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Adjudication is a process created by the
Building and Construction Industry Security
of Payment Act 2002 to resolve a disputed
claim for payment due under a construction
contract. It can help resolve payment disputes
quickly, fairly and at less cost than going
to court.
An independent adjudicator receives written
submissions from both sides of the payment
dispute, conducts inspections or conferences
where necessary, and decides the amount,
if any, which is due in respect of a progress
payment claimed under the Act. The adjudicator
makes the determination within 10 business
days. This time may be extended to 15 business
days if the claimant agrees. The decision
is interim, and does not affect the parties'
substantive rights and obligations under
the contract.
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An ANA is an organisation that has been
authorised by the Building Commission to
nominate adjudicators under the Act. Before
authorising an ANA, the Commission must have
regard to guidelines issued by the Minister.
In carrying out their functions, ANAs must
comply with the Act, the Regulations and
Conditions of Authorisation. A breach of
any requirement or condition may affect the
authorisation of the ANA. Authorisation is
generally for a period of three years.
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An adjudicator must have relevant educational
qualifications and substantial experience
in the administration, management and supervision
of construction contracts or in dispute resolution
relating to construction contracts. ANAs
are required, as a condition of authorisation,
to ensure that the adjudicators they nominate
meet minimum core competencies and comply
with professional standards of conduct.
The Adjudicator Core Competencies and Adjudicator
Standards of Conduct that apply to all adjudicators
nominated under the Act are available.
In conducting an adjudication, the adjudicator
must be fair and act independently. An adjudicator
cannot accept an adjudication application
if doing so would create any actual or likely
conflict of interest, or any perception of
conflict of interest or bias on their part.
Any complaints about an adjudicator should
be referred to the ANA.
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There are two parts to the adjudication
cost: the ANA's fees and the adjudicator's
fees and expenses.
Any costs of the adjudication apart from
the fees of ANAs and adjudicators are borne
by the parties that incur them. The
adjudicator does not have power to make any
determination in relation to these costs.
The ANA may charge an application fee
and fees for services in connection with
the application. The fees amongst
the different ANAs may vary. ANAs
are required to provide information about
the fees they charge.
- Adjudicator's fees and expenses
Adjudicators' fees may vary, depending
on the nature and complexity of the issues
in dispute, the time required and the expertise
of the adjudicator. Generally, adjudicators
charge an hourly rate. They may also
charge for expenses associated with the
adjudication such as the cost of visiting
the construction site. Before accepting
an adjudicator, claimants may inquire about
their fees.
The parties to an adjudication are each
liable to contribute to the adjudicator's
fees and expenses in equal proportions,
or in such proportions as the adjudicator
may determine.
- Adjudicator's entitlement in relation
to fees
An adjudicator is entitled to be paid
reasonable fees and expenses having regard
to the work that he or she has done. This
may include an amount for work done on
a matter which is withdrawn or resolved
by the parties. They may also charge
for expenses associated with the adjudication
such as the cost of visiting the construction
site.
An adjudicator is not entitled to be paid
for work done where he or she fails to
make a decision within the time allowed.
An adjudicator is entitled to refuse to
communicate the decision until his or her
fees and expenses have been paid. If
a party refuses to pay his or her share,
the other party may elect to pay both parties'
shares to enable the adjudication determination
to be released. If the other party
pays, the adjudicator will add that unpaid
share amount to the adjudicated amount.
See Fact
Sheet 6: Adjudication
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An adjudicator must be appointed by an ANA. After
receiving an adjudication application, the
ANA is required to refer it to an adjudicator
as soon as practicable. An adjudicator
must notify the parties of his or her acceptance
of the notification within 4 business days
after an adjudication application is made,
or the claimant can withdraw it and make
a new one.
The respondent has up to 5 business
days to give the adjudicator a written response
but only if they have given the claimant
a payment schedule.
After agreeing to adjudicate, the adjudicator
has 10 business days (or 15 if the claimant
agrees) to reach a decision.
See
Fact Sheet 6: Adjudication
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In reaching a determination, the adjudicator
must consider only the following matters:
- The Act and regulations
- The construction contract from which
the application arose
- The payment claim to which the application
relates, together with all submissions
(including
relevant documentation) the claimant has
relied upon
- The payment schedule (if any) to which
the application relates, together with
all submissions
(including relevant documentation)
that the respondent has relied upon and
- The results of any inspection carried
out of any matter to which the claim relates.
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At the completion of the process, the adjudicator
determines the amount (if any) that the respondent
must pay the claimant and when it is to be
paid.
The adjudicator's decision is in writing
and will include
the reasons for the decision and the basis
on which any amount or date has been decided
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If the adjudicator determines the respondent
is to pay an amount to the claimant, the
respondent must pay the adjudicated amount
within 5 business days of receiving the adjudicator's
decision, or the date upon which the adjudicator
determines the amount becomes payable, whichever
is the later.
See
Fact Sheet 11: If the respondent doesn't
pay
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If the respondent fails to pay an adjudicated
amount on time, the claimant has the following
options:
- Go to court to recover the adjudicated
amount
The claimant can recover the adjudicated
amount by filing an adjudication certificate
and supporting affidavit in the appropriate
court. The adjudication certificate
is available from the Authorised Nominating
Authority (ANA) to which the adjudication
application was made. It sets
out the names of the parties, the amount
payable and the date on which it was due
to be paid. The affidavit attests
to the fact that the amount is still outstanding. The
adjudicated amount will become a judgment
debt, which is enforceable in the same
way as any court judgment. Fees will
be payable to the ANA for the adjudication
certificate and to the court for registration
of the debt.
- Recovery from the principal
If the adjudicated amount is for work,
goods or services that are incidental to
or part of a contract between the respondent
and a third party (the principal), the
claimant may recover the adjudicated amount
from the principal. This option is
not available in relation to a domestic
building contract with a building owner,
unless the building owner is in the business
of building residences.
To recover payment from the principal,
the claimant must obtain an order from
a court for the adjudicated amount. The
court will issue a Debt Certificate, which
must be served on the principal with a
Notice of Claim. The Notice of Claim
and Debt Certificate must be in the prescribed
forms, which are set out in the Building
and Construction Industry Security of Payment
Regulations 2003.
Until the debt is paid, the claimant retains
the right to suspend work or the supply
of goods and services and to exercise a
lien over unfixed plant and materials.
See
Fact Sheet 11: If the respondent doesn't
pay
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The adjudicator must notify any relevant
principal of an adjudication application.
A relevant principal is any person who has
engaged the respondent under a contract to
provide construction work, goods or services,
if the work that the claimant has done or
the goods or services that the claimant has
supplied under contract to the respondent
is, or is part of or incidental to, the construction
work, goods or services that the respondent
was engaged to carry out or supply.
This does not include the principal in a
domestic building contract to which the Act
doesn't apply.
For more information about this exemption
see Fact
Sheet 1: The Security of Payment scheme
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Where a respondent fails to pay an adjudicated
amount by the due date, the claimant can
recover the adjudicated amount by filing
an adjudication certificate and supporting
affidavit in the appropriate court.
The adjudication certificate is provided
by the Authorised Nominating Authority (ANA)
to which the adjudication application was
made. It sets out the names of the
parties, the amount payable and the date
on which it was due to be paid.
The respondent may apply to the court to
have the judgment set aside, however in these
proceedings, the respondent is not entitled
to:
- bring any cross-claim against the person
who brought the proceedings
- raise any defence in relation to matters
arising under the construction contract
- challenge the adjudicator's or review
adjudicator's determination.
Defences and cross claims under the contract
may be decided at separate hearing.
The adjudicated amount will become a judgment
debt, which is enforceable in the same way
as any court judgment. Fees will be
payable to the court for filing the claim
or registration of the debt. All enforcement
methods attract court fees.
The courts of competent jurisdiction are
the Magistrates'
Court of Victoria, the County
Court of Victoria and the Supreme
Court of Victoria. The claimant
will select the appropriate court according
to the amount of the claim.
For more information, contact the relevant
court.
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The adjudication certificate is provided
by the Authorised Nominating Authority (ANA)
to which the adjudication application was
made. It sets out the names of the
parties, the amount payable and the date
on which it was due to be paid. Where
a respondent fails to pay an adjudicated
amount by the due date, the claimant can
recover the adjudicated amount by filing
an adjudication certificate and supporting
affidavit in the appropriate court.
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The adjudication process established by
the Act is intended to provide a quick and
inexpensive way to resolve payment disputes
arising under construction contracts. In
support of this aim, adjudicator's decisions
are generally not reviewable.
However, an adjudicator's determination
may be reviewed by another adjudicator in
limited circumstances. The adjudication
review process is available to both parties.
A determination may be reviewed only where
the contract was entered on or after 30 March
2007, and the adjudicated amount exceeds
$100,000.
The grounds for review are limited. A
respondent may seek review of a determination
on the ground that the adjudicator wrongly
included in the determination amounts which
are 'excluded amounts'. A claimant
may seek review of a determination on the
ground that the adjudicator failed to include
in the determination an amount or amounts
wrongly identified as 'excluded amounts'.
See
Fact Sheet 7: Adjudication review
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If an adjudicator acts in good faith and
complies with the basic and essential requirements
of the Act their determination will be enforced
by the courts.
An adjudicator's determination may be challenged
in the courts only in limited circumstances,
for example:
- The adjudicator has failed to comply
with the basic and essential requirements
of the Act
- An adjudicator took into account an amount
excluded by the Act
- The adjudicator has denied natural justice
to a party
- The adjudication determination is obtained
by fraud in which the adjudicator is complicit.
If a claimant commences proceedings to recover
any unpaid amount under the Act, a respondent
may not make any cross-claim for damages
for breach of contract or any other cross-claim. A
respondent who is dissatisfied with the adjudicator's
decision may bring separate proceedings for
repayment of any alleged overpayment, or
as part of the final determination of issues
under the contract.
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All complaints regarding the ANA process
or any conduct by an adjudicator, officer
or personnel of the ANA should first be referred
to the ANA.
The Conditions of Authorisation require
ANAs to establish complaints
procedures which
address complaints relating to any process
arising out of the Act, including:
- any conduct by any officer or personnel
of the ANA
- any conduct by an adjudicator nominated
by the ANA, or
- any other relevant matter concerning
the ANA.
The ANA must make any person involved in
the adjudication process aware of their complaints
procedures. They are required to report
to the Building Commission about any complaints
they receive about the adjudicators they
nominate.
All ANAs must comply with the Act, the Regulations
and the ANA
Conditions of Authorisation. A
breach of any requirement or condition may
affect the authorisation of the ANA.
The Act requires a respondent who receives
a valid payment claim to pay the amount claimed
in full by the due date or give the claimant
a payment schedule within 10 days. If
the respondent does not do one of these things
within the required time, they become liable
for the amount claimed.
The claimant may apply for adjudication
or go to court to recover the unpaid amount. The
claimant may also exercise a lien in respect
of the unpaid amount over any unfixed plant
or materials they have supplied to you for
use in connection with carrying out construction
work under the contract. They may also
suspend works, or the supply of goods and
services under the contract, until the amount
payable has been paid.
A 'paid when paid' provision in a construction
contract has no effect. The claimant
cannot be required to wait until the respondent
is paid by someone else under another contract.
The claimant also has these options if you:
- Provide a payment schedule and the scheduled
amount is less than the claimed amount,
or
- Provide a payment schedule but do not
pay the scheduled amount by the due date.
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