment, which goes a long way towards satisfying what we were aiming at and would deal with Amendment No. 135 as well.

I have no doubt that when we deal with Amendment No. 139 to be moved by my noble friend Lord Howie of Troon there will be further discussions on this matter. In the meantime, I beg leave to withdraw the Amendment.

Amendment, by leave, withdrawn.

Lord Williams of Elvel moved Amendment No. 129: Page 59, line 2, leave out ("or construction of underground works").

The noble Lord said: This amendment covers a slightly different point but is also concerned with exclusions under subsection (2) of Clause 102. We have taken advice on this and it seems to us that construction of underground works is properly a matter for the construction industry and is performed by what would normally be called construction companies even though the works may be underground. For that reason, I would have thought that construction of underground works should be within the ambit of the Bill. I need say no more at this stage because I am sure the Minister understands what I am getting at, but I should be grateful for this amendment to be given proper consideration. I beg to move.

Lord Ezra

Perhaps I could intervene on this point, having had quite a lot of experience of underground works in my time. Something which slightly worried me when we were dealing with the previous block of amendments was that contracts let by the National Coal Board for major projects were clearly divided between civil work, electrical work, mechanical work and mining work, and it is difficult therefore to accept the concept that some of these major projects should exclude one or other of these activities. With regard to the specific amendment which the noble Lord, Lord Williams of Elvel, has moved, it is clearly in my recollection that this type of work was carried out by civil engineering contractors.

4.45 p.m.

Lord Howie of Troon

Before the noble Lord, Lord Ezra, was in charge of the National Coal Board, the board decided to build six coal-mines in Britain in the 1950s. It turned out that there was no one in Britain who had ever designed or constructed a coal-mine at that time. The board therefore appointed six civil consulting engineers to design and construct certain parts of these coal-mines. There were obviously surface works, railways works and road works. In addition, the consulting civil engineers designed the mine shafts. Mining engineers designed the horizontal works—roads and so on—which were the mine proper, but the vertical shafts, which were very deep—2,300 feet in one case, I remember—were construction works and were bored, dug, excavated and lined by civil engineering contractors. Therefore there was a strong element of underground work connected with the coal industry—in the days when we had one—which was construction work and which should be included in this Bill rather than excluded. I support this amendment.

Earl Ferrers

The noble Lord, Lord Williams of Elvel, and I share a common approach to these matters. This part of the Bill and his amendment seemed to me to be perfectly reasonable and I asked similar questions to those which the noble Lord has asked me. The noble Lord, Lord Ezra, told us of his extensive experience at the National Coal Board and what happened there. I was surprised that the noble Lord, Lord Howie, knew about coal-mining. I expect he will tell us before long that he designed and constructed a coal-mine, too!

Lord Howie of Troon

I was too modest to make that claim.

Earl Ferrers

Modesty has always been one of the features of the noble Lord. Clause 102(2)(b) excludes the extraction of minerals, tunnelling or boring, or construction of underground works for that purpose. That excludes from the provisions of the Bill coal-mining operations and so forth. "Underground works" would not apply to projects similar to the Jubilee Line extension, because that is not excluded, but minerals and coal are excluded.

Lord Howie of Troon

There is no point in the Minister's merely repeating what is said in the Bill. We are trying to persuade him, as elegantly as we can, that the Bill is mistaken on this point. The point made by both the noble Lord, Lord Ezra, and myself is that a coal-mine is undoubtedly for the extraction of minerals but, in order to construct a coal-mine, certain operations are required which are undoubtedly construction operations because they are carried out by civil consulting engineers and civil contracting companies. Therefore, to exclude them, whatever is said in the Bill, is merely mistaken.

Lord Berkeley

I am not sure that the fact that the works are undertaken by consulting engineers or anybody else is particularly important to the argument, but I certainly support what the noble Lord, Lord Howie, has said. I should like to refer to something I mentioned in the Second Reading debate on this Bill. In the construction of a motorway, if an area of gravel has to be removed before an embankment is put on top, because that gravel is used for a purpose such as mixing concrete, it is technically classed as a mineral. If this exclusion stands, I assume this particular operation would 'be excluded from the Bill, which seems rather odd.

I also believe—although I stand to be corrected—that much of the excavation from the Channel Tunnel was mineral by definition because it was deposited in the sea and Eurotunnel had to get a licence from the Crown Estates to deposit it. I believe it had to pay something like £1 per cubic metre for the pleasure of leaving it where it should be—in the sea. I am not suggesting that the Channel Tunnel should have been excluded from this measure but, as regards minerals and motorways, this question will arise again and again. I hope that the noble Earl will be able to look at this again.

Earl Ferrers

As I said when we first started to discuss this clause, it is complicated and there are bound to be cases that we need to consider. I am happy to consider this. What I had not realised was that both the noble Lords, Lord Howie and Lord Ezra, were—according to the noble Lord, Lord Howie—wanting to impose upon the mining industry the provisions in this Bill which relate to the building industry. I was surprised when the noble Lord said that because I thought that they did not want that. Indeed, those involved in the majority of these large engineering processes do not want this part of the Bill applied to them. I shall give way to the noble Lord in half a minute. If the noble Lord thinks that they do want this measure, I shall certainly consider the matter. With regard to the point made by the noble Lord, Lord Berkeley, if one is dealing with mineral extraction, that is excluded from the Bill. If one is using the products of extraction, that is not excluded from the Bill if they are used for the purposes which the Bill seeks to cover.

Lord Berkeley

Without wishing to detain the Committee too long, would that mean that if the gravel extracted from under a motorway was sold to someone else it would be excluded from the provision but if it was used for the contract itself it would be included? That is another question.

Earl Ferrers

This is a fascinating series of questions. If I may, I shall take advice on that matter because we are getting into detail here. I would say, without giving any guarantee that I am right, that I should not have thought that if one is removing a piece of gravel from a roadway, that is regarded as mineral extraction. I should have thought it was a normal building process of removing that which was there. That is rather different to digging into a gravel pit. However, I shall consider this matter.

Lord Howie of Troon

I do not wish to impose anything of any sort on the Coal Board, or on almost anyone else come to that. I would merely remind the Minister that when the six coal-mines were constructed—I do not think one builds them; they are constructed in some way—the Coal Board was perfectly happy that they should be constructed under the normal conditions of contract which prevail in the construction industry. I am sure that if it was happy then, the Coal Board would still be happy now.

Earl Ferrers

At last the noble Lord and I are at one. He says that the organisation does not want this provision. We do not want this imposed on it, or upon any organisation if it provides its own contracts. In the experience of the noble Lord, Lord Howie, and the Coal Board, it made the arrangements and its own contracts and was quite happy. That is fine; that is exactly what we want. We only want this measure to apply in certain parts of the building industry where people have not made such provisions.

Lord Williams of Elvel

I am sure that the noble Earl has understood that this is a matter of considerable controversy. The noble Lord, Lord Ezra, has made his contribution, my noble friend Lord Howie has made his contribution and my noble friend Lord Berkeley has made his contribution. The whole question of what is extraction of minerals and what is construction of underground works for that purpose needs to be looked at again. I hope very much that the noble Earl will look at it again. The noble Earl and I agree that we are at the moment probing the meaning of what the Government are putting forward. I believe that the meaning of paragraph (b) is, to put it at its best, far from clear. It seems to me that my amendment is something that the Government really should take fairly seriously. However, I do not wish to prolong the debate because we shall come to a further debate on this whole question of Clause 102. I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

[Amendments Nos. 130 to 133 not moved.]

Earl Ferrers moved Amendment No. 134: Page 59, line 8, leave out ("storage") and insert ("bulk storage (other than warehousing)").

The noble Earl said: I spoke to this amendment with an earlier grouping of amendments. I beg to move.

On Question, amendment agreed to.

[Amendment No. 135 not moved.]

Lord Williams of Elvel moved Amendment No. 136: Page 59, line 12, at end insert ("unless undertaken by the contractor").

The noble Lord said: I am advised—again I have to rely on advice—that there are many occasions on which the delivery of manufactured building or engineering components is carried out by the contractor. It therefore would seem there is a difficult dividing line between what is manufacture—which clearly is not construction—and what is construction. Again we are in a grey area. As I say, I can only take the advice that I have been given that there are many occasions on which contractors get involved also in the manufacture of small components. This paragraph (d) is unsatisfactory as it stands. I beg to move.

Earl Ferrers

The noble Lord refers in this amendment to a number of quite difficult matters. I believe that one of them would include the elements of the so-called "supply and fit" contracts and whether they would be incorporated in part of this legislation. We are sympathetic to the position of contractors who supply things and who then fit them. However, there are difficult problems in this area. I am bound to tell the Committee that it has been far from straightforward to produce a definition of the construction industry for the purposes of this Bill because it involves so many facets. Many different operations go to make a finished building and not all can be regarded as construction activities. Some, such as painting or welding, for example, are just as much part of other industries. What we have to try to avoid is drawing in work in areas which have nothing to do with construction.

What we want to do is to exclude manufacturing as such. The person who makes a hopper or a conveyor belt manufacturers those products. He ought not to be included in this Bill. Contracts solely for the sale and supply of goods are already subject to very different contractual arrangements and are covered by well-established legislation. I hope that few would argue that, where 95 per cent. of the value of a contract was in the manufacture and supply of a product, with just 5 per cent. in its instalment, it would be right to consider this as a construction contract. But the difficulty is where one draws the line. In extending these construction provisions to supply and fit contracts, we would start to cover a great deal of manufacturing activity.

Many specialist contractors are unmoved by such considerations, but there is one point that they might well consider. At the moment they are being paid to supply and fit items such as windows, boilers and air ducts, but what if we changed tack to include manufacturing and supply? If these elements were drawn in by the work of instalment, it seems likely that unscrupulous contractors would try to split them apart. They could buy the product from one firm and then get another to come and fit it. Such avoidance would be easy. I do not believe that that would do much good to anyone.

If a contractor was not using the manufacturer to install a piece of kit on site, with all the obvious advantages which this entails, there would be little incentive for him to look locally for its manufacture. He could fax his specifications abroad and just use the man down the road to fit the final product in place. I believe that that would be a recipe for import penetration.

I would hope that we would be able to use a degree of understanding about this. These matters are inevitably grey areas. We do not want to draw into them unnecessarily those who should not be drawn in.

5 p.m.

Lord Berkeley

We covered some of this issue on the Second Reading debate. I support the amendment. I give the example of a precast concrete beam on a building or a bridge. At present, the manufacturer of that beam is included in the provisions of the Bill if it is manufactured on the site and excluded if it is manufactured off the site. It is more efficient on most occasions to make these components off the site. The contractor may well choose to do it himself; he may well choose to buy it in. To some extent even Amendment No. 136 does not quite cover this point.

Perhaps I may put forward another idea: to exclude from the terms of the Bill the manufacturer of equipment which is not specific to the contract under discussion. If it is specific to the contract, I believe that it should be included.

Lord Howie of Troon

Perhaps I may help the Minister. These are complicated matters. We seek to clarify them for the noble Earl in the hope that the Bill will eventually be understood by the remainder of us. We are not doing too well so far.

Perhaps I may refer to the Waterloo International terminal—Waterloo Railway Station, as I prefer to call it; it is not too far away. Let us for a moment call it a piece of architecture and get away from construction, and so on. The train shed is steel, made in a factory somewhere, brought on to the site and assembled. The architect was Nicholas Grimshaw and the engineer was Tony Hunt. That component seems to be excluded from the Bill. However, the undercroft to that station—it is very large—is mainly massed concrete designed by Alexander Gibb. I cannot remember the contractor although he is important. That part of the railway station would be included in the Bill.

On the other hand, certain elements in the undercroft are precast concrete pieces. My noble friend Lord Berkeley mentioned earlier that those would be manufactured somewhere and brought on to the site. We have a needless complication. We have reinforced concrete and prestressed concrete—elements which are brought on to the site and excluded from the Bill. We have structural steel elements, and glass, which are brought on to the site and excluded from the Bill. But a large part of that structure is included in the Bill.

I know that the Minister will reply that the client can come to any contractual arrangements that he likes. That is quite correct. But this series of exclusions complicates matters quite needlessly. It would be much more sensible if the station, or any similar construction, were to be regarded purely as a piece of architecture, and dealt with in one contractual package.

This would greatly simplify the worries that I see the Minister has. His brow has been furrowed for two hours now; and I dare say that it will be furrowed further. However, I hope that he agrees with the amendment that we put forward as mildly and patiently as we cans.

Lord Berkeley

As regards Waterloo Station, on page 59 of the Bill line 21 excludes security systems. Those are a massive part of Waterloo Station. I believe that security systems and the like are one of the biggest causes of delay in construction. I am worried to see such things excluded from such a contract.

Earl Ferrers

I am sorry if I gave the appearance to the noble Lord, Lord Howie, that my brow was furrowed. Whenever he speaks the furrows go. It is a moment of charm and happiness when I hear the noble Lord speak. He is now a great authority on Waterloo Station. Perhaps we shall find that he designed the hinges for the front door.

We seek to achieve a simple aim: to make sure that the payments of the construction industry are correctly applied. That is what the Bill is about. We then discuss these vast, grandiose schemes such as mining, nuclear constructions, Waterloo, and so forth, and those muddy what we seek to do in the Bill.

The noble Lord, Lord Berkeley, said that if you build a concrete component on the site you are covered by the Bill; and if you build it off the site, you are not covered. He is quite right. There is good reason for that. One does not want to cover people who manufacture things—air ducts, ventilators, or, for instance, bricks or concrete boxes. Those are brought on to the site. We want to cover only those who would deal on the site.

The noble Lord, Lord Howie, said that the steel work, glass and concrete lumps (if lumps were brought on) in Waterloo Station were constructed elsewhere and would not be covered by the Bill. That is perfectly true, because they were constructed perhaps 100 miles away. What matters is what occurs on the site.

I shall look at the points made by the noble Lords. This is not a simple area. I have never conceded that it is. But we have to be careful that we do not spread the Bill far too wide. We must allow those people who manufacture to do so in the way that they can. When the item comes on to the site, if the manufacturer's job is to fix a thing down, that should be part of the manufacturing, and does not come into the construction part. It is merely the fitting in of a part manufactured elsewhere.

I doubt whether I have been able to satisfy the noble Lord, Lord Howie. I sometimes do not find him too easy to persuade when he has an idea. But I shall consider what he said to see if we can go further.

Lord Swinfen

Can my noble friend tell me whether it makes a difference if the component is manufactured by the contractor or by someone else? A reinforced concrete beam could be manufactured either on site by the contractor or in the contractor's own workshops several miles away and brought to the site. The manufacturer and contractor at that point are the same person. That may not be so as regards other components.

Earl Ferrers

I think that I am right to say—I shall need to consider it—that where a piece of material is manufactured by someone else and brought into the site, that is not covered by the Bill. But I would think that the situation where a person who is a party to the contract manufactures his own component and brings it on to the site was covered. However, that is a point of complexity. I should like to take advice on it before I give a totally reassuring reply.

Lord Williams of Elvel

With great respect to the noble Earl, I do not think that that situation is covered in the Bill as drafted. It would be covered by the amendment that I propose. If the noble Earl accepts the amendment that I propose, or some equivalent wording, I am happy to rely on the Minister to produce appropriate wording. If what the noble Earl has just announced is his intention, I hope that he will accept the amendment.

Earl Ferrers

When one is presented with a curious position at a moment's notice, as it were, it is not always easy to give the right answer. I should like to consider the matter. The noble Lord, Lord Williams, would consider it if he were in my position. If I give a wrong answer, he jumps down my throat. If I say that I wish to give a right answer he jumps down my throat for saying that too. I shall consider the matter and give a correct answer if I have given an incorrect answer. I hope that I have not done so, but I may have done.

Lord Williams of Elvel

I am sure the Committee will be very interested in the correct answer when it finally comes out. I am convinced that if the noble Earl accepted the arguments, which he seemed to be accepting, towards the end of the remarks of his noble friend Lord Swinfen and of my noble friends Lord Howie and Lord Berkeley, my amendment would stand as it is.

Nevertheless, the noble Earl will no doubt give me and the Committee the correct answer in due course. In the meantime, I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Lord Williams of Elvel moved Amendment No. 137: Page 59, leave out lines 18 to 22.

The noble Lord said: A few moments ago my noble friend Lord Berkeley raised the question of the installation of security systems, including burglar alarms. I raise the question of, signwriting and erecting, installing and repairing signboards and advertisements…the installation of seating, blinds and shutters…the installation of security systems, including burglar alarms, closed circuit television and public address systems", all of which seem to us to be construction activities carried out by construction companies. I cannot for the life of me see why the Government have excluded these activities by means of paragraphs (g), (h) and (i) in the Bill. I am advised by people who know much better than I do that all are activities which should be within the ambit of the Bill. I beg to move.

Viscount Ullswater

I am attracted to the amendment moved by the noble Lord. Until I have heard what my noble friend might have to say to convince me, I cannot see that these particular operations should be excluded from "construction operations". I tried to make clear in my previous remarks the difference in respect of, as it were, the process industry in the building and civil engineering industries, which is respected in the Bill; and Clause 102(2) attempts to achieve that balance. We have had long discussions as to whether it succeeds. I am not persuaded at present that the exclusions in paragraphs (g), (h) and (i) have any connection at all to the sort of balance to which I referred.

I mentioned the definition of the Bill given by the Latham Review Working Group 10. These forms of operations fall within the definition of construction operations under that definition. I know that we are not importing that definition, although I think the noble Lord, Lord Howie of Troon, will seek to persuade the Committee that that is what we should be doing. Having said that the working group accepts these items as being part of construction operations, I hope that my noble friend will at least consider this amendment. I believe it to be quite proper.

Earl Ferrers

As I have explained on more than one occasion, this has not been an easy Bill to draft. This particular clause has not been easy, because it would either include too many people or exclude those who should be included. We have put this Bill forward as our considered thoughts as to the way ahead. Being a good, listening, caring Government, we listened to what people said to us before the Bill took shape and to what has been said during its passage. I have already proposed Amendment No. 134, which the Committee was good enough to accept, to make sure that work on warehousing is fully covered. It may well be that some of the exclusions that were appropriate when we originally drew up the list might not he appropriate when it comes to dealing with contractual relationships.

I am still far from convinced that the work of signwriters and signboard specialists should be included in these provisions. But as to the installation of seating, blinds and shutters, and also of security systems, sufficient doubts have been raised. I was sorry that the noble Lord, Lord Williams, laughed when I said that we were a listening, caring Government. The noble Lord made a speech, I listened to it and I am prepared to consider it. I will consider these matters: they are important, and we are not convinced that we have got them right. If the noble Lord will withdraw his amendment, I will certainly see that they are considered, I hope before the next stage of the Bill.

Lord Williams of Elvel

I am most grateful to the noble Earl, who has now changed from being King Lear to being a listening, caring government Minister. We are very grateful for that. I very much hope that he will listen not only to my arguments but to those of his noble friend Lord Ullswater. Coming, as they do, from his own Benches, they may be equally persuasive as the arguments coming from this Dispatch Box. They make sense.

Earl Ferrers

The noble Lord should not try to drive the screw in too far. Of course I listened to my noble friend with deep interest.

Lord Williams of Elvel

I shall drive in any screw or knife that I have as far as I wish. However, I am grateful to the noble Earl. On that understanding, I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

5.15 p.m.

Lord Williams of Elvel moved Amendment No. 138:

Page 59, line 34, at end insert—

("() Any order made under subsection (4) is subject to approval by resolution of each House of Parliament.").

The noble Lord said: This amendment responds to a concern expressed by the Delegated Powers Scrutiny Committee of this House. The committee called attention to the Secretary of State's powers to amend the primary legislation under Clause 102 simply by negative procedure.

It is our belief, a belief reinforced by discussions we have had, that because these definitions lead us into all sorts of grey areas, if the Government (any government) wish to change the definitions and exclusions in Clause 102 it should be for them to come forward and make a case before both Houses of Parliament. It is not enough simply to have a negative resolution amending primary legislation in an important matter such as this.

The Committee will he aware of the report of the Delegated Powers Scrutiny Committee. I do not wish to elaborate on that. It will be aware of the large print in that report drawing attention to this point. I believe that the committee is right, and that the amendment I have tabled would satisfy those concerns. I hope it satisfies the Committee. I beg to move.

Earl Ferrers

We must make sure that contract legislation can move in step with the way industry goes. It has to take account of new developments.

Most of the changes that we are likely to make will be very small and detailed. However, I entirely agree with the noble Lord, Lord Williams. The modification of primary legislation is something that we should take very seriously indeed. The noble Lord made a good case for suggesting that this provision should be subject to affirmative resolution. I am not sure that his wording is quite right. However, if he will withdraw his amendment at this stage, I will see that an appropriate amendment is brought forward at a later stage.

Lord Williams of Elvel

I am most grateful to the noble Earl. On that understanding I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Lord Howie of Troon moved Amendment No. 139:

Leave out Clause 102 and insert the following new Clause—

MEANING OF "CONSTRUCTION OPERATIONS"

(".—(1) For this Part "construction operations" means, subject to subsection (2), operations of any of the following descriptions—

1. (a) construction, conversion, alterations, repair, extension, fitting out, maintenance, restoration, demolition or dismantling of buildings or structures or works above or below ground, including certain off-shore installations (whether permanent or not);
2. (b) preparation for intended buildings or structures, including but not limited to site clearance, earth moving, exploration, investigation and excavation, tunnelling and boring, erection of scaffolding, site restoration, dredging, landscaping provisions of roadways and other access works, and laying or installing the foundations of buildings, structures or other works, including the provision of temporary services;
3. (c) construction, alteration, conversion, extension, demolition or dismantling of any works forming, or to form, part of the land, including walls, roadworks, power lines, telecommunications operations, aircraft runways, docks and harbours, bridges, tunnels, railways, inland waterways, pipelines, drains and reservoirs, water mains, wells, sewers, process plant, industrial plant and installations for the purpose of land drainage, flood control, coastal protection and defence and including light houses, whether on-shore or off-shore;
4. (d) installation, conversion, alteration, repair, extension, restoration, demolition, dismantling or maintenance in or on any building or structure, or works of systems or components of systems, including but not limited to control systems, heating, lighting, air, hydraulics, drainage, sanitation, water supply and distribution, fire protection and alarms, security systems, intruder alarms, closed circuit television, public address systems, lifts, escalators and elevators;
5. (e) painting or decorating, repair, redecorating, cleaning and other maintenance or finishing including water proofing or application of internal or external finishes.

(2) The following operations are not construction operations within the meaning of this Part—

1. (a) off-shore drilling for, or extraction of, oil or natural gas;
2. (b) extraction (whether by underground or surface working) of minerals except insofar as this is borrow pit working for spoil for construction works;
3. (c) making and repair of artistic works being sculpture, murals and other works which are wholly artistic in nature.

(3) References in this Part to construction operations shall be taken as including—

1. (a) the work of individuals participating in the carrying out of such operations, and
1863
2. (b) the professional work of all consultants in relation to such operations, including but not limited to the management of such operations, and the preparation of designs, plans, drawings, specifications, reports, feasibility studies and surveys.

(4) The Secretary of State may by order made by statutory instrument add to, amend or repeal any of the provisions of subsections (1), (2) or (3) above, as to the operations and work to be treated as construction operations for the purposes of this Part and any such order shall be subject to approval by resolution of each House of parliament.").

The noble Lord said: This very large amendment seeks to leave out Clause 102 and insert a new and better clause.

I have followed the general shape of the clause as drafted in the Bill, but I have changed the contents to some extent, largely by transferring some of the present exclusions in subsection (2) of the existing clause to the inclusions subsection. I did so having taken the advice of the Institution of Civil Engineers, the Contractors Liaison Group, the Construction Industry Council, the Federation of Civil Engineering Contractors—which agreed with me, but had slight, modest reservations—and sundry other bodies that I shall not list.

None of the people to whom I have spoken in the past week or so believe that the clause is satisfactory as it stands. As I said earlier, I have not excluded the process construction engineers; I have an open mind about them and I listened carefully to the comments of the noble Viscount, Lord Ullswater, in that regard. I wanted the Minister to put on record his reasons for excluding them and he has done so, so I shall not repeat them now.

As I understand it, from my recollection of what the noble Lord, Lord Lucas, said at Second Reading, Clause 102 is based on a definition in the Income and Corporation Taxes Act 1988. I looked at the Act and found it to be enormous, but I am glad to say that the clause itself is only small. The Latham Review Working Group 10 also looked at that definition and came up with a definition broadly based on it, but rather more inclusive than the Government's definition. It is interesting that the WG10 definition is much nearer to mine than it is to the Government's—that is because I largely based it on WG10's work with modifications which were brought to me from elsewhere.

There are many projects which involve large numbers of contracts and subcontracts. It is right to legislate for payments, methods of adjudication and so forth. Where there are a large number of contracts and subcontracts it makes sense that they are all based on the same presumptions and general rules. The exclusions therefore should be kept to a minimum. The Committee will see from my amendment that I have reduced them as far as I reasonably could.

I do not intend to go through this large amendment in any detail. However, under paragraph (a) I included offshore installations, which the Government did not include. By that I mean constructions such as lighthouses, breakwaters and the kind of jetties that I mentioned earlier, none of which are mentioned in the Bill and all of which are important.

As the Committee goes through the amendment it will be apparent that I tried to identify as many obvious operations as I could. I know that there is a danger of including too much and causing lawyers a certain amount of joy. But the Government included a fair number and I have merely added a few more. At this stage I want to make just two points. The noble Lord, Lord Berkeley, will be pleased to note that in subsection (2)(b) I amended the part concerning extraction to say, except insofar as this is borrow pit working".

The noble Lord's point is a good one and I am sure that the Government will take it on board.

The last minor point I want to make is this. I notice with a little surprise that the Bill, in subsection (3)(b), speaks of, the professional work of—

1. (i) architects or surveyors, or
2. (ii) consultants in building, engineering, interior or exterior decoration or in the laying-out of landscape".

That was taken from the income tax Act I mentioned earlier. But, oddly enough, in that Act those groups of professionals are not split into two—there is no reason why they should he because they are all doing construction work. I covered that in a rather different way in subsection (3)(b) of my amendment.

I do not want to take up any more time on this because the major points of the new clause were discussed and debated in the amendments we have been considering for the past hour or so. It is a much simpler matter than the Government seem to think. They could have solved a lot of their problems if they had taken up the sixth edition of the Institution of Civil Engineers' standard conditions of contract or perhaps the new engineering contract on which Sir Michael Latham was quite keen and which he used as a basis.

I hope that the Minister realises that Amendment No. 139 is intended to assist him and to clarify what he must by now see is a clause in his Bill which produced a certain amount of confusion and misunderstanding, not only here, but also outside in the industry. I beg to move.

Viscount Ullswater

The amendment of the noble Lord, Lord Howie of Troon, is a comprehensive definition of construction operations which is much closer to the definition of the Latham Review Working Group 10 definition that I mentioned earlier. I recognise the problem of trying to include some contracts and exclude others from the provisions of the Bill. It is the later provisions of the Bill that are helpful to the industry and, though we are having long discussions about what contractual operations mean, it is the later provisions that are of benefit.

The noble Lord's definition will affect every construction site, as he indicated, whether it is a building site, a civil engineering site or even a process engineering site. It would make all the construction operations on that site subject to the provisions of the Bill. I know that that is what the noble Lord intends because that is what he says, in a rather provocative way, because he wants to be persuaded that the process engineering industries have a title to be excluded. As I indicated, that may lead to severe problems within the industry.

I am content therefore to see the definition remain as it stands in the Bill, with some of the amendments that we have been discussing for the past hour or so. The noble Lord, Lord Howie, indicates that he wants the minimum of exclusions and indicated some of those in his amendment. I should like to mention one exclusion which has not been mentioned in an amendment but I feel that I should raise it at this stage. I wonder whether there should be some de minimis exclusions for relatively small contracts. I mentioned that point to my noble friend when I had a meeting with him. Are we expecting the repair to a broken window in some commercial property which has been requested in writing to be subject to all the provisions of the Bill? I believe that there should be a limit of perhaps £25,000 on any one contract so that the Bill is seen to apply more particularly to the larger contracts instead of bogging down small business in a whole series of red tape.

The reason I make that suggestion is because I believe there is a precedent for it. That comes into the construction, design and maintenance regulations of 1994 which I understand are health and safety regulations and therefore not similar to the de minimis provision I have in mind. However, it excludes small sites from those regulations where the number of workers is less than five. There is therefore a good precedent for that and perhaps my noble friend can say something about it at this stage.

Lord Monkswell

In rising to support the amendment of my noble friend Lord Howie of Troon, perhaps I can put forward a different viewpoint for consideration. The noble Viscount, Lord Ullswater, suggested that there is a need to exclude certain aspects from the operation of the Bill because they are not wanted by those specific industries—mining, the process plant industry and small contracts. I wonder whether that is because of a misconception of what the Bill is about.

I may have misconstrued it altogether but it seems to me that the Bill seeks to ensure that where we have a contractual morass within the construction industry there is a fall-back position to protect everyone in the industry from the previous regime of litigation concerning contracts that have not been fulfilled adequately and endless arbitration and disputes procedures. It is a fall-back position to protect the people operating within the industry rather than an imposition of some new series of regulations, red tape and other paraphernalia. If one looks at it in that light, the arguments from the processing industry, the mining industry and the small contractor effectively fall away.

I am concerned that, because of the way the Government seem to have drawn the exclusions so far, we could end up with the core of the construction industry being covered by the Bill and the periphery that affects the construction industry being covered by other legislation such as the Sale of Goods Act, but there could be a grey area between the core and the periphery that would not be covered either by the Bill or by the Sale of Goods Act. That could develop into a morass of its own and interested parties would no doubt feel that they could get an advantage by operating within that grey area. It may be that my interpretation of what the Bill sets out to do is completely erroneous, but my view may also have some merit and therefore should colour the way the Government and the noble Viscount, Lord Ullswater, consider the issue.

5.30 p.m.

Lord Berkeley

I strongly support the amendment proposed by the noble Lord, Lord Howie of Troon. Perhaps I may follow on from some of the remarks made by the noble Lord, Lord Monkswell. Since the noble Lord, Lord Howie, and I started in the industry the enormous change has been the increase in subcontracting—and not just one but several different layers. As the noble Lord, Lord Monkswell, said, it is often the small people at the end of the chain who will suffer. I therefore believe that having a lower limit would be counterproductive. This should be seen as a simplification and a benefit for them and I am sure they all welcome it, as do many of the of the organisations listed by the noble Lord, Lord Howie.

One item may be missing from the noble Lord's otherwise excellent definition. I go back to our supply of precast concrete beams and whether or not they are special. If the Minister looks with favour on the amendment, perhaps that part could be looked at again.

Baroness Hamwee

Perhaps I may take this opportunity to pursue a point made by the noble Lord, Lord Howie of Troon, and to ask for the Government's thinking on it. I refer to professionals. Normally there is a distinction between the supply of goods and the supply of services. I should be interested to know a little of the Government's thinking in revising that to the extent that they have in Clause 102.

Another question has been put to me. I do not share this concern but if others do it is a concern that should be addressed. The question is about whether certain further exclusions ought to be made. I do not read them as being included within the Bill but the contracts that have been mentioned to me are contracts such as insurance and guarantee, including the provision of bonds, the financing of construction operations and joint venture agreements. Can the Government confirm that arrangements of that type are not covered?

Earl Ferrers

The noble Lord, Lord Howie, has given us a fairly complex amendment to deal with. He was kind enough to say that he put down the amendment so that I could give my reasons for what we have put down and that as I had already done so I need not do so again. That delightfully gets me off that hook and I am grateful to him for that.

Many people complained that the clause is too long. However, the noble Lord's amendment is even longer. I can only say that if the noble Lord constructs a building like he constructs a clause it must be a very decorative and interesting building at which we would all have to look, even though it may not necessarily be one of artistic merit. I shall consider the merits, artistic or otherwise, of his amendment.

We have had the advantage of the views of the noble Lord, Lord Monkswell. I did not realise that he is such an expert on these matters. I understand that among other great attributes that he has he is a jobbing electrician and that he has even done work in your Lordships' House. It was very brave of the works directorate to give such a desperately important job of work to the noble Lord; that probably explains why the lights in my room always go "phut"! Lord Monkswell: Perhaps I may explain to the noble Earl that I had no involvement in making any connections with regard to the electrical work, so any faults he may find are not down to me. I would also advise him that I had a period in the construction industry some 30 years ago, and it advises me even today. I also have contacts within the construction industry even now.

Earl Ferrers

I am deeply relieved to know that the noble Lord did not have any responsibility for connecting electricity in the House. Obviously when my lights went "phut" it was only the bulb and not due to the misapplication of any sophisticated technique.

The amendment tries to provide a more comprehensive definition of the construction industry not only by adding in certain areas of work which we believe should not be there but also by going over some fairly undisputed ground in much greater detail. I think that very often less is more. In other words, it is better to have less than to have more. The amendment is designed to define the construction industry in respect of a different issue in that the noble Lord uses the working group 10 definition. That was based on a totally different issue; namely, the liability for latent defects, which was also commented upon in the Latham review. It specifically included the suppliers of components, which we have already discussed. The working group definition may serve well for the purpose the working group had in mind but I do not think it is satisfactory for our purposes.

I do not think it is necessary, for example, to add "conversion" and "restoration" to the list of activities in subsection (1)(a). Those are already covered by "alteration" and "repair". It is unnecessary to refer specifically to "water-proofing" in new subsection (1)(e). I would hope that the construction of a building, even one designed by the noble Lord, Lord Howie of Troon, would always be taken to mean that the finished product will at least be waterproof and will keep out the rain.

In its enthusiasm to ensure that no conceivable construction activity should fail to get a mention in the Bill, the amendment provides a new definition which is very extravagant in its coverage. For example, under the amendment having a car resprayed would count as a construction activity under new subsection (1)(e). That is a very remarkable thought and a quite acute misdirection of effort for this part of the Bill: any obvious error can be rectified easily. But it illustrates the point that many activities which take place in the construction industry also take place in other industries. The boundary has to be drawn with care and restraint.

The original Clause 102 allows for the exclusion of work on plant, machinery and steel work for the process engineering industry. I hope that we may be able to discuss this fully when we reach a number of the detailed amendments later on. I point out that one of the Government's main difficulties with the noble Lord's alternative definition is that it does not deal appropriately with process plant.

There are always good things in anything which the noble Lord, Lord Howie, suggests: we have to hunt for them sometimes, but they are there. He will find that the Government are prepared to move some of the way towards him. They have done so. I forget the word which the noble Lord, Lord Howie, used, but I believe he said that he was satisfied or encouraged, and they were words of an approbatory nature as regards Amendment No. 134.

My noble friend Lord Ullswater thought that there should be a de minimis exclusion of small works of about £25,000. I understand why he said that. He was concerned that if one asked a person to put a new window in one's house, one should not have to go through all this rigmarole. In fact, I do not believe that it will be necessary to do all that. The danger of fixing a downward limit is that contractors may find it convenient to split up a large contract into a number of smaller ones so that they are below the figure of, say, £25,000. Oddly enough, if one took my noble friend's suggestion on board, one would have to realise that it is very often the small contractors who are most hit. For all that, I quite agree with my noble friend that if one has a contract for £100 one would not necessarily expect to have all the rigmarole of this part of the Bill attached to such a contract.

I wish to think about what my noble friend has suggested and find out whether there is some way of making it clear that it does not refer to the ordinary jobbing builder or electrician, if one may so put it, but that it does not also fall within the trap of enabling people to split up large contracts into a number of smaller ones, which would have a bad effect.

The noble Baroness, Lady Hamwee, asked whether the professionals were included. This measure has been put forward deliberately because there are professionals of different kinds whose work affects so much of what goes on in the construction industry. She also asked whether insurance was covered. An insurance contract as such is not in the Bill. If it is construction work it will be covered, but the insurance itself will not.

I understand the reason why the noble Lord, Lord Howie, has tabled this amendment. I know that he means the amendment to be helpful, but it is not helpful to try to define too many things, as his amendment does, because it constrains the operation of the Bill very considerably. I shall certainly take account of what has been said, but I suggest to the Committee that it would be better to accept the clause as it is in the Bill and to see whether there are any ways in which we can make it better, having considered all the views which have been expressed in Committee today.

5.45 p.m.

Lord Howie of Troon

When I seemed to speak in praise of Amendment No. 134, which I did, gladly, I was trying to intimate to the Committee that in bringing forward that very small amendment the Government had become dimly aware of the fact that their definition was unsatisfactory and that they were trying to make amends, albeit in far too modest a way. I am pleased with what little we got. I have high hopes that our debate so far will produce further amendments and improvements to the Bill.

The Minister mentioned the phrase "less means more". He will realise that that phrase was coined by Mies van der Rohe, the famous architect; therefore, it is totally appropriate for a debate about the construction industry. The noble Earl suggested that I put too much in the amendment, and he could be right. I shall leave it at that. There is one merciful thing in what he said. He did not say that in the size of the definition the Government "had got it about right". That is what they usually say on these occasions. They usually say that the precise number of words that have been put in are right. In fact, there is no doubt at all that their definition is too scanty and I have tried to make it less so and more inclusive.

The noble Viscount, Lord Ullswater, put his finger on my reason for bringing forward this amendment and it is this. I welcome Part II of the Bill in general terms and I have done on numerous occasions. It is intended to help the industry. It can only do that to the extent to which the industry is included. We know from our examination of Clause 101 as it stands at the moment that that leaves out about half of what is normally considered to be the construction industry. So one pleases half of the construction industry and the other half is left weeping into its beer. That is why I have tried to extend the element of inclusion so that the aim which the noble Viscount, Lord Ullswater, identified can be properly met and not only have half a job done, which the Government seem to be content so to do. As regards the exclusions, I speak purely from memory, but I believe I am right in saying that they were WG10 exclusions. I may be mistaken, but that is my recollection.

My last word on the subject at the moment is this. The Minister reminded us of latent defects. I can recall several unhappy hours in this Chamber debating at great length the latent defects Bill several years ago. We ended up with an Act which was totally unsatisfactory. One of the unsatisfactory parts of this Bill—and I shall not press the matter at the moment—is that it does not include latent defects. It should, because the present legislation is very poor.

However, I have high hopes that the noble Earl will be convinced, even persuaded, by the arguments which have been put forward from all sides of the Committee this evening and that he will consider what has been said and redraft Clause 102 nearer to the kind of perfection that we seek. In that hope, I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Clause 102, as amended, agreed to.

Clause 103 [Provisions not applicable to contract with residential occupier]:

The Deputy Chairman of Committees (Viscount Allenby of Megiddo)

Before calling Amendment No. 140, I should inform the Committee that if this amendment is agreed to I cannot call Amendment No. 141.

Lord Howie of Troon moved Amendment No. 140: Page 59, line 35, leave out subsection (1) and insert— ("(1) This part does not apply to a construction contract which is exclusively for the provision of a dwelling for one of the parties (whether the dwelling is provided by the erection or the conversion or enlargement of any building or structure) or which is for work done on or in relation to such a dwelling, including the means of ingress thereto or egress therefrom.").

The noble Lord said: Nothing would induce me to prevent my noble friend Lord Williams of Elvel from moving Amendment No. 141, so I shall not be pressing this amendment and therefore it will not be passed. I await Amendment No. 141 with bated breath.

As the Bill stands, its provisions do not apply to someone who "intends to occupy" a dwelling. We all know where good intentions lead. We also know that intentions may change. An intention to occupy, which can be changed at any time, will be sufficient to avoid the provisions of the Bill. I am perfectly sure that that cannot have been the intention of the Government. The dwelling in whole or part is required to be the subject of operations to which the contract relates. These operations may include non-dwellings, for example an office block with flats above. Therefore, it is important that only contracts relating solely to work in connection with a dwelling are excluded from the legislation by this provision. The amendment is intended to tighten up a part of the Bill that needs it. I beg to move.

Lord Williams of Elvel

The amendment moved by my noble friend Lord Howie of Troon is grouped with Amendments Nos. 141 to 143. I shall refer in particular to Amendment No. 141. The Committee will be aware that the problem described by my noble friend is a serious one. The expression in the Bill as it stands is rather vague and uncertain. The clause excludes contracts with the residential occupier from Part II of the Bill. It is intended that such properties should not be affected by the construction contract regime. My amendment has the effect of deleting the concept of occupation from Clause 103 and substituting mere possession of the residence as a qualification for exemption. The amendment is suggested by the Law Society of Scotland. It has examined the drafting with great care. It has serious doubts about what "occupation" means. Does it mean actual or constructive residence? When is the intention to occupy formed? Can a person occupy one property and simultaneously intend to occupy another? Those are questions which the Law Society of Scotland is worried about and which give rise to the amendment.

Amendment No. 142 is also proposed by the society. Its effect is to modify the definition of "flat" by removing the peed for a flat to be a self-contained property. In the view of the society, the concept of self-contained flats does not take account of Scottish law dealing with tenements or the nature of tenemental property. The ownership of Scottish tenements is qualified by the concept of common interest. That includes mutual obligations of support and maintenance, especially in terms of common property such as passages and stairs. The roof may also be common. Furthermore, the terms of Clause 103(2) take no account of the fact that many properties are not self-contained. There may be common elevators and car parking and refuse disposal facilities. In an undeveloped property there may even be a common water closet. The society believes that the amendment is necessary for clarification.

Amendment No. 143, which I endorse, stems from the same source. The amendment is consequential upon the Committee agreeing to Amendment No. 142. I hope very much that the Government will favourably consider amendments put forward on behalf of a serious body which has looked carefully at the issue. There are some problems in relation to Scottish law. I am sure that the Government are glad to be made aware of them.

Baroness Hamwee

A person may occupy one property and intend to occupy another, particularly if the other property is in the course of construction. Looking at Clause 102(1), that is not necessarily the case if the property is in the course of extension, and certainly not if it is being demolished or dismantled. The noble Lord, Lord Williams of Elvel, has made me think about the words, "as his residence". To occupy property as one's residence suggests that that may be one's main residence. I should like to know whether or not that is intended. If "any residence" is intended it may be clearer to have the words, "occupation of it as a residence".

Lord Hylton

It would he very helpful if, when the Minister replies, he explains why Clause 103 seeks to exclude residential occupiers. To my knowledge, there have been some very bad cases where individuals, who have not received professional advice, have entered into contracts, for example, for the purchase of prefabricated houses or other kinds of system built residences. In the event, it has been found to be unsuitable for the purpose. I would have thought that individual owner occupiers were exactly the kind of people who needed the protection of the Bill.

Lord Monkswell

I support the amendment moved by my noble friend Lord Howie of Troon. I, too, question why the exemption is needed at all. Perhaps the Government can explain the purpose of Clause 103.

Earl Ferrers

I am glad to say that none of the amendments in this group is at odds with the principle of having an exclusion for contracts with residential occupiers. We believe that such an exclusion is needed for two reasons. First, there is already in place considerable legislation to protect the right of the consumer. In this case, the client will be a consumer as it is a household contract. Secondly, there is a small but significant risk that unscrupulous contractors may try to browbeat those unfamiliar with the new law into paying for shoddy work. I hope that that satisfies the noble Lord, Lord Monkswell. It is prudent to ensure that the provision does not apply to those who carry out works on their own premises, but wanting an exclusion and getting it right are two very different matters. Even if Clause 103 is not yet quite right we must be careful that we do not make matters worse.

For example, Amendment No. 141, in the name of the noble Lord, Lord Williams of Elvel, would have the undesirable effect of removing the exclusion of contracts where the owner was not actually in residence at the time of the work. That would be likely to be the case if the house was being built or extensively repaired. I can think of an occasion when the noble Lord, Lord Williams, may buy a house and wish to do it up. He may desire to get out of the way while all the dust and filth is lying around. He may go off to somewhere like Crete and have a nice holiday and come back to find that everything is all right. Under the amendment that particular situation will not be excluded from the Bill. Similarly, although Amendment No. 140 in the name of the noble Lord, Lord Howie of Troon, has a great deal to commend it, it would not cover the situation where, for instance, one part of a house had been converted into a flat and the main householder wants to place a refurbishment contract for the whole building.

It is true that at present the residential exclusion would not apply to a contract which was related solely to work on common areas. We have to give more thought to that point. There is clearly a great deal to consider, particularly in the light of the views expressed by the noble Lord, Lord Williams of Elvel. I am concerned that it should be fair and workable.

The noble Baroness, Lady Hamwee, asked whether "residence" means main residence. When the Bill refers to "residence", it means any residence. So it would include a second home or a holiday cottage. I believe that covers her point. It would be a pity to insert any such constraining words as "main residence", because that muddles it up, and I understand that is not the noble Baroness's purpose. I hope that she will be content with the word "residence". It means her house in London, her house in the country, her house in Scotland, her house down at the seaside, or wherever she may be. If it is her residence, it is covered by the Bill.

I am not sure what the noble Lord, Lord Hylton, was aiming at, if I may be so rude as to say so. He asked a question which I find difficult to answer because I am not certain what he asked. I am not suggesting that he should necessarily ask it again, unless he wishes to do so. I should like to look at Hansard, consider what he said and to write to him to give him a proper answer.

6 p.m.

Lord Monkswell

I wonder whether I may intervene. The Minister suggested that under the terms of a contract under this Act, as it will become, a consumer might be required to pay for shoddy work. I am sure that he did not mean to suggest that one of the results of the Bill will be that parties to a contract have to pay for shoddy work. I am sure that he did not mean that, and I give him the opportunity to correct what he said.

The Minister explained that domestic consumers, if one can describe as a domestic consumer someone who is having work done on his house or building a new house, are covered by other legislation. But what about the contractor who may be at risk from an unscrupulous consumer?

Lord Williams of Elvel

I hope that the Minister will not brush aside the problem of "occupation" and "intention to occupy" which the Law Society of Scotland raises. It is not clear to me—we have had this before in Part I—when an intention to occupy is formed. I can intend to occupy the Minister's house in Norfolk, say, at some stage in the future. I am not sure whether I shall be able to do so, and in what circumstances, but that is my firm intention. In 20 years' time, I shall be living in the Minister's house. Is that an intention to occupy?

Earl Ferrers

In no way did I mean to disparage the words of the noble Lord, Lord Williams, and still less those of the Law Society of Scotland. What I was saying was that if his amendment were accepted there would be the difficulty that if the building was being worked on and he was not in residence because he decided to go away, that part of the construction would not be covered by the Bill. I take account of what he said, but I understand that his amendment would leave that loophole, which is something we do not want.

The noble Lord asked when an intention becomes a fact. I believe that we had this discussion the day before yesterday. He may say that he wants to live in my house, and has every intention to. I can tell him that he jolly well will not. So however well-intended his intentions may be, they might not come to fruition. On the other hand—if we are going personal—if the noble Lord were to offer me a handsome sum of money, the conditions would be separate and different. However, I do not think that is likely either.

Lord Williams of Elvel

All that I am saying is that we need some definition of the words "intention to". I hope that the Government will be able to satisfy us, either by ministerial statement of what it means so that the courts can understand, if it comes to that, or produce something on the face of the Bill.

Earl Ferrers

I shall look into the point made by the noble Lord.

Lord Howie of Troon

I sincerely hope that the Minister will pay particular attention to the comments on the Scottish question made by my noble friend Lord Williams. Matters of great importance to my fellow countrymen were raised, and dealt with eloquently by a fellow Celt. However, in view of the Minister's explanation, I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

[Amendments Nos. 141 to 143 not moved.]

The Deputy Chairman of Committees

Before calling Amendment No. 144, I should inform the Committee that if the amendment be agreed to I cannot call Amendment No. 145. Amendment No. 144, Lord Williams of Elvel.

Lord Williams of Elvel moved Amendment No. 144: Page 59, line 45, leave out subsection (3).

The noble Lord said: It may be for the convenience of the Committee if I speak also to Amendment No. 145 standing in the name of the noble Baroness, Lady Hamwee. It is odd to have a subsection which consists of seven lines and then a further subsection which provides: The Secretary of State may by order amend subsection (2)".

If the Government cannot get seven lines in a Bill right and have to reserve their position to amend it by order, there is something wrong with the drafting of legislation.

My preference would be my amendment, but if the Minister can explain that there is some good reason why the Government have to go back on seven lines they have put in the Bill, presumably after due consideration and study, then I should prefer the amendment tabled by the noble Baroness, which at least would preserve the principle that if primary legislation is to be amended by order, then that order should be subject to approval by resolution and debate by both Houses of Parliament. I beg to move.

Baroness Hamwee

I approach the matter slightly differently, thinking that there may be something in the pipeline. I wondered whether the proposed commonhold legislation might come up with definitions which might require the Government to review this subsection. I share the concern expressed by the noble Lord, Lord Williams of Elvel. To redefine "a dwelling" is pretty fundamental. We should be able to describe it simply enough so that it does not have to be changed. However, I am open to argument.

Earl Ferrers

That is always a good thing. The noble Lord, Lord Williams, was becoming rather pugilistic when he said that if the Government cannot even get seven lines right there must be something wrong with the drafting. He knows that is a whole load of fluff and flannel, if I may respectfully say that to him. Unusually, that happened to be so on this occasion.

The noble Lord knows well that in any Bill one has to include clauses which allow the small detail of the Bill to be changed from time to time without reverting to primary legislation. Otherwise, one has to produce huge great Bills, or sometimes small Bills, which become caught up in the pipeline. One cannot amend something that appears to be wrong once it is operating in practice. We have no reason to believe that this will not be right. But we believe that it is desirable for the Secretary of State to be able to make minor changes in technical definitions without recourse to primary legislation on each occasion.

Definitions may require fine tuning after they have come into action. There may be a need for modifications from time to time, as new developments emerge. It is not a case of the Government not having it right the first time. The Government wish to make sure that any legislation that Parliament puts onto the statute book is flexible in the course of actions which might take place in five or 10 years' time. That is why we want to have this provision.

I accept that the amendment of primary legislation should not be a matter for negative resolution. We shall certainly consider the amendment tabled by the noble Baroness, Lady Hamwee, which would make it subject to affirmative resolution. I hope that that will satisfy the noble Baroness. I always try to be helpful and to satisfy the noble Lord, Lord Williams, but he does not look, as usual, as though he is too satisfied. He should be satisfied because I have made a great concession by accepting what the noble Baroness has suggested in principle.

Lord Williams of Elvel

So there is a little more "fluff and flannel" corning up. The noble Earl cannot get away with all that. The expression "dwelling" means a dwellinghouse or flat. All those expressions must have been defined in law already. They must have been studied and there must have been endless pieces of legislation which have defined those terms.

However, I cannot do more than express my astonishment that, after all these years, the Government cannot produce a proper definition of "dwelling" in a Bill such as this one, without having the power to amend it as they see fit in the future. Nevertheless, as the noble Earl is prepared to accept the amendment of the noble Baroness, Lady Hamwee, I shall withdraw my amendment.

Amendment, by leave, withdrawn.

[Amendment No. 145 not moved.]

Clause 103 agreed to.

Clause 104 [Provisions applicable only to agreements in writing]:

Baroness Hamwee moved Amendment No. 146:

Page 60, line 7, leave out ("whether or not it is").

The noble Baroness said: This amendment is grouped with Amendments Nos. 147 and 149 in my name and Amendment No. 148 tabled by the noble Lord, Lord Howie of Troon. It is obvious that they are probing amendments.

Amendment No. 146—to leave out the words "whether or not it is"—seeks to ensure that an agreement is made in writing if it fulfils paragraphs (b) or (c) or is signed by the parties. I am concerned about the evidence that would be required as to whether or not an agreement where there is a written form has been agreed if it is not signed.

Amendment No. 147 suggests a wording: Where parties wholly or substantially agree otherwise than in writing".

It queries how much one needs in order to reach agreement. I am aware that the law requires the main terms to be certain and such terms to be agreed as amount to an agreement. But I am bothered about the wording of the Bill as drafted.

Amendment No. 149 would amend subsection (5) where it is suggested that written submissions which are not denied constitute an agreement in writing. That is a little dangerous. There may be no denial for reasons which do not amount to accepting or admitting—"admit" is the verb that I have chosen to use—the agreement.

Those amendments are probing amendments to try to understand what some of those provisions add up to.

Clause 104(4) refers to "evidenced in writing". That makes me wonder what is the point of Clause 104(2)(a). It does not seem necessary to have the two together. That point was also in my mind. I beg to move.

Lord Howie of Troon

Amendment No. 148 in my name is almost as short as an amendment can be in that it consists of only two words. In Clause 104(5) there is reference to: An exchange of written submissions in arbitral or legal proceedings". Since Clause 105, which is the heart of Part II of the Bill, refers to adjudication—the most important part of the Bill—I wonder why adjudication is not mentioned in Clause 104(5). I have suggested that the words "adjudication or" should be inserted before the word "arbitral".

There may very well be a reason for that wording and I just wondered what it might be. I hope that the noble Earl will tell me.

6.15 p.m.

Earl Ferrers

These three amendments would make it easier for parties to avoid the provisions. I hope that there is no need to consider whether the intention behind the fair contract provisions is right, or to entertain the idea that parties should be free to opt in or out at will. The three amendments, Amendments Nos. 146, 147 and 149, tabled in the name of the noble Baroness, Lady Hamwee, would seem to make it easier for parties to continue in their old ways—by making sure that an agreement was never signed, or that not too much of the detail was written down, or by simply refusing to admit the existence of an agreement.

One of the amendments, Amendment No. 147, could also cause some confusion and litigation. As currently drafted, in order to establish his rights to fair contract treatment, it is enough for a party to be able to point to a written document which was the subject of an oral agreement. But if Amendment No. 147 was in force, he would also have to prove that such a document was "wholly or substantially" instrumental to that agreement.

We should be apprehensive for fear that unscrupulous parties might try to push contracts outside these provisions by making oral agreements where written ones are needed. We do not want a mass of litigation to arise over whether contracts can be considered written or not. I suggest that most people are wise enough to get at least something in writing before they embark on lengthy and expensive construction work. If they do, there should be no doubt that they are entitled to fair contract provisions. I believe that their interests would be better served if the noble Baroness's amendments did not form part of the Bill. However, she said that she intended them to be of a probing nature.

I am inclined rather more favourably toward Amendment No. 148 of the noble Lord, Lord Howie of Troon. This would make it possible for an exchange of communications in adjudication proceedings to provide evidence of a written agreement, if that was not denied by one of the parties. I can see much sense in that, especially since we hope that most disputes will be subjected to adjudication in the first instance. Perhaps I might suggest to the noble Lord that he withdraws his amendment, as I should like to reflect upon it and return to it perhaps at a later stage.

Baroness Hamwee

I thank the Minister for his reply. I am still confused. An agreement is in writing if it is made in writing—that is subsection (2)(a). Then subsection (4) explains that an agreement is evidenced in writing—which is the third of the alternatives in subsection (2). If the agreement is made in writing but not signed, how is that different from it being evidenced in writing? Perhaps I am worrying unnecessarily and I certainly shall not push the point now.

Earl Ferrers

I believe the answer is that construction work is often started before all the documents are signed and sealed, even though they have been agreed. The builders come in and start the work and often the documents are signed later. The document, which has been agreed orally, should be part of the contract as though it were signed, even if it were signed later.

Baroness Hamwee

Through my professional work, though not much in the construction industry, I am familiar with people failing to sign contracts. My experience is that often they do not sign them because they have not quite agreed them. I see this as an area of considerable concern but I shall not press the point tonight. I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

[Amendment No. 147 not moved.]

Lord Howie of Troon had given notice of his intention to move Amendment No. 148:

Page 60, line 17, after first ("in") insert ("adjudication or").

The noble Lord said: I thank the Minister for his kindly attitude towards my Amendment No. 148. I hope that it is a portent of things to come, but I shall not move the amendment.

Earl Ferrers

It was also a reflection of Christmas past.

[Amendment No. 148 not moved.]

[Amendment No. 149 not moved.]

On Question, Whether Clause 104 shall stand part of the Bill?

Lord Williams of Elvel

I did not give notice of my intention to oppose the clause and I certainly do not oppose it. However, no doubt the noble Earl will be aware that Clause 104 is inappropriate for Scotland given the terms of the Requirements of Writing (Scotland) Act 1995. That is the view of the Law Society of Scotland and I am sure that that will be taken into account.

Earl Ferrers

I shall always take into account what the Law Society of Scotland says, even if it is mouthed through the words of the noble Lord, Lord Williams. I always take into account what he says and I shall see that the matter is investigated.

Clause 104 agreed to.

Clause 105 [Right to refer disputes to adjudication]:

Lord Williams of Elvel moved Amendment No. 150:

Page 60, line 25, leave out ("A") and insert ("Any").

The noble Lord said: I shall speak also to Amendment No. 151. The Committee will be aware that Clause 105 is one of the most contentious clauses in the Bill. It has given rise to a great deal of discussion and controversy. Taken together, Amendments Nos. 150 and 151 would have the effect of ensuring that any parties to the construction contract may opt for adjudication procedure to resolve a dispute.

Again, I must refer to the Law Society of Scotland. It believes that bestowing a right in Clause 105 to refer a dispute to adjudication procedure is illusory and that allowing a discretion to either party to opt for the procedure is more realistic. If there is a right on one side there must be an obligation on the other side. It is the view of the Law Society of Scotland that any party, including third parties, should be allowed to opt for the procedure. Amendment No. 151 is consequential.

I realise that the issue of rights and obligations to go to adjudication is a major issue. However, I put it forward because it comes from a source which I know the noble Earl respects. I hope that we shall have a proper debate on rights and obligations and not simply illusory rights. I beg to move.

Lord Lucas

It is our firm understanding of the words as they appear in the Bill that the amendments proposed by the noble Lord add nothing to the effect of the Bill. There should be no mistake about the access to adjudication being a right and no doubt that all parties to a construction contract should have the same right. We believe that the Bill has those effects.

However, given the source of the noble Lord's arguments and the particular aspect of Scotland that he has introduced, we shall read the report of the debate in Hansard and consult again in order to see whether we remain firmly of our view that the two amendments are unnecessary. I hope that with that small assurance the noble Lord will feel able to withdraw his amendment at this stage.

Lord Williams of Elvel

I am grateful to the noble Lord. I believe that where a party to a construction contract has a right there must be an obligation on the other side to accept that that right can be enforced. That is the point which the Law Society of Scotland is making and I am grateful to the noble Lord for agreeing to reconsider the matter. We shall see what happens at a later stage of the Bill. I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

[Amendment No. 151 not moved.]

Baroness Hamwee moved Amendment No. 152:

Page 60, line 26, leave out ("resolution") and insert ("decision").

The noble Baroness said: The amendment is tabled in order to query the use of the word "resolution" in the second line of Clause 105(1). Resolution suggests something that is final. This is a probing amendment to enable me and perhaps other Members of the Committee to understand whether what is intended is an interim or a final outcome.

I have used the word "decision" not believing that it is necessarily the happiest of terms but because it enables me to raise the issue. It does not appear to me that a final resolution is intended, given that adjudication is a mechanism for allowing everyone to get over the hiccup and get on with the job. If it is to be final it raises issues about enforcement which I do not follow. I beg to move.

Lord Williams of Elvel

It may be for the convenience of the Committee if in speaking to Amendment No. 152 I speak also to Amendment No. 159 standing in my name. I shall reveal that it comes from the Law Society of Scotland. It takes the view that the terms of Clause 132(2)(d) are too wide and that if not limited by the concept of relevancy they result in adjudicators exercising their powers to ascertain facts in too wide a fashion. That will result in cumbersome procedures. The amendment is therefore designed to focus the attention of adjudicators who initiate fact-finding exercises on the relevant facts. The amendment gives guidance on the scope of the fact-finding exercise.

Lord Berkeley

Amendment No. 152 goes to the heart of whether it is an interim or final resolution. That is why I have tabled Amendment No. 162A. Not being a lawyer, I do not know whether the word "resolution" is correct. I wonder whether the insertion of a word such as "interim" would help to clarify the sentence.

6.30 p.m.

Lord Lucas

With these amendments, we are starting to move into the fundamentals of the adjudication process and how the adjudicator should operate. In Amendment No. 152, the noble Baroness, Lady Hamwee, is clearly worried about the word "resolution" and believes that it implies a permanent solution. I hope that I can reassure her and, indeed, the noble Lord, Lord Berkeley, about that.

It is quite clear from the wording of Clause 105 that adjudication must have force to resolve disputes. Nevertheless, parties would be free to agree whether it should be final and binding or effective for a more limited period. Parties might choose to allow the matter to be reopened by an arbitrator or in the courts at practical completion. We anticipate that in many cases they will do so.

Amendment No. 159, in the name of the noble Lord, Lord Williams of Elvel, is an attempt to restrict an adjudicator's right to ascertain the fads and the law. I cannot agree with him, and nor can my Scottish colleagues. An adjudicator should have access to legal or other expert advice and should not have to rely solely on the evidence offered to him by the parties if better evidence is available within the time available to him. There is no need to specify that the adjudicator should restrict himself to the "relevant" facts. We should leave it to the expert to decide what is relevant and what is not; to do otherwise could be a recipe for wrangling and delays. I am sorry if that is a disappointing reply for the noble Lord.

Baroness Hamwee

As the noble Lord has been speaking, I have realised that another factor which made me suggest the word "decision" is that that is the term used in Clause 105(2)(b). I shall read what the Minister said. I shall not pursue the matter. I appreciate that sometimes there are very fine differences between quite similar terms and, although fine, they may be important.

As I said in moving the amendment, I am by no means wedded to the words "decision" which in itself carries the problem to which the noble Lord, Lord Berkeley, referred. I shall read what the Minister said and in the meantime, I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Lord Howie of Troon moved Amendment No. 153:

Page 60, line 27, at end insert ("and the other party is under a corresponding obligation to submit to such a procedure").

The noble Lord said: In moving this amendment, I shall speak also to Amendments Nos. 158 and 162 which are also in my name.

This amendment is self-explanatory and self-evident. There seems very little point in having a right to refer to a dispute if the other party to the dispute is not obliged to defer to the procedure. That is more or less the point which my noble friend Lord Williams raised a short time ago, to which he receive a somewhat encouraging reply from the noble Lord, Lord Lucas. I hope that the noble Lord will take the same view of Amendment No. 153. It is a matter of right and obligation.

Amendment No. 158 is more meaty. Clause 105 is probably—I think certainly—the most important clause in the Bill since it deals with the speedy resolution of disputes, which is the best way to achieve speedy construction and the saving of costs in the construction industry.

However, throughout the industry the clause is regarded generally as inadequate and confusing. As I said on Second Reading, the draftsman of the Bill appears to have confused—and continues to confuse in relation to the scheme with which we shall deal later—arbitration and adjudication. They are separate matters and should be kept separate. The only supporter of the clause as it stands appeared to be the Government. Even the Law Society is against it.

As I reminded the House on Second Reading, adjudication is not a new idea, although the noble Earl seemed to think that it was. Traditionally in the construction industry, the adjudicator is either the engineer or the architect. He acts in a quasi-judicial way, trying to resolve disputes so as to expedite the contract, leaving at the end, after he has made a decision in each dispute, the possibility of the parties going on to arbitration, which is a different matter. It is different because the arbitration cannot be appealed against except on points of law, whereas the decision of the adjudicator—the engineer or architect—can be appealed against. That is the whole idea of the backstop of arbitration or even the courts.

In Amendment No. 158 I have asked that the adjudicator should be an independent individual rather than a company or a partnership. I go on in paragraph (e) to require that the decision is to be implemented and: be final and binding upon the parties unless and until it is revised by an arbitrator".

That means that the decision must be accepted and acted upon. It is not "can be" or "may be" but "must be". I then go on to provide that where a decision includes payment, that must be discharged within a very short time limit so that the injured party is not injured further by undue delay.

I turn now to Amendment No. 162. Subsection (4) relates to the scheme to which we shall turn later and refers to an Arbitration Act which has not yet been passed. The Arbitration Act is entirely irrelevant to the adjudication process. It has nothing whatever to do with it, although in their scheme the Government are trying to impose a modified form of arbitration when it should be adjudication.

An adjudicator's decision does not involve an arbitral award and it cannot be enforced as such. I am told that there is a legal case, Cameron v Mowlem, in relation to that. Moreover, I remind the Minister that this part of the Bill is wholly unacceptable to the industry. It seems to me rather weird that a Bill which seeks to help the industry includes provisions which the industry will not accept. Perhaps the Government are trying to impose them on the industry against its will.

It is extremely important that the adjudicator should be immune from prosecution. He must be indemnified. If he is not, he will not come forward. He must be protected against making a decision which may be slightly mistaken. He must have that protection. That is the same protection which the arbitrator has. Why should an arbitrator be indemnified but an adjudicator not? There is no answer to that question. The two should be treated in exactly the same way.

I do not want to delay the Committee but Clause 105 is the most important part of the Bill. If the Government wish the Bill to work—as I am sure they do—it is essential that it should work in harmony with the industry and not against the grain. I beg to move.

Viscount Ullswater

The noble Lord, Lord Howie of Troon, is right to say that Clause 105 is a very important part of the Bill. I believe that what is required on the face of the Bill is an outline of what adjudication clauses in contracts should include. That would not allow parties to a contract just to strike out adjudication clauses when preparing a contract, which I understand happens at present. Indeed, Clause 105 would not allow such a practice to take place.

It must also be the intention of the clause to deal with disputes in a limited time in order to keep the work on the contract flowing. That is another reason for having a dispute resolution process by adjudication rather than necessarily referring everything to arbitration or to the courts at a later stage. I understand that adjudication takes place now and that this is to make certain that the contracts about which we are talking should provide the opportunity for an adjudicator to do his work.

If a contract has that intention and the procedures include what is set down in the Bill, then the rather more draconian measures that we have seen outlined in the draft scheme of construction contracts will not come into play. As the noble Lord, Lord Howie, indicated, they are very much more draconian; indeed, the process is very close to a form of arbitration. That seems to me completely the right approach. It will encourage the industry to act responsibly in knowing that adjudication, in the first instance, can be an interim form of settlement. At the same time, the final result can be argued at arbitration or in the courts at the end of the contract. It will not withdraw that right.

I believe that it would be in the interests of both sides to provide for a quick way of resolving disputes. I say that because the scheme, as I mentioned, is much less flexible for later alteration. Therefore, if you do not have the right form of adjudication on the face of the Bill, the scheme would provide another form which is, as I said, much less flexible.

I believe that my noble friend the Minister should look carefully at Amendment No. 153 which would at least get both sides to the table. I am also attracted to paragraphs (c), (d) and (e) of Amendment No. 158 tabled in the name of the noble Lord, Lord Howie of Troon, as I believe that there is a requirement for the adjudicator to be an independent person. Again, paragraph (e) would encourage the parties to a contract to settle the matter satisfactorily rather than leave matters unresolved. Therefore, I give a certain amount of encouragement to the noble Lord, Lord Howie of Troon. I hope that my noble friend the Minister will do likewise.

Lord Rodgers of Quarry Bank

I join with the noble Viscount, Lord Ullswater, in expressing my support for Amendment No. 158. I do not want to speak for long on that amendment, but I believe, as the noble Viscount rightly said, that it begins to open up the whole question of Clause 105 and why it is that a recommendation made in the report of Sir Michael Latham—a report which was so widely supported—seems to have been lost in translation. That has produced much opposition to the clause. I am sure that the Minister is aware of that fact. I hope that he will be emollient when given the chance, take the clause back and look at it again to ascertain whether it implements the decision of Latham in the way intended.

Perhaps I may give Members of the Committee an anecdote. Some years ago I had responsibility for rooms that were available for dinners and receptions. A construction firm entered into a contract for an evening reception and everything was settled. The price per head was agreed; the attendance was expected; and there was no complaint about the quality of the drinks or the service. However, when the bill for the evening was returned it was only paid to the extent of two-thirds of the total. The matter was brought to my attention and I had to decide what should be done. I was asked to write to the chairman of the firm to express deep concern. It was then that the message came to me that it was always the practice of that firm in the construction industry to withhold some part of every bill on principle and to leave it open to negotiation at a later stage. Great surprise was expressed that I had been upset by such a normal practice. However, when the firm learnt that that was not the custom in the catering business, the rest of the bill was promptly paid.

I mention that example because it is a matter upon which Sir Michael Latham put his finger and which won very general applause. I refer to the way that very substantial sums of money are regularly withheld, occasionally for a good reason but often for no reason at all. It was on that account that Sir Michael Latham put forward the proposals on adjudication which are included in the clause.

I do not want to discuss all the matters that are wrong with the provisions. Indeed, there is great confusion about the clause in the minds of those who have read the Bill concerning adjudication and arbitration. A great deal of support exists for the idea of adjudication and the consequences which follow, especially in relation to an appeal. If the Minister has not had an opportunity to take full account of the views of the industry, I hope that he will do so in the light of what has been said this evening. It is a most important part of the Bill. It must be right. There may be very good reasons why the department would like to make some changes to the Bill. I hope therefore that it will pursue that course and not be put off by others who might see advantages in leaving the clause as it is.

6.45 p.m.

Lord Berkeley

Listening to the noble Lord, Lord Rodgers of Quarry Bank, I wondered whether the work he carried out as regards the rooms would be covered under Clause 103 as being a "flat", a house, a "dwelling" of multiple occupancy, or whatever. It would be an interesting academic exercise.

I turn now to Amendment No. 153. I believe there is some confusion as regards Clause 105. I have received many representations from the industry. Is it the Government's intention that any party to a construction contract within the long definition in Clause 102 should be able to go for adjudication? If that is the case, is the other party to the contract required to join in the adjudication? Or is it optional? I believe that I know the answer. However, I hope that the Government will consider clarifying this part of the Bill so as to make the legislation simpler for those we are trying to help have an easier contractual life.

Lord Williams of Elvel

I support my noble friend Lord Howie of Troon in his amendments. My noble friend rightly said that this issue goes to the heart of Clause 105. As I said when introducing an earlier amendment, it is possibly one of the most important clauses in the Bill and has, indeed, caused a great deal of worry, confusion and debate. I hope very much that the Government will understand and take advantage of the debate in Committee this evening. I hope they appreciate that we are not happy with the way the Bill is drafted. Indeed, as the noble Lord, Lord Rodgers of Quarry Bank, said, something seems to have been lost in translation between the Latham Report and the Bill as drafted. I hope that the Government will give comfort to my noble friend by accepting his amendments or at least the thrust of them.

Lord Lucas

I am very happy to make clear to the Committee that we are discussing adjudication and not arbitration. We are discussing what is in the Bill, not what is in the scheme. As my noble friend Lord Ullswater so clearly pointed out, the two are different. The Bill is a flexible, wide ranging and simple provision whereas the scheme is a fallback which is a good deal tougher than the terms which two parties might well agree upon had they the good sense to sit down and write their own contract rather than relying upon what is a fallback and designed to be so.

Amendments Nos. 153, 158 and 162 cover a number of complex issues, and it may help if I start with the easier points. First, my noble friend Lord Ferrers has already tabled an amendment, Amendment No. 156, to increase the time-limit for adjudication and to allow an extension by the parties. We are not prepared to increase it outright to the 63 days suggested by the noble Lord, Lord Howie of Troon, in Amendment No. 158 since that would be far too lax for the vast majority of disputes, but I believe that the right to extend will allow parties to set sensible deadlines where it would be in no one's interest to insist on an inadequate period.

Secondly, Amendment No. 162 proposed by the noble Baroness, Lady Hamwee, has picked up concerns that the adjudicator should be granted immunity lest it prove too difficult to get someone competent to act in a costly dispute. We accept the principle of this but the wording of such a provision needs careful consideration. If the noble Baroness will withdraw this amendment, we will aim to bring forward a suitable amendment as soon as possible.

Next, it is our intention that any award made by an adjudicator should be paid promptly, and we will reflect upon the need for the provision proposed by the noble Lord, Lord Howie of Troon, in Amendment No. 158 to ensure payment within seven days.

However, there is no need for Amendment No. 153 to insist in primary legislation that parties must "submit" to adjudication or that the award should be implemented or made "binding". I have already pointed out in discussing Amendment No. 152 that adjudication must have force to resolve disputes. If an adjudication procedure is not intended to resolve the disputes which are referred to it and does not require parties to submit to the process and act upon its outcome, it will be defective under the terms of that clause.

As far as the adjudicator and his powers are concerned, I do not believe it is necessary to specify that he should in all cases be independent. There may be times, for example, when parties wish to use someone connected with the project as an adjudicator. It is enough that he should act impartially—though of course he must be seen to do so.

Similarly, I do not agree with the provision in Amendment No. 158 to restrict an adjudicator's right to ascertain the facts and the law. As I have already pointed out on Amendment No. 159, he should have access to legal or other expert advice and should not have to rely solely on the evidence offered to him by the parties if better evidence is available within the time available to him.

Perhaps I may give comfort to the noble Lord, Lord Berkeley. Any party to a dispute has a right to start adjudication and that adjudication is something which other parties to the dispute must enter into.

I hope that I have said enough to convince the noble Lord, Lord Howie, and the noble Baroness, Lady Hamwee, that, to the extent to which I promised to come back with alternatives to the provisions they have suggested, we will do so and that my arguments for not doing so on the other parts of their amendments are sufficient to enable them to withdraw them.

Lord Howie of Troon

I have been called many things in my day but I think this is the first time I have ever been called a noble Baroness. I do not know what has happened in the course of this long debate, but I had not noticed and I hope it does not show. Amendment No. 162 was put down by me. I cannot remember what the noble Lord said about it, but I hope he agreed with it.

I should like to go back to Amendment No. 153. I thought we had agreed earlier when we were discussing Amendments Nos. 150 and 151 that rights went hand in hand with obligations. Did we not take a view along those lines? I think we did. That is all I am saying in Amendment No. 153. I am merely putting into the Bill the obligation which the noble Lord, Lord Lucas, seems to find implicit in it, though I do not myself find it implicit. I would rather see it made totally explicit. I think he has misunderstood my amendment in the same way as he had some trouble with my gender.

Turning to Amendment No. 158, there is something in what the noble Lord says about the adjudicator not being required to be independent. That was in fact often the case where the adjudicator was the engineer or the architect: he would have a contractual arrangement with the employer and would therefore be thought by some not to be independent but in fact his professional obligations made him independent. I shall study what the noble Lord said about that.

I was confused, too, by what the noble Lord said about the adjudicator and the law. I think he said something about the adjudicator being able to obtain what advice he could in the course of his investigations. The noble Lord will correct me if I am mistaken. That is, in fact, what I am asking for. I am asking that the adjudicator should take the initiative in investigating matters: that is, he should ask for advice. I am not suggesting that he should become some kind of a detective. I am not using the word "investigating" in that sense.

I shall need to read very carefully in Hansard what the noble Lord said in the course of his reply to this debate. In the meantime, I beg leave to withdraw Amendment No. 153.

Amendment, by leave, withdrawn.

Lord Howie of Troon moved Amendment No. 153A:

Page 60, line 28, at end insert ("but excludes any dispute or difference involving allegations of a breach of professional duty").

The noble Lord said: This amendment does not intend in any way to condone professional negligence or breach of professional duty; it is merely to say that a dispute of that nature is quite different from the kind of dispute about contractual procedures which we seem to be discussing in the course of this Bill. However, the Bill uses the words "any dispute" and it might be construed that such a clause would provide or imply that a dispute or difference about professional negligence should go to adjudication. Such a dispute should obviously go to some kind of investigation, but I do not think it can be under the adjudication procedure laid down in this Bill because, by the very nature of things, an investigation into professional negligence or breach of professional duty is complicated and time-consuming and could not be done within the timescale indicated in the Bill. I beg to move.

Viscount Ullswater

If there is a concern about the jurisdiction of the adjudicator, I would prefer all disputes to be subject to adjudication procedure rather than have endless debates about whether a dispute is within the jurisdiction of the adjudicator or not. I think we shall be straying into that territory if we support the amendment proposed by the noble Lord, Lord Howie of Troon.

Lord Berkeley

It is difficult to disagree with my noble friend Lord Howie because we are both civil engineers, but I wonder whether the proposal to exclude engineers from breaches of professional duty is not likely to work against them as well as for them. I believe we have heard that this is an interim solution. There may be occasions when the engineers are waiting for payment until this professional negligence dispute is resolved. Is there any reason why they should not go to adjudication to obtain a quick resolution, and then be able to take it further to arbitration, if that is necessary, as for the other types of contract that we are discussing?

7 p.m.

Lord Lucas

I am grateful for the support expressed by the noble Lord, Lord Berkeley, in this civil dispute between civil engineers. I have absolutely no reason to doubt the gender of the noble Lord, Lord Howie of Troon. I am sorry that I expressed myself in a way that led him to think that I had.

Amendment No. 153A raises a specific point. It arises from the concerns of some construction professionals that disputes involving allegations of professional negligence could be handled by an adjudicator who was unqualified in the specialty involved. My first concern is that such an amendment could rule out an unacceptably large proportion of construction disputes, since a great many could involve some sort of breach of professional duty. There would also be considerable problems in defining what was meant by a "breach of professional duty". At the very least such an amendment would leave it to a variety of professional bodies to determine the application of primary legislation.

I am also concerned that this amendment could actually increase the number of allegations of professional negligence: any party who wished to avoid the process of adjudication could simply throw in some such claim to scupper it. Not only would this make it all too easy to opt out but it would also tend to increase the cost of professional indemnity insurance. In addition, the adjudicator's powers would be far from clear with such an amendment in place. Granted that he could not act in a dispute where a breach of professional duty had been alleged, how should he behave if he nonetheless uncovered evidence of such a breach—even if no allegation had been made? He could find himself in a legal minefield.

The way round these difficulties, and one that is already available under the provisions as drafted, is for parties to agree that an adjudicator's decision should have only temporary effect, so that any findings of professional negligence may be re-opened in the courts once the work is finished. I believe that is what the noble Lord, Lord Berkeley, was suggesting. In addition, the scheme for construction contracts will make it clear that an adjudicator may decline to decide a matter which is unsuited to the procedure of adjudication. Contractual agreements may include a similar provision. I hope with those few comments the noble Lord will feel able to withdraw his amendment.

Lord Howie of Troon

As the saying goes, I heard what the noble Lord said, and I was not terribly comforted by it. I was confused, too, by his notion that an adjudicator might uncover some element of professional negligence in the course of some other investigation. However, he would be adjudicating on a particular dispute and if he uncovered anything which was not related to that dispute, that would be none of his business until such time as that became part of a dispute. But, leaving that aside, my only objection is the fact that by its nature a professional negligence problem is likely to be a complicated one which will require substantial investigation. I think, for example, of negligence in engineering design. That would require an investigation which would take far longer than the timescale which the Bill permits. The adjudicator could come to no sensible conclusion in that time, even an interim one. He could merely blow the whistle and say that it was half-time and that the people concerned should come back again the following year, or something like that. I am not convinced by the Minister's comments. I see the drift of the Government's answer, but that is quite inadequate.

Lord Monkswell

I hope that I can offer an explanation which might resolve the problem. As I understand it, if there is a dispute between two parties to a contract, the adjudicator is called in to make an interim judgment one way or the other. The debate this evening has concerned ways of keeping contracts going, making payments and other such matters, but there may be an occasion where one party to a contract is doing some work and realises that the work may not be right and that the job ought to be stopped. Perhaps the drawings need to be checked and the engineers need to be consulted. That party calls in an adjudicator with the express purpose—and perhaps the result—of stopping the job and requiring some further action by the other party. If one thinks of the adjudication process as making an interim judgment on one side or the other rather than always one way, perhaps that will resolve the problem that the noble Lord, Lord Howie of Troon, foresees.

Lord Howie of Troon

I regard that as a piece of adjudication, and a good example of it. I repeat that I am not convinced on this matter. I shall examine the arguments that were put forward by the noble Lord at my leisure and perhaps return to this matter at a later date. In the meantime I am happy to withdraw the amendment. I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Earl Ferrers

In moving the Motion that the House be now resumed, I suggest that the Committee stage begin again not before five minutes past eight o'clock. The Committee will wish to he aware that the initiator of the debate which follows is a maiden speaker. I beg to move that the House do now resume.

Moved accordingly, and, on Question, Motion agreed to.

House resumed.