Data released by the Department of Fair Trading provide a number of interesting insights about the use and application of the security of payment legislation in NSW.
One of the most striking findings is that subcontractors made more than two thirds of all adjudication applications in 2016/17. This trend has continued into the first quarter of 2017/18.
This domination by subcontractor applications represents a sharp deviation from the long-term trend. Between 2011 and 2016, contractors accounted for the majority of adjudication applications.
There could be a range of reasons for this trend.
For example, if the number of contractor applications has fallen but the number of subcontractor applications has remained steady, this would explain the higher proportion of subcontractor claims overall. Equally, it may be that the number of contractor claims has remained steady and the number of subcontractor claims has increased.
It may be that changes in economic conditions have had an impact. It could also be that subcontractors are becoming more educated and also more inclined to make use of the security of payment legislation.
Unfortunately the data released by the Department of Fair Trading do not provide a sufficient level of detail to explain the change in trend.
Adjudication fees
The long-term trend for adjudication fees reveals a fairly consistent trend. As one would expect, the smaller the claim, the lower the fees are likely to be.
Average fees for different sizes of claim have remained fairly stable over time. Although these fees are quoted as averages (and we have encountered instances of adjudicators charging significantly more than these amounts), the statistics provide some guidance to claimants and respondents as to what range of fees are likely to be charged by an adjudicator in respect of any given application.
Recovery rates
The statistics demonstrate the effectiveness of the legislation in increasing cashflow.
For example, taking the 2015/16 financial year, the success rate of low value claims (under $100k) is relatively high (85%). Low value claims constitute 70% of all adjudication applications. Perhaps not surprisingly, the likely success rate of a claim is directly linked to the claim value.
The lower the claim, the more (in percentage terms) the claimant is likely to recover. In addition, a claimant’s prospects of recovering 100% of a low value (under $100k) claim is 61% compared with just 4% for high-value claims (over $500k).
Sources: NSW Department of Fair Trading Adjudication Activity Data 2011-2016.
Read more about the NSW Security of Payment legislation here.
