If you are in the construction industry, you are probably familiar with payment disputes, as they are quite common and can cause delays in construction work due to cash flow issues. This article will explain how you can use adjudication in a construction dispute.
What is Adjudication?
Adjudication is a statutory-based alternative dispute resolution process. In Australia, each state and territory has its own laws about payment security in construction, and adjudication is part of that. It is there to ensure that contractors and subcontractors receive timely payment and to avoid going to court to recover owed funds.
In adjudication, a qualified decision maker, called an adjudicator, reviews the evidence and documentation presented by both parties involved in a construction contract dispute regarding a payment present. After reviewing, the adjudicator makes a decision that both parties have to follow.
In comparison to traditional court proceedings, adjudication is generally faster and more cost-effective. It operates similarly to other forms of alternative dispute resolution, such as mediation. Unlike traditional court, you and the other party are obligated to attend in person.
Who Can Apply for Adjudication?
Only you and the other party named in the construction contract dispute can participate in the adjudication process. In most states and territories, only the party that owes money can apply for adjudication.
In order to apply for adjudication, you must have performed ‘construction work’ under a construction contract. The definition of construction work or a construction contract is broad but excludes certain activities across states and territories, such as drilling for and extracting:
- oil;
- natural gas; or
- extraction of minerals, etc.
When the legislation applies, if you or your company has completed construction work under a construction contract, you have the right to progress payments. Any progress payment becomes due and payable on the date stated in the contract or, if not specified, within 10 business days after a payment claim is made.
Before applying for adjudication, you, as the claimant, must serve a statement of claim on the party owing you money, making a payment claim. Your payment claim needs to clearly outline the construction work you have completed and specify the amount you’re requesting as a progress payment.
If the respondent fails to provide a payment schedule within the required timeframe, they will become liable for the total unpaid amount as a debt due and owing. At this point, you can make an adjudication application for the payment claim.
Continue reading this article below the formWhat is the Adjudication Process?
1. Application
The adjudication process starts when one party applies for adjudication and informs the other party of their intention by serving a notice. This notice includes background information outlining the dispute details, the payment claim, and the payment schedule forming the basis of adjudication.
After receiving the notice, you will have a chance to respond. Then, an adjudicator is selected to hear the dispute.
2. Response
When you receive an adjudication application, you need to respond in writing. Confirm which adjudication application you are responding to and explain why you are withholding payment. You can only discuss issues already mentioned in the payment schedule. However, you can also bring up concerns about the validity of the payment claim, the construction contract, or any other issues affecting the adjudicator’s jurisdiction.
Keep in mind that you have a limited amount of time to respond, which varies depending on the state or territory.
3. Decision by the Adjudicator
Once the adjudicator is appointed, both parties will be informed of the adjudicator’s identity and the relevant costs for undertaking adjudication.
The adjudicator will decide three things when they review your application:
- the amount you need to pay, known as the adjudicated amount;
- the due date for the payment; and
- any interest that needs to be paid.
The adjudicator may ask both parties to provide statements about the dispute from their point of view. They will look at:
- construction contract;
- your payment claim;
- the payment schedule; and
- any relevant information from inspections they have conducted.
If needed, they can also seek help from construction experts or independent third parties to fully understand the dispute.
4. Payment
If the adjudicator decides that you owe an amount, you must pay the claimant within 5 business days after receiving the adjudicator’s decision unless the adjudicator specifies a later date.
If you fail to make payment as directed, the claimant can submit the adjudication certificate to the court, turning it into a judgment, which they can then enforce. Additionally, the claimant can send you a written notice stating their intention to halt work under the contract.
You cannot dispute the decision in court if the process followed the relevant legislation. If you disagree with the adjudicator’s decision, you must initiate separate proceedings to reclaim any potential overpayment.
This guide provides key information on how to manage a business dispute as quickly and cost-effectively as possible.
Key Takeaways
The adjudication process offers you a quicker, more efficient, and cheaper method to recover money for unpaid construction work. It operates similarly to court proceedings, in which an independent third party hears both sides of a dispute and decides on payments based on the provided background information.
If you require assistance navigating the adjudication process, our experienced construction lawyers can assist as part of our LegalVision membership. For a low monthly fee, you will have unlimited access to lawyers to answer your questions and draft and review your documents. Call us today on 1300 544 755 or visit our membership page.
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