SA: Claimant Disputes Payment Schedule
If the claimant disputes a valid payment schedule, the claimant can apply to Adjudicate Today for adjudication of the claimed amount. Application must be made within 15 business days of date of receiving the payment schedule.
Why go to adjudication?
Adjudication is quick and cost effective dispute resolution for industry participants to recover all progress payments that are due, including final payments and retention monies. It was created by government at the request of industry groups to "keep the money flowing in the building and construction industry". It represents an alternative to the often slow, expensive and difficult process of litigating payment disputes through the courts.
The Act permits claimants access to adjudication whether the construction contract is written or oral and even when the contract has no provision for progress payments and/or the contract is for a single supply at a fixed price.
Adjudication provides claimants with a quick determination on their claim for payment. Subject to very limited injunctive rights, a respondent must comply with the adjudicator's determination (i.e. pay the money) if it wishes to commence proceedings in court. In effect, the traditional roles of court are reversed. Rather than the claimant litigating in court seeking to be paid, the claimant has possession of the money and the respondent must commence court proceedings to attempt to recover some or all amounts determined by the adjudicator. In practice, few respondents challenge the adjudicator's determination.
The process is simple and rapid. The adjudicator must make the determination within 10 business days (unless the parties agree to extend the time) from when the adjudicator notifies the parties of acceptance of the adjudication application. If the respondent's reasons for not paying are without merit, the respondent is generally liable for all adjudication fees. The process is usually entirely in writing. It was designed to be simple so as most parties would not require a lawyer.
After adjudication, and if the respondent does not pay any determined amount by the relevant date, the claimant takes the adjudication certificate (available on application to Adjudicate Today) to the appropriate court and registers it as a judgment debt.
Unlike litigation or arbitration, adjudication cannot result in a determination that the claimant must pay the respondent money. The maximum liability of the unsuccessful claimant is the amount of the adjudication fees. Even then, the fees are shared by the parties unless the adjudicator determines otherwise.
Prompt payment is vital to the stability and efficiency of the construction industry. Too often the party (the respondent) liable to pay for construction work or related goods or services, manufactures a dispute to deny, or try to delay, payment. In other situations, respondents try to string out the time for payment with promises of future work if only the claimant just waits a bit longer. The Act bars "pay when paid" and/or "paid if paid" as reasons for withholding a payment and overturns them even if they are allowed by the contract. It also provides a minimum rate of interest on late progress payments.
What happens now?
Once the claimant decides on adjudication, it is important that the correct procedures under the Act are followed. The first step is to check that the payment schedule complies with the Act. This means the payment schedule must:
- Be in writing and addressed to the claimant;
- Be served on the claimant within 15 business days of receipt of the payment claim by delivery in person or lodged during normal business hours at the claimant's ordinary place of business or posted or faxed to the claimants ordinary place of business (or as otherwise provided by the contract or common usage, such as email);
- Identify the payment claim to which it relates;
- State the scheduled amount of payment that it is proposed to make (it may be "nil").
- If that amount is less than the amount claimed, state the reasons why. The Act precludes the adjudicator from considering issues not included in the payment schedule. Certain reasons for refusing to pay are void under the Act, including "pay if paid" and "pay when paid".
Assuming the payment schedule is valid, please move to the next step on the SA flowchart which is "Claimant has 15 business days to prepare and serve Adjudication Application on Adjudicate Today from date of receipt of the Payment Schedule. However if the Adjudication Notice [ s.17(2)] was served, the time for expiry is 15 business days after expiry of the 5 business days given by that Notice".