security of payment masterclass - kreisson · part 2:overview of sopa landscape security of payment...
TRANSCRIPT
15/09/2016
1
Security of Payment Masterclass
David Glinatsis
Solicitor Director
18 October 2015
Part 1: Introduction
Part 2: Overview
Part 3: Key amendments
Part 4: How SOPA works
Part 5: Key Issues
Part 1: Introduction
15/09/2016
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Understanding the issues
Relationship between Act and Contract
A lesson from Walters Construction
Part 1: Introduction
15/09/2016
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Part 1: Introduction
Correcting Misnomers and Myths
“Security” is a misnomer - no guaranteed outcome
“Adjudication” is a misleading term
Although not final, a result under SOPL could become final by design or default
SOPL is more than just about “cash flow”
its about risk management and Contract administration
Dispute resolution
spotlights on your business practices
Part 1: Introduction
Correcting Misnomers and Myths
Substance and merit is just as important as process.
SOPL creates opportunity but will also create challenge and risk
SOPL can re configure existing contractual risk profiles
Not always cheap; not always rapid especially if there are challenges to
determinations
“Rough justice” and not always “fair”
Not a neutral process. SOPL can hurt relationships
Part 2: Overview
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Part 2: Overview of SOPA Landscape
Security of Payment Problem
“…..consistent failure in the building and construction industry to ensure
that participants are paid in full and on time for the work they have done,
even though they have a contractual right to be paid”
(source: Commonwealth Government 2002).
Part 1: Overview of the SOPA Landscape
Purpose of SOPA
“As construction contracts in New South Wales have been “notorious” for their
extremely tight profit margins… it is essential for the financial survival of many
contractors and subcontractors that payment for services rendered be
promptly paid and not unreasonably withheld…..”
Justice McDougall
Supreme Court of New South Wales
Section 3: Object of Act
(1) To recover, progress payments
(2) statutory entitlement to such a payment
(3) the referral of disputed claims to an Adjudicator
Part 2: Overview of SOPA Landscape
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Statutory Payment Claim and Payment Schedule
Statutory Right
Paym
en
t D
isp
ute
Pay now
Contractual Rights
Paym
en
t D
isp
ute
Argue later
Contractual Payment mechanism –
Payment Claim and Payment Schedule
fast
Statutory Adjudication Arbitration or litigation
slo
w
Part 2: Overview of SOPA Landscape
What
Part 2: Overview of SOPA Landscape
• Variations
• Set offs
• Preconditions to valid payment claims
• Time bars
• Defects
• Other
Part 2: Overview of SOPA Landscape
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Owner
Engineer
Structural Engineer
Electrical Engineer
Building Surveyor Architect
Draftsperson
Head Contractor
Subcontractors
Sub-subcontractors
Suppliers
Ca
shfl
ow
Part 2: Overview of SOPA Landscape
East Coast Model:
Default system
Statutory rights
NSW model under review
West Coast Model
WA 2005 NT 2005
West Coast Model:
Evaluative
Based on contractual rights
WA model under review
Statutory Adjudication Regime – Australia
East Coast Model
QLD 2004 SA 2011
ACT 2010
VIC 2003NSW 1999
Part 1: Overview of SOPA Landscape
Payment Claim
Payment Schedule
Adjudication
Determination
Enforcement
Step 1
Step 2
Step 3
Step 4
Step 5
Part 1: Overview of SOPA Landscape
35
days
NSW
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Time frames
Tight deadlines
Delays are disastrous
Need for good administration
Part 2: Overview of SOPA Landscape
Key elements of the Act
Statutory right to “cash flow”; pay now argue later regime
Dual track and theoretically runs in parallel to the Act but there are
inescapable points of convergence between the Act and Contract
On account resolutions
Rough and tumble “high pressure cooker environment” with high risks
Rough justice
Part 2: Overview of SOPA Landscape
Adjudication
Dispute Resolution Continuum
Part 2: Overview of SOPA Landscape
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2000 2003 2004 2011 2014 2015
NSW legislation commences
Brodyn Pty Ltd (t/as Time Cost & Quality) v
Davenport [2004] NSWCA 394
commencement of 2014
amendments on 21 April
2014; SOCLA Report
The Cole Royal Commission into the
Building and Construction Industry
Commencement of 2010 Amendments for
Withholding Requests
• Commencement of Retention Trust
Regulations on 1 May 2015
• Consultation Survey by Department
of Fair Trading – survey closed on
28 Sep 2015; Submissions closed
26 February 2016
• Commitment by NSW Government
to review the Act –
• Senate inquiry into insolvency into
Construction Industry.
Part 2: Overview of SOPA Landscape
Some Statistics 2014/15: Claimed Amount
NSW Finance and Service Annual Adjudication Report 2014/15
Part 2: Overview of SOPA Landscape
Part 2: Overview of SOPA Landscape
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Some Statistics 2014 : Claimed versus Adjudicated Amounts
Total value of claimed amounts:
$122,064,731
Total value of adjudicated amounts:
$54,204,209
NSW Finance and Service Annual Adjudication Activity Report 2014/15
Part 2: Overview of SOPA Landscape
2014/15 Statistics: Application by Claim Type
NSW Finance and Service Annual Adjudication Report 2014/15
Part 2: Overview of SOPA Landscape
2014/15 Statistics: Application by Respondent Type
NSW Finance and Service Annual Adjudication Report 2014/15
Part 2: Overview of SOPA Landscape
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Some Problems with the Australian SOPA
Part 2: Overview of SOPA Landscape
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Please open your Poll Everywhere App.
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Some Problems with the Australian SOPA
Part 2: Overview of SOPA Landscape
Part 3: Key Amendments
1. No endorsement required for payment claim: s13(2)
2. Head Contractors to serve supporting statements with payment claims: s13(7)-
(9)
3. Due dates for payment have been changed: s11
by Principal (15 days or less per Contract)
by Head Contractor or subcontractor (30 days or less as per Contract)
4. Retention Trusts
Amendments to the legislation – 21 April 2014
Part 3: Amendments to SOPA
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Amendment No 1 - Removal of Magic Words
This is a payment claim made pursuant to the Building & Construction Industry
Security of Payment Act 1999 (NSW).
Part 3: Amendments to SOPA
Justice McDougall (Kitchen Xchange):
Removal of magic words is “unwise.”
Is Justice McDougall is correct?
1. New Risk Profile
2. Act may be triggered inadvertently
3. Consequences of not serving payment schedule (s15(2))
4. May inadvertently exhaust reference date (s13(5))
5. Confusion with different regimes - is a variation or purchase claim a payment claim
6. Keep words or not?
Part 2: Amendments to SOPA
First Case Post-Amendment
Section 13(7)
A head contractor must not serve a payment claim on
the principal unless the claim is accompanied by a supporting
statement that indicates that it relates to that payment claim.
Maximum penalty: 200 penalty units
Amendment No 2 - Supporting Statements
Part 3: Amendments to SOPA
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Principal
Subcontractor Subcontractor Subcontractor
Head Contractor
Main contract
Part 2: Amendments to SOPA
Stakeholders: s13(7) – (9)
Supporting Statement
Payment
2
1
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Please open your Poll Everywhere App.
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A supporting statement must accompany a head contractor’s payment claim to a principal. It declares that all subcontractors have been paid the amounts due for the construction work concerned.
Are supporting statements effective in ensuring subcontractors are paid on time?
a) Yes - 11.44%
b) Often - 11.17%
c) Sometimes- 22.89%
d) No - 53.14%
Previous Poll Results
Kitchen Xchange v Formacon
Facts:
2014 Contract ; 3 Payment Claims; 1 Reference Date
No Supporting Statements
1 Payment Claim withdrawn
Court Held:
Payment Claim can be withdrawn by consent
Payment Claim not validly served because no Supporting Statement
Case Law
Case Law
Facts DecisionJune 2015 Contract Statutory declaration with PC1 not a
supporting statement
2 PC’s with 2 separate reference dates; payment Certificate issued for PC 1
No supporting statement was served with payment claim 2
Contract required a Statutory Declaration with PC
Claims not served in accordance with s13(7)
Stat decl with payment claim1 and no supporting statement; No stat dec or supporting statement with PC 2
Request for summary judgment refused
Supporting Statements must be served with a Payment Claim and in the correct form:
Duffy Kennedy Pty Limited v Lainson Holdings Pty Limited [2016 NSWSC 371
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Second 2014 Amendment: Supporting Statements New Offences
Service of Payment Claim without
Supporting Statement
Statement is False or Misleading
$22,000 Fine
$22,000 or 3 months imprisonment
Part 3: Amendments to SOPA
Principal
Subcontractor Subcontractor Subcontractor
Head Contractor
Main contract
Amendment 3:Stakeholders: s13(7) – (9)
Supporting Statement
15 day payment
30 day payment
There is no head contractor when the principal contracts directly with subcontractors
Part 3: Amendments to SOPA
Amendment No 4 - Retention Trust Account
12A Trust account requirements for retention money
(1) The regulations may make provision for or with respect to requiring retention money to be held in trust
for the subcontractor entitled to the money and requiring the head contractor who holds retention
money to pay the money into a trust account (a "retention money trust account" ) established and
operated in accordance with the regulations.
.....
(5) "retention money" means money retained by a head contractor out of money payable by the head
contractor to a subcontractor under a construction contract, as security for the performance of obligations
of the subcontractor under the contract.
Part 3: Amendments to SOPA
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2014 Amendments Implications for Head Contractors
Amend subcontract to align with payment times under the Act.
Establish claim processes to ensure receipt of payment.
Comply with retention trust provisions for projects in excess of $20m
Make sure subcontractors have been paid before submitting supporting Statement.
Contract administrators to identify payment claim, informal or otherwise.
Ensure payment schedules are issued.
Up stream - documents may need to state that they are not payment claims under
the Act.
Part 3: Amendments to SOPA
Questions
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Part 3: Amendments to SOPA
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Part 4: How SOPA Works
Part 4: How SOPA works?
When can you not use SOPA?
Act still applies to Subcontractors
Special Exceptions
If person “resides” in premises
Part 4: How SOPA works?
When can you use SOPA?
Related Goods and Services
Contract be written or verbal
Construction Works
Any Construction Contract
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Part 4: How SOPA works?
Which side of the fence?
Contractor/
Subcontractor/
Consultant/
Supplier
Contractor/
Principal
Claimant Respondent
Part 4: How SOPA works?
The Players
The Claimant
Respondent
The ANA
The Adjudicator
Part 4: How SOPA works and risks
The Documents
Payment Claim
Payment Schedule
Adjudication Application
Adjudication Response
Determination
Certificate
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Valid Payment Claim
Claimant must be a party to a construction
contract
Must be Construction
Contract work
or related goods and
services
Must be entitled to make a
progress claim
[Reference date]
PAYMENT CLAIM
Payment Claim
Payment Schedule
Adjudication
Determination
Enforcement
Step 1: The Payment Claim
Section 8 - Reference Date Payment Claim
Payment Schedule
Adjudication
Determination
Enforcement
Step 1: The Payment Claim
Section 8(1):
On and from each reference date under a construction contract, a person:
a. who has undertaken to carry out construction work under the contract, orb. who has undertaken to supply related goods and services under the contract,
is entitled to a progress payment
Section 8
Reference Date
Contractual date for Progress Payment
If contract silent, last day of
month
Payment Claim
Payment Schedule
Adjudication
Determination
Enforcement
Step 1: The Payment Claim
Typical Contract clause
The Sub-contractor shall deliver to the Builder’s Representative claims for payment in the
form of a progress claim before, or on, the date stated in Item 7 (The Reference Date).
Item 7 24th Day of the Month
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Reference Date
Contractual date for Progress Payment
If contract silent, last day of month
Payment Claim
Payment Schedule
Adjudication
Determination
Enforcement
Step 1: The Payment Claim
Some key points• One claim under the Act for each reference date• Claim can only be served within 12 months after works were last carried out• Payment Claim may still be valid if no new work since last reference date [Broadview decision]• A payment claim may not be valid if issued after termination of a contract [Patrick Stevedores
decision]• Act entitles parties to limit reference dates in contracts• The existence of reference date is not currently jurisdictional (Lawrence Constructions)
Payment Claim
Payment Schedule
Adjudication
Determination
Enforcement
Case Law
Lawrence Construction Pty limited v Southern Han Breakfast Point Pty Limited [2015 NSWCA 288
Facts Decision
Contract for apartment block construction January 2013
reference date to support a payment claim is not a jurisdictional fact
Payment claim issued after Builder purports to terminate because of Owner repudiation
Reference date is not an essential pre-condition for the making of a valid payment claim
• 28 Oct 2014 – termination of contract• Dec 2014 – Service of Payment Claim• Payment Claim from last reference date
8 October 2014 to date of Termination
Determination in favour of Builder Challenge to determination on grounds that there was no reference date
Special Leave granted for appeal to High Court against decision
Must an Adjudicator always get the issue of whether there is a reference
date correct?
Are preconditions to reference dates arising under the Act valid ?
Case Law
Hutchinson Pty Ltd v Glavcom Pty Ltd [2016] NSWSC 126
Facts Decision
sub-contract for design, fabrication and installation of joinery at “Pacific Bondi Beach”
Court upheld the Determination
Cl 37 required certain declarations as a precondition to a reference date arising
Clause 37 was void by the no contracting out provisions in section 34 of the Act
Subcontractor submitted statutorydeclaration
Claimant has a right under section 8 to receive a progress payment
Determination in favour of subcontractor
Builder challenged Determination – false stat declaration and that subcontractor had fraudulently failed to comply with clause 37
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Must identify construction work
or related goods and services
Must indicate the claimed amount
Contracts entered into prior to 21 April 2014 must state that it is made under the Act
Payment Claim
Payment Schedule
Adjudication
Determination
Enforcement
Contracts entered after 21 April 2014 DO NOT need to state that it is made under the Act
Step 1: The Payment Claim
Can include earlier claims
Only one Payment Claim per reference date
Must be made within 12 months of last work
Must be served
Payment Claim
Payment Schedule
Adjudication
Determination
Enforcement
Step 1: The Payment Claim
Name of Respondent
is wrong
No description
of works
Claim is too early
Amount claimed not
specified
Prior to 22 April 2014 No use of “magic”
words
Claim not served
correctly
Common problems with Payment Claims
Payment Claim
Payment Schedule
Adjudication
Determination
Enforcement
No Supporting Statement
Not Properly Substantiate
d
Step 1: The Payment Claim
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No Question T/F
1 The date on and from which a claimant can make a
payment claim is called the reference date?
2 If the construction contract does not provide a date for
making a payment claim, the reference date is the last
business day of the month?
3 Only one payment claim can be made in respect of the
one reference date.
4 The payment claim must be addressed and provided to
the party who is or may be liable under the construction
contract to pay the claimant.
6 The time for making a payment claim and the time of
making payment of a claim are two different matters?
True or False
Step 1: The Payment Claim
TABLE 1
A
Nature of Claim
B
What Type of issues and evidence would
you need consider and collate to
substantiate the claim?
TABLE 2
In the Table below list some of the different types of claims that may be made by a claimant in a Payment claim and the steps that would be required to prepare those claims?
Step 1: The Payment Claim
Is the reply to the Payment Claim
Is required if the Payment Claim is disputed
Total claim is automatically payable if no Payment Schedule
Must be served within 10 Business days of Payment Claim
Payment Claim
Payment Schedule
Adjudication
Determination
Enforcement
Step 2: The Payment Schedule
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PAYMENT SCHEDULE
must identify the
Payment Claim to
which it relates
must identify the
amount that will be
paid
must indicate the
reasons if monies are
being withheld
Payment Claim
Payment Schedule
Adjudication
Determination
Enforcement
SOPA Risks
RISK 2
“If the Respondent does not state its case withthe requisite degree of precision andparticularity, it may not be able to rely on theissue in its Adjudication Response (s20(2B)). Ifthe issue has not been adequately raised in itsPayment Schedule then it cannot complain ifthe adjudicator does not consider it…”
Justice McDougall at page 11 of paper “TheBuilding and Construction Industry Security ofPayment Act 1999” (September 2004)
RISK 1 – failing to provide a payment schedule in
time
Step 2: The Payment Schedule
Use proper reasons
State all reasons
Details of reasons need to be sufficient
Essential Requirements
Payment Claim
Payment Schedule
Adjudication
Determination
Enforcement
Step 2: The Payment Schedule
Payment Claim
Payment Schedule
Adjudication
Determination
Enforcement
Examples of inadequate reasons
“Direct costs incurred by builder due to contractor damage and negligence.
Retention still to be paid at a later date and has not been assessed in this
schedule
“Damages for defects.”
“Works are incomplete”
The claim is “rejected”.
The Respondent “again” refutes all the claims
Step 2: The Payment Schedule
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Set offs – generally
Typical set off clause:
“The Builder may deduct from moneys due to the Sub-contractor any money
due from the Sub-contractor to the Builder and if those moneys are insufficient,
the Builder may have recourse to Retention moneys under Clause 5 of this
Subcontract and, if they are insufficient, to any security under this Subcontract
and any balance owing shall be a debt due and payable to the Builder and
may be adjusted against any payment drawn including moneys owed to another
Subcontract related to a different Project for the Builder.”
Payment Claim
Payment Schedule
Adjudication
Determination
Enforcement
Step 2: The Payment Schedule
Payment Claim
Payment Schedule
Adjudication
Determination
Enforcement
How much information should be put in a Payment Schedule?:
“There is a need for “precision and particularity… to a degree reasonably
sufficient to apprise the parties of the real issues in dispute..”
Palmer J
Multiplex Constructions Pty Ltd –v- Luikens
Step 2: The Payment Schedule
Payment Claim
Payment Schedule
Adjudication
Determination
Enforcement
Some Tips - Lessons from some of the NSW cases
1. set out all its reasons for withholding payment in its Payment
Schedule.
2. use proper reasons. Do not simply use the word ‘rejected’.
3. include a full explanation of the reasons why monies are being
withheld.
4. include any arguments that the Payment Claim is invalid on the
basis that the Adjudicator lacks jurisdiction.
5. Documents which look as though they form part of a Payment
Schedule should be clearly identified as forming part of the
Payment Schedule.
Step 2: The Payment Schedule
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Payment Claim
Payment Schedule
Adjudication
Determination
Enforcement
Some Tips - Lessons from some of the NSW cases
1. Reasons for withholding payment of a claim be indicated with sufficient
particularity to enable the claimant to understand at least, in broad
outline, what is at issue between it and the respondent set out all its
reasons for withholding payment in its Payment Schedule.
2. Issue proper Notices under the Contract to establish back charge
3. Serve evidence and documents in support of reasons
Step 2: The Payment Schedule
Payment Claim
Payment Schedule
Adjudication
Determination
Enforcement
Workshop
A
Nature of Claim
[repeat column A of Table 2 above]
B
What type of reasons could be given to withhold payment in relation to the claim?
C
What type of evidence and documents would need to be collated to substantiate the reasons for withholding payment claim?
TABLE 3
Step 2: The Payment Schedule
Payment Claim
Payment Schedule
Adjudication
Determination
Enforcement
Claimant’s options where the Payment Schedule is less than the claimed amount [NSW]:
Payment
Claim
PAYMENT SCHEDULE
Less than amount claimed
OPTION 1 – claimant accepts scheduled amount
OPTION 2 – claimants proceeds to Adjudication Max10 bd
Max10 bd
Step 2: The Payment Schedule
Understanding Construction Law 2016
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Payment Claim
Payment Schedule
Adjudication
Determination
Enforcement
Claimant’s options where no Payment Schedule claimed amount not paid in full [NSW]
Payment
Claim
No
PAYMENT SCHEDULE
Max10 bd
Due Date for
payment and claimed amount not paid in full
OPTION 2: Notice of
Intention to Apply for
Adjudication
2nd chance Payment Schedule
AdjudicationMax20 bd
Max5 bd
Max10 bd
Option 1 – pursue summary judgment
Step 2: The Payment Schedule
Understanding Construction Law 2016
Payment Claim
Payment Schedule
Adjudication
Determination
Enforcement
• A Subcontractor makes a claim under the Act against the Contractor for $25,000
for rendering work.
• The Contractor fails to provide a payment schedule.
• The subcontractor obtains a judgment from the Court for the $25,000 by reason of
the Contractor’s failure to provide a payment schedule.
• Before paying the judgment, the render starts to crack and separate from the wall.
• The costs to rectify the render is more than the amount of the judgment
• The owner refuses to pay the Contractor because of the rendering defect and
deducts the sum of $35,000 from the Contractor’s contract price by way of a back
charge for the costs of repair to the render.
Step 2: The Payment Schedule
Workshop – Problem 1
Payment Claim
Payment Schedule
Adjudication
Determination
Enforcement
• The Subcontractor claimed 6 variations involving plasterboard sheeting and setting work
against the Contractor.
• The claims for the variations totaling $167,000 (incl GST).
• The Scheduled amount in the payment schedule issued by the Contractor was Nil.
• The Special conditions states: “Any variations to works must be approved in writing by the
Project Manager…..prior to commencement.”
• The Contractor argued in the Adjudication Response that the variations were not approved
in writing and were rejected. The Contractor, however, agreed to pay some of the amounts
while providing evidence of written approval.
The reasons provided by the Contractor for rejecting the variations included:
a) Not proper variations
b) Pending approval of time sheets
c) Claim is excessive
Step 2: The Payment ScheduleWorkshop – Problem 2
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Payment Claim
Payment Schedule
Adjudication
Determination
Enforcement
• Subcontractor enters into a subcontract with the Contractor and served a payment claim on 31 March 2016 for $70,000. The subcontract was not in writing.
• There was no payment schedule provided by the Contractor.
• The Subcontractor served a section 17(2) notice of intention to apply for adjudication on 12 May 2016.
• There was no payment schedule issued within the five business days referred to in the Notice and the Subcontractor lodged an Adjudication Application on 21 May 2016.
Step 2: The Payment Schedule
a)What options were available to the Subcontractor on the failure of the Contractor to lodge a payment schedule?b) What is the last date on which the Subcontractor could issue the section 17(2) notice?c) What is the Contractor’s legal position?
Workshop – Problem 3
Workshop problem 3 - Establishing last date to lodge Adjudication Application if no payment schedule
Payment Claim
Payment Schedule
Adjudication
Determination
Enforcement
Step 3: Payment Schedule
29 February 2016 Service of Payment Claim – last business day of the month
25 March 2016 Good Friday Public holiday ‐ Time does not run
28 March 2016 Easter Monday ‐ Public Holiday Time does not run
13 April 2016 Due date for payment 30 business days after 29 February 2016 allowing for Easter (2 business days)
25 April 2016 Anzac day – time does not run
12 May 2016 Last date for lodging s17(2) notice; due date + 20 business days (allowing for Anzac Day
2 May 2016 Assume section 17(2) Notice served on 2 May 2016
9 May 2016 Expiration of 5 date of section 17(2)(b) Notice; 2 May 2016+ 5 business days
23 May 2016 Last date to lodge Adjudication Application; 9 May 2016+10 business days
30 business days
20 days
If Claimant opts to proceed to Adjudication
ADJUDICATION APPLICATIONPayment Claim
Payment Schedule
Adjudication
Determination
Enforcement
NSW
Must be in writing
Must be lodged with ANA within 10 business days after
receiving the Payment Schedule
Step 3: The Adjudication Application
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ADJUDICATION RESPONSE
Payment Claim
Payment Schedule
Adjudication
Determination
Enforcement
NSW
Short response period of 5 business days or
2 business days after notice of adjudicators
acceptance
Section 20(2B) restriction
Step 3: The Adjudication Application
Payment Schedule
Reasons
Adjudication Response
Payment Claim
Payment Schedule
Adjudication
Determination
Enforcement
NSW
Section 20(2B) of the Act states:
Respondent cannot include in the Adjudication Response
any reasons for withholding payment unless those reasons
have already been included in the Payment Schedule
provided to the claimant…
Step 3: The Adjudication Application
Inadequate reasons in Payment Schedule
Locked out from raising new reasons in
Adjudication Response in NSW
Common Problems
Payment Claim
Payment Schedule
Adjudication
Determination
Enforcement
Step 3: The Adjudication Application
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The next slide is a live poll.
Please open your Poll Everywhere App.
If a subcontractor has made a claim and not received full payment by the due date, the next step is adjudication.
Is the adjudication process an effective way to settle most disputes over payment?
a) Yes - 24.52%
b) Often - 12.53%
c) Sometimes - 34.34%
d) No - 27.25%
Previous Poll Results
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DETERMINATION
The Act
The Construction
Contract
The Payment Claim
and Payment Schedule
Submissions of Parties
(& inspections)
Payment Claim
Payment Schedule
Adjudication
Determination
Enforcement
Step 4: The Determination
NSW, QLD and VIC
How much?
Date payable?
Interest?
Must be in writing
Must set out reasons
Payment Claim
Payment Schedule
Adjudication
Determination
Enforcement
Step 4: The Determination
Payment Claim
Payment Schedule
Adjudication
Determination
Enforcement
Workshop – Problem 4
A claimant has been successful at Adjudication and has received a determination against the Contractor in the sum of $233,700.
What steps does a claimant need to take to convert that Determination into money?
Step 4: The Determination
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Some recent cases
Which document is the payment claim?
Case Law
The New South Wales Netball Association Ltd v Probuild Construction (Aust) Pty Ltd [2015] NSWSC 1339
Facts• Contract for construction of a netball centre of
excellence April 2013
• 2 payment claims issued under same reference date (PC 23 & 24)
• Payment schedule issued by Netball with Nil assessment on the basis, with reason including Payment Claim was invalid due to Payment Claim 23 being a valid payment claim
• 1st payment claim 23 payment schedule issued anassessment of Nil on the basis Netball contended:
service was invalid as it was not served by required method; and
• it was served under cover of a document stating it was a draft.
• Netball first sought in court to have the adjudicator stayedfrom determining Payment Claim 24 on the basis it wasnot valid
• The court did not stay the adjudication but stayed anyenforcement of the determination
• 2nd payment claim 24 issued under same reference date for greater amount and included the amount in Payment claim 23
• It went to adjudication, Probuild had claimed around $10 million, the adjudicator determined an amount to Probuildof around $124k
Which document is the payment claim?
Case Law
The New South Wales Netball Association Ltd v Probuild Construction (Aust) Pty Ltd [2015] NSWSC 1339
Decision
• Normally the about face by both parties would see the matter dismissed however he must take into account whether the adjudication was valid
• Payment Claim 23 was valid and it was not a draft
• Payment Claim 24 was not valid as it was under the same reference date as payment claim 23;
• The Determination is a nullity
• Each party to bear their own costs
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Challenger to pay Adjudicated Sum into Court before matter proceeds
Case Law
Nazero Group Pty Ltd v Top Quality Constructions [2015] NSWSC 232
• The Supreme Court has confirmed usual practice that the challenger of an Adjudicators decisions will be required to pay the adjudicated amount to Court before the matter proceeds
Section 25(4) of the Act provides:If the respondent commences proceedings to have the judgment set aside, the respondent:……..(b) is required to pay into the court as security the unpaid portion of the adjudicated amount pending the final determination of those proceedings
• The proceedings were not to have a judgment set aside so the court found this section did not apply however it found that the court did have the discretion to make orders for payment into the court pending a final determination and in accordance with the intention of the Act did make such order:
• “The policy of the Act is not served by removing Top Quality’s protection pending determination of Nazero’s challenge even though s 25(4)(b) of the Act does not apply in terms.”
Judicial review is available to squash adjudicators determination for a non-jurisdictional error of law on the face of the record.
Case Law
Pro Build Constructions (AUST) Pty Limited v Shades Systems Pty Limited [2016 NSWSC 770
Facts Decision
Shade Systems issued a payment claim including retention money
There was no denial of procedural fairness as the adjudicator was entitled to assess the claim
payment schedule with Nil assessment due to liquidated damages
The court was entitled to determine non-jurisdictional errors on the face of the record
Shade Systems lodged an adjudication application with retention money deducted
The determination was quashed.
Probuild lodged Adjudication Response arguing NIL due to liquidated damages
“A fair reading of the Adjudicator’s reasons indicates that he assumed, wrongly, that the onus was on Probuild to demonstrate that the failure to achieve practical completion by the date for practical completion was caused by default on the part of Shade Systems. That was an error of law and it appears on the face of the record of the proceedings leading to the Determination.”
Adjudicator determined revised sum more than claim and took into account retention money
Key Issues
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Patrick Stevedores Operations No. 2 Pty Ltd v McConnell Dowell Pty
Ltd [2014] NSWSC
In December 2015 a Discussion Paper was released by the NSW Government calling for responses
to various questions about the security of payment law and its operation;
5 key areas are outlined in the Discussion Paper:
Application and enforcement;
Progress payments;
Adjudication of disputes
Uniform application of the legislation to all disputes
Supporting statements and retention money trust account
Potential - Further Changes
Patrick Stevedores Operations No. 2 Pty Ltd v McConnell Dowell Pty
Ltd [2014] NSWSC
What are key subcontract clauses?
reference date
set off:
Security and Retention Monies
Liquidated damages
rectification of defects [see section 10 of the SOPA]
Claims and Payment
• condition precedent – return of signed contract;
• condition precedent – statutory declarations
• set off
take out of works
Key Issue – Relevant Contract Terms
Patrick Stevedores Operations No. 2 Pty Ltd v McConnell Dowell Pty
Ltd [2014] NSWSC
Should all risks be managed?
How to minimise the risks?
Cultural change
Upskilling
Contract Administration
Security of Payment
Dispute resolution
Key Issue – Managing Risks
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Questions
Thank You!
DavidGlinatsisDirector/[email protected]
Phone: (02)8239‐6500
This communication is sent by Kreisson Legal Pty Limited (ACN 113 986 824). This communication has been prepared for the general information of clients and professional associates of Kreisson Legal. You should not
rely on the contents. It is not legal advice and should not be regarded as a substitute for legal advice. The contents may contain copyright.
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