Getting paid, in full and on time, is vital to the survival of
any business because money is the life-blood of a business.
However, in tough economic times, maintaining cash flow to your
business can become more difficult and costly - especially in the
building and construction industry.
The Building and Construction Industry Security of Payment Act
1999 (Act) was designed to enable suppliers, contractors and
subcontractors in the building and construction industry to get
paid more quickly and avoid expensive construction disputes.
The Act applies to all contracts (written and oral) for building
and construction work or for the supply of related goods or
services within NSW and covers a wide range of claims commonly made
in the building industry including progress claims, final payments,
most variation claims and milestone payments. However, the Act
doesn't apply to domestic building contracts, financial
contracts with financial institutions or construction contracts
where the consideration payable isn't calculated by reference
to the value of the work or services.
A certain procedure must be followed in order to make a claim
under the Act and it starts with a "payment claim" by the
person claiming payment (claimant). A claimant makes a claim under
the Act by serving the payment claim on the person liable to make
the payment under the construction contract (respondent).
A payment claim must clearly identify the construction work
carried out or the goods or services supplied up to the date of the
claim, and specify the amount being claimed from the respondent. In
addition, it can only be made on or from the date specified in the
construction contract which is generally known as the
"reference date" and if there is no reference date, then
on the last day of each month. Importantly, only one payment claim
may be served for each reference date.
The clock starts to tick after the payment claim has been served
and the Act provides a short timeframe in which certain things must
be done by the respondent. This is one of the benefits of the Act
because claimants generally achieve an outcome in a relatively
short period of time.
Within 10 business days of receiving the payment claim or any
shorter time specified in the construction contract, the respondent
can dispute the claim by serving the claimant with a "payment
schedule" setting out the amount that the respondent proposes
to pay. If a payment schedule is received within the 10 business
days, the claim can subsequently be determined by an independent
adjudicator. The respondent can, in the payment schedule, propose a
lesser amount for payment. If this occurs, the claimant must apply
within 10 business days to have the amount adjudicated; otherwise
the right to dispute the lesser amount will be lost. A claimant may
also begin court proceedings.
If the respondent doesn't serve a payment schedule on the
claimant within 10 business days, then the full amount sought in
the payment claim must be paid to the claimant. Alternatively, if
the respondent does provide a payment schedule, the scheduled
amount must be paid to the claimant.
If the claimant fails to make payment in line with the payment
claim or schedule, then the claimant may enforce their rights by
making an adjudication application or applying to the court for
summary judgment. Once judgment has been granted, the claimant can
enforce the court judgment against the respondent in a number of
ways in order to receive payment, including bankrupting/winding up
the respondent or garnishing their bank account.
The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.
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