The 6 Steps to Adjudication

The Building and Construction Industry Security of Payment Act 1999 (NSW) (“the Security of Payment Act”) (and interstate equivalent) is unlike any other law in the country. These laws can be the source of significant rights as well as severe adverse consequences for most businesses in the building industry.

For businesses operating in the building and construction industry, these laws should not be taken lightly nor should the potential benefits be overlooked. To ensure that you trade successfully and maintain cashflow when it counts, an understanding of the regimes created by the Security of Payment Act is essential. 

security of payment act adjudication application

1. Adjudication Applications

There is no prescribed form for an Adjudication Application, however, most Authorised Nominating Authorities will have a form or coversheet for an Adjudication Application available.

An Adjudication Application:

  • must be in writing,
  • must be lodged with an Authorised Nominating Authority chosen by the Claimant,
  • must be lodged strictly within the applicable time limit,
  • must identify the Payment Claim and the Payment Schedule, if any, to which it relates,
  • must be accompanied by the application fee, if any, charged by the Authorised Nominating Authority, and
  • may, and typically does, contain written submissions and supporting documentation, in particular, relating to the reasons for withholding payment given by the Respondent in its Payment Schedule.

Once lodged:

  1. the Claimant must serve a copy of the Adjudication Application on the Respondent, and
  2. the Authorised Nominating Authority will refer the Adjudication Application to an Adjudicator.

If the Adjudicator accepts the Adjudication Application, the Adjudicator must serve notice of their acceptance on the Claimant and the Respondent.

If a Claimant does not receive an Adjudicator’s acceptance within 4 Business Days’ of lodging an Adjudication Application, the Claimant may:

  1. withdraw the Adjudication Application, by giving notice in writing to the relevant Authorised Nominating Authority, and
  2. make a new Adjudication Application within 5 Business Days after the Claimant became entitled to withdraw the previous Adjudication Application.

Withdrawal of an Adjudication Application:

A Claimant may also withdraw an Adjudication Application at any time:

  1. before an Adjudicator is appointed to determine the application; or
  2. if the Adjudicator has been appointed, before the application is determined by serving written notice of the withdrawal on the Respondent and either the ANA or the Adjudicator.

However, where an Adjudicator has been appointed; the withdrawal will not have effect if:

  1. any other party to the construction contract objects to the withdrawal; and
  2. in the opinion of the Adjudicator, it is in the interests of justice to uphold the objection.

2. Time Limits for Adjudication Applications

The following time limits apply strictly in relation to Adjudication Applications:

1. Where a Respondent provides a Payment Schedule:

(a) an Adjudication Application may only be made within 10 Business Days of the Claimant receiving the Payment Schedule, or

(b) if the Respondent fails to pay the Scheduled Amount by the relevant Due Date, an Adjudication Application may only be made within 20 Business Days of the Due Date for the payment.

2. If no Payment Schedule was provided, the Claimant may not apply for Adjudication unless they have:

(a)   first, within 20 Business Days following the Due Date for the payment, notified the Respondent of their intention to apply for Adjudication, and

(b)     subsequently, allowed the Respondent 5 Business Days thereafter to provide a Payment Schedule.

In this case, the Adjudication Application may only be made within 10 Business Days of the expiration of the said 5 Business Day period.

3. Where:

(a) a Claimant has not received an Adjudicator’s acceptance of an Adjudication Application within 4 Business Days after lodging the application, or

(b) an Adjudicator who accepts an Adjudication Application fails to give a Determination within the allowed time.

The Claimant may withdraw the Adjudication Application and make a new Adjudication Application at any time within 5 Business Days after the Claimant became entitled to withdraw the previous Adjudication Application.

3. Adjudication Responses

Significantly, an Adjudication Response may only be lodged by a Respondent if the Respondent provided a Payment Schedule to the Claimant within the allowed time.

There is no prescribed form for an Adjudication Response.

An Adjudication Response:

  • must be in writing,
  • must identify the Adjudication Application to which it relates,
  • may, and typically does, contain written submissions and supporting documentation, and
  • must be lodged with the Adjudicator strictly within the time allowed.

Critically, the Respondent cannot include in the Adjudication Response any reasons for withholding payment (or related submissions) unless those reasons have already been included in the Payment Schedule provided to the Claimant.

Once lodged, the Respondent must serve a copy of the Adjudication Response on the Claimant.

4. Time Limits for Adjudication Responses

If you are the party served with an Adjudication Application (“Respondent”), the Adjudicator will be prohibited from considering any Adjudication Response (Submissions and supporting documents) that you wish to make in relation to the Application unless that Response is lodged with the Adjudicator by the later of:

  1. 5 Business Days after receiving a copy of the Adjudication Application, and
  2. 2 Business Days after receiving notice of an Adjudicator’s acceptance of the Adjudication Application.

5. Adjudication Procedures

An Adjudicator may not consider an Adjudication Response unless it was lodged before the end of the period within which the Respondent was entitled to lodge such response.

In determining an Adjudication Application, an Adjudicator is to consider the following matters only:

  1. the provisions of the Security of Payment Act,
  2. the terms of the relevant Construction Contract,
  3. the Payment Claim to which the application relates, together with all submissions and relevant documentation that have been lodged by the Claimant in support of the claim,
  4. the Payment Schedule, if any, to which the application relates, together with all submissions and relevant documentation that have been duly made by the Respondent, and
  5. the results of any inspection carried out by the Adjudicator of any matter to which the claim relates.

Relevantly, Section 10 of the Security of Payment Act stipulates the priority of considerations when valuing construction work carried out or related goods or services performed, with a valuation in accordance with the terms of the relevant Construction Contract to prevail where the contract makes express provision with respect to the matter. Accordingly, contractors would be wise to ensure that their Construction Contracts include clear and favourable terms for valuing work carried.

For the purpose of conducting any proceedings for the purpose of determining an Adjudication Application, an Adjudicator may:

  1. request further written submissions from either party and must give the other party an opportunity to comment on those submissions,
  2. set deadlines for further submissions and comments by the parties,
  3. call a conference of the parties, and
  4. carry out an inspection of any matter to which the claim relates.

An Adjudicator specifically has the power to determine an Adjudication Application despite the failure of either or both of the parties to make a submission or comment within the allowed time or to comply with a call for a conference of the parties.

6. Adjudication Determinations

An Adjudicator may not determine an Adjudication Application until after the period that a Respondent has to lodge an Adjudication Response has expired.

An Adjudicator is otherwise required determine an Adjudication Application as expeditiously as possible and, in any case:

  1. where a Respondent is entitled to submit an Adjudication Response;
    (a) within 10 Business Days after the Adjudication Response is submitted, or
    (b) if an Adjudication Response is not lodged, the end of the period within which the Respondent is entitled to lodge a response, or
  2. in any other case–the date on which notice of the adjudicator’s acceptance of the application is served on the claimant and the respondent, or
  3. within such further time as the Claimant and the Respondent may agree.

Specifically, when making a Determination, the Adjudicator is to determine:

  1. the amount of the progress payment, if any, to be paid by the Respondent to the Claimant (“the Adjudicated Amount”),
  2. the date on which the Adjudicated Amount became or becomes payable, and
  3. the rate of interest payable on the Adjudicated Amount.

The Adjudicator’s Determination must be in writing and include the reasons for the determination (unless agreed otherwise).

An Adjudicator may not consider or determine any other claim that might exist between the Claimant and the Respondent, for example, a common law claim for damages for breach of contract or a claim under the law of misleading or deceptive conduct.

Provided that the Adjudicator otherwise makes a Determination in accordance with the Adjudication Procedures, the Adjudicator is free to determine the application as they see fit save only that, if a value of any work or related goods or services has been determined by an Adjudicator in connection with an earlier Adjudication Application, the Adjudicator must give the same value as previously determined unless a party can show that the value has changed since the previous Determination.

Before an Adjudicator will release their Determination to the parties, the Claimant will typically need to pay the Adjudicator’s fees in full, even though they will usually be able to recover at least half of the Adjudicator’s fees once the Determination is received.

If an Adjudicator who has accepted an Adjudication Application does not give a Determination within the time allowed, the Claimant may:

  1. withdraw the Adjudication Application, by giving notice in writing to the Adjudicator, and
  2. make a new Adjudication Application within 5 Business Days after the Claimant became entitled to withdraw the previous Adjudication Application.

An Adjudicator will not, however, have failed to determine the Adjudication Application within the allowed time if they have notified the parties that a Determination has been made and are awaiting payment of their fees before releasing the Determination. 

Free Case Evaluation

At Roberts Legal we’re experts in construction and we’re here to help. If you would like more infomation in relation to the Security of Payment Laws, download a copy of our guide here

If you need an answer fast, contact us for a free case evaluation on 1300 553 343.