3 - Tier 1 Contract Accounts
3.1 Rule 3 applies only to Tier 1 Retentions.
Depositing Retention Funds
3.2 The Employer agrees to deposit all Tier 1 Retention that it withholds under the terms of the Tier 1 Contract into the Contract Account.
3.3 Whenever a payment becomes due to the Tier 1 Contractor:
3.3.1 the Employer must, on or before the Final Date for Payment, deposit into the Contract Account a sum equal to the amount of Tier 1 Retention that is due to be withheld in respect of the said payment under the terms of the Contract; and
3.3.2 the Contract Administrator (or, if there is no Contract Administrator, the Tier 1 Contractor) must, after the final date on which the Contract permits the issue of a Pay Less Notice in respect of the payment in question by the Employer, upload to the online portal a true and complete copy of:
(a) the Payment Notice showing the amount of Retention permitted to be withheld, or
(b) the Pay Less Notice showing the amount of Retention permitted to be withheld, if a Pay Less Notice has been issued in respect of the payment in question.
3.4 All deposits made under Rule 3.3.1 must be:
3.4.1 Made in pounds-sterling;
3.4.2 Made from a bank account held in the Employer’s own name, from a Bank located in the United Kingdom; and
3.4.3 Carry the Tier 1 Contract Account reference number as the payment reference.
3.5 Any transfers into the Tier 1 Contract Account that do not meet the criteria set out in Rule 3.4 will not be accepted into the Scheme, and, subject to the Compliance Requirements, will be returned to the account from which they were received and the Parties notified.
Allocation of Retention Funds
3.6 This section of the Rules sets out how we will allocate beneficial ownership of funds deposited in a Tier 1 Contract Account between the Employer and the Tier 1 Contractor. If the Tier 1 Contractor opens Subcontract Accounts that are linked to the relevant Tier 1 Contract Account using the process in paragraphs 2.11 and 2.12 of the Pre-qualification Information, then we may re-allocate the beneficial ownership of money deposited in the Tier 1 Contract Account to the Supply Chain in accordance with Rule 4. This means that money the Employer has deposited in the Tier 1 Contract Account may at times be beneficially owned by the Supply Chain and not by either of the Employer or the Tier 1 Contractor.
NB: This may have an effect on an Employer’s ability to recover the Tier 1 Retention under Rules 9.7 and 9.8 if the Tier 1 Contractor becomes Insolvent.
3.7 When we first receive a cash deposit into a Tier 1 Contract Account, we will hold the deposited funds on trust for the Employer. We will continue to hold any cash on deposit in the Tier 1 Contract Account on trust for the Employer until we have made an assessment of the Tier 1 Retention due to be withheld under the terms of the Tier 1 Contract as set out in Rules 3.8 to 3.10.
3.8 When the Contract Administrator uploads a Payment Notice or a Pay Less Notice to the online portal, we will check the uploaded document to confirm the amount of Tier 1 Retention that the Employer is required or permitted to withhold.
3.9 If the Contract Administrator does not upload a Payment Notice or a Pay Less Notice to the online portal within five Business Days of the date specified in Rule 3.3.2, either party to the Contract may upload any missing documentation.
3.10 Once we have ascertained from the most recent Payment Notice or Pay Less Notice that has been uploaded to the online portal how much Tier 1 Retention should be withheld, we will hold a portion of the deposited cash equal to the amount of Tier 1 Retention that was due for withholding as at the applicable Final Date for Payment on trust for the Tier 1 Contractor and, where applicable, the Supply Chain.
3.11 We will update our assessment of the amount of Tier 1 Retention due to be withheld under the Tier 1 Contract each time a new Payment Notice or Pay Less Notice for the relevant Tier 1 Contract Account is uploaded. Each time that we update this assessment, the amount of cash that we hold on trust for the Tier 1 Contractor and, where applicable, the Supply Chain will be updated so that we always hold on trust for the Tier 1 Contractor and, where applicable, the Supply Chain, a sum equal to the amount of Tier 1 Retention that was due for withholding as at the Final Date for Payment for the most recent Payment Notice or Pay Less Notice that has been uploaded to the online portal.
3.12 Our assessment of the Tier 1 Retention under Rules 3.8 and 3.11 and the associated change to the amounts of cash that we hold on trust for the Employer, the Tier 1 Contractor and, where applicable, the Supply Chain will take effect the day after the Final Date for Payment associated with the Tier 1 Contract Payment Notice or Pay Less Notice (as the case may be) that we have used to update our assessment, or if later, the date on which we make our assessment.
3.13 Our assessment of the amount of Tier 1 Retention withheld at any given time will be based solely on the amount of Tier 1 Retention that is stated to be required to be withheld in the most recent Payment Notice or Pay Less Notice uploaded to the online portal in respect of the Tier 1 Contract in question. We will not be responsible for checking that the Tier 1 Retention amount stated on any such notice has been correctly calculated or is properly required or permitted to be withheld.
3.14 If the most recent Payment Notice or Pay Less Notice uploaded to the online portal does not state the amount required to be withheld as Tier 1 Retention, our assessment will be taken from the most recently uploaded document, if any, that does set out the amount required to be withheld.
3.15 If at any time the amount of cash on deposit in the Tier 1 Contract Account exceeds our assessment of the certified value of the Tier 1 Retention for the time being, we will hold the surplus cash on trust for the Employer, save to the extent that we already hold the excess on trust for the Supply Chain.
3.16 If at any time the amount of cash on deposit in the Tier 1 Contract Account is lower than our assessment of the certified value of the Tier 1 Retention for the time being, we will notify the Employer of the shortfall within two Business Days. The Employer must deposit sufficient additional cash in the Tier 1 Contract Account to make up the shortfall within five Business Days of receipt of our notification.
3.17 You will be able to check via the online portal:
3.17.1 How much money is held in the Tier 1 Contract Account; and
3.17.2 How much of that money we hold on trust for each of the Employer, the Tier 1 Contractor and, where applicable, the Supply Chain.
Release of Retention Funds
3.18 Upon the satisfaction of the conditions stated in the Tier 1 Contract for the release of all or part of the Tier 1 Retention, the Tier 1 Contractor must notify us using the relevant procedure in the online portal. The Tier 1 Contractor will certify to us:
3.18.1 That the conditions for either a full or partial release of the Tier 1 Retention, as specified in the Contract, have been satisfied;
3.18.2 The cash value of the Tier 1 Retention that is due to be released;
3.18.3 In respect of those matters set out in Rules 3.18.1 and 3.18.2, the notice or certificate issued by or on behalf of the Employer demonstrating the same; and
3.18.4 The Bank account details to which the Tier 1 Retention release should be sent (a “Release Notice”)
3.19 Upon receipt of a properly completed Release Notice, we will notify the Employer that a Release Notice has been received in respect of the Tier 1 Contract Account, and provide a copy.
3.20 If there are no unreleased Subcontract Retentions outstanding in respect of any Subcontract Accounts associated with the Tier 1 Contract Account, we will release the part of the Tier 1 Retention covered by the Release Notice to the bank account stated in the Release Notice five Business Days after the Employer receives our notice under Rule 3.19, unless before the expiry of that five Business Day period:
3.20.1 The Tier 1 Contractor withdraws its Release Notice; or
3.20.2 The Employer obtains a court or arbitrator’s order preventing us from releasing the Retention.
3.21 If there are unreleased Subcontract Retentions outstanding in respect of any Subcontract Accounts associated with the Tier 1 Contract Account when we receive the Release Notice, we will follow the procedure set out in Rule 3.20 in respect of any funds in the Tier 1 Contract Account (up to the value of the Retention Release stated in the Release Notice) that we hold on trust for the Tier 1 Contractor but not for the Supply Chain at the date on which the release is made.
3.22 If we become subject to a court or arbitrator’s order as set out in Rule 3.20.2, we will continue to hold the Tier 1 Retention on trust for the Tier 1 Contractor until the order is lifted. If the order is replaced with a different order, we will deal with the Tier 1 Retention strictly in accordance with the terms of that further order. If at any time we are no longer subject to any court or arbitrator’s order with respect to the Tier 1 Retention, we will continue to hold the Tier 1 Retention on trust for the Tier 1 Contractor until:
3.22.1 We receive written notification from the Tier 1 Contractor that it releases its claim to part or all of the Tier 1 Retention; or
3.22.2 We receive written notification from the Employer that it agrees to the release of some or all of the Tier 1 Retention to the Tier 1 Contractor; or
3.22.3 Either party uploads to the online portal a copy of an adjudicator’s decision, arbitral award, court judgment, or a decision produced pursuant to any form of binding alternative dispute resolution that confirms what further action should be taken in respect of the Tier 1 Retention.
3.23 If the Tier 1 Contractor gives us notice under Rule 3.22.1, we will within two Business Days of receipt of the notice return to the Employer any part of the Tier 1 Retention funds to which the notice applies. If the notice does not cover the whole of the Tier 1 Retention, the Tier 1 Contractor will need to submit a further Release Notice in respect of the outstanding funds.
3.24 If the Employer gives us notice under Rule 3.22.2, we will within two Business Days of receipt of the notice release to the Contractor any part of the Tier 1 Retention funds to which the notice applies. If the notice does not cover the whole of the Tier 1 Retention, the Tier 1 Contractor will need to submit a further Release Notice in respect of the outstanding funds.
3.25 If we receive a submission under Rule 3.22.3, we will take such action in respect of the Tier 1 Retention as is required in order to implement the terms of the decision / judgment / award that we have been provided.
3.26 If the value of retention release stated in the Release Notice is greater than the amount of funds that we hold on trust for the Tier 1 Contractor when the release is made, we will (provided we are not prevented from doing so by the operation of Rule 3.20), upon the transfer of beneficial ownership of any Subcontract Retentions under associated Subcontracts back to the Tier 1 Contractor under Rules 4.20 or 4.22, release such additional amounts to the Tier 1 Contractor as soon as we reasonably can from those transferred funds, until the amount released matches the amount stated as due for release in the Release Notice.
3.27 If, upon the completion of the procedure for the Release of the Tier 1 Retention set out in Rules 3.18 to 3.26, there is cash remaining in the Tier 1 Contract Account that is not held on trust for the Supply Chain, we will release the outstanding money to the Employer within two Business Days.
3.28 Once the whole of the Retention (and other cash) held in the Tier 1 Contract Account has been released to the Tier 1 Contractor, Employer or the Supply Chain, as applicable, the Tier 1 Contract Account will be closed and the Tier 1 Contract will be discharged from the Scheme.
Our liabilities and obligations with regard to the release of retention funds
3.29 In respect of any releases of Retention that we are required to enact under Rule 3:
3.29.1 We will be entitled to rely without enquiry on any Release Notice that is submitted through our online portal;
3.29.2 Without limiting Rule 3.29.1, we will not be responsible for ascertaining:
(a) Whether the amount of Retention stated within the Release Notice as due for release has been correctly calculated, or is properly due for release under the terms of the relevant Contract; or
(b) Whether the issue of the Release Notice has been validly authorised on behalf of the party submitting it;
3.29.3 We will have no liability to any party for releasing funds from a Tier 1 Contract Account even if the person to who we transferred the funds was not entitled to receive it under the terms of the Contract, provided that we have acted in accordance with these Rules;
3.29.4 In carrying out our responsibilities under this section, save to the extent that such liability cannot be disclaimed, we will have no liability, and will not be responsible for:
(a) Confirming that any bank account details that you provide to us are correct;
(b) Any delay or failure on the part of the Deposit Bank with which the Tier 1 Contract Account is deposited in receiving or executing our instructions;
(c) Any loss or damage suffered by any person in connection with any fraud, negligence, default or other act or omission on the part of the Deposit Bank or (except to the extent directly resulting from our fraud or wilful default, or that of our directors, servants or agents) any other person; or
(d) Any loss or damage suffered by any person as a result of the Insolvency or any analogous event in the United Kingdom or any other jurisdiction relating to the Deposit Bank or any other person.