Demystifying the Adjudication Process
Adjudication is the primary dispute resolution process in Victoria for construction related disputes and is governed by the Building and Construction Industry Security of Payment Act 2002 (Vic).
It applies to any construction work and/or related goods and services carried out in Victoria. The purpose is to offer a streamlined adjudication process that allows the contractor (Claimant) to recover a disputed or unpaid progress payment.
When Can an Application be Made
When an adjudication application needs to be lodged will differ depending on the circumstances. The Act provides for three possible scenarios:
- If a payment schedule is received but the amount is less than the claimed amount, the application must be lodged within 10 business days from the date of receiving the payment schedule; or
- If a payment schedule is received and is not disputed, but the Principal fails to pay by the due date, the application must be lodged within 10 business days from the due date of payment; or
- If a payment schedule is not received and the payment claim is not paid in full, the Claimant will need to issue the Principal with a notice, also known as a section 18(2) notice, of their intention to apply for adjudication within 10 business days after the due date for payment has passed. The Principal then has the opportunity to provide a payment schedule within 2 business days of receiving that notice. If there is still no response, the Claimant will then have 5 business days from the end of that two day period to lodge their adjudication application.
Making the Adjudication Application
Most authorised nominating authorities (ANAs) will provide an adjudication application form. If the construction contract lists three or more ANAs, the adjudication application must be made to one of those authorities.
The ANA will then nominate an adjudicator, who must accept the nomination within 4 business days of the adjudication application being lodged. Both the Claimant and the Principal will be notified of their acceptance. If the adjudicator does not accept within the time period, the application may be withdrawn and a fresh application may be made with a different ANA within 5 business days.
There are formal requirements for an adjudication application, which must:
- Be in writing; and
- Be made out to an ANA; and
- Identify the payment schedule to which it relates; and
- If required, be accompanied by an application fee.
The application should also ideally include a copy of the contract, the payment claim and the payment schedule (if one was received). Any submissions relevant to the application may also be included with the application itself.
Adjudication Response and Decision
Depending on the actions of the Principal, they may or may not be allowed to respond to the adjudication application. Where the Principal has provided a valid payment schedule, they will have the opportunity to prepare and serve an Adjudication Response to the application within 5 business days of receipt of the adjudication application from the Claimant or 2 business days from notice of the adjudicator’s acceptance of the application, whichever is later. This must be served on both the adjudicator and the Claimant.
Where the Principal has failed to serve a payment schedule, they will have the serious consequence of being denied the opportunity to make any submissions and responses to the adjudicator. However, this does not automatically mean that the claim will be awarded; the adjudicator must still consider the requirements under the Act and be satisfied that the work was done and was properly valued.
The adjudicator has 10 business days to determine the application from the date of acceptance of the application or the date the adjudication response would have been due or, if the Principal is not entitled to a response, the date the Principal received a copy of the adjudication application. This time for a decision may be extended by up to a maximum of 5 business days should the Claimant wish to do so.
Where an adjudication response includes reasons for withholding payment which were not included in the relevant payment schedule, the adjudicator must give the Claimant a further 2 business days to respond to those reasons.
Once the adjudicator has made a determination, the Principal must pay any adjudicated amount either within 5 business days of the service of the determination or by the due date of payment, whichever is later. If the adjudicated amount remains unpaid, then the Claimant may suspend works by giving 3 business days of notice. If payment is made at this point, the Claimant must resume works within 3 business days of payment or such lesser period in the contract that is more than one business day. Should the adjudicated amount remain unpaid, the Claimant may apply for an Adjudication Certificate and seek to have it enforced via a court judgement.
For any further information please contact a member of our Construction Team.
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