5950

Q&As and counting

January 2017

Security of payments dispute

January 2017
Other
Victoria

Asked

Dear Mentor, 

This is a question in relation to a building dispute.

Our client has engaged a builder to do certain renovation works. Various disputes have arisen, including whether there is a written contract, misrepresentation, fraudulent conduct, duress, breach of contract, defects and damages. However, despite the complication of the matter, our client has paid substantially more than the agreed price and/or the reasonable price for the works.

The builder has now issued out demands for payment pursuant to Building and Construction Industry Security of Payment Act 2002. However, our client instructs that they do not owe any money to the builder and, quite vice versa, they will be seeking actions against the builder for damages (which is a separate matter), i.e. unlike the typical case where client can provide a payment schedule to show the differences.

As such, how should we respond to the claim? Are there any templates/examples to respond to the claims? It appears from my research that our client can either pay the amount, ignore the claim which then the builder can enforce in court directly, or provide a payment schedule. Neither of these options seems to be a solution to this. Is it possible to simply reply in a letter to outline our client's position? Will such a response stop the builder from enforcing their claim directly at the court?

Thank you and I look forward to hearing from you.

Regards.

Answered

Thank you for the question.

A payment schedule should always be served, even if the respondent believes that the payment claim is invalid. Otherwise the respondent will forgo their right to lodge an adjudication response and the respondent will become liable to pay the claimed amount in accordance with section 15(4). If a payment schedule is received outside the prescribed time, the adjudicator will not be able to consider it. A payment schedule in response to the builder’s payment claim must be served within 10 business days of receipt of the payment claim (or earlier period if specified in the contract).

Participation in adjudication is mandatory. If a respondent chooses to ignore the adjudication process, the adjudicator will still proceed and make a determination under the Act.

The payment schedule should state the scheduled amount of payment that it is proposed to make. It may be 'nil'. If the amount that the respondent proposes to pay is less than the amount claimed in the payment claim, the respondent should set out:

  • the amount (if any) that the respondent agrees to pay - the 'scheduled amount';
  • the amount that the respondent does not agree to pay under the payment claim;
  • detailed reasons in the attachment(s) as to why the respondent intends not paying any amount with respect to the payment claim;
  • detailed reasons in the attachment(s) as to why the respondent intends withholding any amount with respect to the payment claim including how the valuation of the withheld amount has been calculated.

Should the claimant not proceed on to adjudication but instead commence litigation, the respondent will have the usual avenues for defending the claim and bringing a counterclaim.

The Adjudicate Today website provides some useful information and example precedents.   

A letter to the other side setting out the respondent's position and proposed course of action may aid in resolving the dispute but be sure that a payment schedule is served in time.

Regards

Mentor

Other
Victoria