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Archive for the ‘Adjudication’ Category

Pay Now, Argue Later: Principals Must Follow an Adjudicator’s Decision
Tuesday, July 22nd, 2014

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By Craig Hollett, Director at Bowen Buchbinder Vilensky Lawyers

22 July 2014

One of the main purposes of Western Australia’s Construction Contracts Act 2004 (WA) is to make sure that progress payments keep flowing.  Historically, this has caused significant financial hardship to contractors who sometimes had to wait for years to be paid – in the meantime, having to finance the cost of running their own businesses themselves.

The Construction Contracts Act has a system of rapid adjudication if a payment dispute arises, which is conducted without any oral hearing, and in which the Adjudicator makes a determination.  That determination may require the principal to make payment to a contractor of disputed invoices, which means the debt is payable. The contractor may then enforce the determination under the Civil Judgments Enforcement Act 1004 (WA).

Alternatively, if the principal is a company, the contractor can issue a Creditors Statutory Demand.  The risk of a Creditors Statutory Demand can be the potential for a principal  to set it aside on the basis that a “genuine dispute” exists about the existence or amount of the debt.    In such an application, the principal must establish there is a bona fide dispute which is not spurious, hypothetical, illusory or misconceived.

The Western Australian Court of Appeal recently considered such a situation following two separate determinations by an Adjudicator under the Construction Contracts Act 2004 (WA).

The Court of Appeal drew an analogy to the way in which tax debts are treated – i.e., you may dispute the amount you owe the tax office, but you must pay first and argue later.  The Court of Appeal said that even though the principal had commenced District Court proceedings disputing the liability to pay the debts which were the subject of the adjudication, this did not give rise to a genuine dispute which would be capable of setting aside the Creditors Statutory Demand.

This case provides a clear direction to contractors who can take advantage of these provisions to receive payment, even while there may be a dispute continuing with the principal.  This is a very different situation from the one they’ve faced in the past when they had to wait until the conclusion of any Court proceedings before they can hope to see any payment, often with crippling financial consequences.

This case has important implications both for principals and contractors.  As always when signing contracts, seeking legal advice in the short term can save a great deal of financial and emotional energy later.

The full decision of Diploma Construction (WA) Pty Ltd v KPA Architects Pty Ltd [2014] WASCA 91 is available on the Supreme Court website (http://decisions.justice.wa.gov.au/supreme/supdcsn.nsf/judgment.xsp?documentId=5EE18FD9166D886E48257CC40013285E&action=openDocument&SessionID=DRZT6Y89A4).

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Pitfalls of Construction Adjudication
Friday, April 11th, 2014

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By Les Buchbinder, Director at Bowen Buchbinder Vilensky Lawyers

11 April 2014

 Disputes are more common in the building and construction area than in most other sectors of the economy.  Poor workmanship, time constraints and demands for payment for extras falling outside of an original contract, are just a few of the typical reasons for disputes.

When the WA Government passed the Construction Contracts Act in 2005, the aim was to enable disputes to be fast-tracked through an Adjudication process, rather than for disputing parties to have to wait to go to Court.

While Adjudication has been a great step forward in many ways, there is one major pitfall: if a claim is made against your organisation, you have only fourteen days to respond.  These are calendar days, not business days, and no concession is made for public holidays.  For example, if you receive a claim on 22nd December, you have until the 5th of January to respond.

The short response period may not always be a problem, at most times of the year, and for simple cases.  But it’s a very different matter in disputes which involve major construction project payments or where there are significant factual or legal complexities involved, and these need to be dealt with  unexpectedly when key staff are on leave.

My advice to companies which may find themselves having to respond to Adjudication claims is threefold:

1. Put in place procedures for making your organisation aware, as soon as practicable, of a claim for Adjudication having been served and for dealing with it swiftly.  This may involve educating staff as to the processes involved and the importance of the timeframes under the Act as well as having contingency plans in place as to how the response is to be dealt with if, for example, critical staff members are absent or there is a risk that a claim for Adjudication may be served just prior to or over a public holiday period or when for some other reason the business may be temporarily closed.

2. Get your documentation/software in order. As a Respondent, it is up to you to supply the Adjudicator with a copy of any relevant documents in support of your response.  Most often this happens by email.  The onus falls on you to make sure that documents are delivered to the Adjudicator in a way that they can be opened and read (compliance with Electronic Transactions Act 2011 (WA).  It seems incredible, but there are situations where Respondents fail simply because the documents they thought they had delivered to the Adjudicator either never arrived, or could not be opened by the Adjudicator.  If you don’t get your documentation and software in order, your side of the story may simply never be heard.

3. Take legal advice  The detail of a claim or response is critical.  The very wide range of contracts used in the construction industry today underlines the importance of looking at each case individually.  The best time to get legal advice is before offering or signing a contract.  The next best time is the moment you suspect there are grounds for a dispute!

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