Special Issue on Practices and Resolution of Progress Payment Claims
2014; American Society of Civil Engineers; Volume: 7; Issue: 1 Linguagem: Inglês
10.1061/(asce)la.1943-4170.0000157
ISSN1943-4170
Autores Tópico(s)Legal principles and applications
ResumoAre some disputes more important than others? Perhaps this is a matter of opinion depending on your position, capacity, and the quantum at stake. Nonetheless, it is generally accepted that cash flow is the lifeblood of construction contracting. Security of payment legislations have been enacted in many jurisdictions, with the primary aim of ensuring that payments due to the contractor and subcontractors are duly honored. This intention has been warmly received by the industry. Adjudication provides the platform for more timely decisions whereby the aforementioned legislative intent can be effected. It is therefore common to have mandatory adjudication linked with security of payment legislations. This special issue includes six articles that discuss the benefits and unintended side effects of Security of Payment legislations in the United Kingdom, New Zealand, Australia, and Singapore. The United Kingdom (U.K.) is possibly the first Common Law jurisdiction that has introduced legislative measures to deal with mandatory adjudication and payment issues under construction contracts through the enactment of the Housing Grants, Construction and Regeneration Act 1996 (HGCRA). Akintoye et al. state that the three key aims of the HGCRA are (1) to allow swift resolution of disputes, (2) to reduce unreasonable payment delays, and (3) to make the legislation more effective at improving cash flow in construction supply chains. Amendments to the HGCRA were made through Part 8 of the Construction Act 2009. The key changes include, inter alia, mandatory adjudication extensions to cover oral contracts and abolition of the pay when certified clause. Through an online questionnaire, the authors examined the impacts of the 2009 Act. It was found that small-sized, medium-sized, and large-sized contractors welcome the proposed changes in the tightening of contract payments so that a more balanced level playing field can be achieved. Moreover, according to the case study by Atkinson and Wright, the cost of adjudication in complex cases has escalated in the U.K. to the extent that the adjudicatory process is masked by the extensive use of experts and lawyers. This is reminiscent of the phenomenon of how arbitration becomes a replication of civil proceedings in court. Ramachandra and Rotimi conducted a study of the 40 construction payment cases that reached the High Court of New Zealand. Five major sources of payment dispute were identified: (1) delay in progress and final payment, (2) nonpayment of amount certified, (3) disagreement over valuation, (4) noncompliance of payment provisions, and (5) argument over prolongation and acceleration costs. The authors found that these types of payment disputes are common and require prompt action of the industry to ensure that the construction supply chain is not affected. The authors also raised the concern of bankruptcy and insolvency issues that may arise if the payment disputes in construction are not addressed properly. On the subject of insolvency, McCagh suggests the use of trusts to facilitate security of payment in Australia. In Australia, there has been a surge in insolvencies among construction entities. The New South Wales Government instigated an inquiry into how such insolvencies can be prevented. Although this issue was proposed some 20 years ago, no legislation was enacted. Forms of construction trusts are operating in Canada and the United States. The proposed construction trust shall require contractors to hold funds received from the principal on the trust for the benefit of (1) the contractor and all subcontractors, or (2) the principal for the purpose of advancing the construction project. In addition, a project-specific bank account shall be established for which the principal and contactor shall act as trustees for the benefit of the entire supply chain. The author is adamant that the proposed trust regime be part of the security of payment legislation. Wong et al. indicate that Australia had looked into the payment issue in light of the HGCRA; the state of Victoria enacted its own Building and Construction Industry Security of Payment Act (SPA) in 2012. The SPA was amended in 2012. The authors studied the cases related to the SPA from the Australasian Legal Information Institute database. The authors suggest that certain issues need to be ironed out if the SPA is to fulfill its intended effect. Notably, the use of adjudication appears to raise the most concern according to the authors’ research. For example, the roles of the adjudicator and the adjudicatory process have to be evaluated in order to maintain the original design of professional judgment for a speedy decision. There is a tendency of growing formality in the process. Furthermore, the decisions of the adjudicator are refuted quite extensively. This undermines the creditability of adjudicators, as adjudication is seen as a rehearsal of arbitration. Lim discusses the pros and cons of having a security of payment legislation with reference to his study in Singapore. The author examined the legislation in light of some major cases decided in the Singapore courts. One of his key proposed reforms is that the entirety of the adjudicated amount should first be paid by the respondent to the claimant even if the adjudicator determination is challenged. It is found that if the respondent—in most cases, the employer—resists payment on technical grounds, then the adjudicator does not have jurisdiction in the matter. The collection of papers in this special issue neatly emphasizes the need for legislative intervention to address payment issues in construction. Security of payment legislations have been enacted in a number of Common Law jurisdic0tions. They share commonalities in intentions and provisions. The operation of the legislation also highlights the areas that need further action.
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