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What work does this Act apply to?
This legislation, applies to both construction work, and the supply of goods and services related to construction work. So it applies to bricklaying as it does to architectural services. As a rule of thumb, any time you do work on a structure that is 'fixed in the ground' this would qualify as construction work.

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What is 'Construction Work' under the Security of Payment Act?
The best answer to that is to show you what the Act actually says. According to the Act it is:

construction work means any of the following work on a site in WA —
  • (a)  reclaiming, draining, or preventing the subsidence, movement or erosion of, land;
  • (b)  installing, altering, repairing, restoring, maintaining, extending, dismantling, demolishing, or removing, any works, apparatus, fittings, machinery, or plant, associated with any work referred to in paragraph (a);
  • (c) constructing the whole or a part of any civil works, or a building or structure, that forms or will form, whether permanently or not and whether in WA or not, part of land or the sea bed whether above or below it;
  • (d) fixing or installing on or in any thing referred to in paragraph (c) any fittings forming, or to form, whether permanently or not, part of the thing, including —
    • (i)  fittings for electricity, gas, water, fuel oil, air, sanitation, irrigation, telecommunications, air conditioning, heating, ventilation, fire protection, cleaning, the security of the thing, and the safety of people; and
    • (ii)  lifts, escalators, insulation, furniture and furnishings;
  • (e) altering, repairing, restoring, maintaining, extending, dismantling, demolishing or removing any thing referred to in paragraph (c) or any fittings described in paragraph (d) that form part of that thing;
  • (f) any work that is preparatory to, necessary for, an integral part of, or for the completion of, any work referred to in paragraph (a), (b), (c), (d) or (e), including —
    • (i)  site or earth works, excavating, earthmoving, tunnelling or boring;
    • (ii)  laying foundations;
    • (iii)  erecting, maintaining or dismantling temporary works, a temporary building, or a temporary structure including a crane or other lifting equipment, and scaffolding;
    • (iv)  cleaning, painting, decorating or treating any surface; and
    • (v)  site restoration and landscaping;
  • (g) any work that is prescribed by regulations to be construction work for the purposes of this Act.
  • (3) Despite subsection (2) construction work does not include any of the following work on a site in WA —
  • (a) drilling for the purposes of discovering or extracting oil or natural gas, whether on land or not;
  • (b) constructing a shaft, pit or quarry, or drilling, for the purposes of discovering or extracting any mineral bearing or other substance;
  • (c) constructing any plant for the purposes of extracting or processing oil, natural gas or any derivative of natural gas, or any mineral bearing or other substance;
  • (d) constructing, installing, altering, repairing, restoring, maintaining, extending, dismantling, demolishing, or removing, wholly artistic works, including sculptures, installations and murals;
  • (e) work prescribed by the regulations not to be construction work for the purposes of this Act.
  • (4) In this Act — construction work does not include constructing the whole or part of any watercraft.

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What are 'Building or Construction - Related Goods and Services' under the Security of Payment Act?
For the purposes of this Act, goods are related to construction work if they are —
  • (a) materials or components (whether pre fabricated or not) that will form part of any thing referred to in section 4(2)(b) or 4(2)(c) or of any fittings referred to in section 4(2)(d);
  • (b) any fittings referred to in section 4(2)(d) (whether pre fabricated or not);
  • (c) plant or materials (whether supplied by sale, hire or otherwise) for use in connection with the carrying out of the construction work at the site of the construction work; or
  • (d) goods prescribed by the regulations to be related to construction work for the purposes of this Act.
  • (2) For the purposes of this Act, professional services are related to construction work if they are —
  • (a) services that are provided by a profession and that relate directly to construction work or to assessing its feasibility (whether or not it proceeds) —
    • (i)  including surveying, planning, costing, testing, architectural, design, plan drafting, engineering, quantity surveying, and project management, services; but
    • (ii)  not including accounting, financial, or legal, services;

      or
    • (b)  services that are provided by a profession that are prescribed by the regulations to be professional services related to construction work for the purposes of this Act.
  • (3) For the purposes of this Act, on site services —
  • (a) are services other than professional services referred to in subsection (2); and
  • (b) are related to construction work if they are —
    • (i)  services that relate directly to construction work, including the provision of labour to carry out construction work; or
    • (ii)  services prescribed by the regulations to be on site services related to construction work for the purposes of this Act.
  • (4) The regulations may prescribe goods, professional services or on site services that are not related to construction work for the purposes of this Act.

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Can Security of Payments really get me my money?
Most of the time it does. It would be a mistake to think that this Act has the power to recover money all the time, every time. Other factors come into it like the ability of your debtor to pay, your ability to enforce a determination, and the level of knowledge you have of your debtor. If you don’t know where you debtor is, who they bank with, or how to contact them, it will be hard to enforce and get your money. But Security of Payments gives a claimant great leverage to recover money which did not previously exist, and it remains your lowest cost 'biggest bang for your buck' option.

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What should a Payment Claim contain?
A payment claim must —
  • (a) be in writing;
  • (b) be addressed to the party to which the claim is made;
  • (c) state the name of the claimant;
  • (d) state the date of the claim;
  • (e) state the amount claimed;
  • (f) in the case of a claim by the contractor — itemise and describe the obligations that the contractor has performed and to which the claim relates in sufficient detail for the principal to assess the claim;
  • (g) in the case of a claim by the principal — describe the basis for the claim in sufficient detail for the contractor to assess the claim;
  • (h) be signed by the claimant; and
  • (i) be given to the party to which the claim is made.

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Does a Payment Claim need to contain State Decs, insurance details, and that other stuff?
No. A payment claim need only contain what the Act requires it to contain. The claim is valid despite not including all the crap so many contracts require.

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When do I serve the Payment Claim?
The Act allows you to make "one or more claims for a progress payment" and the claim(s) can be made "at any time after the contractor has performed any of its obligations". This is pretty flexible and so you can claim anytime after doing the work.

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How do I serve a Payment Claim?
Strictly speaking you can serve it via post, fax, and hand-delivery. But to avoid denial of service the BEST ways are fax (so long as your fax machine produces a transmission report) and courier (so long as the courier service gets a "proof of delivery signature). Post is no good as someone can always say they never got it. Registered Post tends to never get collected. (When you owe money in construction registered post is NEVER good news). Also email is no good. You cannot prove that the intended recipient ever got the claim.

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After I serve the payment claim, what happens next?
You must give the debtor (Principal) 14 days to send you back a 'Notice of Dispute'. This Notice should set out the reasons why the claim has not been paid in full. The Principal however does not have to supply such a notice, and the process can continue regardless. If such a notice shows that some part of the claimed amount is payable, then that amount must be paid within 28 days of receiving the payment claim.

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OK so I received a 'Notice of Dispute' within 14 days. Now what?
You can now take the matter to adjudication. You must have the adjudication application lodged for adjudication within 14 days of receiving the 'Notice of Dispute'. Remember that day 'one' is the next business day AFTER receiving the Notice.

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What happens once the adjudication application is lodged?
The Principal has 14 days to prepare a written response for the adjudicator addressing the matters raised in the adjudication application.
What if I served the Payment Claim ages ago, but did nothing about it?
You can serve the claim again but you must differentiate the claim from the last time you served it. Include any additional work done, add interest, and all ground for entitlement.

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What needs to be in an Security of Payment Adjudication Application?
The most important thing is your written arguments as to why the debtor's (Principal's) reasons for non payment are incorrect. To this you have to supply documentary evidence that support your arguments and disprove the Principal's reasons. If your Principal has not provided a 'Notice of Dispute', then you still have to outline the work done and the basis of your claimed amount.

You must also include copies of the contract, payment claim, and 'Notice of Dispute', if applicable. Keep everything indexed for easy reference.

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What makes for good evidence to support my application?
Contemporaneous documents such as timesheets, variations forms, site diary notes, email exchanges, and invoices are all excellent evidence to show the nature of the dispute and the position of each side. The next standard of evidence is work-related documents such as the contract, plans, technical drawings, technical standards, and Notices served under the contract. All these can be advanced to support your arguments relating to the claim. The less oral arrangements you have, the better!

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What does the adjudicator do?
The adjudicator will carefully review the claim and the arguments in support of it. The adjudicator will also review the Principal's arguments and evidence and will then balance the Claimant's argument and evidence against the Principal's. The adjudicator's decision will be an outcome of this process. Because there is no hearing or cross-examination the adjudicator will make the most just determination based on the documentation before him/her. The reasons will be provided to both parties in writing.

You must also realise that adjudicator s charge a fee for their time, which must be paid before the determination is released.

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Who are the adjudicators?
Some of them are lawyers, but in the main they are people who have had long experience in the construction industry as project managers, engineers, Quantity Surveyors, or contract administrators. You will never get to see or meet the adjudicator of your matter. The communication with the adjudicator will handled via the Prescribed Appointer.

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What do people fight about?
A majority of disputes are over the value and entitlement to variation work, and whether the work is a variation or is ‘within scope'. The next biggie is defects and set offs. It is rare that disputes involve complex matters of law. The majority of disputes are resolved by regard to the scope, site documentation and records, drawings and revisions, and the conduct of the parties. Questions like ‘Was the variation requested? and 'Is the mechanical work in revision E additional to that in the tender's Revision C?' are typical of matters to be decided.

This is straight-forward stuff and balanced decisions can be made with regard to the documents around the work.

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Where do I send my Security of Payment adjudication application?
You need to send your application to a 'Prescribed Appointer'. These authorities are appointed by the state government to receive, process, and manage the adjudication process. They are the 'middle man' between the Claimant, Principal, and the adjudicator.

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What does adjudication cost?
This will really depend on the complexity of your dispute. Current statistics indicate that about $3-$5K is fairly typical. It is rare in our experience to have a determination cost over $10 000.00 and then it would normally be a dispute over six or seven figures. Whichever side is mostly or entirely successful will usually be able to recover the cost of the adjudication. It is still cheaper than court which can cost you $50 000 on even a minor matter.

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How long do I tolerate underpayment or non-payment before taking the matter to adjudication?
There are two elements to this one. The first relates to your cashflow: how long can you continue on the meager cash your client is paying? The second is more important; conditioning. Once your client gets used to the fact that you keep working despite the fact that he is underpaying you, it makes it that much harder to reverse this ‘habit’. Have the fight early. I would not go more than 2 progress claims in a row before going to adjudication.

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Why is it good to get a professional adjudication application done?
You will find that your debtor will often have a law firm prepare submissions such as the ‘Notice of Dispute’, on their behalf. These can run to 3 folders of submissions. There has also much refining of the application of the Act given the caselaw. You need to be aware of these, or use someone who is up to speed. Also consider if you can spare the time away form your business to deal with the case.

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What do I do if payment starts to become a problem?
The key thing is not to pretend it doesn't exist. Too many contractors keep their head down and don't want to rock the boat because they think that keeping quiet is the best way to get paid. Wrong wrong wrong.

Depending on the contract and the circumstances there are many things you can do, or threaten to do, when payment problems start. They key strategy is to bring the problem to a head quickly and deal with it. You can do this several ways; suspend work, issue a notice of dispute, call for a meeting, get your lawyer to write a letter setting out the issues, run a claim under the Act. You need to go hard early.

Don't think payment problems go away with time. They don't. The longer you work the deeper you will go into debt, and the less money you have to fight.

Get advice, and do something.

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How do I suspend work under the Security of Payment Act?
You have to issue a ‘Notice of Intention to Suspend Contract Obligations’ under the Act. The main thing is to know when you can issue this Notice. That is ONLY when an adjudicator has determined an amount in your favour and your client does not pay you the amount by the due date.

Only in that circumstance can you suspend work. But you MUST be sure that the Notice of Suspension is in the correct form. Once the Notice is issued you must keep working for three more days. If your client pays you must recommence work within 3 business days.

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If an adjudicator finds an amount in my favour, when do I get paid?
Generally the adjudicated amount must be paid within 5 business days of receipt of the determination. So if the determination is received by your debtor on a Wednesday, the payment will be due on the following Wednesday. If the due date for payment is defined in the contract, and at the time of the determination, that date has not yet been reached, then the adjudicator will determine that that date is the due date for payment.

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What if I don't get paid…. then what?
You can then enforce the decision in court. First you will need to get an Adjudication Certificate. The Prescribed Appointer that handled the adjudication application will issue a certificate which is a formal document 'certifying' that the amount is payable to you. You can only apply for this certificate after the due date for payment has passed.

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What options do I have to enforce the judgment amount?
You have the same options that anyone else has when they win an amount in their favour in a court case. You can garnish the money from their bank account, send the sheriff around to seize property (including land) and auction it off and pay you from the proceeds, issue a Creditor’s Statutory Demand and threaten to wind the company up. You can also agree to have your debtor pay you in installments via an Installment Order via the courts.

The difference is that you have these options available to you via the adjudication process which is much faster and less costly than a full blown court case.

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How many adjudications are done in my state each year?
In 2009 there were 105 adjudications which is up 25% from the year before. This is a growing method of getting payment disputes resolved.

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How long does it take from serving my claim to getting a decision?
This will vary depending on how fast each party fulfils its part of the process. Having said that, a typical period is about 5-6 weeks.

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Is adjudication done at a hearing where we argue our case in front of the adjudicator?
No. The entire process is done on written submissions. Once the application is in there is nothing to do but wait for the determination. The adjudicator has 14 business days after receiving the Principal's written response, or 14 days after the last day in which a response is due, to get a written decision back to the to the parties.

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Do I get to talk to or meet the adjudicator?
No. You only communicate with the Prescribed Appointer who is the 'middle man' between you and the adjudicator, or else in writing.

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My client has offered to repay me in installments….what do I do?
This caper very rarely works. Most of the time you will get the first one or two payments and then nothing. The best way to handle this is to get a judgment debt in your favour (which will require a determination under Security of Payments or sued through the courts) and then have your debtor file an 'Application to Pay by Installments' with the court. The registrar will decide on the monthly amount to be paid. At this point you cannot enforce the debt in any other way. But if your debtor misses one payment, all best are off and you can enforce the debt again. The important thing here is to understand that in this scenario your debtor is in an agreement with the court, not you. This makes it a little harder to ignore.

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My client has asked for a meeting after they got a copy of the adjudication application… should I meet?
Yes. Always agree to meet and keep talking. You may resolve the issue and you can then withdraw the application at little or no expense. But if that does not happen, you can always get useful information about how your debtor is thinking and what they might do. Meetings tell you a lot… not only by what your debtor is saying, but what their body language is saying and the 'vibe' you get from them. It's good to get as much of this kind of information as possible.

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My client might call me after he gets the claim – what do I say?
As little as possible. Simply say that 'I am claiming what I believe you owe me'. Your client will then argue as to why they owe you nothing. Listen politely and say that clearly there is a difference of opinion.

Do NOT make threats, and do not give away anything you intend to do, and DO NOT talk about how you're going to get an adjudicator to decide. Forewarned is forearmed. Just pull out the poker face and play a straight bat.

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When is it too late to go to adjudication?
If more than 28 days has passed since a Payment Dispute arose under the construction contract. A Payment Dispute arises if payment is not made on the due date under the contract, or if there is no date provided, then within 28 days after the claim is received by the principal.

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