WHAT HAPPENS NOW?
- Payment schedule provided
- Payment schedule NOT provided
- Notice of Optional Adjudication
- Rights to suspend work
- Contract provisions which are void
- Adjudication Application form
The claimant has a number of important options depending on whether or not the respondent served a payment schedule. Rights under the Act can only be exercised by complying with the strict statutory times and procedures.
If within 10 business days of being served with a payment claim, the respondent provides the claimant with a payment schedule and the claimant disputes the respondent's reasons for withholding the claimed amount or the respondent fails to pay the claimed amount by the due date, the claimant can apply to Adjudicate Today for adjudication of the claimed amount. Where the claimant disputes the reasons for withholding payment, the claimant must apply for adjudication of the claimed amount within 10 business days of receiving the payment schedule. Where the respondent fails to pay the scheduled amount by the due date, the claimant must apply for adjudication of the claimed amount within 10 business days after the due date.
Payment Schedule served flowchart
If after 10 business days of being served with a payment claim, the respondent has NOT provided the claimant with a payment schedule and has failed to pay the claimed amount by the due date, the respondent becomes liable to pay the claimed amount. The claimant must now make an important decision. Failure to provide a payment schedule creates a statutory debt for the claimed amount which the claimant is entitled to recover independently of and irrespective of the terms of the construction contract. This means the claimant can sue in a court of competent jurisdiction for the claimed amount (statutory debt). The time for suing is within 6 years. A respondent is entitled to certain defences and does not need to pay the claimant until judgment. Most claimants logically wish to avoid potential delays in payment and the cost of legal action. They choose to exercise their rights under the Act for optional adjudication (see next point).
Payment Schedule NOT served flowchart
Notice of Optional Adjudication
The notification for optional adjudication is made under section 18(2) of the Act. If the claimant elects to apply for optional adjudication, the claimant must notify the respondent within 10 business days of the due date for payment that they will be proceeding to adjudication . This is called the notice of optional adjudication or section 18(2) notice and must include advice that the respondent has 2 business days to respond with a payment schedule before the claimant is entitled to apply for adjudication. The intent of the notice is to give the respondent a written notice that they have a further 2 business days to provide a payment schedule. If after the section 18(2) notice, the payment schedule is still not received or the claimant disagrees with the scheduled amount, the claimant has 5 business days from the expiry of the section 18(2) notice to apply for adjudication.
The notice served by the claimant on the respondent may take the following form:
"Notice under s.18(2) of the Building and Construction Industry Security of Payment Act 2002 Vic.
In response to this company’s payment claim dated ….... for $…... your company failed to provide a payment schedule within the time allowed by the Building and Construction Industry Security of Payment Act 2002 Vic. As a consequence your company became liable to pay the whole amount of the claim on the due date. The whole amount has not been paid. Our company has elected to apply for adjudication of the payment claim. Your Company has 2 business days in which to serve a payment schedule or pay the payment claim in full. If, within that time, your company fails to pay the whole amount, this company will proceed to adjudication. If your company also fails to serve a payment schedule, your company will be barred from lodging an adjudication response [see s.21(2A) of the Act]."
DOWNLOAD TEMPLATE FOR SECTION 18(2) NOTICE
In any case the claimant must submit the adjudication application within the time specified by the Act. Once the time is passed the claimant loses any right to adjudication with respect to the payment claim. Neither Adjudicate Today nor an adjudicator can extend these statutory stipulations. Effectively the payment claim has expired.
Irrespective of what is in the construction contract, the Act gives the claimant a right to suspend work or the supply of related goods or services. In respect of the period of suspension, the claimant cannot be successfully sued for liquidated damages by the respondent because of that suspension.
If the respondent fails to pay:
- The whole claimed amount by the due date for payment, where the respondent failed to serve a payment schedule within time; or
- The scheduled amount by the due date for payment; or
- After adjudication, the adjudicated amount within 5 business days after an adjudication determination is received by the respondent;
The claimant is legally entitled to suspend work or the supply of plant and materials and other construction related services.
However the respondent must be provided with 3 business days written notice of the claimant's intention to suspend work. For example, if the due date for payment is Monday and the written notice is provided on Tuesday, work may be suspended from Saturday of the same week.
The notice may take the form:
“You have failed to pay the amount due under the Building and Construction Industry Security of Payment Act 2002 Vic in respect of my payment claim served on you on date......... Take notice that pursuant to my right under section 29 of the Act, I will suspend work at the expiration of three business days unless, in the meantime, the amount due is paid in full.”
Once the claimant has been paid the amount due, work must resume within 3 business days or less if that is in the contract. Notwithstanding anything in the contract, the claimant is not liable to the respondent for any loss or expense suffered by the respondent as a consequence of the suspension under the Act.
If in response to a suspension the respondent removes any work from the claimant's contract, the respondent is liable for any loss and expense suffered by the claimant as a result of the respondent’s action.
Payment for the loss and expense can be pursued through adjudication like any other due payments
Contract provisions which are void
Certain contract provisions are void under the Act. This means that a respondent can't use such contractual provisions to delay payment or prevent an application under the Act. They include:
- Any provisions that are inconsistent with the Act;
- “Pay if paid” and “pay when paid” clauses, even if they are included in the contract;
- Clauses that attempt to “contract out” of the Act;
- Clauses aimed to deter a person from taking action under the Act; and
- Any provision which would limit interest on late progress payments to an amount less than the rate of interest under Section 2 of the Penalty Interest Rates Act 1983.
