Pitfalls in Responding to Defective Sub-contractor Construction
The Building and Construction Industry (Security for Payments) Act 2009 (‘the Act’) aims to expedite the recovery of payments owing to smaller sub-contractors who may otherwise be disadvantaged if they are forced to litigate against larger head-contractors.
The Act achieves this through a mandatory adjudication process. The adjudication process under the Act can be summarised through the following steps:
A claim is made
Any person who carries out construction work under a construction contract (excluding residential works) can make a claim under the Act. The claim must (a) identify the works performed, (b) state the amount claimed, and (c) express that the claim is made pursuant to the Act.
The Payment Schedule
If served with a Payment Claim, the builder will have 10 business days to provide a Payment Schedule. The Payment Schedule must assess what the builder says is owing and, if it is less than what is claimed, it must specify the reasons why.
If the Payment Schedule does not specify all the reasons available to the builder, an Adjudicator can only consider those listed in the Payment Schedule.
If no Payment Schedule is provided, the claimant may bring Court proceedings for judgment, and the builder will be barred from raising a Defence in relation to matters arising under the contract.
If the claimant does not accept the Payment Schedule, they have 10 business days apply for adjudication. If adjudication is applied for, the builder will have only 7 days to respond (or 5 days from when the Adjudicator accepts his/her appointment, whichever is the later).
Given the short time limits, if you anticipate a dispute, document everything.
The adjudicator will make a determination within 10 days of the builder’s Response being received. The determination will specify the adjudicated amount payable (if any) which is binding on the parties. Failure to pay the adjudicated amount within 5 days can lead to the decision being recognised as a judgment debt by the Courts, with enforcement action (including winding-up of your company) to follow.
The adjudicator’s decision is final. The Supreme Court will only hear appeals on errors of law, such as whether the Adjudicator acted outside of his/her jurisdiction. A party cannot appeal where they are simply dissatisfied with the findings of fact by the Adjudicator.
However, the Act does not prevent a party from commencing civil proceedings to recover a payment paid under the Act, if they believe the adjudication decision was made in error.
If you receive a payment claim, always act immediately. Contact our Litigation and Dispute Resolution team for more information.