The Building and Construction Industry Security of Payment Act 1999 (NSW) (the Act) introduces a statutory process known as adjudication, designed to provide a quick, interim resolution to payment disputes. This mechanism enables contractors, subcontractors, and suppliers to seek prompt payment for work completed or goods supplied, even while broader contractual or legal disputes continue. Below is an overview of the adjudication process and its key legal considerations.

From Payment Claim to Dispute

The adjudication process typically begins when a payment claim is made under Section 13 of the Act. Once a payment claim is served, the respondent has a limited time, usually 10 business days, to provide a payment schedule under Section 14 of the Act. 

When can a claimant apply for adjudication?

  • when the amount in payment schedule is less than claimed amount (Section 17(1)(a)(i));
  • when the respondent fails to pay the whole or any part of the payment schedule by the due date (Section 17(1)(a)(ii)); or
  • when a respondent fails to provide a payment schedule and fails to pay any part of the claimed amount by the due date (Section 17(1)(b)).

Statutory Requirements 

Section 17 of the Act also outlines the requirements of an adjudication application where an adjudication application:

  • must be in writing
  • must be made to an adjudicator chosen by the claimant 
  • must be made within the time frame required by law 
  • must identify the payment claim and the payment schedule (if any) to which it relates
  • must be accompanied by such application fee (if any) as may be determined by the authorised nominating authority
  • may contain such submissions relevant to the application as the claimant chooses to include.

Adjudication Application and Procedure

The adjudication process is designed to be efficient and swift, the common steps and procedures of an adjudication process are as follows:

  1. Adjudication Application: The claimant lodges an application with an Authorised Nominating Authority (ANA), including relevant documentation such as the payment claim and any communications.
  2. Appointment of Adjudicator: The ANA appoints an independent adjudicator to review the dispute.
  3. Adjudication Response: The respondent may lodge a formal response, typically within five business days.
  4. Determination: The adjudicator decides the amount of progress payment due, if any, and specifies a due date for payment.

This determination is interim, meaning it does not finally resolve all contractual rights but provides a binding resolution for the purpose of maintaining cash flow.

Consequences of Non-Payment

Where a respondent fails to pay an adjudicated amount by the due date, the consequences are significant. Pursuant to Section 25 of the Act, an adjudication certificate can be filed as a judgment for a debt in any court of competent jurisdiction and is enforceable. Even if the respondent commences proceedings to have the adjudication judgement set aside, they are often required to pay the unpaid portion of the adjudicated amount pending the final determination to the Court as security.

In Pacific Islands Express Pty Ltd v Empire Building Development Pty Ltd [2008] NSWSC 576, the Court emphasised the consequence of non-payment as follows:

  • the adjudication determination is binding, unless set aside by a court;
  • the adjudicated amount can be registered as a judgment debt in court; and
  • when it becomes enforceable as a court judgment, this allows the claimant to take steps to recover the debt, such as garnishee orders or seizure of property.

Key Considerations 

  1. Time Limitations

    Timeframes under the Act are strict. Missing a deadline, whether in lodging a payment schedule, application, or response, can forfeit a party’s rights to defence.

  2. Jurisdictional Issues

    While the scope for challenging an adjudicator’s determination is limited, Courts may intervene where there is a jurisdictional error or failure to observe procedural fairness.

  3. Practical Implications

    Adjudication does not determine the final contractual entitlements. It is an interim measure designed to facilitate payment and project continuation, without prejudice to later litigation or arbitration.

  4. Costs

    Adjudicator’s fees are usually split between the parties, although this can vary. If the matter proceeds to court, the court may impose additional costs conditions, especially if a party seeks to have a determination set aside.

Feel free to contact Damin Murdock at Leo Lawyers via our website, on (02) 8201 0051 or at office@leolawyers.com.au. Further, if you liked this article, please subscribe to our social media accounts.

DISCLAIMER: This is not legal advice and is general information only. You should not rely upon the information contained in this article and if you require specific legal advice, please contact us.