When Should I Use Adjudication in a Construction Dispute? 

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Table of Contents

• Security of Payment Legislation
• When Should I Use Adjudication?
• Key Takeaways
• Frequently Asked Questions

If you work in the construction industry, you might face some issues getting paid for your work. Often, parties can fall behind on payments or not pay at all. Alternatively, you might be a client engaging a worker from the construction industry and need to agree on payment. In any case, adjudication may be your next best step. This article will explain when you should use adjudication in a construction dispute.  

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Security of Payment Legislation

Each state and territory in Australia has enacted its security of payment legislation to improve cash flow in the building and construction industry. Specifically, the legislation aims to ensure: 

• that contractors and subcontractors in the construction industry are paid for their construction work; and 
• disputed payment claims are addressed quickly and without the need for litigation.

Indeed, the legislation includes an adjudication process, where parties to a contract can settle payment disputes. 

The legislation in each state and territory has similar but slightly varying exclusions. Therefore, you must determine if your state or territory’s Security of Payment legislation covers your construction contract and related services. 

Related services can include: 

• labour; 
• surveying; 
• engineering; 
• architectural work; 
• building design work; and 
• landscaping. 

Most states and territories exclude construction contracts relating to mining for minerals, gas or oil.

When Should I Use Adjudication?

When you dispute payment in the construction industry, you have two options: make a payment claim or apply for adjudication. In adjudication, your dispute is heard and determined by adjudicators appointed by Authorised Nominating Authorities (ANA). 

There are several circumstances where you should be using adjudication, including:

• if the claimant disagrees with the scheduled amount that the respondent has stated on a valid payment schedule – you should lodge an application for adjudication within ten business days of being served the payment schedule;
• if the respondent provides a payment schedule but fails to pay any part of the scheduled amount by the due date for payment – you should lodge an application for adjudication within 20 business days of the due date for payment; or
• if the respondent hasn’t provided a valid payment schedule, the due date for payment has passed without full payment of the claim and the claimant has served a Notice of Intent to Apply for Adjudication – you should lodge an application for adjudication within ten business days of the expiry of the relevant notice period or the provision of a valid payment schedule within the five days stated on the notice.

Additionally, to apply for adjudication, the claimant must provide: 

• a copy of their payment claim; 
• the background of the construction contract; 
• the payment schedule;
• Notice of Intent to Apply for Adjudication; and 
• any other relevant evidence that may support their claim.

An adjudicator’s determination about the payment dispute is usually an interim decision. Although it can be challenging to have an adjudicator’s decision reviewed or appealed, parties retain the right to have the dispute dealt with on a full and final basis through litigation or arbitration later.

Key Takeaways

Litigation is lengthy and costly, and most parties involved in a construction dispute will not want to lose money and time to recover a debt. Adjudication ensures that those working in the construction industry continue to get paid if there is a dispute around their work. Additionally, adjudication will likely result in a resolution within a shorter period.

Navigating the Securities of Payment legislation in NSW can be tricky. If you need legal assistance understanding and implementing changes within a building or construction project, 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.

Frequently Asked Questions