Construction contractors unaware of payment rights

The process of adjudication has been operational in South Australia for some four years now and is slowly gaining traction in the commercial construction market. However, a number of contractors and sub-contractors remain unaware of the extensive rights given to them by the Act, and a number of principals remain unaware of the implications if a payment claim is submitted to them under the Act.

The Security of Payment legislation was introduced with the aim of keeping cash flow moving during a construction project on a ‘pay now argue later’ basis.  The Act has now removed the need for building contractors to become involved in lengthy and costly litigation over progress claims, and the ‘stop work’ notices that usually accompany this.

As a head contractor or sub-contractor, the rights under the Act (which apply regardless of what is in the contract) give an express right to receive monthly progress payments which, if not paid or are disputed, allow the processes under the Act to be used to achieve a simple, quick and cost-effective binding determination, usually within six weeks.

As a principal or head contractor who has retained sub-contractors it is critical to be aware that the Act is brought into play each time a sub-contractor submits an invoice on which is stated ‘This is a payment claim under the Building and Construction Industry Security of Payment Act’.  If such an invoice is received but disputed (for example, it is calculated incorrectly or there is an offsetting claim for defective works), it is essential that a response is prepared and submitted in compliance with the Act. If the invoice is not disputed in the manner set out in the Act, then the full amount claimed by the sub-contractor will be payable and the sub-contractor may obtain a default (immediate) judgment of the court to enforce this.

The timeframes in the Act are very strict and cannot  be adjusted, even by consent. Unfamiliarity with the Act can mean that you will entirely lose your chance to put in a claim or to dispute an invoice you have received.

The adjudication process is generally ‘pro-claimant’ and favours the contractor or sub-contractor who puts in the invoice. The most recent published statistics from South Australia indicate that, averaged across all adjudications in the state, $0.73 is awarded for every dollar claimed. The introduction of the regime has, however, greatly increased the ability to keep large construction projects moving forward without protracted (and costly) legal manoeuvres.

Getting experienced construction lawyers involved to advise and assist in the adjudication process and to prepare the relevant submissions to the adjudicator will maximise the prospects of a successful outcome.