Adjudication - Payment Claim Notices


The importance of the Payment Claim Notice

Payment Claim Notices and Payment Responses are vital in the payment claim process. 

Unlike the Housing Grants Construction and Regeneration Act (as amended) in the UK, the failure to issue a payment response may not necessarily mean that the payment claim notice amount that has been made is deemed accepted.

Importantly, the Construction Contracts Act ("CCA") is silent on what happens if a party fails to issue a payment response. Therefore, the adjudicator has no express authority to award the payment claim amount to the subcontractor in default of a payment response. 

Unfortunately, given that the CCA is still in its infancy, there is no jurisprudence on the correct interpretation of the Act. In recent times, it appears that what background the Adjudicator comes from may influence whether a claim in default of the payment response will be successful - this can be frustrating for consultants advising clients, where perhaps the parties have not agreed upon the adjudicator and, therefore it is for the Chairperson of CCAS to appoint. The parties then have to wait to see who is appointed to consider what may be the correct advice.

To avoid the uncertainty and potential delays caused by the adjudication process, it is crucial to adopt a proactive approach. This means ensuring that you respond to any payment claim in accordance with the CCA, thereby reducing the risk of a 'lottery' situation.

'If the other party or specified person contest the amount is due and payable, then the other party or specified person (a) shall deliver a response to the payment claim, not later than 21 days after the payment claim date'

Section 4(3) of the CCA 

You also will need to make sure that such response is detailed and explains why you contest the amount claimed is due and payable (see Section 4 Construction Contracts Act 2013)

Suspension of the Works 

If the paying party does not pay and fail to issue a Payment Response the subcontractor can suspend work.

However, if the matter is then referred to adjudication, the executing party (i.e. consultant, contractor or subcontractor) cannot thereafter suspend on foot of lack of payment. The Payment Claim Notice (and the amount of the Claim) will then need to be the subject of a dispute.

Given that the dispute process is likely to take at least another month and a half, conceivably the sub-contractor can be out of funds for some time before getting fair payment.

See are Adjudication services