Adjudication is designed to replace expensive and time-consuming methods such as courts or arbitration. We do not charge an adjudication application fee or an administration fee. The adjudicator charges a fee after the dispute is determined.
Payment and adjudication in the Australian construction industry is governed by individual State and Territory legislation. Such legislation in Australia commenced on 26th March 2000, in New South Wales. Five States, the Northern Territory and the Australian Capital Territory (“ACT”) followed over the years, each of which has its own disparate security of payment legislation. Of the fourteen or so pieces of security of payment legislation internationally, eight are within Australia.
Adjudication under security of payment legislation bears some resemblance to the UK adjudication scheme prescribed by Part 2 of the Housing Grants, Construction and Regeneration Act 1996. The UK model, however, permits the construction contract to provide procedures for adjudication whereas the Australian models set down a mandatory regime for adjudication. In Australia, the prescribed timetable for the appointment of the adjudicator and the parties’ submissions cannot be extended by a court, the adjudicator, or even by agreement between the parties. However, the time given to the adjudicator to make his/her decision can be extended in certain circumstances.
BCIPA outlines a procedure for parties to resolve payment disputes themselves before the party who is claiming takes the matter to adjudication. The parties are referred to in BCIPA as the “claimant” (a person who is, or who claims to be, entitled to a progress payment) and the “respondent” (the person who, under the construction contract, is or may be liable to make the payment). This means, for example, that if a principal or client makes an overpayment to a contractor, the principal or client will be unable to claim that overpayment in adjudication because under BCIPA the client cannot be a “claimant”. In other words, it is a one way street.
As in the UK, BCIPA applies to construction contracts. A construction contract is defined by BCIPA to include supply only contracts, verbal agreements and “other arrangements”. BCIPA does not apply to domestic building contracts between a contractor and an individual resident owner and there are various resource sector exclusions relating to drilling and extraction.
Unlike in the UK, the purchaser of construction work or related goods or services under a construction contract cannot be a claimant or make a counterclaim. The purchaser is always a respondent under BCIPA and, again unlike the UK situation, an adjudicator cannot decide that a claimant is to pay money to the purchaser.
In circumstances where the adjudicator determines that the claimant owes the respondent an amount exceeding the value of the payment claim, the adjudicator has no power to decide that the claimant must pay the outstanding money to the respondent.
The jurisdiction of the adjudicator in Queensland is limited to deciding the amount of the progress payment, if any, to be paid by the respondent to the claimant, when that payment became due and the rate of interest payable on any amount to be paid.
Adjudication under BCIPA
With regard to adjudication under BCIPA, the steps are:
– The claimant makes a payment claim;
– The respondent provides a payment schedule if it wishes to dispute the payment claim;
– If the payment claim is disputed, the dispute can be referred to an adjudicator; and, if so,
– The adjudicator decides what amount, if any, is owed to the claimant.
If the claimant has not received payment, the first step under BCIPA is to send the respondent a written payment claim. Items not claimed for in the payment claim cannot be considered at any later date by an adjudicator.
When the respondent receives a payment claim, the respondent must either pay the claim in full by the due date for payment or respond by serving what is called a “payment schedule” within 10 business days after the payment claim is served. The payment schedule must identify the payment claim to which it responds, state the amount proposed to be paid, and state the reasons why the amount proposed to be paid is less than the amount claimed. Again, as with the payment claim, any reasons for withholding payment not included in the payment schedule cannot, with limited exceptions, be considered at a later date in any adjudication.
If no payment schedule is delivered within the time specified by BCIPA, the respondent is liable to pay the full amount of the payment claim by the due date for payment. If the respondent does not pay the claimed amount, then the claimant may suspend future work by giving two business days’ notice, proceed to adjudication after giving the required notice to the respondent, or take the matter to court to recover the amount due as a debt. If the respondent does not issue a payment schedule, the amount claimed automatically becomes due and payable as a debt which is enforceable by the courts.
Three paths to adjudication under BCIPA
A claimant can commence adjudication:
1. Where the payment schedule is less than the claimed amount
If the respondent’s payment schedule is less than the claimed amount, the claimant will need to make a written adjudication application to an authorised nominating authority (a body authorised to appoint adjudicators under BCIPA – in Queensland there are seven ANAs) for the appointment of an adjudicator, submit this application within 10 business days after receiving the payment schedule, and then serve the respondent with a copy of the adjudication application.
2. Where the amount stated in the payment schedule is wholly or partly unpaid
If a respondent serves a payment schedule on a claimant, but the amount is wholly or partly unpaid by the due date for payment, the claimant can make a written adjudication application to an authorised nominating authority (ensuring that it does not include any new issues not included in the initial claim) and must submit the application within 20 business days after the due date for payment of the progress payment.
3. Where there is no payment schedule and the claim has not been paid by the due date
If a respondent does not provide the claimant with a payment schedule and/or does not pay any part of the claimed amount by the due date, the claimant must give the respondent written notice within 20 business days after the due date, of its intention to apply for adjudication of the payment claim. This notice must include specific notification that the respondent may serve a payment schedule on the claimant within 5 business days after receiving the claimant’s notice. After the 5 day period, the claimant can make a written adjudication application to the authorised nominating authority within 10 business days and must provide the respondent with a copy of the adjudication application.
The respondent may respond to the adjudicator within 5 business days after receiving the adjudication application, or 2 business days after receiving a notice of the adjudicator’s acceptance of the application – whichever is the later. The timeframes are mandatory and cannot be extended.
The respondent cannot include any new reasons for withholding payment that were not included in the payment schedule. In order to have the right to respond to an application, the respondent must have sent the payment schedule to the claimant within the required timeframe, and must deliver a copy of the response to the claimant. If the respondent has not submitted a payment schedule, entitlement to submit a response has been lost – there will be no defence for the adjudicator to consider, with limited exceptions – even if it is submitted just a few hours late!
The adjudicator must provide a decision within 10 business days after the date that he/she receives a response, or should have received a response, from the respondent. However, unlike all other timeframes set out in BCIPA, the decision date may be extended with the agreement of both parties.
Once the adjudicator has released his/her decision, it is sent to the authorised nominating authority and published on the Building and Construction Industry Payment Agency website (www.bcipa.qld.gov.au) for all to see.
Although BCIPA gives the adjudicator the power to call a meeting, the entire dispute, almost without exception, is decided on documents only – whatever its value and however complicated. If the adjudicator has any questions, he/she will issue a query list. There is no second chance here for a party to clarify or make good any unprofessional or unclear submissions once they have been submitted unless the adjudicator requests further submissions.
The Act allows subcontractors who make an adjudication application to freeze the payment amount in dispute from the principal contractor to the respondent while adjudication proceeds. This is called a payment withholding request.
A Payment Withholding Request is best explained by an example.
Assume that a subcontractor (the claimant) does $10,000 worth of work for a head contractor (the respondent) and at the end of the month the subcontractor makes a progress claim. About the same time the respondent will make a progress claim against the respondent’s principal for payment for that work. If, within 10 business days after being served with the claimant’s payment claim, the respondent gives the claimant a payment schedule for less than the claimed amount, the claimant can immediately apply to Adjudicate Today for adjudication. At the same time the claimant makes the adjudication application, the claimant can give a payment withholding request to the principal contractor.
All contractors doing construction work or providing goods or services under a construction contract have the right to receive ‘progress payments’ for work delivered. This is to support cash flow to contractors.
There are two steps to take if you have not received a payment schedule within the required number of business days after making a claim, or you have not been paid by the due date.
Ensure you have made a claim for payment.
Apply for adjudication.
You can also get your own independent legal advice about commencing action in an appropriate court
Note: NSW Fair Trading does not recover money owed to a person.
Source 2: https://www.adjudication.org/resources/articles/adjudication-queensland-australia
Source 3: https://www.adjudicate.com.au/nsw/served/payment-withholding-request
Source 4: https://www.fairtrading.nsw.gov.au/trades-and-businesses/construction-and-trade-essentials/security-of-payment