Why Use the Act?
Quite simple really, it is quick. The answer also lies in another question, why don’t most people go to a court over their debts (especially in the building industry)? The building industry is notorious for payment disputes, so why do contractors essentially forfeit their contractual entitlements worth tens of thousands of dollars?
The building industry is probably the leader when it comes to inequality in both financial resources between the parties to a contract and the bargaining power when negotiating a contract.
Most small contractors know that should they go to court they will be facing a much stronger adversary with far superior financial resources. Even if they could afford a solicitor to run the case, the defendants can file motions after motions to delay the hearing date and by the time the case is heard (and tens of thousands of legal fees) the small contactors will most likely be insolvent and let’s not forget the appeals. To give you an idea, a typical construction dispute in a district court can take approximately 12 months before it is heard. What if a contractor is owed $500,000? How many contractors will still be solvent with such cash flow deficiency? Obviously, very very few.
The sad reality is that the contractor is often forced to either simply abandon their claim or to accept only a small fraction of the amount due as the settlement.
Levelling the playing field
The Act attempts to mitigate this inequality by taking away what in our opinion is the main weapon to force the settlement onto the contractor, time. In most cases (nearly all) the respondents will not be able to hide behind their lawyers, the Act is quick (normally 6-8 weeks), the Act is enforceable, the Act cannot be excluded by a contract. Even if the respondent attempts to quash an adjudication decision in the Supreme Court, the court has a dedicated panel of the judges and the cases are normally dealt within 2 months period (read our adjudication page for more). What’s more, is that the respondent will normally be required to pay the adjudicated amount into the court (until the end of the hearing), so the money will be paid one way or another and the respondent can no longer hold on to the payment.
Level, but not quite
Obviously, the inequality still remains. While the Act is quite short and is written in rather simple terms it is nonetheless a legislation and as such it had nearly two decades of judicial interpretations. Those “simple” terms were interpreted by the Supreme Court and trust us when we say, it is not that simple. You need to know what the court ruled on various aspects of the Act as noncompliance will generally result is a rejected application. For example, what happens to the Act when a contract is terminated or what is the implication of serving multiple payment claims (this one has multiple outcomes)? The Act does not answer those questions directly, thus you need to know what the court ruled and how it can be applied.
Again, a party with sufficient resources can afford a law firm with solicitors who know all this, but what about a painter who works from his van? This partially explains why nearly half of all the adjudication applications in NSW are not even determined. People try to save costs and try to adjudicate themselves, which is only understandable as they can’t afford to pay a mega law firm tens of thousands of dollars.
The Act works
Once you discharge all the statutory requirements, the Act gets the job done. Adjudicators can spot any trivial reasons for withholding the payment easily and in most cases (if not all) will make an appropriate decision. The official government statistics (NSW procurement web site) overwhelmingly shows that the Act works and achieves its main purposes.