Adjudication in Australia

Abstract

PurposeThe purpose of this paper is threefold; first, to give a background to the security of payment problem in the New South Wales construction industry and the problem giving rise to the Building and Construction Industry Security of Payment Amendment Act 2010 (NSW) (“2010 Amendment Act”); second, to provide an analysis of the operation of the 2010 Amendment Act; and finally, to address the main implications of the amendments for the three parties involved, namely the claimant, the respondent and the “Principal contractor”.Design/methodology/approachA review of the relevant literature was undertaken on the security of payment problem in the NSW construction industry and the problem giving rise to the 2010 Amendment Act. A “black‐letter” approach is adopted to analyse and explain the provisions contained in the 2010 Amendment Act. At the time of writing, no case law relevant to the amendments had been published.FindingsThe amendments brought about by the 2010 Amendment Act add appreciably to the scope of the Building and Construction Industry Security of Payment Act 1999 (NSW). The effect of the procedure under the 2010 Amendment Act is similar to that under the Contractors Debts Act 1997 (NSW). The 2010 Amendment Act enables a claimant to “freeze” money in the hands of the Principal contractor pending an adjudication, thereby increasing the chance of recovery of the adjudicated amount by the claimant. If, under this new procedure, the Principal contractor fails to “freeze” the monies, the Principal contractor will be liable (along with the respondent) for the amount owed to the claimant. There is a potential for the amendments to be used unfairly by claimants to coerce settlement of unmeritorious payment claims.Originality/valueThe analysis of the 2010 Amendment Act presented in this paper may be of interest in international jurisdictions where statutory adjudication for the construction industry has been introduced or is being contemplated.