Adjudication in Construction

Construction runs on credit. A head contractor pays subcontractors and suppliers before being paid, and a subcontractor pays wages before being paid. When a payment is withheld part-way up that chain, the loss does not stay where it lands. It travels down, and businesses that have done nothing wrong run out of cash.

Before security of payment legislation, the only answer to a withheld payment was to sue. Litigation takes months at best and years at worst, and costs money the unpaid party by definition does not have. A well-resourced party could withhold payment knowing the other side could not afford to test it. Insolvency frequently arrived before judgment did.

Every Australian state and territory now has security of payment legislation that responds to this. It gives a statutory right to progress payments for construction work whether or not the contract provides for them, and a fast adjudication process in which the amount payable is decided on an interim basis and enforced immediately, without prejudice to either party’s right to have the dispute finally determined later by a court or arbitrator.

The sequence is broadly the same across jurisdictions, though the labels and the exact periods differ. The party owed money serves a payment claim for construction work carried out. The paying party responds with a payment schedule, stating what it proposes to pay and, critically, giving its reasons for any amount withheld. If it does not respond in time, it can become liable for the full claimed amount, and its ability to raise reasons later is restricted.

If the scheduled amount is less than the claimed amount, or nothing is paid, the claimant applies for adjudication. An adjudicator is appointed, the respondent lodges a response, and the adjudicator determines the amount payable, typically within about ten business days of accepting the application. The determination is a decision on the amount payable now. It can be registered and enforced as a judgment debt, and in most jurisdictions the grounds for resisting enforcement are narrow.

Two features are widely misunderstood. First, adjudication is interim: it decides who holds the money pending final resolution, not who is ultimately right. Either party can still litigate or arbitrate the underlying entitlement, and the determination does not create a final legal position. Second, the reasons given in the payment schedule largely fix the boundaries of the dispute. A respondent who omits a reason at the payment schedule stage will often be unable to run it in the adjudication at all.

The timetables are the most common cause of otherwise sound claims failing. They are short, they are calculated in business days, they differ between jurisdictions, and they are generally not extendable by agreement or by the adjudicator. The Western Australian regime was substantially rewritten by the Building and Construction Industry (Security of Payment) Act 2021 (WA), so material written for the earlier WA process no longer describes the current one.