ENFORCEMENT

If an adjudicator determines that any of the parties to an adjudication are liable to make a payment under the relevant construction contract, such payment must be made within two (2) working days from the date of receipt of the adjudicator’s determination, unless a later date for payment is specified in the determination.

If a party fails to pay the whole or any part of the amount determined by an adjudicator before the end of the relevant period (whether 2 working days or any other period specified in the determination), a claimant in an adjudication relating to a commercial construction contract may proceed to enforce the determination in the District Court as a debt due together with the actual and reasonable costs of recovery, or by entry as a judgment of the court.

The right to enforce a determination as a judgment does not apply to residential construction contracts.

A determination solely relating to questions in dispute about the rights and obligations of the parties under a construction contract is not enforceable.

A party who is entitled to be paid an amount on money pursuant to an adjudicator’s determination in respect of a commercial construction contract has the right to suspend work after giving proper notice under the Act if the party liable to pay that amount has not done so by the end of the relevant period.

Suspending work

Suspension of work is often an effective means of enforcing compliance with an adjudicator’s determination. Suspension of the contract works is generally effective if the works are ongoing and time for completion is critical.

Section 72 of the Act permits a party to a commercial construction contract to suspend work if an adjudicator’s determination has not been complied but care must be taken to ensure that proper notice has been issued and all the relevant information required by s59(2)(b) and (3) has been included.

The Act does not provide a right to suspend work under a residential construction contract and accordingly the right to suspend work will only exist in relation to a residential construction contract when that right is specifically conferred by the express terms of the construction contract.

If a party properly exercises the right to suspend work under the Act, that party:

• is not in breach of the construction contract; and,
• is not liable for any loss or damage suffered by any party; and,
• is entitled to an extension of time to complete the works; and
• keeps its rights under the contract including any right to terminate the contract; and,
• may lift the suspension at any time even if the amount has not been paid in full.

The right to suspend work ceases when the determination is complied with and payment is made in full. If a party failed to return to site after the determination was complied with, it would not be able to rely on the protections of the Act and may be held to be in breach of contract and liable for damages for loss.

To download a sample notice of suspension click here

Recovery of the unpaid amount as a debt due in court

A party seeking to recover the unpaid amount of an adjudicator’s determination as a debt due in court would need to commence summary judgment proceedings, issue a statutory demand if the debtor is a company, or issue bankruptcy proceedings if the debtor is an individual, for the amount of the unpaid debt.

The Act expressly entitles a party to recover the unpaid portion of any amount determined payable by an adjudicator and the actual and reasonable costs of recovery from the defaulting party.

In short, the process involves filing the requisite evidence of the debt together with an explanatory statement giving the debtor the opportunity to respond and the issuing of a decision by the court.

Independent legal advice should be sought before commencing any recovery proceeding.

Entry as a Judgment

The Act provides that a party seeking to recover the unpaid amount of an adjudicator’s determination in respect of a commercial construction contract may apply to the District Court to have the determination entered as a judgment and may recover the actual reasonable costs of the application.

To obtain entry of the adjudicator’s determination as judgment, the steps in Subpart 2 of Part 4 of the Act need to be carefully followed. First, a party needs to make an application to the District Court in the manner provided by the rules (if any) and must serve the application on the defendant along with a statement setting out the consequences for the defendant if the defendant takes no steps in relation to the application.

A defendant is entitled to oppose the application for enforcement within 15 working days after the date on which the defendant is served with a copy of the application. Any application to oppose entry as a judgment by the Court may only be made if the defendant can establish that the amount payable under the determination has been paid in full to the plaintiff, that the contract to which the determination relates is not a construction contract to which the Act applies, or that a condition imposed by the adjudicator in his or her determination has not been met.

If the defendant does not take any steps to oppose the entry of the determination as a judgment or the grounds for opposition do not fall into any of the above categories, the District Court must enter the determination as a judgment.

If the Adjudicator has approved the issue of a charging order over the construction site and the plaintiff has applied for the issue of a charging order, the Court must immediately issue a charging order in respect of the construction site if the adjudicator’s determination is entered as a judgment.

Once the determination is entered as judgment, the plaintiff can then enforce the decision by means of an order for examination, attachment order or a distress warrant. An order for examination requires the debtor to appear before the Court Registrar to be examined as to the debtor’s financial situation to see if the debtor is able to pay the debt. If the Court determines that the debtor is able to pay, the Court will make an order for payment.

An attachment order directs the employer of the debtor to make deductions from the debtor’s wages or salary, or from benefits, and to pay the money directly to the creditor. The amount to be deducted will be decided by the Court after consideration of the circumstances.

A distress warrant permits a collections officer from the District Court to seize goods from the debtor to the value of the debt. These goods are generally held for five days and then sold with the proceeds being paid to the creditor, less the expenses incurred in the seizure and sale of the goods.

Conclusion

The recovery of money owing can be a slow, distressing and costly exercise. Whilst the Act has provided for the speedy resolution of disputes arising under construction contracts and clarity in relation to the right to recover monies due and owing pursuant to an adjudicator’s determination, and the process to be followed for that purpose, the basic court processes that must be relied on in the event of default and failure to pay on the part of a debtor remain slow and unchanged.

When deciding which process to use for the recovery of money owed, consideration need to be given to a number of relevant factors including: the amount of the determination; urgency, including the likelihood of the respondent going into liquidation; whether the contract is finished or work is still being completed; and whether there is an entitlement to a charging order in respect of the construction site.

The Building Disputes Tribunal strongly encourages any party seeking to enforce an adjudicator’s determination to promptly seek independent legal advice from a lawyer experienced in the processes for enforcement and recovery of monies due under an adjudicator’s determination, before taking any steps towards recovery.