Submission to Parliamentary Inquiry into Payments to Subcontractors

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Background to Inquiry and Submission

A submission to an inquiry headed by the Legislative Assembly Environment and Planning Committee, Victoria, has been made by Harriet Warlow-Shill, founder and principal of Warlows Legal. This inquiry relates to employers and contractors who refuse to pay their subcontractors for completed works. The Committee will examine the mechanisms currently in place for sub-contractors to receive payments, such as the Security of Payments regime, along with aiming to improve the overall framework around subcontractor payments. The submission entails six recommendations addressing the concerns arising from the current Security of Payment regime. Having advised clients in this area for over 20 years, the submission was put forward by Harriet Warlow-Shill on the basis that input from the legal profession is critical due to exposure to the true cost of sub-contractors and others in the construction industry trying to get paid.


Recommendation 1 – Updating the Payment Claim Form to Ensure Clarity and Cost Reduction

Subcontractors have been claiming an increasing amount of money without the proper clarity as to which claims may be admissible. Payment claim forms should therefore be updated to automatically exclude items that have been judicially deemed ineligible for inclusion. By incorporating this adjustment, claimants will be spared the uncertainty and subsequent legal battles arising from the inclusion of disallowed items, resulting in substantial cost savings for all parties involved. Alternatively, the website containing the form should have express mentions of the claims that can be made through the Payment of Claim form.

Recommendation 2: Implementing a Structured Scale for Adjudicator’s Fees

Additionally, it is recommended that Adjudicators’ fees be subject to a structured scale, proportionate to the complexity and value of the dispute at hand. For example, an Adjudicator charged $40,000 for a three-day conference, which is not proportionate to the amount being sought. Drawing inspiration from established models such as the probate costs scale for solicitors, this approach would ensure that Adjudicators’ remuneration aligns with the specific circumstances of each case. Such a system would strike a balance between incentivising Adjudicators’ expertise and guaranteeing reasonable costs for claimants, promoting cost-effectiveness within the adjudication process.

Recommendation 3: Hearing Enforcement Proceedings Before a Registrar in the County Court

It is proposed that enforcement proceedings pertaining to cases where no payment schedule has been filed within the prescribed timeframe be heard before a Registrar in the County Court. This approach acknowledges that matters lacking a payment schedule often involve straightforward debt disputes and are better suited for resolution at the Registrar level. This would alleviate the burden on the judiciary and expedite the resolution of such cases, enabling subcontractors to efficiently seek redress without undue expenditure or unnecessary strain on judicial resources.

Recommendation 3(a): Entering Judgment Without Further Proceedings

Alternatively, an approach inspired by New South Wales practice could be adopted, wherein judgment can be entered without further proceedings. This streamlined process would empower subcontractors to obtain a judgment based on an adjudication outcome without resorting to protracted court proceedings. By implementing this mechanism, the financial burden on subcontractors and the strain on the court system would be significantly reduced.

Recommendation 4: Standardising Legal Fees According to Scale of Dispute

Furthermore, to ensure fairness and transparency in legal fees, it is recommended that solicitors be required to adhere to a standardised scale of costs based on the amount in dispute. This approach aligns with the principles of access to justice and fairness, preventing overcharging and promoting consistency in legal billing practices. By imposing cost limitations based on the scale of the dispute, this measure would enhance predictability and affordability for all parties involved.

Recommendation 5: Establishing Qualification Criteria for Adjudicators

In light of the critical role of Adjudicators in the process, it is essential to consider the qualifications required for individuals serving in this capacity. To uphold the integrity of the adjudication process, it is recommended that Adjudicators undergo a qualification process, ensuring their proficiency and comprehensive understanding of construction law. Establishing clear qualification criteria would enhance the credibility of Adjudicators and bolster confidence in their decisions, ultimately safeguarding the interests of all parties involved.

Recommendation 6: Providing Statutory Provisions for Issuing a Statutory Demand to enforce Adjudication Results

In response to the challenges faced by subcontractors who encounter difficulties enforcing favorable adjudication results, it is imperative to explicitly provide statutory provisions allowing the issuance of a statutory demand to enforce an adjudication outcome. This legal clarification would remove uncertainty and enable subcontractors to effectively pursue the satisfaction of their adjudication rights. By extending this enforcement mechanism, the legislation would provide a stronger avenue for subcontractors to secure timely and just resolutions.

These proposals are based on an analysis of existing practices and legislation, with the goal of fostering fairness, efficiency, and accessibility within the construction industry.

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