Adjudication – 4 Common Pitfalls for Applicants and Respondents

The Building and Construction Industry Security of Payment Act 1999 (the Act) is an incredibly effective way for participants in the construction industry to maximise their chances of fair and prompt payment of invoices rendered.

The Building and Construction Industry Security of Payment Act 1999 (the Act) is an incredibly effective way for participants in the construction industry to maximise their chances of fair and prompt payment of invoices rendered.

The Act offers protection to both head contractors and subcontractors at every stage of the contracting ladder, as well as to those who provide materials and plant for construction work, and even associated services such as engineering and architectural design, surveying and estimating.

When push comes to shove and you’ve made a payment claim under the Act, but haven’t been paid as expected, it can be time to turn to adjudication, but both applicants and respondents alike should be mindful of the strict requirements of the Act.

Below is a list of some of the most common pitfalls for claimants and respondents.

Common Pitfalls

1. Timing of Payment Claims

Incorrect timing can invalidate a payment claim. Unless there is a contract in place between the claimant and respondent that says otherwise, a claimant can only make one payment claim per month. That claim is to be made on or from the last day of the month in which the construction work was done, or the goods or services  supplied.

So beware. Unless your contract says otherwise, a payment claim made earlier than the last day of the month for construction work in the same month is an invalid payment claim that cannot succeed in adjudication. Likewise, in the absence of a contractual provision to the contrary, where two payment claims are made in the same month, the payment claim which is served second in time will be an invalid payment claim that cannot succeed in adjudication.

2. Time Frames

The Act stipulates strict time frames that must be adhered to.

Where a payment schedule is served and the Claimant wishes to dispute the scheduled amount and refer the dispute to an adjudicator to make a determination under the Act, the application for adjudication must be made with ten (10) business days, and a copy of the application must be served on the Respondent quickly.  A failure to apply for adjudication within 10 days will invalidate an application and leave it unable to be adjudicated under the Act.

If you’re the respondent, you only have five (5) business days to respond. If you are later than this, the adjudicator will not consider the response.

Do not make the mistake of thinking that an adjudicator has the discretion to accept late applications or submissions. We are prohibited from doing so by the Act.

3. Demonstrate an entitlement to the claimed amount

Do not make the mistake of assuming an adjudicator will ask either the claimant or respondent for further information if it is not provided to us at first. Whilst it’s true that we do have a statutory power to make requests of the parties for further submissions, there is no requirement for us to do so, and in practice, where there is already very little time allowed for us to determine an application, we probably won’t.

It is therefore imperative that a claimant provides a high level of detail about the contract to which the work relates. If it’s a written agreement, then include a copy of it. If it’s an oral agreement, then provide as much detail about the agreement as possible. When and where was the agreement made? What was discussed about pricing, rates or payment terms?

Claimants also must show that they have claimed in accordance with the agreement. For example, if it was agreed between the parties that payment of a certain amount would be made at a certain stage of the works, you must demonstrate to the adjudicator that you have actually reached that stage of the works, and the amount claimed was the amount agreed.

4. Not Seeking Specialist Legal Assistance

If you think you might need assistance preparing an adjudication application, it’s critical that you seek specialist help as early as you can.

Interpretations of some parts of the Act can be very technical, and strict time limits apply.  An experienced construction lawyer who has intimate knowledge of what an adjudicator is looking for, will be able to help you work through the issues and position your application in the best light to get the most favourable determination possible.

Security of Payment Guide

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Building and Construction Lawyers for Sydney and Newcastle

Ned Mortensen is a Principal lawyer with dual qualifications in both law and construction and an adjudicator appointed by Adjudicate Today and ABC Dispute Resolution Service for adjudication applications made pursuant to the Building and Construction Industry Security of Payment Act 1999.

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The information in this article is not legal advice and is intended to provide commentary and general information only. It should not be relied upon or used as a definitive or complete statement of the relevant law. You should obtain formal legal advice specific to your particular circumstance. Liability limited by a scheme approved under Professional Standards Legislation.

Principal Solicitor
Accredited Adjudicator (Security of Payment)