Let’s say you’ve gone to the trouble of submitting a payment claim and going through the security of payment process for adjudication. You receive the adjudicator’s decision and it’s good news – the decision awards you the entire amount claimed!
But then, the other party isn’t feeling cooperative and doesn’t pay you.
What should you do next?
NB – this article relates to security of payment in Queensland only. Other states and territories have slightly different processes.
When should the Adjudicated Amount be Paid?
Generally speaking, the respondent has to pay an adjudicated amount within five business days after they receive the adjudicator’s decision.
Sometimes the adjudicator might decide that a later date for payment should apply, and if they do that, then the later date will be the deadline for payment of the adjudicated amount.
Do you Have to Keep Working on the Project if They Haven’t Paid You in Time?
If the project is ongoing and the respondent still needs you to keep working, then one big stick you might like to wield is the threat to suspend works.
Irrespective of any “rights” you might have, suspending work is a big deal and you really shouldn’t do it casually – make sure you get advice first and follow any process strictly, otherwise you’re going to get into some dangerous legal territory and the whole strategy might backfire badly.
However, in Queensland if you haven’t been paid by the deadline (see above) then the Building Industry Fairness (Security of Payment) Act 2017 (Qld) (Act) says that you can:
- Give notice of your intention to suspend work or cease supplying related goods or services under the relevant contract (which must be the contract that was the subject of the adjudication process);
- If at least two business days have passed after you give such a notice, and you still haven’t been paid, you may suspend work;
- Claim losses that you suffer as a consequence of exercising the right to suspend from the respondent.
If you do get paid, then you have to get back to work within 3 business days after the payment.
We can’t stress strongly enough though – get advice before you do any of this.
What Can you Do if They Still Don’t Pay the Adjudicated Amount?
So what if you haven’t been paid and you don’t want to suspend (or the suspension hasn’t had the desired effect)?
What you have at this point is a special kind of debt. Yes, legally, it’s a debt – the respondent owes you money and you can treat that in the same way as any other debt.
However, because you’ve gone through the adjudication process you get to skip a few of the normal steps – in particular, thankfully, you don’t need to start ordinary Court proceedings because you’ve already done that through the adjudication.
Here are the typical steps you’ll probably want to consider.
File a Judgment Debt
Generally speaking, everything is easier to enforce if you have a judgment, and the Act allows you to get one simply.
In essence, you go through a process with the QBCC that allows you to simply register the adjudication certificate, together with any interest, as a judgment in Court.
It’s reasonably inexpensive and easy to do.
You’ll then be in a similar position as if you had been through a trial and won, with a Court sealed document saying the respondent owes you $X.
Issue a Statutory Demand
A statutory demand is a tool found in the Corporations Act that allows you to make demand on a company for payment of a debt greater than $2,000.
It’s a powerful tool because it’s:
- Cheap to issue (and even cheaper if you’ve got a judgment debt – see above);
- Fast – a response is required within 21 days of it being served on the company; and
- Serious – if the respondent fails to appropriately react to a statutory demand inside the 21 day period they will be presumed insolvent, which you can then use to wind them up. Most companies don’t want this, especially if they’re mid-project.
There are, however, some risks here. In particular, if the respondent has a big potential counterclaim against you (say, for defective work) that exceeds the value of your adjudicated sum, then you should exercise caution.
Next, although it’s cheap to kick things off and issue the demand, it can get expensive very quickly if the respondent decides to apply to the Court to set it aside. You’ll often get a chance to back out before this happens, but not always.
And last, it’s a tool designed specifically to lead to the winding up of a company and the appointment of a liquidator. That’s normally not a good outcome for you since mostly you want to get paid.
So what you’re doing here is banking on the fact that the respondent would rather pay you than run the risk of being wound up or paying their lawyers to go to the Supreme Court to contest the demand.
Enforce Using the Court Process
If you had won a regular trial, you’d have a standard array of Court options to enforce your debt. Those options still exist here once you have registered your certificate as a judgment.
This can include:
- Obtaining a statement of financial position – this will give you some visibility on the assets and liabilities of the respondent
- Conducting an enforcement hearing – where the respondent’s director/s have to answer questions about its capacity to pay under oath
- Seizure and Sale of Assets – the bailiff of the Court can take and sell the respondent’s assets to meet the debt
- Redirect Debts or Cash – the Court can order that debtors of the respondent pay you rather than the respondent.
These all sound great in theory, but in reality the process of getting these orders can be somewhat cumbersome. Often assets are hard to identify or secured by bank loans and unavailable for sale. Non-cooperation from the other party can also delay things and add to the cost.
However, if you have no idea whether there’s even a chance of getting paid, then this can be an excellent way to find out what’s going on with the respondent’s finances and give you a good shot at making a sound enforcement decision.
Do They Still have to Pay if They are Appealing the Decision?
Generally, yes. Even if the respondent is appealing the adjudication outcome, they still have to pay the debt unless you agree otherwise or the Court orders a stay on enforcement. That can be a bit tricky to get, although it’s not impossible.
Risks of Enforcement
The most significant risk to be conscious of is the chance that the respondent goes into administration or liquidation.
If the respondent is in financial distress, there’s a risk that you will be tagged for an unfair preference payment. This is heightened in circumstances where you have engaged in debt collection strategies, because one of the available defences becomes harder to run.
That all said, getting paid is better than not getting paid. It’s just a potential risk to be aware of.
If you’re concerned, you can read more about external administration here.
Can you Complain to the QBCC?
Yes, if the respondent is a licenced contractor you can consider making a “monies owed” complaint to the QBCC.
So What Should you Do?
Here’s a simple step by step approach:
- Make demand immediately – this is a simple letter and makes it clear you won’t tolerate mucking around with payment;
- Register the adjudication certificate as a judgment – this gives you more enforcement options and leverage against the respondent;
- Pick up the phone – if you still haven’t been paid at this point, sometimes a telephone call can solve the problems rather than sending emails or writing letters;
- For ongoing projects, if you still haven’t been paid and the respondent isn’t making the right noises about paying you, consider getting advice about giving a notice to suspend works (and then suspending works);
- Consider (you can’t do both at the same time):
- Court enforcement process; or
- Issuing a statutory demand;
- Depending on the outcomes of those, consider:
- Whether you’re throwing good money after bad;
- If there are assets you can use for enforcement;
- Otherwise, if you should commence winding up proceedings.
And that’s how you enforce an adjudication decision in Queensland.
Need help with the tricky bits? Get in touch here.