Improving Security of Payment Building and Construction Industry

5. Proof of Payment Page 67National Public Works Council IncImproving Security of Payment in the Building and Construction Industry5.8 Other Issues ConsideredSet out below are the issues that the Brief required us to consider in respect of proof ofpayment.5.8.1 The possibility of the Head Contractor exerting pressure on Subcontractors to signan acknowledgment, even though the Subcontractors may not have been paid orhave only been partly paidIn reality, neither proof of payment approaches detailed in the Brief (ie QBA or theVCB Approach) are able to control a Head Contractor from exerting pressure onSubcontractors to sign such an acknowledgement. These types of unethical behaviourcan only be controlled through education and through implementing sufficientdeterrents for undertaking this action(s).Whilst the proof of payment approaches identified in the Brief provide differentmechanisms for ensuring payment is made to appropriate parties down the contractualchain, their interrelationship with alternative dispute resolution is the same. This isbecause of the premise that underscores the alternative dispute resolution procedure,namely, that there is a dispute already in existence.Thus, in addressing the issues for consideration, there has not necessarily been aconscious attempt to create a dichotomy for the purposes of the discussion concerningthe application of alternative dispute resolution. Rather, we have focussed on thepoint of relevance common to both models in the dispute.When speaking at the CIDA National Conference in May 1995 (p314), John Pilley(Construction Industry Engineering Services Group) had some anecdotal evidenceregarding fabricated disputes. Mr Pilley had the following to say:"There are plenty of instances that I have seen in Victoria where the HeadContractor has not made payment and then has invented a dispute and there isno doubt that he has invented the dispute in order to say that 'I do not owe themoney and that is where I can truthfully say in a statutory declaration that I donot owe any money'. He manufactures the dispute in order to be able to swearto that statutory declaration."Where the Head Contractor exerts pressure on Subcontractors to sign anacknowledgment of proof of payment, notwithstanding that those Subcontractors maynot have been paid or only partly paid, alternative dispute resolution will not providea panacea for this situation as (in reality) there is no dispute to be resolved. Indeed,the Head Contractor and the Subcontractors have settled their dispute even though theSubcontractor may not be entirely happy with the situation.The only way to sort out the problem of Head Contractors exerting pressure onSubcontractors to falsely sign acknowledgments of payment, is to provide amechanism that prevents this situation from occurring in the first place, and even thisis only likely to limit the level of the problem. Some suggested solutions to this