This page explains how to respond to an adjudication application under the Building and Construction Industry Security of Payment Act (NSW).
If you aren't sure how to respond to an adjudication application under the NSW security of payment legislation, we suggest the following approach:
- Find out when (and how) your adjudication response needs to be lodged.
- If you think you might need it, get help straightaway.
- Consider whether there are any jurisdictional issues.
- Determine whether the claim includes any items that are not claimable under the Act.
- Check the Act to see what may/may not be included in your adjudication response.
- Prepare submissions and gather evidence dealing with the substance of the claim.
- Serve your adjudication response by the deadline.
Each of these steps is explained in more detail below.
You can read more about the NSW security of payment legislation here. If you're facing a payment issue with a contractor or supplier, one of our workshops may be of interest. Read more here.
1. Find out when (and how) your adjudication response needs to be lodged.
Two things will determine this:
- section 20 of the Act (here); and
- the date you receive notice of an adjudicator’s acceptance of the application.
You may only have 5 business days after receiving the application.
The time for serving your adjudication response is strict and cannot be extended, regardless of the value of the claim or the volume of material prepared by the claimant.
Once you have determined when your response is due, you should think about how you plan to serve it.
Most nominating authorities will accept service electronically (ie by email or document upload), and you can contact them to find out. Sometimes (but not always) the nominating authority will send you a note explaining how you can respond.
If you will be serving a large volume of material, you should ensure that you allow plenty of time to make sure it can be safely delivered before the deadline.
2. If you think you might need it, get help straightaway.
If you think you might need assistance preparing your adjudication response, it’s critical that you seek that help as early as you can. Some parts of the Act are highly technical, and an experienced construction lawyer will be able to help you work through the issues. (You can contact us here.)
No matter how good they are, a lawyer will not be able to achieve much if they only receive instructions a short time before your response is due.
3. Consider whether there are any jurisdictional issues.
Just because you have received a document that purports to be an adjudication application, this does not necessarily mean that it is a valid application under the Act.
This is an area where a specialist construction lawyer can help.
For an adjudication application to be valid, there must be (among other things):
- a construction contract to which the Act applies (see section 7, here);
- a payment claim that states it is made under the Act;
- a payment claim that identifies construction work and/or related goods and services;
- an available date for the making of the payment claim; and
- an adjudication application made to an authorised nominating authority within the prescribed period of time.
In relation to the third point, there needs to have been a date on (or from) which the contractor is entitled to make a claim for payment. (See section 13, here.) If the contract does not prescribe a date, the default position under the Act will apply (and you can find the details here). Importantly, only one payment claim can be made in any particular named month. (See section 13(5), here.)
Unless all of the relevant conditions are satisfied, an adjudication application will not be valid. If the application is invalid because of a jurisdictional reason, the adjudicator may not be authorised to issue a determination, regardless of the merits of the underlying claim.
Where an adjudicator determines a claim that is affected by jurisdictional error, the Act gives the court an express right to set aside that decision. If only part of a determination is affected by jurisdictional error, the court may set aside that part only, while confirming the balance of the determination.
4. Determine whether the payment claim includes any items that are not claimable under the Act.
The Act gives a statutory right to eligible persons to recover progress payments for construction work and/or related goods and services.
Section 9 (here) explains how these progress payments are to be calculated. Relevantly, the value of the payment will be:
- the amount calculated in accordance with the terms of the contract, or
- if the contract makes no express provision with respect to the matter, the amount calculated on the basis of the value of the relevant construction work and/or related goods and services.
Anything that falls outside of this cannot be claimed.
For example, claims for general damages will not normally be allowed under the Act. This is because most construction contracts do not contemplate general damages being taken into account in assessing the value of a progress payment, and general damages are unrelated to the value of construction work and related goods and services.
If there are amounts included in the claim that cannot be claimed under the Act, these should be identified in your adjudication response and brought to the adjudicator’s attention.
5. Check the Act to see what may/may not be included in your adjudication response.
Section 20 (here) sets out the requirements for adjudication responses.
Relevantly, an adjudication response:
- must be in writing;
- must identify the adjudication application to which it relates;
- may contain submissions relevant to the response; and
- cannot include any reasons for withholding payment unless those reasons were included in the payment schedule provided to the claimant.
The last point above does not prevent you from addressing jurisdictional issues in your response. However it does mean that you cannot introduce any new, non-jurisdictional reasons for withholding payment that were not included in your payment schedule. (You can read more about payment schedules here.)
6. Prepare submissions and gather evidence dealing with the substance of the claim.
Once you understand what can be included in your adjudication response, it is time to start putting the response together, including the supporting documentation.
Adjudication responses can sometimes be lengthy documents. Usually an adjudication response would include:
- submissions addressing any jurisdictional issues;
- submissions identifying any items included in the claim that cannot be taken into account in determining the value of the progress payment;
- submissions explaining why payment has been withheld, including in support of any offsetting claims;
- evidence to support the submissions, usually in the form of a statutory declaration; and
- where appropriate, and particularly for larger claims, expert reports to justify the respondent’s position (for example, a report prepared by a quantity surveyor, programming expert, engineer or other consultant).
7. Serve your adjudication response by the deadline.
Once your response is finalised, make sure you serve it on the adjudicator before the deadline. Late responses cannot be considered.
Also note that, pursuant to section 20(3) of the Act (here), a copy of the response must be served on the claimant.
Need help preparing an adjudication response?
Click here.
