Rapid adjudication under the Construction Contracts Act
Under the Construction Contracts Acts 2004 (WA) (Act), an adjudicator is able to make binding interim orders that payment of a disputed amount be made. This process is known as “rapid adjudication” and it provides a low cost and efficient mechanism through which disputes can be quickly determined. It keeps money flowing in spite of contractual issues and hiccups in the chain of payment.
Importantly, this process does not prevent either party from either commencing court proceedings or any other dispute resolution mechanisms under the contract. It allows parties to the contract to retain their legal rights, whilst also permitting work and progress under the contract to continue.
The purpose of the Act is to “pay now, argue later”.
Any party to a construction contract may apply to have a payment dispute adjudicated. However a number of criteria must be fulfilled in order for an application for adjudication to be properly commenced:
- the contract must be a “construction contract” within the meaning of the Act, and certain works are specifically excluded;
- a payment dispute must have arisen under s 6 of the Act, meaning that the time when an amount claimed or retained under a contract is due to be paid has not been paid in full or is disputed;
- the application must be brought within 28 days of the payment dispute arising; and
- no court order or other decision (i.e. by arbitration) has been previously made in relation to the dispute.
Steps in the rapid adjudication process:
28 days after a payment dispute arises, a party to the contract must prepare a written application for adjudication. This must be served on the other party to the contract and on any registered adjudicator if one has been appointed by the parties.
The application must set out the contract or any relevant parts, the payment claim giving rise to the dispute, and all information, documentation and submissions being relied upon.
Within 14 days of being served the application, the responding party must prepare a written response and serve this on the applicant and the adjudicator.
The response must set out the details or any rejection or dispute as to the Claimant’s claim, and also set out the information, documentation and submissions in support.
Within 14 days of being served the response, unless the adjudicator applies for an extension of time, the application will either be dismissed or a determination made as to whether any party to the dispute is liable to make a payment.
This determination must be made in writing, state the amount to be made, the date payment is due, and the reasons supporting this finding.
In addition to ordering the payment of a disputed amount, the Adjudicator can also award interest to be paid on this sum in accordance to the rate of interest stated under the contract.
Adjudication decision final and binding
A determination by an adjudicator is final and binding as an interim decision. However, this determination will not affect any concurrent proceedings already commenced, nor does it prevent parties from commencing further adjudication, court or other proceedings in relation to other disputes arising under the contract.
Costs of the adjudication process
As a general rule, a party will bear its own costs in adjudication proceedings, although the Adjudicator may award costs in favour of one party to the contract where he or she considers appropriate.
Construction Contracts Act Review
The Act is currently under review. We will provide further details once the review has concluded. For further information see:
- The Building Commission guide to payment disputes and the Construction Contracts Act 2004: http://www.commerce.wa.gov.au/building-commission/payment-disputes-and-construction-contracts-act
- Jacobs, Security for Payment in the Australian Building and Construction Industry (5th ed, Thomson Reuters, 2014)
- Contact Tina McAulay on 6188 3339 or at firstname.lastname@example.org