This article is the third in our series exploring the security of the payment regime within Queensland’s construction sector. We began by discussing Payment Claims, moved onto Payment Schedules, and now, in this article, we’ll discuss the process of Adjudication under the Building Industry Fairness (Security of Payment) Act 2017, commonly known as the BIF Act, and the Queensland Building and Construction Commission Act 1991, most often referred to as the QBCC Act.
What is Adjudication?
Adjudication is a swift dispute resolution method that’s designed to ensure the steady flow of cash, a crucial factor for the survival of businesses in the construction industry.
This process plays a core role in maintaining liquidity, allowing companies to meet their financial obligations and continue their operations without interruption. Adjudication operates on the principle that disputes about payments should be resolved quickly, allowing contractors to “pay now and argue later,” and this premise helps prevent business failures due to delayed payments. By offering a rapid and binding decision, adjudication minimises downtime and reduces legal costs, providing a practical solution to maintain the economic wellbeing of the construction industry.
How Adjudication Differs from Court Proceedings
Adjudication isn’t conducted in a courtroom, nor is the process presided over by a judge. Instead, adjudicators are QBBC-licensed professionals, typically with backgrounds in engineering or construction project management and who adopt a practical approach to dispute resolution.
Here are a few key differences between adjudication and litigation (a court case):
- Decision-Making: Unlike judges, adjudicators can be from various professional backgrounds and are not required to be lawyers.
- Timeframes: Adjudication is much faster than court litigation, claimed are typically resolved in 4 – 6 weeks from commencement.
- Evidence Rules: Adjudicators are not strictly bound by formal rules of evidence, allowing for a more flexible consideration of the specifics of each case.
- Scope of Arguments: The scope is limited to the issues outlined in the payment claim and schedule, as have been discussed more comprehensively in our previous articles linked above.
- Hearing Format: Decisions are usually made based on written submissions without the need for in-person hearings.
Limited Scope of Arguments
As noted above, the arguments of both parties in an adjudication are strictly limited to the contents of their payment claim and payment schedule. A claimant cannot claim for work not stated in their payment claim.
Practically, this means that the amount claimed in an adjudication can never exceed the value of a payment claim. If a claimant wants to claim for additional works, they will need to include that work in their next payment claim and make a further adjudication application.
On the flip side, a respondent cannot refer to reasons for withholding payment that are not stated in their payment schedule. For example, if the reason for withholding payment is defective or incomplete works, and those matters are not specifically identified against the claim line item in the payment schedule, those arguments cannot be raised in the adjudication.
Costs Involved in Adjudication
Adjudication is, in the vast majority of cases, cheaper than court proceedings, as the process is quicker and typically requires less representation than litigation. Adjudication decisions are binding and enforceable, which also avoids the need for lengthy and expensive appeals.
The BIF Act sets out a scheduled fee structure for adjudicators based on the amount of the payment claim being disputed. The party that initiates the adjudication process covers these fees, but they may be awarded as part of the final decision.
Adjudication costs are then twofold:
- Legal Fees: If you choose to have legal representation, firms like ours offer competitive fixed fees for preparing adjudication Applications and Adjudication Responses. Should you wish to have us work with you on a matter for Adjudication, the easiest way to obtain an estimate is to contact us and provide as much information relevant to the payment claim or schedule as possible.
- Adjudicator Fees: Fees are determined based on the dispute’s complexity and the adjudicator’s rates, typically ranging from $200 to $300 per hour. More details on adjudicator fees can be found on the QBCC website. For a dispute that’s only moderately complex, an adjudicator ‘s fee may well be only a few thousand dollars but bear in mind the actual cost will depend on the adjudicator’s expertise, the complexity of the dispute and the amount of material for consideration.
Responsibility for the adjudicator’s fees is initially borne by the claimant, though as part of the final decision, costs may shift to the losing party, and sub-section 95(4) of the BIF provides that both parties are jointly liable for an adjudicator’s fees. Payment is generally required upfront and there is provision in sub-section 95(7) of the BIF act for their decision to be withheld until payment is received.
How Long Does Adjudication Usually Take?
The adjudication process generally concludes within four weeks from the application to the decision. This timeframe includes actions such as lodging the claim with the QBCC, appointment of an adjudicator, receipt of the adjudication response (as is required from the respondent within 7-10 business days) and delivery of the decision after this. Adjudicators have 10 business days post-response to deliver their decision, but in complex cases involving claims over $750,000, this is longer as per Section 85 of the BIF Act.
A Quick Overview Of The Adjudication Process in Queensland
In short, the adjudication process under the BIF Act is a relatively straightforward dispute resolution method that offers a speedy and cost-effective alternative to court proceedings. It’s becoming increasingly popular in the construction industry as it provides businesses with more control over their cash flow and ensures timely payment for work completed. In summary, this is how it works:
- A claimant (usually a contractor or subcontractor) issues a payment claim to their client, known as the respondent.
- The respondent then has 10 business days to respond with a payment schedule, which must outline their reasons for withholding payment (if any).
- If the respondent doesn’t respond with a payment schedule within 10 business days, they’re required to pay the full amount claimed.
- If the respondent responds with a payment schedule, and the claimant disagrees with it or does not receive payment within 10 business days, they may then apply for adjudication.
- Both the claimant and the respondent have 7 – 10 business days to submit written submissions to the appointed adjudicator after an adjudication application acceptance notice is issued.
- The adjudicator then has up to 10 business days to make a decision, which in complex cases can be extended by five business days with the consent of both parties if necessary.
- Once a decision is made, it’s final and binding on both parties.
For more detailed insights into the adjudication process and, of course, if you need assistance with an adjudication application or response, please contact us for a free consultation. We’re here to help ensure your construction disputes are resolved swiftly and fairly, keeping your projects moving forward without unnecessary delays.