FAQs: Security of payment: adjudication applications

The Construction Contracts Act 2004 (WA) (CCA) sets up a security of payment dispute resolution system by which parties to a construction contract can apply to an independent adjudicator for resolution of payment disputes. 

A typical adjudication applicant is a construction contractor or subcontractor who has been denied full payment on a progress claim.

Below is a series of questions that applicants frequently ask about the process.

As you will see, preparing an application for adjudication requires considerable work.  Lavan’s Construction and Infrastructure team has significant experience with adjudications and can assist you with preparing such an application.

NOTE: This document is not intended to provide legal advice. It is not a substitute for reading the CCA itself, nor for taking legal advice. Please contact Lavan’s Construction & Infrastructure team if you need legal advice or assistance relating to any adjudication matter.

How much time do I have to lodge the adjudication application?
How much time do I have to lodge the adjudication application?

The application must be prepared and served within 90 business days after the payment dispute arises.  The definition of business days, excludes weekends, public holidays and the period 25 December to 7 January (inclusive).

For ordinary payment claims (for money), a payment dispute arises upon the earlier of:

  1. when the amount claimed is due to be paid under the contract, but has not been paid in full; or
  2. the claim has been rejected or disputed in whole or part.[1]

Be wary of informal disputes (e.g. oral or email rejections of payment claims) that might “start the clock” running earlier than anticipated.

Note that different provisions apply to applications relating to return of retention and security.

What does lodgment of the adjudication application involve?
What does lodgment of the adjudication application involve?

To successfully bring an adjudication application, you must achieve each of the following within the 90 business day period referred to above:

  1. prepare a written application for adjudication that complies with CCA requirements;[2]
  2. serve the application on each (and every) other party to the contract; and [3]
  3. serve the application on the prescribed appointor/adjudicator (as the case may be).[4]
What happens if the payment claim I want to adjudicate has already been dealt with?
What happens if the payment claim I want to adjudicate has already been dealt with?

If an adjudication application is still on foot, or has previously been determined in relation to specific payment claims, generally you are not eligible to lodge an application covering the same payment claims or same payment dispute.[5]

What if the payment claim has already been disputed?
What if the payment claim has already been disputed?

So long as you have not previously adjudicated a payment claim before, you may be able to include it in your application.

In 2016, amendments to the CCA were introduced that are intended to permit an applicant to include in an adjudication application a payment claim which had been previously disputed or not paid (but not dismissed or determined by adjudication) and a further claim for the whole or part of the same amount or obligation had been made again under the contract (traditionally called recycled claims).[6]

The dispute has already been arbitrated or litigated, what do I do?
The dispute has already been arbitrated or litigated, what do I do?

If the dispute is the subject of an order, judgment or other finding by an arbitrator or other person or a court or other body dealing with a matter arising under a construction contract, then you are not eligible to lodge an adjudication application.[7]

However, if no such order, judgment or finding is in place, then you may be eligible to lodge an adjudication application even if arbitration or litigation proceedings are on foot.

Who will adjudicate the adjudication application?
Who will adjudicate the adjudication application?

A registered adjudicator appointed under the CCA adjudicates the application.

Most commonly, the contract will nominate a prescribed appointor or a particular adjudicator.  Provided that the contractual nomination is valid (and the relevant nominees are registered under the CCA), generally that will bind you.

Alternatively, if the contract is silent on the prescribed appointor or adjudicator, you will need to choose a prescribed appointor from the current list in the Construction Contracts Regulations 2004 (WA) (CCA Regulations), namely: The Australian Institute of Building, Australian Institute of Project Management, The Australian Institute of Quantity Surveyors, Electrical and Communications Association of Western Australia (Union of Employers), The Institute of Arbitrators and Mediators Australia, Master Builders Association of Western Australia (Union of Employers), RICS Australasia Pty Ltd and The Royal Institute of Architects.[8]

What needs to be in the application?
What needs to be in the application?

The application should set out, or attach to it, the following main details:

  1. the construction contract involved or relevant extracts of it (generally attach the full contract);
  2. any payment claim that has given rise to the payment dispute; and
  3. all the information, documentation and submissions you wish to rely on in the adjudication.[9]

Please be aware that failure to comply with the above requirements can be fatal to your application.  However, recent changes to the CCA, suggest that adjudicators have the jurisdiction to continue determining the payment dispute if there is substantial compliance with these requirements.

What else can be included in my application?
What else can be included in my application?

Best practice is to put in the following as part of the application:

  1. cover letter to the prescribed appointor (or prescribed adjudicator) confirming what is contained in the application (if to an appointor, the letter should formally request the appointment of an adjudicator);
  2. outline of submissions explaining why the amount claimed is due and owing under the contract;
  3. statutory declaration(s) or signed witness statement(s) verifying the facts upon which the claim is based; and
  4. book of documents containing all relevant documents including contract and relevant correspondence.
How do I serve the adjudication application?
How do I serve the adjudication application?

It is vital that any application be served in accordance with legal requirements for proper service.  The method of service depends on who you are serving, and it can differ depending on whether you are serving a corporation, an individual, a partnership and so on.  Generally service by post or email should be avoided.  The best method is delivery by hand.

Note that if you are serving a party based interstate you will need to allow yourself extra time to effect service.

How are the adjudicator’s fees dealt with?
How are the adjudicator’s fees dealt with?

Generally, the parties involved in a dispute are liable to pay the costs of the adjudicator in equal shares.[10] Frequently, adjudicators will ask for a deposit or security for costs to be provided.

How long will it take for the adjudicator to make a determination?
How long will it take for the adjudicator to make a determination?

The adjudicator is to make a determination within 10 business days after the date of the service of the response, or if there is no response served, then 10 business days after the last date on which a response is required to be served.[11]

Note that the adjudicator may seek the consent of the parties to extend the time for making a determination.[12]

How is the adjudicator’s determination enforced?
How is the adjudicator’s determination enforced?

If your application succeeds and you receive an adjudication determination in your favour, it is necessary to file a copy of the determination certified by the Building Commission and an affidavit that the amount has not been paid with the relevant court.[13] Upon filing the determination, it will be taken to be an order of the court and may be enforced.[14]

 

Can I appeal the adjudication finding if my application is dismissed?
Can I appeal the adjudication finding if my application is dismissed?

Depending on the findings of the adjudicator, you may be able to apply to the State Administrative Tribunal for review of a dismissal or the Supreme Court for review of a determination.

Can I get assistance in preparing or enforcing the adjudication application?
Can I get assistance in preparing or enforcing the adjudication application?

The Construction and Infrastructure team at Lavan is well versed in the adjudication landscape in Western Australia, and is able to assist in the preparation of adjudication applications as well as enforcement.

We regularly attend meetings of The Institute of Arbitrators and Mediators (IAMA) and occasionally give technical presentations to their adjudicators on matters of construction law. Therefore, we are familiar with many of the key IAMA personnel and often we are able to offer insight as to how a particular adjudication may be approached.

12 April 2017
Construction Updates
AUTHOR
Robert Shaw
Partner
AUTHOR
Shane Pentony
Partner
AUTHOR
Greg Nairn
Partner
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FOOTNOTES

[1] CCA s 6.

[2] CCA s 26(1)(a).

[3] CCA s 26(1)(b).

[4] CCA s 26(1)(c).

[5] CCA s 6(2), 57.

[6] CCA s 3.

[7] CCA s 25.

[8] Construction Contracts Regulations r 11.

[9] CCA s 26(2)(b),(c).

[10] CCA s 44(6).

[11] CCA s 31.

[12] CCA s 32(3)(a).

[13] CCA s 43(2).

[14] CCA s 43(3).