Recovering Retention Money for a Construction Subcontractor

Background

A plumbing subcontractor based in Queensland had completed its scope of works on a residential apartment project and submitted a final claim for release of the retention amount held under the subcontract — $47,000 representing five per cent of the subcontract sum, withheld in accordance with standard retention provisions. The project had reached practical completion and the defects liability period had ended several weeks prior.

The head contractor refused to release the retention money, citing a number of alleged minor defects that it claimed had not been fully rectified. The subcontractor had documentary evidence — sign-offs from the head contractor's own site superintendent — confirming that every defect on the original defects list had been inspected and cleared. Despite presenting this evidence directly, the head contractor continued to withhold payment, offering no specific itemisation of what outstanding defects it was relying on.

The subcontractor had waited eight weeks from the end of the defects liability period before approaching Merion. By that point, internal follow-up had produced only vague correspondence from the head contractor's project manager and no formal response to the final payment claim.

Merion's Approach

After reviewing the subcontract, the payment claim history, and the defects sign-off documentation, Merion identified that the head contractor's conduct engaged the Security of Payment Act (SOPA) framework. The subcontractor had not issued a formal payment claim under the Act, which meant the clock had not yet started running on the statutory response obligations.

Merion issued a formal SOPA payment claim on behalf of the subcontractor for $47,000, citing the contractual entitlement to retention release and the documentary evidence of defect clearance. The claim was served in accordance with the Act's service requirements.

The head contractor responded within the statutory period by issuing a payment schedule — disputing $47,000 on the basis of the same unspecified defect allegations. Merion filed for adjudication under the Act, submitting a detailed adjudication application that included the sign-off documentation, the subcontract terms, a chronology of the defects liability period, and a schedule of the head contractor's correspondence.

Outcome

The adjudicator awarded the full $47,000 to the subcontractor. The decision cited the head contractor's failure to provide specific particulars of the alleged defects in the payment schedule, and noted that the documentary sign-offs provided by Merion demonstrated clearance of the defects list to the standard required by the subcontract.

Payment was received within three business days of the adjudication decision — the head contractor did not seek to challenge the determination. The matter was resolved 28 days from the date Merion issued the SOPA payment claim.

Notes for Similar Matters

Retention disputes in the construction sector frequently involve head contractors who use unspecified defect allegations as a cash-flow tactic rather than a genuine legal position. Where a subcontractor holds contemporaneous sign-offs or defect clearance documentation, the SOPA adjudication pathway is often the most efficient route to recovery — it is faster than litigation, costs are generally lower, and the statutory timeframes prevent the head contractor from continuing to delay by correspondence. If you are a subcontractor with retention money withheld, contact Merion early. The effectiveness of the SOPA process depends on service of the payment claim within the statutory timeframe, and that window can close.