Utilizing the Security of Payment Act 2002 from Building Adjudication Victoria

How to effectively utilise the Building Construction Industry Security of Payment Act 2002 ("the Act")

Those parties who use the Act are aware that if the adjudication process and timelines associated with that process is followed the Act can be an effective debt recovery tool.

Once a Payment Claim has been served on the debtor and irrespective of whether a Payment Schedule has been given the creditor can then initiate the process of lodging an adjudication application.

The Act prescribes time limits for the giving of notice of an intention to adjudicate and, the time frame within which the determination must be made by the adjudicator once an adjudicator has been nominated by the Authorized Nominating Authority ("ANA").

A determination must be made within 10 business days. The determination will determine the amount payable to the creditor and which party is responsible for payment of the adjudicator's costs.

If the debtor fails to pay the adjudicated amount the successful creditor can request the ANA to issue an adjudication certificate.

The adjudication certificate can form the basis of a Court application for Judgment against the debtor.

The short time frame within which a creditor can obtain Judgment via Adjudication is impressive. It will save a creditor a significant amount of both time and money.

The Courts, in discharging their function as decision makers in respect of the type of claims for payment envisaged under the Act, cannot compete with Adjudication.

Exercising a Lien

What is perhaps little known is a remedy available under the Act called a lien.

A lien is a legal entitlement of one person to retain possession or hold onto goods or the property of another until that person's claims are met. Section 12A of the Act confers a particular lien in favour of a creditor in respect of the unpaid amount over any unfixed plant or materials supplied by the creditor for use in connection with the carrying out of construction work for the debtor.

BAV had nominated one of its panel adjudicators to adjudicate a Payment Claim for monies allegedly owed for contractual services rendered by the claimant builder including services rendered by the builder's several contractors.

Those services comprised engineering, design and building surveying services provided prior to the actual construction of the proposed multi unit development.

In conjunction with the builder's Payment Claim the builder had given notice of a lien in respect of the original drawings produced by the contractors. The respondent developer had asserted that its contract with the builder had been terminated.

The matter ultimately settled as the developer wished to utilize the contractors' services in its future dealings with a new builder. As part of the claim included monies owed to the contractors the developer had little alternative but to settle the builder's Payment Claim so as to remove the effect of the lien.

As the matter had settled shortly after the adjudicator was nominated no determination was made by the adjudicator.

Please feel free to contact BAV to discuss how you can effectively utilize the Act in obtaining payment of your claims.