Security of Payment

What Is the Security of Payment Act?

The Building and Construction Industry Security of Payment Act 1999 provides a right to a contractor to make progress claims for payment, even if the contract they have entered into does not

Some of the intended aims of the Building and Construction Industry Security of Payment Act 1999 were to reduce the cost and time involved for a party to receive prompt payment for the supply of goods or services to a construction project. It can be a powerful tool, but it can also be quite complex.

Gavel & Page lawyers understand the intricacies of dealing with security of payment matters and can provide you with clear, timely advice for every step.

Security of Payment Claims and Time Frames

A security of payment progress claim is usually made on a builder or developer. If they do not pay the amount that has been claimed, or otherwise serve a response, known as a payment schedule, setting out their reasons for withholding payment within the required time, then they automatically become liable for the full amount that has been claimed.

The Building and Construction Industry Security of Payment Act sets out numerous other rules and procedures. For instance:

  • What procedures need to be followed if a response is received?
  • What happens if a response to a claim is not received in time?
  • What happens if the claim is not disputed at all, yet no payment is made?
  • What happens when the claim is only partially disputed?
  • Which notices need to be supplied to the parties, and in what time frame?

Numerous scenarios could occur in such disputes and different rules and procedures will apply to each individual situation.

Generally, however, the narrow time frame, complexity of procedure and strict rules that security of payment matters entail, mean it is extremely important to obtain proper advice as soon as possible and act quickly. This way you protect your interests and do not suffer significant loss as a result of technicalities.

Security

Adjudication for Security of Payment Claims

In the event of a dispute, or where no payment has been made in the context of security of payment claim, the matter will usually go to adjudication.

In an adjudication, the parties involved will need to make submissions setting out their arguments in relation to the dispute and the evidence supporting their position. This is a complex process. Submissions are governed by strict legislative rules and guided by case law. It’s a good idea, therefore, to seek advice from knowledgeable legal professionals.

The content of the submissions may be limited depending on the conduct and communication of the parties prior to the adjudication application.

In any adjudication process, numerous considerations must be assessed, about which Gavel & Page lawyers are able to advise you. These include (among others):

  • Other rights potentially available to contractors under the Building and Construction Industry Security of Payment Act 1999 (NSW), such as suspension of works;
  • Interest charges on late progress payments;
  • The risks and uncertainties associated with any application;
  • The costs associated with adjudication;
  • The rules of procedure for the parties to an adjudication;
  • • The obligations of an adjudicator; and
  • Any avenues for appealing an adjudicator’s decision.

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After Adjudication Begins

There are other flow-on effects when a security of payment related adjudication application is lodged. For instance, the contractor lodging the claim is also entitled to ask a Principal Contractor to not pay the builder any money whilst the dispute is ongoing. This is known as a “payment withholding request”.

A Principal Contractor is obliged to withhold an amount equal to the adjudication application until the application is withdrawn, the respondent makes the payment, or some other relevant notification is provided, formally dispensing of the need to retain those monies. Certain rules and time limitations apply to this process, which may require legal advice.

Due to the complex and dynamic nature of the process and the many variables which can arise, strict rules, technical arguments and procedures, it is important to note that each case (and the related advice) will turn on its own merits.

After Adjudication Is Determined

If a party is awarded a sum of money as a result of the adjudication process, then such monies must be paid by the losing party within five business days of service of the adjudication determination. If no payment is made, the debt can be registered with the courts as a judgment debt which can be enforced in a number of ways, including but not limited to:

  • Garnishee Orders;
  • Writs for Levy of Property; and
  • Debt Certificates under the Contractor’s Debt Act 1997.

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