Builder or Contractor Dispute — Know Where You Stand

Each state and territory has its own Security of Payment Act — in NSW it is the Building and Construction Industry Security of Payment Act 1999, and equivalent legislation exists in Victoria, Queensland, Western Australia, and other jurisdictions. These laws give contractors, subcontractors, and suppliers a fast-track statutory right to recover progress payments for construction work or related goods and services. The regime operates independently of the contract — a party can serve a payment claim, and if the recipient does not serve a valid payment schedule in time, the claimant can proceed to adjudication or even enforce the debt in court without a full hearing on the merits.

You must serve a payment schedule within 10 business days (in most jurisdictions) of receiving the payment claim, or within a shorter period if specified in the contract. The payment schedule must identify the scheduled amount you agree to pay and, if that amount is less than the claimed amount, set out your reasons for withholding payment. If you fail to serve a payment schedule in time, the claimant can proceed to court to recover the full claimed amount as a debt, or commence adjudication. A lawyer should review the payment claim immediately to confirm it is a valid SOPA claim and to draft a compliant payment schedule.

If a payment dispute is not resolved after the exchange of payment claim and payment schedule, the claimant may apply to an authorised nominating authority to have the dispute adjudicated. An independent adjudicator is appointed who considers written submissions from both parties — there are strict time limits for submitting an adjudication response. The adjudicator determines the adjudicated amount, which is provisionally binding and can be enforced as a judgment debt. The losing party can pursue a later court proceeding to finally determine the underlying payment dispute, but must pay the adjudicated amount in the meantime unless they obtain a stay.

Termination rights depend on both the contract terms and the general law. Most building contracts (including standard HIA and MBA forms) contain specific termination provisions that set out grounds for termination and notice requirements. Under the general law, a party can terminate for repudiation — where the other party has made clear they will not or cannot perform their obligations — or for serious breach. Purporting to terminate a building contract incorrectly can itself amount to repudiation, exposing you to a significant damages claim. Always get legal advice before issuing a termination notice.

Retention moneys are amounts withheld from progress payments under the contract as security for the builder's obligations, including defect rectification. Most standard building contracts allow a retention percentage to be held until the end of the defects liability period. Whether you can withhold a retention against a particular dispute or defect claim depends on the contract terms and what the retention is expressly securing. Simply refusing to release retention moneys without contractual justification could expose you to a valid SOPA payment claim. A lawyer can advise on the contractual mechanism for retaining funds and how to document your reasons.

The appropriate forum depends on your state and the nature and value of the dispute. In Victoria, residential building disputes are handled in VCAT's Building and Property List. In NSW, NSW Fair Trading provides a dispute resolution service and, failing that, NCAT handles residential building disputes. In Queensland, QCAT handles domestic building disputes. For commercial construction disputes, adjudication under SOPA and the Supreme Court are common forums. In many states, a complaint to the relevant building authority (e.g., VBA in Victoria, NSW Fair Trading) is also possible and can result in rectification orders being made against the builder.