Options for Claimants After Adjudication
The Building and Construction Industry Security of Payment Act 2002 (Vic) (the Act) is a powerful legislative regime designed to ensure cash flow within the building and construction industry. It is often referred to as the “pay now, argue later” regime however, this seldom occurs. The regime sets up a series of strict timeframes for making a payment claim, responding to a payment claim, paying any amount due, and establishes a speedy dispute resolution process if the parties do not agree that the contractor is entitled to the amount claimed.
Adjudication is a process created by the Act to resolve a disputed claim for payment due under a construction contract. The adjudication process is intended to provide a fast and inexpensive mechanism for Claimants (those who are submitting a payment claim) and Respondents (those who are receiving the claim) to resolve the dispute. This is achieved by having an independent person adjudicate (the Adjudicator) between the Claimant and the Respondent.
If a payment dispute is referred to an adjudicator, the adjudicator may determine that the respondent must pay an amount (the 'Adjudicated Amount') to the claimant. Whilst claimants may receive a favourable determination by the adjudicator, seldom does it guarantee or encourage prompt payment of the Adjudicated Amount by the respondent. Therefore, it is critical for claimants to be aware of the legal options and avenues after adjudication. These legal options and avenues will be explored in this article, with a view towards providing practical knowledge for Claimants with respect to their rights and options for enforcing Adjudicated Amounts under the SOPA regime.
Obtaining Judgment
When a Claimant receives a favourable determination at adjudication, it is important that the Claimant applies for and obtains an adjudication certificate. The adjudication certificate sets out the name of the parties, the amount payable and the date on which the adjudicated amount is to be paid. More importantly, the adjudication certificate entitles a claimant to formally file and seek judgement against the respondent for the Adjudicated Amount.
The SOPA process for obtaining judgement is considered a summary procedure, as the Respondent is limited in their ability to raise a defence on the merits. In other words, as the dispute between the parties has been ventilated and resolved at adjudication, if the respondent were to contest the Claimants right to obtain judgement it must do so by challenging the adjudication determinations compliance with the SOPA legislation itself.
Therefore, it is rare that a respondent will make an application to set aside judgement for the Adjudicated Amount as the grounds and scope for challenging an adjudication determination is heavily constrained and limited to arguments stemming from jurisdictional error or denial of natural justice.
Depending on the quantum of the Adjudicated Amount, the Claimant is entitled to obtain judgement in any court of competent jurisdiction. For an Adjudicated Amount less than $100,000.00 the claimant is entitled to obtain judgement in the Victorian Magistrate Court. However, for Adjudicated Amounts over $100,000.00 the Claimant must apply to either the County or Supreme Court for judgement.
For all enforcement applications, and pursuant to Section 28R of the Act the Claimant must file with the Court:
The Adjudication Certificate.
An affidavit by the Claimant stating that the whole or any part of the Adjudicated Amount remains unpaid;
An Originating Process (for the County and Supreme Court this will typically be way of an Originating Motion).
It is important when filing enforcement applications that the Claimant seeks orders from the Court for a debt certificate to be issued, the reasons for this will be expanded below.
Upon receipt of the judgment order made by the Court, the Claimant will be entitled to the same enforcement procedures afforded to Judgement Creditors such as warrants for seizure and sale, summons for oral examination and garnishee orders.
Recovery from the Principal
It is interesting and important to note that SOPA not only entitles a Claimant to seek judgement against the respondent but also entitles the Claimant to recover from parties “further up the line”, particularly the Claimant’s (or contractor’s) principal.
Part 3 Div 4 of the Act titled “Recovery from principal” sets out the provisions for the recovery of debt from the Principal. Pursuant to the legislation, the Claimant can recover an Adjudicated Amount from the Principal if a judgment is made and a debt certificate issued. The Subcontractor then serves a Notice of Claim on the Principal with the Debt Certificate attached. The amount that can be claimed is limited to the Subcontractor’s certified debt. Both of these forms must take the prescribed forms that are set out in the Building and Construction Industry Security of Payment Regulations 2013.
This legislative procedure and entitlement for Claimants is extremely powerful, particularly in circumstances where the respondent is refusing or delaying payment of the Adjudicated Amount. In essence, the Claimant (or contractor) is allowed to bypass the respondent and directly claim payment from the Principal.
How we can help:
Merton Lawyers can assist and advise on all aspects of the Act including:
Strategies for using the regime to get paid or to defend claims
Advising on and assisting with the preparation of payment claims and payment schedules
Preparing adjudication applications and responses
Advising on the enforcement of adjudication determinations.
Get in touch with our team today.
