Contractor Payment Disputes (NT)

In the Northern Territory, it is not unusual for contractors to encounter difficulties collecting payment. It can be hard for a smaller contractor to pursue a payment dispute as they are often running on small margins. In 2020, special laws were introduced in the Northern Territory to ensure that construction contractors (particularly small contractors) receive payment for their services. The legislation provided an avenue to resolve payment disputes quickly. The new amendments apply to the Construction Contracts (Security of Payments) Act 2004, Construction Contracts (Security of Payments) Regulations 2005and the Community Justice Centre Act 2005.

Contractor payments

A construction contract usually specifies the process for requesting payment for completed construction work. When there is no provision in the construction contract, Northern Territory law provides that the contractor should prepare a written and signed Payment Claim. This document should state:

• the claimant’s name;
• the date of claim;
• the amount outstanding; and
• an itemisation of the completed but unpaid work.

Notice of dispute

The party receiving a payment claim can pay, reject entirely, or dispute some of the claim. The receiving party must respond in either the contractually agreed timeframe or when there is no set time, within ten days of receiving a claim. The debtor can respond by paying the undisputed amount within the contractually agreed timeframe or within 20 working days. If the debtor does not agree that they owe the contractor, the debtor must issue a Notice of Dispute. A Notice of Dispute must be signed and in writing, stating the date, name of the party giving notice, identifying the claim, and reasons to reject the claim.

What are contractor payment disputes?

Any contract for construction work carried out in the Northern Territory must comply with this legislation. The laws apply to both written and verbal contracts, and contracts that were entered into in another jurisdiction. Under these laws, the term “construction work” has a broad definition. It includes contracts to install insulation, furniture, furnishings, artistic works, and building construction, including seabed constructions.

Northern Territory laws establish the rights of all contractors to be paid a fair amount for the work they undertake. Importantly, the laws apply even if the contract does not specify a payment amount or a method to determine the payment amount. As a result, there is an implied term in every construction work contract of reasonable payment for work completed. Under the new amendments, when there is a payment dispute over a larger value contract, instalment payments must continue if the dispute is not resolved within 45 working days. Also, this legislation mandates that construction work contracts cannot include payment arrangements that are dependent on third-party payment (“pay if paid”) or clauses that specify progress payments after 30 working days.

In the Northern Territory, a construction contract dispute can be resolved through a registered adjudicator. The Community Justice Centre Act 2005 amended the monetary limit for payment claims adjudicated through the Community Justice Centre. The statutory cap was raised from $10,000 to 30,000 monetary units. An applicant has 90 days from the date that the payment dispute arises to apply for adjudication. Registered adjudicators do not conduct mediations or conciliations between the parties, they make decisions based on presented evidence. If the adjudicator makes a determination, they will establish the amount due for payment, as well as any interest payable.

The Construction Contracts (Security of Payments) Act 2004 defines a payment dispute, describes the appointment process for adjudicators, and sets out the adjudication timeframes for payment disputes and the methods to enforce determinations. It also standardises the timeframes for work completion and defines “working days” to exclude weekends and public holidays, and every day between 25 December and 7 January the next year.

High-value construction contracts

The regulations do differ somewhat for so-called “high-value” contracts. The Construction Contracts Regulations 2004 defines high-value construction contracts at a minimum monetary threshold of 500,000,000 monetary units. Parties to high value construction contracts can choose to opt-out of the adjudication process if they agree to approved alternative dispute resolution (ADR). In that circumstance, the Regulations establish the ADR process that the parties must follow. Specifically, the parties must undertake the dispute resolution in good faith and in a timely manner. The dispute resolution mechanism must be set out clearly and unambiguously, and it applies even if the contract is expired or terminated. However, it is important to note that even when the head contract is high-value and the parties opt for ADR, contractors lower down the contract chain are still subject to the adjudication process.

The other significant change under the legislative amendments is that review jurisdiction for payment disputes transfers from the Local Court to the Northern Territory Civil and Administrative Tribunal (NTCAT). Go To Court Lawyers can help with any questions you have about applying to NTCAT, the new amendments or contractor payment disputes generally in the Northern Territory. Please call our experienced team on 1300 636 846 for assistance with any civil law matter.