Amendments to the Construction Industry Development Board Act, which would introduce prompt payment and adjudication regulations, were expected to be released later this year, said Global law firm Clyde & Co at a seminar in Sandton earlier this week.
Johannesburg branch partner Rob Scott noted that the draft regulations, in their current form, would apply to all construction related disputes; however, it would not be applicable to homebuilding contracts.
“The regulations state that all disputes may be referred for adjudication. However, when dealing with issues of payment, it is mandatory to refer the matter for adjudication,” he explained.
In the event that a contract does not stipulate regular payment intervals, Scott noted that the regulations would provide contractors and suppliers the means to submit monthly invoices to their employer, which would have to be paid within 30 days of the invoice being issued. Should payment not be made, interest would accumulate at a punitive rate.
However, it would be possible for an employer to file a notice of objection within five days of receiving an invoice. In the event that a contractor does not agree with a notice of objection, he or she may then refer the matter for adjudication.
An adjudicator would have to be appointed within seven days of the referral being submitted. He or she would then have 28 days within which to resolve the dispute and hand down a judgment, which would have to be honoured within ten days of the decision.
Meanwhile, in cases where payment was due under a contract but not paid and no notice of intention to withhold payment had been given, “the individual entitled to receive payment is entitled to suspend performance, provided that seven days’ notice had been provided,” Scott said.
He pointed out that one concern regarding the regulations was that it did not stipulate a timeframe for a referral to be submitted, only that a dispute may be submitted for adjudication “at any time”, which was problematic as “the idea of adjudication is to deal with a dispute at the time in which it arises”.
Scott highlighted that “the important aspect of adjudication is the enforcement of a ruling and the support of the courts,” said Scott, adding that a contractor or supplier could seek support from a court in the event that payment is not made within ten days.