Adjudication Research + Reporting Unit (ARRU)
FROM THE DIRECTOR
Dr Jinu Kim
Statutory Adjudication in the NSW Building and Construction Industry
Statutory adjudication in the building and construction industry has its roots in the United Kingdom under the Housing Grants, Construction and Regeneration Act 1996 (UK). New South Wales was the first Australian jurisdiction to introduce industry-specific security of payment legislation for the building and construction industry. The Building and Construction Industry Security of Payment Act 1999 (NSW) ('the NSW Act') was assented to on 5 October 1999 and commenced on 26 March 2000. The NSW Act has undergone two amendments since its introduction – the first in 2002, the second in 2010 and the third in 2013.
In August 2001, the Honourable Terence Cole was appointed a Federal Royal Commissioner to inquire into a range of matters relating to the Australian building and construction industry. This Royal Commission was the first national review of the conduct and practices in the Australian construction industry (Cole, 2003). One of the issues before the Commissioner was security of payment in the building and construction industry. In February 2003, the Commissioner presented his Final Report (comprising 23 volumes) to the Australian Governor-General. The Commissioner gave his recommendations in respect of the security of payment issue in Vol. 8 of the final report. In summary, the Commissioner considered the security of payment issue to be one of national relevance.
The term 'security of payment' refers to the 'entitlement of contractors, subcontractors, consultants or suppliers in the contractual chain to receive payment due under the terms of their contract from the party higher in the chain' (NSW Government, 1996). The security of payment problem refers to 'the 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' (Commonwealth of Australia, 2002). The NSW Act was introduced to counter the security of payment problem in the building and construction industry.
The tactic of unduly devaluing or delaying payment due under a construction contract is aimed at enhancing the cash flow of one contracting party at the expense of the other. According to the NSW Government (1999), '[it] is all too frequently the case that small subcontractors, such as bricklayers, carpenters, electricians and plumbers, do not get paid for their work. Many of them cannot survive financially when that occurs, with severe consequences to themselves and their families'.
To recover payments due under a construction contract, the claiming party (called the 'claimant') has generally relied on one or more traditional dispute resolution processes, such as arbitration or litigation. However, the prohibitive costs and time delays involved in recovering payment under these processes has led many in the industry to abandon their right to payment and move onto other projects in order to maintain cash flow (Commonwealth of Australia, 2002) – cash flow is the lifeblood of the construction industry.
The NSW Act introduced new statutory rights for claiming parties, such as: a right to progress payments; a right to interest on late payments; a right to suspend work; and a right of lien. The NSW Act renders void 'pay-when-paid' clauses in construction contracts, and the parties cannot contract out of the Act. The NSW Act also introduced a unique form of 'rapid adjudication', which is a speedy and relatively inexpensive interim mechanism for resolving payment disputes in the building and construction industry. Adjudication is a process that involves an independent third-party (called an 'adjudicator') making an interim determination as to the amount of progress payment to be paid for work done, or related goods or services supplied, under a construction contract.
The adjudication procedures and timeframes are strict and governed solely by the NSW Act. An adjudicator’s determination, whilst not final, is binding on the parties until the dispute is finally resolved, perhaps by private agreement or by a court. In NSW, if the paying party (called the 'respondent') does not pay the adjudicated amount by the relevant date, the adjudicator’s determination is capable of being registered as a judgement in a court of competent jurisdiction via a relatively straightforward administrative process prescribed under the NSW Act. Once registered, the adjudicator’s determination is enforceable in the same way as a judgement of a court. If at a later stage the respondent applies to the court to have the judgment set aside, the respondent will not be entitled to bring a cross-claim against the claiming party, or raise any defence in relation to matters arising under the construction contract, or challenge the determination by the adjudicator. In addition, the respondent must pay into court as security the unpaid portion of the adjudicated amount pending the outcome of the court proceeding.
As a result of the 2010 amendments to the NSW Act, if a claiming party elects to go to adjudication, they may elect to serve a 'payment withholding request' on the respondent’s client so as to 'freeze' sufficient moneys up the contractual chain pending the outcome of adjudication. The effect of this procedure is similar to that under the Contractors Debts Act 1997 (NSW).
As at 10 December 2011, all Australian States and Territories had commenced comparable legislation for the building and construction industry. In addition to the United Kingdom, comparable legislation exists in New Zealand, Singapore and the Isle of Man. After originally being promoted as a Private Members Bill by Senator Feargal Quinn in 2010, the Construction Contracts Bill 2012 of Ireland has completed its second stage in the Dail. In June 2012, the Irish Bill was referred to the Select Committee on Public Expenditure. Finally, the Construction Industry Payment and Adjudication Act 2012 (Malaysia) came into operation effective 15 April 2014.
Dr. Jinu Kim, UNSW, Australia
Former Director & Special Advisor
Michael C Brand, UNSW, Australia
The Advisory Panel is made up of a small group of academics and researchers, experts, practitioners and representatives of the NSW Department of Finance & Services. The purpose of the Advisory Panel is to advise the Director on a variety of scientific, technical and operational matters related to the activities of the ARRU.
Matthew Bell, University of Melbourne, Australia
Associate Professor Dr. Philip C. F. Chan, National University of Singapore, Singapore
Dr. M. Ehsan Che Munaaim, Hill International Inc, UAE
Dr. Paul Chynoweth, University of Salford, UK
Adjunct Professor Philip Davenport, University of New South Wales, Australia
Dr. Peter Fenn, University of Manchester, UK
Bob Gaussen, Adjudicate Today Pty Ltd, Australia
John Green, New Zealand Dispute Resolution Centre, NZ
Adjunct Associate Professor Dr Christina Harris, Solicitor, Australia
Geoffrey Jochelson, Adjudicators Forum Inc, Australia
James McGee, Martin & Gately Solicitors, Ireland
Damian Michael, Solicitor, Australia
Sean O’Sullivan, Moray & Agnew Lawyers, Australia
Professor Dr. Bill Randolph, University of New South Wales, Australia
John Smolders F.A.I.B., University of Newcastle, Australia
Max Tonkin, Chief Adjudicator and Trainer, Australia
Associate Professor Dr. Clive Warren, University of Queensland, Australia
RICS COBRA 2015 International Research Conference, comprising the 9th Annual RICS Legal Research Symposium, will be hosted by the University of Technology Sydney (UTS), Australia, on 8 - 10 July, 2015 read more...
Posted 18 May 2015
NSW Security of Payment Act: Retention Money Trust Acccount - Effective 1 May 2015 - Introduced by Building and Construction Industry Security of Payment Amendment (Retention Money Trust Account) Regulation 2015
Posted 7 May 2015
Significant changes to NSW Security of Payment Act - Effective 21 April 2014 - Building and Construction Industry Security of Payment Amendment Bill 2013 (Assented 20/11/2013)
Posted 23 April 2014
The Collins Report: The New South Wales Government's Inquiry into Construction Industry Insolvency in NSW read the Final Report and Consultation Summary Papers...
Posted 31 May 2013
Winner of the Emerald Best New Launch Journal Award 2012 is the International Journal of Law in the Built Environment (IJLBE) read more...
Posted 29 July 2012
Final Call for Papers - W113 Construction Law Stream will be held as part of the triennial CIB World Building Congress in Brisbane, Australia, 5-9 May 2013. Extended Deadline for Abstracts - 31 JULY 2012 read more...
Posted 3 June 2012 (updated 18 July 2012)
Australian Institute of Building (AIB) Annual Address - by The Honourable Sir Anthony Mason AC KBE QC - 18 April 2012 - UNSW Built Environment - Topic: "Liquidated Damages and Penalty Clauses in Building Contracts" read more...
Posted 2 Apr 2012
Adjudication Forum Inc - Construction Industry Adjudication 'Mini-Seminar': Topics: "Delay Cost Claims under the SoP Act" (presented by Daniel Fitzpatrick, Solicitor), "Claiming from the Principal under the NSW Act" (presented by Anthony Igra, Adjudication Practitioner), and "Legal Maxims" (presented by Philip Davenport, Solicitor). Date and Venue: Tuesday 6 March 2012, 5.30pm-8.00pm at the office of LEADR, Level 1, 13-15 Bridge St, Sydney. Contact LEADR on 9251 3366 for further details.
Posted 2 Feb 2012
International Journal of Law in the Built Environment – Special Issue on Construction Law: Volume 3, Issue 3, of the IJLBE is devoted to construction law. More information can be found at the IJLBE website.
Posted 29 Oct 2011
RICS COBRA 2012 International Research Conference, which comprises the Annual W113 Legal Research Symposium, is to be held in Las Vegas, Nevada, USA on 11-13 September 2012. Deadlines for abstracts and papers for the Legal Research Symposium, plus information on the conference venue…etc., can be found at the CIB W113 website.
Posted 21 Oct 2011
Society of Construction Law Fourth International Construction Law Conference (ICLC) to be held in Melbourne in May 2012:
Posted 21 Oct 2011
2010 Amendments to the NSW Security of Payment Act – The 2010 Amendment Act aims to improve security of payment for subcontractor-claimants by enabling them to ‘freeze’ monies in the hands of the respondent’s Principal pending adjudication. The amendments are effective from 28 February 2011.
Posted 1 Aug 2011
UNSW Built Environment announcement of the establishment of the Adjudication Research + Reporting Unit (ARRU) - read more…
Posted 1 Aug 2011
2013/14 - NSW Adjudication Activity Statistics
1 Jul 2013 to 30 Sept 2013 - Quarterly Report No. 1
1 Jul 2013 to 31 Dec 2013 - Quarterly Report No. 2
1 Jul 2013 to 31 Mar 2014 - Quarterly Report No. 3
1 Jul 2013 to 30 Jun 2014 - Quarterly Report No. 4
2012/13 - NSW Adjudication Activity Statistics
1 Jul 2012 to 30 Sep 2012 - Quarterly Report No. 1
1 Jul 2012 to 31 Dec 2012 - Quarterly Report No. 2
1 Jul 2012 to 31 Mar 2013 - Quarterly Report No. 3
1 Jul 2012 to 30 Jun 2013 - Quarterly Report No. 4
Adjudication Activity in NSW - Annual Report 2012/13
2011/12 - NSW Adjudication Activity Statistics
1 Jul 2011 to 30 Sep 2011 - Quarterly Report No. 1
1 Jul 2011 to 31 Dec 2011 - Quarterly Report No. 2
1 Jul 2011 to 31 Mar 2012 - Quarterly Report No. 3
1 Jul 2011 to 30 Jun 2012 - Quarterly Report No. 4
Adjudication Activity in NSW - Annual Report 2011/12
Davenport P & Brand M C (2013) 'The effectiveness of time bar clauses following the High Court decision in Andrews v. Australia and New Zealand Banking Group', International Journal of Law in the Built Environment, 5(3), 241-252.
Brand M C & Davenport P (2012) 'Adjudication in Australia: an analysis of the amendments introduced by the Building and Construction Industry Security of Payment Amendment Act 2010 (NSW)', International Journal of Law in the Built Environment, 4(3), pp. 189-202.
Brand M C & Davenport P (2011) ‘Proposal for a ‘Dual Scheme’ model of statutory adjudication for the Australian building and construction industry’, International Journal of Law in the Built Environment – Special Issue on Construction Law, 3(3), pp. 252-268.
Davenport P, Brand M C & Kim J (2015) 'Adjudication in Australia: A study of the Building and Construction Industry Security of Payment Amendment Act 2013' in Proceedings of 20th Annual AsRES Conference 2015, Washington DC, USA, 6-9 July.
Davenport P (2015) 'An update of security of payment in the construction industry in Queensland' in Proceedings of RICS COBRA Research Conference 2015, University of Technology Sydney, Australia, 8-10 July.
Davenport P (2015) 'Contract provisions can be penal even when there is no breach of contract' in Proceedings of RICS COBRA Research Conference 2015, University of Technology Sydney, Australia, 8-10 July.
Davenport P, Brand M C & Kim J (2015) 'An analysis of the amendments introduced by the Building and Construction Industry Security of Payment Amendment Act 2013 (NSW)' in Proceedings of 21st Annual PRRES Conference, Kuala Lumpur, Malaysia, 18-21 January.
Brand M C & Kim J (2014) 'Statutory Adjudication in Australia: Adjudication Activity in New South Wales for 2012/13' in Proceedings of 2014 International Scientific Conference on Construction Technology and Management, Slovak University of Technology, Bratislava, Slovakia, 9-11 September.
Brand M C & Davenport P (2013) 'Adjudication in Australia: Claim splitting in adjudication' in Proceedings of RICS COBRA Research Conference: W113 Legal Research Symposium, Indian Institute of Technology, New Delhi, India, 10-12 September.
Brand M C, Davenport P & Kim J (2013) 'Statutory adjudication and legislative response: Analysis of recent amendments made to security of payment legislation in New South Wales' in Proceedings of 18th Asian Real Estate Society Annual Conference, Kyoto, Japan, 28 June - 1 July.
Michael D & Brand M C (2013) 'Analysis of delay, disruption and global claims in the context of statutory adjudication in Australia' in Proceedings of CIB World Building Congress 2013: W113 Construction Law Stream, Brisbane, Australia, 5-9 May.
Brand M C & Kim J (2012) 'Statutory Adjudication in Australia: analysis of adjudication activity in New South Wales' in Proceedings of RICS COBRA Research Conference 2012: W113 Legal Research Symposium, University of Arizona, USA, 11-13 September.
Brand M C & Davenport P (2011) ‘Analysis of recent amendments made to security of payment legislation in New South Wales’, in Proceedings of RICS COBRA Research Conference 2011: W113 Legal Research Symposium, University of Salford, UK, 12-13 September, pp. 29-41. [Presentation]
Brand M C & Kim J (2014) 'Adjudication Activity under security of payment legislation in NSW South Wales, Australia' in Proceedings of 4th AsiaPacific-Korean Conference on Science and Technology, Plenary Lecture, Sydney, Australia, 20-22 November.
Brand M C & Davenport P (2013) 'Chain reaction: Changes brought about by the Building and Construction Industry Security of Payment Amendment Act 2010 (NSW)', RICS Construction Journal, Royal Institute of Chartered Surveyors, February-March, 2013, p. 17.
Brand M C & Davenport P (2011) 'A call for unification - A proposal for a Dual Scheme of adjudcation in Australia', RICS Construction Journal, Royal Institute of Chartered Surveyors, Apr/May 2011, pp. 22-23.
ADJUDICATION IN AUSTRALIA
Australian Capital Territory
New South Wales
- Building and Construction Industry Security of Payment Act 1999
- Building and Construction Industry Security of Payment Regulation 2008
- Contractors Debts Act 1997
- Building and Construction Industry Payments Act 2004
- Building and Construction Industry Payments Regulation 2004
- Building and Construction Industry Security of Payment Act 2009
- Building and Construction Industry Security of Payment Regulations 2011
ADJUDICATION AROUND THE WORLD
Isle of Man
ACADEMIC & RESEARCH
- Built Environment Law Network (BEL-NET)
- CIB Working Commission 113 on Law & Dispute Resolution (W113): Netherlands
- Construction Dispute Resolution Research Unit (CDRRU): City University of Hong Kong
- Royal Commission into the Building and Construction Industry, Australia
- Society for Construction Law, Australia
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