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In an Adjudication Application, a Head Contractor invariably seeks to rely upon liquidated damages when responding to a payment claim, by offsetting a liquidated damages claim against an amount claimed by a Subcontractor. Below are some ways that Subcontractors can limit the application of liquidated damages by a Contractor in an Adjudication Application. All standard Construction Contracts have clauses allowing for a Subcontractor to claim an Extension of Time (“EOT”) for delays caused by events beyond the control of a Subcontractor.  The Construction Contract will provide for strict time limits for a notice of claim to be made for an EOT, together with the information to be provided in a claim for an EOT.  Subcontractors should ensure that they strictly comply with the contractual requirements when seeking an EOT for delay.  A failure to strictly comply with the requirements for seeking an EOT may disentitle a Subcontractor to an EOT and thereby exposing the Subcontractor to a claim for liquidated damages. What do you do if you are refused an EOT after making a claim for an EOT under a Construction Contract?  A standard Construction Contract usually has provisions enabling a Subcontractor to refer a dispute about an EOT to an independent Mediator.  Negotiations between the parties may result in a satisfactory resolution being reached in respect of an EOT claim and a Subcontractor thereby avoiding a liquidated damages claim for delay. It’s vitally important that Subcontractors ensure that communications in respect of claim for an EOT are in writing, so the written communications can be used to support the Subcontractors position in response to a claim for liquidated damages in an Adjudication Application. Even if a Contractor refuses to allow an EOT claim a Subcontractor can still argue in an Adjudication Application that it’s not liable for liquidated damages on the basis that the delay was caused by the conduct of the Contractor. Subcontractors should ensure that delays caused by acts and omissions of the Contractor are properly documented in writing by either emails and site notes so these can be produced and relied upon in an Adjudication Application. What happens if you have failed to comply with the Contract in making a claim for an EOT or have simply failed to claim an EOT and thereby exposing yourself to a liquidated damages claim in an Adjudication Application?  Depending upon the terms of your Construction Contact a Subcontractor may still be able to defeat a claim for liquidated damages, in circumstances where, the Subcontractor is not entitled to an EOT or has not made a claim for an EOT. Firstly, the Construction Contract may provide the Contractor with a residual power to grant an EOT for any reason and at any time, notwithstanding that a Subcontractor has not claimed an EOT or is not entitled to one.  A Subcontractor in such circumstances, can argue that the obligation of good faith requires the Contractor to exercise the residual power in its favour and grant an EOT, particularly if the Contractor has, by its own conduct, caused or contributed to the delay. Secondly, the amount claimed by a Contractor for liquidated damages may be a penalty and not enforceable at law against a Subcontractor in which case it cannot be offset against an amount claimed by a Subcontractor pursuant to a payment claim in an Adjudication Application. Thirdly, subject to the terms of the Construction Contract, the Contractor may not have a contractual right to set off a liquidated damages claim against a claim for payment for work done by the Subcontractor in a Payment Claim, in an Adjudication Application. Are you embroiled in a dispute regarding variation claims? It is a constant battle for Subcontractors to be paid for variations done. Stay tuned for our next bulletin that will discuss ways to assist Subcontractors with variation claims in an Adjudication Application. If you require further information please contact Justin Mathews of our office on 07 5574 0111 or via email at justinm@qbmlaw.com.au.

Here are some tips to prevent common problems arising, resulting in an unsuccessful adjudication application under the Security of Payment Legislation. Ensure that your payment claim is served on and from the reference date. A payment claim served the day before a reference date or where there is no reference date will be invalid and will prevent a successful adjudication application. Make sure that your payment claim and application for adjudication is served in accordance with the method for service of documents provided for in the subcontract. Can you serve documents under BCIPA electronically by email or drop box? Yes you can, although subcontractors should ensure that the subcontract provides for service of documents by email and preferred electronic means. If your subcontract is silent on the method of service of documents electronically the safest method of service is by delivery by courier to the place of business of the contractor specified in the subcontract, so that service can be easily proven by independent evidence. Ensure that time limits under the BCIPA are complied with. A failure to comply with time limits associated with the making and service of an adjudication application will render the application invalid. You must serve the second chance notice for a contractor to serve a payment schedule before proceeding to make an adjudication application. If you do not serve the second chance notice strictly in accordance with the time limits in BCIPA the adjudication application will be invalid. Your adjudication application must be made in writing. You must serve your adjudication application in writing and it must be an exact copy of the application that is filed with the QBBC. If you fail to give the respondent contractor an exact copy of the adjudication application, by omitting to provide the respondent with all of the documents, your application is likely to be invalid and any decision made in your favour liable to be set aside for jurisdictional error. Never serve a payment claim or an adjudication application on a USB stick as it does not constitute writing and will invalidate an adjudication application. What should you include in an adjudication application?  Evidence in the form of witness statements from those persons who can verify the work done in the payment claim and who can verify the factual matters to dispute points raised in the payment schedule. Relevant documents and written communications should be referred to and attached to the witness statements where necessary. If applicable, expert reports should be included as well. This is particularly so if the respondent contractor is asserting that work is defective. Written submissions should also be included in the application summarising the evidence provided in the witness statements in support of the payment claim, responding to the points in the payment schedule and addressing contractual and legal points to be made. Variation claims are invariably disputed by a contractor in an adjudication. Subcontractors should ensure that the obligations to give notice and obtain the written consent of the contractor prior to undertaking the variation work are complied with as required by the subcontract. If these subcontract requirements are not complied with a respondent contractor will raise such non compliance to dispute a payment claim in an adjudication application. A good practise is to confirm any discussions on the construction site relating to variations between relevant representatives in email communications. The email communications can be attached to a witness statement and relied up in an adjudication application if necessary. Contemporaneous notes and written communications can assist greatly to prove the nature and extent of variations done at the direction of a contractor in an adjudication application. Delay and liquidated damages are, in nearly all adjudication applications, raised by a respondent contractor to try and defeat a subcontractor’s claim for payment. In our next bulletin we will provide you with ways to assist subcontractors in successfully overcoming delay and liquidated damages claims in adjudication. If you require further information please contact Justin Mathews of our office on 07 5574 0111 or via email at justinm@qbmlaw.com.au.

The High Court recently handed down judgment in Maxcon Constructions Pty Ltd -v- Vadasz. Relevantly, the construction contract between the parties provided that the retention sum was to be released upon the issue of a certificate of occupancy under the Development Act 1993 (SA). The High Court held that this provision constituted a “pay when paid” provision within the South Australian Security of Payment Legislation, because the issue of a certificate of occupancy was contingent upon Maxcon completing the building works under the head contract. The Building and Construction Industry Payments Act 2004 (Qld) has the same provision as the South Australian Legislation which renders “pay when paid” provisions of no effect. This decision will have significant implications for head contractors relying on retention sums as security.  Subcontractors may be able to challenge the effect of retention clauses in construction contracts in an adjudication application where a contractor is refusing to release security under the construction contract. The Building Industry Fairness (Security of Payment) Act 2017 (BIFSPA) has been passed by the State Government.  Chapter 3 of BIFSPA relating to Progress payments will commence from 1 July 2018.  Chapter 3 provides the framework and processes for payment claims, payment schedules and adjudication applications.  BIFSPA also has a provision that renders “pay when paid” provisions of no effect. For further enquiries and assistance please contact Justin Mathews of our office on (07) 5574 0111 or email justinm@qbmlaw.com.au.