If you are a party to a construction contract or supply related goods and services under one, then the Building & Construction Industry Security of Payment Act 1999 (NSW) (“the Act”) is relevant to you.
It gives you the right, even if your contract does not, to make Payment Claims and provides strict time limits for responding to those claims. In fact, if you understand the Act and its uses, it can be a means of fast tracking your way to payment.
The following Plain English Guide outlines the Act and how you can make it work for you.
Fast Track to Payment
What does the Act do?
The Act gives you rights additional to those you have under your construction contract. It aims to assist your cash flow by providing a quick way to deal with claims for payment.
The party who makes a claim under the Act is called the Claimant, and the party who receives a Claim against them under the Act is called the Respondent.
Those who can make a claim under the Act include:
- Contractors against principals
- Subcontractors against contractors
- Suppliers against customers
- Consultants against clients
Does the Act apply to my contract?
The Act applies to all contracts, whether written or not, for construction work carried out or for related goods / services supplied in NSW.
It does not apply to:
- residential building work where the party to the contract proposes to, or already lives in, the premises.
- construction contracts forming part of a loan agreement, contract of guarantee or contract of insurance.
- construction contracts where price is not determined by the value of the work, related goods / services.
- construction work or related goods / services carried out or supplied more than 12 months ago.
- employees making a claim against you for construction work or related goods / services.
What is ‘construction work’?
The definition is wide and includes:
- construction, repair, restoration, maintenance, extension, demolition or dismantling of buildings or structures forming or to form part of land whether they are permanent or not;
- walls, roadworks, power-lines, telecommunication apparatus, aircraft runways, docks and harbours, railways, inland waterways, pipelines, reservoirs, water mains, wells, sewers, industrial plant and installations for land drainage or coast protection;
- installation in any building, structure or works forming or to form part of the land such as heating, lighting, air-conditioning, ventilation, power supply, drainage, sanitation, water supply, fire protection, security and communications systems;
- external or internal cleaning of structures or works;
- preparation work such as site clearance, earth-moving, excavation, tunneling, boring, laying foundations, scaffolding, prefabrication of components, landscaping and provision of roadways and other access works;
- painting or decorating of the internal / external surfaces.
What are “related goods & services”?
The following ‘goods’ are covered:
- materials which form part of the construction work;
- plant or materials sold or hired out for use in connection with carrying out construction work.
The following ‘services’ are covered:
- labour to carry out construction work;
- architecture, design, surveying or quantity surveying in relation to construction work;
- building, engineering, interior or exterior decoration or landscape advisory services
Your right to make Payment Claims
If you make a payment claim under the Act you are called the Claimant. Your debtor is called the Respondent.
- The Act gives you the right to make progress claims and receive payment. This includes final or one-off payments and retention monies.
- A payment claim can be made on and from each reference date under your contract,
- A reference date is the date in your contract a payment claim can be made or if nothing is stated, the last day of the month in which the construction work was first carried out or goods / services supplied.
- Only one progress claim can be made in relation to each reference date.
How do I make a progress claim?
- prepare a separate document or by simply issuing your tax invoice;
- it must be in writing and addressed to the Respondent;
- it must state the amount you claim is due;
- it should be served as per your construction contract or if nothing is stated, then by delivering, posting or faxing it to the Respondent. Record the date the Respondent receives it;
- A head contractor must not serve a payment claim on the principal unless the claim is accompanied by a supporting statement that indicates that it relates to that payment claim (“supporting statement” means a statement that is in the form prescribed by the regulations and (without limitation) that includes a declaration to the effect that all subcontractors, if any, have been paid all amounts that have become due and payable in relation to the construction work concerned). You will have committed an offence if a supporting statement is not provided or it is knowingly false or misleading;
- A progress payment becomes due and payable in accordance with the terms stated in your contract, or if not stated, the Act says it’s 15 business days after delivery of the payment claim for a payment being made by a Principal to a Head Contractor, and 30 business days for a payment being made to a subcontractor, whichever time is earlier.
What can the Respondent do?
The Respondent can dispute the claim, by serving on you a Payment Schedule within time for payment.
The Payment Schedule needs to:
- be in writing;
- identify the payment claim it relates to;
- state what amount, if any, the Respondent proposes to pay (the ‘scheduled amount’);
- If the scheduled amount is less than the amount claimed, then explain why.
- be served within the time stipulated in the contract, and if not, within 10 business days after the payment claim is served, whichever is the earlier.
If the Respondent has NOT served a payment schedule or paid by the due date, you can:
- Sue through the court for the amount as a statutory debt;
- The Respondent is not entitled to bring any cross claim or raise any defence in relation to matters under the construction contract in these proceedings. So they cannot claim for example, the work or goods were defective as a defence to your claim in the legal action you bring.
- Notify the Respondent you intend to apply for Adjudication and, if appropriate suspend work or supply after giving notice.
If the Respondent serves a payment schedule but for less than the amount claimed, you can either:
1. Accept the reasons given
You can accept the reasons and wait for payment of the scheduled amount by the due date.
If no payment of the scheduled amount is made, you can either sue or apply for Adjudication.
2. Dispute the reasons given
If you dispute the Schedule you have the option of applying for Adjudication.
Adjudication is conducted by an independent person who decides the amount, if any, that is due in respect of the progress claim. Only you, as a Claimant, can start this process.
If you decide to pursue this action then you will need to provide relevant notice to the respondent of your intentions.
Notice of intention to seek adjudication –
If your Respondent failed to serve a Payment Schedule on you;
- You must send a letter to the Respondent to warn the Respondent of your intention to apply for adjudication and give them a final chance to provide a payment schedule within 5 business days after receiving your notice.
- This notice must be served within 20 business days immediately following the due date for payment; and
Notice of intention to suspend work –
- You can serve a notice on the Respondent, stating it is made under Section 15(2)(b) of the Act, warning of your intention to suspend construction work or the supply of related goods / services under the contract. You must give at least two business days notice.
- The suspension will last until 3 business days after the date on which you receive payment from the respondent. After that you must resume the work or supply.
If a right to suspend construction work is exercised under the Act:
- you are protected against any loss and expenses you incur as a result of the respondent removing from you any part of the work or supply.
- you are not liable for any loss or damage suffered during the suspension by the Respondent or any person claiming through them.
How to apply for Adjudication
The application to refer a dispute for adjudication must:
- be made in writing
- be addressed to an Authorised Nominating Authority (ANA) such as Adjudicate Today or LEADR (Association of Dispute Resolvers)
- be made within time under the Act, as outlined below:
(a) where the scheduled amount in the payment schedule is less than the payment claim amount – within 10 business days after you received the payment schedule
(b) where the Respondent fails to pay any part of the scheduled amount when due – within 20 business days after the due date for payment
(c) where the Respondent does not provide a payment schedule and fails to pay any part of the amount by the due date – within 10 business days after the end of the 5 business day period the respondent had been given to provide a payment schedule in your section 17(2)(b) notice.
- be served on the Respondent at the same time
- attach a copy of the payment claim
- attach a copy of any payment schedule
- contain all relevant information (eg. photos, reports, delivery dockets) and state the reasons given by the respondent as to why payment hasn’t been made
- attach a copy of the contract and terms and conditions
- attach a copy of relevant notices given to the respondent
- enclose the application and adjudication fee
The ANA will then choose an adjudicator and you and the Respondent will receive a notice from him/her accepting the application.
If the respondent had provided a payment schedule within time, then they can lodge a submission with the adjudicator.
How long does the adjudicator get to make a determination?
- 10 business days after the adjudicator has notified their acceptance of the application;
- The adjudicator must serve a copy of the determination and the Respondent then has 5 business days after that date to pay;
- If the Respondent fails to pay you, you can apply for an adjudication certificate and file this and an affidavit at court as a judgement;
- Any judgement can be enforced in the same way as any other court judgement.
To ensure your success in making a claim for payment, you should always:
- Ensure your payment claims are detailed and precise
- Keep records of how and when you serve Payment Claim
- Note the time limits for action
How can Coleman Greig help you?
Coleman Greig’s experienced commercial lawyers can assist you with:
- Drafting effective building contracts
- Negotiating disputes and payment claims
- Advice regarding the Building & Construction Industry Security of Payment Act 1999
- Debt recovery services
- Representation in Court
For more information on how our building and construction lawyers can help you make a claim under the Building & Construction Industry Security of Payment Act 1999 (NSW), please contact our team.